>> world domination. yeah. >> take a very quick look at the markets as we wrap things up today. u.s. equity futures are in the green. we were higher by about 20 points as we went -- the dow was up 30. then we saw the adp employment was up versus what the street expected. >> yeah. kind of looks like a breakout from the recent doldrums. we'll see what happens by the end of the session. join us tomorrfor "squawk on th street" which is coming up next. ♪ good wednesday morning. welcome to "squawk on the street." i'll carl quintanilla with jim cramer and david faber. adp brings a blowout number, 263,000 on the strength of manufacturing, construction, small business. we'll get into that along with panera's -- relatively mixed. oil at one month high on the api

drop in supply. road map begins with amazon's winning streak. shares of the e commerce giant, poised to extend gains this morning. the company now worth nearly twice the market value of rival walmart. and after the march adp report shows the private sector job gains are much higher than expected. and panera added the popular bakery and restaurant chain to its portfolio. ron shaich will join us live at post 9. amazon is on a roll. it's in the midst of the seven session winning streak. market cap now more than $430 million, double walmart. meanti meantime, they have struck a deal with the nfl to stream thursday night football, not exclusive, jim likes to call it tired night football. but it's a -- twitter was a one and done deal. >> yep. they decided that they wanted to do go with the subscription

model. twitter did not come in with that. paying five times what twitter did. twitter intends to continue a relationship with nfl. this is something if you want prime, you get more. they keep giving you more with prime. and i think that that's one of the reasons why we keep thinking you know what? this company could be incredibly lucrative. prime is $120 because they keep giving you product you'll pay for. and charge you. >> not just video product, don't forget they have a music service that's becoming fairly robust. i use it quite frequently. that's part of your membership. interesting they're getting into live programming. >> right, not their own. >> not something we we typically see amongst the rivals. netflix, no live. but here a willingness to do live which opens the idea, well, what else? i know news is and there are other things that are. >> twitter i think people will say wait a second.

is twitter just an also ran? this is 50 very important hours of live. but i think if you remember the hoopla which they did thursday night football it was a very big eye opener. that twitter is a lot more just than conversation and the real donald trump so it's definitely a setback for them. i know they're offering -- doing very well with e sports. as i said, they're doing the major league baseball. but this is a coup for amazon. there are international contracts out there for the nfl. and i know that google might have wanted to be involved with this. but alphabet -- once that international contract, maybe amazon. >> twitter gives a statement to recode. the nfl was a great part initiate aer in and we'll continue to work with them. you mentioned the number of hours. >> right. i spoke to anthony. it's obviously a blow. it's a blow for twitter because this was something if you remember and a lot of us were on

it on thursday night. those games are hard to watch because the players would tell you -- i talked to the players. they're very tired. it takes friday -- they're better, saturday they're strong. you know what? it's the nfl and it brings in a lot of viewers. some way to be able to open accounts and i still think that directv became directv because of football, because of ticket. >> as we watch amazon hit all time highs with a market value as we saw what's called $443 billion almost incredibly what is it almost twice that as of walmart. >> right. >> yesterday i was having a conversation with an investor who knows the company well. who at least was exploring the ideas is it possible that expectations for amazon in terms of earnings are getting too high and it will miss the next quarter and i said will it matter? >> yes. >> will it matter? so much momentum here, jim, in the game. >> go over the last quarter. there was -- it was a spend quarter. the stock gets hit down to 804 and there are people who panic

and downgrade it. what they did was setting the stage for the next growth spurt which they have done periodical periodically. the world is their oyster. we talk about -- $320 trillion market of which they want -- maybe they want a third of it. >> i think they want all of it actually if they can get it. >> they want all of it, they want to be bigger than any other company in the world. that's certain within their reach. >> speaking of multimillion dollar markets you have tesla this morning. adam jones is surprised at how quickly it approached 305. >> he said, maybe tesla is not a auto company that means add $3 trillion of total -- you know for the tam. total addressable market. really talking about the energy

issue. safety going forward. going for safety. i like this epicenter of electric awe on tutonomous shar. they resonate everywhere. >> tesla valuation, amazon valuation, do not seem extreme to you? >> there are people who will pay dramatically more for tesla including the people -- the 26% shortage risk because they will pay dramatically. what they say like what david said about amazon there's a 500,000 car run rate for the end of 2018. if he doesn't hit that but he says it will be 2019 then it will be more. when i got into the business that was called the greater fool theory. to me it's called the make money theory. i don't want to necessarily feel comfortable with this strategy. but a lot of investors particularly growth fund, mutual managers they think they're as good as amazon. because musk and bezos, i'm

going to do a piece tonight about who has vision, like ron shaich, creating a worldwide sandwich shop. >> we'll talk to ron in a little bit. let's do adp, 263,000 in march. that's well above forecast. the report coming ahead of friday's job number and we'll get mirmenutes from the feds ard 2:00. we had more on "squawk box." >> traction in the economy seemed to have taken hold. but other data as well. so i think while one never wants to put too much emphasis on any single number that they -- that the adp number today probably is another piece of evidence confirming the solid trend of growth in employment and i think it probably augers well for the second quarter growth as well. >> people say numbers like this do not connote full employment. maybe participation is rising. there's good stuff in goods producing. >> i like it in manufacturing and what i like about this, this

could be the save. i mean, remember the chatter had been going into friday's number at least the economy got weaker and the fed is saying they're raising two. two rate hikes. if we can print like something on friday, you know what, we got through the rough patch. the continue nu-- continue numbs still good. you know, the other reason that the bank stocks took off by the way mr. tharullo, this man was not a liked figure -- tarullo. he was considered to be a czar, an iron fisted czar. he put out a statement -- i don't know if you read his princeton speech last night, but he talked about the idea of making volcker, too tight. the banks should be able to position -- goldman sachs should be able to buy stock back and he talks about more capital and you read jamie dimon's excellent and rigorous letter last night and

he's talking about they have 25067 capital. the industry could give back 150 to $200 billion and they really restrained our country. you have the iron fisted tarullo who is done today. on the other hand, you have the banks and look at the bank stocks moving the most. they have been handicapped the most by mr. tarullo and friends who said no, you need to raise capital, raise capital. then raise capital. >> raise capital. capital raise. >> yeah, the balance sheet was never enough for this man. he wants a super max. >> he does. he wants a tunnel. >> yes. >> yes. yeah. >> he's worried about operation grand slam, you know? >> as well should be. >> mr. gold finger wouldn't talk. >> when we come back, an exclusive with panera's ron shaich on his company's deal with j.a.b. to be acquired. and the market is pretty strong in light of what adp showed us moments ago. more "squawk on the street" at post 9 in a moment.

they are going to be hitting us with everything they got.

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well, this is a great one for shareholders. panera bread getting a buyout. $315 per share. j.a.b. holding is the company. we are lucky to have ron shaich, the founder, chairman and ceo of panera. we have our own sara eisen. congratulations to you and all your shareholders. >> thank you. good morning. >> you have just -- even you were talking about it on friday on the network. you completed the first real mobile pay that does not create

a mosh pit. you used that term when you were -- about your son. mosh pit. >> yeah, five years ago. >> five years ago. panera 2.0 reaping the gains. the delivery, reaping the gains. you could have gotten there on your own or this is a faster way? >> this is a great deal for the shareholders. wonderful for the shareholders and maybe more importantly it's good for the associates. it's also really good for our ability to serve our guests. i have run a public company for over 25 years. i have been at this longer than cal ripken was playing baseball, right? been through the ups, been through the downs. being private is a point of competitive advantage. this is going to allow us to do better work, it's going to allow us to stay committed. to do the delivery initiative. >> right. >> to do the clean initiative we're working on. it will enable us in so many different ways.

