who cares. the question is are they competent. do they know how to do their job? >> you don't believe anything she says then? >> i do believe a lot of things -- >> she's with bernie. >> no, she's not with bernie. >> almost. so you don't believe -- >> i watch what she and her husband did when they were in the white house before. and i have confidence that on the big issues they can solve them. >> all right. thank you. have a good day. >> my pleasure. >> that does it for us. make sure you join us tomorrow. right now it's time for "squawk on the street." ♪ good wednesday morning. welcome to "squawk on the street." i'm carl quintanilla with jim cramer and david faber at the new york stock exchange. futures week, if you thought the pain was over from retail earnings, think again. we're going to get to what target is calling a volatile consumer environment, goldman taking equities to neutral, overweighting cash. watch europe, got some new brexit polls to tell you about

this morning. yield curve continues to flatten and of course the fed minutes are on the way 2:00 p.m. eastern time. road map begins with target shares plunging after the company issues guidance. call will begin in just over an hour. >> goldman sachs downgrading equities saying there's no particular reason to own them. and fed minutes are coming out later today as the dollar hits a seven-week high. >> four years ago today facebook went public at the nasdaq. shares priced at $38, now closer to $120 on a day where mark zuckerberg is set to meet with some u.s. conservatives. first up, mixed picture on retail, target beats on quarterly profit but revenues and comps miss, current quarter guidance, lows better than expected results, comps up 3 surpassing home depot for the first time since 2010. and staples beats on the top and bottom line. hard to remember a time where lowe's it's routinely the bridesmaid here, not this time, jim. >> used to be for about four or five years during a period before frank blake got in. so now we're going way, way

back, frank is now retired. we want to see the breakdown of the month because home depot was up nicely, up a buck and a half before the call started. and in it we got basically a narrative which just said as the quarter went on things got worse. if lowe's says that, then it's going to be in keeping with what is now turning up to be a very bad april for the consumer. >> yeah. >> very bad. >> i spoke to somebody who decided to short home depot yesterday. i asked them why and they said, well, it's trading at 19 times earnings, the comps decelerated during the quarter to your point, jim. >> they did. >> and then larger question to whether we're going to see even more of a pullback as the presidential election season moves on through the summer and perhaps there's more uncertainty. i don't know the answer to that, but that certainly seems to play into some people's investment thesis. as for target, jim, i'm just curious, i mean, they didn't seem to take all the markdowns that they maybe should have. the inventories are up 4.3% whereas we know sales were down

and comp store sales were not where people or analysts who follow the company had anticipated they would be. and so looking at a stock down almost 8%. >> you read it absolutely perfectly. they didn't take the markdowns, where are the markdowns? in apparel, in consumer electronics, what is amazon done best? apparel, consumer electronics. now, by the way, target did have good online. i think target will struggle to figure out what happened. they could blame the consumer that puts pressure on a thesis that tjx and home depot could say, well, listen, people still spent, they just didn't spend as much. this is a watershed number unfortunately. i say that unfortunately, owned this since brian cornell came in, this is the beginning of what i regard as a may lets -- >> a what? >> a may lets. you mentioned politics, weather, politics, consumer are

conspireing to either change their habits. and whey they still spend on they still spend on make up -- >> i have to say online is up 10%. wages average is the highest since the recession. >> we're getting a government mandated increase in prices. don't forget the huge, huge overtime decision that the president -- >> we have secretary perez on later today. >> that will be terrific because this is a very big move for the middle class. we have the minimum wage going up. >> in a lot of statestates, rig >> we have gasoline coming back up, we didn't get the benefit and now going up and we get hurt. fed talk about need to raise rates to stop medical, which they can't do a thing about, which stop rent increase, which they can't do a thing about, and to stop commodities which they can do nothing about. so you have the worst of possible both worlds. consumer massive slowdown in april getting worse in may, the fed very worried about higher wages, mandated by the

government, and you have stock market that has no underpinnings other than potential takeover rumors. >> right. you didn't mention when it comes to retail you've got amazon, which is something we have come back to time and again here. >> no, no, they renamed it. >> what is it called now? >> gengkis khan. >> most people dna matches up to his. what am i trying to say? >> what are you watson? >> no, responsible for more people walking around on this planet right now than any other human being in history. >> there you go. >> we've talked so often about amazon and are we just now beginning to enter the eye of the storm for these retailers? >> yes. >> you can get a very divergent opinion but those who are negative on companies like target will simply say it's a value trap. the world has changed forever. and it's not going back. >> i think it's better than that

because they do have a raise on debt. when you have a baby, you go there, when you go to college you go there. but when i go over that nordstrom conference call, which was devastating, devastating which basically said, listen, if you can tell us what's the matter, we're all ears. you never want that. it's kind of like president roosevelt talking to general marshal saying, hey, man, what do you got there? you got anything cooking? which did not happen because they had a strategy. i think they have no strategy. they have no strategy for how things have moved. >> in ordnordstrom or target? >> target. i think you'll hear that. i think that will be a thesis. the only guy who's explained what's happening correctly is ellison at jc penney, which is what does he want to do? wood flooring, appliance, shades, window shades. sophora makeup when you go outside you have to look better. and that's it.

beauty parlor. kind of an ulta salon thesis. >> nothing if not consistent, jim, on those calls. >> well, you know what, i should have been telling everyone to sell everything retail other than makeup. >> well, it does lead us to this goldman note today. stocks poised to open lower in selloff, now goldman takes what it calls a fat and flat view on equities downgrading them to neutral over a 12-month time horizon. firm is upgrading commodities to neutral over three months citing some less downside potential regarding crude. in the note goldman says, quote, until we see sustained levels of growth recovery, we do not feel comfortable taking risk. our equity strategists have become more defensive owing to heightened drawdown risk and growth scarcity. they like, as we said, commodities. they like some emerging market fx, but their point is until you see sustained inflation in the u.s., stay in cash, overweight cash. >> can't disagree.

>> you don't have a problem? >> no, can't disagree with it. i happen to like his work very much. i'm somewhat partial to how he's had some pretty good theses, but this is right, i think. it's a bad setup. rates are up. okay. the dollar goes higher on rate increases, the one area we've been starting to kind of warming up to is international, i'm waiting for the chinese baltic freight, maybe that can be a little bit of hope. but we're in a moment where there is a way to get out of this jam, lower stock prices. >> that's it? sort of a -- there's one exit door and that's it. >> that's the exit. really think valuation. >> so you think we're in a jam? >> we're in a jam for -- because the fed -- look, we have to have someone frl federal reserve do some homework. sorry, i know it's such a jam with all that netflix and activision, youtube is like

seven hours a day and don't forget "game of thrones" that's a major impediment to doing homework. >> it is. >> but if they were on the jc penney, nordstrom -- >> wow, really depressed you. >> if they were on the kohl's call, shut up and close it, sears doesn't have calls mercifully. >> no. >> and they were going to be on the target call and on part of the home depot call which talked about the deceleration, they would say we've got to stop talking. we can't come on and say two to three rate hikes because the consumer's challenged and the only way the consumer get out of the jam is the government mandated higher labor costs, and that's what the fed is faced with. but instead they come on and they're cheery. and they're cheery because they haven't done the homework, which by the way is such a drag. it was my daughter's birthday last night, say, listen, i got to go, man. study this home depot conference call more. >> jim, they get every piece of data, they have data wrapped in data with data coming in through

the data that's wrapped through the data. come on. >> i got data too, and it's what the consumer's doing. and whether you're walmart, does that matter? >> they're not just in that brick ivory tower a few blocks away just sitting there thinking about it. >> no, they're in front of microphones talking. hey, you know what, these guys -- mr. lockhart, i mean, broken clock, how often is that right, man? that's dynamite twice. >> yep. williams, kaplan -- >> it's okay to criticize them. they're just people. i went to school with one of them. a really good guy. i was in classes with others. they're really fine people. sometimes i did better than they did, sometimes they do better than i do, sometimes they had better data, sometimes i had better papers, but that's all they are. they're people you went to school with. >> so that move yesterday in equities and in the two-year, this is all part and parcel of what you're saying? >> yeah. let's not forget that oil as it goes higher is going to breed rumors of takeover since the memorial deal.

