that does it for us. make sure you join us tomorrow. "squawk on the street" begins right now. ♪ good tuesday morning. welcome to "squawk on the street." i'm carl quintanilla with jim cramer, david faber at the new york stock exchange. futu futures giving back some of yesterday's big gain, a lot of news setting the table today. home depot crushing estimates. some new valuation estimates on youtube. we'll get to all of that. europe's mixed at this hour. oil's steady, but watch bond yields today. cpi comes in with the hottest number in three years. roadmap begins with oil hitting a seven-month high while the market keeps a close eye on saudi arabia as well as service disruptions. >> home depot reports better than expected earnings and raises guidance, but the overall

retail sector is still under pressure. pandora shares on the rise after activist investment firm calling for pandora to consider a sale. stocks poised to open lower following monday's rally. futures up 0.4 as gasoline, medical care and food prices up. april housing starts up 6.6. well above expectations on a 3.7% gain. economy doesn't look too bad this morning, jim. >> no. a lot of that increase in cpi is gasoline has come up. that's something that the market likes, which is the craziness of this market. remember we go to $48 for oil yesterday, and we have an explosion. all the stocks of the companies that do poorly when oil goes higher, but that's all right because oil is meant to be a barometer. we keep telling ourselves that. at a certain point it's not a barometer. at a certain point it's back to the inflation rate. but at the same time i don't see a lot of strength. i just see a lot of no volume,

algorithmic moves in the stock market. yesterday was one of the worst examples of it because the stocks kind of gravitated -- i was looking at some of the gains and how little stock they were made on. i mean, other than valeant, you had moves 80,000 shares for 3m, 100,000 shares for united technologies. these are things that shouldn't -- you've been in business for a long time. in 1987 it would take a million shares to move united technologies. a million. >> so the rally gets no credit yesterday. >> none. none. it's just oil. if oil were to reverse right now and go to $49, we would be saying can you believe how great home depot is, it's 1.43. >> right. >> that's how bad it is. if oil goes up, home depot had a great quarter, if oil was down, it was better than expected. i don't want to play that game, but we have to understand it's dependent on oil. >> and dependent on that in part because of your original part about algorithms, we talk about

this funds oftentimes. it's not the fast trading -- it's not the high frequency trading we're talking about. we're talking about a different discipline where hedge funds are focused on hiring a lot of math ma tigss who frankly no nothing about the stock market and don't care. looking at relationships between different things setting up algorithms they think are going to work and they dominate trading some days in fact you've never heard of can be as much as 3% or 4% of volume on basis every single day, jim. they run this market oftentimes. >> there was a gal up poll yesterday down to almost 50% of households that own stock used to be much higher. if they do own stock, they're a part of this whole just an index fund, they don't really care, the hatred for individual stocks is unparalleled in terms of my career. and periodically you'll see a stock that just blows the numbers away and it goes higher and breaks the oar. but we see the futures go up. and then when we see big sales

may be redemptions we were talking about before, it's blocks of hedge funds that have kind of given up. it's people who have to withdraw money because investors want it back. you saw this morning they don't like hedge funds anymore. >> what about sorros now buying 2 million shares of this put option on the s&p, cutting exposure to stocks by a third, buying baric. >> i think it's a great stock, but icahn more short than long -- >> what's interesting we say sorros of course and we has people who do this for him, but so little of his capital is focused on the stock market. >> right. >> after this 13-f season what we've been reporting on, what's interesting is how little capital some of them have at work. >> i know. >> and we're also in this

redemption cycle right now for a lot of hedge funds where we may be seeing sales of stocks, perhaps some activist names that they don't necessarily want to but they are. there is something happening in the hedge fund world, capital's starting to come out, maybe they are also starting to take risk off. to your point of not a lot of volume, there's just not a lot of conviction out there. >> none. mentioning apple yesterday, as soon as we heard warren buffett bought it within a minute we heard it wasn't warren buffett, within two minutes we heard it didn't matter, within four minutes we felt we had to short apple because he's so bad on ibm and in five minutes we decided apple was the greatest short ever and the iphone 7 doesn't work and now i'm waiting for a chapter 11 file. there you go. there's the life cycle of a company that made $10 billion this quarter. >> that's the way this world works now. >> todd and ted bought it. interesting apple adventure, this stuff i'm hearing it's like

i want to leave. i want to leave and go do something productive. >> unfortunately we're not going to let you do that. >> honestly the value, i look at tjx, an amazing quarter, okay. and home goods plus 9, now that's incredible. it's just not as important until the basket so maybe it has a shot. pandora, corvex, well big deal, let's call tim cook and see if we can buy it. >> do you want to do more stories we're talking about coming up, you want to get deeper? we're going to talk about youtube later too. >> i was going through it and perrigo's down it. didn't seem important to me at all but i'm making it important because perrigo's down. i'm reacting to the tape. i'm just saying what's moving is insane that the stuff that goes higher should be going lower, which is that a lot of stuff that is going up that is oil related and that oil really is responsive to china and china goes up, the baltic freight goes up, we like freeport.

if freeport doesn't go under then we like the banks. is there not correlated nearly as much as people think, or the gas stations stocks would be higher. >> according to ph.d.s and mathematics hired by -- >> those phonies. >> i thought you were a fan of watson. >> by the guys at citadel or millennium or point 72. >> point 72. >> yeah. they got a lot of them too. >> 38th parallel guys are fabulous. someone the other day was telling me, you know what, in the business of health care and health care mathematics and drug approvals he says he never sees wats watson. i said watson's invisible. he said, no, clients of watson. so you have to go back to ibm and say where are some clients. all i'm saying is the market it's not -- it's acting incorrectly. and if we look at individual companies, a lot of them are doing so much better than the stock market indicates. that's what i'm getting at.

and they're being captured by all sorts of different algos that make no sense. >> to your point one name acting better, or at least performing better is depot raising their four-year guidance posting better than expected q1 comps up 6.5. tjx jim mentions the home of tjmaxx and home goods also meeting quarterly earnings. depot guides comps up to 4.9, which would imply -- they raise comps up 6.5, and 7.4 in the u.s. comp guide to 4.9 is above expectations above the high end of the prior sfwl the stock was up very, very big earlier. i think what will happen is they'll tell a good story. and people say well why was it down, and the answer is someone kind of painting the tame. other people see it was up big yesterday.

now, it's not children's place, which wasn't part of the index and plce did a good job, it's not francesca's, still trying to get to the bottom of that. home depot is a public large stock everyone thought was going to do great and when it did great it was not enough. wait until the comps go, wait until torme gets on, not mel tormay -- spelled different but take anything. i feel what's happened here with home depot is expectations got so high that even though they beat them there's someone selling it. and can we just look back and just say that's silly? >> it's silly. >> it's silly. thank you. >> you got me thinking about marissa tome now. >> the cfo of lowe's. just kidding, lowe's is good, but they bought a canadian company. and canada's bad. >> yeah. >> don't forget canada wildfires.

