number, that's also a dow component which i remember again this morning. goldman sachs is johnson & johnson. >> yes. >> bank america i thought that was interesting, marty mosley pointing out they're an old bank. >> the real banks. >> interest rates up they go better. goldman sachs has to be still good at trading. right now it's time for "squawk on the street." ♪ >> good tuesday morning. welcome to "squawk on the street." i'm carl quintanilla with sara eisen, and david faber. cramer is off. stocks looking to give back some of monday's rally. the best gain of the month as goldman prints the surprise earnings miss, housing starts at a four-month low. europe is lower. pound on a wild u-turn as theresa may announces plans for a surprise snap election in june. ten-year yield stable around 222. road map, prime minister may

makes the surprising call for an early general election to lead the uk through brexit nerks with the eu. plus goldman first quarter results below estimates. shares down about 2% in the premarket and that would drag the dow lower. >> and buy american, hire american. president trump set to sign an executive order to clamp down on guest worker visas and require agencies to buy more u.s. made goods and services. first up this morning, just weeks after triggering those brexit talks, uk prime minister theresa may calling for a general election on june 8th. may had previously been opposed to the idea of an election before the year 2020, but is seeking a stronger mandate headed into negotiations with the eu. came about 5:30 a.m. east coast time. >> that was exciting. >> all kinds of rumors what she was going to say, sky news thought it might have something to do with her health. in this case a political bet, although it seems like she has the votes in parliament to at least make this happen. >> you see the u-turn in the

british pound. when they announced she'd be making a statement from downing street, a, that signals it's important and b, there was a complete mystery. came around 6:15. the bound coming back, and rallying back from about a third of a percent loss, now higher, because this does eliminate some uncertainty. and that's really the factor that's been moving the pound. the uncertainty factor, the fact that she's calling this election, she has great poll numbers lately and she's just trying to clidify her parliamentary majority before pulling the trigger here with brexit. one question that investors are wondering does this delay the brexit talks in any way now that they've triggered article 50, they have a two-year clock and the general consensus what i read from strategists and investors is no and unless it looks like this election is going to go in a different way for now, it's not so uncertain and that's why you see the pound back up and surging more than 1% against the color. >> interesting.

cameron on twitter applauding her for the political decision. >> willem marks joins us. >> reporter: good morning. you mentioned absolutely right, this is an opportunity for her given the strong poll numbers. her opposition the labor party really in disarray here in the uk and prime minister may this morning really laid down the gauntl gauntlet. let's have a listen. >> you have criticized the government's vision for brexit. you have challengeded our objectives. you have threatened to block the legislation we put before parliament. this is your moment to show you mean it, to show you are not opposing the government for the sake of it, to show that you do not treat politics as a game. let us tomorrow vote for an election. let us put forward our plans for brexit and our alternative programs for government and then let the people decide. >> reporter: that was prime minister theresa may there.

really essentially laying down the gauntlet for her political opponents. the labor party and democrats say they welcome a general election at the beginning of june. we'll have a crazy six weeks as they decide what their policies will be against one another. she is obviously pushing for what people are calling a harder brexit. the liberal democrats one of the main opposition parties here say they want people to keep them as the voice against leaving the single market. so there's a lot of complexity in this vote. we'll have a better idea tomorrow, once we see how parliament votes on this idea of a new election. she needs a two-thirds majority. luckily for her the opposition party is saying they will agree with her and push forward this general election. >> willem marx thanks for the update from westminster with the surprise announcement of the morning. headlines out of the imf releasing world economic outlook. the big headline they upgrade global economic growth for 2017. that goes against the trend of recent imf world economic

outlook lately. we're saying expect 3.5% growth globally, economic growth, that is higher than the 3.4% they last predicted back in january. the 2018 economic growth forecast from the imf is unchanged, 3.6% growth expected there. the quote here that i picked out of this report and it is a big one, more than 200 pages, the economic upswing that we have expected for some time seems to be materializing, according to the economist at the imf. they do say there's a salient threat and that is a turn toward protectionism leading to trade warfare, that goes along with some of the warnings we've been hearing lately from imf managing director christine lagarde about trade wars and protectionism. commodity prices as far as the u.s. outlook still expecting 2.3% growth this year, but they do say that the outlook has improved, and they cited fiscal

assumed fiscal policy easing and an uptick in confidence after the november u.s. collection. they do cite some downsite risk to pay attention to for the u.s. imf warning faster interest rate hikes in the u.s. could pose a risk to the recovery and aggressive rollback of financial regulation. they warn against that as well, guys. but imf predicting pretty solid growth, 2017 and 2018 forecast boosted for china, and for a number of advanced economies, including the euro area, including many euro countries, japan, and the united kingdom. so for once not coming out with a pessimistic jut look for the global economy. that's what i would say is the big head line. >> are they any good at forecasting? >> not great, but they do update their forecast pretty frequently and they are good at analyzing some of the policy risks, monetary and fiscal and what the impa kt is going to be. it's interesting they assumed

the fiscal policy easing in the u.s., that's something that the fed has been a little bit more reluctant to do, for instance, when it comes to their path of interest rate hikes. they've been wrong, though. they did predict the uk would potentially face a recession or prolonged economic pain as a result of brexit. that has not happened. maybe it hasn't happened yet or maybe it's not going to happen but there have been some wrong calls. >> tess bite the nudging up of growth they are bringing in their trade forecast to 3.9 from 4.1. >> yes. >> u.s. goes up just a touch, 2.2 to 2.3. uk, 1.5 to 2.0, a bigger change. >> they had a big upgrade partially because they were wrong own brexit and the uncertainty that came before it and mostly the activity we've seen after it. it's something that prime minister tereheresa may in her calling of the snap election today cited better growth, better retail sales, record number of jobs. that's something that most economists and i would put the imf firmly in that bucket got totally wrong. >> got some bank earnings to

watch at home. bank of america better than expected results helped by improved results from loan and trading. goldman the dow component misses on the top and the bottom line, weaker than expected trading revenue. trading essentially flat versus jpmorgan had about 17. roe robust. >> fixed income commodities it was xhcommodities and currencie that pressured the quarter. also equities, again, this is all part of institutional client services, where it appears at least the bulk of any miss on terms of what analysts had been anticipating took place. lower first quarter of 2000 -- sorry, net revenue inequities 1.6 billion, that was 6% lower than the first quarter of '16 due to lower missions and fee, reflecting lower involves in the

u.s. and lower net revenues and security services with the impact of changes to customer balances. you can see it is having an impact on the stocks to the tune before 3%. goldman shares have been pretty strong performer certainly ended the year on a high note, still a $90 billion plus market value for the company. 41% comp. ratio, kind 1/2 line with sort of where people had been anticipating things at this point. and effective income tax rate for the first quarter was 11.2% so they certainly may have benefited from the lower tax rate as well. >> bank of america results and the commentary on the u.s. economy specifically with loans and the statement from brian moynihan says the u.s. economy continues to show consumer and business optimism, and our results reflect that, for instance, total credit and debit card spending up 5%." always a good barometer of loans. remember, carl, going into the reports there were warnings about loan growth slowing down a

bit. >> although my favorite number out of b of a is the interest they're paying on interest bearing accounts up one basis point from a year ago, despite what rates have done. hang on to that trade as long as they go. wilfred frost has been watching all of this at hq. >> as you said a miss from goldman sachs, a significant beat from bank of america, this morning shares reacting accordingly, trading the real focus. here are the comparisons, fixed income, bac up 29% year on year, the big winner of the investment banks so far this quarter. gs only flat year on year. equities similar story in terms of the others outperforming city. bac up 7%. goldman sachs down sharply 6%. for someone who is meant to be the most committed to fixed income and equities trading over the last decade it's a huge