but, you know, look, all i'm saying is you don't -- fed people should listen. they don't need to talk. but they seem to want to talk. and they make it very confusing. they make our jobs hard. they're part of the problem. cleaver had it, man, and i'm not talking about beaver. >> so you'd rather have them say we're done. >> i'd rather have them say, listen, guys, things are so influx. we don't know how much rate hikes would really do to cure the rent problem, the medicare problem. how do we do that? rate hikes really address the notion the oil companies will not be able to meet their debt so then they won't be able to produce as much which sends gasoline up even higher. so they have to think about their narrative. and, yes, they have good data, but do they have good digital data, david? do they know what amazon's doing? most of the ceos didn't. >> i'm hopeful that they do, but i don't know. >> they're better than terry

lundgren. >> they may not fully have understood the implications of the senior tranche of the cdo until it was too late. >> then it's a good chance to say nothing, do a little extra homework. i don't want to criticize them too much. the dog didn't eat their homework, but they're woefully behind in terms of what the digital economy is doing. whether it be uber, amazon, airbnb. >> all of those things also putting people out of work conceivably into the future. >> right. >> we may have a cyclical increase in employment -- >> universal basic income, ubi, get used to that. >> but we have -- >> just an allowance as robots replace. >> as robots replace everybody. >> bill gross, eric peters, everyone is writing about it. >> that's what we need to do to keep unrest at bay. it's only going one way here. >> on twitter more than 70% of the people said david was indeed a simulation, and you're not even there. >> i'm telling you --

>> i know your wife, i know your kids -- >> i got very lucky. they chose a good simulation for me. i feel like a very lucky man. because it could have been a really bad simulation of my life. so far though not too bad. >> we're all simulations with the exception the fed. they're real. they've done homework and they want the stock market lower. why not? you know, we have election. >> just chance you get a simulation just by chance? >> you got to ask -- >> is someone deciding we're going to give cramer a good life. and carl, but other people not so good for you. >> tesla and amazon, and then -- oh, and facebook because it's anniversary. and everything else other than takeover rumors, church and dwight, my friend, apache -- >> oh, you got it out there. >> yeah. >> when we come back, the road ahead for facebook, four years after the social network stock market debut. what a day that was. plus charter communications ceo tom rutledge, what's next for the company after closing its merger with time warner cable? s&p and nas down four of five,

goldman taking tesla to a buy. more from "squawk on the street" in a membership. so what else is new? how's your mother? umm..she's doing good. she needs more care though. she wants to stay in her house. i don't know even where to start with that. first, let's take a look at your financial plan and see what we can do. ok, so we've got... we'll listen. we'll talk. we'll plan. baird.

we are witnessing a lot of american wealth getting generated as we speak after years of people taking risks dealing with uncertainty, unknowns, rivals and this is the payoff. the opening bell mark zuckerberg and facebook. four years ago today facebook went public and since then the stock has tripled its ipo price of 38. social network now is a market cap of about $336 billion, one of the biggest in the world. even on that day we wondered if they were going to get out of the gate at all. >> did not go well that day to say the least. stock of course fell and dramatic failure on the nasdaq in terms of getting it working. but, you know, it's funny because then we all started to revisit it after a couple of quarters even, jim, we said wait a second, maybe they should have gone public earlier in their growth cycle when things were really ramping. and then suddenly they came back, figured out mobile and that was it. >> well, when mark zuckerberg

said don't come into my office unless you have something that's on this, that was the term, this is a man who recognized what the market wanted, realized his numbers were decelerating, realized i think ahead of everyone that actually facebook works better on this, that instagram works better on this, so he has the -- he is the right mojo. now, i got to tell you rgs i feel terrible for the people who cashed out. because when stock went to 18 there were a lot of people on air who were as wrong as when it went public. and the ideas you had -- the stock market was up way too much because overrun by retail orders, once it pulled back at 18, 19, he started pledging he was going to fix it. and he was good to his word. i think he can earn $7 in 2018. i don't think it's expensive. but i know in this market things are going to go down. but he figured it out. you got to give him credit. >> he did. you hold your phone up and of

course this is a larger form factor as i like to say than had been typical not that long ago, right? the bigger iphone, the samsungs, the bigger screen certainly had to help. and has, i think, also ushered in a new wave of willingness to advertise and had video because everybody's looking at stuff on a bigger screen. and maybe they're more likely to buy things. this gets back to our original conversation on retail too. maybe i buy a shirt i see on here where i wouldn't have -- i don't know. >> this is your mall, okay. this is something that is so powerful that we don't even know what it's going to bring us yet. this drives how you look. this is about you. it's about your pictures. it's about what you do. take a look at what people do. take a look at the way lives have changed because of this. and you realize it's very disruptive for everything we talk about. and very disruptive for apparel. if you sell apparel, i've got to tell you you are selling spam.

check that whormel had a great quarter too. >> you're right there was a time we took for granted the degree to which people wanted to show their pictures, message their friends and buy stuff easily. >> yeah. and for the most part this is a better way to shop. you don't have to go anywhere. you just go to the site of what you want and then you go to amazon and you buy it for the next day for half of what other side of what you want. and there's a business model. >> that's why you've got people spending an average of 50 minutes a day, isn't that right? 50 minutes a day the facebook user spends. >> when you want to watch the mets win 2-0, do you watch it on this or on tv? if it's blacked out -- it could be blacked out. >> i watched it last night on my big screen. it was baseball so i was reading target's conference call, time warner conference call getting ready for interviews but i was watching.

>> it changed habits and zuckerberg saw it, a young person who is -- these people in retail, look at their ages, look at their backgrounds. they're older. they don't seem to be in touch with what's happening right now at this moment. >> and this meeting today with diment and glenn beck. >> i think glenn beck will say, look, i think this is a good idea, i think you should do this, this, this. i think they'll do it. they're very open minded. and whatever issues will be will be gone. china's different. they got all speak mandarin and they got to all go over there and say -- i'm not saying they got to be pro -- >> bigger charm offensive. >> right. but they have to get china. >> we'll get cramer's mad dash as we count down to the opening bell, take one more look at the premarket which remains weak. we're awaiting the fed minutes, but everybody's still talking about retail earnings. we'll get to this japan q1 gdp in a minute. the e-class has 11 intelligent driver-assist systems.

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mercedes-benz dealer. ♪ all right. it's time for a mad dash with jim. his voice may not be standing tall, but you are. >> i don't have the voice mojo, but i have the research mojo. tony, a man that i've been somewhat critical of for saying -- for damning apple, basically keeping a buy but saying best days are behind it.

giving me a buy on it but questioning tim cook's leadership. he watches the show clearly, he even admitted he watched the show recently, he said hey, saw tim cook on jim cramer's show. this is one of my shows. >> yes, it is. >> $1 trillion target he uses today. >> 1 trillion. >> that's how you should gauge it. >> that's almost a double from here. >> he's talking about a family plan. he said people will accept the family plan because they're used to paying large amounts for technology utility, and apple family bundle could be coming. opportunity to migrate to subscription model. david, david -- >> yes, jim? >> this is the key. >> this is the key. >> this is the key? >> this is the key because apple needs to do this in order to stop being just a hand set company. and tony is great. yesterday he says this, today he says this. that's okay because it makes the business fun. >> okay. >> it's a long season, david.

>> it is a long season. >> it's a long season we're only a quarter away through it. >> we're not even close to done. >> i love this piece and i think it's totally right. by the way he's fabulous. >> i know, the law of large numbers and what they need from that business to actually move the needle, that's a lot of incremental revenue. >> well, yesterday he was talking about how they don't spend on r & d. today he's talking about how they could have a family plan that you and i would pay. we would pay. >> we always do, it seems, end up paying. all right. we got an opening bell and a lot more stocks to watch this morning. market looking like we'll stay in negative territory at the open, which is coming up next.

