frenemies becoming the "f," the friend part getting more significant there. i always think maybe comcast wish they had bought netflix when it had a very low market cap. just get rid of them then. this is, obviously, pretty amazing. you have to go to ap application to get on it now. it would be great to do it on your cable box. awesome. all right. make sure you can watch peeky bonders. >> thank you for the recommendation. >> "squawk on the street" is next. ♪ good wednesday morning. welcome to "squawk on the street." i'm carl quintanilla with david faber, michael santoli at the new york stock exchange. the rush in to safety continues this morning with the premarket negative gold about $30 away from 1400. lots on the docket including ism services and fed minutes this afternoon. europe looks a lot like yesterday. the pound dipping below 128.

our 10-year near record low yields and oil closer to 46 than 47. our road map begins with netflix under pressure in the premarket after an underperform initiation. plus as you just heard, being added to comcast set-top boxes. we'll dig in on the stock down 15% this year. >> u.s. oncology company medhivation it is now for sale perhaps to sanofi. the details on a potential deal of $11 billion. >> gold hitting its highest level since march of 2014. upgrading its expectations for the precious metal. we'll talk to a portfolio manager how he's playing it. >> stocks poised to open lower amid more concerns about brexit fallout and slowing global growth after three major indices snapped the four-session winning streak and gold at a two-year high and as we said the pound trying to recover from that fresh 31-year low at one point dipping below 128. mike, you're watching the yields as you call them, which are

collectively now larger than the banks. >> yields and dividend paying stocks, exactly. if you look at the yield sectors, utility, consumer staples and telecom, about 17% of the s&p 500 because they've outperformed by so much. financials are less than 16%. in a strange way the u.s. stock market has become a little more bond friendly. in other words when bonds rally, stocks can rally a little bit more and, of course, financials lower bond yield toxic for them. that kind of helps to explain why the big u.s. stock market has been feeling the effects of these huge macro moves across the world, but, you know, to me it's kind of like, you know, there's a hurricane off the coast, it's over bermuda, really bad and here all we get is kind of rough surf. that's what's going on in the u.s. stock market. >> what is the last -- yesterday and now apparently this morning, say about last week? right? why are we chipping away at the best week we had of the year. >> one way of looking at it that immediate decline after the brexit vote and also the violent

rebound, were at least initially, about positioning. it was about people leaning one way, having to come back the other way. and really, i think you can look at that chart of the u.s. stock market and say, well, we're consolidating, one of the best weeks we've had this year. we're pulling back, oil is down a little bit and we're testing to see if there's real buyers at these levels. it's also been a very well-behaved stock market, meaning round numbers, it stops. the areas everyone is looking at, 2100 in the s&p and then it stops and tries to figure out the next story line. >> the technicians have had an easy go of it lately. >> in the equity market is the bond market world wide. negative rates, people bandy about the statistics, can't prove they're true but as many as $10 trillion in bonds with a negative yield. i mean think about the entire japanese bond market, and more or less the entire german bond market, what you've got, the bund now in negative, let's call it 0.19, somewhere in there.

it's just stunning. when i speak to people who manage money for a living, whether they run credit funds or equity funds they stop and don't know what to make of it. >> obviously you have this entire investment complex around the world built around the -- you know, meeting some kind of return objective and the math just -- you can't get there with negative yields anchored this way. so either you adjust your expectations, you save more, which kind of is going against the purposes of these stimulati stimulative central bank policies and that's what the market is trying to figure out, how do you back out of this if you do. >> there's concern monetary policy has run its course and what do we do if we need a jolt? where can we go when we're dealing with negative rates and a 10-year the likes of which we've never seen. >> the markets are with negative yields in low rates are begging governments for fiscal stimulus. begging the governments around the world to say, borrow

heavily, spend, do something else, that you haven't quite tried yet. >> that's political as opposed to central bank related. >> we're sort of handicapped for the time being, given the state of our election cycle. joining us with their outlooks this morning for the markets, william nick kolgs the senior business development head at cantor and emad is a portfolio manager at blackrock. good morning to you both. >> good morning. >> uk property funds, italian banks the action? gold today, everything we've just discussed what is the outlook for the near term? >> listen, i mean it's clearly enormous amounts of uncertainty and terror risk at this point developing in the developed world, right, whether it's the europe financial markets, the political transition in britain. apparent slowdown of global growth, downside risk, and the u.s. election. so there's enormous amounts of instability and vulnerability. in my own sandbox which is

emerging markets, intriguingly, there is an oasis of stability at this stage and the significant value in em. you're getting a complicated situation where volatility and terrorists in the emerging world and how do you trade that. that's a tough place to be. >> goldman today, renewing their call for what they're calling a sharp drop, 10% or so, even though they maintain their 2100 target for year end, do you see the summer being volatile? >> we've seen volatility over the last week and a half so more volatility later in the summer is, you know, should be expected as well. i think the velocity of the snapback rally surprised everyone, so now, perhaps further downside. we'll see. the u.s. has been outperforming. a safe haven. look at u.s. performance relative to europe, you know, certainly money is both going into the bond market and the stock market in the u.s. relative to the rest of the world. >> you know, i guess one thing that investors are struggling

with, they can see the downside risk, a lot of political stuff seems scary, but what's the bull case? you have full valuations, hard to see growth getting away from us on the upside. if you talk to clients what are the bullish ones saying the case for stocks right now? >> it's sector by sector. you were talking about it. the safe havens are utilities, real estate, consumer products. you're chasing extended valuations. there's real divergence in the marketplace. groups up 20% year to date and other groups that are down 15 to 20% as well. so while the market is, you know, basically flat, you've got huge divergence within the market. so safe havens are a group by group, i think i agree with mohammad el hair yan's comments buy good companies on dips and one that works over a long period of time as well. in the marketplace there's the market if you're trading indexes where, perhaps, you say more in cash and look to buy on a

significant dips down 4% or 5% from here and individual names, perhaps you would lighten up if you're longer term in the extended groups but there's still safe havens and that way for a reason. >> amer, china, today everybody is watching the yun and the level at 2010. does that remain a card in the pockets of the bears? >> as it should be, right. listen, sort of stepping backwards in china for a second, what are we seeing? we're seeing economic stability. at levels, but growth deceleration, sharp contraction we're worried about seems to have stopped for the time being. enormous amounts of policy stimulus that seems to have created a bit of a recovery. that seems to have opened the space for them to weaken the currency, without generating capital outflows. this is an interesting junction with that. we're seeing the thing that scared us in august and january but without the impact of capital outflows and financial

stress. my worry i don't know how far they can play that game without creating one more time. for the time being we seem to be safe but watching it very carefully and that is clear vulnerability and downside risk. >> you mentioned the em rally which you believe has legs. what countries will drive that rally to the extent it does exist? >> in a world in which the instability is enormous elsewhere, you have to go up, you have to be in the high quality countries. the ones where you feel comfortable that the institutional strength, the balance sheet strength. in the meantime what is value. rates, local rates in particular, are high compared to the quarter rates. so think places like indonesia a place we've been interested in and very engaged in, increasingly in india, certainly in mexico despite the issues, brazil is a place going through an interesting transition and

becoming increasingly optimistic about, so higher quality countries with value in local markets and rates, relative to the quarter is what we're playing in. >> amer, william, a lot to digest in the near and medium term. thanks, guys. appreciate it very much. >> thank you. >> meanwhile we're watching netflix, down in the premarket. jefferies assumes coverage of the stock with underperform and a price target of 80. the firm sees domestic subgrowth flatter than the current market's expectations and the slowing u.s. market will pressure the stock's multiple. initiating coverage here moderating subgrowth, international more challenging in the near term, and the landscape more competitive over the next five plus years. all that first strike advantage not with standing. >> here in the states the offering of the over-the-top packages not to mention slimmer bundles that eventually will make their way into the marketplace with your loebl cable company, so to speak, conceivably will pressure or at least offer alternatives,

