welcome back. check out the futures a little higher, dow futures up by 15, s&p up by 3.5, nasdaq up 6.5. scott we'll see you today and tomorrow morning. join us. it's time for "squawk on the street." ♪ good morning and welcome to "squawk on the street." i'm david faber with jim cramer, we are live from the new york stock exchange. carl quintanilla is live at the olympics in rio and we will hear from him momentarily. give you a look at futures this morning as we're a half hour away for the opening of trading this wednesday. call it a mixed open, maybe a bit up on the dow jones industrial average. statistically insignificant

average of the three. european markets this morning, let's take a look. we are in the -- whoa. gave us a few more there. look at that. they added italy and spain. getting a little creative there in the old production booth. thanks, guys. always wanted to know what's going on there. but the three we look at are all down and there is the 10-year note yield at 1.52. crude hanging there above 42. it has for the last few days as you also see brent. let's get to our road map this morning. and it starts with the earnings out from yesterday from disney, which topped estimates, making a billion dollar streaming bet as well. we will take a look at the company's video plan and hear what ceo bob igor has up his sleeve. major retail stocks on the move after earnings. how the retailers are handling the pressure that keeps up in that industry. and michael phelps making history last night. we will go live to rio and get carl to bring us up to date on all the latest action, including that amazing and very close win

in the 200 meter butterfly by mr. phelps. let's start off with disney, shares are set to open a bit lower, even though earnings and revenues were ahead of estimates the company revealing plans for a new espn streaming service, saying it also will pay a billion dollars for what would be a 33% stake in bamtech, the streaming unit of major league baseball which powers a lot of streaming from other content providers. ceo bob igor talked about the move yesterday on "closing bell." >> we think it's a good investment. we love the business model. we think that in today's world, having the ability to stream on a scale basis, live sports and live programming, is a competitive advantage and something necessary. we love the user interface. so overall, we look at it as an investment but as a partner, as a part owner and ultimately as a majority owner, we feel it gives us an ability to jump start not

only espn, but our other business as well. >> you know, we haven't talked a lot about -- it's funny, people see major league baseball tag on videos you watch and wait a second, i'm not watching baseball. >> bob bowman who created a real business there. >> always has. >> i remember from the itt days. >> oh, man. i remember -- >> things used to get testy between me and mr. bowman. but back when they were trying to buy starwood. >> exactly. >> or hilton actually. hilton. no starwood. >> well, anyway -- >> who can remember. >> all we know is bob bowman is not a guys to mess with. >> and they sell 33% to disney. back to another bob, that's that being igor, what's your take on the quarter, jim? >> media networks responsible for 2.37 billion of a total of 4.4 bill. that means that espn is still the driver here. i know bob igor doesn't want to hear that but there's a moment on the conference call, this alexa from jpmorgan, drops down

the duck in the room, that all these things, the hulu, okay, the direct tv deal with at&t, the bamtech, make her more worried in terms of the notable shift away from linear tv. david, i'm going to hand it over to you, because you know how much better linear tv is for profit margin. everything else is -- >> right. >> the subfees from espn are still the driver of a great deal of profitability at disney, not to take away from the parks by the way which were very strong, not to take away from the movie studio, which we've known and we have spent so much time complimenting over the last year has been a great profit center but espn and the subfees are the big deal. the question as to over what period of time will the bundle of video programming that goes to the home come apart so more and more people are able to avail themselves of streaming services that include enough networks at a price point they want, how quickly will that

happen and undermine the ability of espn to get those kinds of fees, are the key questions. but they're moving in a direction of saying hey, we're going to be there, we're going to be on the streaming services, with at&t directtv streaming package we're going to have our own offerings out there and figure out a way. >> and monetize content that they basically have been sitting on. they can't because they don't have enough networks to do it. and it will be done a la carte. movies, 766 million versus 472 million operating profit, it's so big but not so big versus the number i gave you in media networks. advertising in media networks up 5%. not enough because of the bundle and the $7 plus per subscriber. david, i think even if they can get 2% growth in media networks from the initiative we will be excited about the stock again. why that is, it sells at 16 times earnings. it was at 20 times earnings -- >> a year ago. >> yes. >> when you and i sat here and did have mr. igor on as a guest,

the quarter where the first concerns about espn really came up in terms of sum erosion of subscriber base which we're not really seeing great signs of right now. >> february 1 of 2011, espn media put out a release that said they have 100 million subscribers, trumpeted. they don't talk about those numbers anymore. nielsen rate is 88 million, a dropoff. what you have is the footrace between new initiatives and this decline in the traditional linear that is so important. it just obscures shanghai disney, obscures the turn in hong kong, quite impressive, it obscures the 29 movies that have each made $800 million. >> amazing. >> david, they're not as big. now, they still -- i mean, now maybe i'm missing the play here, mrs. lincoln, 12% earnings growth. and you should pay maybe 16 times. but david, do you know what multiple was when they were at

100 million subs? >> over 20, right. or was it? >> 16. >> right where we are right now. >> now we have 88. >> right. >> but theme parks are much better and movies are much more predictab predictable. they will never give them credit for predictability in movieps. they can't believe it could continue. i don't know. this is a fundamental existential issue, they call it the delta, the rate of change of ken matter and you can go through that whole conference call and they're not talking about "finding dory" or captain america civil war. they're talking about the opaque espn numbers and where they really are versus all these new a la carte menu. bob igor is very confident both in the interview with julia boorstin where he says this is going to jump start espn and i can't -- frankly can't spend enough time on this. it is the fund nature, can they outrun the decline in espn. >> that's the larger question for so many of these content companies at this point, all of

which, of course, have told me they will be on every streaming service because they are a must have. >> and it's monetization. you can't miss that. >> that won't be the case. we're going to talk more about disney around the open and see how that stock moves. >> i wish i weren't so -- i wish i watched phelps. all this conference call. because i had to keep rereading it. >> that's sad. >> no. that's what we do. >> it is, but you can take a few minutes. really, he's very fast, phelps. he doesn't take a lot of your time to go up and down the pool a few times. >> how do i get to yelp and how good -- >> let's get to the retailers because you spend time around them. >> we have to go. >> michael kors shares sliding premarket after posting a larger than expected drop in comparable store sales and weak outlook given for the rest of the year. you can see the stock down over 3%. >> did you read the wording in the release? >> i did actually. >> geez, talking just point out saying, the mall, the mall traffic, is just hurting them. but mall traffic is not hurting

ralph lauryn. >> ralph lauren set to open higher after first quarter earnings and revenues were ahead of estimates. the company did report a loss of $22 million. remember this stock got crushed when they kind of re-set expectations some time back last quarter. >> that was larson coming in from -- he came in from old navy where people dismiss and sniff at the turn that he engineered there. this way forward program he has put in, is for real. this is a major turn. and i know the stock is up, i never recommend people chase an up plus $6 stock, but david, i believe in larson said it on "mad money" this confirms many of the changes he's made. >> what did you like about the turn and changes made at ralph lauren? >> i think the guy came in and basically, a lot is just you can come in and do things basic supply chain. you can smooth sailing, what has he been doing? pair -- apparel landscape changed. you have to be faster in your

fashion. h and m turn around their merchandise so fast, but there had been a 15-month lead time at ralph lauren versus an industry average of 6 to 12 months. he sold this as a major disadvantage. he is turning around that lead time to be more in keeping with what people see in fashion now. way forward. this is about seeing what's in these other stores. zara's numbers despite their mall presence, have been so much better. why? because they're quick. >> fast fashion. >> ralph lauren is going to be quick because this man understands supply chain and he has an eye. >> speaking of quick, we've got a few swimmers who swim for the united states team who are pretty darn quick themselves. let's get to rio, huge night for michael phelps, katie ledecky, team usa overall. there's carl and he brings us up to date with the latest. good morning, carl. >> hey, good morning, david. we'll talk about phelps later. obviously a huge story here in rio, but katie ledecky is another one this morning, wins the 200 meter freestyle, her second gold, and her third medal

of the games. she continues tonight with a freestyle relay. she'll do a freestyle on friday. but this was the toughest challenge for her and her path to win four golds and five overalls at these games and talked about that last night. >> when racing the world record holder in the event and someone who broke a world record in the meet and had a fantastic meet i knew it was going to be a tough race. >> one thing we're watching is the weather, they've canceled rowing today for the second time since the games began. they canceled them on day two because of high winds, fears of capsizing. the serbians sank on day one and officials determined they did not want that to happen again. team gb, great britain, had to bail some water out of the boats. that will be a concern for the next couple days. soccer, a big story for the u.s. a very awkward draw with colombia at 2-2. hope solo allows a goal early on, very uncharacteristic of

her, the first goal she's allowed at these games. they lose the lead in the 90th minute but go on to the quarterfinals and play sweden on friday. by the way, two young stars mallory pugh and crystal dunn scored their first olympic golds ever. 10 gold. we added one in the past few minutes in women's cycling, a lot more coming up today as we look to more diving, more swimming, katie ledecky again tonight in the relay, so an exciting day five. we will see what it brings. >> yeah. now ledecky doesn't swim the 800 then until when, carl? >> friday. >> friday. okay. so tonight is just the relay. the swimming has been incredible. >> that's right. >> incredible. as has the -- >> of course. i have to say, as you know, it's probably the best spectator sport here until we get to track and field, next week. there is, you know, with gymnastics lots of things going on. hard to focus. but swimming you know where to look.