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double your money back guarantee. that's always discreet. you're watching cnbc "squawk on the street" live from the financial capital of the world. the opening bell in about 40 seconds. and what a day. we've got a lot we've not yet gotten to. goldman note going neutral on equities, fed minutes this afternoon, retail earnings, the google i.o. conference. this brexit poll. pound's at a two-week high today. >> and yet the dollar is back.

we haven't mentioned japan save gdp, circle back to the fact that lowe's is still hanging in there, which means that there is a part of the economy that can't be amazon. april lows may have done better than home depot. you're absolutely right. >> opening bell at the s&p on the bottom of your screen. at the big board cormedix. at nasdaq, national cinemedia participating in this week's upfronts here in new york city. so many headlines out of that bezos annual meeting yesterday. the most important ones arguably regarding aws, which has grown revenues at a faster rate than even their core business did, saying now a million customers will be 40% driven by renewable energy this year. >> yeah. i mean, this is the -- we talk a lot about disrupters on cnbc,

this may be the greatest disrup tor of all time. >> aws or cloud computing as a whole? >> the whole amazon is offering. they're saying use us, you know where i got this? there was this documentary on amazon where it said use amazon web services, we'll be your answers. guys they're being lulled into it and being crushed. >> they were early. amazon web services, as it was developed internally at amazon and then they decided to roll it out. man, the amount of energy taken up by all these server out there it's not actually in the clouds, i don't know if you knew that, it's actually on the ground. >> mark benioff tonight. >> yes, i'm with mark benioff tonight. i've been recommending dominion resources, why? they have the cheapest energy, server forms get sent there. >> i know a lot of these things need to be located near hydroelectric power plants.

>> ge came out yesterday talked about wind power. there's some surveys coming out about how wind power will increasingly being part of mix because the federal government keeps favoring it. we haven't talked about the tesla call today. >> not yet. >> the gold man-tesla call which is again all about alternative energy and love. >> goldman takes it to a buy, price target 2.50 and headline essentially saying price does not reflect the potential disruption, if you're a believer. >> all right. kids graduation, what do you want? what are you looking for? hoda was the fabulous commencement speaker. our own fabulous hoda. >> hoda kotb. >> and you're thinking what kind of job do they want? no, it's what kind of tesla do they want, is the model 3 good for me, is it really 30,000 --

no one's talking about waiting for a gm car, my friends. they want tesla. what kind of job you want? i don't know i want to be able to drive there in a tesla. does it have the mileage -- >> are they talking yet about self-driving vehicles? i guess this may be the last college graduates to learn how to drive -- to have learned how to drive. >> they all have uber. >> i can't tell you how many people i talk to who are in the business of investing who are focused on autonomous driving just as a theme in the belief that as it comes, as we get to semiautonomous and autonomous what it will mean for the economy, what it will mean for jobs, for the automakers, what it will mean in so many different areas. and the ben -- not the benefits that will potentially come to us and also what it will do to the job market. and then what you can do as an investor to benefit from it yourself. >> you know, mobile eye has been

the way, but people have lost money playing that. >> yes. >> people have not made money playing alphabet off of it. >> no. >> but i think again it's disruptive. and if you are a short seller, you would do better with it than a long buy. >> did want to get to the long saga of the sale of time warner cable because if you take a look at twc this morning you will not be able to trade it. it's because it no longer exists as a public company. the acquisition of time warner cable along with brighthouse networks by charter communications has been completed. and importantly a lot of cash is coming to the pockets of time warner cable shareholders. and there is some question as to whether they will quickly redeploy that in other names in the sector and what that will mean or whether they'll just sit on that cash. of course the deal a long time in coming. some significant constraints put on charter. we're going to talk to the chairman ceo tom rutledge later

in the program. >> that'd be great. >> about this. and don't forget it was our parent company comcast that had originally agreed to a deal to acquire time warner cable, but that deal was torn asunder by the regulators. >> right. by, the regulators, you know, i keep hearing there isn't a deal out there that people aren't worried about, whether it be dupont, walgreens, big insider sellers -- >> oh, the rite aid deal. there's tom rud rutledge. >> they tend to go out, staples, office depot, this government's the most aggressive to stop antitrust in 50 years. >> not to mention the hmo deals, humana, etna -- >> why do you think united health is doing bet sner because they can drop out of the exchanges and not worry about the antitrust guys coming down

on them. that's what's hurt -- >> takes to what donald trump told reuters yesterday about letting some of the big banks stay big and compete with the big european banks even as he essentially wants to dismantle dodd frank, have to take him very seriously as he's running even in some of these national polls. >> and he is -- you know, he is lower stock prices now. when you listen to him, he's more of a doomsayer about stocks. >> true. by the way on antitrust the decision from the judge, the full decision on staples odp came out, i think, it was yesterday, showing various areas where the judge decided to keep that injunction on the deal, dooming it, decided -- he agreed with the government in a lot of ways. even though amazon may be poised at some point to enter the market in a significant way, he decided the likes of mcdonald's and other corporations that testified or provided testimony would suffer if odp and staples became one company. >> it was odp's viability ever on the agenda? >> i don't know.

you think it is now? >> yes. i mean, i say that, look at sports authority. okay. there are only a few of those left, right? dick's, sports authority, sports authority goes under. i don't know, i certainly don't want to doom any retailer. you always want people to have jobs, but did the viability come up? is it possible that they'll go under? was that figured in? >> i know. >> i'd love to know. because i got to tell you, to me that's the real issue. and that was probably i think a driver of the actual deal. >> you mentioned hormel not being treated well despite beating by a penny, revenue matches raise their full year guidance on some of these pork margins. >> it's become then part of what happened yesterday, the clorox selloff. they decided to go after consumer package good stocks because those do poorly in an environment where the fed raised rates and hormel is lumped into that. you have to have a takeover rumor like a church and dwight to go up -- which would be very

obvious. that's one of the most highly valued companies in the industry. but that's out there. >> in media land you may notice shares of discovery down rather sharply. >> did you read that note? >> yeah, i did. took a look at citi this morning goes to a sell on scripps and discovery saying those two along with viacom which i think is already a sell there could be left behind in a skinny bundle world. and with the emergence of something like hulu, which may be also to give you some sports and then this mid range bundle of programming that they've been talking about in addition to all the video on demand options. i'm going to be speaking later today with jeffrey bewkes, great american. got an interview with mr. bewkes around 2:30. >> holy cow. he was such a visionary about keeping hbo within despite what a lot of the short-termers and flippers wanted him to do. >> that's true. >> iger making comments at an investor conference today.

>> yeah, a lot of guys were there, a lot of big ceos were there. >> iger saying he's a dedicated "game of thrones" watcher among other things. said "frozen" is coming to broadway in 2018. said that "star wars" and marvel have roic that makes the rest of the industry look silly. and i'm quoting. >> wow. and then we got a note from piper saying the upfront is a little better. i would not sell disney here. that's really interesting comments. the roic of these movies. >> also added shanghai disney has a character presence regarding marvel and "star wars," but those could be expanded to attractions or even entire lands. >> how did that movie that vaguely -- had a guy, a guy in stocks? how did that do? that movie? monstrous something? >> i think it had a rather quiet opening. >> did it? i think if they had actually talked about a guy who helped people and educated people, maybe it would have been better

outcome. >> i take it you haven't seen the movie, or have you? >> my wife -- >> apparently he's remarkably handsome. that's the takeaway. >> okay. as soon as lewis ck didn't get that job, i knew it wouldn't be me. but obviously it must not because george clooney not often mistaken for him. >> that one you don't get. >> no. >> lennon maybe. >> lennon would have been good. could have changed the equation. but, no, i think what happened is it just didn't have enough to do with the good part of "mad money" and that's why they needed lewis ck, could have been a dynamite movie. >> let's get to mary thompson. dow touching its lowest level since march 29th. good morning, mary. >> good morning to you, carl. the markets as you indicated extending losses from yesterday. the big selloff of course caused by expectations we could see interest rate hikes here in the u.s. sooner than expected on the back of some hotter than

expected data, and comments from a couple of nonvoting members of the federal reserve that said expect two to three rate hikes this year. both of those comments coming from fed officials who said similar things to steve liesman about two or three weeks ago, but the markets really took notice of it yesterday. right now the dow is off 57 points off its worst levels of the session. but what we want to do now is take a look at the s&p 500. one of the levels we're watching there is 2039, and the market's touching 2039 just a couple minutes ago bouncing off those levels, but keep watch on that. that is near-term support for the s&p 500. again, the markets facing another negative with that call out of goldman sachs saying they're negative on equities for the next 12 months in large part because of valuations and don't see any underlying growth in the economy to kind of justify any further purchases of equities at this time. the nasdaq as well in focus because it's very close to correction territory. the number that we're looking for there 4708.75, and you can see it is actually turned around. it was lower a little bit earlier, but again, posting a