whether in amazon-led package or hulu-led package or you name it, one being -- hulu actually combines a lot of the content companies but those will represent a competitive threat not to mention, of course, those who sell netflix content may be a bit more wary of doing so or more selective. international is the key area for growth anyway. >> first of all a pretty opportunistic call, stock up from 87 to 98 in a week. it's struggled, trading well below last year's highs or the early year highs this year. it seems like one of those stocks that it gave you an opportunity to lighten up on it in this round. that was key, the idea that first mover advantage is something that is waning a little bit over time. i actually think of the thought experime experiment, what if itunes was a separate start-up company as opposed to apple when it came out. so revolutionary and huge initially but then it became a little bit crowded with other

offerings. maybe you're looking at something similar even if the originals keep netflix in the front of the pack it's not necessarily alone. >> yeah. second negative call on netflix this week after kneedam's call yesterday. when we come back the latest on a potential deal between sanafy and meadowvation. and blackstone vice chairman buy yon wien what is worrying portfolio managers in this market. take another look at the premarket. dow had triple digit moves in seven of the last eight sessions. more "squawk on the street" from post nine in a moment.

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. after the close yesterday, oncology company medivation essentially putting itself up for sale after rejecting a raised offer from sanofi which, of course, has been seeking to acquire the company and had been soliciting written consent throughout the board. that's no longer the case. while 58 was rejected by the company that also included by

the way a $3 contingent value or something they're saying is worth $3, probably worth a lot less than that. medivation did go on to say and sign a nondisclosure agreement with not just sanofi but with two other potential suitors those according to people familiar with the situation are pfizer and celgene. setting up it would seem at least the possibility of an auction of the company with three potential bidders. we'll see. we simply don't know the level of interest of pfizer or celgene on occasion, of course, you will see other companies sign to take a look and get a better understanding of the company's business. pfizer no stranger to trying to take a look at and making a move on other companies that were focused on oncology as is the case at medivation. its key drug for prostate cancer doing about $2.2 billion worth of annual sales. the expectation is that will continue to grow. they're looking for new

indications as well. and they also have something that was at least a beneficiary of phase 3 data last week from a different company, called te sara, you may have seen that stock rocket last week, that same compound is not quite as far along at medivation, but conceivably, given the very positive results seen in phase 3 by tee sar ra for its what they call compound, again an oncology drug for ovarian cancer might bode well for the future here. we'll see what actually happens. sanofi for its part did end up bidding against itself but at least to the end of getting medivation as we've said for so long here, to face up to the music and put itself up for sale. >> what's interesting in terms of how this sale process might go, is medivation stock traded briefly around 70 early last year. in the huge biotech rally as it was finishing up in the spring

of last year. i guess the question is, does that serve as some kind of magnet for potential offers or at least for medivation's point of view. >> that's right. they would certainly and many of their holders would love to see something that starts with a 7. that, perhaps, may be somewhat unlikely again. it comes down to whether there is a full auction here, whether you really do get bids from the likes of pfizer and celgene. we know sanofi wants to own this company. what i can't share is, at least a great deal of insight on, how badly pfizer or celgene really are looking at this. celgene bought recep toes not long ago a $7 billion price tag. they don't have as much cash on hand as does pfizer, which has been fairly aggressive. we'll see how this plays out. let's call it by labor day, perhaps, we may get something in terms of a result here from medivation and sanofi as i said has agreed to a standstill. they've stopped trying to get written consents to solicit written consents and sit for six

months. in the offhand chance that company rejects at a certain price and doesn't sell itself, they could choose to come back, we've had a pace of m&a. this has been going on for some time. the others out there, mondelez/hershey, don't have a lot to offer on either one this morning or other outstanding situations. >> big stable companies looking to do something with the cash earning zero. >> right. >> when we come back art cashin from what to expect from today's market action and some of the these research calls on airlines, news on tesla, and what you'll pay for a 30-year mort again this week in a moment.

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just about eight minutes to the opening bell. art cashin, director of floor operations from ubs who joins us at post nine. heck of a lot of news for a week in july. >> it certainly is. >> what's at the top of your radar? >> all of the fireworks didn't stop on july 4th apparently. so we've got a lot of things going. first of all i think the viewers want to take a careful look at oil. gossip around has been that the china strategic petroleum reserve may have topped out in late june. if that's the case, that could be a substantial difference in demand. it's roo rumored they were putting hundreds of thousands of barrels away every day, so if you continue to see pressure on oil that could be a good part of it. obviously, the geopolitics in europe are important. ramsey has a problem with the

italian banks later in the year he will have his own referendum on rearranging the government. so if mom and pop over there get into a little bit of a problem he's going to have a problem. the interpretation or reinterpretation of what mr. comey meant to do with the press conference yesterday. it was highly unusual. >> do you think the market was focused on that in terms of implications for the election or just sort of a general feel about how things will play out for the summer or just a water cooler thing? >> i think the market was not obsessed with it, but you could see the reaction. as he opened the press conference and began running down the negatives, the market began to sell off. and then when he said no indictment, they came back. i don't think that means that they're rooting for hillary, as much as they didn't want to see potential chaos. >> yeah. >> burst upon the scene with the uncertainty that's there.

but i do think there may be more there than meets the eye. many traders think that, you know, the rumors had been that they would investigate, justice department would not indict, and then disgruntled fbi agents would begin to leak bits of the negatives. here he calls a press conference and gets all the negatives out, in the first 15 minutes. we'll see how they feel about mr. comey as things go on. >> yeah. meanwhile, these fed minutes this afternoon, nonevent or is there any chance -- we know where you stand on the cycle, but is there any chance they keep the idea alive? >> if fisher has any opportunity he will try to. but i think what you want to look and see how much reference there was to brexit because for all the, you know, looks like as passing fad, it looks like the bank of england is going to possibly cut rates twice again and maybe come in with a round

of qe. i don't see there's any possibility, as i've been saying, for the fed to do anything. >> art, one reason we love to talk to you, you've been doing this a long time and you have an incredible memory and so i would ask, in your extensive experience, have you ever seen a fixed income world like the one we're in where, $10 trillion in bonds is negative rates and we're at 1.3 on our own treasury. >> our mutual friend rick santelli pointed out in sydney homer's book "the 5,000 year history of interest rates" you don't really mention negative rates. they only used to come up in switzerland when they were trying to get people not to give them money because they were having a problem. and now, they're all over the place and they are disruptive. the only -- you've only seen the parallel opposite of this. back in the '80s, when rates were going through the sky rather than the other way. but it was disruptive then and this is disruptive now. >> in both cases in some sense,

rates, lower than inflation, right? >> absolutely. >> in some cases. >> that will remain the case. i don't think once you get velocity and money we can worry about inflation. it's not there. people are terrified and pick up the helicopter money and they put it in the garage. >> september 1981, 10-year at 15.8. you remember that. >> sure do. >> art cashin here at post nine. we'll get the opening bell in four minutes. don't go away.