surprise, nomura analyst says "no sense in sugarcoating it. weaker, ficc revenues have driven a substantial ref new miss." for goldman sachs the investment banking and investment and lending businesses both essentially in line. they did also announce a ten cent increase to its quarterly dividend up to 75 cents a share. move that had been telegraphed when it past last year's fed stress tests. in terms of bank of america, net interest income came in at just over $11 billion, 11.1. we're expecting below 11 billion so like jpmorgan and pnc on friday, bank of america has shown better delivery for the improved interest rate environment than wells fargo and citigroup did on friday. paul donofrio the ceo said it would continue to improve this quarter but at a slower pace because of lower long-term rates

despite higher short term rates, so that movement will mean improvement less good next quarter. he also spoke of that trading beat compared to goldman sachs. he said he wouldn't be drawn on to whether that was market share gain from one to the other. carl, back to you. >> we'll come back to you later on today. a lot more to get to including reaction to results from netflix last night. also ahead a live and exclusive interview with lowell mcadam and wendell weeks. yesterday was the best day of april but on the lowest volume of the year. no major indices have had back-to-back gains this month. last year, hsaid he ing to dig a hole to china. at&t is workg with farme toimpre lmo moisture sensors use a treliable netwoo china. attoell them when and where tore water. t farms li ray can compete in b way

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we have breaking news right now on industrial production. let's get to rick santelli in chicago with the numbers. good morning. >> reporter: good morning, sarah. 76.1 the capacity utilization rate for the month of march following a slightly upwardly revised 75.7 originally released at 75.4. if we look at what's going on with industrial production, it's up 0.5, a little better than we were expecting and that follows an unrevised unchanged. market still hovering in the low

220s for tens. looks like it will be a dicey opening for equities and of course housing starts, they were down a bit, that's for sure, but permit were to the upside. carl, back to you. >> rick, thank you very much, rick santelli. the president will sign an executive order designed to promote the hiring of americans and recommends changes to a temporary visa program used to bring overseas workers to the u.s. to fill high skilled jobs. he'll sign the order during a visit to the can he know is a, wisconsin, headquarters of toolmaker snap on, his first time back to wisconsin since taking office, as we watch not just these executive orders but some of the comments that the treasury secretary made yesterday about the timing of tax reform, and dynamic scoring that seemed to give the market a bit of a bounce late in the day. >> yes. although the overall takeaway was one that the market or certainly investors seemed to be coming around to. we're not going to see tax reform this summer. you have an administration that continues to talk about trying

to come back to the aca, repeal and replace. you got mnuchin talking about a border tax of some kind but not really, but saying it's a difficult thing to deal with in terms of trying to craft legislation. i'm not quite sure what he means when he says -- >> economic growth, david, that's the solution for all problems. >> it is. larry kudlow said if you get to 4%, okay. when was the last time we had 4% growth, sara? i don't know. >> it's been a while. >> i think it's been a long time. that would solve potential budget problems. under reconciliation the ten-year window in which then it has to sunset if it adds to the deficit. there are people, carl, who wonder why we're this high and why we actually had a strong market day yesterday with conceivably what would have seemed to be bad news on tax reform in terms of any expectation for it this year. >> he did say that the august time line that he actually pointed out on our air in late

february with becky if you recall he now calls highly aggressive to not realistic at this point, but i think putting it in the framework of you're going to get your cut eventually, it won't be necessarily complicated by arguments about a border adjustment. if you. you the it in a dynamic scoring framework, it comes sooner or later somehow. >> the market likes to hear this administration, david, talk about growth and when he's saying higher growth numbers, deficit neutral, maybe we don't care as much about that, we'll get the growth. >> i think there's an implicit belief there will be a tax cut. you may not get reform in the form of all of the different things we've talked about, that came out of house ways and means and brady and ryan's plan but you will get a cut and repatriation deal. there's a firm belief that will take place in '18 let's say. >> when we come back, a good news/bad news story for netflix and its results. we will explore what that could mean. premarket as santelli said a dicey open, looks to open down

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at rosenblatt securities. good morning to you both. >> good morning. >> interesting story, subs, domestic and international, michael and then there's the cash balance, as they continue to spend a little bit more, quarter after quarter. what struck you as surprising or important? >> well the most important thing for me continues to be the global growth opportunity ahead of this company. we understand investor concerns on quarterly subscriber fluctuations and "misses" or beats there and we understand the concern about the cash flow but this is a unique business, with a tremendous and still very underpenetrated global growth opportunity. we support and we're very optimistic about the investment thesis that includes the fact that they are burning through cash right now as they build into that opportunity. >> alan, how long can they do this? is there a point at which the market gets a little more impatient and what happens when

that spigot turns off? >> they can do this for a number of years as long subscriber growth comes in. if you look at short of tradition metrics, debt to ebitda, they don't top 3.5 to 4 times debt-to-ebitda. it will grow dramatically and three or four years the free cash flow starts kicking and debt decelerating. makes sense to invest now because it's maintaining first mover advantage against amazon an all the other players. >> that's the rosy scenarios investors s embrace. they are expected to burn $2 billion in free cash flow. they burned $400 million in the first quarter, 1.3 billion in cash but 3.4 billion of debt. not to mention they're going to be neglective free cash flow for years to come. why don't they raise a lot more money instead of going at it

piecemeal? it would seem to me that is a risk for this company. you never know what can happen in the marketplace. >> clearly, david, they believe in their long-term model and believe they don't need the equity delution. negative free cash flow is for investment and programming that hasn't been released yet. december 31st they had 1.2 billion unreleased film content. half of the cash flow was development of new product that hadn't been released yet. as long as they continue to program so that subscribers watch it, it makes sense. i agree with you, the stock is not cheap which is why we have a neutral rating. >> speaking of programming, michael, can you explain 500 million hours being watched of adam sandler movies? i didn't even know adam sandler did movies for netflix. what is this about and how is it indicative of their strategy and what we can expect going forward? >> it's interesting. they spoke to that metric in

particular. i think what it tells you, there are a very broad set of tastes and interests globally, and netflix platform, because it's what you want, when you want it, they can efficiently translate cash that they bring in, into spending on programming for individuals who want that programming. they know that that's what a certain group of their clients want, their customers want, and they can efficiently spend on that. the focus on adam sandler, but what we are focused on is how much they're localizing product and new markets around the world. they produce content in 13 different countries around the world, they've been localizing countries step by step and that is just building a foundation for a very strong, long-term business model. >> then there's the competitive issue, alan. reed hastings talking about amazon saying that the human need for sleep is as much a competitor as amazon. they can do great work, it's going to be very hard for them

to directly affect us. is that naive or not? >> listen, you go the to always be scared when amazon's competing against you particularly if they can use videos to sell more amazon prime membership for the retail business. it is one of the risks. i do think if people start cutting the cord, which has been happening, the amount you're spending for netflix and amazon and ott service could be less than what people are spending on the traditional bundle. as long as they keep providing the right content to spend ten and going up to five, seven, years, $15 or some a month seems reasonable. i will say on the movie at dam sandler, i think the reason they highlighted that is because they are spending more on movies and are going to be spending $8 million to $100 million on the will smith money later this year and want to highlight what's happening in the viewership on the movies. [ applause ] >> fascinating conference call, as they seem to turn their back

on sports rights. we're going to do this, making movies the old-fashioned way. thank you very much. michael and alan, talking netflix. let's get the opening bell here and the s&p at the boment tom of your screen. [ bell ringing ] at the big board it's the united states commodities fund, celebrating the tenth anniversary of the united states natural gas fund lp. at the nasdaq software company citrix doing the honors. we want to watch goldman in particular at the open, bespoke points out and down 3% the biggest since october of '13, that was a day where it actually bounced 1% from the open to the close of trading. but that is the highest priced dow stock is going to take at least 50 points off of the dow at the open. >> amongst the big banks, bank of america during the course of this year is the only stock in the green, and up again this morning, of course after stronger than expected results.