>> ron, i'm loving this word us. which means you're not going do and -- i loved when you did the philanthropic work a couple of years ago and came back. but you will take panera worldwide and it's not just you? >> no, j.a.b. is wonderful partners for panera. they're long term investors. they measure their investments in centuries not decades. they are committed to our strategy. they're committed to our company franchise model. they're committed to our team. they essentially have just a couple of people at the holding company level. less than 12 people. you know, they'll let management manage. this is a great place to be here. i'll be here. >> for our viewers before we turn it over, i want you in a capsule form to talk about the journey. boston, athey can be you if the want to get it right. >> i started with a cookie store in downtown boston in 1981.

we took -- we then merged with the company au bon pain and we took that company public and this is that company today. in 1998, we essentially created panera bread. in 1999, we made a very difficult decision, we sold all of our au bon pain international and domestic and manufacturing and bet it all on panera. since that point, this is 20 years ago, we have -- our stock has been up 80 fold. we have been the best performing restaurant stock in the measure of the last 20 years. doubled starbucks performance. better than chipotle. you name it. we have been better than them. last two years we have been up twofold. we have doubled this stock. this is a statement of our success and this is frankly an opportunity to do even better work. >> it is except you won't have a stock price to judge that work by any longer --

>> we never judged it by the stock price. >> no, but you referenced the stock price. >> it's been a by-product of the work we have done. >> my point is as a founder led company it's a big decision -- to say okay, i'm ready to sell. i know you're going to be a part of what j.a.b. is doing but when these guys came to you back in february i think and said we'd like to talk and made the offer, tell me what you were thinking and why you were for the shareholders that 315 is the wright number. >> i run it through a lens. i take this stuff seriously. >> i would hope so. >> i really care. i really want to deliver for all the people that have believed in us over the years. all of our shareholders, but i also try to think about how do we best compete? what's led to this powerful success at panera is our ability to make long term decisions and it's difficult to do that in the public market setting. i spend 20% of my time telling

you what i did. i spend 20% of my time what we're about to do. i'm going to spend 100% of my time doing what we do best which is making a difference for our guests. >> how long have you had aspirations of being private? >> i guess we look at all options, don't we? we try to think about it. i wasn't looking for this. i will tell you this is a great opportunity with great people and i believe we're going to do better work. it protects our franchisees and it validates the shareholders who believe in us and panera is hitting on all cylinders. we announced last night our first quarter comps were up 5.3%. 6 -- >> incredible. >> better than -- >> no one near you. >> some have wondered why you need to go private. the last company that j.a.b. bought was kerr ig green mountain. and you have proven that you can run this company as a public

company through a choppy restaurant downturn and some are wondering why j.a.b. is better off running it. >> well, j.a.b. isn't running it. the whole philosophy they have is investing in strong management teams, strong brands. like us. and the reality is that's very, very exciting for people like us. it's to be -- to be clear, i think you will see increasingly other very strong companies affiliating with investors like j.a.b. these are the good guys. >> but i don't know a lot about them. they're press shy, secret, european. they own a lot of the other company brands like intelligentsia and krispy kreme. tell us about the way they approach the american market. >> they share our values. they care anbout culture and thy care about where the business is going to be. not just next quarter, but next

year, five or ten years from now. they think of strategic issues. you know, we had a board meeting yesterday. i let all of the senior managers at the meeting talk with our board about what they felt about the deal. to a person, they talked about the fact these are the kind of people we want to be in business with. we think this is going to allow us to have greater competitive advantage. this is from strength. this is with people that are strong. and this is going to make this company even stronger. >> now, we have often talked about starbucks, starbucks felt they were concerned about you and your mobile order. they didn't know how quickly you could get it. they were pulling for you. i remember when it was you and another executive watching what happened and the in flow and said, whoa, we're getting this wrong. starbucks is getting it wrong right now. can they fix it and can they fix it in a couple quarters when it took you multiple years? >> >> you know, we spent three years as we began rolling oat our version of mobile order and rapid pickup we were very clear.

not only were we focused on digital access, but we needed to be focused on ensuring we had the capabilities to execute. here's what happens, jim. when you have the digital orders come in unfettered, they hit -- they come in to the store at noon for us. you can walk into the store if you're observing and see our kitchen display systems, our make systems light up like a christmas tree on christmas morning. the reality is you better have the capabilities to deal with it. as well, 70% of our orders in the digital context is customized. you better have operating integrity. that meant rebuilding the whole system and applying the disciplines in total quality management. to do innovation right takes time. >> they didn't contact you? >> they didn't contact us? >> yes. >> starbucks -- >> for advice on rapid pickup. >> they're interested in buying you. >> howard and i are friends so we talk to everybody. >> i have a little bit of a story on that. >> mcdonald -- did you talk to

mcdonald's? >> you know, listen, everybody in this industry is a friend. when you're in the industry like this, we all talk. >> the point is you have a great price, but people want to know, did you have a good sense for the market? did you get the best price you could for your shareholders? >> yeah, you know, here's my suggestion you. wait until this afternoon, you will see the merger document. in several weeks we'll put out the proxy. the proxy is going to have all the gory details. >> i think i have gotten some of them earlier. i'm curious about coffee. some say that's a weakness for panera and these guys are big in coffee. whether it's keurig -- or the mondelez deal they did in europe. are you more of a competitor to starbucks when it comes to kof 2350e? >> i think we'll execute our strategy. that's what this is about. to the degree we can use any resources, capabilities, our partner brands within j.a.b. to do a better job with our strategy. you can count on us to take

advantage. >> to clarify one thing. you're going to be working full-time as a ceo of panera with j.a.b.? >> i certainly intend to. that's what i'm doing today. >> right. >> i wonder what you think -- the short interest was not insignificant even up to the end. >> i'm so sorry to see the shorts get crushed. all right? i mean it's a terrible thing. those guys are betting against us. getting crushed. >> what's wrong with that? >> do you think there's skepticism was about panera or is it something a larger statement they're trying to make about restaurants? >> you know, i think that the short interest is really -- they're really traders and really trading around the stock price. i have never focused on the stock price. what i care about -- and sometimes people don't hear it. what i care about intensely is doing a great job for our guests and doing it through people who care. when i do that, we make money. money is a by-product of doing that. the stock price is a by-product of doing that. this deal was not our focus.

this deal which is a great deal for our shareholders, it's a by-product of having done a great job for our guests. >> now you're going to measure yourself how? now you don't have a stock price any longer -- >> we'll measure it by making a difference, to take market share. in this business, costs are going up 3% a year. if you're not growing your sales 3% a year you have a problem. the reality is we just delivered a quarter, 5.3% comps, up 690 basis points versus the all industry composite. we are taking market share. this is going to help us take more market share. >> and ron, you talked to everybody. chipotle has been talking at you saying you're not an actual. what is that about? and do you think you can teach them a little bit? >> listen, i have known steve for 20 years, i've helped him along the way. the reality is, you know, if they want to follow our lead on clean, we wish them well. everybody is welcome to do it. it's good stuff. >> there's apparently a

distinction between clean ingredients and industrially clean 2k3450erd ingredieingredi >> everything is free of precertain have atives and. >> and the most fascinating thing i heard you say, you didn't seem to want to be public. you were and now you really are embracing the idea of being private. >> i have been public for more than half my life. >> are you sick of the conference calls? come on, admit it. >> i'm not. i love -- no kidding around. i loved doing this. i love seeing you all. i love the -- >> but they didn't believe in 2.0. you and i did, but they didn't. >> what is hard for me is the continual pressure on the short term. when i started 25 years ago, i will tell you that a third of our investors were looking at this for a year longer. today i will tell you two-thirds of our investors are thinking literally -- >> quarter to quarter.