>> yeah. i know. that le clos guy kept looking at phelps and didn't help. >> i remember when we used to go into these olympics and it was russia. we used to be -- it used to be east german, these countries, chain china. we were by this point a second place, third place. is it the drop off of other countries or have we done something dominant in these country that make it so the other countries have become -- >> that's a good question. times has a good piece about women's gymnastics, for instance. remember karolyi, now it's martha karolyi, the way they changed the basics of training how they are housed the activities they do together has really solidified the teamwork, especially in team competition, and that's why you can argue women's gymnastics the most dominant force in the world. it's incredible. >> amazing to watch. we will check in with you later. carl quintanilla in rio. coming up here, perigo shares hammered in the premarket,

lowered it guidance. what's going on there. also ahead, carl will talk to the vice president of brazil at the olympics in rio. let's give you another look at futures as we're about 18 minutes or so from the opening bell. more "squawk on the street" after this. miles per hour. to win, every millisecond matters. both on the track and thousands of miles away. with the help of at&t, red bull racing can share critical information about every inch of the car from virtually anywhere. brakes are getting warm. confirmed, daniel you need to cool your brakes. understood, brake bias back 2 clicks. giving them the agility to have speed & precision. because no one knows & like at&t. at ally bank, no branches equals great rates. it's a fact. kind of like grandkids equals free tech support. oh, look at you, so great to see you! none of this works. come on in.

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it is shaping up to be a really day for shares of perrigo. the stock is down sharply this after the company announced that its earnings were below expectations and more importantly, lower guidance for the remainder of this year. the company's ceo blaming competition and price erosion in the prescription business. i'm looking now and you guys see it here, i mean the stock down over 12%, 83 bucks. disappointed, says new ceo john hendrickson to announce the folg, critical review of our business, changing adjusted eps guidance for 2016, majority due to price erosion, fluid dynamics affecting the pharmaceutical or the prescription business, excuse me in addition revising our guidance on lower performance expectations for the segment as they implement a transformmational organizational change there and talking about

685 a share to 715 a share in earnings for this year. >> i found this disturbing. and particularly because of the words you used, critical review. implies it was not this quarter. i'm not saying they necessarily did a lookback but you know who ran the company before this man. >> joe papa ran the company, exited rather quickly. >> and -- >> i would point out very soon after fighting off and boy, perrigo shareholders must be wondering what they were thinking. amazing as it was and i pointed out it was amazing, they said no and knew they were taking a lower stock price with the promise of a higher stock price over time. >> $200. >> that does not reflect his character. it was a bad call and not taking -- >> and then he left. 2.3 times each share and 75 bucks. do the math at home, pull up myl, $50 stock, multiply that by 2.3 and add 75 bucks and get

where perrigo would have been or was worth 180 plus. >> right. >> now worth 80 something. >> yeah. i mean this is devastating situation. is there a read through david, to say that well, mr. papa is now at valiant which came with extraordinarily strong second half forecast. >> that stock yesterday, just kept moving higher. powering higher no very aggressive forecast -- very aggressive forecast. stymied some of the short sellers. >> when you say very aggressive forecast knowing you as i do, are you implying in some way too aggressive as perrigo's forecast previously, which has now been revised dramatically lower? >> i once met with an executive in 1980 -- actually, geez, really date myself, 1994, who told me about the notion of und promising and over delivering. consumer package goods ceo. i will not reveal his name but he believed in something called [ inaudible ] i was astonnished to hear this. jo papa does not believe in

under promise. he promises high. what i'm looking at perrigo was a promise that was, let's just say that raises eyebrows in light of the perrigo report. >> another stock we'll be watching closely at the open, of course, perrigo down sharply. up next, though, let's get jim's mad dash and count you down to the opening bell. a look at futures for those of you who haven't had enough look at the futures. we like to give them to you time and again. curious how the italy and spanish markets are doing, guys? browse them to us earlier. more "squawk on the street" straight ahead. , social updates. we call it dark data. 80% is invisible to most businesses. the ibm cloud has tools that can help see dark data and put it to work. hello, my name is watson. working with watson in the ibm cloud, we can help an energy company predict pipeline corrosion. and help a start-up to use social data to predict market trends.

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all right. the mad dash coming up. what do we got, about 7 minutes before the opening bell. want to talk about your buddy jeremy stoppelman. you can't be stoppled. >> i like it when good guys win. he has lan eny, the cfo, long-time internet analyst, a fabulous guy, put together an amazing quarter. it had accelerating revenue growth. a true turn quarter the mobile app, 23 million people working what i would emphasize, this is a new term you heard this quarter, point of intent. you want to be the company that has the at the point of intent on your mobile what you might want to do. what the advertisers want. tremendous for the health and service industry, not just restaurants, broadened their target market, loved now, at least by the numbers -- >> right. so things they've turned things

around. >> turned things around. >> i can remember sitting at this board looking at a stock down that much and saying they can't compete. >> no. well they've added a lot of sales people but have not increased the amount of costs. the leverage turned out to be amazing. a true leverage story. it is working. had it been a takeover name, we could take that off the table. >> really? >> why not sell off of strength? >> i didn't want to buy stock up 3, that's a sucker's game. go through the conference call you sense that momentum accelerated revenue growth hard to come by, it was a very, very good quarter. and that does matter. this is a turn and it's a real turn. >> it is a good service. i use it. >> i do too. the point of intent issue, you will see some contradictory stories about facebook being able to block ads, versus proctor, they are -- the ads -- the proctor story in the papers is a little bit, i would say, disingenuous. proctor is not cutting back on its money spending in facebook.

they're using it differently, going broad not narrow, clorox had a strategy of facebook that has made them the fastest grower in the consumer package goods. it's just an exchange of where you put your facebook dollars. you want to be in the intent, the intent. >> i'm about to do something that involves commerce. >> that's why ruth porat tour a story on the alphabet google. nobody is more at the intent other than amazon than google. >> all right. we'll keep an eye on alphabet and the broader market. 4:30 before the opening bell. more "squawk on the street" right after this.