>> got it. canada wildfires. blame canada. >> when you look at a depot up 7.4 versus macy's down 5.6, kohl's down 3.9, dillard's down 5, right, it's the home depot -- >> don't forget nordstrom was horrendous. i want everyone who cares about stocks, and that's about five people in the world, to read ellison's comments, not larry, and we revere larry, but ellison at jc penney. he was so eloquent about what's working. flooring, flooring is working. window -- beauty parlor workin, home goods, working, appliance goods, working, apparel, no, no working. >> no working. >> plus sizes work because people want to try them on. they're afraid. everything else you go to amazon. look at home depot is not a --

>> so in other words plus size you're not going to order on amazon? >> he said they do not feel -- women who order plus sizes are not confident with the web. that's his comments. he's so good, i mean, you got to read them. they did much better than everybody else because he's got a great orientation. he really has -- at one point he says, you know, the other guys they didn't look at the data. i'm very data driven. he's data driven, well, that's kind of what you do, data driven, only data. there's a guy named bezos, there's nonunionized workforce and there's mr. data. >> and mr. data leads everything. >> watson. >> yes. >> watson should get into retail. >> well, i think amazon's got their own a.i. working too. >> is that what they are? >> yeah. and alexa. >> she's going to be everywhere. in fact i'll be able to replace you with her. >> is this the apple reorganization? >> tell me what home depot stock is going to do today.

when we come back we'll get a closer look at why pandora is getting a lift this morning. shares of hp inc. rebounding. take another look at the premarket on this tuesday morning. by the way, happy birthday to the nyse, the 224th anniversary of that agreement signed by 24 brokers outside 68 wall under that buttonwood tree effectively started this exchange today in 1792. a good car has to maneuver quickly. that's also true of a good car company. people have always bought cars. but we saw an opportunity in sharing cars. so we moved fast and launched car2go in 29 cities, all around the world. doing that required dozens of data centers, designed for speed and performance. we built our business on the ibm cloud. because that's what the ibm cloud is built for.

it's a big day for hard data. cpi starts and now industrial production. let's get to rick santelli. >> oh, man, this is a big number. finally, industrial production on its month over month change up 0.7 of 1%. we haven't seen a number anywhere near that in quite a while. looks to me like we could go all the way back to february or march depending on your rounding, and that's of course of 2014. keep in mind so far this year other than this number two out of three numbers were negative. last year 10 of 12 numbers were negative. here's the negative part of this number though, minus 0.6 last month, and two or three negative outside of this one moves to

minus 0.9. capacity utilization done, it is 75.4, now, the utilization rate was expected to be 75, we're doing better. and unlike the last number we gained a tenth to 74.9 last month. 75.4, how does that stack up? well, 75.75 is where we started the year in january, so there's your comp. this rounds out a lot of data, hotter than expected cpi definitely helped push yields up and potentially equities down. i wonder why? i think maybe fed. we'll see how that turns out when we get the new york opening. david, it's all yours. >> all right. thank you very much. pandora shares are up sharply in the premarket. corvex management urges it to explore a sale in a letter it released publicly. run by activist investor keith myself meister makes him the largest

shareholder in the company. this is a company that has certainly well-known in the public consciousness given it's the largest still i believe streaming service out there but competing vigorously with the likes of spotify, not to mention apple music or amazon music and many others that have come along of late. back in february the "new york times" reported that the company had held discussions about selling itself. morgan stanley did work with the company back then. it's unclear whether there was a real process to actually go about selling itself. i was never able to discern in the reporting that i did whether or not they really had moved down the road in any talks in any way or fully explored the potential universe of buyers that might be interested. and that is sort of central to what corvex is now arguing they should do while they spend a lot of time in the letter talking about operations, they go onto say let's be clear it remains their firm belief the company should hold value to -- realized

in a sale transaction and full results of fulsome sale process against other options including risk adjusted value continuing to operate on a stand alone basis. they think there's a lot of value there. of course sirius comes up often, jim, when you hear about consolidation in this area. would they have interest? likely they would, but price becomes an issue as it always does. pandora did get a fairly positive ruling on the royalty last month. stock acted positively to that. founder comes back to run the company as its ceo recently. had considered going after three board seats, they tell us in their letter, this has not been made public previously, they had delivered a notice of intent to nominate directors but they backed off from that, now they're coming pretty aggressively not to nominate

directors but to say get with it, we want you to really explore a sales process which we don't believe you have done previously. that at least is their belief. >> look, i think that there are a lot of people who say why doesn't apple buy it. expand that service revenue stream versus say spotify. i think apple wants to wipe them out, that's probably why they won't buy them. i think apple thinks they can wipe them out. apple is not a pitiful helpless giant like a lot of people think it is. i don't want to take them on. >> you don't want to what? >> i would not want to take apple on even though right now -- >> retooling the music offering at this point. >> right. they're doing retooling. but i do think that right now there are people who are recommending apple stock, like tony -- says their best days are behind them. one of those opportunities for a downgrade. >> it's pocket change for apple to buy pandora. >> or didi. >> yeah, that was a billion dollars. this would be, i don't know, for

a decent premium still don't get to a very big number for apple. >> the bears don't even care anymore. they don't even care. it's really incredible. i find that down 40 points -- >> you're just obsessed with this. you are. with apple. you can't get away from it. >> i'm obsessed with the stories that i don't think are bad. for instance, here, getting some word on a watson. which i don't mean -- watson has some -- geico, these are stocks that i think are not expensive. i don't think ibm's expensive. i don't think apple's expensive. i don't think these stocks are dangerous. that was my theme last night. it's not as dangerous as you think, but when i hear soros, see icahn, i say they must be scared. i'm not scared of ibm at ten times earnings or apple, scared at coca-cola 22 times earnings? no one else is.

>> soros is obviously scared of a big fat tail in china. that's his whole raise on debtra as they said. >> the government could be overthrown, that's true. >> here or there? >> there. >> oh. >> here too, i don't know. i don't get political. stop it. >> let's not. >> yeah. >> but in china, no, there's always a constant worry. you don't think they're worried? you think they have electoral college over there? are they like poland? >> he's more in control than anybody. >> yeah, that government there is not up for election. >> i'm aware of that. >> we should go to commercial. >> let's do it. when we come back we'll get cramer's mad dash, count down to the opening bell and take one more like at the premarket. more "squawk on the street" from the nyse straight ahead.

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let's get to a mad dash here for this tuesday. about six minutes before we open for trading this morning. where are you head snd. >> i think you might agree with me activism has gone a little too wild. children's place, people saber rattle, stock goes up big, maybe cause and effect. but the one that's direct cause and effect is activism gone good, darden. piper goes hold to buy, sustainable management changes, this stock, good yield, big turn, commodity pricing coming down, same store sales going up, again, an example of a stock that people are like so what. >> right. >> i think the so what -- by the way, yum is the same thing. this so-what factor has gotten too high. >> yum's interesting, of course that's corvex we were talking about earlier with pandora. here we're talking jeff smith with starboard replacing the

pyre board, gene lee been on the board for a while -- >> activists are now double edge sword. they can make something happen but if they have redemptions, they hurt your stock. >> sometimes even when they're on the board interestingly they're forced to sell as a result of redemptions but they still have board seats. that's a story for another day. >> didn't have enough capital -- >> no. >> no? >> ackman's got $6 billion in permanent capital. >> oh, okay, he's fine. >> these activists are not going to be playing the big names anymore except for a handful. pe pershing, it's interesting, jim. >> hedge funds that were active need to have great returns to get more money. it worked for a long time. it seems to be going -- it's a vicious cycle down now. could be annin virtuous circle up. watch darden though. it was good. everybody did good there. >> all right. opening bell right after this.

