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, close to the lowest level since

november. ibm is set to weigh down the dow today. notching the 20th straight quarter of year over year revenue declines. plus, a border tax replacement. the white house considering a elimination of state and local deductions needed to pay for tax cuts. some drama at 21st century fox as advertisers flee. reports that primetime star bill o'reilly is now all but out. it would be the third major departure for the network in the last year. ibm bill's down sharply in the premarket. the miss on the quarterly revenue overshadowing the sales beat. down for 20 straight quarters. ibm had an 11 quarter streak of opening lower on earnings. that was broken last summer. now appears to resume. >> yeah. look, this was a kind of quarter where they actually didn't close certain business anded that they closed -- and had they closed certain business, you know what, things are on target.

the gross margins are not done as much as they were. the signings are surprised that they did misit -- miss it. we accept it for qualcomm, they have all the patents, they monetize them. i don't think down ten, you sell it. once again, we're not able to deliver. the streak about the revenues, they're trying so hard to get into really into cognitive and into ai, all the things that we really talk about. that's still going well which makes me say, youg what? -- you know what. down nine or ten. i know the institutions want to get out of it. breaks a little bit lower. inclined to buy it below 160. >> this an ongoing narrative from the company for a couple of years which is don't look over here, look over there. i'm in the cloud. our strategic imperatives and they're saying, hey, they're up 12%. and they'll continue to focus you on the growth dynamics of the portfolio of companies trying to say don't worry about the legacy businesses.

they'll just do what they do and yes it will be done. but i don't know. do investors really want to keep focusing on that? >> no, they don't. and you have got to keep the other businesses decline within reason to make it so that when you do the big cognitive stuff it does not -- it's not obscured. it was obscured. what happens if they -- if they nake -- if they sign the rest of the business. they have clients that they can't really game. then i think people will say, you know what, it goes back up to 170. is it on a yo-yo between those two? until it breaks out, yes. because the whole -- the tone of the conference call and the tone of the research is, you know what? enough is enough. and i question whether enough is enough when you're right there. you're right there if they had done the signings the story would have been okay. >> wow. >> look, nobody -- this stock is friendless. i like that. >> well, not entirely.

b of a does reiterate a buy today. $200 target, particularly attractive opportunity because of the notion as buffett would argue they're sticky in corporate i.t. watching the 170 level where buffett is break even. >> and martin schroeder said they're the heart and the lungs you can't do without them. that's true. execution is not good. they did not execute. i'm not saying they made the playoffs and they did -- they needed to execute, they needed to make those signings and they -- their stock should be punished for that. i'm saying that below 160, 170, you're saying they're never going to come back. i think that those who -- every time has someone has bought it it's been wrong. but any time someone has bought it big on a discount it's been right. >> big picture always interesting to watch these mammoth companies try to transform themselves while they keep going. hp is another example. >> general electric is another -- >> general electric, try to wean

yourself off of the businesses that keep growing and in in case, they keep coming back to cloud overall. they include a lot in there. >> yes. >> but when they talk about their 12 month run rate on revenues 14.6 billion they say that puts them ahead of microsoft. >> i know. i don't like -- >> but it's not quite apples to apples. >> no. >> as well. although they do as a company that helps other companies figure out their problems and how to solve them they have a lot of application for using all the data and the cloud that perhaps their competitors don't. >> i think the salesforce, combination of einstein with watts, a couple of bright guys could matter. a lot of second half. what i think's interesting people say, you know what? i'm done with the second half. i'm not playing that game. i wish to some degree that the bank of america guy had thrown in the towel. you want everyone to throw in the towel and give up on this company and that's not there yet. >> stock was -- >> it was a disaster, they didn't execute.

>> a year ago the stock was 144. despite what gross margins have done. >> very good point. is it still a focus the way it should be? it's interesting that we have companies that are trying to change their stripes in technology and really haven't been able to. >> it's hard. listen, what do they have 400,000 employees still? >> a lot of people. >> think of they're number of employees versus market cap versus facebook's number of employees divided by market cap. >> you make up the content. look, i was away, i was in oregon. okay? what's really incredible is this why do people take their pictures -- facebook facebook facebook. they create all of the ip. here the ip they labor over it. sell some of it. they make money. no one believes that they do it other than to be able to pad the earnings. they don't say that about qualcomm. but it is something that is worth discussing because of how hard ginny, right, we have to be thinking, someone is going to be thinking can she pull it off?

>> it will be a key determiner of her tenure. >> i agree. >> i think that's a simple thing to say. i have a keen sense for the obvious sometimes. >> they call you captain obvious. >> yes. that's one of the many things they call me. >> speaking of corporate leaders going to be a good morning for james gorman. morgan stanley is up. the profits are up 74%. helped by gains in trading. gorman called it one of the firm's strongest quarters in recent years and he gets a double digit roi for the first time in a couple of years and hedging out goldman on some elements. >> a low bar. >> what happened to goldman? what happened? >> i read that conference call twice. >> twice? were you looking for a secret code? >> on the plane ride on the way home. maybe i was on such a high from being with my daughter in oregon -- a mental high -- >> okay if it's the other kind of high. allowed there. >> one of the legal states. and i came back and i just said, wow. talk about not executing.

i mean, they just didn't execute on fixed income. morgan stanley seems to be executing everywhere. by the way, let's not obscure the fact that bank of america had a great quarter. so we're leading -- you know, we're getting to the point where i think you can say that goldman's model -- i'm working on this thesis is too hedge fund. >> too reliant on hedge funds? >> >> yes. >> too much like a hedge fund, which? >> well, no. too reliant because i mean when you go over the first -- i don't know, did you see chavez's comments about how the -- the new cfo, about the idea that look, we didn't do well. we didn't do well because the fourth quarter was great because everyone was so optimistic. then the first quarter had no volatility. stress volatility, volatility, volatili volatility. that's something only hedge funds talk about. they didn't have the lowest volatility for the oil or -- and the hedge funds weren't trading the way we thought.

now, they don't have the big deposit base. the deposit bases for bank of america -- extraordinary. >> but i mean, the language is very different in this morgan stanley than goldman sachs 1.7 billion in net revenues. that was up $873 million from a year ago. >> how do you like that? >> strong performance across all regions on improved market conditions. you did not see that kind of language -- >> improved market conditions for goldman the market conditions were not good. now, i don't want to say that goldman therefore is saying, listen, on our side of the street it was raining, on the other side of the street it was not. goldman needs a different set of conditions now. >> you don't think it was related to extraordinarily weak comps at morgan stanley a year ago? >> you know what, that's a good point. but investment backing was so good. sales and trading, equities 2. -- it was so much excellent. that was an excellent quarter.

