♪ live from new york where business never sleeps, this is "squawk box." > . good morning. welcome to "squawk box" on cnbc. we're live from the nasdaq market site in times square. i'm becky quick along with joe kernen and andrew ross sorkin. the dow coming off a 113 point loss in yesterday's session dragged lower by goldman sachs which reported weaker than first quarter reports on the top and bottom lines. u.s. equity futures this morning are hanging in there. even though we saw some additional weakness that was brought on by shares of ibm. the loss for ibm alone would drag the dow down 55 points. futures are indicated up, though, by 15 points. so you're talking about a 70-point advance from the rest of the dow without ibm. s&p 500 up by 6.5, and the nasdaq up by 18.

overnight in asia, the nikkei flat. hang seng and shanghai were weaker. the shanghai down by 0.8%. in europe this morning, some of the early trade, just 24 hours after that announcement from british prime minister theresa may about a new snatp election, things have turned around. yau european markets in the green. the cac and dax up by 0.3%. the ten-year yield in the united states fell to a low of 2.165% on tuesday. that was the lowest level since november 10th. we'll keep a close eye on that today. the ten-year yield now is sitting at 2.209%. we'll have much more of this coming up later this morning. >> let's get you to some other big stories. in earnings news, ibm reported quarterly earnings that beat expectati expectations, but sales fell short of estimations. revenue declined 3% from a year ago. that marks 20 consecutive

quarters of revenue decline. they have long talked about those revenue being empty calories, but a big debate about that remains. you're looking that the stock down 4.5%. we'll talk to an ibm analyst in about ten minutes about all of this. federal reserve beige book report, which tracks economic conditions in the fed's 12 districts is out at 2:00 p.m. boston fed president eric rosengren is speaking this afternoon. people watching for his comments. on the earnings front, banks in focus. blackrock, u.s. bancorp and morgan stanley out with reports before the bell. >> corp. >> not the marine corps. >> corporation. >> it's not a corps like marine corps or peace corps. >> you would call it citi corps? >> i might. >> he might, actually. >> finally later this morning,

the british parliament expected to approve theresa may's plan to hold an early election on june 8th. debate expected to begin around 7:00 a.m. time with the vote soon after that. the main opposition, labour party, welcomed the call for snap elections, so almost certain the prime minister will retain the two-thirds vote she needs for the elections. >> snap elections. >> they're voting for the vote. >> voting on snap? >> not on snapchat. this is a different use. you say snap now -- >> quack-call elections. >> so they have not adopted some voting procedure using -- >> no. you're right, we need to clarify. >> for me, you do. i'm not sure what snap is. >> so it's now -- >> quick elections. not waiting until 2020, we'll do it in june. >> nothing with voting on facebook or snapchat. >> nope. >> some day we might. stocks to watch today. this ibm thing is weird. >> it is. >> did you see the -- in

buybacks and dividends, it looks like 2$2.6 billion. total free cash flow was like a billion dollars or something. >> we're been saying this for so long. >> i know. >> not -- how do you -- >> but how do you invest for this transition to a new business when you're paying out 200% of your cash flow and -- yahoo! revenues jumping 22% as quarterly results smashed expectations. this is likely yahoo!'s last quarterly report as a stand-alone company. the deal with verizon expected to close in june. shares of intuitive surgical ticking up after posting strong quartly result quarterly results. the medical devicemaker beating expectations thanks to its da vinci robot. and ultra genex seeing a pop after a phase three study to treat a genetic kidney disorder

was approved. stock up sharply. facebook is holding its annual developer's conference this week. earlier this week they made a push into augmented reality. ma one version overlays effects and photos and videos, similar to snapchat and those snap elections, but facebook will allow developers to contribute their own effects. facebook spaces will allow you to interact with other users in an entire virtual reality world. >> we have some political news that may impact the market. the result of yesterday's special congressional eelection in georgia coming in overnight and we are headed for a runoff. john harwood has more on that story. john? >> we had our own snap election last night in georgia. and democrats did not get the snap and awe they were looking for in the first round of that voting. you had jon ossoff, the young democratic candidate who was the

target of a flood of money coming in on his behalf in the district as well as volunteers, $8 million raised. he was able to get 48% of the vote in a very divided field. that is pretty good, but not good enough to win that seat outright. you needed to get 50% of the vote. donald trump, who intervened in the race at the end with a robo call on behalf of republican turnout trying to dilute his vote share. with a bunch of tweets attacking jon ossoff the democratic candidate as a super liberal took credit last night. he said this was a big win for republicans. he was glad to be playing a part in that. and for jon ossoff who is just 30 years old, this was a disappointment. he spoke to supporters last night. said he was ready to fight on. what fight on means is that on june 20th he is going to face

karen handel, veteran republican politici politician. not the most exciting republican in the field, however she will find the republican party mobilizing strongly behind her. we have a real battle in the district that has been represented by republicans for 40 years. newt gingrich once held the 6th district. tom price, the health and hulen services secretary won it easily in 2016. while this is a republican district, it's not a huge trump district. he barely beat hillary clinton. so we'll have a big fight on our hands and have to re-do all of this hype again in june. >> talking about not bag trump district. do you know who bruce level is? do you remember bruce? >> no. >> entrepreneur we had on the program. i met him in atlanta on "squawk" the vote. joe, remember? >> yeah. >> trump supporter, jewelrymaker. >> in a swing state. >> african-american businessman. there he is.

>> right. derun? >> polled 455 votes. >> despite an -- you're saying despite an appearance on "squawk box," he did not make the runoff. >> i was wondering. did the president not make a trip down there to campaign for him or what? >> no. the president did not endorse a candidate. he went after ossoff. and he was simply -- the goal for the republican party was to make sure that on election day they had as much of a republican turnout as they could muster. democrats did very well in the early vote, the mail-in ballots. all of that all the things you can do with money and organization. on election day, the underlying structure of the district, a strong-tilt republican produced enough turnout that those votes that jon ossoff got did not add up to 50%. >> arethere are 1 republica1 re

right? >> that's right. five democrats. >> i guess he got 48 or something. if he got anywhere near 43, which is what any democrat you will always have. you have the base of 43 down there. you spend $10 million worth of whose money was it? it was all out of state money. the guy doesn't even live in that state. >> all over the place. >> you spend $10 million, you get 5 percentage points? you have a base of 43, he gets 48. do you think trump's tweeting yesterday and the day before helped galvanize republicans? >> possibly. >> the republicans were trying to make sure -- democrats will a clear enthusiasm advantage. they lost the last election. the energy is usually -- in the next elections with the losers from the last ones. republicans have been dealing with setbacks in the trump administration, including the

veil you' failure on healthcare that deflates their base. while they knew democrats were juiced, charged up, people were sent in to try to jack up his turnout, republicans had a challenge. i think trump put his shoulder to the wheel metaphorically speaking with the twitter account yesterday and made a difference. >> he tweeted this morning, it was entertaining. i saw some still from the hill or -- you know, the stuff you read every day. it said ossoff ready to deliver knockout blow. just trying to figure that out. it would be one guy going to the house that happens to be a democrat? how many do the democrats need to pick up to take the house? but really, a knockout blow? >> 44. >> so trump was saying today, despite the efforts of the fake news, it doesn't happen. when you write articles like that, a knockout blow, you're frothing at the mouth, mainstream media hoping there

guy wins what do you expect. then it doesn't happen. now it will fall by the wayside again. it's not a story anymore. >> hold on a second. i'm not sure the hill represents the mainstream media. but, look -- >> probably better than the average mainstream media not as bad as politico. >> special elections inevitably become the focus of a lot of hype and importance. >> they're doing the hyping. >> they have some important -- everybody was doing the hyping. >> right. everybody. >> they have some importance. if the republicans lost this race, that would be a marker of the ability of the democrats to rally. it's not a knockout blow for anything. >> it's a fervent desire for that to happen, religious desire for that to happen but it didn't. any way, thank you. >> joe, before you go. joe! i have sports news for you.

>> nationals. >> my cousin andrew triggs -- >> no my cousin andrew triggs in the starting rotation for the oakland a's won his nithird consecutive start. 3-0. he has not allowed an earned run this season. >> that is impressive. >> amazing. >> cousin? >> yu jarvish and the rangers he saw last night. >> 12th cousin? >> he's the son of my first cousin. >> that counts. that counts. >> joe, you'll be -- joe, you'll be interested to know this. the off season before he made the majors, which was last year, he spent the winter working for jeb bush at the right to rise super pac. nobody can say -- >> that's like -- >> nobody can say that no victories came out of the jeb bush campaign because andrew triggs made the makers and he's

now 3-0. >> he worked for a republican. is he the black sheep in the harwood family? >> the red sheep. >> you don't know what you're talking about. there's a lot of -- >> i knew there was a rhino joke coming up. >> exactly. >> con grgrats to your cousin. >> joe, hold on -- >> you're the black sheep. >> a lot of my family is in the deep south. >> then you're the black sheep. if you haven't noticed, the deep south is pretty republican. so -- so he's not the black sheep. >> what happened, john? >> what's his name again? >> andrew triggs. >> the nationals must be good, because i see a 90% chance that they win their division. the reds are in first place. they have a 20% chance. no one believes it. they're 9-5, i think now. any way -- >> i don't want to blow your mind or anything, but i'm a

direct descendant of john d.mosby, the gray ghost of the confederacy. >> you need to go back and change that history, i think, john. that's what everybody is doing nowadays. come up with somebody else. any way, thanks. let's get to the broader markets. we're joined by chris retzler and dennis gartman. dennis, i want to ask you something. you say you just got to continue to slowly add to equity positions because that's probably what you should be doing, even though -- >> fillable market. >> because all of us have to decide what to do if we have enough disposable income to invest. >> yeah. ifrmt don't n >> i don't know something about north korea, something about the unknowns out there that scare me and wonder whether cash at some

point wouldn't be a -- >> cash at some point shall be a wonderful thing to have. >> not yet. >> there's been times when i have gone to cash, every time i had done it i wish i had not. >> you had a nice selloff in the last few weeks, it's still a bull market. you should err on the side of being bullish. yes, eventually cash will be a wonderful asset to have. but not right now. >> 2.20 on the ten-year. the 2.20 didn't come from global forces. it came from domestic forces. >> >> fell below 2.20 yesterday. >> yeah. >> that seems to portend that the stock market has not been factoring in everything. >> it may have been the germi a bund. >> joseph is now going to cash? >> the ten-year worries me. i wouldn't jump the gun with the ten-year at 2.70, but where it is now --

>> markets have a propensity to go to the obscene number, then it turns around. you may get a 1.98 just to get there. >> you can look at it as half empty half full there, too. 2.20 might imply slower economy, but it gets you back to -- there's no alternative. you're back to stocks being more attractive than 2.20 on a ten-year. >> that's what the driving force has been for the last year and a half, two years, three years. we may all find stock prices to be overpriced, priced te ed ear multiples they are, but if you fight the trend, it costs you money. i've done it. i fought the trend, every time i've done it, it has cost me money. i trade from my only account, i'm up for the year, i find it difficult to buy stuff, but you have to. >> we're still at 20,500. you can't declare victory. we were at 17,500 when you were bearish. >> for you to be talking about

cash is victory at this point. >> this is my own -- >> he has been consistently bullish. >> right. i've consistently said the markets will come down 5%. >> if you come back 5%, you're still at 19,500. with your own money you have to think, every quarter -- you have to think about it. >> a little bit. i put money into a vanguard mutual fund, set things aside there. >> this is like sabre rattling. >> you wonder if between that and syria if that is an opportunity to buy. >> as long as this guy doesn't have the capability of hitting the united states. >> right now he doesn't have the capability of hitting the united states. >> you're looking at that -- like looking at stocks with special situations, right? >> yeah. look, we're -- in a period right

now we're in a period exciting for earnings season to start. we went through a lot with the elections. it's time to earn your multiple. stocks have been up on extechtations, which we thought for a lot of the policies, pro growth which we think are coming are further out into the future. if you miss your earnings, as we're beginning to see -- >> ibm and goldman sachs give you pause. >> if you can maintain growth rates, earnings and margins, i think you'll be fine. we think opportunity will come about in the next couple months as companies do come down and miss. we don't think the growth -- the trajectory is over. we think we're still in a bull market. the yield curve is flattening, which tells you the reflation trade is more under questionable times. we don't see the high yield market collapsing. that's all good for small caps. and they underperformed the large caps. >> ibm beat on the bottom line.