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you're watching cnbc "squawk on the street" live from the financial capital of the world, the opening bell in just over a minute. a lot of hard data today. cpi runs warm, fastest rate in three years. starts were pretty good. industrial production the best in two years. and then oil, jim, you mentioned that's sort of the -- that's what's driving everything comes within a dollar and a half of 50, where we haven't been since october 12th. >> rbn sent data out today about how canada's coming online every single day, pretty soon back to the 3 million barrels. the market was up because of that shortage. have to see what happens with nigeria, venezuela, but the market is kind of in balance. there's only -- there's very little drilling. when you see a san ridge go down today. >> yeah. >> they're well above 50, that's a place went bankrupt. a lot of what's going under are shales above 50.

don't think there's going to be a lot of oil going out, they weren't drilling anyway. >> the ceo told us here -- >> oh, chase. how great was he? and yet range did that memorial deal and i thought that was wrong. i thought they paid too much. >> there's the opening bell and the s&p at the bottom of your screen. at the big board today it is networking deal maker juniper networks. we'll talk with the ceo later this morning on "squawk alley". >> fantastic. >> at the nasdaq laser manufacturer coherent, obviously some net negative breadth to start the day. >> yeah. people are so down. i'm trying to fight the gloom. for instance, let's go back to ibm, finish the circle. if you add the dividends, buffett's basically unchanged. so stop thinking when buflt buys tech he doesn't know what he's doing. or when buffett's minions or someone in omaha buys it in his name or nebraska buys it, i want to come back again to the idea

that constant to oil but said something on the quarter freaking people out saying this quarter is going to be the best quarter, that means there's three other quarters. so if that's the best -- >> why is this going to be the best quarter? >> well, it's important. people don't understand they're misinterpreting the story. home depot is a planning store. >> yeah, planting season. >> what about summer housing season? >> i know. >> i think they lowball. they're conservative. they do a good job. people come back, they look at it, see it was better than lowe's, they buy the stock. this is the life cycle of home depot. we've had to do it for a long time. they bought back a gigantic amount of stock in the last five years. they're like sell to us. give it to me. give it to me. you're doing that thing. >> no, no. >> you're doing that thing. >> i think we sometimes forget this is an enormous company. $170 billion market value, home depot. after amazon and walmart, this is it, right? >> well, but they sell things that you don't buy at amazon.

>> i know. >> they do it really well. and when you go there it's all computerized. there was a guy who was mean to me. >> there was somebody mean to you? i'm so sorry. are you okay? >> i don't know. i asked him if he had baskets he said i don't know. i said i don't know? i mean, i'm a good customer. >> you are. >> i am. >> you are. >> that's anecdotal, i spent a fortune at it it's packed. the stock up yesterday off of futures. now it's giving it back. i think it's setting up for -- no one's going to downgrade home depot. no one, not at all. and, you know, i don't know, what do you need an activist to get higher? it's been great. >> no activist getting in there. >> some of the activists are saying give us credit for children's place. >> because they've pushed. >> yeah. >> children's place good number. but i think jnl is responsible

for a lot. looking at new ceo at tj and saying these are fighting the trend. why? because again, they are not amazon. tjx was big winner when nordstrom has extra inventory, when macy's has extra inventory, kohl's, dillard. >> even nordstrom. >> yes. nordstrom has the rack. i think the rack is hurting nordstrom. i think a lot of the factory stores hurt the main stores because people say i don't have to buy it at the fancy place. i can get it -- and the cash flow for some of these dividends, be careful. the dividends look large. be careful. >> yeah. >> cash flow is not there. they raise their dividend too often and too far. and now the coverage could be challenged. >> yeah. a lot of things they need to spend money on and save money on. >> oh, my, and nordstrom in that conference call they talked about how much money they spend and omni should buy us, bring us, get us, forget us.

forget us. >> forget us. >> yeah. >> forget us. >> meanwhile, lending club is down to 3.50 as they announce this investigation by the justice department. and then talk about what would be a big change in how they run their business using their own balance sheet if they can't get investors -- >> just the opposite of what we thought we'd get with lending club. over time, david, i've seen the justice department subpoena so often suboptimal thing. when i look at lending club i think square, how much of square's business is like lending club. i'm not talking about the justice department side. i'm talking about the risk side. you got into some of these companies you didn't think they had real risk. and now you wonder whether they have the risk controls. >> right. >> we don't know. >> jim, yesterday -- >> i'm sorry, just on square, last week you talked about the lock up that i believe hits -- >> now. >> yeah. >> square, round peg.

round peg. >> can't square the circle. >> no. square's got to get a full-time ceo. >> yesterday of course we had that pfizer deal for anacor pharmaceuticals which we talked about a bit because dermatology was not a key area of focus for pfizer, although pediatrics to be fair the company coming back to me during the course of the day today -- >> oh, my god, you got that? >> i got that too. we didn't even talk. all day long they were peppering me with e-mails, what do you mean? all right. fair point, pediatrics, we'll grant you that one, pfizer. but what i wanted to point out, jim, was that it did give a bid to biotech overall yesterday. >> yes, it did. regeneron was up big. it reminded you these companies have pipelines. do you know that i didn't -- i said that they overpaid? i must have gotten half a dozen

people who said they didn't overpay. to me pfizer they overpaid because the stock was the premium. but a lot of people said -- >> stock's trading above the big price right now. >> yeah. >> and i don't know, but we said this yesterday of course this seemed like a deal that might have been better for an allergan. perhaps some people speculating, nothing to offer there as to whether there's any shot of somebody trying to come up with a top for this name. but interesting it is trading a bit above -- >> anacor say the regeneron competitor is not nearly as efficient. this is terrible if you have something for humans, especially for pediatric, it's going to be a big seller. i don't know. people come up with -- they come up with very justifiable reasons why pfizer paid that price. >> right. and of course given the size it's not as though pfizer can't go other places and continue to add to what it wants to be a very significant franchise in oncolo oncology. >> they need to add more, okay. good luck to you. >> yeah. i mentioned dell on friday and

the huge debt deal that dell is embarking on this week with its underwriters. news coming out this morning from various places talking about where they're pricing things, but really the big story is the incredible demand for all that debt that dell is offering for its purchase of emc. on friday may remember talked about over $40 billion in debt they would potentially upsize the $16 million in investment grade bonds they were offering, that in fact seems to be what is going to happen here. company according to other reports has received more than 80 billion orders from investors. >> are you kidding me? >> 80 billion. again, my report on friday 16 billion may go up, term loan a slated to be 10.75 billion, may go up, all of this having the effect of bringing down how much they're going to borrow in the high yield market originally targeting as much as $9 billion in bonds, but that may come in as low as three. we'll see. and then you've also got a term loan b that may be downsized. all of which is to say the incredible demand for yield out there in the world particularly

with negative rates affecting so many different parts of the bond market right now is really in dell's favor. and other companies that are borrowing. their average cost for borrowing is going to be well below what they'd originally pencilled it in as when they did this deal. >> you got to hand it to michael dell because the whole industry away from dell has had a big step function down in that particular segment, enterprise, pcs, but michael dell's wily and he knows how to run a good company and i could see why people -- i myself would not want those bonds. >> no. we pointed out many times we'll have the effect of making dell a public company once again in a strange way because you'll have this tracking stock, vm ware and that will actually be a dell -- it's not -- it's tracking, so it's really a dell issue, therefore they will have to be a public filer again. so we'll get more info on their overall business. >> well, michael's done a good job. there's no doubt about it that he did get the company cheaper, at the same time if you're h.p.,

you know, your printers and your pcs, or if you're hpq and -- you always have to get these symbols right if you're the enterprise, if you're the meg whitman kind or non-meg whitman kind, both of those actually have done okay. i think the meg whitman enterprise company better than people think. but i am surprised that the demand is so high given the fact that there's so many -- people hate that part of technology in the public market. that's a hated part of the market. hated part. seagate, you see seagate? >> i have not. >> don't look. >> i won't. >> avoid that. i don't want to do that to you. >> thank you. >> it's like a 12-0 loss, like when you lose by 12? >> i do. why? are you forecasting what's going to happen to the nationals tonight when the mets play them? >> no. >> i did see mr. met at the espn upfront this morning. >> really? >> yes. >> how do you like that? enough to cut the dividend?