>> i wondered if other restaurants are going to follow and go private. >> you know it. i will tell you our economy is not better served by the intense focus on the short term and i'll go further and tell you politically, when we're focused only on the short term, on essentially the feeding the opposing -- defeating the opposing party and not solving our problems we have a problem. >> one last thing, how does it feel to have the biggest u.s. restaurant deal ever, second biggest in north america? >> you know what feels great? to have a company that's been the best performing restaurant stock for the last 20 years. to have a company that's really taking care of its associates. to have a company that's taking care -- that's the way we value ourselves. >> you know -- >> the rest of it, the numbers i'll leave it to you guys. >> i have a wall of shame. we're going to do a wall of fame. you eerp 're on it. you have a soul. congratulations to you and your shareholders. >> thank you. when we come back, we'll get cramer's "mad dash." we'll have the opening bell.

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visit quickbooks-dot-com. all right. we have a quick "mad dash" to get to. of course we have the opening bell a couple of minutes away. where do you want to take us? >> there's bad storms in asia and bhp can't get the kohl to t -- coal do the docks. the biggest import is japan and second is china. president trump listen, they do not have enough coal right now in china. particularly metallurgical coal. the only people who can provide it right now would be the u.s. there's been a gigantic spike in the price of coal almost overnight. okay?

and i'm not saying go buy peabody or arch. but they're going to be the winners of this force majeure because we have the coal. and the u.s. -- >> your friend owns a few metallurgical mines in pennsylvania -- >> it's the anthracite, the bad coal. you will see the coal spike. play it with norfolk southern. norfolk southern. some say psx, but it's overheated. australia is off line, this is a huge storm. >> how long does that kind of a disruption play out? >> well, there's 70 ships that are idled right now off of australia. you have 14 metric tons. we only ship 67 metric tons. if they can't get this right, it will make the quarter for companies. they will get it right eventually. but it's worth pointing out that coal was up huge in the last 24 hours. >> 20 seconds to the opening bell. let's get the s&p at the bottom

of the screen. big board, lyondell industries -- >> yeah. a good company. >> over at the nasdaq african wildlife conservation organization. as we see a pretty nice free market. jim, speaking of energy prices, oil above $51. we have this draw on api yesterday which could be the second drop in supply this year. unbelievably. >> i think that we have -- of course, confirm with the 10:30 numbers but that got a lot of people hopeful. a lot of the -- those stocks are breaking out. now, there's consensus that we can't ever get past 51, 52 without nor supply coming -- more supply coming on, but be careful. i like the group. >> compliance, we have seen some back and forth on opec compliance. these cuts -- >> yeah. >> you said something about

potentially fibonacci -- >> there's many different ways to skin the cat and carolyn boroden and the. >> terry: -- and the technicians are right. and both think it's 47 was the level. and we keep consider we -- -- we could go higher. but i do think those stocks have been sold down and where -- they're coming down. permian is very cheap. it matters, pipelines too. >> devin, mobile, murphy. >> chesapeake natural gas, if coal gets up too much the companies that are still left that can switch to this gas. this is a wake-up call for i don't know -- for anyone using coal. the president is pro coal. you can say to xi, look we have

it, let's cut out australia. remember we and australia have been going at it for years and australia has crushed our coal companies. crushed them. not just the environment. australia has taken a big share. >> we're talking about a small market cap and a pretty small employment base too. >> look, you know, it is -- >> i mean -- >> right. four minutes on coal is about all you should spend because it's not coming back. but i thought it was intriguing all of a sudden you have a coal president with a chinese shortage of metallurgical coal and australia cannot meet that and india is using more coal than ever which is terrible. there you go. you have a shot. >> the banks will play in the early going. citi and wells get an upgrade over at kdw. >> wouldn't you know it, mr. tarullo who is departing today, i think he's kept citi from -- the members of the federal reserve who regulates from doing what it can do with the excess

capital. wells fargo is excess capital. jamie dimon made a good case that the excess capital has been a bad thing for the banks. they can't buy back, they can't pay dividend or put it in the community. but tarullo wants more -- his swan song was, they haven't raised enough capital which i think is -- well, let's just say dikt dictatorial. >> you asked about rite aid. the ceo was asked about the deal to acquire rite aid and of course what is at issue here is the number of stores that will have to divest for walgreens to receive permission to move forward. freds is thought to be the buyer. fred is the right buyer, we believe we have particularly the configuration we're proposing they're a legitimate player in the industry. >> did they say that just now? >> yes. for some reason this will not be the case, and we'll make a decision. he's still positive on the deal.

we believe we have a stronger argument for the deal. can't comment on the organization of the ftc and we're collaborating very well in being able to certify compliance. that's kind -- that kind of gives you a sense of where they are. >> otherwise, the stock would be -- my charitable trust owns it. i was disappointed in the quarter. >> they get clearance by the end of july. >> the ftc was embarrassed by the safeway deal and they sold it off to hagan and then hagan went bankrupt. i understand why they'd be worried. but i have to tell you, david, again, my charitable trust owns walgreens. this is not a good quarter. what would save this company is that rite aid deal. in the interim, i don't know, whether they took their eye off the ball. >> yeah. what's going on? >> other than scripps, i think just became -- frankly, i have to tell you, retail stuff.

>> retail stuff even when you're walking into the walgreens getting your scripps and -- i mean, that kind of stuff. >> look at the quarter, i was not impressed. i was thinking this stock if they don't get this rite aid deal the stock is going back to 80. they put the buy back in. this is very encouraging because i have to tell you that i didn't think freds itself has the firepower to do this. >> right. >> but you get kroger involved. they have unlimited firepower. kroger needs it. >> that's true. >> ceo of walgreens saying for now they're sticking with it. we'll see. >> in the meanwhile, rite aid stores get run down every day. what's the future there, particularly if you have rite aid right next to walgreen. only one survivor. that's a claymation death match and we know which team is playing with. >> jim, nvidia, slight gain for once, now down 5% for the year. 101 and change here. >> okay, playing with fire. the technicians want to short

this badly. i had cyrus one on last night, one of the largest builders of data centers. one of the key negative approaches there's data center slowdown and they're a speedup in the amount of data centers to put up around the country in order to meet the amazon and alphabet demand. i think that prop on the short side is no go. because -- this is the second data center real estate trust i have talked to. that's the ho that the hottest center of real estate. did they call cyrus one? no. cyrus one is the place to get your data center. so the slower the data center -- no. wrong. >> it's not happening. >> no. no. impe empirically no. fictionally yes. there's an alternative set of facts to everything. >> they sent to get lent great

credence. when it congremes to the stock market you're wrong. >> i'm stuck with the facts which are just a complete bummer. that the data center is strong, so let's take that off the table. >> got it. >> we mentioned gun lag at the top of the hour. no longer sees 3 this year. we could get lower than 2 and then a bounce on the ten year yield. not playing out today. what do you make of that? >> he's wrong on three. so now he's going to two. okay. i remember some guys in the oil business they were -- when it was 80, they said it would go to 100 and then it got to 28 and they said it would go to 20. >> comparing him to harold hamm? >> you're comparing him. i'm talking about oil. >> dunlap -- >> when he talks the bonds we have to listen. >> he could be very right but it sounds like he's bouncing to extremes. >> very -- inflation trade. >> get an employment number like the one we had today, he may not

be right. how about that? nobody bats -- ted williams, right? .400. that's as good as you got, mr. splinter. >> that wasn't lifetime. >> we're going to get ism services in about 23 minutes. see if that confirms some of that reflation. in the meantime, dow is up 81. nice gain to start the morning. bob pisani is on the floor. good morning. >> good morning, happy wednesday. the important thing about today, nice open. better than two to one. advancing to declining stocks. the reflation trade is kind of back here. so you have banks. you have energy stocks. materials and industrials all leading the way here. where are we right now? a lot of debate about the trump agenda versus earnings versus growth. my sense right now is that the trump agenda is not the immediate issue for the stock market. that's what you an intermediate term risk. the thing that everyone is focused on right now is growth number one and earnings number two. and on this front we've got some encouraging news in the last day or so on the banks and in the