slight gain right now up just about three points. retailers are one of the things we're watching as well because the numbers out today lowe's coming out with strong numbers, and also raising guidance for the full year. investors like the news a 3% target of course weaker because it lowered its guidance for the current quarter says concerns about the consumer putting pressure on that stock, that's pretty much bha we've heard from a number of other retailers of course that are focused on the apparel and home goods sector. staples slightly higher after reporting results that were pretty much in line with expectations even though same store sales were disappointing there. i was at a staples this weekend, the help was great but i tell you the parking lot was pretty much empty. and of course walmart will be reporting tomorrow. the last of the big retailers to report. energy also in focus as it has been for the past couple of days with this increase that we have seen in the price of crude, which continues to extend those gains now at 48.51. the api data released overnight was a little bit bearish nevertheless we're seeing strength today as again oil

continues to climb ahead of the d.o.e. numbers, chesapeake, and of course watching apache there was a report from industry newsletter saying it could be a takeover target of occidental petroleum today. and we want to end with anderson -- excuse me, let's talk about financials because there has also been a lot of reports and chatter about this flatter yield curve which would be a negative for the banks, but we are seeing actually financials get a little bit of a bid today. the ten-year note just passing that 1.8% yield there, so that's a positive for the financials right now. the dow, again, getting a little bit better. still off 47 points but certainly off the lows of the day. back to you. >> thank you, mary. let's get to the bond pits. rick santelli in chicago. good morning, rick. >> good morning, carl. i'm telling you what these option pits in chicago are not only highly peopled, they're pretty darn loud today as everything seems to be readjusting. if you want to be bullish, there's a part of the curve for you. you want to be less bullish, there's another part of the yield curve for you.

and finally the dollar's joining the parade. let's look at what's going on. let's look at a march 1st chart of two-year note yields. yes, we're getting close to 86, 85 now. the reason 86 important is you see on that chart that's that little kind of top there, april 26th, i believe, with a close of 86 base points. we're about to blow through that. if you look at the same time period for tens, there's your curve for you. you can see the right side is much less developed in terms of where it is in the high rate barometer. and if i were to go to 30s it would be even more exaggerated. but it isn't only 2s, it's 2s then a little bit of 3s and a little bit of 5s. it's kind of the short end. let's look at 30s minus 5s. there's a part of the yield curve we don't talk about. since march 1st a little bit of flattening going on there as well. you see that line falling down. if we do the traditional 10s to 2s which all of a sudden seems to be the darling of all research, yes, december 7th is the last time -- december of '07

is the last time we've seen these levels. i'm not sure that helps very much. what does it mean? short ends a little nervous about the fed, beyond that it's a roar shack in many respects, a one week of the dollar index and here's where i think it's important, listen, foreign exchange is all about what central banks do. and they all can't make their currency weak at the same time, see the drift up on the one-week chart open it up to 1 march 1st you see we're nowhere where we began the year but certainly off the bottom. >> thank you very much, rick santelli in chicago. when we return, apple's billion dollar bet on a chinese ride sharing start-up. you'll hear what the president of didi told cnbc, plus, labor secretary tom perez on the white house's new rule extending overtime pay to more than 4 million workers. dow's down 39 dragged down by walmart and the nasdaq once again in so-called correction territory. there's no one road out there.

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♪ ain't going down till the sun comes up ♪ still a lot of buzz surrounding apple's billion dollar investment in chinese ride sharing service didi. our eunice yun joins us from beijing with more. hey, eunice. >> reporter: hey, carl, didi's president said she had a very busy couple days playing host in part to apple's tim cook. she said the new relationship she has with apple is exciting and promising. she said that the companies haven't known each other for very long, but she is really excited about what she describes as endless possibilities for future collaboration. >> i was joking with my team it feels like a speed date. we got to know the apple team, they got to know us not too long ago, but we click very quickly. and because the two companies share a lot of similar philosophy, right, we both care

about community. we both want to have a collaborative and inclusive culture as a company culture. so that gives a lot of common ground, right. and in the same time in china we actually share a huge overlap in customer base. our driver base, our passengers, they use apple and iphone a lot, ipad. so i think it's very intuitive. >> reporter: and like many chinese companies, didi has scale. 300 million users across 400 cities with 14 million drivers making 11 million trips a day. now, even though jean liu says these numbers are impressive, by their estimates they think they only have 1% penetration in what they believe is a country that has 1.1 billion commutes a day. now, there's also been plenty of rumors this week about a possible ipo, maybe even in new york, and she said that as for

now there are no plans but that she is very confident in her position in this market against all of her rivals including uber. one thing though, carl, i think you're going to be hearing the name didi a lot more, so i thought i'd explain it a bit more. didi is chinese for beep-beep, and chuxing means mobility. they want to say they're moving beyond taxis to all sorts of transportation. >> that's a good explainer, eunice, thanks so much. >> great report. >> of course a day after jack at the white house unannounced, tim cook today moves onto india where he tweets great to hear from some of india's top ios developers, innovative apps and ideas for the future. >> this is green field, they are just now getting to the kind of infrastructure system that will allow them to be able to use the fancier phones, but i will say this, remember they have mom and pop stores. it's not like you're go to go --

go to verizon and have a big contract, but grass roots, good brand, you know i think india is going to be very big. a lot of people feel will be the biggest country in 2020. so i again am a believer in apple and think it should be owned, not traded. i don't like this quarter. i don't like the fact we have high profile guys downgrading it. makes no sense. because this is a bad quarter. >> right. >> i think target didn't even sell well electronics. but you have to understand that service revenue if they get it. >> yeah. we'll see. we'll see what happens by 2020. we'll get stop trading with jim. dow continues to trade in a range in the red down 55. don't go away.

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people have spoken. that's why j.p. morgan's up so much. this is a stock that is most responsive. second would be bank of america

but worried about rate regulation and what they're doing with their cash, but the market is saying you can own the banks because the rate hikes are coming. and frankly if the rate hikes are staged oefktively enough that won't crush the economy. but be aware that's what's going on. the money is flowing out of retail right into the banks. >> div hike doesn't hurt. >> doesn't hurt, but still 3% doesn't stop selling in consumer product goods. by the way, these retailers people don't even trust the yields anymore from macy's and kohl's and nordstrom. don't trust them. >> do you? >> no. >> i would think not. what would you say is more risky right now, energy dividend or retail dividend? >> energy still because they're not in control of their own destiny. the banks are in control. so the banks may say, listen, like when i'm with devin told you didn't have equity and agency -- rating agencies are in control of the oil companies, the retailers are still hopeful.

they keep hoping. they hope that people will come back. >> right around the next corner. >> maybe they'll come back. >> second half story. >> we're going to sell them some sweaters. yeah. >> what's on mad tonight? you know benioff. >> mark benioff for salesforce. zillow. i know that spencer should be here, but he's showing up on "mad money." and then udi mokady which i think has the keys to the kingdom in cyber security. but cyber security stocks have been bad because of the high multiple. technology connected with apple because of the trillion dollar call by tony, i really don't like it, but now i love it, trillion dollars. >> we'll see you tonight. vocal rest. >> it's just the voice, man. i'm speaking too much. >> "mad money" 6:00 p.m. >> i'm not going to talk to the wife. that's the way to do it. >> talking too much. >> when we come back labor secretary thomas perez on the white house's new overtime

payroll and charter communications tom rutledge completing that merger with time warner cable.

good wednesday 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. two-years seeing some action but being dragged down by goldman going to a neutral over equities over the next 12 months. crude hanging onto 48.50. our road map starts with more retail pain. target shares reeling. the company's revenue and outlook missing the mark, but lowe's and staples are looking up. >> facebook turns four as a public company today. ipo of course in 2012. what a better way to celebrate than a meeting with conservative media at headquarters in menlo park at potential bias at the platform. and a controversial decision from the white house unveiling the long-awaited rule to extend overtime pay. we'll talk to labor secretary thomas perez. s&p 500 almost exactly on the flat line, market edging up the probability of a summer interest rate hike.