you can see it there, but to carl's point, goldman down and frankly, it has not been a good year for the banks thus far, after the election of donald trump, of course, many of the banks stocks ran up dramatically on the hopes of higher growth, higher interest rates, therefore, net interest margin expanding. that by the way continues to be an expectation when it comes to bank america, which will benefit perhaps more than any other bank from an increase, given how many mortgages and just its enormous deposit base as well it has on its balance sheet. but it's been kind of a disappointment so far, dereg certainly also figured into it, the idea of rolling back certain things and capital restrictions, sara, but it has not shown itself thus far as a positive for the stocks. >> this rally and treasuries that caught so many off guard, that has pushed yields back below this morning to 22, that's dragged the bank stocks down. yields lower again.

i point out j&j, also a drag on the dow right behind goldman sachs, right actually in front of goldman sachs came out missed on the top and bottom line. they raised their forecast on the actilian acquisition which they expect to close. general reflection of consumer weakness globally and that was what pressured the revenue numbers on j&j. that's why it's a loser today. >> yes, that is a significant move for j&j, of course, which we think of, you got to remember it's devices, it's pharmaceuticals and of course consumer products as you point out. >> speaking of devices, cardinal health down 10%, buying part of medtr medtronics patient monitoring and recovery unit. concerns raised by fitch over their debt load, ongoing leverage. they say in conjunction with that deal they expect adjusted profit to be at the bottom of the previous range, so some big

cap banks and health under pressure. >> they financed that with a combination of $4.5 billion of unsecured notes and existing cash. that could be a concern perhaps in terms of the balance sheet, people taking a look at it and deciding to sell the start. medtronic flat, largest deal we have this morning. >> another stock united airlines reported earnings last night, actually that were better despite another statement we got from oscar munoz on the incident where dr. dao was dragged out of that plane. it got so much attention, the video that went viral. he called it a watershed moment for the company, and one that they are working to reform, despite what was better than expected results. he said clearly we have problems connecting with our consumer. we are expected to hear a little bit more about this and the numbers on that earnings call, which is this morning, which will follow for you. overall, the metrics that people

are watching including boosting capacity were solid. >> we mentioned the president going to wisconsin today, this buy american, hire american executive order also based in wisconsin, is harley-davidson, which is going to be down i think about 4% here at the open. outlook on shipments 80,000 to 85,000 for the current quarter, consensus around 88,000. they've been reducing shipments of newer models to get dealers to shed their existing inventory but an echo of what we've seen in cars, right, whether it's financing restrictions or just a tapped out or satisfied consumer, who feels maybe we have enough for now. >> there is an underlying concern though that things are a little soft. and i know people are searching around trying to understand that, given we have a lot of disparate data that indicates otherwise to some extent but those car numbers certainly gave a lot of people pause. >> we were talking about david rosenberg, who is largely bearish on u.s. macro, his point

last night, yes, consumer confidence numbers are at the highest since 2000, but that reflects what consumers have already bought, not necessarily what they intend to buy from here on out. that's a debate in the next few months no doubt. >> we'll look for some clues in the earnings outlook about whether expectations of consumer spending have been raised. certainly not seeing it in kate spade, announcing results this stock continues to get hammered. it's in the middle of its strategic reviews. it's basically putting it self up for sale, right? although we don't know -- >> things don't seem to be going well. >> the numbers are weak, same-store sales falling 2.4% for the quarter, they were down 8% if you take away e-commerce, which has been a growth driver for kate spade. analysts were looking for the number to be positive so another set of disappointing results as the company reiterates it's continuing to evaluate its strategic options. >> if you bought the stock based

on the initial announcement you are not a happy person right now. sara, the french election is coming up. i don't have any idea if it's having an impact on our broader market but everybody is coming out with their -- nobody believes any predictions anymore based, given what happened with brexit and our election here, but right now, looks pretty tight, and there is this idea that you could potentially have a second round that involves melancon and lapen think would be bad. >> that's on the total far left side and the complete far right side. those are the two populist candidates with two centrist candidates in the middle that are the most what do we call them, pro-capitalist, poero-eu, pro-euro. maureen lapen on the far right talks about taking france out of the euro. the euro against the dollar has been calm in the face of all of this. it weakened substantially against the japanese yen so that's a good barometer. another one to watch as we

approach the first round voting is the french ten-year bond spread with the german bonds, the risky france versus safe haven germany and that started to gap up, since back during the euro crisis at levels when mario draghi had to say do whatever it takes. >> 2011. >> yes. so not as high as it was during the 2008 financial crisis, 2009 financial crisis but still, on the move, climbing, the risks are rising as these polls remain incredibly stable and tight, and nobody knows whether they can trust them and what the turnout is going to look like after brexit and trump. >> cac hit a four-week low. >> banks are getting hit. >> goldman closing their long dollar trade recommendation which they initiated in november. >> i did the no see that. >> november 17th of '16, going long dollar, removing that now as a top recommendation. three reasons, pickup in global growth which reduces the degree of u.s. outperformance, concerns about dollar appreciation from

the president, and third, the feds turned toward balance sheet normalizations, less hawkish communication than we expected on balance sheet. >> interesting that one of the reasons was not because of the fiscal policy outlook which is why so many people loved the dollar after the election on this idea of infrastructure spending and tax reform, including corporate tax cuts and deregulation boosting the dollar but president trump does not want a stronger dollar. i thought it was notable steven mnuchin clarified that in "the financial times" interview yesterday. we're not looking at trade wars and not intervening in the markets. the president was just making a statement about the strength of the dollar. he hears it from ceos and the ceo council meetings all the time and that treasury secretary mnuchin, as many before him reiterated in the long-term it's in the best interest of the u.s. to have a strong and steady dollar but carl, to your point, the dollar has weakened so far this year. it's given up a lot.

that's the trump train going the other way. it's the fact interest rates have gone down. rates on the dollar tend to track each other. lot of this reversal looking at the small caps, they've also reversed since the election. could you put the dollar in that, too. >> the banks have reversed as well based on as you said earlier the treasuries. hard to imagine buying treasuries here, but i mean you've got scott mynard, well-known bond gu rru saying w could see 1.5 on the yield. >> at the same time the british pound is the at the highest level of the year on this snap election. >> dow is down 71, nearly all of that is goldman and j&j. good morning, bob pisani. >> you're exactly right. ten points in both of them and that's 70 points in the dow so the whole decline in the dow is goldman and johnson & johnson. united health had earnings helping a little bit. let's look at europe. europe was closed yesterday and that reflation trade is looking

rocky over there as well. lot of the commodity names are down. bhm billiton, anglo american, and oil companies, statoil, bp also on the downside. that commodity weakness is spilling over into the united states as well so energy is down, oil is below $53 again here in the united states. some of the other names, materials are down, banks you see are down and slightly more defensive tone to the market as consumer staples and utilities are leading here. we gave you the details on the goldman sachs and the big miss on their trading revenues. bank of america different story there, they've generally had good trading revenues. i want to concentrate on the regional banks because that's where you get the bigger stories. you want to be interested in loan growth and net interest income because that will tell you how much money they're making on the spread between what they can lend out and what they are borrowing from their clients.

