final check on the markets this morning. eight straight records for the dow, the futures indicating a 50-point upward pressure for the dow which is not what it was earlier in the session, but still, surprisingly goes up every day and has been for a while. s&p up 6, nasdaq now up 22. >> that was a fun three hours. thank you, joseph, and kayla, for sitting in for becky today. join us tomorrow. "squawk on the street" begins right now. good morning and welcome to "squawk on the street." i'm david faber and jim cramer we are live from the new york stock exchange. carl, quintanilla, where is he, live from the republican national convention in cleveland. they're on the floor somewhere. taking a look at futures this morning let's give you a quick look. you can see the markets are set up for what appears to be at least at this point a higher open on the broader averages. european markets where do they stand? let's take a look right now at

it all, the dax, the ftse and france's cac, all up this morning as you can see britain not, perhaps, with the uk, at least for now the uk. maybe not that much longer. the 10-year, there it is, 1.57. only a few weeks ago we were below 1.4. >> i know. >> we have moved up. >> oil at 44. didn't think we would take it at 45. inventory at 10:30 today. >> let's get to the rest of our road map this morning and it start with more fireworks from the republican national convention as we kick off day three in cleveland and carl, of course, as we said is there live. shares of morgan stanley up in the premarket on earnings. we will dig into the numbers. also i'll be speaking to ceo james gorman later in the show this morning. and roger aisles' future at fox is in question. it appears he will be leaving the network he founded after the sexual harassment claims. we're going to give you the latest details and what does it

mean for 21st century fox, the company. but first, let's get to carl in cleveland. carl? >> hey, good morning, david. we have made our way to the floor of the republican convention. i'm standing somewhere between where the georgia and the massachusetts delegations sit. not bad seats but nowhere near as good as what new york and california. it's quiet but you mentioned the fireworks from last night. the headline clearly, donald trump is the official republican nominee no longer presumptive. the night was supposed to be centered around the economy, but it very quickly turned into an indictment of hillary clinton. for instance, governor chris christie using a very effective call and response speech arguing her culpability he argued as secretary of state. take a listen. >> tonight, as a former federal prosecutor, i welcome the opportunity to hold hillary

rodham clinton accountable for her character. >> [ inaudible ]. >> chants of "lock her up" on the floor. very effective again speech for a line that got a applause all night long. the other mission is to develop a personality around donald trump and his family. that was done with another effective speech by his son donald trump jr. in some ways more political than some expected. take a listen to that. >> we're still americans, we're still one country, and we're going to get it all back. we're going to get it back better than ever before. i know we'll get it back because i know my father. i know that when people tell him it can't be done, that guarantees that he gets it done. >> so tonight, guys, on night three, all of this is going to

fill up, obviously, once again with the very big line of speakers, harold hamm, the oil executive is going to speak, governor scott walker, senator ted cruz, former speaker gingrich and then governor mike pence. of course the vice presidential nominee. as we get ready for donald trump's appearance and his acceptance speech tomorrow night. so day three, obviously day one set aside, this is going to be a big night for republicans, guys? >> all right. carl, we'll be watching and carl with us the entire show or most of it reporting from there. >> lot of business. >> yeah. >> anything resonate with you in terms of the markets and the election and this convention? of course next week the democrats? >> i think, carl, we had howard hamm on and, you know, howard hamm talking about a trump rally which i thought was interesting. i get a sense, carl, business people, this is a republican party. he's like the first business person i've heard from, other than from the trump family. there is kind of a dissew dense between what i thought i would

hear a triumph for american business with trump and instead just a triumph of for trump. >> clearly last night the theme of the night was make america work again and we did get some discussion of, for instance, stagnant wages, paul ryan talked about that, middle income inequality, middle-class income inequality but to a large degree, the one thing people in this room can agree on is they do not want hillary clinton to be president. so i think there's a natural inclination to leverage that commonalty in a day where people say the party is not unified, they're trying to do that and that's one big step toward that end. we'll see tonight if we get any more energy policy discussion, of course, from harold hamm as you said, credited a lot of the recent stock market rally with the idea he said that the market is getting comfortable with donald trump as president. >> yeah. all right. carl, well, we're going to move on to morgan stanley which is also rising and perhaps will help the financials this

morning, speaking of the stock market. it's up in the premarket, this after ms posted second quarter operating profit of 75 cents a share, ahead of street estimates at 59 cents. the results helped by lower expenses and higher revenue, particularly fixed income, currency, commodities, trading. later on "squawk on the street" we will have a live and exclusive interview with chairman and ceo there he is james gorman. >> could be a breakout quarter. >> i will be going to the headquarters to talk to him. >> two quarters that were different from the previous quarters. microsoft and morgan stanley. both of them bouncebacks and i think it's one of the great things the late andy grove talked about the 90-day period and what can happen in 90 days. take a look at what gorman and na dell did and this is a reasonable period. >> fixed income has proved to be a good area for this quarter for the financial institutions that reported earnings and we've heard from all of the big guys at least. they've cut 25% of their staff earlier this year at morgan

stanley. people may forget, they had a significant layoff there. part of, of course, cutting expenses. they're still focused on cutting another $1 billion by 2017. >> i know. i didn't think it was -- to me it says they were fatter than i thought. >> in expenses. >> what's most interesting, david, i've been on these devgss, work on the fixed income desk and looks like there's way too many people and then a big chunk of business that comes in and it wasn't like they had to turn it away. they didn't have enough people. they were overstaffed. i think this is remarkable. i want to know and maybe you can get this from james when you speak with him, they always had -- they were ahead of the government. they recognized the justice department is powerful. so they quickly got out of a lot of businesses that were controversial. is the era where you're spending so much money in compliance coming to an end? >> that's a great question. >> they're dead weight. worked at goldman, compliance, dead weight. >> everybody has increased their compliance. that's not going away. >> how many -- >> the expenses for litigation and things of that nature and having to deal with particular settlements, that --

>> those lawyers are expensive. i don't think people realize. >> it hasn't just been fromming cutting how much mail you're sending out, significantly from litigation expense and the like. but, you know, jim, wealth management is a part of this company and they had a pretty good quarter, referring to ubs report this morning, pre-tax margin according to them above their estimates, 22.1% estimate likely due to lower than expected expenses. so there they seem to have done fairly well. >> again -- >> they have transformed the last few years. they are different than some of their what we still think of and as their competitors. >> there's no longer plain vanilla. morgan stanley decided to make a big bet on wealthy individuals, when they doubled down, smith barney, and initially, i wasn't sure about it but then that was like the kind of what the justice department didn't go after. they were fine with that. and then gorman slips last quarter. makes it back this quarter. stock down significantly. nice dividend, buyback.

so it does seem to me that this is the last of the financials i was concerned about and they were good. when wells fargo is your weakest player isn't that something. >> speaking of wealth management, on the call saying they haven't seen the pick-up in retail engagement but the continues to thrive stability in an uncertain backdrop. $3.8 billion in revenues. >> can't wait to hear your interview. i think gormans is an articulate man about the industry. >> brexit continues to be a question mark, not just for financial institutions like morgan stanley but for every company. >> yes. >> trying to understand and figure out what it is they're going to do with a lot of the employees they have over there and being uncertain as to what's going to happen because you don't know. you don't know what the treaty is going to be that eventually is negotiated between the uk and the eu and what that's going to mean for your business whether a morgan stanley or hewlett-packard or utx or go on and on. >> i think that one of the things -- this is a huge win for paris. you just have to put people

there. because i don't think the eu is going to want to do business with companies that are headquartered in london. it's like you don't like us, we don't like you. these are parochial institutions in the end and revenge oriented no let's move on to the story that is occupied a lot of front pages today. >> microsoft? >> no. we will talk about microsoft, don't worry. we will get to it. roger ailes, a man you and i know, having worked for him as well, the very same time, but, of course, it was what he did after that became so significant in terms of launching the fox news network which has become such an incredible profit center and important part of the engine at 21st century fox and a key part of their offering to the cable providers, not just from the revenues it creates on its own but allows others to do -- >> i think you're making it a business story. >> i'm trying to think if

zucker/cnn are they a winner -- >> i remember that. i did a piece on him years ago. >> really? >> yeah. >> a lot of revenue up for grabs if they miss their -- >> it's interesting what we're talking about is many reported i did late yesterday mr. ailes will depart as the chairman of fox news. unclear who will replace him. you have to see it as the imprint of lockland murdoch the company's chairman and ceo james player dock, the brothers and sons of rupert murdoch the founder. you have to see it as them really putting their imprint on the company. they have for the most part been hands off when it comes to fox news. it is a very important asset and what the future will be like after mr. ailes' expected departure whether within a few weeks or longer it's happening. >> do you take other parts of the ailes portion of the empire if you're a cable empire if ailes isn't there to pressure

