make sure you join us tomorrow. "squawk on the street" begins in four seconds. >> two, one. >> two, one, there. ♪ good wednesday morning. welcome to "squawk on the street." i'm carl quintanilla with jim cramer, david faber at the new york stock exchange. premarket is looking to build on yesterday's rally, the best day for the s&p since march 11. setup is constructive in europe as german confidence comes in the strongest since september. watch for more fed speak today. oil within sight of 50 yet again. inventory's at 10:30. and in a few moments hp's meg whitman of the planned spin-off of the enterprise services. we'll begin with the fed. st. louis fed president jim

bullard told cnbc about a potential june hike. >> obviously we've tried to be data dependent, and i don't think there's any reason to prejudge the june meeting at this point. we can wait until we get to the meeting, see what the data say and try to make a good decision there. i think on the issue of press conferences we have made many moves over the years without press conferences, so i think you could make a move without a press conference in this circumstance. the labor market data, as i said, if you just took your signal from that, we'd definitely move, i think. >> as a reminder, june is scheduled to have a presser, july is not. says we're at or beyond full employment, jim. >> right. now, he had wavered last time because he felt if oil went to 20 then he would be a lot less willing to hike. obviously oil went the opposite way, so i think he goes the opposite way. and i think he's being very considered, making good judgments. yeah, if the numbers continue to

be this strong, yesterday's number from toll brothers in keeping with the housing data really awesome. that by the way was an unbelievable conference call. >> not to mention the new home sales number. >> the home sales number -- >> so if all that's true, why the flat curve? why the appetite for the two-year, one of the strongest auctions in years? >> i think a lot of people are betting a lot of different ways. and that's one of the reasons why we've seen craziness. like for instance for the longest time if the dollar was strong we had to sell a market. well, that's proven -- that algo is gone. a lot of the algorithms, a lot of the patterns we've seen of 2016 are being upended right here. i don't know if that's someone taking a long memorial day break, some hedge fund. >> or could be the ph.d.s and mathematic at these funds rejig rating algorithms because it could be the time of year, past years, relationship changes or something else that we're unaware of that comes into the algo that then makes it, no, we

don't necessarily sell stocks when the dollar goes up. >> we're not being facetious. >> no, this is the way the market runs. >> there has been a break. now, there was a moment -- bob toll, i've loved bob toll -- i've been following every one of his conference calls. he literally comes out last night in his call and said if the fed goes up and the mortgage rates go up an eighth or a quarter, that doesn't mean we shut down. that probably means price increases soon which spurs demand and action. bob toll saying if they raise rates it's good for housing. wow. that's an algo buster right there. >> yeah. >> says it's going to bring buyers from the sidelines. he's now pro rate hike. look, i'm passing it on. >> just the messenger. >> i'm just the messenger. and i just thought this was -- i mean, people don't understand bob toll is probably -- excuse me, other than stewart miller, no, no, i love stu, but his dad, leonard miller, was a great home builder. but bob toll is the dean.

and if bob toll said it's ready, demand is getting better and better, then i can -- i'm with bob. as he said about demand with 4.9 -- we have very few homes, only 4.7 months of inventory. he said it better than any of us older cohort, when you're out of slits, you're out of beer. >> almost out of hopes. >> isn't that great? >> meanwhile yesterday you said this is how you put together a rally in tech when netflix, fang -- >> oh, my god. >> western dig. >> and then hpe, western dij meeting tomorrow. going to be microsoft. the note looks like it has resonance -- salesforce, all-time high. adobe all-time high. these are the makings ever since that applied materials call. and that hpe when we hear what she's doing on networking, tim cook in india. you know, india has such a small

penetration of smartphones. and then, you know, siri, could that be a new revenue stream? this is how it happens. >> best s&p name still in video for the year. >> graphical user interface. >> yeah, there are thoughts they're going to be in all sorts of things beyond a.i. >> they're in the audi. >> autonomous vehicle take it to a higher level. >> video games, video games, medical, and intel could have bought them. intel could have bought them. intel could have bought them. >> we need seat belts on these chairs. >> nvidia such a good company. >> when we come back, a spin-off plan and stock surge for hewlett packard enterprise. meg whitman will join us in just a minute. they found out who's been hacking into our network.

who? guess. i don't know, some kids in a basement? you watch too many movies. who? a small business in china. a business? they work nine to five. they take lunch hours. like a job? like a job. we tracked them. how did we do that? we have some new guys defending our network. new guys? well, they're not that new. they've been defending things for a long time. [ digital typewriting ] it's not just security. it's defense. bae systems.

shares of hewlett packard enterprise are surging this morning this after the company announced late yesterday it would spin-off its enterprise unit it and merge with cnc in an $8.5 billion transaction. also reported quarterly earnings in line with analyst expectations. its revenue number was ahead of those expectations. joining us now with all the details of the deal on the quarter, meg whitman, chairman and ceo of hewlett packard enterprise. nice to have you. >> thank you very much.

>> you're onset again. >> yeah, it's great. >> let's start off with the deal itself of course. you got a couple questions on the conference call and you and i talked yesterday as well and one of the key ones is why now. there are some people who believe enterprise service is just starting to ramp and a billion in profits -- operating profits this year, could be a billion-two next year. why choose to gent set it now. >> we're really proud of the turnaround. this transaction unlocks value for both companies. first, it creates two new companies. so the enterprise services, csc company will be a $26 billion pure play industry leader. and that's important because i think that part of the business is got to consolidate and always better to be on the front end of consolidation than the back end. >> why do you think that business is going to consolidate? >> ito has changed dramatically. the cloud has become a part of

everybody's i.t. estate today. so that business i think is fundamentally changed versus when, you know, hp bought the business back in 2008. >> right. >> so unlocks a lot of value for shareholders. and then that allows us to focus on the stand alone hewlett packard enterprise. as you well know i'm a big believer in focus now. so we're going to have a great software defined data center strategy for the data center as well as the edge, and so we're excited about it. >> it's funny, you've mentioned this a big believer in focus, of course, you've talked oftentimes in interviews about how quickly the world is moving, how much faster. when you got to hp, that was the old hp it was $100 billion in revenues, 300,000 employees. obviously the big split is taken place and now another one, but you're now talking about a $33 billion revenue company, i'm not sure how many employees you have -- >> about 50,000 to 60,000. >> about 50,000 to 60,000. does it get even smaller from here? there are some who believe your software business is substandard

and therefore perhaps should also be part of another deal? >> well, you know, we like the performance of our current set of assets. obviously the enterprise group had a great quarter growing 7% and as reported 10% in constant currency. i don't think anyone thought an infrastructure business would ever grow at 10% constant currency and the software business had a good quarter when you adjusted for divestitures and acquisitions. so we like the performance of what will be the essence of the stand alone hewlett packard enterprise. >> and so this is the focus you've wanted? >> this is the focus we've wanted. i didn't start out that way, david. when i joined the company i wasn't sure this is where we were going to end up, but technology is changing at lightning speed. i think it is better to be smaller, i think it is better to lean into new technology, i think it's better to delever the company. and that's what we've done. i think mike lawrie who will be the new ceo of the new company, i think he's going to take that business to incredible places as

a pure play focused services company. >> right. and the deal itself of course is somewhat complex but ends up being a merger of equals in which your shareholders 50% of the combined entity a. you also talk 1.5 billion in run rate synergies through year one. >> yes. >> why are you confident in that number? >> both teams got together and looked at the cost structure of cse and looked at the cost structure of e.s., and there's a lot of chances to rationalize. combined we have 95 data centers. can you imagine? we don't need 95 data centers. we have a huge number of delivery centers. we can automate and orchestrate better the delivery for customers and we'll have a broader set of offerings that i think will be really good for customers. >> jim. >> first, congratulations obviously a deal that's working for both companies. i'm confused about whether you're now able to be with this company or not. you're a microsoft house.