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let us help grow your company's tomorrow- today at business.ny.gov you're watching cnbc's menezes live from the financial capital of the world. opening bell in a minute and a half from now. jim, we haven't talked broader market and haven't talked about a couple different companies including lily, which i know is sort of -- >> i mean we could go back over disney and say 16 times is good enough. i want to focus on the

traditional big pharma and how they have historically been able to give you nice trajectories. bristol-myers has, but opdivo did not do well in the small cell lung cancer. this morning an unmet interim efficacy note out of lily for a breast cancer drug. this is called the monarch study. and this was along with their alzheimer's attempted franchise, had been with lily from the 73, 74 level. a major stumble for lily, not as big as opdivo, but i mention it because big pharma has become unreliable when it comes to big tests and this is again, behind why you have a medivation always talked about. they don't have enough franchises. big pharma, eli lilly, one thing left that matters alzheimer's and you know how hard that is to solve. >> interesting point on medivation, which i may update people on in the not too

distance future. as i reported a lot of interest there. whether it's sanofi or pfizer or celgene. gilead and or merck. >> and merck. look at gilead. one of the greatest single discoveries of all time but it's a cure. and you know cures, unfortunately, are not as good as continuals. >> yeah. >> but anyway, i bring lily to mind because once again, what i find is that when you have faith in big pharma, you better really have it nailed down. and i was shocked at opdivo, wasn't sure about -- i think lily is a little -- frankly, bau i like those guys, a little too promotional. >> noncell lung cancer. >> i went to a doctor who didn't tell me that was -- >> you heard the opening bell. here at the big board the autism society did the honors, nasdaq, communications network, there you go, celebrating their 40th anniversary.

congrats on that. s&p real time exchange getting itself together, a mixed open at this point. p. >> we haven't talked seconda secondaries. >> we haven't talked about supply and haven't talked -- never really got to the equity offerings, follow on offerings not necessarily secondaries. >> let's look at two different ones. first u.s. steel. they did a $23 deal, 18.9 million shares, now that stock closed at $25.83 when they announced the secondary. you're talking about a big hit if you owned it. but that's been up because of the steel import tariffs that have kept china and korea out of the market. contrast that with a stock i like very much which is zimmer biomet. kkr and tpg dumping 7.44 million shares. kkr -- >> that is a secondary, by the way. >> that's the true secondary. that is from selling shares. david, these p/e firms have been unloading stock, why they just aggressively come back, this

stock had been at 133. a lot of people talking about a takeover name. dumb at 129.75. why do you think they are aggressive in selling the stocks? >> they have to. they have funds, the funds have timelines made investments have to start to return capital, put up the performance numbers to a certain extent to raise the next fund. that's the business model. >> well -- >> you can only hold off so long. >> own a stock they are in -- >> you have to be aware of p/e being a seller in the stocks and interestingly when they are done that can be a positive sign because there is no more supply following. >> and xp is a good example and semiconductor. >> did some secondaries and got them done. >> [ inaudible ]. >> it is. it's a question we often ask of people who are -- yeah, sorry, guys, delevering, in an ipo because when you have a p/e firm that is behind one of these ipos, it is a question mark for

people as how much are they going to sell, when are they going to sell. >> when are they going to unload. the opposite of that are these incredibly tremendous follow on offerings by the oil companies to be able to buy land, particularly in the permian where people are talking about pioneer. $2 a barrel. at 42, 43, make lot of money. any company moving away like a saint mary, sm, moves out of denver, gets to permian, move into oklahoma, you move in the permian, and have to issue equity, people are thrilled. watch crude. crude is -- i should have mentioned i don't like to say -- something you asked the key to this market, crude, obviously, is still very much in control. and even yesterday, when crude ticked down, you saw it tick down the averages. >> i did. >> still the algos still. >> can we mention my lan. >> the fight there, of course, when -- with teva and then the fight to try to take over perrigo, where teva was trying

to take them over, the nastiest letter i've seen written from my lan to teva. >> mylan got lucky in not buying perrigo. >> probably so. >> would have hurt them. >> probably so. they would own it now and opening those underperforming businesses, particularly the price erosion cited by perrigo in the prescription business which is why that stock is down 12.5%. >> wow. one of the things i think is interesting, when you go back on the allergen call, selling at $40 billion worth of generics, this is a dilutive deal, got rid of the $25 price target, brent saunders getting rid of $40 billion worth of generics was a sign of the top of generics. >> yeah. >> teva, to kings, but something else to watch as i look at the formulas of many of these pharmacy benefit managers they're cutting what they'll pay for these generics. >> should we be concerned in terms of more broadly speaking, when he says that the dynamics affecting the prescription business in terms of price erosion and a fluid market, does

that mean -- does that extend beyond perrigo to other companies? what is he talking about? >> brent saunders talked about that and when you products and prescription, look out. they will pitch you. if you don't have need to products you're fine. >> if you have a hep c product and someone else has a product, you're not going to make your profit margins. saunders gave -- he put on a good teaching educational seminar on the notion of if you have need two products you're going to be pitted in a way you've never expected as the pharmacy benefit managers have gotten smarter and smarter and smarter. >> right. alibaba reporting tomorrow. stock is up today. we're going to be talking to joe tomorrow here on "squawk on the street." >> really? you got him. >> we got him. plenty of things -- >> that's a key stock for another people talk too much about. >> it is a key stock for yahoo! of course. >> yahoo! >> the value of yahoo! >> that's right. it will become a 40 company and

its investment will be alibaba once, of course, the spin of core business has taken place with the sale to verizon and they figure out something to do with the yahoo! japan stake, still unclear at this point. alibaba shares up. we will get a nice read on chinese consumer perhaps. >> you saw the -- >> dealing with a falling yuan over time that may be hurting some of those who invest here. >> the jd.com could be an interesting read through, very good number last night, and you know, chinese company. when we talk about currencies, notice the bid underneath caterpillar of late? >> i haven't. >> gone from 73 to 83, every morning when i watch wilfred and sara they discuss the yen and the yen strength. you know, hpq, the printing company, the printing company, confuses people, and caterpillar are the two most levered company, hp ink and caterpillar, to a strong yen. the stronger the yen goes the worst it is for mat suh and for

the printer companies that compete -- >> it did go the other way for hpq for some time. >> i think there's a big trend the other way and the numbers may prove to be too low for both companies which i have been tepid on but came around big time cat in 73 and i have to admit i think hp with the combination of a good 3d offering and the possibility of a stronger yen, could be a company to watch. >> interesting. shares of disney, which we opened the show with, not doing much of anything. >> it's a dutough -- >> down 8.4% for the year. >> pay 16 times earnings betting bob igor's initiatives will raise media networks. i think there's a possibility. i don't think it's going to be within the next two quarters. individuals don't have to worry about that but the institutions who are still churning, probably going to have patience. individuals should have patience. i believe you will have a decline in espn but it will be offset, but david, i don't know how quickly it can be off set. >> that's the question, of

course, how quickly will it all come apart and how much. and how much. >> look, you know this industry better than i do. >> it's the key question. and people -- you'll get a lot of different answers. lot of different answers. >> i find it one of the more fascinating issues not because we're in this business ourselves but because we spend so much on our cable for spespn. >> great product. >> great product. i love it and can't do without it. >> bob is on the floor and has more on what's moving this morning. >> good morning, david. mixed market as it has been so many times in the last three or four weeks. two to one advancing to the declining stocks, however we're seeing banks lag a little bit, health care lag a little bit but not much. retailers fractionally on the upside even though we got a mixed report from our three major retaltsers this morning. start with the watch business and talk about what fossil is doing. fossil on the surface, 12 cents a beat, but the bottom line was, they made $1.12 last year, 12 cents versus $1.12 last year. the problem is right on your screen, watches down 10%. this is the core of their

business. we've known the traditional watch business has had problems but seeing real declines in the last several quarters continuing. net sales down 7%. see leather and jewelry, a smaller part of the business, actually did pretty good but that doesn't matter. take a look at what fossil has been doing. remember, we've known that problem with traditional watches for a few quarters right now and see fossil was $100 just a year and a half or so ago. now it's $31. mall traffic continues to be an issue. heard this from michael kors. beat on the top and bottom line but revenue is only up 0.2% year over year. comp store sales down 7%. that was worse than expected. most of the numbers i saw had it down 4 or 5%. the guidance q2 is lower, although they are interestingly maintaining their full year guidance here. but here's the key thing everybody is fixing on here. progress was muted by the continuing decline in mall traffic trends as well as a decrease in tourism in certain major cities. seen other companies mentioned the tourism decline as well.