missed on the top line. ibm and goldman sachs, you think those are the exceptions to the rules? >> barracuda networks yesterday. it was a decent number, down 14%, 15%. so they are taking them down. the multiples are probably stretched in certain areas, but that's opportunity for a long-term investor. >> ibm, we'll talk about them obviously some more. the earnings number was down almost 20% but above what analysts are forecasting. >> yes. >> revenue was down for the 20th consecutive quarter. >> 20 consecutive quarters. >> by it's what they're spending the cash flow on. >> your point was apt earlier on, how can you spend that much money to buy back stock which is twice what you are taking in. makes no sense. >> the revenue decline has been going on. they have not been overspending on free cash flow, just to cover the nut, to cover the ability to

do it. something has to give. >> you have to spend in order to make money in the future. that's what ibm has done here and is egregiously wrong. >> thank you. when we come back, as we just mentioned, shares of ibm are plunging after the company reported its 20th consecutive quarter of declining revenue. we'll dig through the report with an analyst next. hey, the f, what's her problem? apparently, i kept her up all night. she said the future freaks her out. how come no one likes me, jim? intel does! just think of everything intel's doing right now with artificial intelligence. and pretty soon ai is going to help executives like her s trends to stay ahead of her competition. no more sleepless nights. - we're going to be friends! - i'm soy about this. don't be embarrassed of me, jim. i'm getting excited about this!

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welcome back to "squawk box." we're having a fierce debate about ibm. ibm has q1 earnings beating expectations, but sales fell short. the company has logged four straight years of quarterly revenue declines. call that an anniversary. the stock down sharply in early trading. the stock now down close to 4.5%. i think got closer to 5 earlier. joining us to talk about this is james wang.

ibm has long talked about don't look at the revenue, they're empty calories, it's not the issue, we're looking for a higher margin here, that's the ball game. that's how they want the market to see the ball game. >> and watson. >> how do you see the ball game? >> we found ibm -- we traditionally wouldn't have gone for a name like this we were looking deep into the artificial intelligence field. if you talk about ai, most of the names that come up are stuff you already own. alphabet, facebook, nvidia if you're into hardware. outside of core internet there's not a lot of choices when it comes to investing in ai. it's an exciting field but not a lot of choices. ibm we think is a legit dif rentaren' differentiated thesis. if you are going to invest in ibm as a theme, there's one

horizontal play, that'sizontal everyone, and a great specific play, ibm. >> what about the -- we talk about ai, i think there is a larger debate to be had about watson versus some other ai efforts. >> sure. >> on this specific issue in terms of earnings, in terms of the continued decline in revenue, also in terms of the buybacks and dividends, the amount of money they've been spending or not -- spending to give to you rather than to invest in the business, how do you feel about that. >> they're investing pretty aggressively in the business. if you look at their r & d spend, they spent about 4% of revenues on r & d consistently. even in '0 and '09, they did not let loose -- >> joseph, whack him. >> what? >> i thought you were unhappy,

you think ibm is terrible. go ahead, andrew. he's your guy. >> you had a whole -- you had a whole thing about -- >> someone pointed out to me that they are spending a lot of money, more than their cash flow, spending almost -- if you don't take out working capital, they're spending 230% of their free cash flow just to maintain the dividend and to buy back stocks. if you're trying to transition your business from the old ibm model to a new one, it's difficult to have the money if you're spending all the money just trying to orchestrate a beat in earnings or to buy back -- or to pay the dividend. >> i think their accounting is fancy, but if you look at the actual reports of the r & d output, there's no way but to recognize that they are actually doing good work. we hear a lot about google being

advanced in ai, and they deserve a lot of credit. ib ma >> we give amazon a lot of leeway, netflix a lot of leeway. you're talking about the future promise, i don't know, maybe ibm deserves some of that a lot of these companies are trading on fumes about the future. >> we keep waiting for the tipping point. >> we do. >> it's been 20 quarters of declining revenue. >> this was not a narrative changing quarter. the revenue declined by another 2%. but it's -- >> so they deserve the benefit of the doubt like some other companies. >> i don't think they're -- >> here's the thing. >> tesla. >> ibm is trading 12 times this your's earnings. there's no other company out there that you can buy that trades 12 times earnings. >> that's how they do the

earnings. >> i have an ai question for you. if you talk to the guys in the valley, dare i say -- >> yes. >> -- they will tell you about what they think of ai up here. they think google is doing, facebook is doing it. they would say microsoft to some degree is doing it, maybe amazon is doing a bit of it. they have a lot less respect for what ibm is doing, for what watson is. system of them in a derogatory way say it's a fancy if then statement. >> yeah. >> how do you think about that given that you've studied ai? >> i think that's -- what's interesting is ibm has been doing ai long before google existed. >> agreed. >> of course the valley guys will pooh-pooh the company. the deep learning stuff came out -- popularized in the bay area. i worked there at time it was very exciting.

but if you ask anyone the key to ai is data. this new wave is about machine learning, the way you get smart is by feeding data into the system. if you look at data, whether it's google or facebook, they only own consumer data. they own what you search, they own what you bought at jay cr c that's fine, but their play has been to go after verticals. >> by partnering with doctors, hospitals, insurance companies, tax companies. >> to use one example with healthcare. they spent about $4 billion of m&a acquiring healthcare companies, four of them over the last two years, today they claim to have the largest repository data outside of government. >> when does it pay off? >> i think it will take another two, three years. some of their solutions are just ramping. like watson for oncology, which

is the closest thing to the original watson tv program being remanufactured, that has just reached 10,000 patients and was at zero a year ago. the numbers are not showing partly because the base is low, but if the narrative is true, and it is a real debate, it will eventually show up. >> great. thank you. >> thanks a lot. we need to get harwood back. apparently if your first cousin has a child, it's not really called a cousin. >> it's your first cousin once removed which is what i said while on the air. you don't listen to me. >> i didn't even know what that meant. >> first cousin once removed. >> people call them a niece or a nephew if it's a first cousin once removed. it's not a second cousin. people will debate back and f t forth. >> all right. we have to get him back and square him away. coming up, mark grant's

message to investors, beware of europe. he explains next. his weekend? his weekend? picnics are delightful. oh, wish we could. but we're stuck here catching up on claims. but we just compared historical claims to coverages. but we have those new audits. my natural language api can help us score those by noon. great. see you guys there. we would not miss it. watson, you gotta learn how to take a hint. i love to learn.

welcome back. you're watching "squawk box" live from the nasdaq market site in times square. good morning. welcome back. general news, some sad news, i guess. former patriots tight end aaron hernandez has been found dead in prison hanging, hung himself with a prison sheet.

last week suzy welch -- >> she had an interview with bill belichick and asked about aaron hernandez. he said i think the word was heartbreaking. that may have been the word that suzy put in afterwards. but something along those lines. >> all right. it says he was discovered by corrections officers in massachusetts early this morning. that's in general news. >> wow. >> we try to follow everything. >> let's transition from that to talk about quarterly numbers that just came out from blackrock. the company earning $5.25 per share for the first quarter. compared to the consensus estimate of $4.89. revenue came in slightly below street forecasts. blackrock increased its quarterly dividend by 9% to $2.50 per share. a snap election in the

united king come. t kingdom are among events fueling uncertainty in europe. joining us is mark grant. it seems like most of the world sat up and paired attention yesterday when theresa may they were calling for snap elections. you said you would stay clear of europe for a lot of different reasons. do you want to lay out your thinking here? >> yes. i would not be investing in anything in europe right now. when you have, as you pointed out, the new elections coming, the snap elections in britain. a nightmare scenario occurring in france right now where it was long thought that mr. fillon or the other centrist candidate would be running against marine le pen. it appears now that one real option is that the left-wing candidate, melenchon, is really

like france's bernie sanders, if you will. communist, running against le pen. either of those two as president of france is a disaster for the european union. mr. melenchon wants to borrow all the money he wants and get rid of the stability mechanism in europe. ms. le pen wants to leave the european union altogether and have a referendum about it. you have the italian banking system that is bust. and you have greece, if you take their public and private debt, well over 5$500 billion, and its 302% debt to gdp ratio. you have too much risk in europe, and i want nothing to do with investing there at present. i told a lot of large financial institutions exactly how i feel about this. >> mark, that's counter to what we hear from so many guests who come on the air and say europe is a great place to be.

i would say that is kind of where the herd is headed at this point. >> i agree with you, but the herd is always headed off from another direction from where i'm headed. the reason is the technical analysis, fundamental analysis for european stocks looks interesting. but it's the event-driven horizon that is the carey part. i don't want to be in someplace that has a lot of possible the risk. so i'm avoiding that area of the world. >> we've been talking about the ten-year yield this morning. back up at 2.2. 2.2%, but fell below that yesterday. the lowest level since november 10th. some commentary pointed towards the yields and german bunds. why do you think we're sitting at 2.2% now? >> i think two reasons. i'll disagree with what was said

earlier. i think part of it is global. i think the large european and asian institutions are very nervous about what is going on in europe. and they're moving money into the united states as the safe haven. and then the ten-year treasury, it's a huge pain trade, as you know a couple months ago everybody and their brother was calling for 3% ten-year. i was on your show with you, i said no, 2.51. we backed up a bit past that. now we're seeing a huge scramble as many institutions bet the wrong way. >> if the fed continues to raise rates, will the yield continue to be so stubborn and hold out? where do you think we're headed from here? >> okay. let's address that, becky. the fed of today is not going to be, in my estimation, the fed of tomorrow. meaning that mr. trump, we know, is going to appoint four people to the fed in short order. so all these dot plots, all

these people speaking at the fed and these conferences, they're really talking about history. they're not talking about the future. >> though he suggested he may leave janet yellen there just last week. >> well, even if you leave janet yellen there, he's going to appoint business people to the fed. in my estimation that's going to totally change the outlook of the fed. and where they're going. i don't see see this big rate rise on the horizon. i think the market is making a comment about that. we're flattening to almost getting towards pancaked in terms of the ten-year versus the two-year. that is giving you an indication that at least the bond market participants just are not buying this. >> all right. mark, always love talking to you. thank you for joining us. >> you, too. always great. coming up, when we return, the battle for defense contracts. we'll get a special report from morgan brennan next live from a

lockheed martin facility in south carolina. and later, riding the rails, how train transportation is performing under the trump administration. what to expect when the big rail companies report. you're watching "squawk box" on cnbc. always on the lookout for patterns and connections to make everything work better. i call it the internet of everything, but it's really the internet of everyday life. ♪ the partnership between dell technologies and sap helps make the promise of the internet of things a reality for our customers. we know how powerful live data can be. we use sap at dell to run everything from finance to procurement to travel expenses. and that's the same kind of live insight we can now start offering to all of our customers. and as we get better information, better insights, it can improve virtually every aspect of society and the economy.