senior economics reporter steve liesman is in washington ahead of course today the fed minutes and importantly vice chair stanley fisher speaking tomorrow. you know, steve, it's not just the strong retail data we've had or the lively inflation prints, it's also a perception in some people's eyes that you've got now coordinated hawkishness from some of the fed members. how do you see it? >> you know, i see a bunch of centerists stepping forward. you have three really elements combined, better economic data, stronger inflation numbers as well as hawkish fed speak from a few of the guys, maybe coordinating, maybe all coming from the same point of view. minutes of the fed's april meeting today they'll come out at 2:00 and they'll be closely scrutinized for any hints of when and if the central bank is preparing for the next hike. steven stanley thinks there will be some hints. the minutes will have hawkish tidbits that could finally shake market participants complacency towards the fed.

and ever co, we think the committee is closer to a hike even after the move this week. raising the yield on the two-year note by more than ten basis points in a week as the chance of a rate hike increasingly gets priced in. the actual probability of a june hike is very low just 14% but that's up from 4%. thinks the fed is more likely to hike in july after that brexit vote in june. now, in recent days as simon was alluding, san francisco fed president john williams he repeated remarks made to cnbc two weeks ago that two or three rate hikes are possible this year. reasonable he used with us, but boston fed president eric rosengren who the markets i believe have most pointedly ignored. he's a known committed dove, but recently said in weeks that the market is underestimating the path of the fed funds this year and markets don't seem to really care. noi, tomorrow, could be even more consequential than the minutes today. fed vice chair stan fisher, he

speaks, he's thought to be by markets more hawkish than fed chair janet yellen followed by new york fed president bill dud li. he'll give a speech and take questions from the press that could further press the case that, simon, investors may need to be prepared to trade fed fund futures from the beach this summer. >> yeah, i hear janet yellen's also pencilled in for harvard potentially on the 27th. >> yeah, there are some other speeches before that too. >> okay. all right. for more on this and where we are with the markets, let's bring in a global quantitative strategist with wells fargo and a global market strategist with j.p. morgan funds. samir, clearly a big divergence between where the market is and where the fed is on two to three interest rate hikes for the year. how live an issue is this for you as an investor or for someone who's advising investors on what the market will do? >> it's not really that big an issue because, again, you know, whether they raise rates once or twice or even three times, it

all comes back to the economic data. if they're doing it on the back of positive economic data, which then flows through into consumer spending, into earnings, again, we think that would be a good thing for the equity markets. >> that's kind of like a standard thing that you would always say. the perception had been that they would put themselves deliberately behind the curve because a lot of the asset markets can't take it. we have a generation of people who've operated on almost zero interest rates and therefore the fallout could be huge. now, if that is an erroneous argument, please tell me. no, i'm not scared about higher interest rates. >> i think again depends on which rates we're talking about. if you're talking about short-term interest rates if they were to go up on the short end of the curve i think savers would benefit. i think what's interesting once the fed starts to raise rates the long end starts to come down and flatten a little bit. again, what we're telling folks is don't take too much duration risk, but starting to put money in savers pockets through short-term interest rate hikes which then flatten the curve could be a really good thing. >> samantha, is your glass

equally half full? >> i would say it is. we're still constructive on stocks. i think it's important to note that the fed does control the short end of the curve, but that long end of the curve is controlled by forces way outside of janet yellen's control. so we're looking at treasury inflows, institutional foreign flows coming into our markets and those are upticked significantly since negative yields have come into play. so we think the long end of the curve is going to stay anchored regardless of what the fed does. >> so i'm really pleased that you're both here because i was concerned when i saw that goldman sachs this morning had downgraded its outlook on equities to neutral saying there's no particular reason to own them, samantha. you disagree with that as well presumably? >> i would disagree. i would say there's less upside maybe going forward, but we expect the market to grind higher. and we think there's more returns to be had. you have to be increasingly selective. maybe you don't want to own the bond proxies for example, but there is strength in the domestic economy, which means there will be strength in equities if we can just get earnings to pop.

>> and with regard to those bond proxies, samir, consumer staples and utilities are the worst performers in the s&p. carl mentioned banks are leaders along with technology. is this time to rotate in preparation for an interest rate hike out of those dividend paying yield stocks which have been the best performers this year and into some of the laggards like tech and financials have been waiting for the hike? >> we think so. we think the opportunity is you've got to go where the growth is. if you look at the earnings season we just got out of, top line there wasn't a lot of earnings growth, but get under the hood and look at places like technology, consumer discretionary, there's a lot of growth to be had. samantha mentioned you have to be more selective at this point in the cycle. >> i don't see that in technology. there was huge disappointment wasn't there for many of the technology issues. department stores are falling apart at the seams. maybe the narrative of having what we watch every morning is different from where you are. isn't the expectation -- samantha talks about a pop on earnings. we don't see a pop on earnings. we see earnings in decline, don't we? >> no, headline earnings are

flat. if you look at some of the sectors they're continuing to hit earnings peaks for the cycle. again, you have to be very selective. you can't just go out and buy broad discretionary. obviously there's a lot of undercurrents where, you know, places like amazon, online shopping is doing very well. so i would say, again, it has a lot more to do with at this point in the cycle you want to be a little bit more finesse of a player in equities than just throwing your money at them. >> finally, samantha, if you agree, then which sector are you in to capture the earnings growth if you presume that it does come back in the second half of the year? >> right, so i would just add we haven't seen earnings growth in the first half of the year. we wouldn't expect to see it. we are waiting for the second half of the year. and i do think investors are tired of -- and are maybe a little skeptical about easy monetary policy or buybacks, none of those things are going to bolster the market this year i think going forward, so we have to see earnings pop. if we don't that will be a different story. we're still optimistic we could see it in the second half of the

year. >> samantha -- i'm sorry, i thought you'd finished. complete your thought. >> just to answer sarah's question, sectors we like are based on the consumer, we like consumer discretionary, tech and health care. >> thank you. thank you both. the white house unveiling a major overhaul to overtime rules this morning. the labor department announcing an increase in the salary threshold under which virtually all workers are guaranteed time and a half. the new threshold now 47,500 is more than double the current rate potentially making 5 million more workers available for overtime pay. joining us first on cnbc this morning is u.s. labor secretary tom perez. mr. secretary good to have you with us. good morning. >> good morning. great to be with you. >> explain to the business community at least why this is necessary. >> well, this is necessary because the overtime rules have lost their luster because over the course of the last 30 or 40 years they have nonbeen indexed

and as a result people who had middle class jobs 30 years ago are no longer having middle class jobs. if you index this to the 1975 level, the threshold should have been 57,000. and so what we have right now are workers who work 70 hours a week and frankly get paid for 40 hours because the threshold right now is at 23,000 and change. and that is too low. and so it's brought about a litigation explosion as a result of the 2004 bush rule which changed the duties test and frankly shifted leverage from workers to employers. and so i think what this is going to provide for employers is clarity, what it's going to provide for workers is either more money or more time with their family. and for us what it does is it fortifies the basic pillars of worker protection, which is middle class jobs should pay middle class wages. and when you work extra, you

should be paid extra. >> we're always on the look out for the law of unintended consequences. so would it surprise you to see the workweek shortened for employers to stop giving as many hours certainly as many overtime hours? >> well, you know what, there's no freedom in working for free. and right now the way a number of business models have been structured is you have managers who are -- you have so-called managers who are working 70 hours a week, 99% of the work is stocking shelves, and it's very rational for an employer to make them do that work because they can do it for free. pay them $25,000 a year and that way they don't have to pay that front line worker. so actually the study from the national retail federation showed that one likely result of this is that there's going to be more hours for more people because what we're trying to do is make sure that people get paid for the time they work. so, yes, some supervisors who work 70 hours are only going to