you can see kors was a similar situation, 90 two years ago, half that right now at $49 and change here. but some companies are making progress. i was very encouraged by ralph lauren. i know the numbers don't look good if you look at them you say ew, everything is down here. but the bottom line is all these numbers were much better than expected. the guidance was also reaffirmed. it is a company that was -- got a plan, a restructuring plan the way forward and seem to be making progress on that although ralph lauren was $180 two years ago. want to mention southwest, saying they have a problem here with their revenue outlook, lowered their outlook. a computer outage, remember that, 2,000 or so were canceled flights just a short while ago and said that would be an issue. we don't have any clarification from delta on how much that outage they had is going to cost them. back to you. >> thank you very much, bob. let's head to the bond pits and check in with rick santelli at the cme group in chicago. take it away, rick. >> thanks, david. you know, my opinion is, what

central banks are doing is absurd and that doesn't include the notion that buying all these corporates is going to make a difference. but what's interesting is, is that it hit a snag, regardless of what your strategic opinion is, about what central banks are doing, mr. carney, bank of england, and what's deemed reverse auction. regular auctions when you sell the securities. nowadays, almost as important to do the reverse auction where you buy them back. but the problem with buying something back is you need people to sell it to you. and investors, well, we could go over the reasons, but they aren't. and if you look at a one week of 10s of yields and bunds see the aftermath that doesn't even go to the relationships between them which are really topsy turvy? terms of the spreads and in terms of foreign exchange, very fascinating. look at a june 1st start pound versus dollar, the pound is doing a little better today as the rates plummet, it's all relative i guess. but if you look at the pound

versus the euro, not the same dynamic on the right side but in both cases, it's the brexit lows that you want to pay most attention to. david, back to you. >> thank you very much, mr. santelli. well as we said earlier, alibaba set to report earnings tomorrow and we will let you know again. we will speak to alibaba's executive vice chairman joe tsai after the numbers. more from rio where we find our own carl quintanilla. carl? >> hey, david. as you know the stock market here has priced in a recovery from this deep recession in brazil. but a lot still rides on the man who has the ininter rim presidency now. what to know when "squawk on the street" continues. listen to me. i am captain of the track team, and if i'm late... she doesn't really think she's going to get out of here, does she?

be nice. she's new. hello! is anyone there? rrr! wow. even from our standards, you look awful. oh, sweetie, what happened? girl: me? my friend becky got to talk to this super-cute boy, and i tried to act like i wasn't jealous, but i so totally was, and then, out of nowhere, this concrete barrier just popped up. maybe it was a semi. you mean you were driving? yeah. i mean, i know the whole "eyes on the road" thing. but this was a super important text. maybe you have to know becky. texting? great. but it was only, like, 5 seconds, and i'm a really, really fast texter, so it wasn't even a big deal. actually, has she texted me back yet? [squishing sound] wow, i get, like, no bars in this place. i wonder if they have wi-fi here.

brazil is on the world stage for the next week and a half but behind the celebration lies a deep political crisis and the worst recession in decades. if that weren't enough, the man responsible for fixing all of that, hasn't been officially handed the job yet.

throughout rio signs reef session are hard to miss. but as brazil's senate nears a final vote on impeaching dilma rousseff and suspended president many have lie hopes in interim -- many have high hopes on michel temer. >> one of my board meshers is the finance minister kind of running the economy of brazil right now and i have a ton of confidence in him and i think he's doing a great job. >> temer has reassured investors, brazil as stock market and currency are the best performing in the world this year. >> if you look at gdp projects, inflation projections, for 2016 and 2017, it shows also that people are getting more confidence with brazil and with the temer administration. >> reporter: but many brazilians remain cautious pointing to the country's long history of corruption and skepticism that temer can push through reforms on government spending, infrastructure, even pollution. >> i think people are -- they

just don't like politicians right now. you know, every politician they boo because, you know, there's been so much rampant corruption and i'm not sure -- you know, president temer hasn't been involved and hasn't been implicated, so i'm for one am happy he's there. >> just last month, guys, the imf revised higher its forecast for brazil's gdp. they went from 3.8 contraction to 3.3, but not a lot of comfort in a country where unemployment is still 11% and, jim, i'm sure you know the petrobras scandal conditions. iron ore the number one export. a lot will depend on demand from other countries including china, guys? >> yeah. carl, this is the critical issue, how much iran ore is china -- iron ore is china going to order and whether valet has lowered its costs to the point of making money. both valet and petrobras have

come off their bottoms and the real is just not as week and a lot of people are shocked at that, carl, given maybe it is because of the change in government, that is being heralded there. >> yeah. i think. his domestic popularity still in the teens, very unpopular at home, but talking about fiscal austerity, the big oil companies selling assets outside of brazil, so we'll see what it brings. clearly a lot of optimism we might start to get green bars on that gdp chart instead of red. >> that would be something. >> yeah. >> major turn. because we have india doing better, russia doing better, china stable. quite a different change from the last two years. worth watching. caterpillar again. >> right. carl, i hope at this point, given you got only a couple more days left, you've made it to some of the events. and have enjoyed them. what else is on the calendar for today and tomorrow that we should be keeping an eye on? >> yeah. we did get to women's gymnastics last night, an absolute treat.

i would watch men's basketball. we've been so dominant over china and venezuela, but the team has not faced real nba players on the opposing team. that will change tonight. five nba players on australia's roster. and then, of course, we'll watch phelps over the next couple days. my favorite statistic of the morning, guys, all-time, phelps alone has more gold than north korea, mexico or india. as a country. just gives you a sense of how dominant he is. >> 21 golds. >> what a great stat. >> that's incredible. carl, thank you. we'll see you the next hour, of course. >> triple. >> yes. >> spitz has been dusted a long time ago by phelps. >> yeah. actually he didn't. >> nobody really? >> yeah, he didn't. we talked about -- >> well whatever i mean -- >> i don't think he did. >> eclipsed entirely. you know what, this man is other worldly. >> he is. 31 winning gold medals that says

something. up next, get ready stop trading for us, jim. >> sure. >> we have that coming up on "squawk on the street." back right after this.

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>> maybe we buried the lead. what's winning with disney you have 12 straight quarters of double digit including 12% earnings growth and people are saying let's give bob igor the benefit of the doubt, done a remarkable job and the acquisition could lead to an increase in streaming and hats off to them that they've been able to say, listen, rely on us and we will figure it out. 16 times earnings bob igor gets the benefit of the doubt right now. >> well, he proves over time that that's probably been the right way to go. >> bet against him since he came in. it's a blip. that's what people are saying 16 is not -- it's factored in. i don't know. inexpensive 12 straight quarters of double digits. >> other things that may be more inexpensive. >> absolutely. but i'm pointing out a battle between the bulls and bears and bulls are winning. sun power, opco, deutsche bank, jpmorgan, all like this company, a solar panel power plant company and they missed on both.

it could be chinese dumping of panels but they were too aggressive on their pricing, too aggressive on the outlook for power plants and people are comparing it to you know others in the industry -- >> different model than solar city. >> yes. more -- some people say more like -- got sun edison, which that's not fair because we know what happened there, and versus solar. put it this way, when under pressure on your big business lines and so many firms believed in you, well, you can just say, can't own it. >> what will you keep an eye on the rest of the day? >> there's been such gigantic shortfalls. you know, restatement by orbital etk, mer riyadh genetics versus companies that are in retail doing it right like a ralph lauren. david there are cross currents right now in the market that make it the averages look wrong. there are some companies that are trading, that are

collapsing, wayfair, for instance, goldman abandons wayfair. >> yesterday. reported earnings, stock down sharply. >> maybe furniture doesn't sell as well on the web. ralph lauren is in the mall and do a good job. >> ralph lauren is in the mall and do a good job but kors reports a number talks about the mall not strong. >> what it comes back to, same thing that happens at disney, execution. people believe that bob igor is great at execution. people believe that this mr. larsson at ralph lauren, great execution. >> that should make it a stock picker's market. >> that's my point. thank you so much. you know what ceos are doing well and you bet on them. you've done quite well. try to avoid situations too much hype and could be disappointed, you've done well. if you're in tech, where they are under valued and offering dividends done well. >> watch some olympics tonight. don't just read conference calls. >> i don't have a lot of conference calls tonight, thank heavens. >> thank you. >> worth watching only every four years. >> focus on rite aid, someone

saying the wall green deal will work. >> i did work on rite aid. >> we did. >> catch that next hour. >> you know it. coming up in the next hour, behind the bunker, we have a lot of new details on roger ailes and 21st century fox. the "vanity fair" reporter who broke an important story there. >> very interesting story. >> widespread criticism after donald trump appeared to suggest, quote, second amendment people could stop hillary clinton. we'll have more on that when "squawk on the street" comes back. when it comes to medicare, everyone talks about what happens when you turn sixty-five.