energy stocks. take a look at the bank stocks here. we heard mr. trump, president trump excuse me mentioning yesterday he was going to see a major hair cut in dodd/frank. don't know if that's going to happen. i think that helped the bank stocks. we have 2.31 yesterday. now we're at 2.37. these have major implications for bank earnings. the banks have been doing better recently. the upgrade at citi and wells fargo at kbw. the bank index since the yields started at least looking like they were trying to stabilize has been better -- there's a one month of the kb -- the bank index. not quite a u-turn, but looking better and looking like it's trying to bottom. speaking of trying to bottom, move on to the energy story here. oil is definitely on the verge of doing a u-turn. remember what happened a month ago, oil is at $52 then to $47 and now back to $52. this is major implications for

all of the oil stocks and the earnings picture overall. take a look here, for example, at the xop. the oil and the gas exploration index. the bottom white line that you see. there's oil, that orange line. it tracks it perfectly. it's been moving around and doing a trough here, a u-turn as oil has been doing a u-turn as well. so the big oil stocks have been moving again. look at some of the typical big names here. cab ott and apache, they're up nicely. a large part of the earnings are coming from oil companies turning around the negative earnings picture they have seen for the last two years. you get closer to $60 the market is going to definitely improve now. it's also helping the ipo market. i'm waiting on hess midstream. did you see what happened overnight? way over expectations for hess midstream. this is a bakken play.

they own pipe line assets there. 14.7 million shares at $23, wait a minute the price talk was 12.5 million, at 19 and 21. they're going to raise close to $350 million. that's a huge upgrade. partly it's on the oil turn around. partly it's on the improved ipo picture. but good news. not just for the oil companies but even for the ipo market. speaking of the ipo market, we're waiting for tonight. another big transport company, snyder national. the second largest trucking company in the u.s. is going to price tonight. trade here at the new york stock exchange tomorrow. a very well known name and azulle founded by owner of jetblue, we'll see how that does. the banks are moving, oil is moving and the ipo market is starting to move as well. finally waiting for that story. we're up 93 points in the dow. david, back to you. >> thank you, bob. did want to check of course on

our big story, we talked to ron shaich, the ceo and founder of panera. you can take a look at the stock this morning, as you might expect it's up. this even after reports that it already moved the stock up because they're getting 315 bucks a share. it's 17 times ebitda and 40 times earnings not bad. did they do an auction to sell the company, no. i'm told that they were approached by j.a.b. back in february. about a month after that the offer was made. negotiations ensued and a very significant way. they ended up a 315 in cash. that's where they are. was starbucks interested, jim, we had raised that idea. best i can tell in 2016, i'm told that starbucks did at least engage, but they were not a part of the process. >> gha's what i understand. >> but as ron shaich indicated they had a sense for what might be out there. i don't think that's any arguments in terms of where they ended up on multiple and price.

>> stock was at $180 last year and people were writing it off. that's why the shorts. panera 2.0 hadn't spread around. that was the mobile ordering. everyone thought this sector was horrible. this is the second deal. remember we had popeyes louisiana kitchen, boom, restaurant brand. so i think even a restaurant brand, everybody is in the mix. >> i want to talk about j.a.b. briefly. because of course you heard him mention it. he's working for them. what is it? it's been a very quiet though large player, both in this country and in europe. remember that mondelez deal back in july of 2015 when they closed that deal for de master blenders. and dowwy egg bert as well. look at peet's coffee, stumptown, keurig offer. where's that money coming from?

a lot of places it used to be the reimann family and other large and powerful european families. but now it also is the presence -- for the first time we learned in the release a consumer fund that j.a.b. has raised that is over $5 billion in assets. they raised the money from the typical sources. family offices, endocuments. i'm told stanford, the university of pennsylvania. they're part of the investors in this fund. when you look at this deal, the contribution of equity for it is 50-50. roughly 50% from j.a.b. the holding company which of course owns all of the brands we were talking about and 50% of the consumer fund they have raised with outside money and still control that will be part of the investment. they don't layer on that much debt either. this is not your typical leverage buyout fund. don't confuse it with that. it's not quite as leveraged as that might be.

it's more about owning the things for a very long period of time. as he indicated when we spoke to him a few moments ago. take a listen. >> these guys at j.a.b. are wonderful wonderful partners for panera. they are long term investors. i mean, they measure in centu centuries not decades. they're committed to our strategy. they're committed to our company franchise model. they're committed to our team. they essentially have just a couple of people at the holding company level. less than 12 people. you know, they let management manage. this is a great place to be here. i'm going to be here. >> keep an eye on j.a.b. and that consumer fund of over $5 billion that is making its first significant investment -- >> nice -- >> don't know the whole capital structure. over $7 billion, half-half. but there's some -- >> they're clearly not done. no. >> wow. >> a whole new player.

you can stumptown -- >> benckiser, the people get confused about, it's 8% now. another source -- >> a lot of firepower. by the way a lot of names out there. they're looking for a home. i have to tell you, david, my charitable trust owns starbucks. they'll do what ron shaich did in te in terms of serving the mosh pit. but stumptown and peet's a competitive offering. they can put up 4,000 paneras. >> start competing on coffee. >> mcdonald's is competing on coffee. cryptic mcdonald's, cryptic j.a.b., not cryptic panera. >> no. j.a.b. will be part of the conversation, no doubt about that. let's head to the bond pit and get into a conversation on fixed income from rick santelli. >> thanks, david. if you look at one week, we came down, we're coming back up.

wri we're basically hovering around that 240 area. let's have some fun. you want to see seven trading sessions look at the 4th of november through last year. we covered 50 plus basis points. open the chart up to present day the reason it's so important is because at 227 area was overtaken in that period and it was the settlement of 2015. 245's why -- that's why below the market it's so important. and 263 it is the high. above that 303. can it make it there? you have three powerful levels. let's see if we hold this range or not. we look at the boon versus the italians 10s that wideness gives you a good barometer on the shrinkage going on in draghi world with regard to quantitative easings. it's how it trades, and let's move the guilt off separately

considering brexit issues. november 1st, i'll tell you what, of the gilt this is starting to soften up. and counterintuitively not so much. look at the pound versus the dollar, steady as she goes. you can't get more of a steady as you look go and finally to finish with our currency. december 1st of the dollar index, you can clearly see it's definitely doing better. but you have those three lower lows and you have to watch that formation carefully. carl, jim, david, back to you and carl, i'll see you tonight in chicago. >> we will see you tomorrow. we'll interview tom ricketts of the cubs. >> fantastic. >> talking some politics. >> they're still the champs. you have to view it like that. >> when we come back, we'll look at the pepsi ad that has many in an uproar and the company on the offensive. 52 week highs for apple, disney, amazon and microsoft.

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briathe customer app willw if be live monday. can we at least analyze customer traffic? can we push the offer online? brian, i just had a quick question. brian? brian... legacy technology can handcuff any company. but "yes" is here. you're saying the new app will go live monday?! yeah.