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you're watching cnbc "squawk on the street" live from the financial capital of the world. the opening bell in 40 seconds as we wait for ism services at the top of the hour, fed minutes this afternoon, but everybody is paying attention to the low yields on the 10-year. gold now the highest since march of 2014. ubs says it's on the cusp of a new bull run, 1400 near term. >> record low treasury yields and gold pushing higher. that's going back to 2011 and

12. that was the dynamic then if you remember. the sovereign debt crisis. kind of a rerun in performance. >> there's the opening bell and look at the s&p at the bottom of our screen. at the big board, gold royalties a canadian precious metals mining company celebrating its first day of trading. the mission continues, a non-profit helping veterans adjusting life through community work. wba on the docket. 1.18 beats by 4 cents, revenue a little shy but raise the bottom end of their fiscal '16 eps forecast. analysts apparently didn't ask about it. >> nothing much on ta front. it really seemed to be really a medicare prescription type story. if you looked at the front of the house so to speak, the real consumer part of walgreens, comps were up just fractionally, 0.1%. sort of remains a struggle outside of the pharmacy, but,

you know, this is kind of slow growth, somewhat global story i think it's pretty much intact with that. >> the rite aid deal to complete and run by a very aggressive italian gentleman, mr. stefano pa seen no. >> no real road blocks ahead for the rite aid deal for regulators. >> see how that goes. >> the large move they made over the last year at this point for walgreens. stock down about 1% in line i guess. we have s&p only down right now by 0.4%. >> yeah. >> airlines getting hammered today by credit suisse. they take aal from an outperform to an underperform. they take ual's target from 64 to 42. she calls cash flow at american abysmal. >> right. and fuel costs going in the wrong direction. i think tactically if you looked at this call it with you a little bit of -- it was a little bit of taking care of a stale price target. there wasupgrade?

january of american. the market has been hurt on these. a rough story for the big airlines and part of this whole paradox with consumers seeming like in good shape but the consumer leverage stocks have been poor, autos, airlines, retailers. >> apple, of course, continues to make news. citi cut their estimates yesterday, citing in part brexit concerns and macro uncertainty, but also today, they will be doing away with the 16 gig entry-level storage. if you buy the new iphone you will start at 32 and then you can upgrade from there. people saying that's good news for qrvo. consumers have a lot more to store on their phones. >> they do. wasn't the standard take that it was kind of a, you know, kind of a joke to have that entry-level phone when you kind of practically speaking needed something more. but it seems to me, too, i mean just expectations being curtailed all around for what's going to be as part of the new

iphone launch, and by the way, by this point in the iphone 6 cycle you knew what was going to be in that phone. it's not a lot of mystery anymore. >> twitter has an interesting morning. not only did they add a new board member, brett taylor the former cto of facebook but as of this morning, you can live stream wimbledon on twitter. you actually see a video product of the tennis match on your left and then streaming tweets on your right. lot of discussion about it being the new chapter in the evolution of twitter which things they hope to do with the nfl come fall. >> yeah. >> what's the arrangement? in other words, in terms of the rights? >> espn is all over the map. yeah. >> got it. >> to be able to fire up twitter and watch a live sporting event is something we've not seen yet. >> it goes to the earlier conversation about netflix or those who would consider eventually cutting the cords. sports is so much an important part of that. but if you have the opportunity to have your tv on the wall in some way be able to get that

sporting event, they love their bells here. it's as though people have never rung a bell before. >> it's like anchoring from a zoo, a nice zoo. >> sometimes the calls from the traders themselves are -- >> yes. >> juniper in the red. deutsch cuts it to a hold. profit margins they say the routing business to come under pressure. certainly some others in that space with a lot of international exposure will be subject to the same kinds of scrutiny we've gotten lately. i was making a list of the brexit-related either downgrades or negative comments. apple, netflix, and there were a couple others, but we're starting to see it seep into the sell side commentary. >> absolutely. you wonder if it's one of those things it's a relatively convenient way to say look, our numbers look too high, seems like there's this one added bit of macro uncertainty. to me business spending is the place where maybe it's more likely to take hold as opposed to, you know, consumers.

and i guess companies very leveraged through the uk, you know, domestic market where it seems there's been a capitol hill. >> we also continue -- a chill. the reaction to the banks to what is historic lows in interest rates around the globe, not just here where we hit 1.32 i think at our lowest yield on the 10-year treasury, japan is negative at the 20-year mark for the first time, japanese rates, if you lend your money to the japanese government for 20 years, you get nothing. and the banks, mike, are taking it on the chin again. bank of america down 2% and the complex let's call it of the big banks down between 1% and 2%. that's not a new story. >> yeah. >> but it has not been a good year and many of them off 25% or so for the year. >> it's also not the market being incredibly pressured and clever. it's kind of clocking the flattening of the yield curve. every day it gets flatter is a day where the interest spread is less and book values accrues less. it's not a lot of mystery as to

why it happens and i guess there's no counterweight of a positive story in terms of how they're going to grow other parts of the business right now, although huge surge in refi applications for -- in the mortgage business because now we are at near historic lows in mortgage rates. >> when you have jpm's yield, 2.3% on jpmorgan one would think that might be enough to sustain it. to be fair it is only down 12% this year versus some of the competitors which down a lot more. >> that's where they keep it simple investor says jpmorgan is trading at book value at 3.something percent yield, manage to grow several percent a year i can live with that. that's your bull case for jpmorgan. >> a lot of attention this week to consumer staples. look at the green, campbells, smucker, hormel, kroger, tyson, paychecks. if you were writing the old column what would you be saying about these valuations?

>> first of all, i'm uncomfortable that everyone is saying right now people are overpaying for safety or overpaying for perceived safety which what is those things are. what's interesting, it seems to me, is that last week's hershey's bid, i think almost got people catalyzed even more so than they were. wow, maybe there's even an m&a or cost-cutting story or 3g/kraft/heinz deal. i'm not saying that's going to happen but it's interesting people are retrofitting a rationale for why it makes sense to buy these. by the way, on paper it kind of does make sense. if you don't really care about the mark to market of the stock price if we have a rough market and goes down 10%, all you care about is collecting the dividend yield that's probably going to grow over time there are worse things to do with your money, i guess. >> those wondering if we're going to get news in terms of mondelez's pursuit of hershey, you can see the stock at 110. they rejected the 107 a share bid, half cash, half stock. it may be a few more days but it

doesn't appear that mondelez is yet done, but it is interesting the silence at this point that's come from the mondelez camp. it's interesting about this from my perspective trying to really understand the relationship between the board of directors at hershey and the ten-person trust that runs the hershey trust. they have different objectives, of course, in terms of what they do, but that relationship, which has been dysfunctional in the past, could end up being a key here if mondelez does keep trying. >> finally, one note on mortgage rates, have you seen the number, the average 30-year fixed, 3.66 is the lowest since may of 2013. probably come down a bit more as the week goes on. but refis up 21% this week. diana olick this morning said refis year on year up 113%. so the rush to restructure your housing debt. >> do you buy home depot on that? >> that's the question. will people spend the savings on

the interest payment or not. you're preeblly refinancing from a relatively low rate. >> right. >> so you wonder if the cash bonanza is what it used to be. >> dow down 84. check in with bob pisani on the floor. >> and damage, but still comparatively minor, particularly what's going on over in japan and europe. want to show you some of the japanese automakers again today. the yen strength has been killer here. nissan up a bit but toyota and honda down. the yen is near 100 to the dollar here. it's rallied 16% this year and the damage to the exporters and i'm talking about the automakers is rather severe. look what we're doing for honda, toyota and nissan for the year. honda down 36%, toyota down 32, nissan down 28%. we talk about the european banks. this is the same kind of damage the european banks have been seeing year to date. speaking of them, another tough day, deutsche bank, deutsche bank has been cut in half.