let's look at regents financial. regents reported their numbers were pretty good overall here. the average loans here's the big issue. down 2%. remember we talked about loan growth being disappointing, and generally has been. most of the time it's a little better than expected. it's still down but it's better than expected. their guidance for 2017, flat to down slightly. again, maybe a little bit better, but still a little bit disappointing overall, given the hopes for the economy. net interest income for them, up fractionally, again not bad. this was a little bit of hope here, 2017 guidance was better. they raised their guidance saying they'd be up 3% to 5% on that interest income. this is hopes the fed will keep raising rates but the fact that rates have been down recently, ten-year yields have been down and the yield curve has been flattening has been a major issue. we've got three days of bank earnings. let's look at the bank etf kbe here. with the exception of goldman sachs, all generally better than expected. long growth anemic, that's the

general theme. net interest income still a real wild card. there is hopes it's going to expand a little bit more but even that's under pressure. here is the bank kbe last few days essentially we are a little bit below where we were before earnings season started. the market hasn't dramatically changed. we haven't gotten any dramatically new numbers or expectations overall. still a little bit disappointing on the loan growth here. so what's the trend right now? yesterday we came out with a nice, big up day. we were working off oversold conditions. the market has been in, there's since march 1st we've been in a down trend. markets hit historic highs march 1st, the day after the president spoke to congress and modest downtrend, 1.5% off historic highs. we bounced yesterday, partly oversold, partly remember this is an options exploration week. look at the vix. people had been buying protection going into this long easter weekend, and carl, when nothing really happened over that weekend, yesterday you could see obviously people

covered some of those bets there, and that protection. so the question is, are we out of this down trend or not? it's too soon to tell, as you can see by what's happening today, there's still a little pressure on the market particularly from that reflation trade with all of the commodity stocks and particularly with the bank name. downdown 63 points. carl, back to you. >> bob, thanks so much, bob pisani. to the bond pits and rick santelli at the kcme. >>y but carl. important day if you're a technician with a fixed income portfolio. we've gone on and on how 2.27, maybe 2.25 is a key technical level for ten-year note yields. the two-day chart shows basically we're at 2.26 yesterday towards the close, outside our time zone we were there so we failed to jump above that intraday and closing under that level since wednesday of last week. look at november 1st of tens,

clearly see that move and you can clearly see that was the last time we were at these yields. look at the yield curve. so many talk about it and there's so many conflicting signals, because of such a history of management with regard to central banks and our fed on rates but tens minus twos still flat, very flat, and if you look at 30s minus fives a different picture. it's steepening, not a lot but it's basically the steepest since february and it's getting close to 115 basis points. now, let's switch gears a minute, shall we? let's look at what's going on, now that prime minister theresa may has called for snap elections. look at august 1st start to the pound versus the dollar. okay, now this is key, because at this point, the pound is trying to make a move basically it hasn't been here since august but you can see it's not a huge move, the gilt getting closer to 1%. haven't been at these areas

since october as well and year-to-date of the dollar index, it really failed once again to climb above key resistance, failed to hold 100 and downward bias. settlement last year 102.20. carl, back to you. >> we'll check in with you soon, rick, thank you very much. snapchat is out with news this hour. live to julia boorstin in san jose. >> snapchat is introduces lenses for not your face but the world around you saying they can paint the world with new 3-d experiences. if you open up the snap camera and turn it to face out it will offer you these kinds of lens options, now they say they're working to innovate with the rear facing and front facing camera. this announcement comes on the heels of facebook and instagram app announcing features that copy successfully some of snapchat's most popular feature.

instagram has 200 million daily users more than snapchat's daily active users. facebook gave snapchat credit for pioneering the popular stories. three weeks ago facebook announced new lenses taking a page from snapchat's focus on its camera. with the ability to copy and scale features like lenses and stories, that puts much more pressure than ever for snapchat to innovate, carl and guys right now, i'm here at the developer conference, we'll have to see if we hear more about facebook's plans to work an augmented reality. back over to you. >> julia, thank you very much for the setup there from facebook. when we come back, jim o'neill weighs in on the uk's special election and bank earnings, former chief economist of gaxz. later an interview with verizon ceo lowell mcadam and corning ceo wendell weeks, a cnbc exclusive, there to talk about the future of 5g.

taking another look at the markets right now, the dow is down 55 points, so early losses. goldman sachs is still the big weight. the nasdaq almost flat, almost positive on the session. "squawk on the street" will be right back. i thinthathea very n. inthrld of newdigital prts ander l worker for you. can i bo thear wh it'ba?

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a special congressional election taking place in georgia today could have far-reaching impact. john harwood is in atlanta with more on that this morning. good morning, john. >> reporter: carl, this is the seat in the northern atlanta suburbs pretty affluent and upscale. this is the race to replace tom price, who gave up his seat to become donald trump's health and human services secretary. democrats are turning it into a referendum on president trump. the question is whether or not all of the volunteers and cash have flowed down here from around the country are enough to take 30-year-old former congressional aide jon ossoff

over the 50% mark he needs to win without a runoff. he says it's possible. >> i think we could win it today. and the intensity at the grassroots level here is unprecedented. it's got very little to do with me and everything to do with the times that we're living in and the kind of community this is. >> a mouthpiece for terrorists. that's been paying jon ossoff thousands of collars. >> reporter: republicans have thrown the kitchen sink at jon ossoff, linked him to osama bin laden and his youth, just a few years ago he was pumping kegs in college. he's telling republicans can he work with donald trump but tell democrats this. >> when president trump embarrasses our country or acts recognize thely, i'll hold him accountable. that's why a proved this

message. >> reporter: republicans are also walking a fine line, donald trump remains popular within his party, but everybody's frustrated with the lack of action on health care. here's the director of the georgia republican party. >> when we go to doors, we are not seeing anything that says oh, we got to put somebody up there to stop president trump. what republicans want is congress to start working with the president, and they want to elect someone who is going to go up there and yes, they want somebody who is going to represent their values and work with the president to get things accomplished. >> reporter: president trump has got a huge interest in the race because he knows if he loses it, if john ossoff wins his agenda will face more resistance. he called ossoff a super liberal. can he get where he is in the polls around 45%, way ahead of the divided republican field can he get up to 50 and win it

today? if he doesn't his chances go down precipitously in a june 20th runoff one on one with a single republican. >> we will be watching for the results there, john. also wanted to get your take on the president's trip today, he's going to be in wisconsin, signing this executive order, buy american, hire american. specifically as it relates to the immigration provision here, he wants to review h 1b visas. is there anything concrete for tech leaders in silicon valley who rely heavily on the foreign high skilled workers to take out of this in terms of the administration strategy on this front? >> reporter: well i think, sara, silicon valley should take seriously the message in this executive order. the executive order itself is not going to have a huge impact on h1b spree sass. attorney general jeff sessions indicated he wants to crack down

on what he considers aabuse of h1b spree sass and president trump said he wants to bring illegal immigration down but legal immigration. lot of the business community depends on those workers from across our borders, and they could be in for a real showdown with this administration. >> we'll see what sort of specifics we learn today. john, thank you, reporting from georgia. >> reporter: you bet. >> we are watching that house election. up next, how president trump's new executive order could impact the manufacturering industry. we will talk to former nuor ceo dan dimicco. the dow is being weighed down by goldman sachs and johnson & johns johnson.

coming up, david's exclusive with verizon's lowell mcadam, congress's wendell weeks on the future at 5g. dow was down 111, now down 42.