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jenner handing the can of soda to the police officer as a peace offering. they're accused of co-opting a peace movement. this is a global ad that reflects people from different walks of life coming together in a spirit of harmony and we think that's an important message to convey. social really did let them have it last night. >> oh, geez, they have a great spokesperson for women and humanity and go hit them, geez, give me a break. give me a pepsi. >> brings us to changes in the management in consumer brands. mcdonald's replacing the menu chief. >> yeah. >> north american marketing chief. >> boy, is easterbrook not happy with great performance. and it's important what ron shaich did. he took five years to get it done. >> one important question for

pepsi, what they want to play for smithfield foods which has to be sold because of the whitewave deal. >> really interesting. i have to work on that. >> a play on those small but important deals. >> i thought that would be b & g. i thought pinnacle -- even campbell's. got to work on that. >> you get to work. >> i will. >> you're working hard enough. >> you've been sitting here strumming your fingers. waiting for the big call. waiting for the big call. >> about mar-a-lago. just kidding. >> dow is up 150. we'll get stock trades with jim in a moment.

stop trading. >> okay, a downgrade by jefferies not noticed enough. amgen, this drug which inhibits cholesterol, i think it's a monster drug. anyone who's really at risk, wants to take this drug but the insurance companies don't necessarily want to pay for it. 194 goes down to 180. watch this battleground. this is the coming battleground about whether a drug that can save lives but not enough lives is going to get paid for. $14,000 a pop. i'm working on this thing all time. big time.

dr. nissen likes it. i trust him. cleveland clinic. >> tonight on "mad?" >> we have got -- we have major news tonight from rick smith at taser. can't reveal it yet. we have cara therapeutics. i have them in the lightning round, you don't know, we'll come on. anyone who stumps me on the lightning round you're welcome to come on the show. and the wall of fame tonight. >> i feel like doing the show is like having my own personal lightning round for an hour. >> ready, skeedaddy. >> moved taser by the way. >> well. [ laughter ] >> congratulations, jim. dow's up 147. best day for some energy stocks in about a month. back in a minute.

♪ good wednesday morning. i'm carl quintanilla. nice to have sarahi eisen back 9 and david faber.

a nice number out of adp, got the panera deal, but it's financials and energy driving it. >> and the largest u.s. restaurant deal ever. the company that owns krispy kreme and keurig green mountain acquiring panera for $7.5 billion and ron shaich on why he thinks it's good for his share holders. >> on the heels of a blowout adp number, lacker out after that leak. what tarullo had to say about that on his last day on the job. >> plus, north korea provocations. the latest ballistic missile launch likely to intensify tensions as president trump and china's president xi jinping prepare to meet here in the u.s. later this week. another big number out of ism. to rick santelli. >> yeah. the service side, so nonmanufacturing ism for march comes in at 55.2.

now, that's definitely less than the 57ish we were expecting and less than 57.6 from last look. i call it october's wild. this is the weakest number since october of '16. last week was the best number since october of '15. we've digressed a bit on employment and considering we have the big number friday, employment moved up to 55.2 to 51.6. new orders moved down from 61.2 to 58.9. we have gotten a little spoiled about the feel good indexes. this one has come back a bit. but not bad levels. carl, back to you. >> rick, thank you very much. meanwhile the gop facing another party rift as the trump administration focuses on pushing through the budget and an ambitious budget time line. with us is the former director of the cbo and along with chuck

mar from the federal tax policy. good to have you both. >> thanks. >> don, we're trying to gauge the pace at which this is now moving as we get a little bit kabuki theater regarding health care this week. any sense on how the pedal is to the metal on tax? >> you may remember the president saying that health reform was complicated. tax reform is complicated. there are a lot of moving parts. we have heard a lot from the house. we have heard a little from the president. only a little from the senate. so i would say this is going tock take a long time. >> we got some rumors yesterday, reports about carbon tax and v.a.t.s. larry kudlow tells politico this morning it's the silly season for tax reform rumors. chuck, what did you make of those? >> well, i think yesterday was another one of the head spinning days so we're not shush ture th direction they're going. i think they need to settle down and be very deliberate about this. i think the president -- the one

really compelling part about his agenda during the campaign was to highlight the stress that working class people are under. right? he came in and he moved quickly on the health bill that really actually hurt working class people, took health insurance away from millions of people while giving a tax cut to the highest income people. i think that tax he has to settle down and figure out what they're trying to do and to come one a plan to do it. >> right. i mean, i think they have to figure out how to pay for it, and since we have an expert here, can you describe the distinction between that and v.a.t. if the white house doesn't go with either how this gets paid for? >> sure. you're right. if you want to do tax reform you have to pay for any of the rate cuts you want to do and the b.a.t. has been the leading thing thus far. so the b.a.t. is like the v.a.t., the first is it's not called the v.a.t. which makes a bunch of people happy and the second is it has a subsidy for

domestic labor. which is attractive to many folks. unfortunately the b.a.t. is unpopular among the retailers and other constituencies and they have to find a different way for. >> is the political distinction that democrats might be on board with a v.a.t. tax which we see in all sorts of other countries but some of the house freedom caucus and others more conservative republicans wouldn't? why is that so politically to c toxic? >> one can see a v.a.t., one can see a carbon tax being excellent policy. but it's how it fits toig tinto tax code. you want a fiscally -- a tax code. so it could be done, but it needs to be offset in part of a thoughtful package. we haven't seen that thoughtfulness yet. >> why are you both assuming it is going to be deficit neutral? i mean, i understand that reconciliation, certain things you could have it expire in ten

years but it doesn't appear that the administration despite their comments from gary cohn to us a few weeks back is focused on keeping the deficit where it is. i mean, isn't it possible we'll just end up with a bunch of cuts that expand the deficit? >> i think that's possible and i think that would be devastating. every day that we have the -- we have the oldest baby boomers right now are turning 70 years old. for the next 15 years, more and more old people are getting older and older. that puts pressure on the budget. the last thing we need here is to lose trillions of dollars in tax cuts to the highest income people. so i think, right, exactly. one of the parameters. fiscally responsible plan. speaker ryan has said it will be deficit neutral, right? they have to adhere to that. the president has sent mixed signals. i think that's important to watch. it is going to be designed to help as secretary mnuchin said working and middle class people and not high income people. those are the two main parameters we need to see fleshed out and guaranteed.

>> is it clear that the locus of the tension is on corporate as opposed to individual? the idea of commingling reform is looking a little more difficult? >> so there's always been this tension that -- there's very broad base of agreement, we have to bring down the corporate tax rate and find a way to pay for that. president obama had a plan -- republicans have plans. and in principle, everyone wants to do that. the challenge is if you're going to do businesses you have to deal with pass throughs, the ll llll llcs and that brings you into personal income tax reform which raises the hard issues about charitable deductions and state and local deductions. it goes back to the top, this becomes very complicated. you have to trade off certain groups who are going to win and certain groups are going to lose. there are great tax reforms that are possible on a white board. but one that's politically viable is hard to do. >> yeah. finally, chuck, does the time line that the gop is suggesting seem reasonable at this point?

>> i think you have to take the time lines with a grain of salt. there's going -- it's going to be slower. they rushed it on health care and they ended up with a disastrous plan. they need to start with the basics. fill the government, fill the staff positions. take their time. come up with a plan that actually fits the framework that they have set out. tax cut that leans to middle class people. one that's fiscally responsible. we have to see that. and we haven't seen it yet. >> guys, thank you for your time. don marron. as we're speaking the dow is up 178. once we got that ism services number which as santelli said was the weakest since october of '16 a little bit below expectations, lower than the prior 57.6, obviously market thinks it's a strong number. maybe not too strong to bring the threat of faster rate hikes out of the fed. >> especially with the strong

adp number. we're having the debate about the hard numbers like the jobs. whether it looks as strong as the soft numbers like confidence. we see that in the jobs numbers. see if we see it on friday. nasdaq 100 is at an intraday all time high. as nasdaq composite is higher. materials and big energy companies are strong as crude goes back to a one month high. that's something a lot of folks are watching today. >> we mentioned those highs for four very high profile names. amazon. disney. microsoft. and apple. microsoft is up 8 of 9. it's worth $511 billion. record high for microsoft thanks to don chu for that. nasdaq trade, it's continuing to work on. >> i don't know that's an all-time market high from microsoft. we had that happen because these companies buy back a significant amount of stock. same with apple not yet at its

all time market cap and the stock is up two cents. right near its highs also. amazon's market value while we're on the subject roughly twice that as of walmart. kind of shocking. >> yeah. we watched that pairing and the tesla/general motors pairing, surpassing ford. >> yes. >> a lot of high fliers. see what the fed minutes hold from the last meeting. we'll watch the tone on how aggressive they are when it comes to cleaning up the balance sheet and raising interest rates. when we come back, the largest u.s. restaurant deal ever happening today. j.a.b. holdings agreeing to buy panera for $7.5 billion including debt. you'll hear from the ceo with the up 14% when "squawk on the street" comes right back. yes?