and you know, they are -- they can be -- if you spoke about analys to apples -- apples to apples there's a degree of that. and goldman came up short. >> is this enough to lift the group? we sort -- >> no, because of the yield curve. we talk about the yield curve again. that was the other thing i was soul searching about. the yield curve. >> really? did you read the conference call on the yield curve? >> did you ever read sidney homer's the yield curve? it's like the war and peace on the yield curve. >> are you saying that the -- that curve can exist while stock prices are at the levels? >> >> yes. i'm saying how much does the possible government shutdown, how much is it trump not doing as much as we thought? and the goldman logic about the first quarter not being as strong as the fourth quarter. and all of these pieces, or how much is this a short squeeze? guy's on the wrong side of bonds or how much it is, there's

general confusion in this country about taxes, about what's going to happen. >> even where our carrier groups are. >> oh. >> yeah. >> we don't seem to know. >> where is carl vinson? >> the story about the international fallout from the vinson episode and how the south koreans are like well, if that isn't true, what do we believe? >> i don't know. you see -- you know how narrow thinking i am. when i heard problems with the carrier group i was thinking we were talk about the pacific crest deal where t-mobile is gaining -- >> we're not talking about the carriers but to carl's point -- no credibility, cuts across the board in a lot of different areas. and when -- it starts to erode -- >> right. >> your confidence erodes. >> well, i think this is causing people to do a bit of a freeze. we need to see right now infrastructure spending. we need to see gary cohn come out double head and say, listen,

goldman's numbers are bad because of me and i'm doing a $500 billion saving bond initiative for your ira. >> instead of saying i'm going to cut to the core california and new york by not allowing the deductibility of local and state income taxes? >> i was in oregon, easy come, easy go. >> exactly. is that a pen in your mouth? what did you bring from oregon? >> franklin delano roosevelt, it's time. >> we'll get to gary cohn about warming up and fox fallouts. reports saying that bill o'reilly's days may be numbered. look at the premarket. looks pretty solid. we want to economic in with jim on arconic. more from post 9 in a minute. the power of a low volatility investing approach. the power of smart beta. power your client's portfolio with powershares. before investing, consider the fund's investment objectives, risks, charges and expenses.

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published reports say fox is preparing to cut ties with bill o'reilly and that he's unlikely to return to the primetime talk show as he has been the focus of sexual harassment allegations. as a result, many companies have pulled advertising from these program. the question is what is the effect on fox a which brings in hundreds of millions from that

show alone. >> the fox network extremely important to the overall financial performance of 21st century fox. board meeting tomorrow, regularly scheduled. typically this kind of a thing would not be something that a board would be board business. but certainly when you're dealing with the culture of a company, the board will get involved. and this does go to broadly speaking culture. i think my reporting indicates james murdoch certainly is very much aware of that. he was very much aware of that when they moved to oust roger ailes. >> right. >> he is management. as ceo, his brother lock lap. but there's a gentleman named rupert who controls it, who is in there every day at fox news running things. >> right. >> it will be fascinating to see where things end up after this board meeting where you expect a conversation to take place. more about culture than specific moves although that may be at the table.

>> full disclosure, i'm about to mention my law firm. i think when you bring in paul weiss, think about you brought in paul weiss for the nfl and next thing you know brady, four games. you bring in paul weiss to 21st -- they do an honest -- they don't care where the chips fall that's the most dangerous thing in the world when you're trying to keep a guy. when you have a official that can't be bought and they can't be bought, they basically are going to tell you what's wrong. when you do an internal investigation, they tell you what's right. >> yeah. it would -- if he's out, how do they replace him? he's an incredibly talented broadcaster who has an incredibly loyal audience. there's one other element to this that kind of creeps into my part of the world. you know, they are still getting approvals in the uk for the purchase of what they don't already own of sky. james already had been the

chairman of sky, but there's a fit and proper test by off com, the uk versions of the fcc. there are questions about the tumult there in terms of what may or may not become going on at 21st century fox, whether that would affect the fit and proper test. probably not, but at the margin do you want to take the chance? you certainly want to get that deal done if you're 21st century fox. >> can you amal jazz any other talent that can play -- >> one individual broadcaster who would be the subject of a board agenda? >> yeah. >> oprah might have been once. somewhere. >> very good point. a very good point. but this is an institution. an institution -- >> the highest rated show on cable television. >> yes. >> just a huge moneymaker and the advertisers -- look, this book empire that he has, i mean, this guy is a major figure in the firmament.

some people feel like you expected a president. >> i think you might be a board level discussion some day. cramer. >> board level discussion? why? whether by wife is going to be use what kind of board she's going to use in the italian house? >> that could be the case. what did she go with? >> she went with some local board. >> walnut. >> yeah. >> well, fox "a" is going to open up nearly 2%. we'll watch that any developments we'll stay on top of. when we come back, we'll get cramer's "mad dash" and get the opening bell. a lot more from "squawk on the street" straight ahead. say carl, we have a question about your brokerage fees. 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. tbut with lightning fast shifts instant. and dynamic track-tuned suspension, what the road demands, the gs delivers. experience high performance through high technology, in the lexus gs 350 and gs turbo. experience amazing. we cut the price of trades to give investors even more value. and at $4.95, you can trade with a clear advantage.

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time for a "mad dash" on a wednesday. good to have you back. we'll talk a little ko. i'm not talking knockout. >> no, it's good to be back, up that. good to be back with you guys. coca-cola. david, this is a very important call. people should listen up. this is a credit suisse hold to buy. handing the baton off to james quincy in may 1, he is giving him, quincy, a refranchised leaner, meaner, very strong coca-cola with a very light business model where quincy can now make add on acquisitions to make it a total beverage company. i have to tell you, i think this call is great. now, what's happened is that people kind of written this company off, just when they finished their -- they're so close to finishing what i regard as being this multiyear effort

to make it so that the company is growing faster. it's going to work. and the stock is going to go higher. credit suisse is right on this call. >> they're right because -- >> because the gross margins are expanding and it will be a slimmed down company because of refranchising. and quincy going to come in hot. most new ceos are not given a baton the way he has gotten. mew tar has left him in fabulous shape. >> well orchestrated succession. >> yeah. >> it's very important -- that's one of their key functions. can we go back -- i don't know if we go back ten years or take a look. >> that's a tougher call. >> buffett and ibm -- >> american express which reports tonight. >> yeah. >> well, candidly -- >> sugar, baby, sugar. >> cantilever, the issue is what

they sell. i own this -- my charitable trust owns this. pepsico made a big long time move out of just total beverages into what turns out to be the fastest growing eating snacks while playing video games or doing virtually reality. while you order a pizza through pizza hut or get frankly if marijuana laws continue to pass around the country, munchies. munchies may be the key. >> not familiar with that. >> well, you look at the pod stores in oregon, munchy monday, half price. who knows? >> chips ahoy, i can go through -- an entire thing of chips ahoy. let's talk -- >> rosenfeld, she has the really terrific 100 calorie packages of the oreos. >> got it. opening bell, coming up after this.