cse is an amazon web services house. they compete against each other. how can you be under one roof? >> well, this is the benefit in some ways of being a pure play services company. cse can actually do business with all the different vendors. now, we have a partnership, a commercial arrangement with them for the next three years to make sure we continue to pull through the infrastructure and software that we sell today through enterprise services. but we're going to have to compete for that business over time with e.s. and we're happy to do it because i think we've got the best portfolio enterprise services -- sorry, infrastructure and software in the industry. but they're going to have to be able to bring, you know, all kinds of different solutions to customers. >> okay. that will be different. >> it will be indeed. the quarter itself was a strong one. again, we should point out because it is complex. hewlett packard shareholders will own 50% of cse, it's not as though hp itself will have any ownership whatsoever. >> absolutely. >> on the deal itself you're relying on an irs opinion.

we've seen a number of situations lately where we've seen the irs decision get a little tricky. why are you confident you'll get the tax opinion that allows it to be tax free, which is a key part of the deal. >> you can imagine this was a key part of the deal. so we're very thoughtful about how we assessed whether there would be in fact a tax free spin here. and two sets of advisors, lawyers, everyone has looked at this and we feel very confident this will be a tax-free spin for both parties, cse as well as hewlett packard enterprise. >> you're going to be buying back a lot of stock conceivably over the course of the year. >> yeah. >> you had thein fusion from the china deal. >> yeah. >> you're devoting 100% of free cash flow to buying back stock. you said on the conference call you think there's really an incredible value in our stock price. why? >> well, as you know hewlett packard enterprise trades at a lower multiple relative to our competitors. we are beating the competition now, which was not true four years ago. you know, you look at what happened this quarter, our networking business grew 18%,

cisco shrunk 3%. we have gained share in external disk storage for three straight years, ibm, dell, all lost share. our three par all flash storage array is now bigger and faster growing than pure. and we've gained share in servers overall especially in density, optimize and rack. >> so you feel like you're at the beginning -- i mean, again, you got a 1% overall revenue growth. first time since 2011. and constant currency i think was 5% top line growth. >> yes. >> but you feel like you're starting to ramp. >> i do. i feel very good about our core business. we use a returns-based capital allocation strategy. so we look at all different ways to deploy our capital. right now we think our shares are a good buy. and we ought to continue to buy shares. >> can i ask about eunice blender? >> yeah. >> we don't have any idea, give us the tenor of business there. >> yeah. so china is mixed.

it's gone through some boom times and then some tougher times. but we decided that we had to have a strong local partner. and, you know, you could own 100% of a foreign owned entity in china which probably wasn't going to grow very rapidly, or we could own 49% of a joint venture with basically a commercial entity under xinhua agency. they'll tell you maybe this is the new model for how western companies do business with china. and all i can tell you, jim, is since we announced that deal, our china business has turned around dramatically. we had a record breaking quarter this year for our china business, and the deal hadn't even closed yet. so i think it's indicative of how the chinese want to do business. >> so in other words what we're seeing for companies that are going their own in china, maybe that's no longer a good strategy? because we know many who are. >> i think it's a tough strategy

to be alone in china, you know, for the next five or ten years. i think you want to be with a great local partner who understands the market, who understands how the government works. so i think this was actually a really smart move. >> what about the dollar? it was somewhat quiet for this quarter, and you guys expect things are going to moderate given the year over year comparisons, but it's been a little strong lately. >> yes. >> now, this is not the old hp where you had printing to compete with the japanese, but do you expect that if it continues to strengthen it's going to impact your business? >> so the big effect in the first and second quarter was largely that we couldn't anniversary the hedging gains we had done in the first half of the last year. so the hedging gains rolled off. now, basically we thought that the exchange rate for 2016 would be about where it is today. so if the dollar strengthens a little bit, that will, you know, be okay for us. i think as long as it stays in this, you know, versus the euro 113, 114 range we'll be fine. >> back to the big deal itself

of course positive reaction in the stock market both in your shares and cse shares, but some people saying how did you get to 8.5 billion? >> yeah. >> that's how you're valuing the enterprise services business. >> right. >> a lot of the old ede assets. >> well, it's a negotiation like any other deal, right? you know, how much is the e.s. asset worth inside hp? and how much would it trade for if it was a separately traded company? so you look at multiples of revenue, multiples of earnings, multiples of ebitda, and then you look at what you think the growth rate and earnings capability and margin expansion will be and it's a negotiation back and forth. >> of course. >> meg -- >> sorry, carl. >> i would like your opinion on brexit, election, what are you thinking? >> so brexit we hope britain will stay in the eu, it will be good for our business. in fact, i think it will be good for the eu. the fed hike, listen, you know, i don't know whether that will happen or not.

obviously we have debt on a lot of our companies, so a low interest rate is a good thing for us. but we could cope with, you know, a bit of an interest rate hike. >> and, meg, what about a trump possible presidency? last time we had you on it was days after you had made some very strong comments. >> yeah. >> against the idea of trump becoming the nominee. he's now the presumptive nominee, the republican party, do you worry as the chairman and ceo of a multinational that a trump presidency could be bad for your business? >> yeah, i don't think that a trump presidency would be good for our business. and i'm exactly where i was three months ago. i am not supporting donald trump under no circumstances will i support donald trump. i don't think he is -- >> businessman as president? >> i just don't think he is the right person to be president of the united states. and i think his policies around free trade will be damaging to business as a whole. >> he is a great businessman. >> you know, i think the jury's out on that. >> what do you hear from other ceos conceivably who also lean

towards republican party? >> so i think about a third of the people that i talk to won't support donald trump and may support hillary clinton. then there's a third that are just not know what to do. they're not happy with either choice at the moment. and then there's a third of republicans who will fall in line behind the republican nominee. >> do you worry about what it will mean for multinational business, particularly if he follows through on some of his trade policies? >> i do. i do have a real concern about that. you know, we have to be the most cost effective competitor in the world. we've got to compete against our competitors. our services business has to compete against actose and other companies we have to be incredibly cost effective. if jobs in the united states are in suffering, hewlett packard

won't survive. free trade is right for american business and frankly american workers. >> meg whitman, we always appreciate you taking your time coming to post nine. >> great to be with you. >> chairman and ceo of hewlett packard enterprise. when we come back cramer's mad dash, count down to the opening bell, premarket still in the dwregreen, the rockettes ar here and will ring the bell in a few moments. olay luminous

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♪ rockettes, great rap group. >> all right, we're going to go to dycom for a mad dash on a wednesday. >> this is a sit up and take notice, david. what is really happening here? they are a contract of fiber and all things that go when you're billed out for telecommunications. the reason why this is important -- thank you to james for this. they are currently -- at&t is their largest customer. remember, you can do the high speed, wi-fi, fire wall, i think the read through here, david, and i've been saying this ever since that last quarter, at&t is doing very well. maybe better than we think. directv, installation. >> right. >> i think that's a sign. >> broadband. >> broadband, directv, att made a good deal when they bought

directv, otherwise dycom wouldn't have this kind of quarter. google is building out. did you know? installations atlanta, nashville, austin, you need companies like dycom, sleepy company no one's focused on them until today, att is the proper read through. i like t, i've liked vz for a while, john ledger -- >> don't like s. >> i don't like s. >> no, we don't like s. you don't like dish that much either. >> no, but -- so cool. >> right. we've got the opening bell and more to check on including a lot of m&a that's potentially going on, monsanto, sanofi making move on medivation. those two stories and more when we come back.

you're watching cnbc "squawk on the street" live from the financial capital of the world. the opening bell in about 90 seconds. a lot going on as markets are coming off best day since march