you. >> right. >> that's the issuissue. >> july 17th, when susan, when you see a major executive have his own counsel you're outside the tent. susan was one of my professors. hard left wing. >> kind of funny. >> great irony in the story. >> i know. it is. by the way she's talking to everybody. >> ferocious left. >> never seen something like that giving interviews discussing things. it is -- >> does appear they are in the midst of negotiating an exit package. investigations continue into the claims made but does appear his exit will take place prior to the lease of the findings of the paul weiss investigation. >> very odd. the paul weiss investigation they were brought in for brady and the bullying incident. >> they're considered to be unable to be bought. >> finally back to the stock. because that's what we like to talk about. i talked to a number of my sources who own fox, who are

well aware of it, none seem concerned about the potential departure of the man who has single handedly created it. >> that's stupid. >> you think so? >> yeah. >> they just don't seem -- he's 76 years old as it is. not as though we expected him to live on as the ceo and chairman for the next 10, 15 years. >> when i worked for him and i was in there at the meeting, this is a man who decided what america watched. so you decide that he leaves, and that he is such a power when it comes to the carriage, the karnlgs, to be able to say you're taking fox business. you want fox news take fox wise fx. >> taking fx. the idea that they -- blindly think that this man can leave -- this is the most personally run empire in the news business. this is not a news business that can slot a new guy in. there is no other ailes. name me another guy there. >> i can name you some names. >> i'm saying an executive.

look, you blindly decide that this doesn't matter, then you're underestimating this man and what he's accomplished. that's all i'm saying. >> fox's stock for its part has not been hurt at all which has bubbled up over the last few days. >> not hurt at all. >> no. >> i get that. it's a big empire. i think when i sit here and think about espn whether they made or downgraded espn today and they have any growth at all and therefore offsets entirely "star wars" then i say how can i not think about this -- >> more important news on 21st century fox saying they're suge charter saying we want the time warp warner cable rates not what charter wants to charge us. >> put the others in the bottle. >> i know. >> fios say roger he's not there. >> skinny bundles. >> all right. coming up we will talk microsoft. it is also looking to open sharply higher on the company's latest results. hear what satya nadella had to say. morgan stanley ceo james gorman

live and exclusive not just one but both, jim. >> really? >> yes. >> doubleheader. >> doubleheader. >> another look at futures. we're back right after this. you've wished upon it all year, and now it's finally here. the mercedes-benz summer event is back, with incredible offers on the mercedes-benz you've always longed for. but hurry, these shooting stars fly by fast. lease the gle350 for $579 a month at your local mercedes-benz dealer. mercedes-benz. the best or nothing. the first stock index ♪ (musicwas createdughout) over 100 years ago as a benchmark for average. yet many people still build portfolios with strategies that just track the benchmarks. but investing isn't about achieving average. it's about achieving goals. and invesco believes doing that today

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ailes. microsoft looking up as much as 5% this morning, this adding perhaps to a dow's nine-day winning streak and record closing high for a seventh consecutive session on the broader markets. the company microsoft posted better than expected quarterly results helped by growth in its cloud computing business. satya nadella spoke about the cloud on last night's conference call. >> overall the microsoft cloud is winning significant consumer support with more than $12 billion in commercial cloud annualized revenue run rate we are on track to achieve our goal of $20 billion in fiscal year '18. also nearly 60% of the fortune 500 companies have at least three of our cloud offerings. >> cloud cloud cloud cloud cloud. >> that's actually the wrong way to look at it and that's the way everyone is playing it. cloud was good up 100%. but a bond that was dropped in the middle of the conference call by amy hood who i thought was subdude in previous quarters not subdude this time.

pc growth she said it's back. >> she said the cfo of microsoft said pc growth is back. >> better than expected pc growth. a read that the economy is better. >> bing better, xbox, i don't know how people found time to play xbox. funny when amy hood says it was better than expected. why is that important? confirms what seagate said when they said things were better and intel reports tonight. maybe an interesting read through. back over the cloud people felt to make that number you have to buy salesforce.com. linkedin barely mentioned in the conference call but not consolidated yet, a great quarter. congratulations quarter. >> what should the takeaway be in terms of the growth of cloud. we see it at ibm, know the influence of amazon web services. here at microsoft we see it. many others. we continually talk about it, but is everybody a winner because it's growing so fast? >> yes. and i think that amazon is being challenged. you want -- microsoft is

becoming a challenger to amazon, serious challenger and a lot of internet of things. these guys talked about industrial companies, ge, boeing, going on the cloud. there's a huge amount of business done by kroshgs the regular renewal business. they have a gigantic amount of regular business that comes to them simply because they have recurring revenues, munster amount. it was a very, very good amount. incredible what you can do in 90 days. the previous quarter if you go through the arc of the conference call, the questions were like how did you come back so fast. it was very interesting. >> i did notice the tax rate, gap and nongap was 7 and 15%. >> they actually spent some time on the tax rate explaining at the top. i felt okay about it. >> you did. >> i did. >> another thing that's interesting, two interesting read through, one that economy is better. couldn't get that kind of numbers in surface and pc unless it was, japan is better by the way, europe be better. and this is a company that is

very much different from the balmer microsoft. and that's just important. this guy did not take long to make this into a different company. >> he really hasn't. he de-emphasized windows, said forget about mobile phone, get out of -- i'm not interested. that was a writeoff day one. and he's focussed on the things we're talking about here and with apparent success at least thus far. >> i'm sorry that quote from amy our pc market was a little better than we thought and follows up with developed markets it was better. i don't want to -- satya is saying jim what are you talking about anything other than cloud. but important to point out that surface was better. >> margins down because windows less important. >> margins on pcs could come back. imagine what this does for intel. i think intel will split into a higher margin, lower margin. asm, a lot of spending in tech,

that's my thing. >> okay. that would be a good thing for the overall economy. >> very positive. that's what's happening. it's positive. >> up next, that man's mad dash as we count down to the opening bell and stay tuned, we're just going to hammer away at this, aren't we? live and exclusive interview, looking forward to sitting down with james gorman, chairman and ceo of morgan stanley. here's another look at futures. we're back with more "squawk on the street" right after this. th. why pause to take a pill? or stop to find a bathroom? cialis for daily use is approved to treat both erectile dysfunction and the urinary symptoms of bph, like needing to go frequently, day or night. tell your doctor about all your medical conditions and medicines, and ask if your heart is healthy enough for sex do not take cialis if you take nitrates for chest pain, or adempas for pulmonary hypertension, as it may cause an unsafe drop in blood pressure. do not drink alcohol in excess. side effects may include headache, upset stomach, delayed backache or muscle ache. to avoid long-term injury, get medical help right away

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about 5:30 before we have an opening bell on this wednesday. our mad dash, a name we spent a lot of time talking about but not typically in the positive realm. >> should be smiling the ceo of

valiant, they have a preliminary approval for a drug, psoriasis, and opiate induced constipation issue that's important, that's oral which is the pgnx. i think it's important david, people forget, there's 1.5 billion in potential sales that they could have from the new drugs, third drug. i point these out, negative news negative news negative news but you know what, this is going to be -- if there's a savior for valent it's going to be new drug -- >> they talked about that when you spoke to him and i've had a couple conversations, but, you know, that is where he believes you will start to have people focus in terms of the growth opportunities the company has is in r&d. makes it sound like a good old fashioned pharma company not what the model was under pearson. >> the psoriasis drug could be very big. that is a terrible, terrible disease.

they have a suicide risk sticker possibly, but i think that will not -- that will be ignored by most people because it's a tough disease. valiant, good day. it's important because i've said bad days, this is a good one. when you have new drug approvals it's going to win adherens. should it? i don't know. it's the debt situation. always the debt. >> $30 million in debt. >> can breathe easier today. >> get a multiple to the enterprise value it's not as cheap as it would look based on its equity value. >> that's the main problem. well put. >> go see gorman today? >> yes, i am. but first we will do more business here. before i get on the subway and go to times square. the opening bell right after this. .

there it is the applause building at the new york stock exchange as we get set to ring the opening bell in about 20 seconds or so. jim, you know, we've heard from all the banks.