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financial capital of the world. the opening bell in 2 1/2 minutes. big day for earnings. once again ibm and morgan stanley before the bell tonight it's going to be am ex -- amex, qualcomm, ebay. 15% of the s&p is now in and about two-thirds are beating, but by less than the historic allowance. >> i think it's important to remember the financials go first. now we're going to get into the thick of things when it comes to the industrials soon. and those are going to be very hard because they have to forecast with nothing to forecast. they don't really know. they're the ones that have the -- they have the rebate reetion. they have the tax rate that's important. i think that's going to cloud them versus a bank -- they're looking at the yield curve. but some of the results are prettiamazinging. >> you're saying that will be reflected in guidance? >> yes. i think you'll hear about the uncertainty -- particularly as we get closer to the french elections which i don't want to

bore the viewers but the guys are worried about government shutdown. worried about tax rates. >> that would be the 28th, right? i mean, we're getting close. >> i mean, in the near term, i think some of the guys are going to punt and say it's a little difficult to give you a forecast which is going to be dreadful. we don't want to hear that. >> how about the dollar ticking up a bit today, these additional comments from mnuchin that the president was quote, absolutely not trying to talk down the dollar in his interview with the journal. >> boy, i'll tell you the mixed signals are so tough. we know -- he was definitely trying to talk down the dollar. so i mean, i think the dollar is always one of these things where it's just best for the president not to address. you know, a strong dollar is a sign of a strong -- remember he said it's a referendum on his governing. i want to go with mnuchin, he should be talking about the dollar and gave you a dollar heads up. >> treasuries sending out inquiries about your ultra long

bond offering. >> it's coming. >> and if there's interest -- >> i'm working on this. this the a zero coupon all government maturities series "e" bond. it will you want to hark back to my days. it will be so terrific. $500 billion on the line here. it will happen. it will make america's roads, pretty good. >> let's get to the opening bell and the s&p at the bottom of your screen. at the big board u.s. utility corps over the nasdaq exploration and oil company celebrating the 40th listing anniversary. yeah, they're talking 40, 50, 100 year. things you have -- >> that a what's i have -- that's what i pushed for a long time. i pushed it during the obama administration and i think it was deaf ears. it would be great for your ira, make it a zero coupon, i want it

50 years from now. >> 30 years is a pretty long period of time. >> david, that was speaking for me. see, someone who's younger might want a 50. a 50 for me could be a little problematic. i'd like a 30. because that would be -- >> could be left to your heirs. >> 50 year bond for your kids, i would love that. by the way, there's a lot of other different cross currents this morning that must be mentioned. i want to talk about lam research and -- >> biggest gainer. >> this was a fantastic conference call. where the orders for d-rams. the orders for flash off the charts. a european company had a same experience. this is the strongest because it says there's amazing demand for data center chips. okay? amazing demand for chips having to do with cell phones. the samsung, i don't know how much you talked about the new samsung. but that is a generator. huge generator of need for chips. so the chips called -- which by

the way was a beautifully orchestrated call by martin who said, listen, don't try to get me to tell you that the clients are going to stop ordering because there's a supply demand imbalance. it was a thing of beauty call and the sign that the semiconductor stocks -- they deserve to go up. i'm not saving they're going to order too much at one point and it will tip. i'm saying you have to watch that. but it's not here yet. >> the stocks are now back above the 50 day. >> yes. >> for -- >> exactly. >> for the first time since april 10th. >> that's where i'm going, because martin and asmlf, when you listen to an sis, this merger with novell us, if they had done -- holy cow, the stock would have been up 10. but that merger gave them the best look on the area that is the fastest growing which is the internet of things. it's for real.

>> it is for real and they talk about what will 5-g will mean. the commercial applications that i don't know about at this point because they don't exist, but will be enabled if you actually do have that 5-g capability. no latency, ten times the battery life. you can have somebody looking at the engine and expecting the engine, but not where -- at the engine. somewhere else. but that will involve the chips being in engine to allow you to actually inspect it. >> chips -- >> 5-g network. >> you know, remember, a google in this -- waymo is making their own chips but this remains a story that is not going away. whether it be a -- whether it be amd, whether it be -- you know,

geez, skyworks is in the samsung. >> nvidia. to a certain extent. >> nvidia was up so much. >> and then softbank and vision fund. >> now we have qualcomm. if qualcomm can close that gosh darn nxpi deal that's not moved, my charitable trust owns it, it was a great hit, but it's not moving. but the lam research call was the most upbeat call you could have at this stage. remember, the industrials -- you know, i think 3-m will do a great quarter and a honeywell will do a great job. i think that they're asked about what -- what do taxes mean to you? they're going have to say we don't know. not to say that -- >> yeah. we do want to -- while you were away, a bunch of cramer names came up. one was chipotle which is up again today. >> that's right on schedule. i mean, geez, it's obviously --

it's going to be 18 months. that was the jack in the box that was 18 months recovery. taco bell. plus they're putting through the price increases, the stock is a win. >> we have two upgrades for mcdonald's back-to-back. >> mcdonald's, i think they have got the balance sheet to do what they want. they're finally doing the technology. obviously these big companies they have so much heft. walmart and mcdonald's are similar. they both have the industries that they're up against that they can do what they want. steve easterbrook not celebrated enough. doug mcmillon not celebrated enough. they are turning around the operations that most people felt like carriers. i'm not talking about carrier in indiana or t-mobile. but the vincent. i got that right. i was on the harry s. truman. that was dynamite. like a floating -- >> incredible.

>> coming in hot, david. >> on the m&a front, axon mobile is accelerating growth, and value creation. what are they doing? going to create two different companies, one specialty chemicals. they'll separate that in 12 months and the vast majority of the proceeds will be returned to shareholders so they'll have paints and coatings. one company. and specialty chemicals separated out another company. that's the main focus here of what akzo is talking about. they're trying to keep off an unsolicited approach by ppg. we have heard your plan, and the merits of combining the two companies are much better because the new plan is risky and creates new uncertainty for the employees and the

shareholders. >> going elliott on me? >> no, i'm not going elliott. >> really? wow. because i was going arconic. >> go ahead. >> shocking. >> you were here in spirit -- >> well -- >> we dealt with what was the shocking news. >> they were going to win that proxy. now it's up to the -- obviously to the charitable trust that owns arconic. but here's the issue, blackrock, will will they vote? blackrock i thought they had a good quarter, but not enough. how will the index funds vote. we don't know. >> you raised the key question. in any of the proxy fights the ownership level of the passive funds is enormous and only growing. what did van guard take in last year, $1 trillion. >> a trillion dollars. >> a trillion dollars. incredible. >> so at some point -- you're talking 30, 40% of every stock is held by van guard, blackrock, go through them. >> right. >> it's their votes that matter.

they have only one guy in the basement going through a thousand proxies a day. why did we vote this? >> they can't pay -- >> they can't pay for the real analysis that -- you might want the -- the rigor that you want someone to apply to the large ownership position, no way. which is why they continue to hold a great deal of sway. we mention iss and the other names they can influence the passive investors who have enormous influence on whether or not you get your board members on our management wins in these fights that we talk so often about. >> we have to stay on this because it was a big issue in dupont. >> yeah. >> the -- you get someone like elliott who does a lot of rigorous work and i believe the work on arconic is rigorous. they do -- now, lawson, that's the guy larry lawson -- >> that put out -- >> i'm not going to say it's a done deal there, but if you were

someone in an index fund and you listened to both sides right now, there really isn't a leader. you'd be voting on a leaderless situation if -- patricia russo, stand in guy. russo, late of lucent who did not distinguish herself at lucent. >> no, she's now chairman. you have the other guy -- what's his name, hess -- >> yeah, hess. that was a shocker. i have known klaus kleinfeld for a long time. it's not about friends but about money. this was a shock, a true shock. and i'm scratching my head because, you know, when you have a win, you don't turn it into the loss. >> but elliott is still coming. they're still coming for four seats. >> if they get it, they'll make it so they can really change the company dramatically. but on a short term basis get the stock higher short term. >> any information about what specifically that letter said? >> that's today's business. that's today's business for me and it was -- >> all we know is what elliott

said in their other statement, some sort of a threat. not like elliott doesn't write threatening letters all the time, but they don't like getting them. only like sending them. >> i don't know. really, i mean, i woke up and there it was. i have to make some calls but my daughter is -- i'm going to take a break from the ridiculous life where i'm trying to figure out what his letter said. at least i had enough perspective not -- sorry, i didn't want to be existential. but klaus's letter versus my daughter, i chose the latter. which klaus would like. >> with all of that, s&p is about six points or five points from its 50 day moving average. let's get to bob pisani. >> good morning, carl and happy wednesday. the reflation trade is working for the moment. gold is down, ten year is up. we are seeing the dollar up a little bit. that's the reflation trade. stocks normally react positivity to that. generally that's happening. let's look at the markets. major sectors here. banks which have been the big losers down about 2%.