11th. the president is in japan this morning. he's wrapped up his visit to vietnam. and in a few moments will do a bilateral with prime minister shinzo abe. he'll actually be there ahead of the g7 summit the rest of the week. watching that closely. meantime we haven't talked any tiffany yet. comps down 9, much worse than the estimate. >> oh, my. it's such a bad story. what did they say this was the best -- in terms of the most lame excuse i've seen yet for bad quarter, bad in america, why? softness in spending. huh? customers didn't like us? customers aren't -- i mean, come on, it's tiffany for heaven sake. they blame the strong dollar, significant decline in hong kong, research will confirm that but this was a flabber ga er gb

you do not blame softness -- well, what was the problem? well, business is soft. that's not -- that's not -- that's circular reasoning. why are you not doing well? well because we're not doing well. >> not doing well. >> oh, okay. this is the line in the sand, tiffany. enough. >> as the opening bell at the s&p at the bottom of your screen at the big board madison square garden company celebrating return of the new york spectacular starring the radio city rockettes who are here today presented by chase. over at the nasdaq recreational vehicle company arctic cat doing the honors. back to tiffany, citi this morning comes out and says we doubt that this is all macro. >> thank you. that's really the issue is that it's execution. i mean, frankly, i just think it's embarrassing to come out quarter after quarter blame the strong dollar. i mean, you know, it's not year over year that's not even

acceptable reason for missing the quarter. i think this is a company, i know some of the high end is challenged, but other parts of the high end are good. i understand the hong kong problem because there are major luxury companies that did bad in hong kong. by the way apple did bad in hong kong. the fault is in themselves not the stars, and i'm tired of this fi blaming. another one you saw out today express. >> not good. >> in the first line of their release we believe our product is on trend and providing customers with engaging experiences, if that's an engaging experience, how could a stock be down so much? disengage. disengage now, express. si kamore was in there. >> we're talking little over a billion dollar market value, going to be less today. >> this is another one of these retailers where you question the

rai raise. like why? why do we need express? what? where? how? >> you're asking all the key questions, jim. >> journalism school. >> old cover reporter there. >> as express you sometimes wake up and say are we necessary, do we make a difference. well, yeah, if you're short. >> and if you wake up and can't answer those questions just go back to bed. >> i think so. i think you just kind of take a permanent intellectual vacation to go with what you're doing at the office. >> well, i'll tell you, shareholders of hewlett packard and cse are happy they got out of bed, if they're at least looking at their screens this morning. >> we didn't talk enough about cse because that guy is a monster. >> let's start off with -- >> head of ibm sales. >> jim, that stock is up 32% cse, right now 46 -- let's call it 90 this after that deal we just talked to meg whitman about that we reported on yesterday. somewhat complex of course but essentially a spin-off of the enterprise services business of hewlett packard that will be merged into csc and own 50% by

current hpe shareholders and 50% by the existing shareholders of computer sciences. they're talking about 1.5 billion in run rate synergies. you heard meg whitman explain how they get to that number. they'll also be sending 1.5 billion dividend to shares to hpe and taking on $2.5 billion in debt and liabilities. the market loves this deal, jim. mr. lawrie will be running the combined company of course as it its chairman, ceo and president. >> this is a man who came into a really bad situation. a lot of problems with the government. a lot of contracts that were very questionable. he came in and spent the first year cleaning it up. then he spun off this government business. this may be the next -- that's how good this could be. and i love excentury. this man ran sales at ibm. to take that job was a shock for me because it was such a nasty job to come in and have to clean

up. we got to get him on the show. >> okay. >> this was a master stroke by him. >> i had an opportunity to speak with him briefly yesterday. >> you did? >> yeah. >> what'd you think? >> um -- >> straightforward guy. >> yeah, it was via phone. >> but still, you buried the lead, what was he like, right? >> straightforward and very much excited about the potential of this combination. my thought was he had to see how the market responded to it and of course the market responded very, very favorably, jim. because the idea -- and meg whitman explained it, if there's going to be consolidation you want to be ahead overit. the question is, well, if there is, would there be anybody looking at buying csc and trying to break up the deal. but when you get a response like this, that's highly unlikely. >> yeah, congratulations to him. that company was very -- you could see all the upgrades today csc, people had sales and holds on it. >> yes. >> there was a lot of crow eaten. a lot of crow. >> throwing in towels. >> towel throwing, crow eating. it was really remarkable. >> and not to take away from

hewlett packard enterprise which is up in part on the deal and in part because they did have a solid quarter. in fact, when we spoke with meg whitman just a few moments ago she did indicate things seem to be ramping up. >> i do think it's important to underscore the backdrop of an excellent quarter. it's the best quarter of earnings we've had since i joined the company. so we're really proud of the turnaround. and then this transaction unlocks value for both companies. first, it creates two new companies. so the enterprise services csc company will be a $26 billion pure play industry leader. and that's important because i think that part of the business is going to consolidate. >> well, when they draw this thing up, as complex as it is, they have to be very happy with the market response. >> look, i was surprised the three par acquisition finally came into play, the ruba acquisition, i'm a huge supporter of cisco, but that was an interesting fact that switching for her, that demands

more work on my part. >> very interesting. again, they own 49% now of their chinese operations. hpe, the underlying point is chinese are happier doing business with china-controlled companies. >> that's why my read through was apple. apple's independent is this part of the reason why they blocked some patent trademarks, is apple -- is this a backlash? i don't want to read too much into it because apple, you know, employs a huge number of people in china and i think the revelations are better than they were since tim cook visited. but i thought that was very telling. >> before we move onto mary, stocks are dead money, what's your response? >> he's very good at thoughts. very good. >> great at bonds. >> yeah. he's like gun lock in the u.s. bonds, man. i'm going to not focus on him until a quarter to 3:00 in terms of the stock market. i think he's -- i think he's a very bright guy.

>> yeah. >> but within this market unbelievable opportunities. and you can miss them if you take a broader macro kind of basket view as he takes. by his own admission -- he's a terrific guy, not a stock guy. look at the action of some stocks here really rather amazing. so dead money, he's been saying dead money for a long time. the rigger mor tis clearly not set in if you look at this. >> on that note the dow up 92 and now gone green for may along with the nasdaq and s&p. mary thompson's on the floor. >> hey, carl, best two-day performance for the dow since beginning of april. best two-day performance for the nasdaq since march. we'll see whether or not the early gains we're seeing on wall street hold, but basically we're seeing a broad based gains across the board we are seeing a little bit of weakness in the dollar index. gold is lower and the vix is under pressure, other than that pretty much green arrows. one of the reasons of course the strength we saw in europe coming into today's session. this is helping to offset the weakness from the reports that we've seen from u.s. retailers. and keep in mind the markets are

watching or on edge a little bit because we have a lot of ipos pricing tonight. that's good news for the stock market. let's take a quick check of the s&p 500 index, again, building on the gains from yesterday. the s&p now positive for the year up just about 10 points or half a percent in early trade. as i mentioned earlier, broad based gains pretty much all the sectors looking positive in early trading. all of this helped by the rally we're seeing in the european markets. these markets up on the back of the greek debt deal also financials among the strongest performance over in europe today. there was also positive numbers on german business and consumer confidence helping to give a lift to the european markets. and again that spillover coming here to the u.s. speaking of financials, let's take a look at some of the financials here in the u.s. of course yields continue to climb, the yield on the 10-year now at 1.866. wells fargo held its investor day yesterday and lowered its longer term targets on its r.o.e. and r.o.a., not effecting its stock.

even citi group pays over $400 million in civil fines to the cftc for some manipulation of some indices. let's check energy as well because we have crude oil approaching -- or actually -- yeah, approaching that $50 a barrel level. rugt now west texas intermediate giving a lift to this group which has been strong as of late of course reflecting gains we've seen in oil prices. retailers and we've been talking about it all morning struggling in particular tiffany and express, both of these companies reporting disappointing results and investors expressing their disappointment with sales. you can see express taking a big hit off more than 15%. as i mentioned earlier we have a number of ipos pricing tonight. four of them we'll list here on the new york stock exchange. some of the bigger ones we're watching, u.s. foods. if it prices in the mid range of 21 to 24 it will be the first billion-dollar ipo this year. cotiviti is a software firm geared toward the health care industry and gypsum management and supply, yesterday we had strong housing numbers and could

bode well for that company. right now the dow is up over 100 points, david, back to you. thank you very much, mary thompson. want to get into a couple of the existing merger and acquisition tussles going on out there starting with monsanto. yesterday monsanto responded to bayer's $122 all cash offer for the company with a very encouraging rejection. i'm not sure you could call it a rejection of course. and we reported on this yesterday late in the day bayer coming back and saying thank you for that, we look forward to engaging with you. and, in fact, in speaking to people close to the situation the expectation is both companies will engage soon in negotiations designed to see whether they can reach a deal under which bayer will acquire monsanto at a price obviously above the $122 that's been offered but has been deemed significantly below what monsanto views its overall value at. in speaking to people familiar with the situation, they indicate to me however that shareholders out there at this point who seem to be expecting a