have to work 40 hours, but as one of those people told me when i asked them when was the last time you had a vacation, they looked at me, laughed and said, vacation? vacation is a 40-hour week for me. so i think that person would welcome working 30 less hours because that time, you know, the value of time is a pretty remarkable value when you can get to dinner with your family and go to their baseball games and their recitals, things like that. >> i mean, it's interesting you brought up the national retail federation, mr. secretary, because they call these rules a, quote, career killer. talked about some of those consequences which could happen, why wouldn't a business just cut salaries across the board in order to afford these new overtime pay rules? especially at a time when we're getting retail report after retail report in terms of earnings that show their sales are declining, they're going through a very challenging period, and they're clearly not raising wages on their own. >> well, actually, i certainly

don't think that's true. yesterday when we rolled this out we were joined by the ceo of hgb grocery store. they have $23 billion in sales, their main competition in texas they have something like 90,000 employees and their main competition in texas is walmart. and they're very competitive. i don't want to put words in craig's mouth but what he said yesterday was we welcome this rule because we've learned that when you pay your workers a fair wage, you have a much more productive workforce. and so, you know, when i see the race to the bottom, which all too frequently is occurring, you know, there are so many employers out there whether it's craig yesterday, you know, kos koe and so many others who understand that it's a false choice to suggest that you either take care of your workers or you take care of your bottom line. one more data point, we estimate that this is going to eat into

one-tenth of 1% of profits. one-tenth of 1% of profits. that's hardly socialism. >> you did however, mr. secretary, use the expression race to the bottom. one of the things, one of the great things about this country is that everybody wants everybody else to do better. and that's kind of obvious. but people who travel particularly over the last year, 18 months, will see automation in airports or restaurants with ipads and tablets to an extent that they've never seen before. and there is always that question of substitution. you know, as the cost of technology falls, and it's visibly falling, and the cost of those businesses to borrow an investing technology is near zero, the danger is surely that you're at a tipping point where the best in the world you raise real wages but the effect of that in some areas unemployment is really quite big. i mean, you can see that as you go around the country. >> well, i think it's important to level set what this rule is

about. this rule is about the manager. he or she opens this door. they close this door. they go to the bank and deposit the money. they hire, they fire, they're the most important worker all too frequently in that organization. this is what we're talking about. and the employers that we spoke to in our year and a half-plus of outreach told us repeatedly that these are our most valuable workers. and that is why we need to pay them better. so i understand your point, but i think we have to level set this with the reality of where we are now, which is we have a situation where you can work 70 hours a week and literally make the poverty wage of $24,000, which is the current threshold. that isn't right. that is not consistent with the fair labor standards act. and that is why you see so many angry people in this country. they're angry for good reason because middle class jobs of yesterday got hollowed out not

because of some act of god, but they got hollowed out because the fair labor standards act, which is the crown jewel of worker protection, lost its luster. and it lost its luster because we don't index, until now. it lost its luster because you know what, the salary threshold was too low and the bush administration regs of 2004 they took all the leverage away from workers and gave them to employers. and that's not fair. >> mr. secretary, it's big news essentially for anyone watching our channel for sure. we appreciate your time. >> my pleasure. >> labor secretary tom perez joining us from the white house. coming up, retail numbers to digest, target shares under pressure down more than 9% right now. and charter closing itsz acquisition of time warner cable and brighthouse. the ceo of charter tom rutledge joins us in just a few moments. man 1: i came as fast as i could. what's up?

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retail stocks continue to struggle today. shares of target tumble down more than 9% at this hour. the retail giant reporting declining revenues and tougher times ahead. target's ceo brian cornell calling this a, quote, volatile consumer environment. for more on target and the rest of retail let's bring back paul trussell of deutsche bank, paul, when you see moves like this it's becoming sort of a regular thing down 9%, 10%. were analysts just not pessimistic enough on the quarter, or are the companies just that ugly and surprising in

their results? >> yeah, you know, i think that as we think about the last few weeks, retail has obviously disaspointed but it's been very focused within apparel. it's been very focused within the mall. and i think there's been a lot of conversation amongst the investor community that perhaps this was more a reflection of traffic simply going elsewhere, whether it's the amazon effect or trading down off price in t.j. maxx. target is a scary number frankly this morning in terms of second quarter guidance. this is a bread and butter consumer, consumables, household essentials, kind of everyday shopping retailer located in the suburbs. and so this type of deceleration certainly kind of puts us in question of the pace of consumer spending on a go for it basis. >> beyond apparel. >> well beyond apparel. >> interesting. >> and well beyond amazon.

this is now a question about consumers' health. >> then how do you explain what we saw in terms of retail sales in april? which was one of the biggest jumps in months, a big bounceback pretty much across the board. >> yeah, there's definitely being some disconnects between what we're seeing from a large scale kind of macro standpoint versus a kind of down-to-up kind of analysis. i will say that obviously there are segments of retail that are still doing well. home depot and lowe's, for example, and home improvement. we know that the consumer is still eating out. we know that there's still travel and entertainment and other goods being purchased. but what we do know is that perhaps apparel is the first category that that consumer has shied away from. >> stacey, let's bring you in here, specifically on target because it was an interesting one in the middle of a turnaround that was pretty successful. paul just called the second

quarter guidance scary. does this mean the turnaround at target has hit a wall? >> sarah, target has done the right things internally, cornell has done a really good job with the brick and mortar, the problem is this, the likes of target and walmart have underinvested in their e-commerce business. that's no secret. and right now they're in catchup mode. there's only under 4% of target sales that are online. so that is way too small for where we are in the cycle of the consumer transitioning online. and the other problem is now that the likes of walmart and target are in catchup mode, we know that as those sales migrate online away from brick and mortar it's a lower operating margin proposition. so that's a bit of a scary thought going forward as we look at these companies going into spend mode, particularly when the brick and mortar business is slowing down. >> stacey, i remember sitting here with you at the stock exchange either two or three

years ago and you were fresh from london and you said the one thing u.s. retailers do not understand is what zara and h & m particularly within apparel are about to do to them. h & m has 424 stores here, we have now zara with 68. >> yes. >> is underlying this what we're witnessing here that effect now playing out and an inability on the part of the retailers to correctly attribute it to simply being competed out of the market, or having them lower the prices with fast fashion? >> yes, simon, i do remember that well sitting with you two years ago. and we talked about the fact h & m and zara were just coming to the united states and everybody was underestimating their impact. the problem is this, people are spending not only transitioning to lower price points and disposable fast fashion, that's where the trend is going. you can't fight that. and companies, for example, like the gap that have not embraced the supply chain fast fashion model are frankly a dying breed.

you look at what has happened to that stock in the last three months. it's been cut in half. so, you know, you can't compete with these models and these supply chains and the speed and just sit and expect to charge money and have bad fashion in general and think that the consumer is not going to transition out of your brand. >> higher wages are probably making it difficult as well. finally, paul, walmart earnings tomorrow. are they insulated from any of this pain? because they have such large exposure to the grocery business? >> yeah, i think that they're definitely more insulated with 55% of their sales on the food side, certainly a lower income consumer who's benefitted from gas savings. at the same time just given target's tone around the second quarter i think the view has to be that there's a likelihood of deceleration at walmart as well. >> all right. we'll leave it there on that less than cheerful note. paul, thank you. as always, paul trussell from deutsche bank and stacey, good

to see you as always from sw retail advisors. when we come back, charter now the second largest cable and internet and tv provider. the chairman with us next. and live pictures of facebook's headquarters this morning where a dozen or more conservative leaders are set to meet with mark zuckerberg about potential allegations of bias at that company. more on that when we come back. this might look like a zero-gravity drop... but it's actually a triumph of predictive analytics. because of optum. through population health data, they provide insights so doctors and hospitals can identify high-risk patients. like me... asthma... potential hospital visit. so now thanks to optum, this asthma thing's under control. gravity not so much. this is healthier, powered by optum. from health plans to providers to employers. we connect all parts of health care. healthier is here.