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time for the executive edge. we're taking a closer look at the big business of defense contracts. morgan brennan joins us from a lockheed martin facility in greenville, south carolina. good morning, morgan. >> good morning, joe. as we look behind me, these are t-50a's. i flew in this one yesterday. this is an upgraded version of the t50 golden eagle used to train pilots and military pilots in south korea and a few other countries. this plane is the plane that lockheed martin along with korea airspace industries is proposing for the tx trainer competition. that competition represents one of the biggest contracts in play now. it's a $16 billion program for 350 jet trainers that are expected to be rewarded this

year. when president trump talks about rebuilding the military, a big part of that is future programs like this, which is sorely needed to replace the t-38 trainers that pilots test fined for f-35s and f-22s are using. even though they are dr dramatically different. this will come down to this system and boeing, they have built a brand-new plane direct to specifications. for lockheed's part, they say because it is already in production, they can begin building the planes now and they could deliver them two years ahead of the air force's schedule. as i mentioned, i did fly in that plane yesterday. given the fact we had multiple conversations in recent weeks about what it's like to pull gs, i thought i would just wrap it up with this clip for you. >> ready? >> ready. >> all right.

here it comes 7. >> base ops. >> oh, my gosh. >> 7.1. >> whew! >> nice job. >> so, i thought i would let you know i just did 7gs and i lived to tell the tale. >> wow. what did that feel like? >> almost like a roller coaster on heavy duty steroids. that's the only way to describe it. that doesn't even do it justice. your whole body presses back, you have a compression suit on that inflates immediately, and you just shake. afterwards, as the day went on, i felt sort of -- i felt like i had been beat up a bit. i didn't throw up, though. >> i was going to say, did you feel like you were going to throw up? never? >> no. but after we were done and we were coming back in and we got out of the plane, i did feel like i had been knocked around a bit. i felt woozy and out of it.

>> i was going to ask whether you had to rinse out that mask. really. because, becky hit a pothole on the way in this morning and threw up. >> i did throw up after being on the west side highway. >> there's no way you would get through that. >> no. >> you were not nauseous for the rest of the day, just queazy or anything? >> i wasn't really gnaws hav s ynauseous, just achey, woozy. >> are you okay today? >> i'm good today. i had a little coffee. that's helping. drank a little water. the other thing we did, we did rolls. i got to even fly the plane for one of those rolls. >> you are kidding? they let do you that? >> they did. we have video. i don't know if you guys can pull it up, but it's really crazy. yeah.

my husband is not a good driver but -- >> did you tell them that before they let you fly? >> the pilot said i was. >> good job, morgan. we will see you again later. fun day. >> i have to give a shout-out to elliott clemens, a, kaka hemo. when we come back, the china factor and the escalating problems with north korea next. things are mixed in the european markets, the dax and cac are higher. when this bell rings... ...it starts a chain reaction... ...that's heard throughout the connected business world. at&t network security helps protect business, from the largest financial markets to the smallest transactions, by sensing cyber-attacks in near real time

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welcome back to "squawk box." president trump walking back campaign promises to label china's currency manipulator after his visit with president xi at mar-a-lago. our next guest is a china bull and says the currency has bottomed out. you like being called the bull? peter alexander, founder and managing director, good morning to you. let's talk currency. but help us understand in the context, if you will, of what's going on in north korea, and what's happening -- no, no, but this is the real sort of larger overlay to this is, our relationship with china, what happens with north korea, and therefore what happens to china

and ultimately china's economy. >> okay. well if you're trying to tie the two together basically between the bilateral agreement with the u.s. and china, what areas are there that the u.s. is trying to achieve? north korea seems to be a very high priority. and how can they push, if you will, or work with, even better, the chinese government to be able to achieve that? so whether or not there was some sort of grand plan that was agreed to down in florida, or even before that, remains to be seen. >> but what do you think donald trump has on offer? >> what he has on offer is the market. meaning that, you know, a lot of the talk that's been out there has been china has had pretty much open access to the u.s. market. >> right. >> and the united states has had very little to the chinese. >> but you've long thought that china's going to open up? >> very much so. >> and it has. and that's the irony over the last 24 months, especially on financial services, you've seen an opening up of the equities markets, fixed income markets, hedging of the curvesy, you name it. the issue is global institutions

are just unwilling, if you will, to take advantage of it because there's concerns over what direction things will go. there's a lot of volatile if i. and it always will be. it's an emerging market, after all. >> in terms of labeling them a manipulator or not. we were talking during the break, they might be manipulating it, but the other way. >> right. i think what is funny is everybody jumped all over president trump saying oh, he's walked back. i think in your segment you called it that. it's the most recent of many presidential candidates that say one thing on the trail. bill clinton in '92 i'll never forget talked about china with then-bush saying coddling dictators from baghdad to beijing. by the end of clinton's tenure they were part of wto. there is a reckoning that the u.s. and the chinese have a symbiotic relationship. i think trump is trying to work his way into getting more from that. >> and -- but how does that manifest itself in terms of what happens to the currency? >> i think if you look at the currency right now it's up 1% for the year. our outlook is it's probably going to be 2% higher this year,

probably another 3% next year. a lot of it is sentiment driven. the government's been able to step in and slow the flows. you have a populist driving a lot of flows out. >> last time we had you hear. >> right. >> i think i mentioned have you ever talked to jim chanous and you said no. >> look, between jim chanos, kyle bass and all these guys they were throwing bombs last year, about 30%, 40% devaluations. some of the hardest money in the hedge fund has crowded in against the relast year and i think investors and their funds should be asking a lot of hard questions. >> peter alexander. appreciate it. >> thank you very much. >> coming up, british parliament debating the prime minister's call for a snap election. still don't know how that works. use your mobile phone, i guess. snapping who you want -- >> it's a quick-call election. that's what it means. they're going to have it in june instead of 2020. >> wouldn't the results

disappear if it was -- >> aquaman? >> some fireworks, we're expecting some fireworks between theresa may and members of the labor party coming up next in. that schwab billboard. oh, not so fast, carl. ♪ oh no. schwab, again? index investing for that low? that's three times less than fidelity... ...and four times less than vanguard. what's next, no minimums? ...no minimums. schwab has lowered the cost of investing again. introducing the lowest cost index funds in the industry with no minimums. i bet they're calling about the schwab news. schwab. a modern approach to wealth management.

happening now a big vote in parliament on theresa may's call for a snap election. a live look-in at that debate which is getting a little heated. we'll tell you what it means for your money straight ahead. can the transports get back on track? two major railroads reporting after the bell. a preview of those numbers and what is next for the sector is just minutes away. plus the ford foundation committing up to $1 billion to impact vesting. the foundation's president will join us. the second hour of "squawk box" begins right now.

live from the beating heart of business, new york city, this is "squawk box." good morning welcome back to "squawk box" right here on cnbc. we're live from the nasdaq marketsite in times square. i'm andrew ross sorkin along with becky quick and joe kernen. in studio for the hour sharing his thoughts on the markets and washington, scott sperling is here, copresident of thl partners. futures right now, a little bit of green there. dow looks like it would open up three points higher. s&p 500 up over 5.5 points and the nasdaq up about 15.15 points. a couple of big headlines earnings just out for morgan stanley. first quarter profit came in $1 per share compared to estimates of 88 cents. revenue beating forecasts. ceo james gorman is calling it one of the firm's strongest quarters in recent years although says the market environment remains uncertain. some on wall street would juxtapose those earnings against

goldman sachs. we'll talk about that a little later. another wall street earnings report coming from asset manager blackrock. earnings of $5.25 compared to consensus estimate of $4.89. now revenue was very slightly below street forecasts. quarterly profit was more than 30% higher than year earlier levels. and the fed will be out with its beige book later today. that's the region by region assessment of the u.s. economy. it's scheduled to come out at 2:00 p.m. eastern time. breaking right now, let's take a look. there are some live shots of parliament in the uk. and that's where the debate over a snap election has begun. things can get a little heated in parliament. and they've been doing that this morning. yeah. >> this guy wants to do a facebook election. not a snap-that guy is promoting an instagram election. >> there has been some debate this morning not only about that snap election which would occur on june 8th. >> why snap? >> they've also been going back

and forth about scotland. my guess would be scotland leaving the uk, not leaving -- not leaving the eu. >> they're going to get another referendum. >> whether they're going to get another shot at this, too. >> wilford frost is going to be with us in just a little bit to wrap us what's been debated, who's been yelling at whom, and preview today's vote as well. we'll tell you what this could mean for stocks as well. >> switching gears back to equities a couple of stocks to watch today ibm reported quarterly earnings that beat expectations but sales were short of estimates and declined 3% from a year ago. that marks the 20th consecutive quarter of revenue decline for the stock, which is five years. >> that's why i'm here. >> to do the math for us. >> to do things like that. five years, every quarter, year over year, revenue has declined. >> this is a story we've known for awhile. they've wanted to get rid of what they call empty calories. those -- the revenue that's not helping them. but there's been a huge question about when you're actually going to see the turning tide.

the tipping point for when it gets back into -- >> it's a 30-year question, really. going all the way back to grossman trying to figure out what he'd do when mainframes get replaced by distributed computing and now trying to get into the cloud. yeah, it's a rough day. i'm surprised that you're not seeing more of an effect on the futures. the dow futures. so some other stuff is offsetting it. >> this alone is more than 55 points negative towards the dow. the rest of the dow futures are making up for it. >> the rest of the market was mixed. comcast was up. yahoo! revenues jumped 22%. quarterly results beat expectations. this is likely yahoo!'s last quarterly report as a stand gentleman loan company. the deal with horizon is expected to close in june. a consortium -- you haven't said one thing about adams in those comments yesterday. >> what did you like me to say? >> you didn't think that was a little weird? >> thought it was interesting.

>> why would you say that? why would you want to bring people up to speed -- >> you can bring people up to speed. referring to -- >> yeah. >> why would you say that if you were really -- >> which part are you talking about? >> about whether they were -- would do a deal with someone, an acquisition or a merger with someone. >> right. but you're saying -- >> there were several companies that were mentioned, comcast -- >> wouldn't that be sort of a big deal if comcast or disney merge with verizon. >> a lot of these -- but there was also some question about whether -- >> you get so excited. >> questions about whether lowell mcadams' comments were walking about comments he made earlier. >> come on, this is you. this is dealbook. this is you. >> i've got to wait. to me there's a regulatory overlay that means that all of this is sort of -- >> then say that. >> what did you say? >> so it's not likely -- >> to me, you can't do it. >> wouldn't it be the biggest deal in history, either one? >> oh -- what's the market cap?

>> verizon's got a huge market cap, obviously. >> i don't know if it would be the biggest deal in history. >> 200. >> is it over 200. >> disney is just -- >> i think if you're acquiring disney -- >> normally you get really -- >> still under the price tag of manusman. you remember vodafone buying manusman -- >> but they'd have to pay a premium -- >> and this should be the kind of thing -- >> back in 2000 maybe. >> this should be the kind of thing that you just really go on. and i'm just surprised. i don't know if i'm disappointed. i thought i could have brought this up. it's an m&a thing. that's you, man, isn't it? >> i don't know what's going to happen. >> probably not but to say yeah, consider mergers when the guy says i consider a merger with either one of those. i thought you worked for comcast. >> i'm right here. >> okay. >> all right. >> i -- it would be -- they'd be the acquirer with comcast? or -- so -- >> it's just not going to

happen. >> we'd end up owning verizon shares? >> i don't think it's going to happen. so that's why i'm not -- >> somehow you could see a little mo green going on there. you buy us? no we're going to buy you. so i'm not sure that, you know -- >> who gets shot in the eye? i don't -- >> you know what happens. >> i know, someone is getting a massage and gets shot in the eye. you can't come in here and talk to a man like mo green like that. anyway. >> all right. let's talk about the broader markets. the dow dragged down triple digits by disappointing earnings. gee joe political your honor certainty surrounding north korea, the uk election debate in parliament. joining us to weigh in on all of this is jason trendert, strategic research partners chief investment strategist. anastasia, jpmorgan's investment strategist and scott sperling, with thl partners the copresident there. jason, thank you for being here with us today. why don't you tell us a little

bit about what you see, because there are a lot of sort of doubters recently with the market run-up that we've seen and people now really looking to earnings to see if they can put up the numbers. >> the good news is that earnings are poised to be up probably something like 10% for the first quarter, which is a pretty meaningful change. as you might remember, we had an earnings recession that started in the second quarter of 2015, and it ended the third quarter of 2016. and a lot of that was due to energy, and the dollar. lapping some of those problems. so the good news is that earnings, i think, are good. the bad news is that from my perspective is that the trump trade faded pretty dramatically in the first quarter. so a lot of the things that really, we have a republican sweep portfolio that we created. and, a lot of the things that make that up, which are financials and industrials and all the other things that you would see in a republican sweep portfolio faded during the quarter, and tech really took its place.