who was the best? >> jpmorgan by far. >> jpmorgan. >> by far. not even close. totally distinguished itself in all the businesses. munster quart monster quarter, monster beat. >> the real-time exchange at hq. a sense of how the broader expense is going to look here. acadia did the honors and vbi vaccines, i mentioned the banks because we did hear from morgan stanley this morning the shares up after a better than expected quarter particularly given the performance of the fixed income currency and commodities unit. stock up about 3%. not a huge move but you say jpm emerges from the earnings season given we've now heard from jpm, bank of america, citi, wells fargo, goldman sachs and morgan stanley as the best. >> relative. on an actual just absolute number it was driven, but relevant versus the second would

be citi. >> citi. >> because mike core bot put away citi holdings and a strong currency number, very strong fit number as you will say, and that's important because the book value is very, very much higher than citi. they can be in there buying back an aggressive amount of stock and they will be and they are. so these bank stocks, they are the cheapest in the industry, dave hilder came on on "squawk box" and talked about 10, 11 times earnings. p/e current s&p argue it's 20 so almost half. i thought goldman was a better quarter than people realize but started at 147 in this morning. wells fargo my travel trust owns it it's just fine. just fine. it did not do a blowout. because you needed [ inaudible ]. >> right. >> we look at the s&p now as you see it right there setting an intraday high along with the dow. jim, there is and probably should be at least some concern about multiples and how high

things are getting. >> 20 times earnings. >> that's a big number. >> i'm doing a talk today -- >> why should you not be concerned about the market trading 20 times. >> what you said i'm glad you pointed it out, tonight on "mad money" too, i'm doing a speech today about the idea that we've seemed to have forget that the multiple got expensive during this period, this run of eight days straight of dow maybe none, expensive mode and that's worrisome unless the earnings continue to come through. you need to watch the dollar because the wsj, "wall street journal" dollar index down year over year why the numbers look better, what happens if the dollar gets stronger. >> and if the fed does raise again once if not more, a journal article indicating you never know potentially still twice before the end of the year. >> yes. >> doesn't that help the dollar and suspect that also something that conceivably is going to force multiples lower. >> absolutely. i think that people forget that the big runs this year occurred when the fed is on hold and the big declines have occurred when the fed starts talking about not

being on hold. be aware that we are now so far from brexit, with all these markets up around the world that you're going to -- i'm surprised there hasn't been more chatter. i know the wage growth number wasn't high, so maybe that keeps us. but after this -- after these conventions, this is the debate you're going to hear. things are too good for some of these people in the fed to not say listen we have to move. that's one of the reasons the dollar goes higher. this rally has occurred with the dollar going up and oil going down. this may be deet link, big delink going on. >> what about oil and the impact there. we watched it around 44 on wti. >> this has not been -- it's almost as if all of those algorith algorithms. >> every day we came in and it was about the price of oil. >> crazy. we're going to get at 10:30, halliburton, important call, the bottom is here on rig counts. i have to tell you, that's negative for oil. and that's one of the reasons

why oil has broken down from the 45 level it's been held during this whole period of the rally. so be aware halliburton making the call, north american bottom. you shouldn't own oil because what they're saying is, hey, look for the rig count not to be average when they report on friday, it will be up all the time now. i think they're too bullish. when back at 43 most of the counties in the country are at a loss. >> right. >> natural gas has been strong because of the heat, not great. certainly better than it was. >> disney down a bit this morning on a downgrade from steve -- >> everything you said -- >> to a hold. 110 is their new fair value estimates, unchanged from the previous target but downgraded relatively -- valuation. >> they're talking about flat espn, cautious on carriage growth, sports rights costs going higher. circle back to fox. this what is i'm talking about. once you get a problem in growth of a cable company, look what

happens. of a cable division even. all that said disney has more to offset than fox. >> a lot of things. parks being a key one, continued growth. not to mention, of course, their studio is the best i think i can say, right. >> quarter over quarter, "star wars" coming up. but you know what, david, the street is fixated on espn and on costs of -- on costs of sports. >> yeah. espn is -- >> rated as a worry. >> what's overrated? >> at a point we will bake it in. >> espn. and sublosses if they occur over time as the changing nature of the distribution programming. >> you talk about it all the time, like even netflix, netflix cutting. we're just seeing a lot of shuffle everywhere and the shuffle is not good for the incumbent players. >> right. we should point out fox is down 2%. it's interesting. >> that makes sense. >> despite the reporting yesterday the stock barely budged. this morning does appear to be down a bit more than the group. pointed out disney down 1.5% on

the downgrade. the rest of the media, big media stocks, not down very much this morning. netflix for its part after the significant loss yesterday, is trading water. >> good luck. geez. again that was worse quarter in a multiple choice test what was the worst quarter so far of this earnings season. netflix. >> okay. >> perhaps by far. another thing to watch, david, we haven't mentioned sap and it had a remarkable quarter and one of the reasons they did, bill mcdermott, thank you, european strength. a continuing theme. the trades are too low in europe and anyone who buys the german 10-year is an idiot. i shouldn't say that. >> what do you mean buy? you pay to own the german 10-year. >> you agree to lose money. >> don't contractually buy that. >> it's a contract to lose money. make a contract and lose money over a 10-year period would you take that? >> i would not. >> lots of people are. billions of euros worth. >> trillions.

>> luna. >> i around the world. >> lunacy. buy our treasuries, you make something. everyone in this room agreed to lose money. >> finally microsoft is up. the extent that microsoft is not just about that but a reflection to a certain extent of growth within technology spending, jim, to our earlier conversation about the economy and whether -- >> correct. >> 20 multiple maybe will be justified by a period of growth that is to follow, can i make that argument? >> yes. and what i think you have to do is say first there's a dip as people say we're at 20, 20 times, and then we come back and realize that's actually on forward numbers, we're much lower. you have to look, the microsoft quarter was triumphant whether search or games, whether it be surface, whether it be pcs or web, and i have to tell you you can't have all those going right unless you have true tailwinds in the economy. true tailwinds, not headwinds. and currency no longer talked about. remember those days. >> i do. >> j&j same thing yesterday. j&j a remarkable quarter, a

number of bumps today. these people go over j&j and realize consumer coming back, the share, we forget how much share was lost in tylenol after the recalls. congratulations gorske to getting it back. most companies when very the recalls like that are finished. used to own that market and got killed and coming back. that's a big change. hard to make consumers come back. >> i want to do a faber report you will like. i will talk about kellogg and talk about the way wall street operates and something, of course, that you wrote a book about a long time ago, confessions of a street addict. you know, kellogg shares if you notice have been moving up dramatically and i would reference one week or even two weeks, more than the group, don't forget, of course, kellogg and many others benefit from the white wave deal in which white wave was bought at a very significant multiple. by deknown. but what has been moving the stock lately has been the strange i going you call it a --

i guess you call it a rumor as a result of a hedge fund that tracks airplane tail numbers. which by the way is completely legal. there's a look. a hedge fund that made presentation last week, made its findings public talking about kellogg saying we've been tracking tail numbers of planes. >> warren buffet. >> between chicago, headquarters of kraft heinz, battle creek, headquarters of kellogg, omaha, where, of course, mr. buffet has typically partnered with 3g, in the kraft/heinz deal and also southern california where you've got charlie munger, buffet's partner and director of kellogg as well. and so this has been going on and i've been getting calls on this and, of course, as you might expect i was checking it out because it is interesting to note. by the way, this is proved correct one other time i'm aware of, namely when james dolan's plane from cable vision was tracked going to al tease and

people able to do that figured out that's interesting. bet there's something going on there. >> heinz had a decent quarter better than expected. a lot feel like they haven't totally integrated kraft. kraft heinz, i can buy kellogg. >> with the talk of consolidation, kellogg shares moved up. going down. maybe people are anticipating what i'm about to tell them which is after checking it out and speaking to people who would absolutely know they indicate that there is nothing going on here. >> just people like going to see -- >> track all the planes you want, but at least according to the people who i certainly believe would know, there is not the likelihood of a deal any time in the near term between kellogg and kraft heinz. when people talk about consolidation down the road, certainly one has to believe kraft heinz and 3g want to be aggressive but right now, despite all those planes being tracked -- by the way this has become a hobby. hedge funds heard this and went

and tried to do the work and everybody has their maps. i love that. i wanted to mention it because i'm tired of getting phone calls on it. i did what i could to track it down. >> on south park they killed kenny, you killed kellogg. you just killed kellogg. >> i'm not killing kellogg. i'm just telling you -- >> special k. >> following may occasionally result in a positive outcome when you follow these. i don't know. who knows. >> people -- >> i don't know why they're going through battle creek and omaha and who knows what warren is up to and charlie plunker. the craft heinz guys. they do their deals, they typically do them in new york. >> where was byron trot? >> he's in -- >> i know. there you go. >> being the merchant bank to buffet. >> huge coincidence. they just battle creek is probably a great place to go in the mid summer and nothing like going to buffet's town because that's a great town for some minor league baseball? >> i know.