charter today closing its deal to acquire time warner cable and brighthouse networks creating the second largest broadband provider in the country, the third largest pay tv company. joining me now with more details on the future of this became chairman today in fact did mr. rutledge, always nice to have you, tom. thank you for joining us. >> thank you, david. >> all right. here you are, it's finally done. what is your main focus over let's call it the next hundred days as you integrate these three companies? >> well, you know, our first process will be to try to just get to know the companies and

get organized and make sure everybody knows where they're supposed to go. but we have a game plan that will allow us to reprice and package all of our products and begin to re-brand our products. and start to improve all the products. we're going to go all digital and make every outlet we have a two-way interactive television outlet. we're going to take our data speeds up. we're going to repackage and reprice our voice product so that it's a fully featured service on every phone that we provide service to. and we're going to put that all into a compelling package and begin marketing it. so the first hundred days are really about laying the groundwork and starting the projects and then beginning to roll them out across the country in an orderly fashion. >> right. you mentioned data speeds of course, a key provision of the fcc's decision to allow the deal was this seven-year cap on data,

or on your ability to charge user base pricing for residential broadband service. there's the language behind it. they say it ensures the new charter will continue charter's past pricing and prohibit you as well in practices and protect subscribers from paying fees designed to make online video consumption more expensive. tom, does that hamper your ability to improve the profitability of the company? >> i don't think so. in fact, it's been charter's practice not to do usage based billing. we always thought it wasn't the most consumer friendly way to package data services and sell data services. and so the fcc would like us to do a different way of essentially segmenting the marketplace. and we have that ability and has been our business plan. in fact, we proposed a three-year cap on no usage based billing. and they extended it to seven. there's a five-year out if the market changes, but i don't

think we're going to need an out because i think we've got other ways of making the service attractive to the various market segments that are going to develop over the next seven years. >> in previous interviews you and i have talked about the proliferation of over the top programming bundles, and we talked about it, i also note that the fcc also says that they for seven years new charter will not -- they will make sure -- and prohibit you from entering or forcing ce inine ining contr penalizing anybody online, i don't know if you plan to do that but again my question is does that hamper your ability to run the company in the way you want to? >> no, i don't think so. in fact that was a concern of the fcc's at the time, they found no contracts that did that. it wasn't our practice to do it. wasn't our intent to do it.

we actually embrace over the top. charter has a great video business and we sell video to 17-plus million new customers in the company. we have a great data business, we have a great voice business. we want to sell all our products to our customers and the best is it does video well. so it's really in our interest to support over the top, and we do. and we plan to integrate over the top television with traditional television so that it's a seamless viewing experience for the customer. so i don't think the line -- >> does that mean netflix will just be on my cable box? or hulu? >> yes. that means that we'll be able to put those into the same user interface so that you can be able to search all the products that you have, whether it be an over the top service like netflix or hulu along with traditional networks like cnbc. >> you know, on the subject of over the top, hulu itself made an announcement a couple of

weeks back about a new approach in terms of providing a fairly robust bundle of programming. bob iger was talking about it on his conference call recently on may 10th. and he sort of characterized it as being between the big expanded basic bundle category and the lighter packages, talking about the feeling really good about the opportunity. i guess as somebody who's paying all that money to these programmers, how do you feel about the growth of a company or an offering that hulu is talking about right now with all of these programming partners? >> well, you know, it is true we pay a lot of money. in fact, the new charter will be paying $9 billion a year to programming companies. and that in addition to those license fees there's another 4 billion or 5 billion of advertising on top of that that comes as a result of our distribution. so, you know, we're a significant contributor to the development of content. and i'm not sure what the

business strategy of the new hulu product is, but my guess is that it's really designed to reach a niche product -- a niche market that wants something less than the total service of today and is unwilling to pay for the total service of today. but obviously if it were the main product, it would be lesser of a product for everyone and it would be a very different television ecosystem if that were the case. >> yeah, but i guess i wonder whether you're going to keep paying more for programming while you have fewer and fewer video subscribers. is that going to continue? >> well, you know, actually we're growing video subscribers. we've grown video subscribers all last year. we grew video subscribers in the first quarter this year. even time warner cable is growing video subscribers. so we expect the new cable company, the new charter, to grow video. we think we have a great video product. we think that we can grow at the expense of other video services

like satellite and telephone companies video. and, yes, there's other disruptive services and technologies out there, but most people who buy netflix also buy our service. so we expect to continue to grow. >> well, tom, we're out of time because of course we always have to sell our advertising, as one cable network that you carry. >> good. >> by the way i'm going to be keeping a close eye because now you are my cable provider as well and probably a lot of the other people i'm sitting here at the desk with. >> well, give us a few weeks to work it out. >> all right. we will do that. a few weeks and then the calls will start. tom rutledge, chairman and ceo of charter, thank you. meantime stocks have turned positive. dow is up about 36 points thanks to j.p. morgan and goldman sachs in the lead. it is also time to get to sue herera with a cnbc news update. >> hi, sarah. good morning everybody. i'm sue herera and here is the news update this hour. a powerful magnitude 6.7 aftershock rattled ecuador near

the pacific coast area where a devastating earthquake hit a month ago. ecuador's president says there was no tsunami alert. only limited damage was reported. the quake last month though killed more than 600 people and left 28,000 people homeless. iraq releasing video showing coalition aircraft bombing various isis targets in the country's northern and western districts. it said the jets were able to destroy an oil station near mosul and other targets. dramatic video of the rescue of a man trapped in a burning suv has been released by police in alaska. this is dash cam footage, and you can see the smoke billowing from the vehicle as the officer arrives. he and bystanders work together to free the trapped driver before the car is completely engulfed in flames. and the rare pear-shaped pink diamond we told you about last month sold for $31.5 million at sotheby's auction in geneva. that diamond weighing more than 15 carats.

it was sold to an unidentified telephone bidder. wow, that's the cnbc news update this hour. simon, they say they are a girl's best friend. and you've cheered everybody up with that, sue, thank you very much. >> excellent. the dow is higher up 31 points at the moment. it's interesting in the way banks notably j.p. morgan up 3% and goldman sachs leading us higher. coming up more on the meeting between facebook and mark zuckerberg and conservative media leaders after this break.

conservative leaders meeting with facebook's ceo mark zuckerberg today in menlo park, all related to those claims that the company suppressed conservative news outlets in its trending topics section of the website. our eamon javers is in washington with more details on what is sure to be an interesting meeting. >> that's right, sarah. remember this controversy began with a report anonymously sourced on the website gizmoto

cited several former facebook employees who said the employees there were suppressing conservative viewpoints particularly on facebook's trending topics section of its news feed. facebook denied that that was the case, but the controversy me tast sized ironically enough on social media as much as on broadcast and print media. and facebook now feels like it has to do some damage control here, so they're hosting this meeting. we're told it's going to happen in the afternoon pacific time, so late in the day here on the east coast. here are some of the people we know who are going to be invited to the meeting including glenn beck of the blaze and dana perino, jim demint of the heritage foundation and also s.e. cupp, conservative commentator for cnn. no elected officials we can tell will be in the room. this gives you an indication of just who facebook thinks is running the conservative movement right now. very heavy on media figures, less so on actual politicians, but also it gives you a sense that facebook really wants the

contents of this meeting this afternoon to be broadcast far and wide as all those pundits presumably will rush back to their news outlets and give us a report on exactly what took place today. so facebook clearly making an effort here to reach out and cultivate conservative leaders. we'll see where all this goes, sarah, in the days and weeks to come. >> thank you very much for that eamon, eamon javers in washington. when we come back, outrage at airports. the tsa warning of longer lines, airports and fliers up in arms. is it possible for airports to just simply replace some members of the tsa? surprisingly yes, that story and the man behind it coming up.

stocks have been stuck the past year. what's it going to take to bring us back into the market? one technician has the theory. he will break it down on tradingnation.cnbc.com. more "squawk on the street" coming up.