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ndut how american express cards and se cahelpre y r growtht open.er or expande ♪ good tuesday morning. welcome back to "squawk on the street." i'm carl quintanilla with sara eisen at post nine of the new york stock exchange. fabler join us shortly exclusive interviews with the ceos of verizon and corning. dow is down 45, a lot of that is j&j and goldman but a lot to watch around the world.

>> our road map starts with earnings. goldman sachs and bank of america reporting this morning, we'll dig through the numbers. snap elections, uk program theresa may announcing plans to call a general election june 8. we'll go live to westminster. >> my american hire american. the president set to sign new executive orders with major implications for business. details straight ahead. start with the bank earnings, goldman sachs and bank of america out with results this morning, wilfred frost has been on the goldman sachs conference call. >> a big miss from goldman sachs flat year over year, equities also disappointed down 6% year on year. the recently promoted deputy cfo marty chavez on his first earnings call. >> within thick, g10 foreign exchange volatility approached its lowest level in two years for the dollar/euro pair. this was a headwind for clients

volumes. reduced volatility also negatively affected client activity within another macro thick market commodities. >> he said that xhozities was a particular reason for their relative weakness because they sore strong there, normally he didn't say he had any transparency into other investment banks performance clearly they outperformed them. he wouldn't give guidance to how the second quarter started. overall the first quarter of 2017 should be characterized as a period of recalibration. on the plus side, gs did boost their dividend ten cent increase to 75 cents per share, a move that had been expected. bank of america significantly beat on trading, especially fixed income, up 29% year on year, but investors were most pleased by their strong operating leverage, and encouraging net interest income, which came in above 11 billion ahead of expectations. here is their cfo paul donofrio.

>> what should shareholders expect for q2, given the march rate hike by the fed? based on our models and assumptions, we believe nai should continue to improve, but the improvement is expected to be much more modest than q4 to q1. >> donofrio saying the reason being long-term rates have come down despite short term rates ticking up during q1. in the market, gs down sharply, bank of america up in today's trade. guys? >> busy day for you, thank you very much. uk prime minister theresa may calling for a snap general election on june 8th as her party continues to negotiate a brexit. willem marx has the latest. >> reporter: theresa may faced a fair amount of criticism with her approach to brexit and the triggering of negotiations. she laid down the gauntlet this

morning to her own party and political opponents. take a listen. >> you have criticized the government's vision for brexit. you have challenged our objectives. you have threatened to block the legislation we put before parliament. this is your moment to show you mean it, to show you are not opposing the government for the sake of it, to show that you do not treat politics as a game. let us tomorrow vote for an election. let us put forward our plans for brexit and our alternative programs for government and then let the people decide. >> reporter: that was prime minister theresa may there. essentially saying put up or shut up. tomorrow she'll ask the house of commons to vote two-thirds majority in favor of having in election in six weeks' time. she'll need the support of the opponent opponents, labor and liberal democrats, both say they're supportive of the general election and will welcome the chance to essentially fight how

brexit should be pursued going forward. >> willem marx out in westminster, thanks. for more on the snap election market's reaction and more we're joined by former uk treasury minister and jim o'neill. pleasure as always, good to see you. >> nice to be with you. nice to see you. >> safe to say market didn't exactly see this coming. i'm wondering if you can walk us through what you think her motivation is and how much risk is involved here for her? >> i think it's pretty opportunistic politics to be honest. you look at the latest opinion polls, her party, the conservative party is significantly ahead of the main opposition, the labor party, in the polls, and given that they have a very small majority currently in the house of parliament, and the complexities of brexit, as well as other things that she wants to or appears to want to do, the

previous election didn't give a mandate to do, because she wasn't prime minister, i think she's having to look at the numbers and thinking do i want to have this constant hassle of various people trying to battle with me on everything? let's go for it. it is obviously risky, because she's said until now since she became leader, what was it, last july, that she wouldn't do it. it should stick to 2020 so it is risky but i think she's looking at the weakness of the labor party and thinking it's a low risk strategy. >> for investors, one of the key questions in these brexit negotiations, jim, is is it going to be a hard brexit or a soft brexit? what exactly happens to the access to the european common market? does this change your outlook on that at all? and what is your outlook, as to where the uk ends up there? >> so what is very intriguing in the short time since this surprise announcement, as you will have focused on, i'm sure,

is the pound has risen significantly, and that is a bit of a surprise to me, because it sort of implies a number of things, but amongst them could be that the markets would be happier with a bigger conservative majority in government, but that would virtually guarantee the harder edge of brexits that the government's been struggling to get support to pursue and generally speaking since the referendum the pound's got weaker when the markets feared a harder brexit, so there's something a little bit inconsistent there, unless another reason why the pound might be strong is the markets are trying to reassess the probabilities and give some probability to the fact that a credible alternative could arise, which might end up keeping us with a softer brexit, or who knows in this crazy world

we've had the past 12 months here in the uk. maybe we don't end up leaving after all, but i would think that's a very little probability, but it is very interesting that the pound has reacted so well, when it's not done on the back of repeated better than expected uk economic data. >> it's quite the u-turn this morning. jim, where would you put the locus of political risk right now? is it in the uk? is it somehow in france? does it involve turkey, some other relationship regarding turkey or russia, north korea? >> i think by and large the uk thing is very much an isolated british event. i think for the whole broader european issue, the first round elections of the weekend are extremely important, especially because in the past fortnight there appears to be more uncertainty in the polls with

all three unknown candidates pretty close for the first round, so i think that is extremely important for the future of europe, and as a consequence given europe's importance to the world very important for the rest of the world. i don't see the turkish thing as that crucial, given that we sort of had a good chance of expecting her to win this mandate for presidency, and that i have to say, i'm relieved since i was just recently on with another one of your colleagues programs a week and a half ago, it looks to me as though your leader has come to some sense and decided to try and treat china as an ally rather than an opponent. i think that's a welcome development on all fronts and that might be behind why the market were doing better through the latter part of last week, especially of course we're seeing stronger chinese data but i think that's a welcome development. >> so you mentioned france as the most important and

potentially the biggest risk here. what's the playbook, if we do get far left melancon, far right lapenn on sunday, what happens to the euro? >> i would imagine if that's what we get on sunday, next monday is going to be a pretty ugly day for global financial markets. not a good day for the euro either, because whilst neither would get a mandate, that clearly as president to take france out of the euro, the message from far left and far right is pretty much dissatisfaction with what the euro is doing for france, and it would cause people to price in a serious possibility this could be the genuine beginning of the end. throughout the euro's long existence, i've always believed myself that the only end to the euro would ever happen with france because it's in many ways a french creation. so i think it is a very

important issue for the euro, and indeed on a broader setting, just as important for the whole of the eu, given the arguably the eu was created by germany and france initially to avoid the horrors of the past of europe. so very important. >> is this a mixed case do you predict -- >> no. >> what is your prediction with regard to the euro? do you think it will stay together? >> well, luckily i don't do predictions anymore and haven't had to do for a while. so i can't help adding also that you know, the one thing you know for sure is the euro will go up and down unless it's down and up. i think last time i was on with you guys i said i didn't share the market's overall confidence in the dollar, and i still don't, and i think if we get what the bookies are suggesting which is indications that either one will be the winner more

likely the euro would rise than fall. there are other risks the other way for sure. >> one last thing on the dollar your former shop goldman closes out its long dollar top trade recommendation in part because of trump's rhetoric, in part because of what they call less hawkish communication from the fed relative to the balance sheet. the pickup in emerging markets. >> obviously it's four years since i left the great goldman and i don't have consult with the research guys but i occasionally see their stuff and i was pretty surprised they remained as bullish as they were. it was clear to me the dollar was unlikely to be as strong as everybody was saying. what they've just done sounds more sensible to me. >> finally, jim, global equities remaining near multiyear highs. u.s. stocks remaining near