50% drop in 2016. it was in the 20s just a while ago. royal bank of scott lan and ubs to the downside. so people have been asking and trying to figure out the brexit fallout. we can see it already, it's obvious a week and a half after. much tighter financial continues, in the uk and europe and the united states, and we've had a lot of currency adjustments here. obviously that's going to affect trade and i believe it's going to see an impact on the earnings situation which will get under way in a little more than a week here. since the fallout, since the brexit, minimal fallout in the u.s. with the s&p only down 1%, but uk stocks, the ftse 250, down 10%, the british pound has been weaker down 13%, eurozone banks down 22%. there's very obvious impacts and a flight, of course, to safety with u.s. treasure prices up about 4%. your brexit fallout right now. here in the u.s., well, very

typical day whenever we see europe under pressure, in the last week and a half, we see bank stocks down. there's your contagion. tech is down. a lot of impact of technology and sales potential over in europe. energy is usually down a little bit and then consumer staples and utilities tend to outperform and what we're seeing once again today. stop me if you've seen the new high list before. seems to be a new law that the dow could be down 500 points but clorox has to hit a new 5 week high, up -- 52-week high. along with the standard group of large utilities like southern and duke and the usual gold big cap gold names like new month and four or five of the biggest cap reits like kimco, simon property groups sitting near 52-week highs. one other question about brexit and i don't have an answer because i think it's not clear right now, the impact the foreign direct investment in the united states. the uk is the single largest foreign investor in the united

states as of 2014. still waiting for the 2015 numbers. but half a trillion dollars directly invested in the united states from the uk in 2014. that is 20% of all foreign direct investment holdings. the question i'm asking is what impact is that going to have, another potential knock on effect. we don't know the answer right now, but i think you can say there's going to be some kind of effect. the dow down 81 points. back to you. >> thanks so much, bob pisani. rick santelli, celebrating a special day today in chicago. hey, rick. >> good morning, carl. i will tell you, you know, i love talking technicals, people on the floor are into charts. how low will yields go? the problem it isn't only technicals or fundamentals and both might be a small proportion and you get the ideas through the charts. greater forces at work here. you see a two-day of 10s and they traded down to 1.31 yield. we're back up a bit. on a closing basis there have

been violations of the july 2012 all-time low whisker under 1.39. 10-year and all the fixed income, like double tops and bottoms so we still want to pay attention to this. look at one month charts. here's the other force i was talking about. of course look at the bund. 10-year bund, minus 18 basis points. but, the most negative instrument on the euro curve is the 3-year note. minus 70 basis points. now it's eased off a couple basis points. french two-year, minus 61 basis points. the uk 10, it's positive. but it's under 80, trading 76. consider david was talking about the japanese curve. it is negative. out to 15 year. but consider this, the one year, two year, three year, four year, five year all the way out to the nine year, that whole block, is in the minus 30s. their curve is flat as a pancake and trades by employment. how can you do a good chart on

that? nobody really has a gps on these markets. except for drawinggy, core rhoda, abe, janet yellen, stan fisher and that isn't the kind of direction we or guidance that we can really use trading. finally the dollar index. it's been sputtering all things considered and how counterintuitive. rates dropped to historic lows you look at a two-day chart it is making a bit of a comeback. carl, back to you. >> all right. rick santelli in chicago, rick, thanks. check in with jackie deangelis as well at the nymex watching energy go lower. >> good morning to you, carl. that's right. continuing yesterday's decline in energy commodities we're seeing oil prices after the 5% bump down a little lower today. so the selling is measured, but we did take out that 46 level that was a key technical level. traders call it mushy under there. 45.92 the session low. supply fears abroad are starting to ease a little bit. seems like the domestic outages fears about those are easing as well that supply is coming back

on-line and the demand picture right now is bleak and that's the problem when it comes to the oil trade. now traders will be watching for the fed minutes today and, of course, they're going to be cautious ahead of the jobs number on friday as well. they will be watching the action in equities as they decide what they want to do with oil too. remember, the department of energy usually releases its inventory number on wednesday because of the fourth of july holiday, that will be tomorrow at 11:00. meantime the bright spot in commodities, gold prices more than two-year high, carl, 1377.5 was the session high. back to you. >> thanks. >> when we come back a portfolio manager's take on the best ways to ride the rally in those gold stocks. dow is down 85. we're about 15 minutes away from ism services. don't go away. i'm only in my 60's. i've got a nice long life ahead. big plans. so when i found out medicare doesn't pay all my medical expenses, i looked at my options. then i got a medicare supplement insurance plan.

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stocks and says there's more room to run. vanek precious portfolio manager and street strategist for the gold fund joe foster. joe, good morning. seems like you run a gold fund and think it's always a good time for gold, but right now if gold moves on political instability, questions about other currencies and very low nom my nall interest rates i guess pretty much everything is working in gold's favor tactically here? >> yeah. there's a lot of financial risk in the system right now, not just brexit. it's the fact that the fed is unable to normalize interest rates, the central bank's radical or unconventional monetary policies, looks like the stock market in the u.s. is topping out, a lot of financial risk that investors are seeing driving them to gold. i think it can continue. we're calling this the beginning of a new bull market for gold. >> if it's a new bull market for gold we basically had a bear market begins about three years ago, i guess. what is it going to take for gold, if you even think it could

get back to those old highs around $1800 an ounce? >> well, gold thrives on financial risk. when people look for a story of value, a currency hedge, way to protect their wealth they go to gold. and again, when you look at some of the geopolitical and financial events that we're seeing and we look at the monetary and fiscal policies that have been pro mull gaited over the last five, seven years there's a lot of financial risk and i think that's what people are starting to recognize. >> even ubs had some bullish comments today about gold, kind of reupping the call for still higher prices although they do acknowledge that on a short-term basis it seems as if investors are leaning heavily to the bullish side. in other words, maybe it's gotten a little bit overlogged in the short term. is that a concern for you? >> at some point we will have a correction. we always do. okay. but we've gone through 1300 a lot faster than we thought we

would. we're seeing a lot of activity in the silver market, so this gold market, the precious metals market has gone from strength to strength all year and so i think it can continue for the remainder of the year. >> you know, joe, it's easy for investors at home to buy gold directly these days as it has been for years and other vehicles, why buy gold stocks which are, of course, what you do through your funds? >> well, there's several reasons. one is gold stocks can give you leverage to gold, so they tend to outperform gold in a positive market. which is what we have. these gold companies have done a tremendous job of turning their business around. they're much better managed companies than they were a few years ago. so as just businessic business propositions they look more attractive today than a few years ago. >> as you evaluate those names what's the most important thing to watch? cost to production, more complicated than that? >> yeah.

i mean mining it's risky business. there's a lot that goes into it. you really have to dig into these companies and look first -- the first stop is to look at their costs, their balance sheet, and then, you know, we really dig into the minds and we analyze these companies on a mine by mine basis. the quality of their assets and what their growth potential is, what kind of development properties they're working on, all these things go into our stock selection. >> all right. you dig into the mines. i like that. thanks very much. joe foster from vanek. >> thank you. >> the unique sell, chipotle firing at its rivals when "squawk on the street" continues.

andrea sikon. medical doctor 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. that was quick. as part of our research, i also compared lab results with notes about prior treatments, then cross referenced it with thousands of medical journals. and i get the benefit of much more data, and a lot more time to plan the best treatments. i stay focused 24/7 and never sleep. you sound like a lot of medical students i know.

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following that outbreak of e. coli. whether or not it can move the stock off of these call it a three-year low. >> yeah. bet 50% down off its highs. seemingly not so far. but you have to believe that chipotle feels like what do they have in the way of reinforcing what their brand stands for and the idea that they're against big industrial food i suppose. >> yum is not having -- i wonder if that's thrown into sort of a kroger, hormel universe? >> it does get in. i think mcdonald's more so. mcdonald's has been the favorite yield stock there and you have the cover story of a new ceo revival and everything else. those stocks without a doubt they get put in there. they are typically kind of the consumer staples area. >> interesting. fast food industry sales look a little slower in q2 than they did in q1. we'll see when we start getting those earnings. when we come back, blackstone's

byron wien, dow is down 65 points. don't go away. i

♪

good wednesday morning. welcome back to "squawk on the street." i'm carl quintanilla. with sara eisen and david faber. continued weakness as we move further near the holiday shortened week. dow down about 70 points. breaking economic news and we will gee to rick santelli in chicago. rick? >> we're looking for our june read on ism nonmanufacturing. the service sector, the biggest swath of the u.s. economy. looking for 53 and change. add 3 points. 56.5. 56.5. much stronger than we were expecting. and that's the best read since november of last year which was 56.6. considering it's employment week, let's go through the employment index. the employment index moved back above expansion of 50, from 49.7 to 52.7.