my own opinion, for whatever it's worth, is that people should reload on that on the trump trade. i think that they -- i think it's just going to be delayed. i don't think it's going to be canceled. and it might take longer. there are certain things, though, part of the new administration that can happen without congress that would be regulatory reform, and deregulation of financials and energy. the budget, and taxes will take a little bit longer. >> you say buy now? >> i would. i would certainly in financials i would like in. i think this is a multiyear change in financials personally. it's not going to obviously be a straight line but i think this is an opportunity right now. >> anastasia, you say when you look around you think that you see some deals in other markets that might be a little better at this point? >> i do. i look to european markets. i look to emerging markets. i do look to u.s. cyclicals, and i look to reduce duration and add credit so i agree with the statement that was just made.

i would add to this that this is not just about the fading reflation trade. this is about the election fears, and this time emanating from france. the reason why the u.s. 10-year is at 2.2% this morning is not because all of a sudden we had a collapse in confidence in the united states or the economic data. it's because investors are rightfully worried about the outcome of the french election this weekend. so i think that's artificially been driving down the yield, the safe haven yield in germany, and has a knock-on effect in the united states, as well. so i agree that this should be looked at as an opportunity to reload, and to amp up exposure to some of the trades we like, which is cyclicals, europe, emerging markets and credit over duration. >> you're talking about short-term pullback, particularly if the election goes smoothly this weekend, this could be as quickly as next week that the market picks back up. >> i'm not, by the way, saying that this is going to go smoothly. i think investors are right to play a little bit of defense

into this weekend. because if the polling is telling us anything, it's a very tight race. so it's absolutely anybody's -- any two candidates' race to win to go into the second round. so i think it's right to play defense here. but you also have to look on the flip side of the coin and what if you do get a positive outcome. what if it is macron and le pen heading into the second round. >> europe is a toughy. we're underweight, despite the fact that it's cheap -- >> mark grant -- >> despite the fact that it's cheap. despite the fact that economic activity is picking up in europe, but i -- we're very skeptical as a firm that populism has peaked. and that's really the bet that you're making. and there was obviously the dutch election, there were some german regional elections that might suggest that. i'm very skeptical on that, though. i think, you know, you have a possibility in europe of a

neverendum. this rolling existential question, you have france, you have germany, now you're going to have the uk, italy by next march, and that's, the lord only knows. >> things won't stabilize you think in europe -- >> i think it might stabilize for a couple of weeks and you're going to have another election, and another one of -- another one of the member states. >> scott, you probably have incredibly important view of the u.s. markets. and private equity always seems to be the smart money, deciding when to buy, when not to buy, when markets look expensive. when you look at the u.s. market does it look expensive to you? >> thank you for the incredibly smart comment. i'm not so sure i will earn that. the markets have been pretty frorsy for awhile. we've seen them go up. some of it on the animal spirits coming out of the election with the expectation that all these good things were going to happen. i think the reality in terms of the fundamentals are going to get better because you haven't yet seen the full effect of the regulatory pullback. so without changing any laws,

all you have to do is have the regulators no longer start to legislate as they have been and enforced in ways that went well over whatever the existing legislation was. i think that's impacting a number of different sectors from energy to finance to health care to a number of things. and i think that's going to have a very positive impact on the performance of companies in a fundamental way. i'm hopeful that washington get itsability together, and one of the things to focus on with that hope is that we have a president who, as he says, likes to win. and i don't think you can win solving complex issues with complex solutions in today's political environment. so what does that mean? that means that -- >> nobody gets a nuance -- >> well, your best hope is some tax reduction as opposed to reforming the entirety of the tax code. if you thought health care was bad, as people say, then you know, this whole debate over do we do a v.a.t., which has all

sorts of unknown implications for our -- >> border adjustment tax? >> the border adjustment tax. i would hope it's gone because i do think we just -- it's a wild card you don't need. and i don't know if you're ever going to get to a 20% corporate tax rate. but i'm not sure you need to. i think if you get to 25%, 26% you bring down other rates and you go for a simplification across the board, that would have an enormously positive effect, and my hope is you have a president that wants to win, and you have a belief that there is some central agreement that can be reached, then you're going to have another positive impact on the markets. so, that's the hope, we'll see what happens. >> all right. scott's going to be with us for the rest of the hour. jason, thank you for coming in, anastasia, it's great to see you today, too. >> okay, when we come back, the rails have been long considered a good economic indicator. tonight, we got two major railroads that will report results. we will find out what the street is expecting and how you should play the sector after the break.

later lots of buzz around europe this morning, including a vote in parliament on theresa may's request for early elections. a closer look at whether or not you should be buying european stocks right now. stay tuned you're watching "squawk box" right here on cnbc. ♪ to err is human. to anticipate is lexus. experience the lexus rx with advanced safety standard. experience amazing.

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welcome back to "squawk box" everyone. shares of morgan stanley are higher this morning after the

firm reported quarterly profits of a dollar a share. that was twelve cents better than had been expected. revenue also beating forecasts. that stock is up by 2.25%. 42.15 is the last trade. >> going back to the lowell mcadams comment on verizon. you want to do it now? >> no! >> you don't want to do it now? >> no, i don't. >> you don't? >> no! no! >> okay we can talk about it later. >> no we can't. >> we can. >> no, we can't. >> talk about the dow -- >> becky -- >> do you need a helmet? >> sometimes. i feel that way. flak coming in and coming down. thank you. >> transports had a rough ride so far this year. the group is down just over 1%. but tonight, things could get back on the track. oh, boy. for the sector when two major railroads report results. dow transport component csx and canadian pacific will be out after the bell. joining us, donald broten, managing partner and principle at broten capital.

don, it was, i think the last time we spoke, we were staying well commodity prices are still weak but we got this rip-roaring economy, either here or coming. from the trump train. and so this is going to improve. now, i don't even know where we are right now. now, maybe even that narrative isn't as strong as it was. you look at the ten-year. you look at the gdp numbers. it was -- that was just reported. even the jobs numbers. is there reason to be not as optimistic about an economic rebound right now, which would help, obviously, the rails? >> no, not quite the contrary. what you have hang is i would say the stock price performance since the beginning of the year is really a function of we had a rally going in to the end of the year. and now they've just been looking for -- waiting for the evidence to come along. but when you look at the volumes underlying, chemical volumes in particular have been very, very strong in the united states. and even in canada. and what that's telling you is that industrial productions is

indeed picking up. you know, chemical volume is such a great predictor of industrial volume because it's almost impossible to make or assemble anything of any magnitude without consuming some form of chemical. >> so, the five most important things in deciding whether to buy or not buy a railroad stock are -- are there five? can you come up with five commodity? week commodity prices doesn't help, right? >> well, it doesn't -- well, it depends. it depends on what the demand side of it is. the pricing of a commodity could be simply, as in the case of oil, that we've discovered a new technology in fracking, and that allows there to be plentiful, cheap oil. and it doesn't mean the volume's going down. i started at the macro level and look at the dollar. we certainly had a strengthening dollar going into the end of the year and then there's been more placid since. usually strong dollars are bad news for railroads. but we've had tend growth in chemical volumes, now, we have

very easy comps, but in the case of csx and canadian pacific we have a different story. you have the macro story, then you also have a different management team story. >> so give me some of the other ones, then that -- help us decide whether to buy a railroad stock. what else? most of these guys logistically the mergers have happened, they've got their act together in terms of efficiency and operating, right? i mean you don't try to find someone undervalued because they have -- you know, they got a lot of upside, you know, from getting better. >> csx is a different story. understand you have to have the macros right. these are cyclical businesses. so what's the dollar doing? what are commodity prices doing? what are commodity demand volumes doing. what's happening with housing, building, auto, et cetera. all those things are important. but then you also get down to the level where you got a guy

like keith treel who runs canadian pacific and hunter harrison, who is the michael jordan, wayne gretzky of railroading. you have to understand what he's capable of. in the first quarter results that csx is about to produce he's only been there just a mere little over three weeks. but i guarantee you that the results are going to come, they're going to come fast, because that's what hunter does. he's going to go in. he's going to take out any and everything that doesn't produce return. he's going to sweat the assets, and these are very asset intensive companies. and so anything you can do to improve asset utilization is the fastest way to improve the finance results. hunter is one of these guys who literally, if there's an extra paper clip somewhere around in the csx infrastructure that isn't being utilized, he will sell it, he will get rid of it, and he'll make better financial results as a result. >> then you've got cars, right? you've got auto sales matter. and then i would think infrastructure, or at least construction activity would be bullish for the rails. >> absolutely.

to the extent that we get infrastructure built, somebody's got to move that cement, somebody's got to move that aggregate, somebody's got to move that steel to make that build happen. and rails are definitely almost the entire trip, if not the entire trip from the mine and the mill to the destination where we all get to ride on that highway or go over that bridge. >> and then what about -- i -- i'm giving you your five things. you were supposed to do this for me. and if i'm dragging this out -- what about auto sales? if auto sales peaked doesn't that matter whether we're at the end of that cycle? >> it does matter. but, yeah, no, it does matter, joe. but here's the thing, are auto sales going to go get cut in half or do they go down by 20%, or are they going to be down mid single digits this year? i think down mid single digits is probably more realistic. if you have enough volume in other segments that can more than offset a little bit of weakness here or there. it's like any business, the

whole picture, it's not just one segment that makes it. what i'm looking for, though, in these two particular rails is more important is asset utilization. am i going to see train speeds go up? am i going to see times going to go down? am i going to see cars online? are they managing their inventory of cars more efficiently? i look at csx's results in the most recent quarter, their on-time pickup was just over80%. their on-time delivery was just over 60%. i guarantee you, day one, hunter walked in and said, that's not acceptable. both of those numbers need to be over 90, and this is how it's going to happen, and this is what we're going to do to make that happen. and like i said, asset intensive companies, you increase asset utilization and financials get better really quickly. >> got it. all right, don, thank you. thank you. >> okay still to come this morning a number of strategists telling us that europe is the place to be putting money to work. this, right now, is parliament

debating prime minister theresa may's proposal for early elections in the uk. we're going to get an update on that and what's been said and find out if it's time to buy european stocks when "squawk" returns in just a moment. time now for today's aflac trivia question -- mr. diaz. mple procedur, we're just going to make one small incision here, then we're gonna go in and remove your '67 corvette. my vette!? it's just a gall bladder! you don't have.. aflac! paying you cash, so you might have to sell that sweet little muscle machine just to cover your rent. more funny juice. but my papa gave me...that...car. what do you wish you had? aflac. ohh, i love doing that. health can change, but the life you love doesn't have to. keep your lifestyle healthy with- aflac! it's your tv, take it with you. with directv now and at&t, get the ultimate in entertainment plus unlimited data.