they're rallying in materials and industrials. consumer staples that's lagging along with real estate investment trusts as well as utilities. how is the retail investor doing? i like to talk about the retail investor. i look at schwab and ameritrade earnings. ameritrade they said something similar to what charles schwab had been saying yesterday. brokerage account openings have increased rather notably and client assets have i believe creased. a lot of worried about the commission war going on. but those cuts have been off by -- have been offset by the asset in flows here. the ceo tim hockey kind of implied that investor enthusiasm was a factor. and the strong investor engagement with an improving rate environment. in other words, post election people were more interested in trading. putting more assets to work on

the stock market. but the commission wars that initiated in february with schwab hurt td ameritrade. but a small part of the revenue stream. it's assets that really matter now. i think you can make a good argument that sell-off was a bit overdone right now. speaking of sell-off what is going on with the stock market? the trend has been down since march 1st here and a lot of people are trying to add up what factors are moving the markets most. so obviously, bond yield's trending down what the implication might be in terms of the weaker, hard economic data. the major issue that people are talking about. but we have geopolitical risk. we have fiscal reform delays. i think an earnings situation is out there. high valuations are leaving stocks very vulnerable right now. you can see that in reaction to ibm for example. so don't underestimate the high valuation and what's going on with that. meantime, regional bank earnings we have enough to make general

trends, huntington bank shares are seeing improving pipelines. u.s. bank corps was better than anticipated. these are the ones you want to watch, it's been generally anemic. disappointing. and the net interest income how much are they making off of loans versus what they are paying out in deposits that's been mostly off -- that too is under pressure as rates are moving down. this is why the bank stocks have been moving to the downside. i think the big issue here is what exactly going on. why are we seeing a loan slowdown right now? there are several reasons. people have been talking about the energy loans are down. i don't think that's a big reason. that's a small part of the portfolio. some people are saying corporate borrowers are turning to the bond market, not to the banks. the corps rat loan market that's not so robust. jimmy mentioned this earlier, i think this is the main reason and others like ubs has been talking about the uncertainty

about tax cuts, infrastructure spending is one reason that the banks are not seeing as much interest in terms of loan growth. jim mentioned this and i concur this is going on. how do you make a prediction on your earnings situation if you're an industrial stock? jim mentioned this, so ge is south on friday. they gave us guidance back in january for the full year. it was 1.60 to 1.70. most of the analysts have been moving to the down side. $1.62 to $1.63. the first quarter is the weakest in terms of earnings. but the point is, they're going to be the first one out of the gate. truly a big global player. financials are of course really not an issue for general electric -- ge finance is not an issue for them anymore so this is pretty much a pure industrial and technology play. we're looking to them for overall guidance on what the atmosphere is right now in terms of capital spending. that's the lead for us on

friday. right now the dow just turned negative. carl, back to you. >> bob, thank you. let's get to the bond pits and check in with rick santelli. >> good morning, carl. twos are up two, tens are up four. sounds a lot like steepening, doesn't it? but hold your horses. everything has to take a bit of a reprieve and if you look around the globe most of the high quality sovereigns are trying to get a little traction after some pretty -- not big slides but long lasting small slides that actually added up to a big slide. year to date of two year note yields which should jump out at you as we have three bottoms all around 114. yesterday, we came very close to challenging that. that's the area you need to know for the next wave pushing yields down. but two days of tens up four basis points but in the context of yesterday it puts a bit of perspective in the equation. it doesn't only end in our

market selling off a bit on the sovereign side, but let's look at the ro etwo year. -- the euro two year. it looks like the end result of a sell-off but it is around minus 88, minus 87 yesterday. that's eight basis points higher even though the ultimate destination is minus 80. let's continue to focus in on what may be affecting the foreign exchange markets. we know soft rates shouldn't be good for the dollar. let's look at a chart starting in march. shall we? i picked march because right and the end of march you see that bottom of 9916. the president would say that's huge. stretch that chart out year to date puts it in the macro context. there was a lot of market moves predicated on what's going on with regard to theresa may and as there should be. but if you look at what's going on on the two day chart we saw the pound move aggressively. as a matter of fact, to some of

best levels since beginning of october of last year. when you do see it on the two day, maybe most of that goodwill is done because it seems to be pretty flat today. let me see, carl, david, jim, back to you. >> all right, rick, thank you very much. speaking of theresa may we are getting a vote out of the uk parliament this general election vote does pass 522 in favor, 13 against. so bring on june 8th. what's being called the very savvy political move by -- >> yeah, that was. i think that -- boy, she's ju z underrated. i like the fact that the pound had a little of a bounce, but there's an inflation issue to stay focused on. the french election this weekend. i wrote a piece for "real money" about how -- ever since brexit from june the hedge funds watch these elections very closely. but remember, brekts -- brexit ten can days year, we didn't see

it on the chart. >> well, trump won, the market's going down, it was the opposite. >> we're prepped for the market to go down in france and if there's a runoff -- my preference is not to have that happen, but you open down monday, buy it. >> i wonder is that dynamic different in an environment where rates are ostensibly going up? >> i think you -- geez, anyone who buys the french bonds buying u.s. bonds right here. i do think that the car registrations were extraordinary in europe. they have a bit of a boom going. but it's really obscured by the politics. i look at -- there's a stock ferrari symbol race, wow, look at how that's doing. that is probably the best acting auto company in the world other than tesla. other than tesla. >> yeah. in europe they're in a great spot. growth, inflation not biting yet. >> although you mentioned ferrari in italy. people are worried about the elections there. >> i think they should be

worried less because they're -- they need the euro strong. >> you're not as worried. some people say forget france. >> you have to worry -- >> anti-eu. >> doing some work in italy. i have to tell you they need to stay in that euro. they really do. by the way, unh is breaking out. >> unh breaking out? >> the company that benefited the best from the affordable care not being repealed and replaced. i'm calling that by the way the paul ryan stock. he's a genius by the way. you know how they get together for salesforce -- watson -- the genius. >> by the way, tomorrow sara will talk with christine lagarde on everything from the uk vote to the global economy to political uncertainty in europe. dow's down four points. s&p up seven.

it's not often you see the s&p with a bigger point gain than the dow. s&p is up almost eight, dow is

up two, that's because of that stock, ibm, taking about a 60 point bite out of the dow index. we'll get stock trading with jim in a moment. ♪ can i get some help. watch his head. ♪ i'm so happy. ♪ whatever they went through, they went through together. welcome guys. life well planned. see what a raymond james financial advisor can do for you.