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j.a.b. holdings the company that owns krispy kreme and keurig green mountain agreed to buy panera today and that includes $340 million in deal. it's worth 315 when it comes to dollars per share. you can ski -- see panera is 312 right now. earlier, last hour, we spoke to panera's ceo ron shaich. here's what he had to say about the company's path to going private. >> what's led to this powerful success at panera is our ability

to make long term decisions. and increasingly it's difficult to do that in a public market setting. i spend 20% of my time telling the world folks like you what we just did. i spend 20% of my time telling the world what we're about to do. i'm going to now spend 100% of my time doing what we do best which is making a difference for our guests. >> of course he is the founder of panera. i thought it was a little strange covering the restaurant and consumer names because would be prime opportunities for deal targets. not panera. they have outperformed the entire restaurant industry and the stock is up almost 40% so far this year. but clearly, david, ron shaich thinks it's an easier life going at it as a private company. we don't know a lot about j.a.b. >> listen, he made a decision. of course if you're a shareholder of his, you're not interested in what he thinks is great for the company from here on in because you're getting

cashed out. i haven't heard a lot of complaints this morning. >> yeah. >> the premium, look at the multiples compared to other deals in the sector it appears they're doing quite well for their shareholders in that regard. why they did not run a process so to speak. where they tried to solicit other bidders, they have a good idea of where the market is. starbucks in 2016 had engaged at least in the idea of would there be a affordabilipossibility of they go to j.a.b. although quiet. interestingly expect to hear more from them. as part of the deal they said it in the press release they have a consumer fund that they have raised as we reported as other $5 billion in assets. contributions from the like of endowments such as stanfords and u-penns and sovereign wealth funds like singapore.

the equity in the deal itself, they have agr growing portfolio- >> they have stumptown and they have intelligent is a. but they take out krispy kreme and keurig was the last big one. >> $14 billion a large deal. >> that was an embattled xan at t company -- company at the time when they took it out. what also stands out here, panera was so out front on technology. i was at the young global leaders meeting last week. and the ceo was saying we have been a little behind when it comes to technology pointing to the panera or a domino's pizza or starbucks and what they have been doing on mobile ordering. it's something that ron shaich talked about this morning. >> when you have those digital orders come in unfettered, they hit -- they come into the store at noon for us. you can walk into the store and if you're observing and see our kitchen display systems are -- our make systems light up like a

christmas tree on christmas morning and you better have the capabilities to deal with it. >> i wonder what it means for the rest of the sector if anybody else is next. if this is a trend, going private or more consolidation in the restaurant industry. which has been challenged by competition. from fast casual players. food deflation which is making groceries cheaper and people are eating at home more. >> it was adamant about the focus on the short term and we have heard it before. we hear it when it comes to talking to people equity which is why they encourage people to go private. he's been public for a long time and he's relied on the public markets. >> all the tech announcements. >> yeah. these guys were the first with apple pay. part of the launch for apple pay. >> i remember when he came on for that. he was on just on friday talking about how to show calorie counts on soda. >> 20% of his time is telling people what they have done and

20% is telling people what they're going to do. 315 is a far cry from 53 ten years ago. 33 a share in the february in the '08 lows. that's an amazing return. when we come back the feds in focus. we'll get minutes this afternoon. lacker of course leaving after that leak. what fed governor tarullo had to say about that on his last day of the job. the dow is up 79. this is the first gain since march 1st when the dow gained 303. back after a break.

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xfini'll get my coat.ek is back. meaning you can catch up on all the moments you might have missed. you seriously can't tell the difference between a bird and a plane? like that time gwen and blake got a little too flirty. that's so inappropriate to talk about us hooking up. xfinity watchathon week ends april 9. the greatest collection of shows free with xfinity on demand. welcome back to "squawk on the street." our senior economics reporter steve leishman speaking earlier with dan tarullo and on the heels of this morning's plowout adp report. a lot to discuss given tarullo's own retirement, exit interview. tell us the highlights. >> exactly. well, first i want to talk about the adp report which surged past the street's 180,000 estimate coming in at 260,000. this quickly prompting at least some wall street economists to boost their jobs forecast for the friday report which comes from the government.

now, fed governor dan tarullo is leaving office after more than eight years on the job. he says the data bodes well for the outlook. >> the confidence and the durable goods orders, business investment plans are starting to move up as well. and those are some of the indications that in the next couple of quarters you will see renewed -- >> so now the february number was revised down substantially but it's still correctly pointing to the above consensus report. so the forecast was upped for march. look for others to do the same. it could be higher than the current 175,000. he said he's with the consensus and that calls for two more rate hikes this year. tarullo declined to respond to reports that the abrupt resignation of lacker. he admitted after in the leaking

of confidential fed information. >> i think it should be a reminder to everybody on the fomc it's important to be very aware of the rules and to be very careful and my judgment at least not to get too close to the rules. >> tarullo was the fed's leader on writing banking rules in the depart -- and he departs without a successor being named. >> a lot of openings there on the fed board for president trump to get through. thank you, steve. steve leishman talking to governor tarullo. the dow jumped nearly 200 points in early trading after the strong private payrolls report. joining us to discuss this rally and more, alexandra lavin hall and schwcharles schwabs chief investor. here we go, we get a fresh burst of life. what do you think is driving the rallies? >> if you look at the correlation between the s&p 500

and the surprise index which measures how data is coming in relative to expectations a high and positive correlation. high and positive correlation between stocks and yields. i think the market does believe in this reflation renewed growth and when we get better news i think that's reflected in stocks. i think the pull back we had had less to do with the economic or the earnings fundamentals and more to do with sentiment in the mid february time frame. once we worked off that optimistic froth which happens quickly in these days i think we set the stage for the next leg up. >> and that we are seeing, alexandra. today's driver, adp, private sector jobs 263,000, not bad. do the fundamentals match up with what you're seeing in the markets right now? >> you know, i think she just made a very good point about the market sentiment and the failure of the health care bill to pass really put a big brake and when

president trump has positioned himself as the best jobs creator, best everything to have that failure early on really did make people pause and say can he really do everything? >> and with that, we focus on tax reform. and the prevailing view seems to be corporate tax cuts he can get done. maybe not a more comprehensive tax reform plan. what would be the most market friendly? >> well, you know, it's interesting because obviously he ran on this populist agenda. if you are -- you know, somebody working in kfc or panera in idaho, making $30,000 a year, 23 if you're a woman, you care more about a personal tax cut -- minimum wage increase and a child care tax credit. unless the ceo of kfc is going to come on "undercover boss" and make your dreams come true those are things you care more about than the corporate tax.