all right. we'll keep an eye on that. kellogg shares -- >> killed humana. we will see if we hear something from the department of justice to the humana aetna and anthem cigna deals. before we get to that to bob, give us a head's up on what else is moving this morning. >> hello, sir. good morning, everybody. europe, mixed market right now, europe up, asia is a little on the mixed side. the dollar index hitting a four-month high, creating problems for commodity stocks, materials, energy, having a little bit of a headwind right now. i want to focus on earnings because we're starting to get in the heart of earnings season, besides the banks. i think it's important to know we are continuing to beat, abbott beat, microsoft had a good beat, illinois tool works, al hally burton did not have as big a loss as some people had expected overall. concentrate on illinois tool works the first global industrial to report. i love these global industrials all over the world. this is one of the most diversified companies in the world make automotive parts,

commercial food equipment, testing products, welding equipment, in 60 countries. a lot of businesses, lot of countries and overall they not only beat, raised full-year guidance a bit. the mid point above the consensus for the full year. six of their seven segments posted organic revenue growth. mid single numbers. very good numbers overall. and you can see the stock is sitting right near 52-week high. good start for the industrials. earnings are beating but it's done from last year and that's not true. the problem comes from energy. look at illinois tool works. 12% above what the numbers were last year. 10% for microsoft. 6% for abbott. morgan stanley a little weak. halliburton the energy stocks kill all of the earnings situation for the s&p 500. they're trying to turn that around. did you see what ceo is saying this morning, dave lesser. he said you can't underestimate the positive change in attitude, halliburton's ceo. oil reaching $50 a barrel was a

critical emotional milestone for our customers. we'll see if that holds up. the big topic on the desk is about the dollar shave deal and the question why would unilever pay a billion dollars for dollar shave club a company that generates $152 million in sales when unilever generates $58 billion. doesn't seem to make sense when you take a look at it. the main arguments three plain arguments. number one, they want to take more share away from gillette. but this sales, it's less than 1% of the razor value out there. that doesn't seem like a strong argument to me. they're making an argument that unilever wants to shift towards home ander. al care and away from foods. lower margin. the most important thing makes sense to me, data collection. this company collects data on 10 million people. 10 million. and in a world where data rules everything, that's what's worth something right now. there's p&g, hit a new high last year around $93. back to you. >> thanks. i use that dollar shave club.

>> it's cheap. >> the young guy who's founded it must be happy. >> absolutely. half billion get a billion from unilever. i think this is an important deal because once again my travel trust owns proctor but gillette overpriced itself and they have to be scrambling, the proctor division of gillette. it costs too much to shave. dollar -- this outfit saw an opportunity, an opening, given how much cost to buy those blades and how inconvenient it is to wait for someone to open the case a. >> at cvs. >> or costco for mine. i have to tell you, you cannot continually raise prices for these products without someone coming in with a better mouse trap. >> thank god for a market economy. to a guy whos like the economies. rick santelli at the cme group in chicago. >> good morning, david. it's been close to a month, 23rd of june since the 10-year note settled with the 1.60 handle meaning 1.60 yield or higher.

the 23rd, brexit, 10s are in fixed income markets, sovereigns especially, one of the last to kind of retake some of the levels that were caused by the surprise brexit vote. as you look a two-day, above yesterday's yield, but we keep running against that area and backing off. look at a may 1st of 10s, clearly see a couple of things, especially the mid june 1.57 yield close. we want to pay very important attention to that. july 1st, 10s minus bunds. it's not widening dramatically but you want to keep an eye on what's going on in this spread because our rates are moving a bit faster than bunds. lqd, it's an etf, but you could see the risk meter is changing. people are starting to sell the lqd from close to record level highs. march, mid march, dollar index, everybody is talking about it. bob's right. it has a lot of implications. sitting at the highest levels since may and, of course, it's

most influenced by the euro relationship. let's look at that. exactly the mirror image, of course. if we look at a june 1st doll dollar/y dollar/yen, what's note worley the dollar starting to do better against everything. i'm starting to feel fed vibrations with regard to normalization may be back on the table. david, back to you. >> thank you very much, mr. santelli. morgan stanley is one of today's winners on the earnings front and the stock is up. an exclusive interview with chairman and ceo james gorman. coming up. i'm heading up there now so i will leave it to jim and carl from here. we're back with more "squawk on the street." >> dollar guys is a philly guy! can an established bank move like a start-up? it's a question we get from some of our largest banking clients. the face of their business was tellers.

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welcome back to cleveland. day three at the republican national convention joined by john harwood in the booth. good morning to you. >> good morning. welcome to cleveland. >> it's good to be here. people taking stock of last night, people were looking for an economic theme, but that's not exactly what we got. would you agree? >> yes.

and it's not hard to understand. first of all the signature economic policies that donald trump has advocated, are divisive within the republican party. the trade deals, paul ryan wants to pass them. he doesn't want to curb entitlement programs. paul ryan believes deeply that's necessary to reduce our debt and make them stable over the long term. so you focus less on the things that divide and more on the things that unite. what unites? opposition to hillary clinton. and the democrats. so they shorted the economic debate. there were some illusions to it and mitch mcconnell and paul ryan expressed the hope that a president donald trump would sign their tax reform legislation and donald trump does favor deep tax cuts although he's revising those cut because of their effect on the deficit, but that's why jobs night didn't turn out to be jobs night in addition to the fact that under president obama you've seen the unemployment rate decline rather substantially and some of their material is limited on that

sense. >> you've written about the power of conventions over time, ratings have come down, but they're up over the last one and the importance -- >> donald trump is certain to generate greater ratings than past conventions because of his star power. >> the opportunity then to build the personality around the family how well did the kids do it tonight and how well can he do it on thursday night? >> there were two beneficial things about last night for donald trump on a personal basis. first of all, the melania trump controversy, which got more attention than it deserved in part because the campaign didn't fes up to exactly what had happened, that faded by the evening. and you had two very poised and polished performances by two of his children. tiffany trump, was very effective. recent college graduate. attractive young woman. that's a positive association for donald trump. and then donald trump jr. was highly effective as a young republican star.

>> right. >> it wasn't such a personal speech. it was one of congressional candidate might give. >> lot more coming today and tonight. stop trading with jim in just a moment. & in a world held back by compromise, businesses need the agility to do one thing & another. only at&t has the network, people, and partners to help companies be... local & global. open & secure. because no one knows & like at&t.

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time for cramer and stop trading. >> you will see apple on the move. a report that says pokemon go could add $3 million to apple's revenue because of downloads and the cut they get. i've been a fan of apple and said listen don't trade it, own it. this is the story i don't like because i don't think it's going to translate into that much. but i do point it out that that's why apple is moving. >> all right. meanwhile, jim, you tweeted that david killed kellogg. >> he killed kellogg and i have to tell you, perhaps kellogg is trying to offload one of its less natural organic businesses the way that ken powell did at general mills when he got rid of green giant to bng. so don't give up. i'm not a kellogg fan. i think general mills is better. but david killed kellogg. >> second killing in a row. what's on mad tonight? >> okay. we hear from halliburton, how

about core labs the best scientists of finding oil and gas. david dem sure in how he's been able to pile his company. brad jacobs, xpo the largest transport truck and logistics company and i can't wait to hear from him. a great read on the united states and europe. >> jim, we'll see you tonight "mad money" 6:00 p.m. eastern time. when we come back more from the rnc here in cleveland. governor asa hutchins will join us and david's live and exclusive interview with james gorman in a moment.