record highs. does that look right to you given the economic back drop and central bank backdrop globally? >> i think it makes sense from a cyclical perspective. if i look at all the indicators, i prefer to follow, and the ones indeed i helped for the global leading indicator, i presided over constructing at goldman, we're looking at signs of a world economy stronger than it's been probably since 2008. so cyclically the strength in global equities particularly outside the u.s. makes a huge amount of sense. obviously from evaluation perspective, one gets more concerned especially with the u.s., when you look at what have you, but given the latest signs of inflation pressures and the fed's sort of ongoing underlying dovish rhetoric, there appears

to be no real spark to generate a major reversal. that's what normally causes it. the valuations suggest to me that one has to be a lot more careful around the world and for many years especially on the u.s., but cyclically the state of the world economy is just defying the strength that we're seeing by and large. >> jim, very nice to talk to you and covered a lot of ground this morning. see you soon. >> my pleasure. thanks for having me on. take care, guys. when we come back, buy american, hire american. the president getting ready to sign a new executive order. plus the imf releasing its world economic outlook this morning upgrading its outlook for the global economy. we'll talk to the chief economist who wrote the report, maurice obstfeld. first an exclusive interview with the ceos of verizon and corning on the future of 5g. "squawk on the street" back in a moment. the dow down a little more than 80 points.

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but we've got the get tdigital tools to help. now with xfinity's my account, you can figure things out easily, so you won't even have to call us. change your wifi password to something you can actually remember, instantly. add that premium channel, and watch the show everyone's talking about, tonight. and the bill you need to pay? do it in seconds. because we should fit into your life, not the other way around. go to xfinity.com/myaccount >> president trump getting ready to sign buy american hire american. new executive order focusing on guest worker visas, buying goods and services from u.s. goods. ylan mui joins us. >> this executive order is the essence of their signature america first policy reflected in both parts of the order. the first part deals with immigration. the white house wants to move away from using a lottery to

help decide who gets an h1b visa. the administration says the system has created a flood of relatively low-page, low skilled workers particularly in the tech sector, the move comes despite significant pushback from technical ceos, all on a conference call with jared kushner last week and this issue did come up at that time. this order also directs homeland security and the labor and state departments to root out immigration fraud. trump blamed president obama in a tweet for weak policies that he says have allowed gangs to spread across the country. now the second part of this executive order aims at getting rid of loopholes and requirement for government agencies to buy american. one industry heavily impacted is steel and this could provide a back doorway to target the influx of steel coming from china. the president is expected to sign this order when he visits a factory in wisconsin this afternoon. it's important to remember that not much will change immediately. the deadline for the review is

220 days away. back to you. >> ylan thank you. for more we're joined by dan dimicco, former ceo of nucor and chairman emeritus, served as a trade adviser to the trump campaign. always good to get your take. thanks for joining us. >> my pleasure. thanks for the opportunity. >> ylan walked us through sort of the basics but tell me what you think the political calculus is and what will the impact be on business? >> well, will be, listen, at th the day it will be positive on our economy, which will be good for business, particularly american-based businesses. it will be good for american workers and our middle class. american made by american workers and also immigration executive order, which is part of this whole thing, you know, the tax dollars used to stimulate our economy, all right, are wasted, if they don't result in the huge multiplier

effect that comes from jobs and economic growth that come from buy america, hire america. that's where obama screwed up with trillion-dollar stimulus package because most of the money went to foreign, by foreign goods and did not have a multiplier effect at creating jobs and economic growth. and this is even more important when you understand that the so-called procurement agreement that the countries have signed or not signed are like free trade agreements. they're not worth the paper they're written on. okay? we've got countries that don't live by the procurement agreements and every fta enthe wto procurement agreements. we're the only suckers that have abided by them. to one else does. this whole thing of buy american, hire american is to get back to the point where we are treating america the same way other countries are treating us. okay, and to do what's best for

america first. >> dan we should note you advised president trump during the campaign on these sorts of trade issues. so i get your point on the buy america hire america provision when it comes to companies looking to buy american steel and other goods and services. what about the immigration component. what is your understanding how the trump administration wants to change the h 1-b visa program? >> here is another travesty put upon the american workforce and this case high he will educated, highly skilled american workers not only the ones currently in the workforce, but have been forced out and also those that might come in that are highly trained and won't find the jobs. h h1-b visas i received countless letters, text messages, tweets, linkedin comments from people, all right, doing jobs that are being replaced by h1-b visa

people, whether they be from india or other places, and they can't find a job of similar skill sets before they leave, because for the same reason that they lost their job to begin with, and what's even worst, worse yet is the fact that they are forced in many cases to train their own replacements before they're let go. not asked to, forced to. let me tell you this, the ceos in the companies that perpetrate this kind of thing on their workforce should have their inflated corporate compensation packages slashed by two-thirds if they're going to resort to this kind of tactic to lower their costs and i guarantee you they don't. i can speak with some authority there, because when times are tough at nucor, my salary was reduced by two-third. >> i have no doubt you speak with authority on this. i want to you touch on two other things before we let you go on

which could you also speak with a lot of authority. one is auto production. two-year low today as we get these industrial production numbers. and then iron ore down 30% since late february. can you just talk about what you think is going on in those two markets? >> yes, with the automobile situation, listen, it's been a hot industry for some time now, right? nice strong recovery, and there's always going to be a lull in these things. so that's part of it. the other part of it is the economy is really not as good as you folks on wall street think. the real economy is still growing at an anemic rate of less than 2%. i'm not even sure it's going to make 1%. so that's part of the problem. eventually it catches up to you. as far as iron ore, to be quite honest with you, you know, global steel making capacity is still running somewhere around 60% to 70%, except in china, where they're running at 110%

because they shut down stuff that supposedly they're still running. part of the problem is that you know, there is a global slowdown, that steel is being not used as heavily, nowhere near the capacity of operations in europe. the united states was running at like 75%, and so that all takes its toll on things, and you know, but there may be more to it than that and in all honesty, i'm not as close to it as i used to be. >> still we love to get your insight. you always bring it to us straight. dan, appreciate your time on that and the h1-b. >> any time, my friend. bye-bye. dominic chu market flash. >> cardinal on pace for their worst since late july. they bought a patent for $6.1

billion from medtronics and traded more than doublity 30-day average volume of 1.7 million shares. cardinal health is a member of the cnbc iq 100 index, also keep in mind that earnings guidance was lowered on at least that side of the equation the lower end of their prior gaddance. some of the big reasons for that big drop today. sara back to you. >> health care the worst performing sector in the s&p, dom, thank you. as we head to break, look at shares of united continental down 2. %. the airline beat estimates by three cents. revenue also scoring a slight beat. united holding its conference call in ten minutes. we'll monitor that for you and bring you the headlines. "squawk on the street" will be right back. throad can cnge instt.