welcome back to "squawk on

the street." stocks marginally higher ahead of the fed release this afternoon for the minutes. financials the leading sector in the s&p 500 up by about a percent as you can see there. lincoln national all up by around 3% in the early trade. for the year the financial sector one of the year's worst performers down around 3% year-to-date also keeping an eye on the bank etfs like the spdr kre having its best day in months, sarah, back to you. comes back to the treasury market, thanks, dom. let's go to the cme group and rick santelli at the exchange. >> good morning, sarah. and good morning an di, how are you doing today, andy? >> good morning, rick. i'm good. >> well, listen, you know, it's all about in many ways crisis avoidance when i think china. and you're my china all that is china guy. now, maybe a crisis has been avoided, and maybe lots of liquidity and debt was created, but just because you avoid a crisis doesn't mean that the opposite is going to occur and it's going to go from less

crisis to more growth, does it, andy? your thoughts. >> that's a really good point because people have been talking about impending doom and crisis in china for at least a decade. and it hasn't happened. so what we have to ask ourselves as investors is the chinese economy faces a lot of challenges, debt for example, but are these challenges going to result in crisis, or are they going to result in what we've seen over the last ten years, which is gradually slower growth, more volatility but still tremendous opportunity? >> absolutely. now, when it comes to debt and all the shadow banking and all the banks lending government directing money through the banks and the banks basically incestuous with the business, that is quadrupled according to that mckenzie study we all love to read from $7 trillion right around post crisis to somewhere just under $30 trillion today. what are the ramifications of that outside of the fact it's obviously going to diminish future growth? >> right. the question is is growth going

to continue to decelerate gradually? remember, china's growth peaked in 2007. or is this going to result in a crisis? and what you highlighted is really important. this is the state instructing state-controlled banks to lend money to state-controlled enterprises. so this is not going to be a debt unwinding like we had here. it's going to be a much more orderly process with a process and timing controlled by the state. >> now, here's the other thing, andy, we could talk about china, everybody's fascinated with it, but from a macro level, the "new york times" shut down "the wall street journal" shut down, many companies can't get in, if you're on tv over there and you say something bad about the economy, you disappear. are we all just kind of ignoring the reality of the fact that everything we're talking about is built on thin ice anyway with regard to quantifying the data and the facts? >> well, actually, i've said a lot of pretty harsh things about

the chinese economy on tv in china and i'm still here. it is unfortunate when you talk about politics in china you run the risk of the wrath of the government. but in terms of economics the exchange is still pretty vibrant. i was just there again a couple weeks ago and met with economists from chinese banks and from the government, and i think the debate is still quite strong there. but we have to remember that we really need to pay attention to what happens in china because china accounts for one-third of global growth today. that's greater than the contribution of global growth coming from the u.s., europe and japan combined. in fact, if you look at all of the asian countries invested in that's 60% of global growth. we have to invest it. >> excellent. andy, that's why we like to talk to you. we read all these stories, firsthand is the best hand. thanks, andy. back to sarah. rick, thank you very much. the summer travel season is just kicking off, but the lines are getting longer and longer at the airports. we've got a live shot here lines

at chicago's o'hare airport. the debate intensifying on whether or not to keep the tsa. representative john mica is here to weigh in next.

outrage at airports growing. marathon security lines leading to thousands of people now missing flights. chicago's o'hare is telling the passengers to arrive three hours early. congress meanwhile approving $34 million for extra tsa officers and to pay the overtime bills. joining us is the chairman of the subcommittee on government operations, and republican congressman john mika who had previous legislation to make it easier for the airports to ditch the tsa all together in favor of the private security operators, and congressman, good morning. the trade unions say, we are down 5,000 officers over three years, and the volume is up 15%, and do you have sympathy with the view? >> no. >> why? >> well, first of all, republicans who have been in control of the last three or four years each year we have given tsa more money than the

administration has requested for tsa, and in addition we gave them an inkrecrease, the abilito increase the fee. when we set up the tsa we set up $5 as the fee to process the passenger and it has not been changed for years. so now for every increased passenger, they are getting increased funding to process the passengers faster, but tsa can't manage. they are late at the gate with this proposal, and they changed the method of screening last fa fall, because they were failing 95% of the time according to leaked press reports, and now they are cracking down on 99% of the people who pose no risk, and not doing the government job which is going after people who pose a risk and getting the intelligence, and doing the information that government is supposed to do and collect, and go after the bad people, and now they are hammering all of the innocent folks. >> and you changed the law four

years ago to make ut easier for the airports to employ private security contractors and only 24 airports have done that so far, and why so few? >> well, that is because tsa has had a gestapo-like approach for any airport that wanted to opt out, and they have gone in to hammer the folk, and they took control and we started out with 16,500, and then we went to 2 #,000, and then 28,000, and at 35, it was leaked to the press that they had a performance failure rate of 75%, and now we are up to 45,000, and the failure rate is 95%. but very few airports have opted out, because of the pressure. this is first with the department of transportation when it went to homeland security, and they took it over and created a huge bureaucracy, and 45,000 screeners and then 13,000 people within just a few miles of where i can be standing

with 4,000 bureaucrats making on average $50,000 a year, and so we have models, and other airports who do it. >> and how do we move on forward from here, and what is the answer? >> right now, i am writing all of the airports to remind them that will there is a simplified process which took me four years to get it in place, and now the tsa must take the application, and before it is optional and they would not the grant it. so we are hoping the make the transition, and in the meantime, tsa is announcing that 10-point program, and it is not a question of more money, because they get information on how many flights are coming into every airport weeks and months in advance, but they can't even staff to traffic. instead, they want to pay more overtime, and spend more money,

and they can't fill the positions, because they have 5,000 positions last year, and they filled 500 of them, and then of the ones that they fill, 30% according to the testimony at our hearing rekrecently, 30% the few that they hire wash out within the first year. >> and so, tell me, because there are people watching who believe that fundamentally people in the public service putting safety above alles here, and maybe that is sacrificed to the extent if you put a private operator in and presumably incentivize them on the lateness of flights, and that type of thing, and what about the legitimate concerns that people might have there. >> absolutely, the opposite. because when we set this up, i had five airports with private screening under federal supervision, and the government's role is to supervise and set up the protocols and audit the system, and then hay had it independently tested and the results came back that private

screening under supervision performed significantly better and so they are not only better at managing the people, but they pay the people more than some of the all federal systems, but they can schedule and handle people. they can schedule to traffic, and tsa is a huge bureaucracy, and they can't get it right, and it has not gotten it right, and they cannot recruit, and they cannot train or retain and they cannot certainly administer that workforce. >> it is good to see you, sir. and thank you for sparing the time. and republican congressman john mi mica there on behalf. and we have a call in from mark cuban and dallas mavericks' owner, and "shark tank" investor to react to new donald trump comments talking about a tech bubble liken iing the market to 2007, and mr. cuban, are you on? good to speak with you.

>> yes, i'm here. >> and what is your reactions, because so far, the trump's comments are met with mockery from silicon valley. what do you say? >> in terms of the private tech investments, there is certainly a bubble, and if you look at the vc and look at guys like bill gurley are saying, and if you invest and you have no liquidity for the investment for more than a de-cade, you are stuck. so while we are not in a bubble like we had in 2000, and not the same at all, because we are talking about the private companies, but for private investments, you are stuck. you know, if you make the investment in a private company today, because of the culture that says, particularly in silicon valley that says you should not go public, you need to write it down to zero e immediately, because you have no liquidity with five or six exceptions, and some companies that are actually profitable. so will whether or not you want to term it a bubble, it is up to you, but it is not good for the

private investors right now. >> and you have been warning for a year now, and what trump's comments are saying that this is happening in the private market, and he likened it to the stock market 2007 with the valuations ta are frothy, and the companies that don't make money, and valued at millions of dollars in the market. >> well, it is 180 degrees wrong, because they are not going to public. and we don't have frothy valuation valuations, but it is because there are no tech companies with high growth rate to get the frothy valuation. that is the problem. if you are looking at the high growth companies are today that have under $100 billion market caps? netflix? how many are there? that is the real problem in the market. what is happening, because the companies are refusing to go public, it is if you want to talk about the valley, the whole ethos is that it is not to go public and it is crushing the

stock market and we have gone from 8,500 to under 3,800 to declining, and imagine if twitch was a public company or oculus or zip zap and not only would the markets be fun and high growth companies to talk about, but the positioning of facebook and youtube and google and the positioning of amazon would be completely different. these are four examples, and what you are getting instead is that i saw a little study that said that since 2010 in total raise ed d in the ipos, 4% havee to chinese companies, and that is crazy. we are, where silicon valley is so wrong and hurting the economy is that we have to get them thinking again that, you know, to take the companies public, because the market needs them and donald is 180% wrong. >> and why are people like per