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good morning. welcome back to "squawk box" right here on cnbc. we're live at the nasdaq marketsite in times square. among the stories front and center, mortgage applications fell 1.8% last week. that's according to some new figures from the mortgage bankers association driven

entirely by a drop in new purchase applications. refinancing activity measured a rise as mortgage rates fell to their lowest level since november. also pet food and supplies retailer petsmart extending its online presence announcing a deal to buy chewy.com. do you use chewy.com? >> no, do they sell pig ear, do you know or lamb -- >> for you or the dogs? >> no, no, you buy that for your dog. can you imagine buying lung for somebody? but you do. >> it's an online seller of pet supplies. i don't know if it's called chewy, the financial terms of the transaction not disclosed. petsmart was taken private two years ago. did you bid on that f >> we did not. we used to own -- we have been heavily involved in the pet business for a long time. >> scott sperling, private equity mogul. >> it's a great space. people care about their dogs. and cats. and whatever else. >> we pay unbelievable amounts of money for crazy stuff.

and the margins must be huge. like, well, i think online i could get an elk antler for less than $40 or $50. but it's a bone that lasts basically forever. >> you know, again, it's a business going through some level of transition, and the threat from e-commerce is pretty significant. >> it's real. >> you've seen that impact -- >> the margins are so high at the pet store. >> the margins are reasonably high. but you know, the same store sales across retail, in pet superstores are no exception are suffering because of the growth of the e-commerce channel. >> but the weight of a lot of these things, meaning they're physically heavy, costs more to -- >> you know, i get -- we have three dogs, and i get dog food, you know, delivered every month. >> you think we're at a tipping point with retail? to hear that it's been impacting the pet stores. >> i think we have been at a tipping point in the sense of growth. whether or not we see it go negative on bricks and mortar,

you know, maybe the smartest people look at what's walmart buying. what's pet smart buying? where are they expanding? is it more white space expansion with stores? or are they trying to change channels? >> they're trying to change channels. >> the problem with a lot of these changes is that the margin structure and the profitability of e-commerce isn't necessarily what it was, as you point out, in the bricks and mortar store, and so you're seeing this transition occur, and you know, history would suggest it's going to be pretty rough. >> you're buying a car. >> i might. i might finally break down. >> you don't own a car? >> i'm a proud new yorker without a car. >> next i'm thinking dog. >> yeah. >> you know, then you go to go to the burbs. >> i could see you carrying one of those little dogs around. it's got to be a little dog. >> no, i think it's inhumane to have a big, large dog in a new york city apartment. i do. >> i agree with that. >> it's also harder to carry, right? >> do you think -- >> we have labs. beautiful. >> now here's my joke that i

always use. so i go in -- >> carl's got that little thing. >> he does. lucky. don't mess with lucky. >> very cute little chihuahua. >> lucky is adorable. so, you go in and buy like a bag of pig ears. >> yeah, i don't do that, buy the way. >> it's not an acronym. i thought it was like bear claws. give me a bear claw. it's not really a bear claw. pig ears are pig ears. >> yeah. i bet that's a high margin product. >> and they're greasy, and they're big, and they're -- [ dog barking ] >> you could see him with -- >> you know the nice thing about that is then you need the vet deal. so, because you know, look, there's no -- there are no reimbursement issues, government reimbursement issues with vets. >> you walk into the vet it's $350. that's the thing. they say hi, and you say oh, i'm in the wrong building and you get a bill for $250 for walking in there. >> the boys need a dog. you should get one. >> the boys need a dwaug.

>> like scott said. >> we need one, too. >> pomeranian. >> we could get a parrot. >> a marmut. theresa may will likely get confirmation in parliament for her early general election on june 8th. in the next hour. cnbc's wilford frost, a bachelor, you can't get a dog wilford, it's got to be -- it's a family thing, joins us now with more on what it all means. hey, wil. >> joe, yes indeed. that parliamentary vote comes when the current debate finishes. it's been heated, as usual. here's theresa may. >> and every vote for the conservatives will make it harder for those who want to stop me from getting the job done. every vote for the conservatives will make me stronger when i negotiate for britain with the european union. and every vote for the conservatives will mean we can stick to our plan for a stronger britain, and take the right, long-term decisions for more secure future for this country.

>> to recap, theresa may's main reason for calling this election is her current strength relative to the main opposition party, labor. the latest polls give her a 20 percentage point lead. this is huge in uk terms. for some perspective, in 2015, david cameron won the current conservative majority with 36.9% of the vote to labor's 30.4%. just a 4.5% lead. could the polls be wrong? well the risk for theresa may is that this becomes a de facto second eu referendum with her party representing leave, other parties remain. in that light, may is certainly risking some of her mps in pro-remain prosperous urban constituencies, and parts of the rural southwest, who will likely lose their seats based on campaigns centering on brexit. she believes she'll take enough off labor elsewhere, particularly the north of edge land, for it to be whort while. another big risk is what this

ends up meaning for scotland. either way sterling and the ftse settling down today after the pound rallied past $1.28 yesterday on the expectation of may increasing her majority and with it her bargaining power with the eu in brexit negotiations. the ftse hitting negative territory year-to-date returns earlier this morning. having fallen 2.5% yesterday. >> wil, thank you very much. all that political uncertainty surrounding the upcoming elections in europe, including right now that snap election in the uk, so is this the time to buy or is it just a little too risky for europe right now? joining us for more is david zahn, head of european fixed income at franklin templeton. david we've seen how this has played out in the bond market for european bonds. all this uncertainty has certainly spooked people a little bit. what would you be telling people to do at this moment? >> i think what we have to do is look at the fundamentals. and i think that theresa may calling an election will solidify her majority in

parliament, which will make it much easier for her to negotiate, and get anything passed that she does negotiate. so i think that's positive. for the brexit outcome. and so we think that, you know, uk bond yields will continue to do well. conservative government tend to be very fiscally austere, and so therefore that should be beneficial, and the pound, i think, is seeing some optimism that yes, actually, there could be a good outcome. and i think that's important. >> so you would be telling people to go ahead and buy, that the risk is less than might be implied not only by the uk situation, but also by the french elections this weekend? >> well, i think we have to split the two. i think that the uk election, i think, is the lead is quite wide. so i think there's a good chance that she will win. and the french election, i think that election is wide open. and you have four different candidates that could go through to the second round. and any -- there's several combinations of that. which could be quite bad for france. there's some combinations that could be quite good for france. so i think that french

government bonds, and french assets are not really pricing in that risk. we're kind of just sitting in the middle not really sure what's happening. i think we need to have more information there. we don't even any french government bonds in our european accounts. >> what about german bonds? >> german bonds are very good credit quality but they're very rich. on the short end of the yield curve is very negative. so we don't own anything there. we do own a little bit out in the 30-year sector which doesn't have a huge amount of yield. that has the yield of about 90 basis points but it's kind of a hedge for the rest of europe. coming undone. and that's really what the french election is about. is whether or not you get in somebody like a le pen, and she calls a referendum and what does that mean for the eurozone. that's what people are concerned about. i think the probability of that is not that high. >> but beyond the french election, there are all sorts of other questions. questions we've been asking for seven or eight years at this point about the future of europe. if it's not france, then potentially it could be the next step with greece, whether they

choose to pull out or whether they get kicked out. whether italy chooses to take itself out of the mix. we had a guest earlier today who suggested, jason trennert, who said, look, if you want to get into europe, then you are guessing that the populism play there is done, and he's not convinced that's the case. are you? >> well, i think populism will continue to bubble along in europe. i think that probably this election cycle it's probably too early for populism to come back into the ruling party. and so i think from that perspective, it probably is going to be the next election when we need to be very concerned about it. i think this one we'll probably still stay more mainstream. germany, especially, will stay mainstream. france will probably stay more in the middle. and then we can see that change back to populism if they don't do anything to fix the eurozone. i think that's one of the reasons why european assets can do okay is because the ecb is going to the central bank is going to continue to be accommodative for the next several years. because they have to. they're the only ones doing anything to keep growth up, and keep inflation up, and keep euro

down. and so i think in that environment, you really need to have that. give politicians time to make some adjustments. >> david, thanks for your time. >> thank you. coming up, unleashing the power of endowments. one of the nation's largest foundations committing up to $1 billion over the next ten years to help reduce poverty and injustice. the president of the ford foundation, darren walker, is here to tell us where they will be putting that money to work. check out the futures at this hour. "squawk box" will be right back. at fidelity, trades are now just $4.95.

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welcome back to "squawk box" this morning. the ford foundation pledging $1 billion of its endowment to mission related investing. we want to bring in darren walker, the president of the ford foundation. and this is a major milestone in mission-driven investing, if you will. how did you come to this? >> well, andrew, when you think about the mission of the ford foundation to reduce inequality in the world and advance social justice, we have to use every asset in our tool kit. and our largest asset is, in fact, our endowment. but, by law we only have to

spend 5% of that annually. so the question is, how do we use the other 95% to advance our social mission? >> so what were you doing before this stuff? >> well -- >> did you not think about these other pieces of it at all? i mean, what was the mix? >> well, the mix was, 95% invested in a traditional -- >> right. >> -- portfolio. >> and were you getting pressure from -- i mean did people come to you and say you need to start thinking about this? how did it all come to be? >> i think when we consider the challenges in the world today, and the fact that there's $850 billion in foundation endowment, and 95% of that is invested in traditional -- traditional investments. so the question is, how do we think about using that money, that capital to advance our mission? >> what kind of stuff were you in that you no longer will be in and what kind of stuff will you be in that you weren't in before? >> we will be in affordable

housing. we will be in financial services for the poor. these were not areas we invested in outside of our 5% grant-making and program related investment budget. so this will be a new kind of frontier for us. but it's essential that we think about how to deploy capital for social impact. it's no longer good enough to say, do no harm. we have to say, how can we do good? >> did you change your quote/unquote hurdle rate, if you will, in terms of how you think about investing to pursue a sort of more socially mission-driven investing approach? >> well, that's a really interesting question. because when you look at the housing funds, the housing marketplace, there is a lot of money to be made in affordable housing. so i'm not willing to say that there's going to be some big haircut because we now are investing in housing for the poor, housing for low income people. there is money to be made. you know, 25 years ago when i was working in harlem, we were

doing housing, a big supermarket. we couldn't find investors. today, there's a huge marketplace. there are clients who want products that serve their financial needs, but also make them feel like they're using their capital to do good in the world. >> and back to the second part of the question, are there things you were invested in that you now no longer feel comfortable investing in? >> no. we had a traditional screening. no tobacco, no guns, that sort of thing. but we are confident that our traditional portfolio will continue to do well. we have always been a high performer. but what we need to focus on now is how do we build this new marketplace? so that more capital flows to social impact? >> and how are you investing, and the reason i ask is, private equity industry over here is now starting to think much more mission-driven. i'm thinking tpg just started a fund called rise. others are doing similar things. how do you see the money flowing

in to funds like that, relative to more traditional funds, and how do you think that's going to change investment? >> i think there will be more funds, likewise. and that's in part because clients, consumers, will be demanding more products. >> right. >> and so clients like the ford foundation and i think an increasing number of large foundations, and high net worth individuals, are going to be looking to fund and so we're going to see those kinds of vehicles multiply, i believe, in the coming year. >> have you had that experience thus far? >> more as a investor, contributor in a number of social finance things, including my wife's been very involved in social finance bonds which i think is a great concept of being able to prove out, use that kind of public financing, to prove out a concept that can have a major impact, where the individual contributor takes the risk, but then can stimulate government support if the project works. and i think those -- >> and the money goes further that kind of way? >> those kind of public/private

partnerships i think are going to become increasingly important in order to be able to leverage into the objective that i know you have. >> absolutely. there's no way we'll solve these challenges without public/private partnership. >> let me ask you about just, in terms of tracking mission-driven investing. i did a column earlier this year with bono, who's involved in the rise fund. and he said that a lot of these deals are bad deals done by good people. meaning that there's a lot of people who want to do the right thing, but there's been a almost a laziness, i think was the word he used, in terms of how people approach it, and then ultimately track the success of these investments. you need these investments to work for your endowment to work. >> absolutely. this is a charity. >> right. >> this is an opportunity to make the capital markets work. for social impact. so what bono i think was talking about is a lot of people came in to this marketplace early on with a kind of a charitable instinct. >> right. >> don't do that. that's a big mistake.

we're coming in to this with the instinct to do good, to do well, and to deliver performance. >> okay. darren walker, thank you. appreciate it. >> happy to be here. >> when we come back, abbott labs reporting just a few minutes ago. we'll take a look at the numbers and the entire biotech sector after this. and is the border adjustment tax dead? former commerce secretary carlos gutierrez will join us to talk trade and the president's proposals. n, i just need to knof the customer app will 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. with help from hpe, we can finally work the way we want to. with the right mix of hybrid it, everything computes.