price perhaps as high as $135 to $140 may be disappointed. now, you often will get this kind of talk prior to those negotiations trying to keep a lid on a stock price at that point. but we will see. it is worth noting, however, that again, people close to the situation do indicate those who were expecting a number at that level may very well be disappointed, pointing out it's unlikely to get done at that high level. where is it going to get done? well, people keep pointing to the multiple china paying on the ebitda roughly 16.5 times last 12 months of ebitda of cingenta. we'll see where this ends up, but the negotiations are expected to begin soon. don't expect to see any of the consideration added in bayer's stock. that's not going to happen, according to people who are familiar with the situation and as well other potential creative

solutions, at least at this point not being looked at. they want to follow a simple straightforward path increasing the offer to a point where they think monsanto would be willing to take it. the question of course becomes what's the number if you're not willing to go to $135? on medivation and sanofi this morning, sanofi as we told you a week and a half ago has nominated eight directors. it will act by written consent to place them on the board of directors. it's slate to replace the entire board of medivation. it is its hammer to get them to the negotiating table, but they are also trying to be constructive. in their latest letter they say we've relayed our willingness to enter into confidentiality agreements in order to receive information that is typically provided in the process. that could include a standstill. could prevent them from acting in written consent over the next few weeks certainly. they say if you engage with us we'll be in a position to increase our offer, i'm

confident we'll be able to offer significant additional value. that's a term of work by the way in m&a. it's less than substantial but better than decent. doesn't appear they've signed with anybody else as i've seen in the past. as i said the ability to act by written consent has really been the key here for sanofi, which apparently really desperately wants this oncology franchise. >> it's really amazing. sanofi has had a fabulous relationsh with regeneron in the past years. rules on how much they're able to buy, i find that the whole tenor of this is so different from the relationship with regeneron. they're pretty aggressive and always known as being consensual. what is going on here? >> they have, but a few years ago they were pretty aggressive. >> good point.

>> they got it, i think they went up 12% or 13% from their original offer. so, you know, we'll see. they're not increasing the offer as of now, but the expectation is they'll certainly go to, you know, more than the 52-week high. >> it's putting a lot of bid on the biotech. a lot of people sensing the takeover market for biotech, i remember jnj saying we did not take the bait, we did not pay. i don't think they're going to speak about biotech. >> there's the president and prime minister abe. we're not going to take their statements in this bilateral, but when they get to q & a we'll try to take that live. >> let's head to rick santelli now check in at the bond pits at the cme group in chicago. rick. >> good morning, david. what a strange new cycle. a deal on greek debt, again, again, again, again. and it's bullish. as the european markets improve, but is it really greece? i know it seems like all the

equity markets are marching to the same song and they are doing a bit better. if it's dead money, i hate to see what the comps are to put it elsewhere at this point in time. let's pick a date. how about march 1st? and let's look at several charts and hold that date steady. let's look at a two-year note yield as they continue to rise. rates on the long end are steady, it's just the short end isn't more aggressive so we're comping back to march. dollar also comping back to march. why do i bring this up? because a lot of this is central bank driven. there was more chatter today on the hawkish side, but is it going to be chicken little? many out there like jim graham think there's a bluff going on. i don't know how many times they can get away with it, but we'll have to see when the june meeting gets here. let's look at tenures, not quite but close, not comping to march but you can see as we go down the curve less aggressive, the 0 30-year really exemplifies that and then there's the bund.

it is under pressure here as you can see, a much different look when you look at that march 1st than all the other charts and that should be reflected in the differential which is approaching 70. that comps to march like the first several charts and it makes sense. so what's the good news driving this? well, the fact is we saw maybe a smaller than expected trade deficit, alt though $57 billion seems large but you're expecting 60. and imports were up close to 2%, exports were up close to 2.5%. so they were both positive, which is a good thing. but embedded in that is some good information. we continue to be a bigger driver normally and usually our imports are more. but the fact of the matter is even though they're not dollar equ equal, hence the difference, you see the export pick up is really a good thing. carl, back to you. >> rick, thank you very much. rick santelli. when we come back, whole foods betting big on millennials with this new concepts store, first of which is opening in

california today. we're going to take you there for a live interview, talk to co-ceo walter rob. later on walt mossberg with a look at where apple is losing out to both google and facebook. dow's up 105. all three major averages are positive for the month.

president's journey through asia continues. he has left vietnam overnight, currently holding a bilateral with prime minister abe. when they get to q & a we're going to definitely take a listen into that. >> in the meantime let me tell you there's a bank rally that is equivalent of the tech rally yesterday. just what's going on, wells fargo -- doesn't matter. if we were getting the two, three, people are betting yellen is going for two. this is a bet yellen is going to say, listen, things are stronger, part of that whole bob toll thing i mentioned earlier, lending is picking up in the country. so you are seeing these bank stocks just tearing. they can lead, remember, finance and tech are this stock market. and it's really rather amazing. i think that this is another

stealth rally. no one's talking about it. people want to get out of these stocks. you got to stay in because this is day one of the rally. >> we've got -- above the 200 days we've got the dow, the s&p, the nasdaq, the russell, utilities, only transports really, jim, that's stubborn. >> we have a lot of work on the transports. rails set another cut from ubs. but when i see the banks on no research whatsoever other than some negative wells fargo, this is about rate hikes and how much money they will make on rate hikes. they can lead better than any group in this market other than transports. we need the transports to kick in. i was hoping delta to say some good things, not yet. but let me tell you something, when the financials rally, this is what you get. it's more bullish than even tech. it is. j.p. morgan, look at that stock breaking out. >> i see it. >> look at citi, they settled another one of these myriad government investigations. bank of america back over 15.

this is saying something. >> it is. we'll see if we actually get a hike. >> we've been faked out many times. >> yes, we have. >> the bank aficionados, but this rally seems to have staying power especially because it's based on bad news. interesting, huh? isn't that interesting? i like it. >> we will get stop trading with jim in a couple minutes. dow now up 118. latest data say? our customer is a 21-year-old female. heavily into basketball. wait. data just changed... now she's into disc sports. ah, no she's not. since when? since now. she's into tai chi. she found disc sports too stressful. hold on. let me ask you this... what's she gonna like six months from now? who do we have on aerial karate? steve. steve. steve. and alexis. uh, no. just steve. just steve. just steve. live business, powered by sap. when you run live, you run simple.

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it's time for cramer and stop trading. >> here's a very odd note today. workday, citi comes out and really raises the price target big, says workday is about to do breakout. workday is similar to salesforce and adobe, cloud based company, human capital, i've got to tell you this is a company that oracle has its sights set on destroying. a you do not go out and make this call unless you're really confident that they are going to beat the numbers and crush the numbers. so watch workday, it's a heavily shorted stock. most controversial in the hypergrowth universe, they even admit it. i am shocked that they came out with this call. and if this one works out, it's

going to work out gigantically, workday. >> so you don't think we're peak enterprise here at all. >> i think if you listen to meg, one of the things she was really saying in the translation is cloud, cloud, cloud. and they were very aggressive in building up their cloud business. that's what you're hearing about with western digital. this is about flash and cloud, amazon web services, workday is a part of that. oracle wants to destroy these guys. this note says it ain't going to happen. i got to tell you i thought this was breathtaking especially because oracle on its conference call took dead aim, larry ellison took dead aim at workday saying we are going to crush these guys. they're going to turn it on, turn off the oxygen. the citi says no toto. >> what's on mad tonight, jim? >> we got a couple things. i got to answer what's going on with intuit, but the most important thing is that you know how weak apparel's been, after

the close pvh, manny chirico, i think he holds the key to jc penney, nordstrom, kohl's, the keys to the kingdom because he has percentage of the shirt and tie market that's obscene. antitrust would never have let it happen. hey, i'm there. i always wear a manny tie when manny's on. >> you know the way to their hearts. >> right? this was a dynamite show. how did you get that meg whitman interview? >> like we have her every quarter. it was really tough. thank you, jim. it's a long relationship. >> you know, look at that. >> i know, jim, we'll see you tonight 6:00 p.m. eastern time. when we come back, whole foods, walter robb live from the company's first concept store aimed at millennials with the dow up 125. or from cleveland clinic, watson, let's review the electronic medical record of the next patient.. no problem. it's a pretty huge file. done. sorry for the wait.