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♪ good morning. and welcome back to "squawk on the street." i'm sara eisen along with david faber and kayla tausche live at post nine at the new york stock exchange. our carl quintanilla is with us from the 2016 olympics in rio. we'll get to him in just a moment. in the meantime take a look, we've got a mini rally again in the dow. it's up 15 points. s&p 500 and the nasdaq both negative, but just barely. and wti crude has turned around and now marching higher, just below $43 a barrel. our road map this morning starts with retail earnings.

kicking into high gear, ralph lauren and michael kors, both beating the street but how are the giants navigating a turbulent retail environment. >> disney reporting an earnings beat and a billion dollar investment in streaming. we'll dig through those numbers straight ahead. and a huge night in rio, we'll go live to carl in rio with the big olympic highlights, including many more u.s. gold medals. >> but we start with the markets and two retail stocks moving in opposite directions, kors shares are falling as mall traffic continues to stall, but ralph lauren shares are surging after beating on both the top and bottom line and anna is an analyst with oppenheimer and john is a retail reporter with fortune. welcome to you both. john, both of these names are trying to engineer a turnaround. it looks like investors prefer the results from ralph lauren. where are we in both of those? >> both are facing issues because of the decliping traffic in department stores. that's -- they're both highly exposed to that and sell goods

there. ralph lauren this year kind of outlined that they would have a double-digit sales decline. their current fiscal year. but the reason that the stock is doing well today is because they're beating expectation for the first three months of that fiscal year. and sales aren't down as much as people feared. they did say that sales were down 11% in north america and that's, obviously, very problematic. >> and look at kors, anna, big miss on comps. analysts looking for them to fall, 4.8%, instead sales 11.4%. pretty disappointing. >> yes, absolutely. michael kors talks about tourism being an additional drag to their business in a retail. full priced stores are experiencing significant declines so it's not just the outlet channel. and specifically kors talked about some of the south american customers affecting their southern markets in north america as well as the european

tourists here in new york. so yes, a disappointing miss. wholesale continues to contrast as well. and interestingly, michael kors is talking about pulling out of some of the couponing and friends and family promotions in wholesale starting this february. so we'll see that take place. >> how possible are the companies and department store vendors can get on the same page because the department stores have been amping up the discounting that they've been doing to try to get sales up and trying to get their comps up at the same time that some of these brands are trying to re-establish themselves as sterling, affluent, high end? >> that's the tension that's happening in coach yesterday said they're pulling out of 250 stores in north america. they were in 1,000. they're reducing their exposure to wholesale by 25% because of the high discounting. they can't really control the way that the retailers are discounting some of their goods. like you said how can you convince a shopper to spend $400 on a purse at a coach store when

they know that they can get it for less at a macy's or another retailer that sells a similar bag. it kind of hurts the image of the brand. they're all trying to really achieve this aspirational luxury image that, you know, you want to have broad distribution but don't want to hurt the image of that. >> but anna, it's a pretty delicate dance. how many of these companies can really afford to just say no to their department stores? >> we actually think coach's decision to pull out of some of the channel is a prudent one. coach is not highly levered to the department stores in the first place. we think preserving the brand in that aspirational luxury type of positioning is the right thing to do. so yesterday they talked about pulling out of some of the lower volume wholesale doors. michael kors, this morning, talking about keeping the door count similar, but discounting less. so certainly it seems like

reliance on the wholesale at large is becoming less and the resale is something to talk about. >> beyond weaning customers off promotions talk about the stock prices and the valuations and add in kate spade which gets grouped in here. the valuation for kors is almost half of kate, ralph, and coach. is that justified or do you think there's room for it to start catching up? >> so, michael kors' stock has been inexpensive for some time now. of course you have thep top line pressures. but also, question marks around profitability. and like we said before, some of the inexpensive retail stocks are typically cheap for a reason. with michael kors, just not clear how much lower can this wholesale channel reset and what happens with profitability. so out of the three we continue to be very constructive on coach. coach is not an inexpensive stock. it's trading about high teens multiple but you are seeing

north america comps turn positive for the first time in over three years, so we think that turnaround really is starting to play out. >> yeah. the ceo on "closing bell" yesterday talking about that. he was proud of those results. of course the big picture here, john, is that the retail environment is tough, tourism is down from overseas, and the mall traffic is down as well. so given that environment, who is faring the best no? who are you going to keep an eye on? >> athletics continue to do well. nike had not such a great quarter this summer but they seem to be a strong kind of space and home improvement does well, toys are laying a good year, so there are certain pockets of -- it is apparel that's just struggling because analysts say over and over again millennials especially are spending more money on experiences and travel and going out to dinner and less money on apparel and if they are spending money on apparel they're spending it on fast fashion. >> not handbags. >> not handbags. >> john from fortune and anna as

well, of open himer. >> thanks for having me. >> well, it was another historic night at the olympics with team usa winning big in gymnastics and swimming. our carl quintanilla is with us from rio and has the highlights. good morning again, carl. >> hey david, michael phelps we've been talking about him all morning long the most decorated olympian of all time gets more decorated with now 25 medals, 21 of them gold. the next highest athlete on that gold medalist is carl lewis with 9. sounds silly to say only 9. reporters asked phelps last night whether his sheer dominance at this point impresses even him? take a listen. >> i was talking to bob the other night, i guess one of the things that really kind of sticking in my head more, that's a lot of medals. we got a lot of medals. i mean, it's just insane. it's mind blowing. almost to me.

to think about when this all started and the things that we've been able to do together in the sport. it's special. and, you know, i told bob when i came back how bad i wanted that 200 fly. i came in, in the pool tonight, on a mission. and the mission was accomplished. >> of course he wins the 200 meter butterfly, redemption after london when he lost to south frick a ka's chad le clos and anchored the 4 by 200 relay as he told his teammates, guys, i'm tired, just get me a lead. turns out, they didn't need much of one. they crushed it by about a 2 second margin. for a lot of his teammates on team usa, guys, competing with phelps, training with phelps, is truly a life-changing things. as you can hear from katie ledecky and ryan held. >> it's been cool to kind of have events the same night as

him and he always -- he always delivers. and i'm so grateful to be a part of a team that he's on and to see him dominate like he always does, it's just inspiring to everybody. >> what kid doesn't say he wants to win an olympic gold when he's 7. when i was 7, i said, i wanted to go to the olympics, win a gold, you know, be like michael, and i got to swim on the same relay as michael phelps. so, you know, that was aamazing. when you're on a relay with michael and you have the world's most decorated olympian of all time on your relay, like it kind of makes you stand up a little bit taller, have a little more confidence, because you know you have the best in the world swimming into you. >> our favorite photo of the day, katie ledecky, guys, when she was 9 years old, a decade ago, getting phelps' autograph. that's one for the ages. finally what's a gold medal worth?

we always ask this at the olympics. about $564. if it were made of solid gold, it would be about $22,000. but interestingly, the gold medals they're giving out in rio are the heaviest in the history of the olympics. a lot more to come later on in the hour, guys. for now, back to you. >> yeah, fascinating, carl, the duration of phelps' career just shown in that photo alone where he was dominant ten years ago. and, you know, you look at somebody like missy franklin, for example, who i follow closely, she was incredible four years ago, it's not that easy to keep it up. and that's i think in some ways even more amazing than the medal haul, just how long he's been able to be dominant for. >> yeah. and that goes along with, obviously, things, challenges you go through, just as a young man, right. under the spotlight, now a new dad, so the success he's had in the pool, but also offsetting it with the pressure of celebrity is an amazing thing. >> but less we think he is done,

he is not. both he and ryan lochte have races coming up. you will be watching those closely. we will see you in a little bit. carl quintanilla in rio. when we come back disdisney reporting an earnings beat announcing a big bet on streaming. we'll dig through the report straight ahead. another record high for stocks. how far do the bulls have to run? we'll discuss that as well when "squawk on the street" comes back. yep. stirred it... mm-hmm. drowned it again... mm-hmm. and now just feel if it's cold.