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abbott labs reporting moments ago. meg tirrell joins us with a deeper look inside abbott. >> that's right. a beat on both the top and bottom lines for abbott labs on earnings per share and adjusted basis coming in at 48 cents versus analyst estimates of 43 cents. in terms of revenue, 6.34 billion dollars versus analyst estimates of $6.15 billion. the company also reiterating its 2017 adjusted earnings per share guidance of $2.40 to $2.50. there's been a lot of news for abbott recently renegotiating the terms of the adeal with ahere. be listening for any commentary on that. call starts at 9:00. the share looking up just 1% on low volume. beats and unchanged guidance in the first quarter. >> okay, thank you for that. let's get some final thoughts from our guest host scott sperling, thl partners

copresident. >> you're looking -- >> for today. >> final for today. that's good. >> final for today. >> i don't like that, right, exactly. >> he's fine. he's good. >> where do you think this is all going to go? between the time we see you now and see you next. >> so, again, as i said, i'm reasonably optimistic that we have fundamental drivers that are going to be very helpful to investment, for investment opportunities. but let's face it, the market in terms of conventional metrics still is reasonably pricey. you're looking at almost 19 times forward p/e. maybe that's a good metric. maybe there are better ones. but, you know, you need to have good performance to sustain this level. i think if you look around the world, i still like the united states better. for all the reasons that some of the guests were talking about. i think the potential divisiveness in europe, and the corresponding impact on the markets there remains a very significant risk to their fundamentals. and i don't think that dissipates. the election, populism is a sign

of other underlying problems. and that's not going away because nobody's dealing with those problems. so i think that there's still some risk in europe, and if you look at emerging markets, the developing world, it's the end of the whip. in other words, if things go bad in the u.s., and we hit a recession, and look it's been a long time since the last one, so you can argue that we're within a couple years of recession. but i've been saying that for four years. at some point i'm going to be right. >> have you been holding onto cash waiting for it? >> we have reasonably high hurdle rates. i would say that in our business we've been very unsuccessful at buying things at auction. so, you know, in our last fund the dozen deals we've done eleven of them have had to come from other sources. and they're on average much smaller than i would have exp t expected. we're looking for companies that we can build upon. that's how you find things at prices that to us make some sense. it's hard to go directly into the public to private big deals

and find value there. >> other investors say look if i can't get any yield in the bond market though it makes the stock market look more reasonably priced. >> right. >> than p/e ratio might suggest. >> i think that's exactly right. the math works until it doesn't. in other words, you know, if we get the growth and rates go up, then obviously that math changes, and the relative -- the multiple that you would expect to come out of that formula will -- should compress. so you know, it's a little bit of a two-edged sword. but it's definitely true that when you look at the cost of money today, it justifies higher multiples. what we need is higher growth. and that's what we haven't had and that's what again i'm hopeful we get an environment that allows for that higher growth rate. >> pet supplies. >> pet supplies. it's a great growth area. >> people pay up. you don't even ask. it's like, it's for my dog. crazy. >> thank you, scott, it's been

great seeing you. >> thank you. good to see you all. >> when we come back, former commerce secretary carlos gutierrez talks trade wars and the president's agenda. and later facebook holding its developers conference this week. we'll take a look at what the company is working on and what it means for the stock. "squawk box" will be right back. fees? what did you have in mind? i don't know. $4.95 per trade? uhhh. and i was wondering if your brokerage offers some sort of guarantee? guarantee? where we can get our fees and commissions back if we're not happy. so can you offer me what schwab is offering? what's with all the questions? ask your broker if they're offering $4.95 online equity trades and a satisfaction guarantee. if you don't like their answer, ask again at schwab.

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earnings alert. blackrock and morgan stanley both beat the street. we're going to dig into the reports. a showdown in parliament. >> we welcome the general election. but this is a prime minister who promised there wouldn't be one. >> there are three things that a country needs, a strong economy, strong defense, and strong, stable, leadership. that's what our plans for brexit and our plans for a stronger britain will deliver. >> uk lawmakers debate the prime minister's call for an early election. the latest on the vote is straight ahead. plus the business of beauty. makeup mogul bobbi brown is going deeper into department stores. she will join us on set as the final hour of "squawk box" begins right now. ♪ learn from the most powerful city in the world, new york, this is "squawk box."

good morning and welcome back to "squawk box" here on cnbc. we're live from the nasdaq marketsite i'm joe kernen along with becky quick and andrew ross sorkin. the futures right now are up 14, even though ibm is down like a lot. down like eight or nine points. i haven't checked it recently. eight or nine points puts about 50, 60 points of downward pressure on the dow. yet still higher. s&p indicated up 7. dow up 14, nasdaq up 18. treasury yields up a little bit in recent sessions. they had been below 2.2. >> morgan stanley reporting earnings in sharp contrast with rival goldman sachs which reported yesterday. first quarter profit came in at $1 a share compared to estimates of 88 cents. revenue also beating forecasts. the ceo james gorman is calling it one of the firm's strongest quarters in recent years although he says the market environment remains uncertain but as you can see, morgan stanley shares up by 1.6%.

shares of ibm as joe mentioned are under pressure. the company reported quarterly earnings that actually beat expectations, but the sales number was short of estimates. revenue declined 3% from a year ago and that marks 20 consecutive quarters of revenue decline. ibm shares are down by 4.8%. that's a decline of $8.16. a lot of talk about this throughout the trading die. also bidu is banking a self-driving technology later this year. the chinese company said its apollo project will provide tools that carmakers need to make autonomous cars challenging the likes of google and tesla. and across the pond a heated debate is under way in parliament over british prime minister theresa may's plan to hold an early election in june. results from the vote are expected soon. the main opposition labor party has welcomed the call for snap elections meaning it's almost certain that the prime minister will obtain the two-thirds support she needs for the

election to be held. and president trump signing an executive order to bolster protections for american workers and american made goods. at snap-on tools headquarters the president also called nafta a complete and total disaster. comments we heard on the campaign trail. joining us right now is former commerce secretary carlos gutierrez, the chairman of the albright stonebridge group. what do you make of those comments about nafta? he's sort of gone a little back and forth on this now. >> no, no, no. i have been a firm believer in nafta and i am a firm believer in nafta -- >> not you, i'm suggesting president trump. >> oh, i'm sorry, i'm sorry. okay. yeah, look, i think that they're going to go forward with some negotiations. nafta is 25 years old. so, you know, it was before the internet took over the world. there's a lot to update. i think the idea of restarting nafta and renegotiating nafta is not a good idea and it's not good for our economy.

but you know, you mentioned the buy american, hire american, i think that is the -- the scope is relatively small. but it's tremendously symbolic. so it does have a ripple effect around the world where other countries will do pretty much the same. but, you know, if you look at it, not a lot is changing on both sides. whether it's the buy american or the hire american. and that's all part of, you know, having an impact on the way the world reacts to trade and reacts to opening up their markets. >> mr. secretary if you were in charge of trying to bring back jobs to america, what would you do? >> incentivize foreign investment as much as i could. i would review our immigration laws, because i believe that we need more immigration, not less. it's a matter of math, very simple math. the economy gross on the number of people in the workforce and the productivity of those

people. our productivity has been relatively low. so we're not going to grow 3.5% through productivity. and our native-born population isn't enough to keep the workforce growing enough to grow at 3.5%. so, you know, for me it's an economic issue. i think we need more high tech workers. i don't know what we're going to do about the million farm workers we need. it's just -- it's a reality of our economy. the other thing, too, is look at banking regulations. i think the president's right on. in terms of dodd-frank. i don't think small businesses, start-ups, new ventures, medium sized businesses, are getting the capital they need. and at the end of the day, this economy works on the basis of new businesses. new businesses hire well over 50% of all new employees. all new jobs are created. primarily by new businesses. not small, but new.

our start-ups are actually down. which is a bad thing, because in the future. >> right. >> you know, that's the pipeline for large companies in the future. so those are a few things. i think tax reform is a great idea. and if we want to attract foreign investment, and investment in the u.s., i think we have to do it through incentives. >> right. >> not, you know, not through punishment, if you go overseas. so, you know, those are all things that work. >> secretary -- >> and i think the president should get on those things that actually help hit the 3.5% >> we're coming up on 100 days here. how would you grade the administration thus far? >> well, look, first of all, i think the idea of this artificial 100 days is crazy because you can't judge a ceo in the first 100 days and what they do in the first 100 days will be very different than what they do in 18 months. i would say he's done a very good job on building a team. and he has a good team. this is a good cabinet. he's delegated. he -- that looks to be one of

the bright spots. i think there's still a lot of question on policy. and whether it be foreign policy, domestic policy, and i think that's the challenge, is it's either a management process challenge, or just a discipline challenge, but policy is the key. >> mr. secretary, when your clients, in your current role, come to you and say, what do you think is going to happen? meaning what do you think is going to happen to tax policy? what's going to happen to infrastructure spending if that's really on the table? what's going to happen to health care reform one way or the other? what do you tell them? >> look, that's very uncertain. and that's the big question. what we know is that health care was not easy to put through. and just think about tax reform if you want to step back, okay, take taxes down. spend a trillion dollars on infrastructure, increase defense

spending by $58 billion. don't touch -- don't touch social security or medicare. well how do you put that together in a way that doesn't blow up the deficits? >> right. >> you can, perhaps you can do it in the top line. by growing. but we're not going to grow if we continue to clamp down on immigration. >> but you're in d.c. so what do you think the chances are that we get some tax reform? what is the chance we get this infrastructure spending? >> look -- >> -- what you're seeing out there. >> i think the highest probability is probably infrastructure, because both sides agree on infrastructure. the tax reform's going to be tricky. because, you know, how do you pay for it? and there's always this idea that the tax for corporations and big, bad multinationals, which you know, thanks to those big, bad multinationals we have the best economy in the world. but, you know, there's this

string inside the trump administration that is on one hand it's pro-business. on the other hand there's a so-called globalist corporatist elite. well thank god for that corporatist globalist elite because that's why we have the best economy in the world. >> thanks so much. >> i think infrastructure is more likely. >> right. >> tax reform can be done, but i think it's going to take focus. just let's focus on tax reform for the next twelve months, and stop the distractions. >> secretary, that was pretty unapologetic defense of globalism. you think populism goes by the wayside? >> well i think the numbers will tell. you know, at the end of the day, it's going to be the numbers. and we have a president that is numbers oriented. results oriented. and whether populism works or not, is going to depend on how

fast we're growing gdp. how fast we're creating jobs. it's a matter of results. so at some point after the 100 days in six months, in nine months, in twelve months, the numbers will start showing up and that's when policy will be reflected in the numbers, and you can't hide from that. >> okay. mr. secretary, thank you for your time and your perspective, of course. always. >> thank you. we've been talking about earnings this morning. blackrock also out with earnings. leslie pick ert joins us right now with a rundown of that. >> hey, becky. a few things reinforce the trend from active to passive investing quite like blackrock earnings. the girl grew its total assets under management to 5.4 trillion dollars. and most of that can be attributed to $64 billion worth of inflows into i-shares, etf products and another $12 billion in index funds. now blackrock cut their fees in core etfs about six months ago to build even greater scale in these products and that showed

in the quarter and blackrock was still able to produce a gain in revenue, which was $2.8 billion during the quarter. that was up 8% from a year ago. that still lagged analyst estimates, though. the story looks a little different on the asset management side. the firm saw outflows in equities and fixed income and these results come just weeks after the firm announced an overhaul to part of itzhs activy managed equity unit. all in all, blackrock beat analyst estimates for adjusted earnings. block rock reported $5.25 per share while analysts were expecting $4.89. shares little changed this morning. guys? >> all right, leslie, thank you very much. take a look at it. looks like they're down by about $1.60. >> coming up, china's car sales. in that rare yeah of the world, running out of gas a live report from the shanghai auto show next. plus, facebook's new spin on reality. ceo mark zuckerberg pitching the future of social media, and that

platform at its annual show and tell and it looks a lot like snapchat. we're going to talk to an analyst after the break. then later money and makeup bobbi brown is heading back to the department stores. she'll join us to explain. stay tuned. you're watching "squawk box" on cnbc.