♪ good morning. welcome back to "squawk on the street." i'm sara eisen and simon hobbs live at post nine at the new york stock exchange. carl quintanilla is live from the republican national convention in cleveland, ohio. this hour and david faber will join us with an exclusive interview with the chairman and ceo of morgan stanley james gorman. all over the big stories for you. in the meantime have a look at the markets. modest gains but enough to keep the dow's winning streak going. the best streak in three years. the ninth day in a row that dow is higher.

s&p 500 is up by 4 points, wti crude worth watching, down almost 2%, at lows back to early may, simen. >> our road map for the next 60 minutes on cnbc. with day three of the republican national convention, carl will join us live. governor mike pence a clear focus in cleveland. >> roger ailes may be nearing the end of his tenure at fox news as questions continue to grow over sexual harassment claims against him. the latest for you straight ahead. >> morgan stanley reporting an earnings beat. the shares up moderately this morning, david will sit down for an exclusive interview with the chairman and ceo of morgan stanley, james gorman. coming up at about 10:45 eastern. >> in the meantime day three of the republican national convention under way in ohio. attention squarely on governor mike pence as trump's vp running mate. carl is there and joins us live from cleveland. another busy day, carl. >> another one, simon. you're right. the nomination of donald trump is officially on the books and

with that closure the challenge for the convention now is to establish the unity within the party that some argue has eluded it so far. last night paul ryan made a big effort to try to get that process going, talking about a break from the past, politicalically and economically in this country. take a listen. >> here we are at a time when men and women in both parties so clearly, so undeniably, want a big change in direction for america, a clean break from a failed system, and what does the democratic party establishment offer? what is their idea of a clean break? they are offering a third obama term brought to you by another clinton. >> obviously any line that references hillary clinton gets big applause here and not in a good way. that's going to be echoed again tonight. the other part of that, of course that mission is establishing a personality around donald trump and his family. two of his kids last night,

donald trump jr. and tiffany trump were very effective on that front. tonight the speaker's list, a lot of heavy hitters, harrell hamm of continental resources, might hear about energy policy, senator ted cruz, governor mike pence, the vp nominee making his acceptance speech. empty floor for the moment but will fill up this afternoon and bring you coverage in prime time tonight. back to you. >> it is good to see you there and we will see you in a few minutes. carl, thank you for now. let's check on the markets here. i mentioned small gains. the dow is up about 4 points. we'll see if it can stay positive. it would be a ninth day in a row. the s&p 500 up just a little more than 0.10%. the nasdaq doing the best up half a percent and brings us to the best performing group in the s&p which is technology. a group that has lagged pretty much all year long, but is now starting to rotate into a better position. microsoft earnings certainly helped a lot. >> yeah. i mean microsoft is up 5% as you

probably will be aware. top loser is actually kelloggs within the last 20 minutes after a david faber debunked the idea that as a result of tracking some private aircraft movements around the united states an indication that kellogg was about to be a takeover target or at least that discussions were under way towards that. so kellogg is a top loser. yesterday we managed to push higher towards a fresh record on the dow towards the end of the day. that might belie actually the underlying volume here in the market. we're very light. this is very much summer trading but still importantly, of course, for the price action loan you see the indices drifting higher. >> we will get more earnings which could be the test and after the bell -- >> ebay, qualcomm. >> a dollar at a four-month high. >> catch the detail on the fast money show at 5:00. >> will you be hosting? >> i might be. >> a shameless plug. >> yeah. >> an interesting summer with the big market rally underpinned by a series of surprises not

just on earnings but the economy, the federal reserve, politics. steve liesman joins us with a look of where wall street thought the markets would be this summer versus how we're turning out. >> a little different, sara. sell in may and go away has given way to buy buy buy in july. apology to jim there. 6 point dow rally has caught many on the street or who knows maybe at the beach but caught them by surprise wondering if this is a passing market fancy or durable bounce. but there could be something real here in a series of summertime surprises from the economy to earnings to the fed. let's take a look. exhibit number one, the u.s. city economic surprise index it swung from around minus 20 end of june to plus 25 now. power in the index better than expected. jobs, the recent housing data and consumer spending. doesn't tell you how much growth there's going to be or the market will go higher. does say the market had to do catch-up with the better data. that's one. exhibit number two, early indications of earnings surprise, it is early, just 11% of the s&p reporting as of

yesterday. but the market seems to be cheered by the 64% of companies beating estimates and the 53% beating revenue. that's according to thompson reuters. it could go the other way but there have been notable marquee beats like ibm, goldman and morgan stanley along with some better guidance from some companies. to be sure the blended earning growth looking for a 4.3% year over year decline in earnings. and the backdrop for all this very important, comes with interest rates far lower. the 10-year yield down 20 basis points in the wake of the brexit vote. now a chance of a fed rate hike has gone from 12% in july, that was the june number, it's 0 today. for the month, down from 33% to 18%. you can't rule out the chance of a fed surprise the other way if the economy continues to improve. it could be the markets too low on the chance of a september hike. one criticism of summer rallies doesn't seem to apply here. the market is not higher on thin volumes. volumes are about normal. if wall street is at the beach

they seem to be trading these summertime surprises from the beach, simon. >> okay. yes. thank you, steve. steve liesman there. >> technology lets you to that. >> it does, yes. it's very true. and in the meantime widely reported 21st century fox is negotiating roger ailes departure following the sexual harassment allegations. the lawsuit from a former anchor. joining us here at post nine to discuss the ailes' legacy and fox news future after ailes is cnbc contributor and pulitzer-prize winning "new york times" columnist james stewart. >> hi, simen. >> a moment in broadcasting history for this country. >> not just the fall of one person, this is somebody who really not only shaped entirely fox news but transformed the landscape of media generally. >> the cutting edge of where we seem to be at the moment, seems to be, whether or not some of the anchors might leave with him. the degree to which he might be setting up his own network if he's minded to do that.

therefore, the way in which you lock everybody down presumably in the negotiations that are under way at the moment? >> i'm sure fox is going to be paying attention to that very carefully. i think it's really premature to speculate that ailes can go off and start his own network. first of all, that's hard for anybody to do. he has a huge cloud over him with the lawsuits. i mean this, you have to look to shakespeare for analogies about someone this powerful, falling so dramatically. i don't think there's any question he is on his way out given their lack of statements and support. these revelations about megyn kelly. he has a lot to deal with. i can't believe he's going to be taking anchors with him. by the way, these anchors, you know, he's -- one thing he will discover which is also true in hollywood, that when you're in power, everybody is there for you and the minute you are out, you -- good luck getting a restaurant res ser sfligs materially for the business this is important. 20% of 21st century's profit. >> right. >> and i see figures of a net

operating income this year of $2.35 billion. clearly that has to be protected as far as the murdochs are concerned. the inevitable question is, is fox news without roger ailes, like apple without steve jobs? >> personally i don't think so. i think fox news should be fine. they have thanks to roger in large part they have really established an identity for them and an ideological standpoint. one of the things he recognized and transformed all media is, is a big proportion of viewers they don't really want fair and balanced. they want more or less they want to hear what they already think and there's a large population that -- >> at this time they don't want liberal media, they want conservative media. >> yes. it is generally conservative. >> the rest of media has a very strong liberal bias. >> yes. i think in some ways it goes beyond liberal/conservative. something trump is tapping into, elite/nonelite. there's a kind of elite perspective on what people should be thinking what they should know and frankly a lot of

people out there, like roger ailes, i'm from a small town in the midwest, there are a lot of people out there who do not share those elite views. fox has delivered the kind of treatment that they want, has in many cases said things they wanted to hear they weren't hearing from anyone else. they have a loyal following. i don't think it's personal to roger ailes. >> another question on what you're hearing from your sources, this really is a made for jim stewart kind of media saga here, but the $40 million pay package, as these exit talks continue, what are you hearing about the likelihood that they give that to him, or not? >> well, i'm sure, you know, one of the interesting things he has a contract and i don't know the exact terms of it but it would cover termination and the value of his contract if terminated earlier. one of the odd things is, what constitutes termination for cause. most of these contracts the language is distorted. you almost have to kill someone to be terminated for cause. i'm assuming this is a

termination that will not come under for cause which means he's going to get the full payout of the value of his contract, which we could easily be $40 million. and whether they want to -- sweeten that -- >> whether they find any wrongdoing from their internal investigation or from the lauchl law firm investigation of paul, weiss. >> i think he's probably going to leave before that investigation is fully concluded. by the way, depending on how for cause is defined in the contract a lot of times an internal investigation finds improper behavior is not enough. i mean it does almost require conviction of a felony. >> as far as the story is concerned in the tv movie that presumably is made from it, what do you make of the revelation that megyn kelly ultimately said to the lawyers she, too, had suffered some advances years ago and that was made public? that surprised or intrigued a lot of people as perhaps certainly their biggest female star. >> i think it was devastating for him. i don't think it's any accident

that news of his departure and the news of his negotiating his departure came hard on the heels of this revelation. she is their biggest star right now, and it's recent, it's current, a lot of these allegations went back a long time. you scratch your head saying how good are people's memories, that will be tough to prove. the -- you know, the woman who filed the suit is not a household name the way megyn kelly is and when megyn kelly didn't deny this, saying i'm not going to make comment, everyone assumes it's pretty much true, and i also think it's fascinating to people because, of course, he replied, i promoted her and made her a star and did all of this. in the nuances of the work place and i mean i -- i'm not a woman, obviously, but talk to a lot of woman in the work place these things are complicated. the fact that you got promoted does not mean you were not also sexually harassed or put under pressure. >> assumption here that the lawyers of the company leaked that? >> i have no idea. >> presumably megyn kelly's staff didn't leak it? >> absolutely not.