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dow, s&p, nasdaq all now green for may, oil within sight of 50 for the first time since october. we're also going around the president in japan today meeting with prime minister shinzo abe. any headlines and we'll get them to you as soon as possible. in the meantime our roadmap this morning starts with another canary in the coal mine for retail. tiffany sales coming in weak. we drill down for more on luxury spending ahead. >> new cheaper chain launching today for whole foods. can it fix their cheaper stock price? the co-ceo walter robb joins us from the aisles of the new concept shore. >> also the man at the helm of tsa heads to the hill sitting down for testimony in congress as we speak. the latest on the outrage heading into a big travel weekend and how one company is taking matters now into its own hands. >> but we start with a stock market rally. the fed has signalled it's more likely to hike rates in june, so what's fundamentally different? what has actually changed and what has happened to those red

flags in the market that we're gi -- were giving the fed pause a few weeks ago? dom chu has the big change. >> it's change in sentiment, that's the keyword, sarah. you can't changed really wholesa wholesale, but the market perception of some of these risks in the overall global economy have perhaps started to ease a bit which may be giving the fed a little bit more room to go ahead and perhaps raise interest rates later on this summer. so let's take a look, we've put them into a thermometer of sorts for market risks here overall. and one of the things that we're watching for of course is the really hot topic items for traders and investors out there. these are all debatable. these are all risks, but where they fall in the spectrum has a lot of traders talking about whether or not they really factor into the way markets really work. first of all, you've got the summer rate hike possibly happening here. that's still a risk to the market there's no doubt traders are paying very close attention. we don't know what the ripple effects could be. on the other hand take a look at

some of these other risks to the market that are really still outstanding and still very much in the front and center for investors out there. the brexit, will the uk stay in the eu? the u.s. elections coming up, is that perhaps a bit fitting into the uncertainty overall? but other places in the market have really started to see a little bit of easing in terms of market worries. remember, at the end of last year early this year it was worries about the chinese stock market and economy that really sent things into a tizzy. it's still there. china's still a concern, but perhaps not as much so in the perception of the markets as they were back earlier this year. oil prices, are they going to go down to $20 a barrel? we've seen them rebound sharply. now, as they've gotten higher the risks to that overall energy patch have weighed in a little bit less than before. corporate earnings season, it was not good, but not as bad as people thought so maybe that's not as much of a factor anymore. and i will put this out there as a point of debate, sarah, the u.s. economic condition, yes, it's not going gang busters, but still a pointed debate perhaps

an all-clear signal if the fed is data dependent and the data comes in better than expectations, sarah. a big debate. back to you guys. >> dom, thank you very much for setting that up for us. stocks continuing as dom said to rally as oil prices push higher. we're at the highest level since back in october. investors could be getting more comfortable with the possibility of an interest rate hike in june. for more on these markets and whether we can expect that, scott brown joins us chief economist at raymond james. boy, what a difference 48 hours makes, scott. we're now positive for the month for the s&p, the dow and the nasdaq. so is that the markets giving their blessing for the fed to move in the summer? >> yeah, i think so. i mean, we're talking about very small increases in short-term interest rates. it shouldn't really matter that much, but we've seen oversized market reactions now for a number of years if you remember the taper tantrum a few years ago. and even earlier this year there's a lot of fear about the fed. but the thing to remember is fed policy's still going to be very, very accommodative even after the next two or three rate

increases. rates are pretty low. the analogy i think is not that they're hitting the brakes as much as as gradually taking the foot off the gas pedal. >> i wonder if it's bigger than that and if we've sort of reached a paradigm shift where investors don't need to fear the fed anymore if the data really is getting better in the fundamental u.s. economy. is that happening? >> i think that's really the message. if the fed is raising rates, it's that they're comfortable in the economic outlook. when you look at the consumer sector, that's 70% of the economy, solid fundamentals, very good job growth, we could see more of an increase in hourly earnings and such, but that will come over time. the fed has so set monetary policy with an eye on where the economy will be 12 months from now. so they see even tighter job market conditions and want to be a bit closer to neutral. they don't necessarily have to be at neutral, but they want to be closer than they are now. >> scott, i'm assuming when you talk about this in the way that

you are that you're speaking here as an economist, not necessarily as somebody who's leveraged up on the stock market. a note out he was concerned about this argument that we're more comfortable with a rate hike because when rates do move up the cost of carrying the huge amounts of leverage that some people do in the market is going to rise and therefore inevitably there is going to be some selling, some reduction in leverage. and that in itself could take the market lower. how would you deal with that argument? >> well, when you look at the stock market and valuations, you consider price earnings ratios, and that's the inverse of an interest rate. if interest rates are low, p/e ratios can be a lot higher. so as the fed raises interest rates, you might expect the p/e ratios to come down. and it's a question is it the ease coming up, earnings getting better or prices coming down? i think initially it's probably going to be earnings. we've had a lot of restraints particularly with the strong dollar, the contraction in energy exploration. and that's not going to last forever. you got a lot of uncertainties

in the near-term with the election, uk referendum and so on, but we're going to work through those. i think it's still a pretty optimistic outlook for the u.s. economy. >> i mean, one of the big fears when it comes to the fed actually tightening and raising interest rates and we saw this play out earlier in this year is the spillover effect on emerging markets, economies, investment flows, the currencies there. is that less of a concern right now? >> i think it is still very much of a concern. and if you remember last september when the fed delayed they cited global concerns as the main reason for that. and even this year we saw further turmoil, but things look a little more stale. and i think that gives the fed to green light to raise rates. we don't think they're going to move in june, july is a possibility. i think september is probably a lot more likely. you're going to get a lot more data, we'll have second quarter gdp numbers and so on and annual benchmark. so we'll have a better idea of where the strengths and weaknesses are, but for the most part, you know, the consumer

fundamentals are solid. we are seeing weakness in business fixed investment. a lot of that is related to the energy contraction. if you throw out energy and the impact of the strong dollar earnings have been a bit under pressure. we think that's transitory and probably looking at better growth, you know, beyond the election and into 2017. >> scott, thank you very much. with the dow up almost 150 points, scott brown, chief economist at raymond james. well, two stocks that are up sharply today, hewlett packard enterprise and computer sciences corporation, after the two reach a deal under which hpe will spin-off its enterprise services business to csc. it's a somewhat complex deal that will also involve the exchange of $1.5 billion going from this new company back to hpe and the assumption of $2.5 billion worth of debt and liabilities by the newly merged company, which will then be split between 50% ownership of current hpe shareholders and 50% being the existing shareholders of computer sciences.

you can see investors reacting very positively to both -- on both stocks particularly for csc. hewlett packard also reported better than expected earnings, at least when it came to the revenue number. earlier on "squawk on the street" meg whitman, the chairman and ceo of hpe joined us here on set. and i asked her specifically if she was confident in the $1.5 billion in run rate synergies csc and hpe have identified as a result of the deal they are or have constructed, which they believe will be completed by the end of march next year. >> both teams got together and looked at the cost structure of csc and looked at the cost structure of e.s. and there's a lot of chance to rationalize and deliver services more effectively. combined we have 95 data centers. can you imagine? we don't need 95 data centers. we have a huge number of delivery centers. we can consolidate delivery centers. we can automate and orchestrate better the delivery for customers.

and we'll have a broader set of offerings that i think will be really good for customers. >> and as you see of course investors reacting quite positively to that deal which valued the enterprise services business at roughly $8.5 billion, that according to hpe and the considerations that i just mentioned. they believe the new company will have a market value at least based on current -- well actually maybe more multiples of around $9 billion hence they get to that number. meg whitman has made no secret of her opposition on the political front to donald trump. she's a long-time republican, of course, having once run for the governorship of the state of california. but a number of months ago she came out in opposition to mr. trump. that when chris christie she supported threw his support behind trump. we asked ms. whitman what her thoughts are now that mr. trump is the presumptive nominee of the republican party for the presidency. >> i don't think that a trump presidency would be good for our

business. and i'm exactly where i was three months ago. i am not supporting donald trump, and under no circumstances will i support donald trump. and i think his policies around free trade will be damaging to business as a whole. >> and as she said for whatever it's worth, that at least is her opinion, simon. >> coming up on the program, tiffany dropping in early trading today missing on the top line. and yet again it's the profit outlook that's worrying investors. more on high end retail next. and testimony on capitol hill this morning from the head of the tsa. the hearing entitled long lines, short patience just about sums up how many people feel. tracking those headlines when "squawk on the street" continues.