♪ ♪ i'm dr. kelsey mcneely and some day you might be calling me an energy farmer. ♪ energy lives here.

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time for cramer and "stop trading." >> i'll mention genuine parts, but they raised their outlook. why is this important? look at autozone, look at orally, look at -- orly, o'reilly, look at advanced auto, jeff smith, starboard -- >> starboard, yeah. >> look at all of the read through. maybe that whole initiative that amazon was going to come in and bust up this business is wrong. maybe the fact that autos are maybe at peak, that's why the sirius satellite was downgraded maybe that's the wrong call. this is a remarkable company that doesn't get enough credit. they'll get credit today and the read through to auto parts was a very big business and it will be very strong. watch genuine parts it does matter. >> good tell. >> thank you. >> what's tonight, jim? >> i mentioned recently that i had the fastest growing company robotics. now, can they outdo -- you know, isrg, intuitive research, it's

hard to outdo that company. but this company could be the son isrg i look forward to speaking to them. it's good to be back. it was fabulous to see -- whenever you see your kid, you know, in an environment -- wow. you come back on a high what can i say? >> it was nice you had a vacation, please don't do it again. >> i told my wife, i'm done with the vacation, you go away. that was well received. not! >> jim, see you tonight, "mad money," 6:00 p.m. eastern time. when we come back a lot more on o'reilly and the fallout at fox. and walter isaacson will join us with his perspective with the s&p up almost ten.

with our job series at cnbc we can get you rare behind the scenes access, with we'll show you where you can get hired. the southwest airlines is set to hire 4,000 workers, jobs are a huge driver of the economy. we're more focused on them now than we have ever been. ♪ good wednesday morning. welcome back to "squawk on the street." i'm carl quintanilla with sara eisen and david faber at the new york stock exchange. look at the markets. interesting morning, vix back below 14. dollar ticking up. watching all of that, although ibm worst day since june. taking a big bite out of the dow. >> our road map starts with the

markets. ibm as carl mentioned weighing on the dow as the company posts the 20th straight quarter of revenue declines. >> fox's bill o'reilly's future in question as sexual harassment allegations come into focus. the hot spot for autos may be hitting a speed bump. we'll explain and take you live to the shanghai auto show. a number of factors impacting the markets you have ibm weighing on the dow after reporting the 20th straight revenue decline and treasury secretary mnuchin playing down the president's comments last week saying trump is absolutely not trying to talk down the dollar. here to weigh in on all of this is stephen miro and the chief market strategist from cantor fitzgerald. welcome. so i want to start with this report that looking to strap the deductions from state and local

income tax to pay for tax cuts. does that work? >> absolutely in this case, and it's something that the house republicans have been looking at for a while. while normally this would be a controversial deduction, or elimination of the deduction you're talking about raising almost $1 trillion and in the states that it really hits the most are the ones with high property taxes which tend to be the blue states on the coast. so as long as the republicans are pushing through a partisan tax reform plan, using the reconciliation process, i think this could be a big revenue raiser for them. >> the biggest beneficiary is new york and california and what would that do to the local economy of new york, so key for wall street and industry? just as an example. >> well, i think one of the sectors that will be most

concerned about is the real estate sector to the extent that you have the high end real estate markets in these areas. this is a big issue in terms of what's motivating people to, you know -- the high income earners to take advantage of the mortgage deductions. so that's where i think the real estate sector is going to weigh in. >> peter from the market perspective, how big is tax reform for you right now? as a thesis for buying this market, for looking ahead to potentially higher profits from lower corporate taxes? >> well, tax reform is obviously a very important consideration for us. as you recall, many people in the beginning of the year were factoring in considerable benefit to s&p 500 earnings from tax reform. i think what has become the realization is the tax reform is going to come a lot more slowly than many had suspected. and in fact, may not even come this year. so i think people are going to

have to factor that into the earnings forecast for the s&p 500. that's the reality of the political process and should not come as any real surprise, but people are off guard in terms of how quickly this is evolving. >> yeah. steve, goldman has a note out this morning talking about tax reform. the timing is slipping once again, at this point we expect that enactment is likely more in q1 than q4 of '17. is that the consensus? >> i think that's the conventional wisdom among those on wall street, but i don't think they have their full finger on the pulse of what's happening here in d.c. at beacon, we're actually -- i believe more bullish than the conventional wisdom in terms of tax reform. i think in some ways with the implosion of the effort to repeal and replace obamacare it puts more pressure to get

something done and it actually frees up the is senate to be able to work more on tax reform because while all the focus has been on the house, the long pull of getting tax reform done is what the senate ends up doing. >> some more immediately, peter, what about this idea of a government shutdown? congress is on recess, gets back next days has a few days to pass a spending bill to avert the shutdown. the deadline is next friday is that impacting the markets? >> it's interesting, you know, in previous situations where we have had potential budget impassi impassion -- impasses there's been a lot more discussion around the shutdown. what i can tell you from observation and conversation from clients there's far less conversation and concern this time. in fact, it would seem to me that it would be reasonable for there to be perhaps a bit more concern this time. but i think, you know, we're creatures of habit. and it's ended up not being very important in the past and i think that's sort of the

attitude that market participants have adopted in this particular case. >> although it was sort of floating around yesterday when we saw that big buying of treasuries pushing the ten year down to 216, stephen, final word to you on this. i guess the market implication here is what would it say about the prospects for other pro growth policies if they can't keep the government open. how likely is that at this point? >> at this point i think we'll get a one week punt when they come back next week and then get it wrapped up before the house goes back on the recess on may 4th. i would say rather than looking at the macro perspective, one sector to pay attention to is the hospital sector. because if there is a shutdown or the tension over the shutdown, it will be over what are known as the cost sharing or the obamacare subsidies. the democrats have finally found something to rally around and draw a line in the sand. which is they want those subsidies guaranteed to be paid going forward.

and until that's resolved i think the hospital sector is going to have some uncertainly hanging over its head. >> thank you. good discussion with the dow up three points. morgan stanley on the move after reporting earnings that beat estimates on both the top and the bottom line. wilfred frost has been watching that over at hq. >> hey, kracarl, yes, the trade was up 26 year over year which come firm -- confirmed goldman sachs as the outlier there. cfo says the trading beat was due to higher client activity. pretty much across all products other than fx. rates were particularly strong. but he wouldn't comment on the market share base on one quarter. ceo gorman added that the back end of march was much harder than on the back end of the quarter. the call focused on improving

political outlook for the banks. here's ceo james gorman on tax reform. >> anything on the corporate tax rate front is positive to morgan stanley. and it appears likely whether it's this year ultimately or next year that there will be movement on that rate. i suspect it will be a little more modest than some of the numbers have been thrown out. but nonetheless, anything sub 30% which appears probable would be very positive. >> and more with james gorman on deregulation. >> at the very least it is hard to imagine the regulatory burden increasing and some of the policy proposals being floated make good common sense. given morgan stanley's strong capital and liquidity position, potential modifications could impact us over the coming years. >> meantime, he said there should be zero appetite to bring back glass/steagall itself.