>> hd is the big laggard on the dow. good morning, mary. >> good morning to you, carl. the dow is lagging as well off just about 60 points off of worst levels of the session. still the blue chip index and rest of the markets giving up gains from yesterday's session when energy of course was a big factor along with the gains in apple in the rally. let's take a look at the ten-year yield because this is one thing we'll be watching today. we did get a stronger than expected print on the cpi. and better than expected numbers on industrial production. nevertheless yield on ten-year after popping initially on that cpi data has given up those gains suggesting of course investors still not convinced the u.s. economy is on a steady improvement at this point. also, we're watching crude oil because what we saw yesterday was a continued -- i guess you could say a return to the correlation between the markets and crude oil as oil moved higher in yesterday's session. right now wti up just about two cents, not having much of an impact on the market again which is down 73 cents -- or 73 points

i should say. again, yesterday it was a factor in the rally. we'll see whether or not this helps to mitigate the losses on wall street today or actually helps to turn the market around. of course earnings in focus as well. we've been talking about it all morning, both home depot and tjx coming in with better than expected numbers and raising their guidance for the full year. home depot saying this quarter or the past quarter was the best of the year. that doesn't give investors a lot of reason to buy the stock, at least today you can see it's down about 2%. the stockholm depot up is about 19% over a one-year period. so investors, again, giving back some gains. tjx with good numbers, ross stores, there's a spillover in the premarket, ross looked healthier but it's turned lower. we're watching maker of lab equipment set to open at a multi-year high after this company reported stronger than expected earnings numbers. up now 5.25%, all business segments reporting stronger than expected revenue in the quarter. we want to just touch on apple

because this too is another reason for yesterday's rally to see how it's performing. whether or not we're seeing a follow-through, nope, now just about flat. of course yesterday benefitting from the news of berkshire hathaway took a stake in the tech giant. last look at energy, this is a sector we'll watch given yesterday's rally, number of the stocks continue to move higher, chesapeake, transocean, diamond, marathon showing a little weakness again as wti up 3 cents coming off the overnight highs when it touched its best levels since october. right now the dow is down 80 points. back to you. >> mary, thank you very much. let's get to the bond pits as well. a lot of action today. rick santelli's the cme in chicago. hey, rick. >> good morning, carl. it's funny you mention a lot of action. normalization of the fed, all the things coming up between brexit and elections, find it so interesting that regulators of course again talking treasuries in the year ago october flash crash, everybody is a bit nervous or is it the market just

isn't the same? because nothing's the same in treasuries. year-to-date two-year to date, short led everything hotter, hotter cpi. that cpi up 0.4 was the hottest it's been going all the way back to february of 2013 when it was up 0.6. and industrial production up 0.7 today. said march it was november of '14, but all solid data. intraday ten on the data i talked about 8:30 eastern that's when ten-year made their high yield of the day. year-to-date clearly reveals how the long end is a little different than the short end chart i started with. 2s haven't closed above 80. they're at 80 right now since february 27. these 10-year yields recently like 30-year yields, everybody is talking about the yield curve and it is interesting, but do the singles mean what they used to? 10s minus 2s on a one-week

chart, it is the flattest since '07, but this chart three years earlier than that to demonstrate, yes, we've been flat, but we're comping to a move before the crisis and around the crisis that was negative -- we are negative about 18, 19 basis points on this and the high was about 290. you could argue we're below the halfway mark which is 155, but there could be room here. and if we continue to monitor everything that's important when rates move, how can we go much farther than foreign exchange although comping other currencies is a limited activity. it's down a little bit today dollar index, traditionally when rates pop the dollar pop. but now with all the fed implications what they may or may not do, the dollar kind of goes back and forth on the issue. carl, back to you. >> all right. rick, we'll see you in a little bit. rick santelli in chicago. when we come back, an exclusive be juniper network ceo ram rami rahim, his take on the

state of tech and future for the networking equipment provider. and heard mary say home depot dragging down to the tune of about 77 points. back after a break. ♪ approaching medicare eligibility? 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,

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a 67 to 86 billion dollar valuation for alphabet's youtube, that's according to a new note from alliance bernstein attempting to outline a business we quote know ridiculously nothing about. on the path to becoming one of the largest media businesses in the world. more than 140 million people spent every day they paid 1.6. >> i think it's been completely undermanaged. they better get to start managing because amazon's coming in. i've been after them to try to do sports programming, to do kind of original sports programming but also get in the nfl. they don't want to listen. it's almost like they say let us alone, we're fine. all the ideas i've suggested -- now, i think they don't have to do it.

but because it's been so lucrative of a company and it is a great company, but i think it's time. and i think they'll do a fabulous time. >> that's a lot of time to spend 40 minutes, facebook gets 50 minutes, but those are serious times. >> a lot of these younger people they have shifts and when they're not at a shift they're watching -- i know that i want to say anything about les moonves because he has everyone watching his stuff, but people watch videos, i mean, we watchdog videos all the time. we watch them. >> you look ashamed. >> it's like what a terrible use -- just watch, we're okay. it's not a great use of my time watching dog videos. it's like they always show you like the dog does something and they make the dog look guilty and the dog acts guilty. i don't know, i'd rather read shakespeare. to me i'd rather read the mark, i'd rather read research. but people they like those videos, they like them.

>> and actually it's a small slice of videos that make up the lion's share of all total views. >> and the things that go viral i don't necessarily think they're as good as reading or watching bbc documentaries about chauser. >> that's true. a lot of people do listen to podcasts now. people listen to long form. >> for the most part, david, they like to see dogs that carry eggs to the door. they love that. they love dogs that do remarkable things. that's what it's about. that's what it's about. >> you're still watching the ad, that's really all they care about, right? >> google -- they can make a fortune if they want to. >> you think it's undermanaged? >> well, i don't think you had to manage it because it happens naturally. i'm saying what could happen -- susan is brilliant. one day they're going to turn it and say we're going to make a fortune on this thing because people watch. they watch anything. >> yeah. another thing for you to run. twitter.

>> you can bring them altogether, jim. >> i've actually suggested -- i've made suggestions to them that i think would have dramatically increased their earnings per share. one day they'll listen to me. but i'm so busy i got to fix square now. the guy he's got me doing square and i'm doing twitter. i had to go to my daughter's graduation, but we have memorial day coming in so look out. i'm going to fix twitter over memorial day. >> we look forward to coming in on that tuesday, jim, getting some answers finally. >> twitter is up just on that. >> it should. you think i couldn't move that stock up if i went there? you insult me. the only thing i can't help is facebook. and when i move over to -- home depot is good by the way. i refuse to believe just because february so good and march not that good, i don't need to go to home depot other than as a customer. they're doing fine, but i got to get to twitter and square right now. i'll see you guys, man -- oh, i have to come back. >> yeah, we have one more block.

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time for cramer and stop trading. >> i hate to deal with actual companies but agilant last night

which is testing life science, that's a spin-off from 1999 hewlett packard. a lot of forecast in china. go listen to the conference call, china business is booming, these are smart guys. did a reorganization. no one cares, except for me, and watson, but that's okay. and there was nothing but about pfizer in that call. >> thank you for sparing us that. >> yes. >> agilent they can now call me and say thank you. i don't know who they are, but it was a great conference call. it really was. and it made me proud. >> in the second we have you'd asked me earlier what was going on with charter and time warner cable. >> yeah, what is that? >> what i can tell you is based on at least what i'm hearing that deal's going to close tomorrow. charter's purchase of time warner cable. so you may see some last-minute position squaring here. people just getting, you know, it's done. >> thank you. >> they've gotten all the approvals, that is charter and time warner cable.

and they will conclude the acquisition that is of brighthouse networks, of time warner cable, charter will become second only to comcast in the country. just want to let people know. >> all right. >> the deal will close tomorrow, at least based on what i'm hearing. >> no one knows that. >> well, now they do. >> okay. thank you. >> what's on mad tonight? >> i'm looking into amazon private label. remember amazon is one of two companies we care about, facebook and amazon, everything else doesn't matter. maybe google if they get youtube. we don't care about apple because of the chapter 11 filing for the $10 billion they made. remember, i'm making fun of apple because it's so hated. >> yes. >> it's hated. ibm, warren buffett up. >> private label stuff, page six today says amazon is the hottest thing at the film festival, expanding restaurant -- >> what is grubhub going to do? i don't know. geez, amazon, we could do the amazon show. welcome to amazon.