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welcome back, everybody. facebook ceo mark zuckerberg taking the stand for his keynote dress at the annual developers conference. some include the media giant's plans for augmented reality. joining us right now is colin sebastien, senior research analyst at robert w. baird. colin, it's great to see you today. and you know, facebook came into this really having quite a bit of momentum in terms of the earnings that they've been dealing with, and in terms of what they've seen with instagram and the momentum it's picked up. so how do they kind of build on this? what messages have you been looking for? >> well, it's primarily a developers conference but it does give us a glimpse into the

company's product road map and from that point of view, what we saw yesterday was a focus on the core facebook app and how facebook using the camera, as a bridge towards augmented reality, hopes to engage with more younger users. so that's an important point number one. secondly video. video is clearly more important for facebook. half of mobile traffic and there facebook is introducing more tools for professionals. publishers, to distribute videos on facebook, and to monetize those. for example through new ad breaks. and messenger was the other point of focus of the conference. and there it's becoming a little bit like amazon alexa but in chat form. more of a personal assistant to answer questions, and deliver goods, and things like that. so it's an interesting day one. >> let's break down some of these things. augmented reality is interesting but it's not really reality at this point. we haven't seen huge pickup with a lot of these things and facebook, the virtual reality

set that they have has been running in third place. are they behind the gun at this point? or is everybody still kind of trying to figure out how to make this become main stream? >> well in terms of the near term trend specifically they are behind the curve a bit. it's an expensive device. there aren't many practical applications for it. but in terms of vision, i'd say mark zuckerberg is a bit ahead of the curve. and the integration of camera features, integrating some of those snapchat-like features into facebook is a primitive way as he put it to taking a step towards augmented reality in which we use glasses or the camera on the phone or perhaps a head set to socialize with our friends, to interact with businesses, so the vision is there, but it's going to take awhile for us to see that affected in terms of the facebook app. >> you mention the voice platform trying to use it with messenger and getting something i guess that's more akin to an apple siree. but apple's had huge success with siree, and you've seen

amazon have this huge success with alexa now maybe a tipping point from that perspective. facebook really knows how to come in and kind of capture a market even when they're not the first once there. do you expect to see that happen in this instance? >> yes, definitely. i think the vision, in particular for messenger is to use the artificial intelligence the machine learning that helps make facebook a great technology company, and turn those into tools through voice, as well as through chats, where users are given access to personal assistant, intelligent asithsant like google home, like siri, like alexa and echo. this is a paradigm for internet plorms. in facebook we're seeing messenger as the centerpiece for that initiative for them. >> all right, colin. you sound like a true believer.

thank you for joining us today. >> thanks, guys. >> the auto sector in china could be facing a tough reality. phil lebeau joins us now. really? holy cow, phil. live from the shanghai auto show. that's kind of cool. hey, phil. >> what a view, joe. as we were 60 floors over shanghai looking out the big focus here is all about what's happening with the chinese auto market. compare china's auto market with the u.s. auto market. we talk about the u.s. being at record sales. look at china. more than 23 million vehicles sold last year. the question is, will it top that total this year? so far sales are up just 2%. they had a rocky start to the beginning of the year, january and february posting double digit declines. part of that is because of the taxes on new vehicles, went up from 5% to 7.5%. the one part of the market where they are not noticing any slowdown, luxury automobiles. and also electric automobiles

are growing. not quite as quickly as luxury. and who plays in that segment? tesla. in fact we went to a tesla store today, saw a few of the tesla owners driving in, as we talked with one analyst here he said look, tesla is gaining momentum here. it tripled its sales in china last year. remember as we take a look at shares of tesla we will get the first quarter earnings report in two weeks. tesla typically does not break out individual sales by countries, and certain markets. but that's always always a question that comes up during the conference call and it will be interesting to see what tesla has to say about the growth that it's seeing here in china, and whether or not at some point, guys, we see a tesla production plant or a giga factory here in china. guys, back to you. >> phil thank you for that. in the meantime we're going to talk bank earnings this morning. morgan stanley beating the street. wilford frost just got off the phone with the company's ceo. >> as we knew revenue and eps beat $1 versus 88 cents more

like 95 when you account for one-off tax. just spoke to the cfo. he said it was strong trading activity across the board. particularly in rates, fx was a little slower pushing him in terms of the offset compared to goldman sachs' performanceance. it was hard to say if there were market share gains based on one particular quarter. it is interesting that he said very much it was volumes, activity across the board that drove this which is something goldman sachs said wasn't the case for them. still we don't quite understand why there was that difference. just to highlight how big that difference was. there you have it the select performance of various investment banks, for q1 trading overall. goldman sachs down 7% quarter on quarter. morgan stanley plus 9. bank of america, as well, with the standout of all the names, up 38%. that huge dichotomy that we saw between goldman sachs and all of the other banks confirmed this morning that they were the single outlier. also just quickly i asked him if he was sort of welcoming the

upcoming european elections balls it would lead to pickup in volatility again and he said that wasn't the case. and in particular, which again is slightly different to what some others have said with the french election he said it's leading people to do nothing at the moment, to sit on the sidelines, as opposed to being taken big positions. so we'll have to wait and see whether that and the upcoming uk election lead to bigger volatility, as brexit and the u.s. elections did last year. just saying he wasn't expecting that to be the case in contrast to what some of the other guys have said. the atlas call starts in eight minutes. >> wil we'll let you get to the phone. in the meantime when we return, adidas under fire. we're going to tell you why the sports apparel company is saying sorry this morning. and then tomorrow on "squawk box" you don't want to miss an exclusive interview with former treasury secretary bob rubin. he will be our guest at 8:30 eastern time. stay tuned, "squawk box" returns in just a moment.

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welcome back, everybody, azidous is under fire. adidas acknowledged that the e-mail was incensensitive given that three people were killed and more than 260 people were killed in the boston marathon

bombing back in 2013. sounds like it was probably an unfortunate accident. coming up, trouble in the terminal. and we're not talking about united. we'll tell you why one investor is betting on the comeback of two airlines. that's next as we head to break, take a look at u.s. equity futures overcoming the weakness in ibm this morning. and the dow is indicated up 28 points. s&p up 8.5. the nasdaq up 25. that schwab billboard. oh, not so fast, carl. ♪ oh no. schwab, again? index investing for that low? that's three times less than fidelity... ...and four times less than vanguard. what's next, no minimums? ...no minimums. schwab has lowered the cost of investing again. introducing the lowest cost index funds in the industry with no minimums. i bet they're calling about the schwab news. schwab. a modern approach to wealth management.

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♪ welcome back to "squawk box" here on cnbc. i can't even keep it together right now. live from the nasdaq marketsite. we will let everybody in on what we were talking about in just a minute. we have some stories to tell you about. the first one here mortgage rates are at their lowest since november. a weekly report from the mortgage bankers association puts the average 30-year mortgage rate at 4.22%. the report also shows mortgage applications are down 1.8% last week thanks to a drop in new purchase applications. also, take a look at shares of abbott labs this morning. higher in premarket trading.

drugmaker beating estimates by five cents with quarterly profit of 48 cents per share. revenue also beat forecast by abbott's acquisition of saint jude medical. alcohol and beverages appear to be doing well in world markets in recent month's. france's -- they told me how to pronounce it, reported 1% rise in quarterly sales helped by a rebound in china and continued good demand in the u.s. also heineken reported better than expected first quarter sales with europe the key driver there. joseph? >> time now to take a look at what's working in the markets. joining us with his view on airlines, and technology, is paul meeks, chief investment officer at floyd, dahl and holtz. what is working? >> the nasdaq is up sharply today. >> yeah the way i look at it i have a couple of tech ideas. i continue to like micron, then i have a stock idea that i like very much as a turnaround

candidate so it's not working very well at all, at least fundamentally in the short-term. but that's a big fit that will make a comeback right now. the stock trades for fiveish. it's got about $3.5 in cash and no debt. and if they ever do anything right, i think you have a double in the stock, and probably our downside is five bucks even which is about 10%. >> broaden out your perspective. you follow a lot of the, you know, the name brand technology players. what are your two or three favorite in the big names? >> you know, i continue to like facebook. i think apple, i might be turning more positive on. since the stock is finally flattened out and give me a chance to buy it. amazon and google. google is one that has not really participated in the last couple weeks or month or so. probably has at least these biggest upside. and so i know, old news but

ex-netflix i like them all. >> in terms of, you know, the, just the investing environment and macro concerns, what is buffeting the technology right now, is it the fed? is it the prospect of tax reform? is it europe? what is it that, you know, that's -- that is keying off on? >> yeah, joe, that's a great question. you know, this was a beneficiary of the trump bump. you know, maybe with a little bit of delay a couple weeks after the election in november. but the last couple of sessions, you know, technology has kind of come in somewhat. i think everybody is very anxious about what they're going to say this quarter. and the biggest story, that continues to buffet these stocks, as you've asked is cloud computing. you know the cloud computing leaders. the way i look at that is, you know, some days you can't buy them because they're too expensive. but you always want to buy them on dips. it's a real powerful theme

within the sector. >> do you cover ibm, paul? or do you have an opinion on it? >> yeah it's a great question. ibm i don't even think that is a tech stock. you cannot shrink your revenues every quarter for five years and call yourself a tech company. i know they're working on the cloud. and they know what they'd like to advertise that the cloud and artificial intelligence and big data analytics is becoming a bigger piece of that pie. but the way i look at that, this is a '70s, '80s, '90s story and maybe for the 3% dividend yield you buy it. but this is a value stock. i don't think i would even consider it a technology company anymore. >> hmm. so, when you're looking at something like an amazon, which we had this discussion earlier, you know, amazon, god knows the valuation. netflix the valuation there. there's so much future growth in the multiple, or in the stock price, why not give the same benefit of the doubt to ibm if they're successfully transitioning to the next generation cloud computing?

>> interesting perspective. the way i look at it is, we have to go, it won't be a number of quarters, it will be a number of years, before we see even close to the tipping point. where it becomes more of a cloud or new era technologies franchise. because we are being held down by the al ba tros of the old. i don't think it's a short-term in coming i think it's going to be awhile. >> all right. so the nasdaq has been on a relative basis, probably holding up better than some of the other areas. you expect this to continue if, you know, if there's any policy on successes? >> yeah, i think so. because we'll have a couple of things. they will benefit from a drop in the corporate tax rate, and of course, as we know, joe, these are companies that have a lot of money abroad. and when they repatriate their capital, if they can do that with some sort of tax holiday, i

think it will drive another round of mergers and acquisitions in the united states within the tech sector and that should bring, for better or worse some euphoria and higher valuations. >> all right, paul meek, thank you. we appreciate it. >> thank you, sir. >> when we return, makeup mogul bobbi brown is moving beyond beauty. she's here with the details about her new venture in retail and she will join us, next, right here on "squawk box." ♪

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beef prices are dropping just in time for grilling season according to data from the u.s. bureau of labor statistics, consumer beef prices were $3.59 a pound in march, that's 30 cents lower than the same time last year. and 60 cents lower than two years ago. beef is expected to see increased consumer demand as prices drop in grocery stores. starbucks cashing in on the unicorn trend. check this out. the company debuting its first color changing and flavor changing drink, with what's called the unicorn frappuccino. those of you who know me know i enjoy frappuccinfrappuccinos. this one i don't know about. the drink starts out purple with a sweet and frutti taste but after stirring changes color to pink and the flavor becomes tangy and tart. drink was once on the secret menu. now will be available across the board starting this sunday. or until this sunday. it's a special -- a special thing. i don't know about this. does it have caffeine in it, though? >> don't know.