anyone as powerful as roger ailes has a lot of enemies and probably people in the company who want him out for all i know the murdoch sons want him out. >> well, there's a strange relationship there, is there not, over time. we know there have been squirm ishes in the past. >> thank you jim stewart from "the new york times." >> coming up on the show, chairman and ceo of morgan stanley, james gorman will join us for an exclusive interview. you won't want to miss that. it is coming your way 10:45 eastern time. the governor of arkansas speaking at the rnc last night. have a listen. >> a hillary clinton presidency will endanger our national security. it will be the wrong direction for our economy. and will undermine the innovation coming from the states. a trump presidency will be about the art of the possible. donald trump is the right leader

for our time. >> governor hutchinson will join us live from the convention with carl next. [dance music playing] [music stops] woman: looks like it's done. [whistle] [dance music playing] [record scratch] announcer: don't let salmonella get funky with your chicken. on average, one in 6 americans will get a foodborne illness this year. you can't see these microbes, but they might be there. so, learn the right temperature to cook each type of meat.

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welcome back to "squawk on the street." we're coming to you live from the republican national convention in cleveland. donald trump now officially his party's nominee for president. tonight his running mate indiana governor mike pence will make his case for the team. is pence enough to unite what some call a fractured gop. joining us this morning arkansas republican governor and former

undersecretary of homeland security, asa hutchinson who addressed delegates in cleveland last night. governor, great to have you, good morning. >> good to be with you, carl. >> your evaluation of the convention so for. >> it's growing momentum toward unity. you know, we came here, obviously, you had cruz delegates and rubio delegates, trump got the nomination last night, and there's a sense he's our nominee, and let's get behind him and win in november. that's what i tried to do in my speech, let's unify and you unify because of the importance of it to our country, secondly, the issues that are at stake, but who we're running against and the direction hillary clinton would take our country the economy being a big part of that. as a state governor, how much authority comes back to the states and the flexibility we have. we also are starting to understand donald trump, his family has been a big part of the equation to really illustrate what kind of leader he would be and all of that together is helping to unify the party. >> you've had your own path to come to support donald trump.

how much pressure is there say on a ted cruz tonight to outwardly endorse trump as a candidate? >> well, he should do it. he made a pledge to support the nominee of the party and that is important for the un in ity of the party. he should come here tonight and express his support for donald trump. obviously make his own case and talk about his vision for america, but, you know, his presence here first of all is important. that in and of itself says i'm part of the team, i'm here to support the nominee, but we look forward to those words and his expression of support. >> there's been a sort of improvisational tone to the convention overall, whether that relates to speech writing, whether it relates to the agenda. does that add electricity and x kwimts to you or as some claim a sign of disorganization. >> i think it's the first. electricity. i think the spontaneity of the

convention, whenever you have the alask delegation saying we have to get our numbers right, the possibility of a roll call vote, that is what american politics is about. the spontaneity has created interest among the delegates and see what happens next. at the same time we're getting the mission done. the platform has been adopted. we got our nomination secured, which really was done one day earlier than has been done in previous years. so then the uniqueness of the guests here, the family s it's all added a great deal of energy to the convention. >> we're a financial channel. so we pay a lot of attention to the pilars that define the gop economic, right. low taxes, free trade, limited government. are all of those pilars as clear to you as they were before trump was a candidate? >> they are not as clear, but that's one of the things that's important, is that he is going to be president under the framework and the pilars of our

party, limited government, commerce, strong national defense, and so you talk about the court and the direction it goes, but economically it's republican governors, 3.8% unemployment rate in arkansas, the lowest in the history of our state and so, you know, we're doing that at the national level. we want to shape it. for example, trade. he is -- donald trump, obviously, is strong on building american business and industry back again, which we support. he's going to be a tough trade negotiator, but i want to shape it because trade is very important to arkansas. we have walmart, tysons, riceland, we export across the country, all across the globe, and we want to keep that ability to have that global trade. >> is there a challenge in -- you mentioned low unemployment. obviously stock markets hitting new highs today. gas prices are not high for a summer, at least historically. is there a challenge in making

an economic argument for the party because of those things that are going right so to speak? >> no. i think there's a sense that while we're starting to move in the right direction, it still needs to be kickstarted a little bit at a faster level. we need to have stronger economic growth, but also they're concerned about the threat of change. and you look at hillary clinton, what's going to be her tax policy, what's going to be the health care policy, is it going to go more to a one payer system, those are things that did not give confidence to the financial sector. and so even though donald trump is a little bit more unknown, i think the republican framework, the pilars of our party of limited government and things that he said about recognizing the role of the states this indicates he's going to be more in the line of a traditional republican leader with his special abilities, with his special pa nash.

>> those are going to be on display tomorrow night for sure. we really appreciate your time as always. >> thank you. >> good to be here. >> simon -- by the way, don't miss our live coverage tonight of the rnc, begins at 10:00 p.m. eastern time. simon, over to you. >> speaking of panache, thank you very much. coming up, the chairman and ceo of morgan stanley james gorman will join us live following the company's earnings beat, he will talk about the state of the economy, interest rates and the brexit vote. how much will it really affect the banks? that's coming up on "squawk on the street."

jo morgan stanley shares up slightly. the company reporting an earnings beat and we dig through the numbers with the karm and ceo of morgan stanley, james gorman, that exclusive interview, 10:45 a.m. eastern time. you will not want to miss it. another earnings mover in a big way is microsoft, shares up this morning more than 5% after earnings topped analyst expectations, revenue from the asher cloud computing business rising over 100% in the quarter. joining us now with his take is john fortt who sat down with

microsoft ceo satya nadella. we should mention microsoft adding about 20 points to the dow rally. >> quite a quarter for microsoft. the beauty of the report was not only was this quarter good, it made last quarter's report look better in retrospect. the star of the report was microsoft's cloud business which competes with amazon web services, asher more than doubled compared to last year and microsoft said the margin should get better because they won't be spending as much building new data centers. office 365, the cloud versions of the traditional productivitity suite looked good with commercial revenue growing 59%, consumer growing another million over the quarter, before -- a million users i should say. one interesting wrinkle in the quarter the way satya nadella and amy hood talked about longer term strategy, lifting microsoft above the fray in the cloud landscape. they talked about linked inn eventually helping people getting things done seamlessly in the cloud and microsoft's

global reach in the cloud. that's something that came up actually when i spoke to nadella earlier this month about how many data centers microsoft is going to have to build in a fracturing world. take a listen. >> overall the microsoft cloud is winning significant consumer suppo -- customer support with $12 billion annualized run rate we're on track to achieve our goal of $20 billion in fiscal year 2018. nearly 60% of the fortune 500 companies have at least three cloud offerings. >> actually that's from the earnings call last night but when i spoke to him he talked about how especially in a pro-brexit world, but just in general they will need data centers in different places. he mentioned on the call last night he can't predict what the ceiling and the number of data centers will be. one analyst asked is it going to be 34 and he said, i can't really say because we don't know exactly what we're going to need. i do believe we have the clip of

the interview. let's take a look at that. >> so we've not yet gotten to a point of equilibrium where it's friction-free but we can't expect that so, therefore, we are building azure and azure infrastructure, office 365 and dynamics for that and the cost of that will be higher than just having one data center in the world, to serve everybody. >> now i said that they actually made last quarter look better because last quarter microsoft got hit because traditional transactional server revenue was down. microsoft was able to explain why that is. kind of the interplay between traditional server sales and then the transition to the cloud, saying that they've actually tuned everything to sell based on cloud and traditional more volatile, guys. >> one of the questions becomes if everybody is racing to service people in the cloud at what point do you commoditize that and it becomes worth less or people can shift easily. they seem to be trying to

differentiate the proposition here central to what they say. >> microsoft making the argument as they connect not just the infrastructure but also your office 365, giving productivity abilities and when you add in linkedin, adding the social component they're going to let people get things done a lot more seamlessly than a competitor like amazon can. now everybody has their story, we'll see if that bears out. right now, with some of the big deals, boeing, ge they've managed to do they're getting the benefit of the doubt. >> and investors are giving it to them as well today. thank you. >> thanks, jon. >> coming up, james gorman chairman and ceo of morgan stanley will join us live for an exclusive interview to break down his company's earnings beat with david faber, on "squawk on the street." welcome to the world 2116, you can fly across town in minutes or across the globe in under an hour. whole communities are living on mars and solar satellites provide earth with unlimited clean power. in less than a century, boeing took the world from seaplanes