>> some days we do. >> you're a simulation. >> thank you. >> welcome to amazon. oh, there's a human. he's a human. thank you. and you're nonunionized too. >> so far. that could change. >> we could do a thing. >> i would like a health care plan. >> could we return to the notion -- >> because what we got here -- do you have a health care plan? >> i saw your documentary. >> we give a lot of money towards something. >> jim, i'll see you tonight. >> netflix is up. >> "mad money" 6:00 p.m. eastern time. when we come back donald trump's call for apple to make iphones in the u.s. you want to hear from our guest who says demand like that is not crazy. dow's down 68. don't go away. for fastidious lin emily skinner,

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good tuesday morning. welcome back to "squawk on the street." i'm carl quintanilla with sarah eisen, simon hobbs, david faber at the new york stock exchange. oil gaining a little ground, but for the most part dow being dragged down by an underappreciated home depot quarter. >> our road map starts with home

depot. shares in the red despite the company beating estimates and raising its outlook, we'll explain why. >> inflation finally showing its biggest gain since february of 2013. oil flirts with that $50 mark and a chinese warning from larry fink weighing in on all of today's news. >> and tim cook is getting ready to head to india, but back here at home donald trump wants iphones to be made in the u.s. and we'll have a guest who says that actually that may make economic sense for apple. inflation data is the big story rising at the fastest pace in more than three years. our steve liesman is back at hq breaking down some of the numbers. >> yeah, some interesting numbers this morning, carl. a lot of the economists on wall street especially concerned about mountding price pressure. at bmo capital markets they're not concerned saying nothing could put the federal reserve into alert mode, but everything else i've read was the opposite. barclays says reduced slack in

the u.s. economy will continue to put upward pressure on prices. and at capital economics they're more excited yet saying we expect that rising inflation will force the fed to pick up the pace of rate hikes significantly in 2017. here's numbers we're talking about headline cpi coming in a tick above expectations. the core cpi coming in as expected 0.2. the economic growth part of the equation doing okay. housing starts up 6.6%. industrial production up 0.7%. but a lot of that was a weather effect because of utility production, so not too excited about the i.p. numbers there. get into the details of inflation. gasoline prices rebounding 8.1% along with that airline fares taking a tick up 1.1%. and rent still helping out the inflation numbers while new cars and apparel prices fell 0.3%. now let's take a look at the year over year numbers, which are the ones the fed watches up 2.1% on the core number, but headline number it's still marching up a little bit higher. and the expectation among a lot

of folks out there is say by the fall or the end of this year those headline and core numbers will reconnect again at that 2% level. and, sarah, that's where the fed wants it to be. so what we're seeing is the oil effect or the lower energy price effect washout that we're still getting some downward pressure on prices from imports that doesn't make it a slam dunk in terms of inflation, certainly something the federal reserve needs to be watching here. >> and of course the adults in the room stanley fisher told us this was going to happen. >> excellent point. >> where are we -- i mean, the core obviously is what they look at, the core inflation rate. what is the takeaway here reminding ourselves that we're still at emergency levels of interest rates. we've only had one interest rate from the floor here. >> i have to say to you, simon, when the federal reserve raised rates in december and then sand fisher told me that one of the things we want to do here is get out in front of what we know is going happen which is oil is not going to dpo down forever.

it didn't. the dollar won't go up forever in strength, it did not. so you would expect over time both of those things to wash out. so the idea of the federal reserve getting in front of those changes made a lot of sense to me. it was not the consensus of the board to do that though. they decided to wait essentially to see the whites of the eyes of inflags before they're going to shoot when it comes to interest rates. >> yeah, that discussion in tomorrow's minutes will be interesting as well from the last meeting. >> yeah, we'll watch that as well. >> steve liesman, thank you very much. meantime we're watching shares of home depot, biggest loser in the dow even though retailer beat on earnings and boosted guidance in part due to the strong rebound in the housing market and warmer weather. our courtney reagan has all the details from headquarters. interesting to see this decline here, courtney, with what looked like a pretty strong quarter. >> it is. i think the reason, sarah, on the call executives noted that comps decelerated from february to april from up 10% to just up 4%, still i think it's fair to say some signs of relief in retail. it's not totally surprising because consumer spending has

been strong on home and off price categories. but adding to many quarters of strength home depot still soaring past estimates for profit revenue and comparable sales, also raising full year earnings forecast. comp store sales impressive even if they declined up 7.4% for the u.s. on the call home depot did say transactions above $900 rose 9.5% for the quarter. spring is the holiday season for home improvement retailers, marks the start of the housing market high season and demand for outdoor merchandise. but that also means weather can impact demand. and we know it was kind of spotty, but home depot acknowledged inconsistent weather and still said it drove demand throughout the quarter. now, off price retailer tjx also posting a solid first quarter beating earnings estimates by 6 cents on stronger than expected revenues. like home depot comp sales up strong 7%, one weak spot is full-year forecast which is below the street due to some

negative expected drags from wage increases and currency. but tjx ceo ernie herman's tone calls the quarter excellent, shopper traffic strong. he goes onto say we are confident that we're growing our customer base and gaining market share. there's even a couple exclamation points in his quotation. children's place also reporting a strong quarter beating earnings consensus by wide margin. upping full year guidance even despite what the company calls a challenging environment and continued weakness in store traffic. so, sigh mmosimon, i think this better than what we saw last week for retail. >> i guess you would expect a ceo of that business to use exclamation marks. stay with us if you would. let's bring in a retail analyst at j.p. morgan. chris, what do you make of the fact we've not got better gains here on the stock price?

>> it is a little surprising. they beat the consensus in the first quarter by 7%. they grew comp 7%. it's $100 billion company. that is an outstanding number indeed. i think there's a couple things, one, they did talk to deceleration like courtney talked about, and that's a sore spot from last week with department stores seeing business really drop off in march and into april. but honestly that's not all that surprising to us. our azaleas haven't bloomed yet, i live in west chester county, it's been a cool, cool last four weeks. and there's a lot of spring business ahead. so we think the stock pulls back here, but ultimately the business is going to reaccelerate and the stock will accelerate. >> yeah, i mean, i guess the positioning statement is really that u.s. stores comparable sales are up 7.4%. when you talk about a deceleration which is a company doing extremely well and of course, chris, the stock has done extremely well, we have that 20% gain over the past year. >> yeah. >> where will it trade to if

they continue at this pace, do you think? >> i mean, ultimately for home depot it's one of the best executing companies across consumer and certainly in retail. it has one of the biggest amazon motes and frankly one of the best online platforms in our coverage. buying home depot today you're buying the sustainability of the earnings algorithm. they grew earnings 19% in the first quarter, guiding to 5% comps for balance of the year, 15% earnings growth. our research shows that share of while around the home is still four to five years off normal averages, not peak averages. so if h.d. sustains 15% to 20% earnings growth rate we think it holds the multiple and that's how much the stock will creep and pullback today provides opportunity to buy more. >> clearly consumers are a lot more willing to spend on home improvement than at department stores on apparel and accessories, chris, i wonder what these results say about lowe's tomorrow and even target and walmart, which are coming later this week and also in your

universe. >> absolutely. i think today's results and for the balance of the week it's going to show one important fact, which is the consumer's okay. it's not great. it's okay. in that there are secular issues around online threat, amazon really going after the apparel business, mall traffic down, that's more idiosyncratic to the department stores. as we look ahead to lows tomorrow, lowe's always trails home depot in terms of performance. we expect about a 5% comp tomorrow. and we think target and walmart will show some moderation particularly target relative to the last quarter, but overall put up overall in line sales growth in line with what people are expecting this quarter. >> i think another interesting point too on the home depot call is that the transactions above $900 grew 9.5%. and the transactions below $50 grew 2.5%. so maybe that's, you know, some consumer strength but even stronger professional strength. what do you make of that, chris, and how that potentially could