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tiffany out with results, sales missing estimates, down very slightly in a market down of course in a second day. our own courtney reagan. >> there's not a lot of bullish news out of luxury center this morning. tiffany lower than expected revenue, worldwide comparable sales, retail key growth metric dropping 9%. it's more than twice as bad as analysts had forecast. the high end jeweler doesn't see it getting better any time soons a it lowers its second quarter and full year forecast. tiffany points to lower tourist spending due to the strong dollar as the main culprit for the disappointing quarter. and europe, the u.s. and asia,

particularly in hong kong there, the weakness was basically widespread, comparable sales fell 9% in the americas, 12% in asia pacific, down 14% in europe. only japan saw positive comp sales compared to the same period last year. now, the one shining spot in the report is the gross margin. the sales that tiffany did make were more profitable compared to those made the year prior thanks in part to the -- pardon me, to both price increases and the lower cost. that was the reason for the better gross margin. now, this morning consultant firm bain & company reported slower steady growth for the luxury market and only slightly stronger through 2020. all eyes again on mainland chie narks the key to unlock recovery around the world. and really all of the luxury growth, carl, is coming from mainland china. so that's the consumer that all of these retail players, luxury

included are really focused on. >> really interesting story today. court, thank you so much for that. for more on the challenges facing luxury and tiffany in particular, let's bring in vanessa friedman, fashion director and chief fashion critic at "new york times," dorothy lackner senior retail analyst. good morning to both of you. dorothy, sell sides trying to get their arms around whether this is macro or brand perception. which is it? >> well, i really think it's more macro than anything else. i think, you know, tiffany does have some work to do in terms of new product introductions, but the latest ones are gaining traction. they're speaking with a stronger voice in marketing and that's helping, but quite frankly in all the years i've covered tiffany, and that's over 30 years, i've never seen, you know, as we've seen in the past couple of years foreign tourist spending get to such a high level as it's been. so we're seeing the downside of that, and particularly lower spending and lower tourist visits from chinese consumers,

which is, you know, why i would say, yes, all eyes should be on mainland china. you know, they are spending more at home. the one bright spot was obviously gross margin, but i would say also japan which is tiffany's highest margin business. so i think, you know, there are some bright spots. the quarter came in in line with management's guidance. we analysts were perhaps wrong on the top line and the bottom, but it was in line with what the company had said would happen. >> indeed. we had a long discussion this morning off camera, vanessa, about sarah's about to get married. >> congratulations. >> we were talking about the last time i bought my wife a blue box, and it's been a while. what do you think people think tiffany is? >> classic. you know, i think it really is still associated in almost everyone's mind with "breakfast at tiffany's," with the

daughter's gift at graduation, maybe engagement, that's not a bad thing. it speaks long-term opportunity but also not a hot thing. >> i was telling carl the last thing i actually got in the blue box were wine glasses, not jewelry anymore. does tiffany have a millennials problem? >> you know, it's funny because you'd think it does but it actually has 4.1 million instagram followers, 1.2 million jewelry -- twitter followers. i think tiffany is going to catch up to the market. >> dorothy, that dynamic, that idea is not new, the notion that tiffany needs to be a place where you go not just to buy an engagement ring, right? >> sure. >> so why hasn't silver for them done better? >> well, i do think they've made a lot of efforts and i would say the success of tiffany t, the collection that came out in 2014, suggests that they're doing a lot of the right things.

the fact that they're getting traction in some of the newer silver introductions, the fact their victoria collection is doing well. i think they are doing a lot to update the product and be more modern. and i think reflective of the way consumers are spending. consumers are no longer that classic, you know, kind of upper east side customer. it's the customer may be wearing jeans and nikes but want to wear jewelry. so i think that's what they're trying to play. i think they're trying to build a product assortment that will reflect that. >> let me make exactly that comparison. you suggested it was 1.2 million twitter followers, i think is what you said -- >> 1.4. >> okay. 1.4, which is big for a jeweler, but actually we heard maybe the reference should be nike or the sports brands or the sponsorship or the ability to use social media in a transformative way. maybe that's the future, that's what needs to roll through the industry. do you think maybe? >> you know, i don't think tiffany should be nike.

>> but to have that exposure in the new media way in a different way than perhaps a classic brand might? >> well, you know, they're doing some interesting things to that. and last november they did a collaboration with dover street market, which is a store owned potentially the coolest store on the planet. they have just hired grace cottington of september issue fame to shoot their autumn winter ad campaign. so, you know, i think they really are moving into a different way of communicating and a more kind of current way of communicating. >> don't they have a new designer we were speaking about 18 months ago? that would be transformative. >> well, she made the t collection. and as we heard that is selling very well. that has been a boost for the brand. but it does take a while for this to penetrate. >> dorothy, their guidance implies a return to growth in q-4, are you buying that? >> yeah. i think obviously last year was a disappointment, and i think

that while we're looking for more muted growth going into the back half of the year, certainly the comparisons are a lot easier, tiffany's always done a good job controlling expenses. we know there's going to be more lift than we might have thought from gross margins. so, you know, i think there's good potential for an uplift at holiday season. >> dorothy, how many times have you had to lower your price target for tiffany over the past 12 months? and i'm wondering because the stock has been -- i mean, it's lost almost 30% in the last year and still has a multiple of 17 times earnings. >> right. i mean, certainly a couple of times, but, you know, there's a lot of company out there in retail. i think, you know, nordstrom, elle brands, a lot of companies have reported disappointing numbers. the stock's been taken down pretty heavilheavily. so we're in a period where i think there are a lot of good

companies selling at relatively lower multiples than they were before and i think are worth taking a look at at this point certainly for longer term horizon investors. >> finally, vanessa, do you have a favorite luxury brand right now? >> i'm not going to go there. >> all right. i'll try. >> is rose gold still over silver still? >> you know, it's all sorts of the outsider stuff. >> vanessa, good to see you. please come back. vanessa friedman of "new york times." dorothy lakner of topeka. when we come back, more on the tsa and interview with walter robb and whole foods new concept store opening in california. dow up 164, session high.

the rally continues here on the floor of the new york stock exchange. again, it's the energy stocks and those financials leading the way. citi group for one up 3%. on the other side of this break we've got a live interview

for you with whole foods co-ceo walter robb. the company is opening a lower priced new brand concept today. and we will be there next.

i'm sharon epperson, here's your cnbc news update at this hour. a state department audit has faulted hillary clinton and previous secretaries of state for poorly managing e-mail and other computer information. and slowly responding to new cyber security risks. it cited longstanding systemic weaknesses related to communications. the afghan taliban confirming they have appointed a new leader. mullah -- today in an audio recording he vowed there would be no return to peace talks government. this happened as a suicide bomber targeted a minibus carrying court employees in kabul during the morning rush hour killing at least ten people. an afghan official says the bomber was on foot when he detonated his explosive vest.