but was confident morgan stanley could deal with a potential modern day ring fencing rules if they came in. morgan stanley is up in today's trade. >> all right, thank you very much. when we come back, bill o'reilly's future at fox now in question. new reports that the network is ready to break ties with its famous host. we'll talk to the former chairman and ceo of cnn walter isaacson and jim stewart when "squawk on the street" comes back. finally. hey ron! they're finally taking down 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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david faber? >> thank you, carl. drama at 21st century fox with advertisers fleeing, new reports that primetime star bill o'reilly is now all but out. it would be the third major departure for the news network just in the last year. for more, we're joined on the line by the aspen institute's walter isaacson, the former ceo and chairman of cnn. walter, put yourself back in that chair or running an important network. your most important star is accused of these things. do you get rid of him? and risk what would be certainly a financial blow to your overall performance? >> well, i think you -- you have to put aside the financial blow and do what's right. they have got a firm looking into it to see if these allegations are fair. but, you know, the real larger issue, this is the murdochs, especially the two sons of murdoch now putting their stamp

on fox. it will be interesting to see how they make this decision. it seems to me that the decision is pretty clear because you see joe flynn, the great media writer for "the wall street journal" writing about it today and of course the journal is owned by murdoch. so i think that's a pretty definitive story. but you have to remember how much bill o'reilly -- i remember it when i was at cnn transformed what cable television is all about. you have to give him credit for that. >> he's an incredibly effective broadcaster. and speaking of investors i should note, they are doing the math because there will be a financial impact given how , you know, there is another gentleman though named rupert murdoch who is still pretty involved in the day to day there. it's your sense that he's come around to agree with the view

points of his sons that o'reilly has to go? >> that's what it looks like wheyed business man and he knows what he has to do. certainly controversies he doesn't need. so there's a lot that's a part of this. also, i don't think as far as i have known that murdoch is personally close to bill o'reilly. he has been personally close to a lot of people he's worked with. mr. murdoch has. but i have never seen them be personally close. so i think it's going to be a clear eyed decision on what's best for the company. and it is pretty surprising, you know? i never would have guessed that after this election, you know, roger ailes and rupert murdoch would be out -- i mean, that roger ailes and bill o'reilly assuming it does happen to mr.

o'reilly. >> it's kind of odd, walter. this is all happening against the back drop of some of fox news channel's ratings ever. they have really cemented their audience after the trump presidential win and into the election. do you think that takes some of the urgency off these issues inside? how do you think the culture is inside fox right now? >> well, i mean, i think fox should be -- you know, the culture -- the morality should be good in some ways. what we have had is a major shift in american media where there are different alternative universes around. a person who watches fox, you know, has a totally different view of the world than somebody who's watching say msnbc in primetime. and when bill o'reilly at least -- i at least respect him for this. he was more open to more alternative viewpoints and more willing to surprise. every now and then he would surprise you with a certain opinion that wasn't part of the,

you know, ideological line. you don't see that with the other fox hosts quite as much. they follow a formula, and the formula is, you know, pretty simple. especially when it comes to supporting trump and blaming everything on, you know, susan rice or something. i just think that -- you know, that bill o'reilly had a really good way of doing what he did, but it did help change the immediate that landscape in america to make it more polarizing. >> walter, it's carl. there's an old saying in tv that anchors are fungible as much as a lot of us on tv would prefer it not to be the case. i wonder is o'reilly replaceable or do you have to replace him with somebody who is not going to reach the audience in the same way or the same scale? >> well, i mean, megyn kelly ended up being replaceable. i don't -- i have never believed that anchors were fungible.

if they were, carl, you wouldn't be making the big bucks and nor would o'reilly be making $20 million a year. it's an opportunity for fox, especially if lock lap and james redefine what fox is doing. go to the younger demographic and a new audience. >> that brings me to another question, walter, that is you talk about o'reilly helping define what cable tv now is. you know, we're coming off of fa and it's unclear if they'll graduate to the new methods of communication. i wonder if that changes the landscape for the type of personalities that appear on cable news. >> yeah, i mean, o'reilly was one of the forerunners when i was at cnn as you'll remember, carl, you know, we were paying $1 million a week to keep a baghdad bureau open. suddenly, people at time warner

were saying, excuse me, you know, i know they're paying o'reilly a lot, but it's 1/120th cost of keeping reporters overseas in a bureau like that and they get twice the ratings. so that was a major seismic change to having opinionated anchors do the evenings. i would love to see another seismic shift again. i'm not sure it's about to happen, but i do think that in some ways as people get their news from other sources and not sit there especially younger people watching a television set at night, it could change things. >> yeah. well, speaking of younger people there's a generational change going on in the leadership of 21st century fox, walter. of course james murdoch is the ceo. >> yeah. >> i mean, rupert -- >> james -- >> yeah. go ahead. >> they're both brilliant -- they're very savvy.

definitely not as ideological or as opinionated but then again rupert murdoch isn't as ideological as people thought. he could support tony blair when it was in his interests or support anybody else. but i think james and lochlan are interesting characters and this year has been one of their tests. i don't think they have been particularly comfortable with the way fox news reports the world and yet, it's been so successful it's been hard to change it. but now with megyn kelly going, with roger ailes going, with bill o'reilly possibly, i think likely going, we're going to see a new generation. not only put their stamp on what is cable news, but does it have to be so opinionated, poisonous, divisive, but how do we get news delivered to ourselves in the future where we aren't sitting around and watching cable tv at night. >> yeah.

well, i think you and rupert on the most important challenge that we face, the transition to digital and how they're going to actually play that out. walter, thanks for joining us. >> it's good to be with you. thank you very much. >> walter isaacson. getting some breaking news. tom brady of the new england patriots will not attend the white house ceremony today with his team. patriots are set to meet with the president to be honored for their super bowl win. brady released a statement saying he'll skip the ceremony because he has personal family matters to attend to. all right. when we come back, former -- oh, we're not going to take a break. talk about tom brady. people are interested to see if he would show up. there he is, bob lutz, his take on the president's new executive order, trade, manufacturing in america and more. but first we'll take you inside lockheed martin's new jet. much more ahead, stay with us.

let's go, she's a dog.