play out for lowe's? >> yeah. if you look at that what's interesting the consumer now that prices are recovering there are fewer houses under water this year relative to a year ago about 12% of homes are under watererer sus two or three years ago it was in the 30s. so people are spending on roofing, they're spending on windows, doors, they're doing that deferred maintenance. and they're also buying a lot of appliances because there's innovation there. that's a positive for lowe's. overall, but not as positive for h.d. home depot's pro business is about 40% of their sales. it's about 35% for lowe's. so they won't see the same lift. but clearly a positive. >> against the broader context, chris, probably worth pointing out you say the motor against amazon is quite strong, go into the store on advice something you need to buy something you can't get online and then you have the big items courtney and you were speaking about. in a sense a category that stands on its own as we see department stores stripped away

and people moving off to online. >> and that's exactly what's part of two things from that, one, that means it's going to maintain a higher than expected multiple than investors expect. we get a lot of investors calling out cyclical, you know, peak to trough d rating, it's going to maintain a high multiple. and the second thing is, you know, clearly as you move forward that amazon -- that low amazon risk is going to crowd more investors into the name. and that's probably why you're seeing a bit of a trade-off today. >> we used to call it customer service. chris, thank you very much for joining us from j.p. morgan and our very own courtney reagan. made in the usa, that's donald trump's message to apple. >> we're going to get apple to start building their damn computers and things in this country instead of in other countries. >> our next guest says trump's idea is not actually that crazy. he will explain after a break.

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apple shares still in the red barely today after warren buffett's rally the stock is down over 15% in the last month. so which stocks got swept away in that apple tide? susan lee is back at hq with more. >> good morning to you, simon. apple being the world's largest oil company by market cap at least on most days causes big ripples when a stock makes big moves. so we ran the calculations with

our partners at kent show and found the best and worst performing tech names when apple stock gets sliced. since apple's launch nine years ago there have been five times apple's stock dipped into or close to bear market territory which is down at least 19% in a month's time. facebook far and away the outperformer trading positive 100% of the time and gaining 4.3%. but you got to remember that fb has only been around as illicit company since 2012. netflix is another big tech name that's worth a look at. it trades up 45% of the time, and it averages returns of 1%. so then we have games maker a activision but down during an apple slide by around 3%. intuit beats the s&p during a big apple losing month though you can see it averages a 5% loss. so we should point out that typically when apple performs poorly in a month, the tech sector in a whole in particular underperform significantly.

get to the stocks that get hit the hardest, first solar lost 26% on average during a bad month for apple, seagate technology has historically fallen by 25% and so has qorvo and then we have salesforce which loses 16% when apple's down over 20% in the month and trades positively less than half the time. and that's a look at sector no, ma'am -- nomics for technology. susan li, thank you very much. dismissing donald trump's plans that apple build its iphones here in the u.s., our next guest says that quote for once donald trump's rant isn't so crazy. in a "the washington post" op-ed today stanford law fellow argues that it certainly is possible for apple to bring manufacturing back to the united states. and he joins us now in the cnbc newsline. good to speak with you. >> good to speak to you. >> so you think mr. trump is right and they should build their damn computers in this country, why? >> i hate using those words donald trump is right, but i looked into whether it was

possible, and i was really surprised at how feasible it seems. when you look at the value chain for its components. >> i mean, how would that work? because apple's value chain and its supply chain is so complex, so diversified, fox con, for instance, employs 1.4 million people. how do you bring jobs like that to the u.s.? >> well, first of all, that's the advantage. it's global. so less than half of the components are manufactured or made in china. and manufacturing is simply assembly. you're putting pieces together. you could import them in any other country and do the assembly. yes, at one point 1.4 million workers but fox con itself is looking at replacing workers with robots. imagine if you had the robots in america or in mexico. our robots are just as productive over chinese robots. they work 24/7, they don't commit suicide, it's a level playing field. >> i take your point on that. but if the whole idea is that

it's all being done by robots, then what's the benefit for promising on the campaign trail bringing the manufacturing revitalization back to this country? how many jobs can you really create if it's going to be automated and technology focused? >> you're still going to have to build factories and still have people operating robots and programming the robots. there are jobs, just fewer than there might be. if we get 200,000 jobs back instead of 1.1 million, those are very high paying jobs we're talking about. and then we don't have the dependency on china that we do today. china has been demanding companies give it, intellectual property, it's been robbing them blind and we have to ship goods all over the ocean to china and bring them back over here, which is destructive to the environment. imagine if we could do it in mexico or in oklahoma. >> i mean, the other argument which makes this whole idea that we shouldn't outsource a little outdated is that for companies

like apple and a lot of multinational companies, the demand growth is happening in places like china and the emerging markets. and in order to show those customers you're serious, you have to go there and build a presence and hire workers to try to get customers. >> true, but look at the way china shot out of the itunes market, the books market and so on. china is also trying to rob them blind. and to have its own company replicate what apple is doing. now become the largest smartphone manufacturer in china using technology stolen from apple. so, you know, it's a losing game. the next three or four years apple might do well in china, but look five or ten years in the future and it's very highly likely that china kicks out as soon as everything is stolen they leave from it. >> vivek, tim cook rose to prominence because of his ability to create a supply chain for apple as it stands at the moment. what do you think that he doesn't see that you see?

why would he first cite these factories where they are if your analysis is so accurate? >> well, it wasn't feasible to do robotic manufacturing for circuit boards until about a year ago. only in 2015 that you have a new generation of robots that are enough to thread a needle, abb from switzerland, the number of new robots that have come out that can do circuit board assembly. fox con had said four years ago replacing the minion, but the robots of four years ago couldn't do it. the new robots can. that's the key here robots do the manufacturing and you can now look at manufacturing plants closer to market. it's not that you won't have manufacturing in china, you'll manufacture in china for china, manufacture in the usa for north and south america. >> right. and have you put a figure -- forgive me, i haven't read the article. have you put a figure on the investment in robotics that would be required to replace 1.4 million people? >> fox con through a number out in india.

india basically has been very strict about not letting apple dump its old iphones in india and now suddenly apple is looking at manufacturing in india. the number is $10 billion as what it would take to do iphone manufacturing in india. my guess is that's about the right number. it will be about $10 billion to put an iphone factory back in the usa. but once you've done it, you're independent of china. >> well, it's certainly a view that's resonating with voters. i have a feeling we're going to talk a lot more about manufacturing in this country. vivek, thank you for calling in. stanford law fellow and out with the op-ed today in "the washington post." coming up after the break, one company is choosing to stay in north carolina despite that controversial hb 2 bill, the ceo of the company making that decision next on cnbc.

president obama yesterday telling buzz feed the north carolina bathroom law is a matter of dignity. take a listen. >> schools were asking us, were asking the department of education, how should we handle this? so they sought out some

clarification, some guidance. and that's what we did. we said, you know, it is our view that you should try to treat these kids with dignity. >> as some companies are deciding not to do business in north carolina, one company is pushing forward with its expansion into the state. joining us this morning the ceo of rayburn pharmaceuticals, she joins us at post nine. >> thank you. >> how close did you come to canceling plans to expand? >> we seriously considered moving to other states. it was quite a quandary for us right after the announcement we realized that durham county of course was opposed to the law. and so the people of durham county would be unfairly penalized if we were to leave. on the other hand we really strongly believed that hb2 is unjust and it needs to be overturned. and couldn't see placing our company's strong foothold of

manufacturing in r & d in a place where other companies would not necessarily be moving forward with the same kinds of progressi ivive policies as we y intend to have ourselves. >> your statement made the point that the a.g. argued to you, we can do more to fight this bill from within if you're here than if you simply walk away. who was prodding you to leave? who was saying don't do this? >> we were prodding ourselves. >> really? >> we were concerned that because dignity and diversity and inclusiveness are so core to our own business because we are committed to the cause of another group of stigmatized folks who are people suffering from the disease of opioid addiction, how could we tolerate stigma in any way in any of our citizens? so no one else was pushing us. the attorney general actually very strongly pushed we could do better by staying in the state and fighting the governor made