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will not sue disney. matt and melissa graves releasing a statement saying they intend to keep their son's spirit alive through the layne thomas foundation. the defense department releasing video of a coalition air strike on an isis target in iraq on july 7th. territory controlled by the islamic state in iraq continues to shrink. iraq has pledged to retake mosul by the end of the year. theresa may facing her first prime minister question session in the uk parliament clashed with the opposition labor leader on issues including both party's record on women leaders, remarks made her newly appointed secretary boris johnson. prolific producer writer and director garry marshall has died. he was known for a string of tv hits in the '70s including happy days the odd couple, lavern and shirley, and "mork & mindy," he was 81 years old. that is the cnbc news update this hour. let's send it over to jackie

deangelis with the eia inventory report. >> good morning. that's right. the numbers just out actually a draw down in crude oil inventories of 2.3 million barrels, that's what the api said, and a surprise build in gasoline of 911,000 barrels. the draw down in crude would be bullish for prices but prices are trading lower on this number because it's a relatively small draw down. traders are expecting these draws to stop as the summer driving season comes to a close which brings back the supply demand balance. it is no at balance. -- not a balance. the rebalance isn't happening. a large spike in the dollar index putting pressure on crude. expiration at the close, august will roll to september, that usually adds some pressure in either direction. 43.69 the session low the lowest since may 10th here. traders think there could be another bump up before we take another leg lower. look at the charts last year you can see in third and fourth quarter when demand drops the

prices do tend to drop as well as long as supply remains table. back to you in cleveland. >> thank you so much. day three of the republican national convention we're here in cleveland as jackie said at the quicken loans arena. donald trump's officially the republican nominee for president. the question, can he unite what some call a fractured republican party. joining us trump supporter roy bailey, ceo of giuliani capital interest, long-time republican fund-raiser. great to have you. >> great to be here. >> your take on last night because you got all those old stalwarts of the party like a mcconnell, not getting the most enthusiastic response from the floor. are we watching the party change before our eyes? >> i think we probably are. i think we're watching it come together, this is a trump movement, it is truly a movement, and that's what wins elections. movements win elections. obama had a movement eight years ago and trump has a movement now. i wouldn't want to be in his way. >> yeah. lost opportunities on day one

because of the speech story? >> not at all. i thought it was a brilliant speech, passionate from the heart, so poised. i think that's old news. >> what needs to happen tonight? >> we come together. everyone continues to come together. governor pence i'm sure will give a great address. >> what do you want to hear from him? what will signify a successful speech? >> he will unite the true, hardline conservatives of the party. i think he will give them the red meat that they're looking for. they'll know we have a balanced ticket and off to the raise. i think he will do a great job and fantastic selection. strong governor, strong conservative, great congressional experience, real humble public servant. what a great addition to the team. >> some reports about offers, we don't know about it, supposedly made to john kasich a while ago in terms of a vp partnership. does that take anything away from pence tonight? >> i don't think so.

i think he was with pence all the way. i think he saw his record, what he could do to balance the ticket. i think it was -- showed me what a smart guy donald trump truly is. he's out to win this thing and to govern properly. he selected someone that's got great executive experience as governor, great congressional experience. i just think it's a great choice. >> ted cruz going to play nice? sure. senator cruz is a leader in the country and support the candidate i'm sure and i'm excited for his address. >> good placement in prime time although he's been reluctant so far to offer that full throated endorsement. do you think we get it? >> i sure hope so. i really hope we do. he's got so many people that follow his lead and he ran such an inspiring campaign and i respect him a lot. i really do hope he steps up and supports the nominee in a strong way. >> you worked for giuliani in his campaign, perry and his

campaign for a while. >> absolutely. >> you came around to trump. what about it as a financial guy attracts you to trump's platform? because people are still talking about ways he cuts across the party on limited government, right. and some areas of free trade. >> i'm a business guy. i've had the pleasure of having a couple of private meetings with him and i will tell you, he is, perhaps, as different privately as publicly as anybody i've seen in a good way. he is first of all a real gentleman. he is a great listener. people say a listener, a politician. he's not a politician. great business people learn from listening. a business person wants to learn from every meeting or else it's basically a waste of time if they're just hearing themselves talk. he's got a great charisma, sense of humor, and i know he truly wants to relieve businesses from the regulatory burden on them and create job growth. i think he's going to be fantastic. >> it's funny, if you're in a

meeting with him, and he -- he'll ask questions about the building. he'll say, who did your rebar, right. he'll ask about how did you get this fire coded? it's true the way he asks questions. why do you think americans haven't, some say, truly gotten that part of him? >> i think his son donald jr. may have said the greatest two lines that i've heard in all the campaign even during the primaries. first he said my father is really a blue collar billionaire. that spoke to the fact that he's not just up there in his ivory tower in trump tower but he's getting his hands dirty, respects the workers, he's down there, he's got so much experience in business that said a lot to me. last night when he said that his father sees the potential in people when they may not even see it themselves, that said it

all. that's what he sees for the country, carl. he sees the untapped potential in this country, and he wants to release it and let it happen. so that all americans can have the benefits that he has had and live the american dream that he's lived. >> all those things you said about last night are true, but by some count, hillary clinton's name was mentioned more last night than donald trump's. i wonder where is the balance over the next two nights, highlighting the so-called negatives of clinton versus the positives of trump. >> i don't know if there's a balance because there's such a contrast. i mean, you've got one who is for all americans, no division, all americans. he wants them all to have the opportunity that he's had and live that dream and i think we see hillary in a different way and so i think, you know, you're going to see the great aspects of donald trump and you're going to probably continue to hear what we think are problems with secretary clinton. >> we'll see what happens

tonight. really appreciate you helping us set it up. roy bailey, joining us here in cleveland. sara? >> all right. carl, thank you very much. meantime a deal to tell you about. unilever taking aim at procter & gamble with an acquisition. the european products giant buys dollar shave club for reported $1 billion in an all cash deal. no financial terms have officially been disclosed. dollar shave club has 3.2 million members and has chipped away at a market leader gillette which is oenz by procter & gamble. the size of this market i can tell you, this is a slowing market. one that has traditionally been dominated by gillette over the last ten years averaging 70% market share. number two player is edgewell, which is the maker of schick razors. but upstarts like dollar shave club to all sorts of hilarious viral videos offering cheaper razor blades, have made a dent in gillette's market share. if you take a look that's dollar

shave club and harry's. it gives you a sense of how much cheaper their blades are, $2.25 versus $4.87 doesn't take into account as i was talking with mike santoli this morning how long the razor blades last. the gillette razor blades they say last 15 or 16 uses. and then the harry's and dollar shave club one to five or six. actually, gillette is a little cheaper. but they have not been able to market it that way and so a lot of people have signed on to the subscription services. which do you use? >> i have an electric shaver these days. but i -- a lot of people are concerned they spent a billion dollars. a tech valuation for a company that doesn't make month. >> it has 30% growth. >> it's a billion dollars. >> e-commerce company and considered a distributor in the consumer products category. another interesting angle shares of edgewell on the move. this is widely considered a takeover target, the takeover of

schick, un unilever is lean as the player that would buy it. now it's getting in by a dollar shave club, ali debadge at bernstein said that makes edgewell less valuable, lowers the price for it or not a potential target. they could buy it and get more scale to expand dollar shave club but shares are under pressure right now because it is considered a little less appealing. >> somebody making a lot of money. don't miss, of course, on a separate subject, cnbc's special coverage of the republican national convention, tonight, hosted by kelly evans and carl quintanilla. that's kicked off at 10:00 eastern. 10:00 eastern tonight on cnbc. after this break, we'll sit down for an exclusive interview with the chairman and ceo of morgan stanley, james gorman. let's hope that david faber has made his way to times square on the subway.