new orders, they got very close, as close as you can get to 60 without actually overtaking it, 59.9. so that was a nice jump from 54.2. so we've had some spotty data. the service sector seems to be at least based on this measurement doing better. and yields, hovering around 1.37, 1.38, about the same place they were in july of 2012 and other than those two places you have to go to the eisenhower administration to find lower yields. sara eisen, back to you. >> yep. history making bond moves. thank you. despite the better data in services the skittish move continues on wall street. investors selling stocks the dow down 38 points off the lows but still money pouring into safe haven government bonds sending yields to record lows from the u.s. to germany to japan and the british pound, continues to get pummeled post-brexit. joining us to discuss the markets on a tuesday is dan, head of north american fx

strategy at bmp paraban. sounds like stocks are a side show compared to what's happening with the strong yen, weaker british pound and weaker chinese ewan. what is the deal to you? >> sterling is the biggest mover over the past month and we think it's premature to say it's moved enough. big questions for the pound stretching out over the next few years. uk runs a current account deficit that's been funded by direct investment and the real question mark now is, whether you're going to get direct investment on a pace that will allow the uk to run a current account deficit like that. sterling needs to weaken to a point where uk assets seem to be cheap or where uk can begin to run less large trade deficit. >> so we've already seen, what, almost 15% move lower in a matter of sessions. how much lower can the pound go here? >> well, we thought 1.30 was an initial target in the aftermath

of the vote. we've reached that level. as we noted in our publications it's premature to say that's the bottom. the market looking for a new equilibrium the bank of england is able to add qe and all those should weigh on the currency. >> is that's what's driving the rush into global safe haven bonds, the fact that we are about to enter another wave of central bank easing or something else, something darker that is happening with the global economy driving it? >> well definitely seems as if the market is taking out any possibility of u.s. tightening and that's pushed u.s. yields down across the curve and we're -- markets are expecting more easing from other g-10 central banks. bank of japan is one to watch. with the yen strengthening the way it has been and inflation expectations falling in japan makes sense to look for more boj action if not at the meeting yet at the meeting at the end of this month if not sooner.

we would watch for a currency action. dollar/yen has faun repeatedly. better data in the u.s. may help it bounce a bit but if that doesn't happen, you know, watch out for the ministry of finance to keep risk more two-way in dollar/yen. >> daniel, sara mentioned stocks seem here. more stock market people look at the u.s. dollar index as a read for when they should maybe worry about the u.s. dollar getting too strong and acting as financial tightening globally. the u.s. dollar index has been range bound. a lot of these moves you're talking about seem to be canceling one another out. does that mean we don't have to be concerned about the dollar getting too strong? >> it's true. because of the way euro structure of balance of payments is set up, the euro a lot of people think it would fall sharply following the uk referendum, it didn't, and that's because europe has the large current account surplus during times of global market stress euro investors tend to

keep money at home or cautious like investors everywhere else and the euro has this unexpected stability. it doesn't weaken as much as people expect. that's why that dxy is so stable. dollar/yen as i noted is falling. that also contributes to dxy staying stable and, you know, i think from the u.s. economy standpoint maybe that's one thing that we should be maybe relieved about or less concerned about, the strong dollar was a real risk to the outlook six or seven months ago and that's really quieted down a bit in terms of being a factor for the u.s. outlook. >> is the market action, dan, telling you, telling us, that this is going to be an isolated uk story, that the impact is going to be felt there, or do you see bigger risks lying in europe? the euro has been pretty stable. >> yeah. i think right now the price action is telling you that world is world markets are concerned that the uk result could have broader implications.

you see during asia hours overnight when sterling was breaking down, we also saw pressure on global equity markets, global markets seem to be focused on the uk. i think as we move forward this will be increasingly viewed as a uk-specific issue. definitely a big question marks for the uk economy and sterling, but maybe less implications for other financial markets globally. the euro is a close proxy for sterling but as i noted you have the current account surplus which means even though people will get bearish on the euro after the vote it's difficult for the euro to go down in an environment where global markets are more cautious. >> on this yield move we're seeing, everyone noting the flatter yield curve which usually predicts a recession. there's a debate whether that is signaling potential recession in the u.s. or as mohammad el ereyan argues today a tell of what's happening in japan and in europe and you can't look at it traditionally like you normally

would. >> well, i think there's no obvious correct answer to the question. people will take different views on what it means. one thing that's clear is the market is not prisds for any real scope for fed tightening in the near term. normally that would be bad news for the dollar, but with everything else going on, overseas, there's sort of offsetting penalties. and we wind up with maybe less net movement in the dollar than you might expect even though there's a fair amount of volatility in the market. >> dan, thank you. dan good to see you, head of north american fx strategy for bnp parabass. >> meanwhile in politics fbi director james comey recommending no charges against hillary clinton for her handling of classified information on the private elon mu private e-mail servers. john harwood joins us with the latest. >> exactly as expected the republican national committee and trump campaign are out today with videos capitalizing on that sharp criticism that fbi

director comey had for hillary clinton and her handling of classified information yesterday. the videos are different, but they both use a very simple technique. lay james comey's words next to hillary clinton's. >> a 52 e-mail chains have been determined by the owning agency to contain classified information at the time they were sent or received. >> i did not e-mail any classified material to anyone on my e-mail. >> 110 e-mails in 52 e-mail chains have been determined by the owning agency to contain classified information. >> now, of course, hillary clinton is going to take solace in the fact that james comey did not recommend criminal charges. she's also going to bask in the support from president obama. he campaigned with her in charlotte yesterday and vouched for her judgment.

>> north carolina, my faith in hillary clinton has always been rewarded. i have had a front row seat to her judgment and her toughness and her commitment to diplomacy. >> now hillary clinton herself is going to try to change the subject today. she's going to be speaking in atlantic city and trying to call attention to donald trump's business practices and the demise of his businesses in atlantic city but she's got a big problem that's going to continue. carl? >> all right. john harwood in washington, thanks very much. appreciate it. coming up, takeover target. medivation saying it's opening the door to takeover talks with sanofi. you see the two stocks there. medivation getting a little bid. we'll break down the possibilities next. plus, later in the hour, byron wien, blackstone advisory partners vice chairman, why he says populism may hurt markets. much more ahead. stay with us. .

live shot of the roosevelt room the president expected to deliver a statement on afghanistan around 10:25 a.m. eastern time. joined by the secretary of defense and chairman of joint chiefs. we'll bring it to you live. >> we seem to be getting perhaps close to a large deal in the biotech industry. medivation, when sanofi came calling for that company at 52.50 a share i reported it was likely given the weak defenses at medivation. it would eventually be forced to

move into so-called auction mode. the company at this point may not want to term it that, but that more or less is what medivation seems to have decided. this after receiving a higher bid from sanofi which if you recall was also soliciting written consents to try to row place the board of directors. the $58 a share bid along with a so-called contingent value worth they say $3 a share was rejected by medivation but it did decide to sign confidentiality agreements, not just with sanofi, but as well sources tell me with pfizer and celgene, all of this designed to see exactly what price it can actually get. those potential buyers to pay for the company. key drug being an oncology -- a prostate cancer drug that does about $2.2 billion or is expected to do as much as $2.2 billion in annual sales. they do split that by the way in the u.s. with es stel has. but there is also hope that a --

something called a inhibitor for breast cancer, we won't know clinical trials for quite some time, could also present a significant revenue stream many years down the road. as for what the price will be here, it's very much unclear. you can see medivation holding in the low $60 range and it moved up to that range last week, actually, on very positive results for another inhibitor from competitor te sair ro. we'll see where we get at this point. sanofi has agreed to stand still for six months. it's dropped its written consent solicitation at this point. and whether or not there is real interest from pfizer or celgene, perhaps, will be a key as to what the price ends up being. analysts kind of all over the map here. some will say high 50s or low 60s is an appropriate price, others want to go far higher on the promise for extended

indication of exstanedy and what they believe will be a vibrant auction. it would appear at the very least we are going to see a deal done at some point perhaps as soon as labor day. >> david, thanks. meanwhile the british pound as you know hitting its lowest level against the dollar in more than three decades. global stocks extending their losses as investors continue to talk about the fallout from the brexit vote. joining us this morning byron wien the vice chairman of blackrock's multiasset investment group. it's good to see you again. good morning. >> yeah, carl, it's blackstone, not blackrock. >> apologies. i might have read that wrong or it might have been typed wrong. thank you, byron. i should know that. you went to london in june, amsterd amsterdam, paris, geneva, zurich, i didn't find anyone who was enthusiastic about any asset class. >> that's right. >> where does that leave us? >> i think you have a great period of uncertainty and the brexit vote just added to it.