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eping the wowod usines connted anprd. that'the power. inity voice re.y, let's .e at's aming! netflix reporting earnings yesterday after the bell, the company beating expectings but the first quarter subscriber additions still did fall short of promgsjections. julia boorstin is in san jose with details on the good tidbits in that report. >> that's right, sara. confidence in netflix's ability to keep growing its subscriber

base helped moderate the concerns about lower than expected first quarter subskrishers and netflix projected more in the second quarter than analysts expected saying it will hit 100 million members this weekend and on track to add as many subscribers in the first half of this year as it did in the first half of last year in addition to the $6 billion netflix expects to spend on content the company announced it will spend over $1 billion on marketing to add members and drive viewing. >> our viewing is very large and growing, but nowhere near as big as youtube so we got youtube envy and a lot of room to go. >> hastings weighed in on news streaming services as well as amazon prime video saying despite amazon doubling down on content, he's not concerned. >> they're doing great programming, and they'll continue to do that, but i'm not sure it will affect us very

much. because the market is just so vast. think about it when you watch a show from netflix and you get addicted to it, you stay up late at night. you really were competing with sleep on the margin. >> hastings also said amazon's move into nfl football buying streaming rights to ten thursday games is not a strategy netflix will copy. market saturation questions, hastings doesn't see anything stopping netflix from reaching most people in the united states and then most of the people in the world. another company already reaching a good portion of the world is facebook. we're here at their facebook f8 developer conference and back in the next hour with a preview what to expect. back over to you. >> interesting to watch netflix share price losing some early gains down 2%. julia thank you. when we come back the imf chief economist maury obstfeld joins us, plus exclusive

interview with the ceos of verizon and corning. stay with us here on "squawk on the street." dow is down just about 100 points. m re to fix elevease. i's wrg withhe elghar. t wa t. ri so who syo ri w y. newuy wats alysis senr and e e cates elevat 3 mactin 2ays. there you go

♪ good morning, everyone. i'm sue herrera. here is your cnbc news update at this hour. vice president mike pence in japan for his second stop of a ten-day asian tour, after arriving with his family, he met with japanese prime minister shinzo abe. pence telling him the u.s. is with japan 100%. >> the alliance between the united states between the united states and japan is the cornerstone of peace and security in northeast asia and the president and people of our

country are deeply committed to standing with japan. >> french police say they thwarted an imminent terror attack, arrested two suspected radicals radicals radicals in marseilles before elections. arkansas officials are vowing to carry out a double execution later this week after the u.s. supreme court blocked the state's plan to resume capital punishment for the first time in nearly 1 12 years. you are up to date. sara, back downtown to you. >> sue herrera, thank you. imf upgrading its outlook for the global economy today. now predicting 3.5% global growth from 3.4% just a few months ago but the imf did warn about risks from protectionism, and trade warfare. let's dig deeper into all of this. joining us now maury obstfeld the chief economist and chief

author of this report. welcome back. nice to see you again. >> thanks, sara, great to be here. >> when i saw this report, i thought the u.s. must be behind it. i was a little surprised to see you did not take up the economic forecast for the united states but you did for much of the rest of the globe. why is that? >> we see broad based growth, the great thing about this forecast. we see it in europe and asia. of course some parts of the world are struggling, some countries in latin america and african-american and this is not just a u.s. story. >> specifically regarding the u.s. you cited an improved outlook, boost in confidence since the election and what you called assumed fiscal policy easing. how much do you expect that to add to the u.s. >> we revised our u.s. forecast up in january, assuming some fiscal easing, and that is an

important factor. we'll see how that develops. of course that depends on the politics in washington, which as always are hard to predict. looking at data, we have seen in the first quarter, it could be that there is a soft patch which may affect the outlook, we'll be revising again in july as we look at the data and look at what fiscal policy actually is doing. >> how do you read those better confidence numbers? consumer confidence, investor confidence, ceo confidence, all really have small business skyrocketed since the election. do you expect that to translate into more investment and more spending? >> other things being equal those confidence measures can have important real effects on spending and investment they

reflect expectations on policy. if policy days appointments confidence may be affected. we'll be revisiting that in a few months. >> there's debate about the clash between the soft survey numbers, confidence numbers, whether it's consumer or small business and so forth, and the hard data we're getting, i wonder whether you think confidence numbers truly reflect an intent to spend, or satisfaction with purchases maybe that consumers have already made and currently enjoying. >> that's a question for psychologists, the view we generally take, is that you know, consumers are expressing or businesses expressing confidence about the future and what it holds for them, so these indicators can have very real effects on the economy and conversely when confidence

indicators tank, as they did in the global financial crisis, we really do see the effects. >> what happens to your improved rosier picture of eurozone growth if if we see a french election surprise this weekend, if the betting odds are wrong again and you do get a result where marie lapenn who wants to take france out of the euro secures a victory. what happens then to the forecast? >> you know, we view the political uncertainties as being potentially serious, but then again it would be foolish for us to say that given electoral outcome we'll immediately have this or that effect. we think there's a risk that financial markets would react adversely to that. we felt there was a similar risk in the brexit situation, and as always, financial markets will do what they do, so you know,

going forward, we'll see how the election turns out and we'll see how the data look after that, and revise our forecast accordingly, but you know, these are very unusual events and it's very hard to predict their effects. >> maury you also worn as the imf has done many times recently of rising protectionism, and trade warfare, including currency wars. can you spell out the worst case scenario on this front? >> we've actually seen a rise in protectionist measures throughout the world since the global financial crisis 2008-2009 and the report we did on trade in our october world economic outlook did estimate this was negatively affecting the growth of world trade. so a further escalation of trade measures with retaliation by

some countries could take a chunk out of world trade, and therefore, out of world growth. we have nightmare scenarios from the 1930s. we wouldn't expect that to be repeated but it is a worry some prospect for us. >> imf continuing to sound the alarm on that front. thank you for joining us, as always on this new report. dr. maury obstfeld, chief economist at the imf and carl, expect more trade warnings later in the week. i'll head down to the imf world bank meetings, both of those institutions warning against rising protectionism. >> a lot to look through just in this report today. when we come back an exclusive on the future of 5g, with the ceo of verizon, lowell mcadam and the ceo of korncongr. dow is down 84.

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it's an oasis. the 2017 e-class. it's everything you need it to be...and more. lease the e300 for $549 a month at your local mercedes-benz dealer. mercedes-benz. the best or nothing. welcome back to "squawk on the street." i'm david faber. at the nasdaq market site with two guest this is morning, lowell mcadam, chairman and ceo of verizon and wendell weeks,

chairman and, kr eo of corning. the two companies announcing together this morning a new pact under way verizon is agreeing to pay $1.05 billion for a three-year minimum purchase agreement with corning for the next generation of what they call optical solutions. what does that mean? it means an awful lot of fiber to help improve verizon's 4g lte coverage and perhaps most importantly speed the deployment of 5g services. that's what we're here to talk about in part. gentlemen, thanks for being here. >> good morning. >> why are you buying all this fiber? >> david, we viewed fiber as the cornerstone building block for the network, the next generation network, and that network is going to look very different than what we've built in the past. if you look at 2g and third generation and fourth generation of wireless, it was about capacity and through-put. fifth generation is about those things. we'll see 100 times faster

through-putt and latency of a network, the network will go out, come back and respond in less than the time it takes to brink your eye, ten times the battery life we've seen in the past that opens up a whole new set of applications for consumers and enterprise, but you can't do it if it you don't have fiber deep into the network compared to what we've done in the past. >> it's called densification, one of the words used here and wendell, i would think this is beneficial to corning's business overall the need to bring this fiber frankly as close to the end user as possible, that last little bit is wireless, and 5g but the rest of it is going to be a lot of your fiber, correct? >> absolutely. we invented the first fiber over 40 years ago and actually those companies were among the first customers for fiber in the world, and then they were the first folks to do a widespread deployment of fiber to the home, and now they're going to be the