the taliban claiming responsibility for the attack. protests turned violent at a donald trump rally in new mexico last night. demonstrators throwing bottles at police who retaliated with smoke grenades and pepper spray. inside trump was interested several times by protesters. that's our cnbc news update for this hour. back to you, carl. sharon, thank you very much. whole foods is opening a new line of stores called 365 by whole foods market described by quality meets value. the stores will be smaller than a regular whole foods market and offer some new features. our jayne wells is live joined y walter robb. >> hey, guys. this is a big gamble for whole foods. you've been struggling with lower priced competition in general, smaller store, fewer products, fewer employees, lower prices, what is the biggest difference? and who's your target here? >> i think what we've done is

created something that's a fresh, fun, contemporary convenience shopping experience. you're in the space now, you can feel the sort of unique nature of the experience. i think we create a new experience for existing customers and hoping to attract new customers as well. we've really got quality in a new sort of imaginative way, a new expressive way for whole foods. >> i would say it's like a larger industrial sort of euro trader joe's. i mean, there's no tiki party kind of thing going on, but it has kind of a similar feel to that. is that your target? trader joe's? >> i'd say we've taken ideas from all the sort of value format players, but i would suggest to you it's really unique in terms of what's out there in the marketplace. it's got our touch on fresh foods and prepared foods. you can see the whole fresh food expression here and the selection of prepared foods. and i think the integration of very useful technology for the customer to be able to shop and options, i think is different than anything that's in the market right now. >> we're going to go to the guys back east. i know there's a lot of automation involved, but real quickly there's a whole foods

five miles away from here. >> right. >> what are the chances you end up hurting yourself? >> well, if we do disrupt ourself a little bit, that's okay. but what we're also going to do is extend ourself. this is going to allow us to reach new customers, give existing customers new options. i think this is a great complement to whole foods. it's an and, not an or. and i think what this is going to do is help us to evolve a lot quicker as an overall company. >> carl. >> i just have a question, jane. it's sarah. hi, walter. clearly this is -- >> good morning. >> good morning. thanks for joining us. so this was one step in one of the things whole foods is doing right now. i know you're taking a lot of moves on pricing, on loyalty, experimenting with delivery. clearly there's is a turnaround plan in place, but very little progress in terms of results. comps are still falling. they were disappointing last quarter. what's the timeframe for when we're going to start to see results? >> well, steady eddy, step by step. we did lay out kind of the nine-point plan, but we're doing

a lot of work at whole foods. there's a lot of initiatives in different areas, market communication value, technology initiatives we're doing to change our platforms, the great new stores, there's a fantastic new store here in downtown l.a. which i hope jane will visit. so progress is there. and this is another step today of a very competitive, exciting, compelling format i think shows we're on the move. >> mr. robb, can i ask you, you mentioned prepared foods? i'd be really interested in seeing where you're taking that. i come from the uk, you'll be aware of marks and spencer's made fortunes by putting in ready-made tv dinners, refrigerated microwave food, essentially, but with very high margin that will bring professionals in once or twice or three times a week in order to load up for the evening. they made a lot of money out of that. and that doesn't really occur in this country. i wonder why, whether you're changing that or the supply lines are simply way too long

here. >> well, i think if you're -- i couldn't hear all of the question, but i think if you come in here, you're going to see there's some tremendously new excited prepared foods choices. very convenient. lots of self-serve, lots of order and order ahead, lots of new prepared foods ideas in terms of mix of products and recipes and lots of fun options. >> it is different in here. i know that with prepared and easy tried that here in l.a., that concept did not work out. l.a. is a really hard market to start a new grocery concept. so why did you pick here? >> let's remember we've been in los angeles for a really long time. so this was the site that came up it was a nice neighborhood, an opportunity for us to launch this and i think it was timing as much as anything in sayinsay here, this is where we want to get started. >> i'm going to grab my phone here because i picked up the loyalty -- >> was that simon on the question? >> yes, that was. >> i know what he's referencing. he's referencing the prepared foods offered in the uk.

and i think you will see here, sim simon, a nice selection of prepacked foods that's new and different and evolved from whole foods and bar options behind us. >> there's a lot of preordering you can do. there's this crazy t-bot thing where you can order your tea like a robot thing. you have this loyalty program that you can now do here. >> that's right. >> could this transfer to the regular whole foods? >> yes, ultimately what will happen is we have it going in philadelphia, we've said already we're going to dallas this summer and ultimately these things will blend and you'll be able to participate in both rewards programs, but we'll have a view of the customer whether they're shopping in whole foods market or 365. so the benefits at 365 will be a little unique and different for this particular format, but you'll be easy to go back between the two. you can earn credit in both programs. >> how much lower are prices here? >> they're lower, remember, this is a range of choices that's different. this is a great value shop. these are great prices and great values here. you'll have a chance to look at that when you go around the store, but the range of choices

we don't have a full service butcher shop for example, whereas we have all the meat is self-serve. the quality is there, it's just presented in a different way. so i think you're going to find this is a very compelling value. and against the competitors i think you'll find we're being very, very aggressive. >> will these low prices translate to whole foods, the regular whole foods? >> we've already been working on that for some time and i think we're making good progress. i'm not sure we get enough credit for the progress we've made, but yes, they will. >> what is your favorite part about this? you have a vegan -- of course it's silver lake, you have to have a vegan restaurant. over here preorder, express checkouts, what's your favorite part about this store? >> i think the great values and great prices, i think the open air kind of you can see the whole store, fun, convenient experience. i think the use of technology which is kind of cool and hip in terms of being able to check in on rewards and being able to do the tea bot, in terms of being able to get your pick ten discount things here. >> right. >> there are lots of different features. >> and two more opening this

year, one in oregon, one in washington, total of 19 going. real quickly, we have to go, how will you measure success in a year? by the basket, sales? how will you measure success? >> sales are a big measure. sales per square foot will indicate how successful we're being and all the usual metrics. the customers coming in, buying, we're going to be excited by that. >> walter robb, thank you for joining us. >> thank you. >> back to you. oil sitting below $50 a barrel. jackie deangelis has the latest on the inventory report of the new york merck. >> prices pretty much flat since the report came out just a few moments ago. we saw a bit of a spike because crude drou down slightly less than what we were seeing from the api last night. but a drawndown nonetheless. gasoline actually built 2 million barrels. traders weren't expecting that which could be why prices are flat but higher on the session so far this morning. i will say this, these are backwards looking numbers. the demand is supposed to really pick up for gasoline and for

crude coming this memorial day weekend, actually drivers start hitting the road as soon as tomorrow according to aaa. let's talk gas prices for a moment. the national average right now $2.30. it's actually up 16 cents in a month, so that may hurt a little bit, but from last year at this time it's down 44 cents. so aaa saying about 38 million americans will travel for the weekend, this is the highest on record expected, second highest that is since we've been keeping tabs. and these are the lowest gas prices we've seen in over a decade. so as these people start to hit the road, summer travel will peak and july 4th that timeframe, you will see gasoline numbers start to drop, but crude definitely making another run for 50 especially as we head into this weekend. back to you. >> thank you very much, jackie. on that travel note we're going live to atlanta next where one airline is taking long security lines into its own hands. plus, the former tsa administrator john pistole on the problems with the current administration. when it comes to, everyone talks

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welcome back to "squawk on the street." stocks are higher today with financials, materials and energy standing out as the best performing s&p 500 sectors, as you can see there. energies gains come as oil moves towards that $50 mark for wti, where it hasn't been since last october. among the names lifting energy stocks higher, chesapeake energy also transocean, devon and hess all up between 3% and 6%. s&p the best performing sector so far up by about 10% but still down about 14%, sarah, over the past year. back over to you guys. >> dom, thank you very much. long security lines, the tsa is certainly under scrutiny. tsa administrator testifying in

congress this morning saying right now he does not have enough staff to meet periods of peak air travel demand. that headline just crossing. we're keeping an eye on that, but away from washington we want to take you to atlanta because delta is taking a unique approach to trying to ease these long tsa lines, our phil lebeau has been following that story for us today. good morning, phil. >> good morning, sarah. we're going to show you that line in just a bit, but i want to take that picture on capitol hill one more time of tsa administrator peter nefenger as he's being questioned by members of congress about what the tsa needs to do to improve its performance. yes, he's saying there's not enough staff for all of their peak areas that they have people coming through security. they are adding officers this summer and more overtime, but even they admit that's not going to be enough in certain cases. by the way, tsa replaced its former head of security earlier this week. there will no doubt be questions about that. we're monitoring this hearing. we'll let you know if there's any other news coming from the

testimony of peter neffenger. meanwhile here in atlanta give you a sneak peek of what we'll get a full view of later this afternoon. it is a new automated screening area here in the south terminal. now, this was an investment of $1 million by delta to put this screening center together. it ideally will screen about 20% more passengers than the conventional screening locations. this system is already used in london and delta believes this will cut down on wait times. >> if this is successful given what we've experienced with security check lanes, if this is successful as we believe it is, i think airports around this country are going to be looking for this technology very quickly. >> by the way, did you take a look at shares of delta? delta spent $1 million developing this system. guys, let me summaryize how it works very easily. instead of going up one at a time waiting for the person in front of you to unload their belongings out of their pockets and put everything in a bin,