and the markets are in turmoil and the only asset that seems to be working right now is gold. >> does this -- does this seem to be something that is systemic? is this a fundamental shift in the way we think about asset classes or what we went through with greece, cypress and other examples? >> i think people are going to try to figure out what brexit really means. remember, people are -- i mean, the european union is still intact. the uk has not left yet. britain is still importing tremendous amount of goods from the continent. and they haven't even invoked article 50 of the lisbon treaty. for the next two years, it's going to be pretty much business as usual. but the market is treating it as if britain is cut off as of now, and that's an overreaction i think. >> you think actually that the

separation could happen a lot sooner than we think, that the eu might want to move this along. why? >> well the only reason the eu would want to move this along is to punish the uk and to prevent other defections from other countries. you elections taking place all over, but happily, the spanish vote on the sunday after the brexit vote, went in favor of the establishment party. so my view is that the turmoil that's being described in the decline ins asset prices is exaggerated. >> you mentioned one of the only assets that's working is gold, byron. does that mean you're not a buyer of swiss government bonds or german government bonds with negative returns? >> i'm not -- i don't believe in negative interest rates. i believe that the borrower should be paying the lender for the capital that's being provided? >> well you could always go to

the high yielding u.s. treasury. i think the 10-year is 133 right now. >> right. that looks good compared to almost everything else. but i think there's some real bargains in the high yield market. i think mortgages are attractive, leveraged loans are attractive. you have to go into the riskier end of the credit markets in order to find value, but there is value there. >> you know, byron, you mentioned that every investor around the world wants to know how to get the double-digit returns, even most high yield corporate bonds don't get you there in terms of coupon for double digit returns. is it something that investment professionals will have to abandon this idea that you can achieve that without taking on a lot of leverage or additional risk? >> well, as i said in my essay, i mean there are two points i made. one, i think that most institutions of sovereign wealth funds are looking for very high single-digit returns, if not 10%, something close to it, and

i think that's too optimistic. i think that the returns are going to be closer to 5% than 10%. and that's what the target should be focused on. but you can still get double-digit returns in real estate and private equity. >> two key areas that blackstone operates in, if i'm not mistaken. >> yeah, yeah. i guess i have to throw in the caveat i'm talking my own book here. >> that's all right, byron. i'm wondering, though, generally you don't seem particularly positive. i mean what if there were another recession, you mentioned you don't believe in negative interest rates but it would seem that central banks may be out of bullets to do much with monetary policy if the world economy were to falter. what happens? >> i think we don't have -- i've looked in the toolbox. the recession toolbox. what's in there? there's usually only two tools, monetary and fiscal policy. we've already gone about as far

as we can go with monetary policy. on fiscal policy, i doubt with conservative governments in europe and the republican congress, we're going to get very far in the u.s. so we don't have the tools to deal with the recession. if we get into one. and so the best policy is to try to prevent one from occurring. on the other hand, the signs that usually appear before recession aren't there. we don't have an inverted yield curve, we don't have a lofty price earnings ratios, we don't have heavy inventory overhangs so i don't think a recession is close, but i think we've got to do everything we can do to avoid one because we don't have the tools to get ourselves out of it. ordinarily you would have fiscal spending an the feds would lower interest rates but with interest rates already near zero there's not a lot the fed could do. >> finally, byron, i wonder if the rise of populism this year is something you flagged in your

surprises, if you have been surprised by it and if you think it's efemoral even over the medium or long term? >> i think it's here to stay. i think people are dissatisfied with what the government has been able to accomplish. most people, i would say, that maybe the top 20% of the population, feels that they're gaining from the economy. the middle 60% feel they're holding their own. the bottom 20% feel they're losing ground. so i think that that's given rise to populist candidates and why donald trump is the republican nominee and that's why bernie sanders did as well as he did in the democratic primaries. so i think populism is the reigning philosophy. i think people who are disadvantaged feel the system is rigged against them and they want a candidate that's going to change that. and that's going to be a dominant theme in the presidential elections this

fall. >> byron, it's always good having you back on the show. thanks again. >> thanks for having me. >> byron wien of blackstone. dow down about 99 points. sara? >> we're awaiting a statement this hour from president obama on afghanistan. we'll bring it to you live as soon as he takes the podium. we'll be right back.

if in a few moments to the roosevelt room in the white house where the president is expected to deliver a statement on afghanistan. troop levels appear to be at least one of the things he'll discuss. john harwood is here to set that up. john? >> carl, we're expecting the president to announce a slowdown in the pace of withdrawals he had previously discussed. remember, the war in afghanistan is our longest war, claimed 2365 american lives. president obama had planned to remove almost all troops by the end of his presidency. the last plan that he had issued called for about 5500. the associated press is now reporting that he's going to announce that 8400 troops would remain. it, of course, has been a year of violence in afghanistan.

just a few days ago 33 people killed in an attack on a convoy of bus containing police cadets. a military review going on of our troop levels and it is expected he's going to conclude that review with the announcement that more troops will stay behind. of course the president has been criticized for not leaving troops behind in iraq and leading to the rise of isis and the islamic state throughout the region. that is one thing weighing on the president's mind. and, of course, you can't help but note how remarkable, carl, this is occurring, the presidents a statement on a day when a british commission has come out very strongly criticized the previous british prime minister tony blair for his alliance with george w. bush on the war. tony blair has been standing out and refuting the attacks on his judgment, but barack obama is somebody who criticized that war from the beginning and on the very day that blair is being criticized for the decision to go to war, this president is

going to slow down the removal of troops from afghanistan. >> indeed. that report essentially arguing that the administration in the uk went to war with an urgency that wasn't justified. meanwhile, john, the president will go to this nato summit in poland and i have to assume that troop levels in afghanistan and other countries will be high on the agenda. >> that's right. nato, of course, our partner in the war, has also indicated that it is going to provide extended support for the afghan military. the hope had been to transition to a situation where the afghan government could protect its own power and protect its people. that has not proven adequate. the taliban have not submitted to engaging in peace talks ant so these attacks -- and so these attacks have continued leading to the decision today. >> here is the president. >> good morning, everybody.

more than 14 years ago, after al qaeda attacked our nation on 9/11, the united states went to war in afghanistan against these terrorists and the taliban that harbored them. over the years, and thanks heroic efforts by our military, our intelligence community, our diplomats, and our development professionals we pushed al qaeda out of its camps, helped the afghan people topple the taliban, and helped them establish a democratic government. we dealt crippling blows to the al qaeda leadership. we delivered justice to osama bin laden. and we trained afghan forces to take responsibility for their own security. given that progress, a year and a half ago, in december of 2014, america's combat mission in afghanistan came to a responsible end. compared to the 100,000 troops

we once had there, today, fewer than 10,000 remain. and compared to their previous mission, helping to lead the fight, our forces are now focussed on two narrow missions, training and advising afghan forces and supporting counterterrorist operations against the remnants of al qaeda as well as other terrorist groups, including isil. in short, even as we've maintained a relentless, you know, case against those who are threatening us, we are no longer engaged in a major ground war in afghanistan. but, even these narrow missions, continue to be dangerous. over the past year and a half, 38 americans, military and civilian, have lost their lives in afghanistan on behalf of our security. and we honor their sacrifice.