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earnings driving the markets right now. retail brings up the rear in earnings season but 90% of the s&p 500 has reported so far. dom chu joins us with an earnings scorecard. >> like you said, kayla, the fuel has pretty much been spent. not a heck of a lot the remaining companies in the s&p can do to alter the course of earnings this time around. with nine out of every ten companies in the s&p reporting here's how things stack up. you've got 70% of companies beating the average analyst estimate, albeit we know on lowered championshiptations. 70% have beaten. 11% have met estimates and 19% have missed the average analyst estimates. on the earnings side of the equation, take a look at this, if you look at the sectors consumer discretion fairy, the retail stocks bringing up the rear. on average if all other reports come in as expected 13% growth in earnings for consumer discretiona discretionary, health care 7%,

the two best performers in terms of earnings growth. the worst side of things, material and frenergy no surpri on commodity prices. the sales side to round things out here. if you look at telecom and health care grown top lines the best and the word side of things, materials and energy again. the important part here, kayla, guys, is the idea here, that you have perhaps a q3 earnings growth rate that could be negative as well. right now according to thompson reuters, if all reports come in as analysts expect it will be a 0.3% decline in earnings if that happens, kayla, guys, it would be the fifth consecutive quarter of earnings declines, guys. back over to you. >> all right. thanks, dom. something we'll be closely watching. stocks are mixed after trading near record levels yesterday. even as the dollar and oil prices continue to slide. will this positive swing continue in the face of all resistance? joining us is scott rehn senior global equity strategist at wells fargo and larry mcdonald, head of global macro strategy at

acg. i want to start with you, i got another note in my index -- inbox this morning calling this the most hated rally ever. why is it so hated still even with all of this? is it low volume, the fact that there's no volatility or is it something else entirely? >> well, kayla, i think it's lack of retail participation really. we deal with retail clients and many of them have sat on their hands for literally six years. there's nobody chasing this market. there's lots of nonbelievers out here. and the market just, you know, keeps going up. now i think the market is close to fair value. this is not a typical market rally in any other cycle over the last 50 years, by now, you would have people piling in, waiting for pullbacks, chasing this thing and it's just not happening. of course that's one of the reasons why stocks keep going higher. >> larry, we learned from jan net yellen last year that a bull market can't die of old age but oil did give the market a run

for its money a couple weeks ago when it entered bear market territory. it does make you wonder whether we're set up for deja vu in the back half of the year, and whether the market, the equity market especially, will be on notice. >> well, since the fourth quarter of 2013, the only thing that's worked for the little guy, the small investor, be is buying fear, if you bought fear last august, if you bought fear this february, you're doing really, really well. the problem is, since 2013, if you chase rallies, the fed has burpts the smaller -- burpts the smaller investor over and over again. we've been sharing this with our subscribers. at the end of the day if the fed needs to talk of a rate hike for this year, because they promised us four of them, and then when they start to do that the dollar strengthens oil weakens and then all of that risk that's tied to oil and commodities comes back into play and we go risk off. the same thing will happen again.

>> larry, the fed took its own expectations down for a rate hike and yes, the jobs number that we got did make the conversation a bit more relevant. do you think we'll get one before the end of the year? >> well, i don't think we're going to get one but they're going to try to get one in. in other words, their beloved hillary clinton -- >> you don't want one but think the fed will do it anyway. >> i don't think they will hike but i think they will try to get one in. it's very, very big powerful difference there. so in other words, their beloved hillary clinton, they're going it try -- 12 fed governors they all would support hillary clinton. they're not dg to be too negative on the economy right in front of the election number one, and number two, you have the jobs numbers that have been barely decent in the back and q3 gdp according to all estimates up at 3.6%. if they start to talk up the rate hike and try to say okay, we're going to hike in december, relative to the rest of the world, that's a big deal because the rest of the world is, obviously, easing. >> well, let's talk about the

rest of the world for a moment. while we debate what the fed will do next, the german dax runs up to a bull market, 20% off the february lows. hong kong stocks are at 7 month highs. is there a story here of a global recovery that we're not telegraphing and paying attention to here with some of the sort of sluggish economic data in the u.s.? >> i think it's more of a stabilization kind of story. whether you're looking at china or the eurozone, the news from or the rest of the emerging world, the news there has been pretty bad. i think bad news was over priced into a lot of these markets. we've seen a bounce there. i still think when it's all over and done with and you look back on this year, it's going to be u.s. large cap stocks that lead the charge. i think emerging markets are going to fade to a certain extent here. the eurozone and things like the ftse and all that will be in line pretty much with the s&p 500. we're neutral there. i think leading the charge is going to be the u.s., the u.s.

economy. i don't think that's going to change any time soon. certainly i don't think it's going to change through 2017. >> larry, one of the reasons u.s. stocks have been so attractive is because of the quantitative easing going on everywhere else in the world. we saw the bank of england whiff, trying to initiate its own bond buying program. do you think that's a one-time blip or do you think the private sector will stave off what they're trying to do. >> i think the big thing to follow in watch here for the next quarter, is japan where the bank of japan has disappointed two to three meetings in a row here. if you look at the stocks in japan only 23% of the stocks are above the 200 day moving average and the u.s., 77, 76% are above the 00 day 00 day moving average. light exposure to the u.s., by japanese stocks, because the chances the bank of japan surprises to the upside and becomes more accommodative in the coming months, and supportive for japanese equities.

>> thanks to both of you this morning. >> thanks. >> thanks. when we come back, donald trump getting slammed about comments on hillary clinton. we've got the latest on the blowback. plus, inside the fox news bunker. a look at the newsroom that roger ailes' built. vanity reporter sara ellison joins us next. much more ahead on "squawk on the street." dow up 12 points. images, videos, social updates. we call it dark data. 80% is invisible to most businesses. the ibm cloud has tools that can help see dark data and put it to work. hello, my name is watson. working with watson in the ibm cloud, we can help an energy company predict pipeline corrosion. and help a start-up to use social data to predict market trends.

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that new controversy from donald trump setting off a firestorm. john harwood joins us with the latest. i want to know what you've learned about what's going on inside the offices of the republican leadership this morning. >> look, the republican party is panicked about where donald trump is and where he's headed in that -- in this campaign and how that's going to affect them and their whohold on the house senate. when a presidential candidate goes from being protected by the secret service to having the secret service issue a statement they've taken note of his comment you know you've got a serious problem. donald trump yesterday said he was simply urging second amendment supporters to get out and vote. but hillary clinton's campaign

and many other people heard it as a joke about political violence. here's what donald trump said, judge for yourself. >> hillary wants to essentially abolish the second amendment. by the way, if she gets to pick -- [ booing ] >> if she gets to pick her judges, nothing you can do, folks. although the second amendment people, maybe there is, i don't know. >> very bad time for that controversy to overshadow donald trump's remarks about the economy and other issues because if you look at this new bloomberg poll out today, just like every other, it shows hillary clinton with a clear lead outside the margin of error. 50 to 44. then you see -- that's a national poll. then look at the nbc news/marist/"wall street journal" battleground state polls you see that hillary clinton is up 4 points in iowa, 5 points in ohio, 11 points in pennsylvania. all of those are target states for donald trump.

and the risk is, that now voters who are not with donald trump, most voters, are going to look at this comment after the string of others and say, there is something very wrong with this man. and that republicans who have been in a arm's length alliance with him, cut him loose. paul ryan last night after his -- winning his primary said he thought this was a joke gone bad but a joke about something that should never be joked about. >> all right. john, thank you very much. john harwood reporting. details behind roger ailes' tenure as the head of fox news continuing to come out following his resignation over sexual harassment accusations. inside the fox news bunker is the new article in "vanity fair" and sarah ellison joins us now. >> nice to see you. >> you know, something that's gotten a bit obscured as the investigation is still under way by paul weiss. it began prior to ailes'

departure but he departed long before it would seem that is concluded. where does that stand and with what are you hearing they're finding? >> what i found in the story is that investigation is ongoing. there are new women being interviewed every day. and by using that investigation, 21st century fox has started settlement talks with gretchen carlson and witness to get the scandal behind them. so many headlines coming out, new women making allegations every day. they want to get this out of the way. james and lack lin mur dk want to use the investigation to get to the bottom of things but don't want to stlis constant drip. -- to have this constant drip. tapes multiple women say they have of rogers ailes speaking to them. >> women taping roger ailes which is so ironic. >> gretchen carlson allegations came out or over the years? >> inning it's over the years. over the years women including gretchen carlson taping roger ailes and that those tapes have become a part of the settlement