quite a case that especially with the new d.o.j. suit that has now become in the hands of the courts and it's become a national issue. >> can i pick up that point specifically? you detail in the press release the meeting that you had with north carolina's governor as you just said who explained now appears the federal courts will move swiftly to rule on the legality. is he behind closed doors therefore using the fact that the d.a. will challenge and maybe win as a screen with which to keep you in the state? because other businesses are probably not as vocal as they might be because they think it will probably be struck down business as usual? >> it's hard to say exactly what's in somebody's mind. all i can say is from our conversation he appears to be very compassionate towards the people of his state. there are definitely aspects of the bill that he personally disagrees with and said he would have vetoed if he could have had line item veto. but ultimately the issue as he

explained it is that there isn't a great definition of gender identity. and so he wants the courts to be able to weigh in on that. >> of course he didn't veto it. within hours he signed it into law very deliberately and made a big song and dance at the time about how it was a question of safety and so on at the time. in those meetings that you've had with him, i don't know as a private company what sort of incentives you have to expand in the state, but are the tax incentives rising or are they remaining as they are? >> the tax incentives were never really the key for us. the key was the talent pool available in the research triangle park area. and other states had equal or maybe even betterin se inincent. we didn't ask for additional incentives, we didn't get additional incentives. ultimately we decided for that 15-year-old transgender girl who would now have to be forced to go to a boy's bathroom, is it better for us to leave her or better for her to stay and fight for her rights beyond the

chamber of commerce, voice our opinion and talk other people into joining forces with us. >> there are still those who argue a ceo has a fiduciary duty, not to weigh social policy. what's wrong with that argument? >> we have a very strong social justice mandate as well as a businessman dait. and when it comes to bringing medicines to people with opioid addiction, we know if we do the right thing by patients we will absolutely succeed in our fiduciary responsibility to our investors. and we have great support from apple tree partners who is our main investor in all of those aspects. >> we appreciate you coming in and sharing the story. it's not going away for a while. meshad sheldon of braeburn pharmaceuticals. warning of china's mounting debt pushing for more aggressive reforms. josh ramo who ran the world economic forum once called one of china's leading foreign born

scholars will be joining us in a few minutes to weigh-in. day to"♪ ♪jake reese, "day to feel alive"♪ ♪jake reese, "day to feel alive"♪

i'm sharon epperson. here's your cnbc news update at this hour. a wave of bombings striking outdoor markets in shiite-dominated neighborhoods of baghdad killing at least 69 people. isis claiming responsibility for the deadliest bombings of the day. in that attack a roadside bomb exploded followed by a suicide bomber who blew himself up as people gathered to help victims of the first explosion. world and regional powers meeting in vi enna to try to shore up a shaky truce in syria. the u.n. special envoy said they failed to agree on a new date for peace talks between warring syrian parties. australian counterterrorism police carrying out raids across melbourne connected with five men planning to travel to syria to join isis. the five between 21 and 31 years

old were arrested last week. and the world's largest cruise ship docking in sou southampton after its maiden voyage from france. the harmony of the seas is taller than the eiffel tower. the 16-deck vessel, which cost $1 billion to build, both a 6,300 passenger capacity. that's our cnbc news update this hour. now this news alert ncht we're checking out shares of abbvie. a rheumatoid arthritis medicine humira brought in more than $14 billion in sales last year down almost 4%, shares of the challenger coherus up 24% before being halted earlier. this is supposed to be the first in many potential challenges underlying this patent. this particular review is expected to take a year and then they could -- sorry, they could appeal. again, abbvie down on a patent

challenge. sarah, back to you. keep an eye on that, thank you, meg. stocks meantime are in the red. we're off the lows with the dow now down more than 85 points despite a gain for oil and a rise in energy stocks. the big economic news of the morning inflation. the biggest jump in consumer prices in more than three years. joining us to discuss that and this market setup jason pride and jeff rosenberg, chief investment strategist for fixed income at black rock. jeff, are there any policy implications from the fed from this consumer price data? >> certainly the story has been that what has allowed the fed to stay on hold for a very long time is missing on the inflation side. what we've seen out of this report and some reports for some time now is that inflation and signs of inflation increasing are starting to show up. and so the concern in the markets are particularlnot out of today's report but what we've seen out of wage inflation that you're starting to see the inflation pressures build. and that this might begin to be

recognized by the fed and put some more pressure on expectations for fed to resume normalization. >> i mean, the data's been okay, if you look at it. jason, underlying inflation is building, construction is coming back, better starts this morning, retail sales beat for april. how do you square all of these reports if everyone still feels so lousy and corporate profits are not growing? >> i think what you need to look at is what a lot of economists refer to as sticky inflation. that wage component is the most sticky component within the inflation sort of data that we have. and what's going on there is the labor markets even though there are a lot of people that still can't seem to get into the jobs, there seems to be an underlying tightness in those markets when you dig into the corporate surveys whether it's nfib or the ism numbers, you find that there are a lot of job openings, but there is a lack of available supply of qualified applicants to fill those jobs, meaning that employers are feeling pressured

to increase wages in order to fill the spots that they have opening. that wage growth is starting to seep in. we're seeing it a little bit in cpi, a little bit in the wage numbers. we expect that's probably going to be creeping up and we'll proeblt keep some continuous pressure on the fed. at the end of the day though that pressure isn't overly strong, it's just enough to substantiate one to two interest rate hikes this year. it should keep them on a tightening path but a very slow tightening path. because we haven't seen a rampup into like 5% to 6% wage growth. we've just seen tickups into the 3.5% to 4% range. >> so i guess, jeff, the question to you is do you agree with that assessment of where we go from here in terms of fed policy skprks do investors agree? are they going to be caught surprised? the 10-year yield is barely budging right now at 1.74, it's not like people are imminently betting there will be a rate hike. >> you focused at the 10-year but you have to look at the short end of the curve to see what's going on with fed

expectations. we have seen basis points off the lows for the two-year example. we think that's because the market got a little too complacent on the idea that there would be no hikes at all this year. this is a fed that's still talking about two increases and the bond market barely has 18 basis points priced in for the entirety of 2016. so you take what jason just said in terms of the economic data and the wage inflation, the inflation print today and the risk is that the market got a little too complacent on fed normalization. >> but, jeff, how far does that run? i mean, a lot of people felt that the fed was deliberately putting itself behind the curve on inflation because the economy may be slowing down. if you look at what lacquer said yesterday, he said that the weakness we had in the economy at the beginning of the year has dissipated and he thinks june is on the stable. is this part of a sweep that we're going to see where suddenly people wake up and it will take time to digest today's figures and actually put june front and center, jeff. >> you know, it may be hard to put june front and center. the other question is whether july or september becomes more

likely. your question was how far can this run. and a big piece of that conversation is what happens to global and financial market conditions, what happens to the value of the dollar. you know, the fed took out their concern on global financial market conditions. we'd had this stabilization. and that creates an environment where you could bring back expectations for fed normalization. i think it will be limited to the extent you see a strong dollar response because that's been associated with some tightening in financial market conditions. >> so either way it seems like we can all agree, jason, that with inflation coming back you have to put the fed back on your radar. and you yourself said maybe one, two hikes this year. so how as a portfolio manager are you advising clients prepare for this? >> well, you know, i think you have to put into context one to two rate hikes, one is already essentially in the expectations, maybe it's a couple basis points away. two is not dramatically off of that. i think the market can absorb a two-rate hike in 2016 sort of scenario. it's not that draconian of a

rate hike pattern. it's not like four rate hikes piled on top of one another or anything like that. having said that our approach has been you stay with equities because we're still in an expansionary cycle but you realize we're in the later stage of the expansion where the fed does have to gradually increase interest rates, economic growth is a little sluggish, you're in an expansion, things are on the sluggish side so position with equities but position a slightly defensive sort of manner within those equities. >> i was going to say do you stay defensive, because year-to-date the best performing sectors are utility and telecom, in world of rising rates theoretically those shouldn't be the most popular, the dividend payers. >> i don't think you can really call it on a sector basis right now. we're actually taking a relatively sector agnostic approach. what's actually happened is the spreads within valuations within sectors have really gapped out. there are opportunities on a stock by stock basis within every one of those sectors, and there's an opportunity on the defensive basis where you can go with the more defensive peers

within a basket of sectors by comparison. and basically pick up protection and valuation side by side without giving up a lot. >> all right. guys, good discussion. thank you for joining us this morning. jason pride from glen meade and jeff rosenberg from black rock. when we come back, an interview with the ceo of kissinger associates and board member at fed ex and starbucks. meanwhile, dow continues to trade in a pretty tight range down 70 points.