we stand with their families in their grief and pride. we resolve to carry on the mission for which they gave their last full measure of tee voe -- devotion. this is not america's mission alone. in afghanistan we're joined by 41 allies and partners, a coalition that contributes more than 6,000 troops of their own. we have a partner in the afghan government in the afghan people, who support a long-term strategic partnership with the united states. and, in fact, afghans continue to step up. for the second year now, afghan forces are fully responsible for their own security. every day, nearly 320,000 afghan soldiers and police are serving and fighting. and many are giving their lives to defend their country. to their credit and in the face of a continued taliban insurgency and terrorist

networks, afghan forces remain in control of all the major population centers, provençal capitals, major transit routes and most district centers. the afghan forces have beaten back attacks and pushed the taliban out of some areas. meanwhile, in another milestone, we recently removed the leader of the taliban acthar mohammad mon mun sour. nevertheless the security situation in afghanistan remains precarious. even as they improve afghan security forces are still not as strong as they need to be. with our help, they're still working to improve critical capabilities such as intelligence, logistics, aviation, and command and control. at the same time, the taliban remains a threat. they've gained ground in some cases, and continued attacks and suicide bombings, including in kabul, because the taliban deliberately target innocent

civilians, more afghan men, women and children are dying. and often overlooked in the global refugee crisis, millions of afghans have fled their homes and many have been fleeing their country. now, as president and commander in chief, i've made it clear that i will not allow afghanistan to be used as safehaven for terrorists attack our nation again and that's why i constantly review our strategy with my national security team, including our commanders in afghanistan. in all these reviews we're guided by the facts, what's happening on the ground, to determine what's working and what needs to be changed. and that's why at times i've made a adjustments, for example, by slowing the draw down of our forces and more recently giving u.s. forces more flexibility to support afghan forces on the ground and in the air. and i strongly believe that it is in our national security

interest, especially after all the blood and treasure we've invested in afghanistan over the years, that we give our afghan partners the very best opportunity to succeed. upon taking command of collisaln forces this spring general nicholson conducted a row view of the security situation in afghanistan and our military posture. it was good to get a fresh set of eyes. and basds on the recommendation of general nicholson as well as secretary carter and chairman dunford and following extensive consultations with my national security team as well as congress and the afghan government and our international partners, i'm announcing an additional adjustment to our posture. instead of going down to 5500 troops by the end of this year, the united states will maintain approximately 8400 troops in afghanistan into next year, through the end of my

administration. the narrow missions assigned to our forces will not change. they remain focussed on supporting afghan forces and going after terrorists, but maintaining our forces at this specific level, based on our assessment of the security conditions and the strength of afghan forces, will allow us to continue to provide tailored support to help afghan forces continue to improve. from coalition bases in jalalabad and kandahar we will be able to continue supporting afghan forces on the ground and in the air and we continue supporting critical counterterrorism operations. i'm reaffirming the enduring commitment of the united states to afghanistan and its people the decision i'm making today can help our allies and partners align their own commitments as you know, tomorrow i depart for the nato summit in warsaw where i'll meet with our coalition partners and afghan president ghani and chief executive abdullah. many of our allies and partners

have stepped forward with commitments of troops and funding so that we can keep strengthening afghan forces through the end of this decade. the nato summit will be an opportunity for more allies and partners to affirm their contributions and i'm confident they will, because all of us have a vital interest in the security and interest in afghanistan. my decision today also sends a message to the taliban and all those who have opposed afghanistan's progress. you have now been waging war against the afghan people for many years. you've been unable to prevail. afghan security forces continue to grow stronger and the commitment of the international community, including the united states to afghanistan and its people, will endure. i will say it again. the only way to end this conflict and to achieve a full draw down of foreign forces from afghanistan, is through a lasting political settlement

between the afghan government and the taliban. that's the only way. and that is why the united states will continue to strongly support an afghan-led reconciliation process and why we call on all countries in the region to end safe havens for militants and terrorists. finally, today's decision best positions my successor to make future decisions about our presence in afghanistan. in january, the next u.s. president will assume the most solemn responsibility of the commander in chief. the security of the united states and the safety of the american people. the decision i'm making today ensures that my successor has a solid foundation for continued progress in afghanistan, as well as the flexibility to address the threat of terrorism as it evolves. so in closing i want to address directly what i know is on the minds of many americans, especially our troops and their

families who have borne a heavy burden for our security. when we first sent our forces into afghanistan 14 years ago, few americans imagined we would be there in any capacity this long. as president, i focused our strategy on training and building up afghan forces. it has been continually my belief that it is up to afghans to defend their country. because we have emphasized training their capabilities, we've been able to end our major ground war there and bring 90% of our troops back home. but even as we work for peace, we have to deal with the realities of the world as it is. we can't forget what's at stake in afghanistan. this is where al qaeda is trying to regroup, this is where isil continues to try to expand its presence. if these terrorists succeed in regaining areas in camps where

they can train and plot they will attempt more attacks against us. and we cannot allow that to happen. i will not allow that to happen. this september will mark 15 years since the attacks of 9/11. and once more we'll pause to remember the lives we lost. americans and peoples from around the world will stand with their families who still grieve, will stand with survivors who still bear the scars of that day, will thank the first responders who rush to save others and perhaps most importantly will salute our men and women in uniform, our 9/11 generation, who have served in afghanistan and beyond for our security. we'll honor the memory of those who made the ultimate sacrifice, including more than 2200 american patriots who have given their lives in afghanistan.

as we do let's never forget the progress their service has made possible. afghanistan is not a perfect place. it remains one of the poorest countries in the world. it is going it it continue to take time for them to build up military capacity that we sometimes take for granted. and given the enormous challenges they face, the afghan people will need the partnership of the world led by the united states for many years to come. but with our support, afghanistan is a better place than it once was. millions of afghan children, boys and girls, are in school, dramatic improvements in public health have saved the lives of mothers and children. afghans have cast their ballots in democratic elections an seen the first democratic transfer of

power in their country's history. the current national unity government continues to pursue reforms, including record revenues last year to strengthen their country. and over time, helped decrease the need for international support. that government is a strong partner with us in combatting terrorism. that's the progress we've helped make possible. that's the prog -- progress our troops have helped make possible and our diplomats and our development personnel. that's the progress that we can help sustain in partnership with the afghan people and our coalition partners. and so i firmly believe that the decision i'm announcing today is the right thing to do for afghan, for the united states and for the world. may god bless our troops and all who serve to protect us, may god

bless the united states of america. >> that is the president having to adjust once again to the situation in afghanistan, which he called precarious, arguing that afghan security forces are not up to speed. he will leave 8400 troops in afghanistan at the end of his term, that's about 3,000 more than he had planned earlier. our john harwood has some reaction in washington. john? >> carl, he emphasized that the active combat mission was over. this is a point that he's made before. he ipds katsds that our troops were providing various kinds of assistance to afghans who have the principle responsibility for their own defense. he indicated that our nato allies and others are stepping up with us to sustain support, given the deterioration and the security situation, so what he was trying to do is, in effect, explain and justify why he is doing something that the arc of his career before he came to the presidency, would have suggested he would not do. that is to say, leave troops in

for the duration of his presidency, leave 8400 for his successor. you know, this has been controversial topic for him from the beginning when he first took office in 2009 at the behest of u.s. commanders. he surged troops in more than 30,000, but provided a plan at that time that was much krits side for withdraws and the withdraws were supposed to have concluded by the end of his presidency. as you indicated he's adjusted that plan more than once, going from 5500 to 8400 and his successor will determine from there. >> he didn't take any questions but hillary clinton is still on all the front pages this morning and everyone is talking about that. do you expect anything further from the administration from president obama after he campaigned with her yesterday, it was not mentioned, obviously, but the reaction is coming fast and furious here.