first folks to do a truly 5g ready wireless network, and what it basically means is compared to fiber to the home you're looking here at somewhere between two and six times more fiber to do a wireless network right. than takes to do fiber to the home. >> why not take fiber to the home like fios and take this capacity. does it save you a lot of money to have that 5g, for that last little bit into the home? >> absolutely. let me give you an example what this network will look like. when we deployed fios we'd run a strand, cable into a neighborhood which cable with six or eight strands. now we're going to drop six or eight strands to every street light and every neighborhood. it allowed through-put to the home and intelligence

transportation grids, intellect electric grid management, water system management. you hear a lot about awe on it news cars and things like that today. that does not work without 5g. >> that's a long way away. isn't it? >> i don't think so. david we're going to be launching 11 markets this year, this summer, 200 cell sites where we'll deploy this architecture over 5g and this is one of those if you build it, they will come. >> that's fixed wireless broadband. isn't that for somebody who is now going to get a signal wirelessly the way they do via broadband on a wire? not for the other applications. >> the early stages would be those sorts of applications. wendell and i returned from a trip to korea where you see what they're doing to manage the rail system. what they're doing to have consumers experience the olympics and i'll give you an example for enterprise, you can put on a set of goggles and through a digital twin in 5g you

can go in and do maintenance on a turbine or jet engine or manufacturing line without ever having to go into the facility. all that is available through augmented reality and because the net, can deliver capacity and be responsive to a customer's needs. >> are you able to deliver what you need to? do you have the capacity right now? my understanding is there may actually be not a glut but a shortage of fiber. >> that's right. that's why we're also announcing that we are expanding the world's largest and lowest cost fiber optic plan right in north carolina. adding another quarter of a billion dollars to the $2 billion we've got invested today and adding about 10% to our optical communications team and workforce. we've got to put up some fresh steel to make this happen. >> did you mention that to the president when you go to his manufacturing summits? you've been to a couple. >> i'll invite him to come down for the groundbreaking. >> creating jobs in north

carolina. people look at and wonder the growth directory 5g will present. verizon had a competitive run where your earnings have been constra constrained. i'm looking at 2015 numbers going to be similar to what analysts estimate for 2018. when do the benefits of what you're talking about start to accrue for your investor base? >> we see this starting to accrue in '18, david. that's why we're out there with the trials now. obviously it will take some time to deploy this, but we will be commercial next year, and we'll be moving hard over the three-year part of this deal. one thing we're looking for and if you compare the u.s. position versus other parts of the world, is the administration helping with infrastructure placement, whether they do an infrastructure bill, but even what chairman pi of the fcc is doing this week as an example is important to us. it's working with the

communities to make sure that the conduits are available, that the facilitates the small cell placement that puts a shot clock on the amount of time before permits are approved, in the municipalities. municipalities. those sorts of things will help us move it forward and deliver to the bottom line. >> you're talking about 10,000 different small cell sites in a city like new york alone. >> by the way, we've learned over the last several years as we've been manufacturing capacity for our 4g network how to do that but to your point, we have about 60,000 very large towers around the country right now and about 13,000 small cells. when we get rolling in some of these towns like boston, where we're deploying today, we'll put 8,000, 10,000 small cells literally the size of the palm of your hand, and that will be delivering these sorts of services to the customers and consumer and the enterprise.

>> they're not your only customer but are they ahead of everyone else? >> with the network they're talking about deploying, i think they really are world leaders. they did this in fiber of the home too. what verizon has always been is innovative leader when it comes to networks and then we typically see rest of world actually following their architectures over time. >> it occurs to me that your main competitor at&t some say is running away from its business with large acquisitions whether directv which leads me to ask will you make a large acquisition but have it infrastructure you said there was industrial sense for verizon to buy charter. is that true? >> it gets back to the deal we're doing today.

as we look at companies around the u.s., there's nobody building to architecture that we're talking about. so instead of maximum 144 strands of fiber, in boston today we're placing 1,700 strand fiber. nobody has that. so a cable company would have customers obviously. would have infrastructure, conduits, pole attachments. >> doesn't have that kind of densification. that's not going to do you any good. >> the network investment is going to be the cornerstone as i said in the very beginning. that's why a deal with corning like this today is so transformational for our company. >> you don't seem to say no to a large acquisition that would allow you to advance more quickly. there's been plenty of speculation about charter. >> i think our shareholders expect us to look at every option. i would tell you right now we haven't seen the architectural fit and we haven't seen a willing seller and buyer that have a meeting of the minds. >> that's where things stand.

when you say architectural fit, it doesn't necessarily work if you were to -- >> from a fiber perspective, nobody, whether fiber company or you're a cable company, you don't have architecture that we're talking about today. >> so then you just got to build it all yourself? >> well, that's what we're doing. we'll see. >> is that included in the 18 billion you spend or is that going to ramp up over time as 5g becomes more of a reality? >> it depends on how 5g becomes a reality. it's well within our stated guidance on capital today. we'll see. these trials this summer are going to be very informative to us as we become commercial into next year and we see these applications come online. then we'll decide where we go from there. >> when you look at the 5g world, we're still a long way away from an autonomous car grid running on the cloud via 5g, right? when is the date here when you really start to think we're going to see true deployment of

5g? >> i think you're going to see 5g deploy very rapidly. >> u i think the way i tend to think about the network is his business case works around just doing 4g densification, improving your quality of service, improving all of the different options you get on 4g. on top of that it he's able to scale 5g, and he's able to bring that type of band width as a service to each city as it goes. i think you're going to see revenue layer as basically everything you see from the tech companies today fundamentally is built around the assumption that we're going to have this type of band width. without this type of infrastructure, you're not going to have any of that stuff. >> it's about commercial applications as much as anything else in terms of revenue producing eventually, right? >> sure. >> i remember a conversation i

had with steve jobs when we offered 5 megabits of service and i said we would be up around 15 with 4g. he said i got it. we'll build it. now we'll say we'll deliver a hundred times that 10 average of gigabit. people will build to that. you see applications already. we went to korea and you see people with virtual reality participating in a hockey game using the gigabit of service and downloading video on high-speed trains. i think the biggest limiting factor for us is whether our education system turns out enough engineers and entrepreneurs to build to this. if you look at china today, they're doing 2 million engineers a year. the u.s. is around 200,000. we can't even fill 20% of the jobs that we're projecting in the next decade. we've got to get that right as well as the technology. >> so many other questions, of course.

i know we're going to do this again fairly soon, perhaps get an opportunity to talk about unlimited and everything else. you report earnings in a couple days. we'll be focused on that. gentlemen, thank you for being here today. >> come down and visit us and come see a great big fiber plant. >> i will do that. >> for now, i will say thank you. send it back to you guys in the studio. >> david faber in his element talking fiber and deals and telecom. david, see you in a bit. much more ahead. stay with us. quick check on the markets. dow down triple digits. still weighed down by goldman sachs and johnson a& johnson. consumer staples and utilities higher on the station as treasury yields move lower. health care and financials "the washington post" perfo-- worst performing in s&p. new bikes aren'tling guys...

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welcome back to "squawk on the street." consumer staples as you can see there the leading s&p 500 sector while health care and financials are lagging while markets are making their lows of the session

so far staples at their highs. components in the staple sector are top among performers here. general mills up more than a percent and two notable consumer staple stocks hitting fresh all-time highs today, you have dr. pepper snapple and pepsico. sector one of the year's best performers up more than 7%. now from consumer staples to technology, we'll send it back downtown to the start of "squawk alley." back over to you guys. >> thank you very much. good morning. it's 4:00 p.m. at 10 downing street in london. 11:00 a.m. on wall street and "squawk alley" is live. ♪