but that will have more of an effect on the economy. >> people were looking at the internals on ism. backlog and new orders are down. is this goldilocks here? a good number, but not too good? >> you know, the internals on the manufacturing ism were a bit better than on the services ism. i don't think we yet suggest that a new trend is under way. it was certainly lighter on services. i think the data is still sufficiently strong to ward off any risk of my kind of significant down turn here, contraction in the economy. in fact, i actually don't mind every once in a while if you get a little bit of a lighter number. that's another thing that helps to keep sentiment from going back into excessive optimism territory. it keeps things from boiling too much. >> but when you couple it with auto sales disappointing, incentives up, consumer spending essentially flat on friday, do these things add up at some point or not? >> i think the consumer side of

the economy i wouldn't expect to see much more growth than beyond what you see in terms of real income growth. i think we have a smarter consumer, even though largely the deleveraging is passed. i think they're not approaching discretionary consumption like in the last cycle. so we have the deleveraging mindset even if a lot is passed us. i wouldn't expect to see a significant pickup in consumer spending even if the rest of the economy -- i think we'll need to see it on the capital spending investment side of the economy. in we get a pickup in growth beyond the 2% trend. that's where i'd like for it. >> look for the earnings which do kick off here. high expectations for the best quarter since 2011. what does that mean for valuations on stocks versus some other assets. you look at bonds very carefully. >> well, look, there's obviously a lot of optimism. markets still up 13% since the election. credit spreads are still tight

but i think we'll see the stock market being driven by the earnings that are coming up. >> what are you expecting on that front? >> so i think earnings will probably be fairly decent for first quarter. the pattern that we have seen heading into the quarter both for the quarter expectations as well as for calendar year 2017 are not beyond what is typical. you start the year with much loftier expectations. start to see them come down. typically a little bit too far and then you hit the inflection point and you see estimates move back up once the reporting season starts. a good thing i'll say at least about calendar '17 numbers, 11 or 12% expected year over year growth, nothing in there for pro growth policy whether it's tax reform, regulatory reform. it's mostly due to the turn in the energy sector so the good news is if we do get any of the progrowth policies and they're a function of retroactivity and they affect 2017 numbers, it would be really icing on the cake of what is otherwise going

to be a decent earnings year. >> ladies, thank you very much. especially that nod to the gender gap, alexandra. >> i had to do it. >> so subtle. >> equal pay day. equal pay week here on "squawk on the street." when we come back, how trade, a possible border tax and a new america first policy is impacting retail. got a rally under way. all 30 come poz its are higher and all 11 s&p groups are higher. back in a minute. shift in human history is happening before our eyes. sixty to seventy million people are moving to cities every year. at pgim we help investors see the implications of long term megatrends like the prime time of urban expansion, pinpointing opportunities to capture alpha in real estate, infrastructure and emerging markets. partner with pgim the global investment management businesses of prudential.

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good morning, everyone. i'm sue herera. here's your cnbc news update. in brussels, u.n. seco secretary-general is condemning the attack in northern syria in which 58 people died. including 11 children. >> horrific events of yesterday that demonstrates that war crimes are going on in syria,

international humanitarian law remains being violated frequently. we will meet today. voters in ferguson, missouri, re-electing mayor james knowles in the first election since michael brown was killed in a police shooting in 2014. knowles campaigning on a promise to continue changes and police reform. the new pepsi commercial featuring kendall jenner is coming under fire. in the ad the model is seen participating in a photo shoot when she comes -- becomes distracted by a group of procedur protesters. she joins them and offers the police officer a pepsi. it was criticized for using the black lives movement to sell soda. that's the us news update a this hour. now to jackie deangelis. >> good morning. the crude oil prices are coming off the session highs after the department of energy came out with the weekly status record. so crude oil inventories a build

of 1.5 billion barrels. the api set us up for a draw last night. the gasoline, a drawdown is not supportive either. we were looking for a steeper draw. this is the time of the year that we start to see more churning of product as we head into the summer driving season. it looked like the past couple of weeks we were getting there and this week the data is defying the odds. $51.44. back over to you. >> all right, thank you very much. we'll watch for the impact on the invin tore number on equities. jackie mentioned oils coming off the highs. still up 171. of course that inventory number going to collide with api last night which did see a draw. >> helped crude oil prices. retail has been underperforming with american imports from china having the largest one month fall on record. the president's meeting with xi jinping tomorrow and friday comes as the critical leaders

are expected to discuss trade and china's role in global markets. joining us now to discuss that and a lot more, the president and ceo of the american apparel and footwear association. he represents ralph lauren and many more. nice to see you. >> nice to see you. >> so clearly, retailers have some skin in this game when it comes to the export/import picture from china. a lot of clothing and shoes in this country are made there and some of them actually sell there. from your perspective what do you want to hear from the two leaders tomorrow? >> well, first of all, we're hoping for a very cordial meeting that's real important particularly like most of the members -- we have dealt overseas in china for years and we're hoping for a tone of civility and hoping for some excellent feasible results for both sides. for both sides. and, you know there's certain things we don't want to see happen. we don't want a contentious tone in any way, shape or form. we don't want to see any large

tax discussions. and we're very interested particularly in the protection of intellectual property. in china. >> so we'll talk border adjustment tax in a moment. which i know is so key for you guys. b but with china, are some of the retailers bracing for a more confrontational trade relationship there and if so, are we going to have to pay higher prices for clothing and shoes no matter what happens with border adjustment? >> have you ever seen prices go down, that just -- >> true. >> that's a nonstarter. >> i'm wondering if the apparel industry gets caught if there is trade war or trade tensions increased -- >> here's the simple math. 38% of all apparel to the united states comes out of china. 38%. 73% of all foot wear comes out of china. any movement that interferes with that is not going to be

helpful. you can take that to the bank. we are concerned as an industry. we're very concerned and we're hoping that things will work out. you know, president trump's big issue is the trade deficit. and yeah, we import four times more than we export. i understand that. everybody gets that. but you know don't take it out on us. that's the bottom line. don't take it out on us. supply chains are extremely important and we're just hopeful to find a way to work things out. that's good for everybody. >> have you seen examples of a retailer that's starting to make supply chain contingencies? >> absolutely. if you're a ceo and running a big firm if you don't have a war room set up by now something is wrong. you have to be strategic about it, your planning because we don't know what's going to happen next. which just don't know. and these supply chains are

highly intricate. they're planned far out. any sudden change is a disruption. you all know because you report on it all the time. retail's not in great shape these days. we have had people who have closed their doors, the limited, sports authority. the doors are closed. >> payless. >> payless. and we have had eight bankruptcies. >> we have had a rough go although the consumer is not and amazon isn't when it comes to selling things but the extent it goes back to the jobs bringing jobs back to this country as the president wants to do i continue to hear to those guys who do robotics it's not long before a robot can sew on a button. is that try and what extent is your industry eventually going to replace so many of these jobs throughout the world where clothes are sewn and put together, sneakers are with robots? >> well, let me sort of reverse the question. yes, you could put a button on

with a robot, but you couldn't make the rest of the garment with a robot. the garments, they go stretch, you have to cut them. this is labor intensive. fabric on the other hand is capital intensive. it's a totally different world. in the case of footwear, there's an opportunity for more automation. in the case of apparel quite frankly that horse has left the barn a long time ago. 44% of apparel was made in america and ten years ago it was 8% and now 2%. we're going to grow assembling garments in america, a little bit. >> off a base that's now 2.7%. a -- >> yeah. how much higher -- >> what contingency plans are they looking at? bringing in other countries? >> they're looking at diversifying the supply chain in the hopes that china doesn't become a target. and, you know, in the world of supply chains, seriously, china

and vietnam is 48% of the market. five countries equals 65% of the u.s. market. ten countries is 78% of the u.s. market. so within those ten countries, perhaps there will be some realignment. >> you mentioned store closures. you have ralph lauren this week. big store on fifth avenue. >> yes. >> where are we -- what inning in the game are we in store closures? is this fifth, sixth, first, second? >> look, everyone knows we're a little overretailed. that's been developing over time and there's a shift to e commerce. some of this is a natural happening. but you get into the b.a.t. tax that we talked about a second earlier. you want to tax a business that's struggling? what do you think the result is that going to be? it will be a disaster. >> unless the dollar appreciates by the same amount. >> come on. i'm an economist too. you believe that? i always bought my goods in

china -- >> that's what you hear. >> you hear a lot of things. i said that the chairman of the house ways and means committee, brady, was on cnbc was on other day. a very impressive interview he's changing his dialogue. he was talking ago the border adjustment tax with modifications. i don't know if your viewers fully understand what this border adjustment tax would do to retail. it's crazy and i can sum it up in one second if you'll allow me. a retail item is $10, you bring it into the u.s. because remember 98% is imported. bring it in for $6 so you have $3 operating expense and a profit of $1. right now we tax that profit of $1 at 35 cents. under the b.a.t. tax, the $6 is taxable on $1 -- you'll do me a big favor and lower my rate from