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welcome back to "squawk on the street." the dow up 46 points. our own david faber joins us now from midtown, manhattan, with a special interview. >> thank you very much. you may have heard it promoted on cnbc for a bit. now with james gorman the chairman and ceo of morgan stanley at the company's headquarters in times square. >> thanks for coming up. >> you're welcome. i was reading the transcript of the call i think i was on tv so i wasn't able to listen to it, and you don't seem that overjoyed at what was a pretty good quarter. i think you said, it was okay, this is what you said, it was okay, feels good in this environment but 8.3% return on equity why aren't you more excited. >> quotas come around with alarming frequencierly 30 weeks. i don't get too excite dd or do when they're down. we're making prog xwres.

the business did well. all of our businesses sequentially were up. it was an 8.3% roe. decent for sure. >> what does that mean? again, on the call you talked about sort of emerging from the pack in terms of the global banking industry. and being one of the institutions that is strengthening at this point. what can you point to that says we're strengthening and that will continue? >> yeah. well i think if you look at the core businesses that have been supposed to do well, they're doing great. equities, number one franchise in the world. investment banking top couple franchising with the ipo market and m&a et cetera. the acquisition we did with smith barney creating a business that has $2 trillion of assets under management, $15 billion in revenue, that's a phenomenal gem that is going to keep growing and in 2that buried is a institution we've created and turning around fixed income a

major forecuss for this firm. starting to see evidence, not time for victory laps but evidence this business can perform the way we want it and investment management has for many years been a very important part of this firm. so we've got the pieces together, we've got the capital, got the liquidity. the firm is moving forward. i feel good about it. >> you and i have had a number of interviews through the years since you commit completed the smith barney acquisition. we had a discussion about trats jektry for the firm and it is different than your competitors given the focus on wealth management you mentioned. are we not as far along as you might have hoped in the transformation? >> it's funny. i was looking at notes, i don't know why, the other day and i set a target for the board of having a 12% margin for that business in 2012. we're at 22.5% now. so as far along yeah the business honestly has done everything and more for what we hoped when we did the acquisition. i think it's just been terrific. our clients are stable, financial advisors are stable,

and the business is doing well. against the backdrop, though, individual investors are subdued with the global uncertainty going on. so from this point forward, we need that global uncertainty to abate a little bit for, again, some of the equity transaction business to come back. >> do you feel like that business is assured? i'm talking there specifically about the fact that etfs now proliferate, people don't seem to buy a lot of individual stocks or perhaps go to their financial adviser for the same advice they may have gotten previously. do you feel like the model holds that people who have money or who will have money are going to seek the advice from the people you're employing? >> it's a really good question and it's what we should all be worried about. i would say, david, if you look at the wealth management and i said this on the earnings call, look at the wealth management market in the united states, there are very, very different segments. only 2% of our client's money is with households that have less than $100 thrs to invest.

%. those individuals have very complex financial relationships, the kind that morgan stanley can bring real and immediate value to. >> now, of course, the strategy has been sort of create, i gerk what would be a steady high-margin business that received a fairly high multiple in the marketplace that delivered steady eps return. you still have this fixed income business that's been here and here n itand it's created more volatility. very good quarter this quarter. you're aiming at this right at a billion and a quarter. what gives you the confidence that fixed income is still not going to be all over the map? >> firstly, we right sized it. with what expense and what capital are you prosecuting the business. we have the expensing capital in the right place. secondly, the right leadership team which eave integrated with equities under executive ted pick and the leadership team leveraging the electronic trading, risk management across

equities and fixed income is great. it's important to morgan stanley, but a lot of very big businesses here of which it is one. it's not our primary securities business as it is at some other firm. in some ways, honestly, i think our down side risk to that business is way offset by the upside risk. >> the amount of revenue we'll generate in a difficult environment represents what we did in the first quarter of this year. a slightly normalized environment. more active foreign exchange obviously, brexit, et cetera. >> there are those, though, james, who say at this point when i look at the bigger banks -- you being one of them -- it's more like a util y utility. highly regulated. generating an 8.3% return. it's not like what we once saw from financial institutions. unfortunately unlike a utility you are subject to the whims in the market. why should i ever pay up for one of these? >> you have to decide, is this a high cost problem or low class

problem generating below 10%. could be not having enough earnings or having too much capital. too much equity. and i think the fact we have this year for the fourth consecutive year raised that dividend by 20 cents a year ands raised that buyback. we've been operate with excess capital. they are a function of having too much equity in these businesses. as we get through the final processes from the federal reserve and the others, we'll have a better understanding what capital do we need long term? then we focus on the earnings side. that's where expense management and driving the core businesses. we've got turning around fixed income are all working in our favor. >> the plan to cut another billion in expenses by the end of 2017. you mentioned the return of capital, $3.5 billion. you got approved of that from the fed. you were the only u.s. institution that they sort of said but we're not that 'wihapp withior processes. >> it was a disappointment.

we've had a clean record for six years of going through, i think, scar and ccar. this was the first year we got a contingent pass. the distribution of dividend and buyback. but, clearly, found wanting some of the processes in our planning which we take extremely seriously. i'm personally involved with it with our whole team led by a cfo and we'll resubmit. i think december 29 we resubmit. we've got all shoulders to the wheel on that one. >> right before we went on air you told me you've been traveling, the ceo, london, germany, i believe as well. brexit. i know so early, very difficult to know what the real impact will be, but what are you doing? how are you approaching it given what may become, of course, a need to move staff, i would think, out of the uk potentially? >> good question. i was in germany last week and i was going to stay and see

clients but went to london monday and yesterday. frankly to be with our employees. and assure them that we're not having a knee-jerk reaction here. i met with various government figures in the uk yesterday. and on monday. my assessment is this is going to unfold over at least a five-year and if i listen to some of the folks on the ground over ten years. this is a very uncertain, what ultimately it will mean. clearly we and other banks will have to have a european-style headquarters in one of the major markets whether it's frankfurt or one of the other cities there. we will have to move some people to support that, but the uk is going to remain -- london will remain a critical part of our global footprints. >> we don't know what the treaties are going to be. >> we have no clue. what i essentially said to the employees is everybody cool your jets. settle down. nothing precipitous is about to happen. the treaty negotiations haven't

begun. so we're a long way. but we'll obviously have to respond to reality. when we know what reality is. >> finally during our conversations in the past you seemed to always be rooting for rates to go higher. you've said, i think they purpose you've been wrong like so many other people. here we are at 1.57 on the ten-year. negative rates around the world. are they ever going to go higher? >> we had a rate move in december. there was a starting -- i'm of the view which has clearly been a minority view and not shared by the folks who matter who vote on this that having rates at this level with unemployment at 5% or less and clear gdp growth of 2-ish percent and some pressure on wages doesn't align with my macro economic view of the world. that's been a minority view. rates will rise. how much, this year, next year, i'm beyond predicting it at this point. >> hopefully we'll sit down and

say you were right. >> one of these days. >> i appreciate your time. >> thanks. >> james gorman, chairman and ceo of morgan stanley. morgan stanley shares up 2%. over to jon fortt with a look at what's coming up. >> carl quintanilla is live in cleveland at the republican national convention. he's going to join us with some guests to talk all sorts of things, including the impact of social in this year's race. also microsoft with some great results out fuld by the cloeled. and is there potential downside risk at peter thiel's speech at the rnc tonight. he's on facebook's board. all that's and more coming up on "squawk alley." hey there. hi, i'm looking for a deal on an iphone... ...i was thinking, something along these lines.

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market. the s&p 500 is up about 0.4%. some individual movers on potential deal news and earnings. one we can point out is one of the laggers is kellogg, ticker k. they busted a myth of a report it was going to potentially combine with berkshire and 3g's kraft heinz. >> people have been tracking where private aircraft have been going and came to the conclusion

that maybe there was a takeover in the offing. but he's knocked that down and kellogg suddenly dived low. one of the main losers on a relatively flat market overall. >> keeping the gains. and the dow up for nine days in a row. the longest winning streak in three careers. with that, over to the team, carl in cleveland for "squawk alley." >> good morning. 11:00 a.m. day three of the republican national convention in cleveland, ohio. "squawk alley" is live. ♪ ♪ ♪