discussions because you can imagine that there are multiple people who have an interest in not having those come out. i think that's -- that's sort of a focal point, certainly everyone at the company is curious about those tapes, and whenever there are tapes in a situation like this, everyone sort of wonders what's in them. i think that they're talking about an eight figure settlement. gretchen carlson's attorneys say we're still actively litigating this. they won't comment about any kind of settlement talks. there's a lot of different interests at play here. >> sara, i think from the investment point of view we tend to talk about, fox news so important for the overall profitability of 21st century fox and the question i think is, will they find paul weiss, that there were more people who enabled or covered up or did things in management currently, that, therefore, need to go, or at least that the ceo of the company, james murdoch, and the chairman lacklin, need to make a decision about? >> you've hit on that exact --

the exact question and tension in this investigation which is that they want to reform the culture. whatever was going on, you know, under roger ailes, everyone has identified that there were parts that were not good and were damaging to a lot of employees. at the same time, this is the golden goose. so what james and lackland do from fox news from an investor standpoint, lack lan on the investor call said we're not going to change anything, the market position of fox news, have both things be true at the same time if roger ailes was a prime ministeri i programming genius, but they want to change everything about the way he ran the place. difficult to figure if they can do both things. >> revelations over the years they did pay in some cases multimillion-dollar settlements to make some of these previous cases go away. there was a "fortune" article that said when you have a company or unit as profitable as

fox news something of those price tags are a rounding error, but i think of jpmorgan chase, $6 billion and discloses when it has a $1 million settlement. >> this is the question of what -- and investors are talking about what is material to the company. material is sort of an amorphous concept of what we think is important. they said about this explosive allegations from laurie loan who had a $3.15 million settlement people said that wouldn't be reported up to someone like rupert murdoch because that was something ailes was in total control of the budgets and he could hide that, but how many of those exist and how many $3 million settlements do you rack up before someone at headquarters is paying attention. >> if they are paying attention they were complicit in it potentially and, therefore, saying that environment was something that was okay. >> right. exactly. this is the hope that people have at fox in james and lack lan. a divide in fox news. people who are ailes' loyalists

and were really happy working for him and other people who feel such professional relief he's gone. james and lackland have promised to change the culture. rupert was at best looked the other way. >> who is now running fox news we should point out. >> come in and running fox news, rolled up his sleeves in there. this is the first real test james and lackland have who have been primed to run this company since they were little. and the internal investigation is the main tool that they can use to reform the culture. >> we'll be watching that investigation closely and your continued reporting. thank you. >> thank you. >> sarah ellison. >> when we return disney combatting slowing subscriber growth making a $1 billion bet on streaming. we'll get more insight on bob igor's vision for the bundle when we return. hey gary, what are you doing? oh hey john, i'm connecting our brains so we can share our amazing trading knowledge. that's a great idea, but why don't you just go to thinkorswim's chat rooms where you can share strategies, ideas, even actual trades

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good morning. i'm sue herera. your cnbc news update at this hour.

delta continuing to struggle in the wake of their systemwide computer outage on monday. the airline canceling another 170 flights today, and delaying 104 more. it's offering $200 vouchers to customers whose flights are canceled or delayed more than three hours. a fire ripped through a maternity ward at a baghdad hospital overnight killing 12 newborn babies. officials say the deadly blaze was likely caused by faulty electrical wiring. angry relatives blaming the government for the tragedy. by a 59-21 vote brazil as senate agreed to an impeachment trial for suspended president dilma rousseff. the trial is expected to begin after the rio olympic games. in ferguson, missouri, gunfire erupted during a protest on the second anniversary of michael brown's death. a car hit a protester sending him flying into the air and multiple people fired at the car as it sped off. the victim taken to a hospital to treat his injuries. you're up to date.

that's the news update. over to jackie deangelis with the eia inventory report. good morning, jackie. >> good morning to you, sue. these numbers very important moving the market. building crude inventories over a million barrels but a draw down in gasoline of close to 3 million barrels, the push and pull here. on its face the crude number is bearish, the gasoline number is bullish. that gas glut that everyone is worried about. right now appears that perhaps in the marketplace, things are working themselves out. other supporterive factors the chatter that the opec members might get together on the sidelines of an energy conference and talk about a production freeze. the dollar index moving back to 95. finally rbc is out with a note saying that the crude oil trade is falling into a little bit of a bear trap here and beware, we could go higher. watch the trade because a lot of people saying that oil is the key to the stock market right now. back to you guys at post nine. >> yeah. wti above 43. thank you. meantime keeping an eye on disney shares they've turned

around and now higher after the company reported better than expected profits and revenue with the big announcement about the over-the-top streaming services and a billion dollar investment in streaming. here's ceo bob igor on the new investment. take a listen. >> we think it's a good investment. we love the business model. we think that in today's world, having the ability to stream on a scaled basis live sports and live programming, is a competitive advantage and something that's necessary. we love the user interface. so overall we look at it as an investment. as a partner, as a part owner and ultimately as a majority owner, we feel it gives us the ability to jump start not only espn but our other business as well. >> igor on the major league baseball bamtech investment. for more let's bring in steven kayhill pedia analyst at rbc and ben swinburn media analyst at morgan stanley.

steven, i believe you're on hold but did say in your note that the quarter goes to the bulls and the stock has turned around. explain why you like what you saw? >> i think we've had seasaw sentiment of the stock over the last 12 months or so. a bull case that loves the long-term cash flow of the studio and parks but a bear case focused on the media networks and subscriber loss in the ecosystem last quarter i think went to the bears but this one went to the bulls, particularly on parks and resorts doing better than expected. there were fears about zika virus and brexit. and then also the investment of bamtech but the affiliate fee growth accelerating in the quarter makes investors feel a little less worried about the state of the ecosystem. so it was at the low end of what we think the trading range is going into the quarter not surprised to see the shares you. >> would you agree if the overhang on this stock has been worries about subscriber growth at espn, and cable and general, the bamtech investment does alleviate the cord cutting concerns a bit?

>> no. i would not agree. i think the bamtech investment is a smart one in giving disney optionality, around getting aggressive with the consumer model. can't opine whether they bought it at a good valuation because we don't have disclosure. the bottom line the market is concerned there are 80 million homes in the united states paying for espn and if you give consumers more choice the number is probably lower than that. against that revenue concern long-term obligations to the sports league and conferences they will have to navigate. so whether or not they are investor in bamtech i don't think that changes that overhang. >> what do you make, ben, of the offering of the espn, not stuff, of course, that they offer to paying subscribers right now, but at least trying to dip their toe in the water. will they have a robust espn offering out there in a streaming way and if so, will it canna ballize the offerings being paid for by cable subscribers over this country? >>. >> it's a great question. i think it's the question.

there's not an easy solution. if you look outside of the united states, sports on tv is almost an a la carte network sold everywhere. it's just the u.s. where you have an expensive network fully distributed where everyone is paying for it. no real easy solution there. i think what they will do is experiment and test a lot of different direct to consumer models in the u.s. with the rights they have and a smart thing to do. bamtech gives them a faster time to market if they decide, you know, a year, two years, three years down the road we've actually got to go and attack this 15 to 20 million subscriber base that only takes broadband that's getting bigger with a direct to consumer offering. but that's going to put them in competition with their distributors and again that's -- there's not an easy solution there to get through this. >> go ahead. >> i'm sorry. what's an appropriate multiple for the stock? you know, a year ago we were seeing it traded around 20 times i think and then the concerns that we've discussed with ben came up now closer to 16.