35% to 20%. wait a minute, 20% of $7 is $1.40 my tax went up four times. four times. 35 cents to a $1.40, thank you, uncle sam. >> we have to leave it there. but you're going to continue to fight this fight on behalf of the retailers. as we go to break, look at a few of the big leaders. caterpillar, the leading gainer in the dow again with commodities up today. copper best day in a couple of months. under armour been pounded over the last 12 months. top performer through early trade. up almost 3%. don't go away. (fans cheering) because when you really, really want to be there... but you can't. (cheering) at cognizant, we're helping today's leading media companies create more immersive ways to experience entertainment with new digital systems

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got a rally under way. the dow is up 176. mike santoli joins us today at post 9. nice tug of war between some of the hard numbers we're getting today. ism and adp. >> yeah, i think the adp number it's where the future started to get a bit of a lift. i think it was a be kacareful getting too negative. the ten year treasury yield was sinking lower and we're extrapolating that maybe in fact we have to deal with another one of the rough patches. maybe we will, but i think in the very short term people are leaning too heavily in the direction. people said, oh, 2.32 whatever we got to on the ten year yield was as low as we got to in late february. well guess what? the s&p is at 2260. i feel like we're kicking around this range defined by the highs and lows in the march.

2322 on the low end. obviously today you had to be careful in really fading the market too much. >> yeah. nice discussion on social this morning about what is the key contrarian trade right now. is it going short or something else? >> you know, it's funny because you look at the levels and you look at something like amazon. you feel like it's up and away and people must be exuberant. there's that overlay of this can't really last all that long. that's why i feel like -- i don't think there's tremendous buy in by everybody to a point where you'd say going negative is a bold contrarian point. >> go short the nasdaq it hit a record high. nice job. look at the health check of the trump trade and you see banks and industrials back on top in terms of the sectors. >> they are today, absolutely. the yields go up it's the predicate for everything else following along in that direction. you know, we only went down 3%

from high to low in the s&p 500 during march. but during that period internally a lot of those trump trades did correct a lot more. transports, banks down 8 to 10%. so you definitely had that feel that you refreshed some of sectors. once again i don't know if it's the things to lead us out here and they stayed supportive like the big growth stocks. >> earnings season is soon. study up. >> i think it will be knelt -- net okay, but choppy as they are. >> thank you. with the dow up 177 from n son -- santoli to santelli. >> thanks. i want to welcome my special guest as we get ready for xi jinping visit, bill lines. thank you for taking the time. >> thank you. glad to be here. >> all right. you know, i see the layout somewhat like this. you know, north korea seems to be misbehaving, so you have the

geopoliticals on the one hand. you have the trade on the other hand. and from the chinese side you have the party congress in october. what is going to be the most important issue and how do you think we're going to end by the end of the week for the first inning between xi jinping versus electrocu donald trump? >> i think they'll both get the advice for their minions, make your points, don't expect immediate resolution of them. set up a framework like we did with the japanese and with the chinese to have ongoing high level future discussions. i think xi will follow the script. i think he'll come with a few gifts they usually do. the question of course always is will trump follow the script? sometimes he does, sometimes he doesn't. he'll press on north korea. i think that's probably the number one issue. i think that may produce a frank exchange. i think the chinese are -- in their own way as concerned as we are. they're in a different position.

and i think xi will probably talk fairly honestly about some of the limitations that he's got. the question of cordiality will be on how hard trump pushes on that. i think the second issue is the trade discussion. i have a fear that it's not going to get beyond trump saying we have a big deficit. buy more and sell less. and xi saying, well, we can talk about that. and that would be good actually if they set up a framework for future discussion. i can see xi bringing another present along which is to -- an offer to do something on steel overcapacity. which is a big problem. it's a big problem for the chinese. they know it. they don't like to admit it. it's a big problem for us and it goes directly to the politics of trump's campaign. and if xi could come in and offer to do something there, that i think would be something that trump could brag about afterwards which i suspect is what he's looking for.

those i think would be the biggest issues. i think there will be some discussion about the south china sea. i think xi will want to talk about -- >> real quickly, real quickly, let me get into the final 30 seconds, you know, i know that the trade deficit i know that the trade deficit, about $350 billion, our largest, is oversimplified. many of our experts get mad. when you talk to the people out there, they need it a little bit watered down. they see it this way. the multinationals had their day in the sun. maybe the middle class can have its day in the sun. somebody always gives, somebody always takes. in a few seconds, what do you think about that? >> i think they have a point. that's clearly what was driving the train in the election. the question is how to translate that into concrete results in talking to the chinese. they have the same problem back there in china, which is jobs. the things we are going to ask them to do is going to cost them jobs. there are scenarios here in a real negotiations where you can

have a win/win outcome. whether trump has the patience to get there, i don't know. >> we are out of time, bill. so fascinating. we are going to have you back on in a week or so. let's do a post-mortem on exactly how it turned out. thank you very much. >> thank you. >> david, back to you. >> let's send it over to john forton. your all-time highs, we'll dig into them. winning thursday night football deal as well. also, tesla, still up above 300. pepsi taking heat on social over a new ad. all of that and more coming up on "squawk alley." 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 with market professionals and thousands of other traders? i know. your brain told my brain before you told my face.

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north korea firing a ballistic missile ahead of the president's meeting with xi jinping. >> similar to previous tests, this crashed into the sea of japan and the u.s. pacific command said it tracked the launch and it did not pose a threat to the continental united

states. secretary of state, rex tillerson, issued a very terse statement and said the united states has spoken enough about north korea. we have no further comment. they have testify fired ballistic missiles multiple times this year. the timing of this one is particularly interesting. it comes one day before the meeting between president trump and president xi. president trump and his advisers have already indicated that north korea is going to be on the agenda at that meeting. rex tillerson has been calling on china to put more influence and pressure on north korea to curb its nuclear program. overnight, white house officials had said all options were on the table and that the clock is quickly running out. now, china has said today that it sees no link between this test and the meeting between the two presidents but the talk on social media here, as well as elsewhere just with people talking is that this particular test is going to make it that

much more difficult for president xi at the meeting and that he is going to be at a disadvantage while president trump will have the leverage. carl? >> we will find out what tomorrow brings, eunice. thank you. before that meeting. the president and the king of jordan will meet this afternoon and hold a joint news conference at 1:10 p.m. this afternoon. the nasdaq hitting an all-time high. the dow is having its best day since march 1st. all 30 points are higher. it is up 176 points. much more ahead. stay with us. at fidelity, trades are now just $4.95.

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welcome back to "squawk on the street." all 11 s&p 500 sectors are higher and led by energy and industrials. those energy stocks are higher with crude oil touching its highest level in nearly a month. crude pulling back after the highs, the weekly aia showed a surprise build. leaders include halliburton,

baker hughes, pioneer natural resources and marathon oil, all up between 1%-3%. the energy spdr, also about a 1% higher. if it closes above the 1.5, it will be the best day since march 28th. keep an eye on that sector. for now, let's send it back downtown for the start of ""squawk alley."" good morning. it is 8:00 a.m. at amazon headquarters in seattle, 11:00 a.m. on wall street and "squawk alley" is live.