>> lots of pink and lots of purple. entrepreneur bobbi brown made her name in the beauty industry, but the experienced founder and grand developer has now moved deeper into the department store. bobbi brown is a makeup artist and the founder of her namesake cosmetics line. she has a new book out this week called "beauty from the inside out" and she's here with us on set this morning. thanks so much for being here. >> thanks for having me. >> you moved away from your autonomous brand, stepped away from that. you've got a whole new line that includes not only beauty products but also wellness. how did you go down this path? >> it's not my line. it is a concept store at lord & taylor, basically a creative pop-up shop that talks more about lifestyle. there's beauty. beauty tools. great health supplements. everything is there to lead a great lifestyle? >> why wellness overall? >> wellness has always been really important to me and i do believe that the better you take care of yourself, the better you look, the better your skin looks, the better you feel, the

more you can do the best thing at your job and now it's a trend. it's always been important to me but now it's a really big trend out there. the food you eat, healthy food. >> i wouldn't bet against you, because you are an incredible entrepreneur. but moving deeper into the department star right now there are people who think wow there's such a change happening in retail. how do you kind of see the landscape? >> we are all buying online. you know. i mean there's no question. but i love this opportunity with lord & taylor because it's a way to bring people in the store. and you have to be creative in order to, you know, bring the customer back. so we have a lot of vents that we're going to be doing and just now, you know, different kind of assortments every month. i do think that the department stores have to now figure out how to get people back into the store. >> do you think they will? if you could create a new company tomorrow would you create something that's brick and mortar at all? >> i would do both. i would absolutely do both. because people still want to touch and feel things. you want to feel the material and then you want to, you know, be able to get it online. so i do think that there's a way to do both. but it has to be a little bit

experiment -- experience. >> experience kiss margins. because you've got to have people, right? you need talented people to be hanging around. >> that's right. yes, we need talented people hanging around to give a reason for people to come into a store. >> this kind of back to your roots, the whole idea of e-commerce. you were selling out of your house at first, right? >> right, exactly. >> with the lipstick in a manila envelope which i didn't realize at the time i was green. i was saving the universe. i just didn't have, you know, enough money for a box. >> so, is it something the pop-up stores will you be doing that also with an e-commerce site as well? >> oh, absolutely. right now it's going to be on lord & taylor.com and we're in five stores and there's plans for definitely growth. >> what's the book about? >> the book is called "beauty from the inside out" and it's honestly, i spent my life telling people how to put makeup on to look healthy and look better. i'm not telling people not to wear makeup but honestly if you take care of yourself and eat the right food and you know what

supplements to take -- >> what are the right supplements? what's the right food? >> well, first of all. for me the right supplements are things that are easy to take. in a powder or something to chew. i don't take capsules. >> okay. >> but you know, and everyone is different. the whole idea of the book is that you read all the different experts, and you try one thing at a time. you know. when you're not feeling good you maybe open the book again and say okay, let me try that. green powders, elle mcpherson is in the book and she's got this amazing green powder. so maybe if we take it we will all look like elle mcpherson, i don't know. >> green powder? >> yeah. it's greens -- it's like vegetables. >> okay. >> it's a powder and it's green and it works? >> it's green. >> and it's made of green. >> it's full-on green. have you ever had it? >> no. i prefer blue powder. >> blueberries -- but think about color. good color is good food. >> just thought green powder -- >> okay. >> you get it and be like -- >> i feel like all of the models sleep a lot. because that's you need for it

to look -- >> the models are really young and they don't sleep a lot. >> they don't sleep a lot? >> no. but there's meditation in the book. >> you always hear people say you need to sleep. >> you do. >> you live in new york city. you know this guy leonardo dicaprio, models -- >> i'm not saying leonardo dicaprio is sleeping. >> you can do that when you're young and get away with it. you can get away with a lot when you're young but you have to take care of yourself as you get older. >> -- model he's dating -- >> i'm with the program. >> bobbi you created bobbi brown i guess 26 years ago at this point. >> yeah. >> and, it was quite a ride. >> mm-hmm. >> how does it feel to be an entrepreneur all over again? >> well, it's amazing. you know, it's amazing that i started it, and it's amazing that i, you know, worked in this big company. when i left we were building in sales which was awesome. and now, to be able to start all over again, press the reset button, see what's out there, you know, i don't know what my future is going to be and how lucky am i to be at that place right now? >> i don't know if this is hard or not.

how does it feel to see this thing that you created with your name on it, and then be one step removed? >> well i'm not the first founder that have left a company. >> right. >> there's calvin klein, there's donna karan, so you know, i love the company. i love the company i created. i'm proud of my product. i still wear the product i love. i put on a lipstick which is called bobbi, and you know, but now i have an open slate. and so i'm looking and seeing a lot of interesting things out there. i'm not sure what my future is. but that's such a great place to be. >> as an entrepreneur working inside a big company what are the advantages and disadvantages? >> well the advantages are that you figure out how to get around things. and as leonard lauder once told me never ask for permission, beg for forgiveness, and that was great advice. but the exciting thing not being in a big company is i don't have to ask 15 people or 100 people what their opinion is. and i can actually get it done probably in a couple days or a couple weeks. >> that's nice. >> the lord & taylor thing took six weeks, which is amazing how

quickly we did it. >> we want to thank you very much for joining us today. the book is called beauty from the inside out and the pop-up stores will be appearing when? >> it opened in lord & taylor fifth avenue and there's five others and lordandtaylor.com. >> thank you very much for joining us. >> orange powder? met musil. >> it's amazing. >> yeah. >> fiber 100% but it's orange. does that count? or do i need -- >> it's like -- >> you've had it? >> it's like tang. >> for me it's an orange powder. >> go eat oranges for, you know, the vitamin c. >> that's not going to help me with the problem -- >> drink a lot of water. if you drink a lot of water that will help you. i guarantee it. >> fiber. >> how many glasses of water do you drink a day? eight, ten? >> probably. >> okay. >> probably do. >> okay. >> probably do. >> i swear by the other stuff though. when we return, jim cramer, live from the new york stock exchange, we'll get his take on the day's top stories.

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welcome back to "squawk box." new data on media consumption from nielsen. the company says streaming services have become a bigger staple in homes now than the dvr. in the first quarter of the year, 57% of homes subscribed to some streaming video services. outpacing dvr ownership, which is at 54%. of the streaming services, netflix is the market share leader with 51.2% of homes, followed by amazon at 28.6%. and hulu at 4%. >> okay let's get down to the new york stock exchange and cramer joins us right now. what are you looking at, jim? >> i'm actually -- i think that we're trying to figure out whether these banks are rear view mirror or not given where interest rates are. i tend to think that a lot of these banks have a lot built in away from the yield curve. morgan stanley is not a yield curve dependent company as some of these others. banks are really pretty good.

goldman was the outlier. and it's kind of surprising. i think it took away from the luster of the bank of mesh conference call. bank of america was really terrific. so look at the banks. liking abbott this morning. abbott really seems to have gotten it together. have gotten it together. i'm looking at j&j to see how bad it was. i don't think it was. it's an okay morning. >> how do you look at morgan stanley relative to what happened with goldman sachs yesterday? >> i really don't -- you know, going over that fixed income commodity currency line, i just don't get it. i mean, goldman just did not deliver. what -- it's almost as if their business were hedge funds and hedge funds stopped doing things. i know that's too simplistic. i need to do more on goldman. i just don't get it. >> and then how do you think about ibm? we were debating that earlier this morning. >> look, i think ibm, they've -- they didn't close on some deals. if they had closed on some deals

the whole narrative would have been difference. it's hard to sell it because people are sick of waiting. i would not sell something down 10. >> what do you think the chances that lowell mcadams at verizon ends up buying either comcast, disney or cbs? >> i love lowell. you know, love him. none. >> none. that's -- i'm in the same place. >> i love him. love lowell. love lowell. >> great to see you. we'll see you a lot more in a couple of minutes. as we head to the break, a quick programming note. former treasury secretary bob rubin is going to be join us here on the set tomorrow. an exclusive interview you don't want to miss at 8:30 a.m. eastern time. "squawk" returns in a minute. kevin, meet your father. kevin kevin

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all right. take a look at the shares of ibm, the stock slipping after the earnings report. it was the 20th consecutive quarter of decline. year over year revenue decline, the shares are down over 9.

that's about 5 -- >> by the way, where's the dow future? the dow futures have been fighting this heavy draft. >> 20 or so. >> this is a decline, down 9%s -- >> a quarter and a half. >> that's a drag of 60 points from ibm. so we'd be up more than 80 points. >> right. we're watching the shares of td ameritrade, it fell a penny short of quarterly profit of 40 cents a share. and shares of intuitive is up. they had strong sales of the da vinci robot. more than 175,000 arizona residents received blood tests from fair aknows who will full a full refund. the lab company will pay $4.6 million into the state fund and theranos will pay a civil penalty without admitting wrongdoing. that's in stark contrast to the $30,000 penalty theranos agreed to pay to regulators.

there are still additional lawsuits pending. this is the story that never ends. >> nope. it does not. emirates airlines is reducing the number of flights to boston, l.a., ft. lauderdale. the reduction is the result of weaker travel demand to the united states. >> and also, i don't know -- well, the issue of they can't -- i don't know if it's not all on of their flights but you can't bring an ipad or a laptop on many of the airlines. >> that's right. >> talk about competitive disadvantage. >> right. >> another airline was temporarily doing that, right? or just in certain parts of the world? >> certain parts of the world, but emirates serves a lot of the places. facebook holding the fa conference and pushing into augmented reality. mark zuckerberg demonstrated how

it will work on the smartphones and vr headsets. and facebook will allow developers to contribute their own effects. i think if you can put dog ears an a dog nose on someone that's 50 billion market cap just for starters. who doesn't like to put a dog nose or dog ears on a person? >> hours of entertainment? >> it's just worth a lot. a big bump to the market cap. another platform called facebook spaces will allow you to interact with other users in a vr world. now, that's getting avatar like. maybe we'll get that way some day. >> okay. other news, pet -- see, i shouldn't be doing this because i'm not a pet guy yet. pet smart is buying chewy.com. financial terms are not disclosed. pet smart was taken private by bc partners.

let'get a final check on the markets. we have been showing you throughout the morning that the dow futures have been relatively stubborn, hanging in there by the pressures put on them by ibm. down $9 this morning. we'll see where it opens when we get to the opening bell. green arrows across the board. the dow futures are indicated up by almost 20 points this morning. s&p futures indicated up by about seven. the nasdaq indicated up by 23. this comes after the down day for the markets yesterday. dow was down triple digits yesterday. after being up about 185 points the day before. >> down four out of five days. >> down four out of the last five days. and momentum -- people are questioning momentum at this point. part has to do with the bond market. the yield has picked up to 2.2%. yesterday, it fell below that. the lowest level since november 10th of last year. all kinds of questions about what was going on. the uk announcement bringing up

some uncertainty in the market. that put pressure on yields and german places in the market. let's look at oil prices today. crude oil prices so far look like they're relatively flat. wti is down about 5 cents to 52.36. >> a heated debate under way in parliament over theresa may's early vote in june. the main opposition labor party welcomed the call. it is almost certain that the prime minister will obtain the two-thirds support she needs for the election to be held. look at all the ramifications. the pound rallies like crazy on the idea that brexit becomes more certain, but what it really means if they have enough people on board and a consensus with her party that they can extract better deals from the eu so it won't be as -- >> so they're not facing an election when they're in the midst of these negotiations again. >> it's four years early, supposed to be 2020 when the

next election was. >> what are they doing there? >> do you know how many snap elections we'd have over here every time we were unhappy -- >> we have one on the set every morning. >> maxine waters wants to call one right now. a snap election. >> i want to call one on you. >> you had -- >> re-elected in a landslide. join us tomorrow. "squawk on the street" is next. ♪ good wednesday morning. welcome to "squawk on the street," i'm carl quintanilla, good to have jim back at post 9. futures are solid after losses, the dow looks to open higher despite a 60 point drag from ibm on the revenue mix. some mixed action in europe. and ten year sits right at 2.2,