there are five stations. you go up there, you put stuff in your bin and it goes through. if the person in front of you is a slow poke, you go around them. and there are two x-ray machines. so theoretically even if somebody is stopped there will be another x-ray machine that they can go through. the idea here is to increase how quickly people go through the system. we'll get a chance to take a look at that system a little bit later on this afternoon. guys, back to you. >> you know, phil, it reminds me of google putting in fast fiber into some cities in an effort to say to the rest of the telecom industry, look, this is how it can operate. i mean, delta isn't going to roll this out themselves, are they? >> well, delta put $1 million into this area. and it has a vested interest in making sure that it has shorter lines here in atlanta. i mean, it dominates this market. dominates this airport. will delta invest $1 million to set up this system in another market that is dominated by another airline? no. but it could be replicated and put in other markets. and i wouldn't be surprised if we see other airlines do

something similar, especially in their hubs. >> okay. phil, for the moment, thank you very much. the view there on the new innovations in atlanta. joining us now is the former tsa administrator john pistole, now president of anderson university. welcome back to the program. >> thank you. >> is this technology the answer here, do you think? >> well, i think it's one of the possibilities. and i'm glad to hear delta, i know american and some other airlines are looking at investing their own dollars to help both buy down risk and to facilitate the movement of people through checkpoints. so, yes, i'm encouraged by that. knowing ultimately congress will need to step up and provide funding for additional officers for tsa, and probably additional equipment and technology. >> so you would agree with your predecessor still on capitol hill that he simply doesn't have enough staff for peak periods. does what's on the agenda with the additional money that's coming not in addition to overtime for more officers do you think that will solve the

problem or at least patch it through the summer? >> i think it will probably be more of a temporary fix the fact $34 million is good in terms of providing some in short-term help, but when you look at the passenger numbers that are up from this year compared to last year, for example over 55 million additional passengers thus far this year compared to last year, that's over 10 million a month through the first five months for each month. so it's almost analogous to going to the holland or lincoln tunnel or g.w. bridge or something if you had 10 million people to that choke point, that's going to slow things down. >> it may not actually be though the number of passengers but the amount of luggage that they bring with them. neffenger did an interview with usa today where he talks about the number one problem that the number of bags going through has

quadrupled in recent years and a lot of that has to come down to the fact the airlines are charging if you put the baggage on the hold and on the price signals going through this industry just simply the wrong way round now. >> yeah, it's clearly a challenge for tsa. and that's where the partnership between the airlines and the airports and congress has to really come together because as people put more and more in their carry-on bags, that makes it much more difficult and slow things down for those at the checkpoint. so those bag fees can really complicate the issues for tsa. >> i mean, i understand, john, there's a lot of outrage about this issue. nobody likes waiting in lines and makes summer travel a big hassle. i just wonder though if we're talking enough about security in the effort to fix it? i was reading about some of the private taigs effoization effor in 22 different airports, this idea the government can't do it right, turn to the private sector. i wonder though in that does

security get compromised at all in any of these kind of solutions that are being proposed? >> well, that's a great point. and that's the context obviously for why tsa was created after 9/11 where the privatized security at airports just didn't work. and we saw that on 9/11. and so the notion that a privatized company which san francisco, kansas city airports and about two dozen other much smaller airports have a privatized front line work force. they're still supervised by tsa, have tsa protocols and equipment and all that. but the context is for the current terrorist threat, which is obviously high given the egyptair crash last week which may turn out to be terrorism. >> right. >> the metro jet flight out of sharm el sheikh to st. petersburg, russia, last october which was clearly terrorist, the attack on the brussels airport even though not an aircraft but in the airport. so terrorists are out there trying to do bad things. so tsa's clear paramount responsibility is to keep

travelers safe here and in 450 airports in the u.s. that they provide security for. >> okay. we'll leave it there. so as the hearing continues of course on capitol hill for the moment. thank you, john pistole, former administrator of the tsa. as we've told you all morning the president and japan's prime minister shinzo abe are wrapping up a meeting in a joint statement in japan. we've been seeing some video of that. eamon javers has details. eamon. >> hi, carl, tense moments in japan as the press availability between the president and the prime minister touching on some of the real stress points in the relationship between the united states and japan. the president here landing just a week after an american was arrested on suspicion of murder in okinawa near the u.s. military base there, a young japanese woman killed in that attack. that has sparked outrage in okinawa and throughout japan. the president forced to deal with that in his press availability. the prime minister abe opened his remarks saying that he feels profound resentment for this what he called self-centered and

despicable crime for his part president obama responding that the united states is appalled by any violent crime that may have been committed by any u.s. personnel or u.s. contractor. both leaders promising to get to the bottom of this particular a personnel or contractor and both leaders are promising to get to the bottom of the case, and to prevent steps of crimes by americans in japan. and another couple of sensitive topics in the press availability, including the president's visit to hiroshima, and the global economy, but also the japan's currency movements which is a point of tension between the secretary jack lew and his counterparts in japan, and that is not brought up here in this particular setting, guys. >> eamon, thank you. and coming up on the show, the first of the installment in what we are calling the modern medicine. a look at the futuristic technologies and the opportunities in the treatments of tomorrow. that is next on cnbc. recently, a 1954 mercedes-benz grand prix

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the defense advanced research projects agency known as darpa played a role in

developing some of the most technological advancements in history, and what are the agency's researchers have in mind when it comes to medicine? our own meg tirrell is here with more on that. what did you find out? it is pretty cool stuff that darpa is working on. it is created as part of the u.s.'s response to sputnik, and what the director called a t terrible surprise for the united states. and that is what she said. >> we were created in the defense department to prevent that type of technological surprises, and so we decided to create our own. so that is what we have been doing. >> they are a small agency, but they are responsible for huge technology such as the internext and gps, and stealth technology, and of course, they are known for working for the defense purposes. you will see here, this is an

exo tlt suit working on the lighten the load for the soldiers out in the field. they have to carry 1110 pound, and this is a computer to read somebody's gait to help them support the walking, and the load they are carrying. this guy carrying it is not a soldier, but one tof the researchers. and this is prosthetic memory that darpa is trying to implement as they would implant this e electrode in the hippo campus, and have a onboard computerer to help wp the signals of the injuries and try to fix them. this is a new wave of pros thet ti thetics that darpa is working on. i didn't try this out on my brain, but people have to undergo brain surgery to try it, but they have done it at pitt and johns hopkins where the

patients are controlling a robotic arm with their brain. some really, really cool stuff they are wosrk on. >> are they working with the private sector who get the contracts? >> yes, they work with academia, and experts, and this is something that we talked to darpa's director as well, and this is what she did with industry. >> after we did the investments, then this huge private investment came in and built products and companies and whole new industries which changed the way we all live and work. >> so you can read are a lot more on this on cnbc.com, and hit later on "power lunch" and "closing bell ". >> and technology, and we are ready for that moment again as jon fortt is ready for us on "squawk alley ". >> anybody else thinking of sarah connor when they see that hand robot? and now, we will be talking about spinning off the services

business, business, and is either of those a good bet? and google, the a ads are bigger. is that a good sign for the investors or a bad sign for the product overtime. and also, cutting back the major piece of phone business it bought from nokia cut by microsoft, and what does that mean for the future? all of that is coming up on "squawk alley." the championsh? that was sebastian diaz. good guy. and all i had to do was ask for their money and pretend i was investing it. their life savings is now my lifestyle. female announcer: don't let someone else live the life you're saving for. find out if you're dealing with a registered investment professional at investor.gov. it's a great first step toward protecting your money. before you invest, investor.gov. the call just came in. she's about to arrive. and with her, a flood of potential patients. a deluge of digital records. x-rays, mris.

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good morning. it is 8:00 a.m. in microsofted headquarters in washington, and # 11:00 a.m. on squawk alley, and we are live. ♪ welcome to "squawk alley" this wednesday morning. jon fortt and kayla tausche and myself with you, and also kate mitchell, and at post