[ ] find ping-pong. okay, let's go. find your awesome withhe xfinity x1 voice remote. that's amazing! lockheed martin taking on boeing as the two aerospace

companies compete for the coveted tx trainer complex. we have more on this story. good morning, morgan. >> reporter: hey, sara, good morning. take a look behind me this is the plane that lockheed martin along with korea aerospace industries is wanting to replace the old talent trainers. there are a number of teams pitching systems for the $16 billion, 350-plane contract. but analysts say it will come down to lockheed and boeing. now lockheed's trainer is an upgraded version of the golden eagle that military pilots in south korea currently train in and lockheed says that gives it an advantage. >> we can deliver new trainer aircraft at least two years ahead of the air force's schedule and the reason we can do that on a very predictable

low risk on schedule on cost program is because we have done all of the basic design and development and test work to show that everything is ready today. >> reporter: so lockheed chose that more off the shelf strategy because it wouldn't have been able to meet the own accelerated in house deadline if it had built a brand-new design. that being said, a clean sheet plane that was built specifically for this contract is what boeing is pitching. analysts estimate that boeing has spent 1 to $3 billion in development costs on that system which it created with saab. this is the 250-a behind me and i flew in very plane yesterday. i'll tell you it's fast. we pulled seven times the force of gravity. a lot of the technology that's in the cockpit as well as the simulator system that is on the ground is channeled directly from the f-35 and f-22 which are the two fighter jets that lockheed does make and which the

new tx trainers will be getting new pilots ready to fly. guys? >> morgan, i just got to ask whether or not you passed out. >> reporter: i did not pass out. i have to say i was pretty impressed, i did not pass out or throw up. when i got back on the ground i felt pretty beat up and that got worse as the day went on. >> anyone who has done 7 or 8 or 9 gs you have to tighten up to get through it. back to bill o'reilly's potential departure from fox, for more we are joined by pulitzer prize winning columnist jim stewart. >> good to be here. >> we clearly don't know what's going to happen, but assuming his position is increasingly tenuous as "the times" says it is, what does it say about the evolution of 21st century fox or

cable news? >> i think it's tenuous. if i'm in top manage at amount fox news i don't think this is a hard call here. i think o'reilly is in an untenable situation. one thing i have learned in the media is none of us is truly irreplaceable. i have seen, you know, big stars in the television firmament come and go. the network survived. may be a ripple here or there, but they go go on. i think for fox the problem is this clearly wasn't just, you know, an issue for roger ailes at the top. not only is o'reilly caught up in this, but there seems to be a culture there that needs to be examined. there are people there -- i'm thinking of the legal department and administrators who covered up for this kind of activity. i don't think you can really reform the place until you go deeper into the ranks and hold people accountable. >> well, if o'reilly does in

fact leave, clearly that follows megyn kelly who left in part because of this culture. greta van susteren is gone, lachlan and james are ascendant. is that message getting through to the company to the board that meets today? >> well, my hunch is that it has probably gotten through at this point. it's the future of fox here which is really at stake. i mean, they have an aging demographic. bill o'reilly let's face it, he has had an amazing run there. i don't mean to take away from that achievement and his popularity there. but he's aging too. they have to be looking years, decades into the future at who's going to be watching the programs, who's willing to work there? i think the message has come loud and clear especially from women employees there, but i suspect younger men as well. this is not tolerable. they won't be working at a place where that kind of culture. >> not to dwell on the past too much, but why did it take all

the advertisers to pull all their dollars to come to this conclusion if they do so? >> i think it's the combination of the advertisers and the personnel maybe even more. i mean, i -- i think the advertisers have been a factor, but, you know, advertisers are a fickle group. you know, they probably would have come back, somebody else would have stepped in there. i don't know that that is as important as the personnel problems they have. and the problems with recruiting people and retaining top talent apart from o'reilly himself. >> yeah. jim, you bring up this larger culture issue which gets you to millennials what they want to see from corporations, to the extent they want to see anything. i mean, that's sort of a broader play here, isn't it? you know, getting yourself right with your potential audience at least and your customers. >> absolutely. and i mean, if there's any silver lining to this, if i'm on the board i would think this crisis actually is an opportunity to do a lot there that otherwise would have been maybe very difficult. they have a catalyst now for

change. they have an excuse for really going through the management ranks there and looking at how that place has been run and who's been responsible and making key changes. i think they can position themselves for the next decade or so. >> we should point out, jim, stories about corporate culture and effects on employees is not only at fox. you have to see them saying let's build in some hedges about this not happening in our shop. >> i agree with that. you have to look at the top, look at the messages than have set. with roger ailes at the top and such a commanding personality there for so long, in a way it's probably surprising we haven't seen more of this stuff surfacing since his departure. but as i said, it's -- you can't just lop off one high profile person and expect the problem to go away. there are a lot of what i would call enablers embedded in there.

i don't know who they are. you know, they have to treat them fairly. but there are people i think who need to be held accountable and that's going to send a powerful message both to people in there not to do it again and to reassure people that the company is truly not going to tolerate this in the future. >> we'll see what happens. jim, thanks for the time. good to talk to you. jim stewart of "the new york times." >> thank you. when we come back, buy american, hire american. bob lutz will give us his thoughts on the president's new executive order. look at where the stocks are trading at this hour. mild gains of the dow being suppressed by the weak action by ibm. the worst day since june.

good morning. i'm sue herera. vice president mike pence visiting the aircraft carrier "uss ronald reagan" in japan. he spoke to a crowd of representatives from both the

japanese and u.s. military. >> the full range of the united states capabilities is dedicated to the protection of japan. japan, you are our friend. you are our ally. and on that foundation, we will face the future together. defense secretary jim mattis meeting with king solomon in riyadh calling the desert kingdom a pillar of our security framework for the region. the u.s. military is providing support for a saudi led coalition fighting the houthi rebels. and former new england patriots star aaron hernandez committed suicide in his jail cell earlier this morning. he was discovered hanging by a bed sheet. it comes on a day the new england patriots will visit the white house to celebrate their super bowl win. you're up to date. that's the news update this hour. carl, back downtown to you. >> all right, sue, thank you very much. the white house reportedly considering an elimination of local and state tax deductions as a way to help pay for tax

cuts. the president discussed the time line of the much anticipated tax reform plan yesterday. listen. >> we have the concept of the plan. we're going to be announcing it very soon. but health care, we have to get the health care taken care of. and as soon as health care takes care of, we are going to march very closely. you're going to watch. >> all right. weighing in on the impact of the latest executive order and the future of the tax and infrastructure plan is bob lutz, former general motors vice chairman. good to have you back. >> good to be here, thanks. >> people are watching this report about these state and local tax deductions and the joke this morning is that everybody on twitter at least is saying, hey, i'm not rich. how would this go over? >> what the state and local tax eliminations? >> yes. >> well, you know, something's going to have to happen to raise the revenue for these various programs, for instance. the multihundreds of millions or

trillion required for the infrastructure renewal which you can probably do a federal gas tax of 25 cents per gallon, but that would be equally unpopular. and fundamentally, i think some taxes are going to have to be raised because otherwise we're into more deficit spending. nobody likes tax increases but let's face it, our tax code when you take into account federal taxes, state taxes, local taxes, county taxes, et cetera, et cetera, is so complicated and unwieldily that it in itself inhibits productivity of the nation. and without, you know, knowing all of the ramifications and all the details, but you have to be in favor of anything that simplifies the u.s. tax code. >> is deficit neutrality a priority for anyone at this point? >> i don't think deficit neutrality, but certainly working it down.

because it has been at unacceptable levels you can't keep going like that. but i think fundamentally whenever there are new federal programs -- new major federal initiatives like modernize the military, or redo the infrastructure, i think a responsible government owes it to itself to try to find offsets or try to find ways to pay for it. which frankly the obama administration never did. >> bob, i wanted to get your take on the h-1b program given your experience in the private sector. now that it's currently under review thanks to yesterday's executive order is there a way for this administration to reform the program so that it makes it harder for businesses to hire low skilled, low wage foreigne foreign workers but at the same time still keep the best and the brightest coming to this country so we can compete globally? >> i think it's a question of balance and everything i read on the h-1b visa program has been

somewhat abused and especially in the high-tech companies apparently brought in a lot of workers under the program and that workers that could have been hired in the united states allegedly with equal skills -- i think, look, every country does this. i mean, if you want to hire -- if you want to bring an american skilled carpenter in to switzerland or germany, it's extremely difficult and they're going to need proof that this person has a skill that's only available with this american who has to be brought in. and so forth. so protecting your highly skilled trades is -- is a normal thing for a country to do. now, people say, well, but trump also brought in foreign workers in florida and for the hotel business and he said quite rightly said, well, you can't find americans to do that jobs and that's right. you know, your unskilled, non-h