>> it is coming fast and furi s furious. as a matter of fact, speaker ryan just a few minutes ago had a press conference which he sharply criticized hillary clinton. let's take a listen to what the speaker had to say. >> the dni, clapper, should deny hillary clinton access to classified information during this campaign, given how she so recklessly handled classified information. that's point one. point two, director comey's presentation shredded the claims that secretary clinton made throughout the year with respect to this issue. >> so you see there speaker ryan moving to capitalize on james comey's stinging indictment of the administration. of course without criminal charges. a criticism nevertheless of how she handled classified information. i would expect that we will hear either from the president or through his spokesman that those briefings will in fact take place, that hillary clinton will not be denied access to

classified information, and the question for republicans is do they have a nominee who can take advantage of this fact. hillary clinton has made the argument against donald trump that he lacks the judgment to be commander in chief and now he has a comeback in the words of the fbi director this is going to be a back and forth we see throughout the rest of the campaign to november, guys. >> all right. john, thank you very much for summarizing it for us. john harwood in washington. dow has lost steam down more than 90 points. to the cme, rick santelli has the sapntelli exchange as alway. >> thank you. good morning. i would like to welcome my guest this morning, mark. thanks for taking the time. >> my pleasure, rick. >> okay. if i look at what 30-year returns have been, currently, year to date, 30-year, 21.5%. that's principle and interest. if i look at a 5-year annualized

return, 12.5%. >> you're talking about the stock market, right? >> no. the 30-year bond. isn't that amazing. >> yeah. >> listen, mark, i'm looking up there and see 2.14 on a 30-year bond now. what are your thoughts in this era of super low rates, central banks gone wild and negative rates to the tune of 12 trillion plus around the globe? is this still where you're advocating investing or do you have some other alternatives? >> i got out of bonds several years ago. i thought the top had been reached. but, obviously, i was wrong. and look, you could have done just as well in the stock market if not better. there are al iter natives to the bond market andhave to look at where the puck is headed, not where it's at. with the fed engaging in dramatic increases of money supply, they are like you, just looking at the price of money. the supply of money is growing

at 8 or 9% if you look at m 2. i think they are working overtime to bring inflation back and gold, gold, which is finally moving, is the best indicator of inflation of future inflation. so we may see a return of inflation here if the gold market continues to rise. so that's what i'm looking at more than the bond market. >> you know, you bring up a really good point. i've been trying to talk about the pricing issues in a bit of a different way, considering brexit, some of the issues with hillary's e-mail, central bankers, this anti-establishment trend, of course, is paired up with more of an isolationist view of the world. shouldn't the reverse of globalization bring higher pricing pressures, as countries regroup? >> yeah. i think that's what could possibly be an outcome and why the gold price is moving higher. the fact that bond prices are

extremely low is taking into account that hillary clinton is probably going to be our next president, which means more kind of a sluggish economy and not a lot happening. no dramatic changes in government policy. it's more of the same that we've had over the last eight years. it's a little bit unfortunate, i think, for our country because we need to get strong economic growth and we're just not seeing it if we have a continuation of what we have seen over the last eight years. >> you know, mark, we're out of time. i would like to press your buttons a bit on why you're drawing a conclusion that anything in the marketplace means that hillary clinton is going to win. i have no thoughts as to who is going to win, but i'll tell you one thing, with all the uncertainty involved in both candidates, i find it hard to believe that the markets could focus on something that i think is just not discernible, but thank you for spending the time today. >> all right. >> sara, back to you. >> i have a feeling we'll be talking a lot more about the

election and markets, rick. thank you. keeping an eye on the sell-off, down about a half a percent. health care is the only positive sector. much more ahead on "squawk on the street." stay with us.

a new ad targeting the fast food competition. it's called a food love story. it's the first ad since a series of noro virus outbreaks this year. jessica, good morning, thanks for being here. >> sure, happy to do it. >> so wall street is expecting sales to slide 7% this year. do you think this animated ad

will help it all? >> well it's hard to say. there's no way that an animated add is going to help reverse sales that dramatic but it will help remind people what they used to love about chipotle and now that time has passed maybe they're more willing to give it another shot. >> there's some criticism that it's an attack on the competition for not using fresh ingredients. your competitor ad week wonders if it's an actual cry for help. they didn't go into a mea culpa or apologize or anything like that for the ad. do you think it could backfire? >> well, the reality is that the animated ad was being produced well before the company's food issues came out. so i think it sounds like they stuck with the original plan and

the way that they're marketing it now there's a lot more at stake. but it's the same menu and a same technique and stays away and it's the main things that people think of when they think of fast food and that's at the core. that's not going to change. >> and jessica, chipotle grew to the size it's gotten to without being very much of an advertising driven fast food story and in contrast to its competitors it's a grass roots thing and became very popular on its own. did they actually have to be a little bit more aggressive and careful in how they project some kind of an image through advertising? >> the image is very interesting right now. obviously they don't do the mainstream advertising that you would think of. they don't do television commercials for example and they have a edgy voice particularly

on social media and they think that that appeals to millennials and others that are willing to give it another shot. however it does turn off some people as well and recently they had something for nurses and they had a burrito with a stethoscope in the image. that might not be the image people want to see when they think about people getting sick eating at chipotle. >> we'll see the reaction. thank you for jumping on the phone. >> meantime, a spanish court sentenced soccer star lionel messi to prison for tax fraud. >> lionel messi will likely avoid jail time and pay a $2 million fine but the world's second highest athlete has taken a big hit to his image. he and his father defrauded spanish tax authorities of more than 4 million euros between 2007 and 2008 and the fraud

involves companies used to hide his income from his image rights. now messi and his father denied knowledge of the fraud saying they signed tax documents without knowing what they were signing. prosecutors said even a 10-year-old knows you have to pay taxes on your income. messi will pay a $2 million fine but he can afford it since he was the second highest paid athlete in the world last year with $81 million and he's not likely to go to jail since in spain first time offenders can avoid ste avoid sentences of 2 years. now his employer says it continues to be at the disposal of messi and his family to support him in defense of his honesty and legal interest. back to you. >> thank you very much. >> over now to john fort with a look now at what's coming up next on squawk alley. >> good morning. we'll take a look at netflix. it has recent downgrades but

also recent upgrades. what's going to determine the direction of the stock going forward? also we're all in the flood of data. whether it's data on our phones or messaging services but help might be on the way. we'll attack that from a couple of different angles and finally tesla. should they change the name from auto pilot to something else? all that and more coming up on squawk alley. one of millions of orders on this company's servers. accessible by thousands of suppliers and employees globally. but with cyber threats on the rise, mary's data could be under attack. with the help of at&t, and security that senses and mitigates cyber threats, their critical data is safer than ever. giving them the agility to be open & secure. because no one knows & like at&t.

welcome into squawk alley on a wednesday morning. the gang is back at post nine.

dow is down 63 points. all the usual suspects today. even oil closer to 46 than 47. netflix one of our top stories. shares falling after getting downgrade to under perform at jeffreys. long-term growth should be flatter than current expectations. stocks down about 7% this year after jumping 140% in 2015. they go through sort of the general narrative that's being built which is first strike advantage. they've had the sand box to themselves for a long time but over the top is going to make it crowded and more competitive over the next five or so years. >> one of the core arguments is that the broadband penetration rate that would be necessary for netflix to get to the level where investors wanted to be, it isn't likely to get there by 2020. a lot of policy considerations there. hillary clinton wants everybody to have broadbay band by 2020.