retail stocks as a whole have been sliding, but savvy traders spot buying opportunities at a few choice companies. we'll tell you where they are and how to invest on tradingnation.cnbc.com. more "squawk on the street" coming up.

welcome back to "squawk on the street." stocks mostly lower. s&p down about seven points. consumer staples lagging by the most off more than a percent as you can see there among the names dragging the sector down

overall food and beverage stocks like constellation brands, hormel, campbell soup, for the year consumer staples as a sector up about 4%, so one of the relatively better performers, simon, still in this day. pushing for more video continue tent, shift in strategy. we'll join "squawk alley" to discuss the current state of digital media later. but after the break joshua ramo will join us on the other side of this break on his new book "the seventh sense."

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our next guest is the co-ceo of kissinger associates, a china expert that i often turn to to make sense of the world's second largest economy, a board member of starbucks and fed ex, joshua cooper ramo's new book "the seventh sense" aims to make sense of the emerging era of connectivity. he says it is as transformative as the enlightenment. that's a pretty big statement. of course i'm making it, but i read the book. >> thank you. >> and you make it as well. everything you look at whether it's a corporation, a human

being, i have to see not just what they are or it is but what its connections are to get a sense for it. >> that's right. as you look around the world to there is almost nothing behaving the way we would have expect. we thought the most expensive war on terrorism, we've had monetary policy designed to help the middle class for the last ten years almost hasn't helped the middle class. my argument is all these problems basically they're the same problem. they're driven in the way by which connectivity and networks fundamentally change the nature of an object. that's something that can be understood. and in the book i try to explain, i think it's an understandable concept. this idea when you look at something it's fundamentally different when it gets connected, whether stock exchange or dollar bill or doctor. >> you also seem to take to task many of the world's leaders including our own in terms of their failure to appreciate broadly speaking whether it's economics globally or foreign relations, these very thesis that you're putting forward. >> yeah, it's a generational shift. if you look around and we ask ourselves what are the most

transformative companies, what the people running those companies fundamentally understand is these network dynamics the way they work, it's also true people in isis understand these network dynamics. the very fact that these groups are out of power is what allows them to see these sort of lines and channels of influence that are otherwise invisible. and they are visible, i mean, the point of the book is to go case by case through the artificial intelligence guys, the guys running the most successful hedge funds, guys running the most successful terrorist organizations and map out what is it they see, what is it they know that we can learn from. >> we here at the new york stock exchange of course we hear a lot about corporations, you're on the board of two of them, i know you can't talk about deliberations per se but my sense is starbucks and fed ex do appreciate as many successful corporations these very things you're talking about. >> in my day job what i do in addition to writing these books is advise the ceos of some of the largest companies on earth. i think there's no question, you know, if you look back 100 years ago and identify what are the most successful companies, they all had an instinct for industry at scale.

they kind of knew how to build that. i think 50 years from now, 100 years from now we'll look back at companies and there will be companies that have 1 billion, 2 billion, 5 billion customers on their platforms. all of those ceos have a deep understanding of what connection means and a deep understa understanding of what connection means, and how it changes their companies. >> and there are allusions to donald trump, and the isis that they appreciated the networks in ways that others have not, and when it comes to mr. trump and your expertise in china, and joshua, what are you hearing from the leaders there in terms of what they hear him saying, and what impact? >> well, not just in china, but part of what i do is to travel around the world, and what is happening is people trying to make a judgment not just about the political candidates, but the political system as a whole. we are tenenter thing a profoun

point at where the country comes out of on this, and si a litmus test that this united states which was a huge dominant pow her in the industrial era, but what about the information technology? and so if you are looking at the billion users, the sew -- ceos are mostly american, so how you are g are going to be mapping it on is the thing that i try to get to in the book "seventh sense ". >> so will there a huge network, and somebody who is wanting to seemingly run fort president and wants to cut it off, is that a benefit or the detriment? h. >> and this is what network theory is going to el the us, if you are looking at the e period since the end of the cold war, the global gdp was out groan by

two time, and trade growth sips has been slower than the gdp growth, and the networks explain it. they begin by spreading very, very broadly, whether it is in your brains or elsewhere. then they entrench, and expand with a new thickness and effectiveness, so that the trade is not simply the pulling back which is a natural thing for trade to do, and ttp is an example of this to develop a robust framework that we are seeing not only in the united states, but around the world where the benefits of trade are less more valuable than the growth. >> and what about the drones, and the ai growth that has over # 1 billion increased users and why shouldn't we be as afraid as

we should. >> well, if this is as big as the industrial revolution, it wiped out huge continents and leader leaders, so it is really going to be something we should monitor. >> and i think it is f fascinating, and thank you for the book. >> and now over to the rick santelli at the cme. >> and welcome in bob stauffer. quickly what happened, up 0.4 on the cpi and the biggest change, and the industry up 3.4% and the year over year, the down is small e. and the prorated is six months with the two handle, and thor is vis sector is sticky at 3%.

why aren't the rates moving higher, body? is there any question in your mind why they shouldn't? >> no, there really isn't. first, the information here is the last pricing information we will get prior to the fed's meeting in june 14th, and it confirms that the core interest rate with cpi is 2%, and this and the other inflationary trends in the economy are going to be making it very difficult for the fed to say that the inflation will rate is not an excuse to raise the rates. >> and there are things that we deal with every year in life, and not every year, send the kids to college, and rent new house houses and contracts, but i can't help but notice when i am looki looking at the rents versus the first-time home buy er, i am'in

the 0.3 for people who can not afford the buy a new house, and so as long as that is sticky, some of the good goldilocks news that i keep hearing about the housing news is not spot on. bob? >> yes, as you have reported on the show, starter home sales permits and so forth are squares now, and this is pushing the home buyers into the rental unit, and pushing up the rent. this is a important component part of the consumer price index which is by the way, 2/3 of all of the consumer price index, and that is why the rate is going up 3%. it is going to continue, and again, one of the underlying

inflationary forces are there in the economy. one thing that is not emphasized is the fact that the labor costs have started to perk up. over the last year hourly rates up 2.5%, and the annual labor costs are up 2.5% over last y r year, and in the service industry where they have the power to raise the prices because of the limited competition, you will see the higher labor costs feed through, and retain the higher inflation rate for services. >> thank you, bob. always a pleasure to discuss the price for you, and what the outlook for inflation may or may not be. simon, hobbs, back to you. >> a lot more money is making more money. and now over the jon fortt for what is coming up on u alley." >> thank you, simon.

and for you, too, the lye games around and the recorded social game they have been in a long time, and we are going to dive into the numbers. amazon is holding the shareholder meet iing today as they are deeper on e speech, and automation, a wlepd see what is in forestore them, and the ceo of hp is going to talk about the future of 3d printing. all of that and more coming up on "squawk alley." recently, a 1954 mercedes-benz grand prix

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good morning, it is 8:00 a.m. at the amazon shareholder meeting, and 11:00 a.m. right here on "squawk alley." ♪ ♪ i have been drooling ♪ ♪ all this time baby ♪ i have been missing you ♪ the viewers love the led zeppelin.