1 menial workers like yard work and hotel and restaurant service, it is difficult to find americans. but in some areas, american jobs are available and then if companies abuse the visa program to get people at -- with the same skills but at a lower cost, you know, i can see that's not in the national interest. now, we also have to make sure as a country that the skill level of our people are at the same level as other countries and that's not always the case. and we have to make sure that for instance if people are buying japanese or chinese machine tools or swedish machine tools or german or swiss machine tools and these highly complex -- we no longer have a machine tool industry in this country. so everybody is buying foreign.

then naturally you have a tendency to want to import people from that same company or that same country who have familiarity with that type of equipment. now, as far as i can see, there's nothing in that executive order that prohibits people from -- or companies from bringing in people under the h-1 program. they just have to answer more questions and there will be tighter scrutiny. and that gets me to the ultimate conclusion of this whole thing. i think it's largely cosmetic. it's more of a let's create an atmosphere where people feel that it's the right thing to do, to hire american workers. and let's get more publicity on america first. and i think that's really the basic purpose and you know what? i think the trump administration is being successful in creating an overall environment where all

other things being equal people are proud to hire american. and two years ago -- two years ago it wasn't like that. >> understood. but to your point about skill level here in the u.s. and education, i mean, as far as i have heard -- i mean, vocational training, all of these things you're talking about have gotten just passing mentions by the administration. when does that become a priority that as reflected in policy. >> yeah. i don't know. you'd have to ask them. the other thing is, you know, if the american worker is manifestly more expensive for reasons other than wages, because it's union work rules and union benefits and very narrow job classifications and the electrician isn't allowed to turn off the water faucet and the plumber isn't allowed to touch the light switch, i mean, it's stuff like that that over time has made american labor uncompetitive. and that has to be addressed because long term, if american

labor is uncompetitive for whatever reason, whether it's skills, training or union rules, the situation is untenable if you go try to -- if you try to force employment. >> bob, to president trump's goal of trying to revive american manufacturing and american manufacturing jobs he's clearly made the auto sector a priority, focal point. is it a concern at all that this is happening at a time where the auto industry itself might be on the verge of some sort of cyclical decline or peak? >> well, look, nobody is going to open plants and hire workers in the capacity isn't needed. and so far, the automobile industry has been very skillful in talking american job creation in situations where it was only preservation of jobs that were okay anyway. in the case of, you know, modernizing a plant or changing over a plant from one model to the next model always involves

$100 million or so. so it's -- you know, so and so company invests $280 million in ohio assembly plant safeguarding 2,300 jobs. so there's a lot of pr to make it sound like they're doing more than they actually are. the -- but reality finally wins. and if there is no demand for the cars, there's going to be no jobs created. where it will work, however, is if there's a very decate financial decision to be made. do we outsource this or do we build it in the states. and in the old days it was, well, let's outsource it. that way we know we have low cost, et cetera. now with all of the pressure on american jobs, people say, well, you know what? we better not outsource that. it might be a couple of cents more in the u.s., but let's do it here. so i do think this whole

atmosphere that the administration is creating of protect american jobs, create american jobs, et cetera, it is having an effect. >> that's going to be one to watch for a number of reasons. both for the country, for margins. incredibly important dynamic. bob, good to talk to you. see you soon. >> good to be here. >> bob lutz. as we head to a quick break look at shares of ibm, down more than 5.6%. the company posting its 20th straight quarter of revenue declines. having its worst day on the market since last june and taking 62 1/2 points off the dow. a bright spot in the auto industry taking a hit. we'll go live to shanghai auto show when we return to "squawk on the street." stay with us. the dow is down 27. this is the new new york. we are building new airports all across the state. new roads and bridges. new mass transit.

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it's been the growth engine of the auto industry, japanese auto sales but now it's seeing the first drop in 27 years. phil lebeau is live from the auto show. >> hey, carl, it's fairly consistent over the last 10 to 15 years but when you compare what's happening in china with what's happening in the united states, you have to wonder if whether or not the lead that china has built which is considerable, selling more than 23 million vehicles last year well above what the united states sells, if that's going to be changing. here is why. as we walked around the shanghai auto show, you talk with executives and analysts and one thing is clear. sales are up 2% in the first quarter of this year, partly because the government has raised the tax on new vehicles and is that possible we'll see a down year for auto sales in china? >> double digit declines.

january and february. total decline, 19%. we did see some indication in march of wholesale sales shipments increasing, but not a lot. so i have a lot of concern about the first part of this year. >> if there is one segment where there's not a lot of concern it is with luxury brands. in fact, mercedes-benz had its best year ever last year in china and expects to have just as strong if not a stronger year this year. we were at the mercedes-benz reveal of the new s-class. the world debut. guys, why did they show it here in china? as you look at shares of daimler, the parent of mercedes-benz it's because in is the biggest market for mercedes-benz. this is the most important. so the luxury market is still going strong here in china even as the overall mass market starts to slow down. guys, back to you. >> hey, phil, it's david. you know, this morning we got

news about baidu about opening up on autonomous vehicles, sort of the open software platform. how important is that in terms of the chinese and what they're thinking about in terms of autonomy and sales there? how quickly are they moving on that front? >>

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adidas is showing an apology. after sending out an e-mail to those that survived the boston marathon race. given that three were killed and more than 260 injured in the boston marathon bombing back in 2013. boston globe reporting that a few of the survivors ran in this year's marathon. it has been a spring of marketing fails. it doesn't xhar compare to peps united. it is problematic. >> they are selling lots of stuff. >> this is an insensitive mishap, i would say. >> taking a look at stocks, we have the dow down about 26 points. ibm is the biggest loser, shaving 60 points off of the dow. j&j is still falling and taking two points off after a big decline yesterday on earnings. earnings remain the focus. the key, the nasdaq is

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welcome back to "squawk on the street." i'm dominic chu. as you can see there, markets mostly higher. financials among the leading sectors. they are being boosted overall by shares mofof morgan stanley. that stock on pace for its best day since november when it gi d gained 4%. morgan stanley, certainly a standout there. the spider regional bank, the ticker kre, both up about 1% or so in trading. the broader financial sector spider, that's that ticker there, off the highs right now. still, about half a percent higher as well. briefly, s&p did turn positive in earlier trading. we'll ski ee if it can close ou out of the negative territory.

interest rates, a big part of that picture. that's it for "squawk on the street." we'll send it back downtown for the start of "squawk alley." back over to you guys. good morning. it is 11:00 a.m. at ibm headquarters. it is 11:00 a.m. on wall street and "squawk alley" is live. good wednesday morning. welcome to "squawk alley." dow down 22. s&p up 6 as