>> right. and we think that's probably not far off fair value and the reason we think that's the case is number one, you've seen a compression in the amount of growth that's coming from these long cycle highly visible affiliate fees. at the same time, the growth has come from parks and resorts which is a more cyclical business as well as the from the studio which is difficult to anticipate going forward. the transition of the earnings composition to something less predictable should result in multiple compression and then the second element that disney's growth is not as high as some of the peer group and the challenge is they've operated so well when you have things like the force awakens rolling through it's tough to grow off that base. the way we look at it, where they are right now on a p/e basis is close to about where they've been when they've had earnings growth around this level. >> ben, your take on the stock valuation at this point with the one-year loss down to about 11%, getting a 2% boost today. what's the appropriate valuation? >> well, we have $105 12-month price target on the stock.

some upside but not a ton. i think again, there's a little bit of a victim of their own success as bob said on the call last night, consumer products, for example, is more than doubled its income in the last four years. they've had a tremendous run. it's hard to grow against those big numbers. and i think that's why the multiple is where it is. versus the market, it does look compelling but versus the rest of media to us there's better opportunities in terms of being overweight elsewhere in the sector. >> we'll leave the conversation there. thank you both. ben from morgan stanley and steven from rbc at post nine. back down to carl quintanilla with a look at what's coming up from rio. carl? >> hey, kayla, when we come back from the break we'll talk about the highlights from swimming last night, what to look for tonight and what's going on with the water in the diving pool? those mysteries resolved when "squawk on the street" continues.

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on trading nation, where stocks are going. on trading nation.cnbc.com. more "squawk on the street" coming up. across new york state, from long island to buffalo, from rochester to the hudson valley, from albany to utica, creative business incentives, infrastructure investment, university partnerships, and the lowest taxes in decades

are creating a stronger economy and the right environment in new york state for business to thrive. let us help grow your company's tomorrow- today at business.ny.gov welcome back to "squawk on the street." to carl quintanilla in rio. what's the latest? >> kayla, we will talk a minute about what to watch tonight. mainly, the women's 4 by 200 free style relay featuring katie ledecky who won gold in the individual equivalent of that last night. u.s. has a really good track record in this event. they've won four out of the five golds. since it was introduced as a sport back in 1996. of course with events on tuesday, wednesday, and friday, ledecky was asked last night, how she's pacing herself in this very busy week. >> it's tough. everybody who has won a medal for team usa always comes back

the next morning and is like, yeah, i got no sleep. it's important to go through the routine, warm down, get ready for the next race and my next race is the relay tomorrow. >> the other big story in the water, of course, is what's going on in the diving pool at the aquatics center. it's technically called the diving well but suddenly turned this really rich green. it was blue on monday and then went green on tuesday. officials said after some experimentation and testing it was a proliferation of algae due to a lack of wind and a lot of heat. they promised it's going to be blue by today. but that didn't stop diver david boudia from asking if we're celebrating st. patrick's day. maybe an embarrassing thing for officials. in squawk alley, we will talk to airbnb. rio is the number four city by listings after paris, new york, and london. they're having a lot of success

here trying to educate brazilians about the service and your favorite segment ask the athletes is coming up on "squawk alley" as well. >> i love those little bursts of ask the athletes but as someone who is ten years old in 1996 and watched the magnificent seven in atlanta, my hometown, enrolled in gymnastics classes the next week, i want to know what it was like being in the arena and watching the final five take the team gold? >> it was really something, kayla, to watch the women last night. of course it's very strange, but all the events are going on together and they rotate, so simone biles could be doing the vault and you might hear applause for a russian on the floor. i don't know how they keep their concentration but clearly just a monumental victory, total dominance. the biggest margin of victory in the modern scoring era and what a tribute to not just the gymnasts but martha karolyi, who has made that team what it is. this is going to go down as one of the highlights if not for

week one, made possibly the entire games themselves. >> well, of course, aly raisman who got gold in the floor exercise, one of her best events, she's going to have to defend that title later in the week but she was something of a celebrity it seemed within the arena as well? >> yeah. you know, there's been some pictures of sort of the global nature of gymnastics, all these competitors in the same room, there was a shot of a north korean and a south korean gymnast taking a selfie together. we watched raisman just walking casually around the arena being stopped by chinese gymnasts who just wanted to shake her hand and give her a hug. so that's an inspiring moment. it said a lot about what the olympics are supposed to be about. >> there's so many good moments and good snapshots. i like the one of her parent in the stands. >> mom ducking and -- >> wanting to watch -- >> getting nervous. what has been a surprise?

team usa has the lead in the medal count. is it a surprise china is number two and how some of the other countries are doing? i was teasing wilfred that great britain is number 11. is that surprising at all? >> i think team gb definitely had some higher aspirations. we're going to see, it's still early and things change once the flow of events gets to track and field next week. i think clearly the crowds are playing an outsized role here. whether or not that's the loud brazilian crowds we talked about yesterday or team usa basketball watching swimming last night, you're really getting a sense that countries are rooting for each other in ways we haven't seen before. >> with michael phelps alone having more gold medals than some entire countries, there is a lot for americans to be proud of in rio. we'll see you in just a little bit. >> okay. . >> let's get over to rick santelli, in chicago at the cme group. rick? >> thanks, kayla.

special guest, anybody whos like to read good, historic books knows am mety. thanks for taking the time today. >> thank you, rick. >> okay. two quotes and then i will wind you up and listen to your comments. edmond burke, those who don't know history are doomed to repeat it and an unknown graham sumner, tariffs, you know, tariffs were around even back in the early 20th century. tariffs generate forgotten men and forgotten costs. wow. sometimes things don't change. tell us about how forgotten man fits into today's political cycle? >> well, sumner spoke of the forgotten man who paid for everyone else's projects. that would be the taxpayer, for example, and he seems to be forgotten today when, for example, we have tariffs that hurts the forgotten man because he pays higher prices. there's a real tension around this idea, franklin roosevelt

identified his forgotten man as the poor man in america, that's a different forgotten man, but the real lesson on the forgotten man is you can't identify him. you just have to have opportunity for a good open picture of the country and things one can can do economically. that's where it comes from. >> the more things change, the more they stay the same and if you look at the cartoons of the day, the crisis of the depression, so similar. but there is one big deal i want to concentrate on. fdr did high drath forgotten man and make it a class distinction case successful from a political standpoint but his programs didn't work. compare that to obama's administration today. the hand off to hilary and how donald trump is using the term.

>> well, in the 1930s the government intervened too much and intervened in all differ ways from monetary to managing business to regulation and raising taxes. it told people how to be and that felt good but it did not help the economy enough to get the unemployment below 10%. bottom line, the forgotten man was the unemployed man in fdr's time and didn't provide strong groethd and great jobs so now we have yobs but not always great ones and the opportunities isn't great so there's a feeling and isn't what it could be. that's the main point. >> we're almost out of time but very quickly, tariffs have become a big deal. obviously sumner didn't like them. their final word on both candidates so antiglobal trade.

finish it up. >> you can't always see the benefits from trade but they're there and they can help troubled cities inlewding chicago. it can help all of us far more than we acknowledge so when either candidate goes on and says we need protection, that candidate forgets what benefits we could get in our cities and our towns from fewer tariffs and free trade, rick. >> thank you. >> i don't know if you're happy with that. >> no, i'm happy with with that and i'm also happy every time i read one of your books. >> thank you so much and we're going to go back to sarah. >> forgotten man is a good one. thank you. alibaba reporting earnings tomorrow before the bell. you won't want to miss it. we'll talk more about the markets next. squawk on the street coming back.

>> let's show you where we are on the major indices. the dow drifting higher thanks to disney that's leading after a earnings beat. disney now 2% helping the dow. the s&p and the nasdaq both negative. the nasdaq losing the most. down about .2%.

the leaders in terms of the s&p 500 now consumer discretionary and staples and largely due to ralph lauren trading higher to the tune of 9.7% after earnings were well received by investors. michael kors also reporting this morning moving the opposite direction so earnings are still the story. >> we'll have department store earnings later in the week. those happen thursday and friday. in may they reported the worst single quarter since the recession which spooked the market. made people think the recovery one as momentous as they maybe had thought previously. that was followed by the gdp number that disappointed by a wide margin so it raised a lot of questions and people are wondering even with reset expectations what's the story in retail. >> you mention the gdp. it speaks to the theme of the markets and yes there's lower than normal volumes and less volatility and you still have the mode and you can see the dollar weakening today where growth is sluggish but central

banks are all in and it's providing a good environment at least for stocks. let's send it over now to john forte with a look at what's coming up next on squawk alley. >> good morning. we're going to take a look at disney making this billion dollar investment in streaming and streaming infrastructure. what does that mean for technology companies that hope to reap from that? also google or should i say alphabet? it's been a year since that he announced the new structure. we'll take a look at a report on exactly how they have done since then. all that and more coming up on squawk alley.

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