delivering this curriculum. >> scott, thank you for oyour time. we appreciate it. we're continuing to watch the futures today. we had three dow components that are out. two trading lower. one higher. >> make sure -- michelle, thank you for being here. make sure you join us tomorrow. we will be in the nation's capital. "squawk box" and "squawk on the street" i should say starts right now. ♪ ♪ good wednesday morning. welcome to "squawk on the street." i'm carl quintanilla with jim cramer, david faber at the new york stock exchange. futures have been ticking up slowly as we learn more about the white house tax plan set to be rolled out this afternoon. mnuchin as you know has already made parts of it public this morning and we'll cover it all along with the boat load of earnings. our road map begins with the trump tax plans. the details trickling out.

what it means for you and the markets. >> a big day for earnings. some major movers ahead of the open will set the tone for this trading day. we'll dig in on a lot of the big reports. >> and one name with a big earnings move is twitter. shares up nearly 10% right now. take a look at the eye popping numbers. first up though the president set to unveil his proposed tax law changes today. among the highlights a cut in corporate taxes, a cut in the rates of foreign profits brought back to the united states. the lawmakers were briefed yesterday by treasury secretary mnuchin and director cohn. mnuchin spoke a moment ago about corporate tax rates. >> i will confirm that the business tax is going to be 15%. that is what the president said in the campaign. he said that's critical to drive growth and, you know, what i would say people talk about pass throughs. what we think is important is small business. and we are committed that small business, owner operators, will have the benefit of the business rate.

what this is not going to be is a loophole to let rich people who should be paying higher rates pay 15%. this going to be -- this is going to be for small businesses that drive the economy and they will have the benefit of this. >> we're going to learn a lot more this afternoon. other important components increase in the standard deduction. 10% on repatriated profits and it looks like that unless they revisit it somehow is gone. >> i think repatriation has the best hope because that's plain old positive. i don't know if 15% is the initial gambit, but there's 11% of the tax receipts that are right there. so you're cutting them at an easy way to raise money for the treasury. not like corporations are clamoring for that. when i look at the pass through, i think about yes, small business. could benefit. but there are a lot of people who would be able to do what people did with capital gains at one point which is to arbitrage. try to make your ordinary income into the capital gains and into pass through. and i think that if you own a

series of small businesses like i do, i'm thinking wow, this is a big win. >> why don't we all change ourselves into llcs? i did hear the treasury secretary say we won't allow that. but you can probably figure out a way to do that. >> yeah. >> get a tax rate down -- >> i think it's the same thing when reagan -- they were so concerned about this idea of making i would so that your actually business became a capital gain business. but let's deal with the substance of this. this is a much more organized approach. i feel like that the president's leading, not like they're out there in the wilderness. we haven't heard -- tomorrow, i know "squawk" going down there. i think that they would be crazy in congress to say we'll fight this tax cut, because americans like tax cuts. even if it's corporate they don't want that 401(k) thing -- get that thing out of there. >> even as mnuchin was on stage, ryan made a headline saying that the plan as it stands is about within 80% agreement of what he

had put forward on the house floor. >> well, 80% is -- well, let's see what the 20% is. >> interesting because when you think of the ryan/brady plan, you think of the immediate capital expenses. no interest deductibility. you think about a border adjustment tax. >> it's been 20%. >> so that amounts to 20%? that seems like an awful lot of things that are not part of this plan. >> and that's what i mean. >> jim, you can say that you think it's sort of the president leading. >> yeah. >> you know, well, no, i think that -- we'll see. but isn't this going to rely primarily on this idea of gdp growth. larry kudlow said you only need to get to over 3.5% to say that you can generate the revenues that will be forgone by not having a b.a.t. or having the other closed loopholes or nondeductions any longer. >> it's not a significant as the president thinks it is. okay?

the actual rate. the effective rate is 19%. there are plenty of companies that i follow, you follow that have -- that are in the 30s. but this is one where if you go back what warren buffett talks about in his fabulous letter, look, corporations are flush with cash. what they'll do is buy back stocks and dividends with i is great for the 50% of people who own stocks. i don't want to have any ill luges that the corporate tax -- illusions that the corporate tax cut will make us richer. >> the repatriation -- >> i think that's a fabulous thing. that's something that obama wanted. of course, they have always made it so much more complicated. if you want money it's -- now it's a 2$2.5 trillion you want that money to come back, give them what they want. listen, send it back. it's going to rebound positively for the treasury. >> no doubt. a territorial system seems to be a certain -- almost a certainty if you get this reform. >> yes. >> but jim, i -- i'm coming back to the idea of 15% with no

offsets for raising revenue. you think that's going to actually be able to get through congress? >> no, i don't. >> where there are still some deficit hawks. >> not if 11% of the tax receipts from corporate. you can't do it. there are too many republicans who stand for the exact opposite. that's why repatriation -- look, they want to do massive. because the president likes that word massive, he likes the word huge, massive. i think it's important to be competitive. i'm not against it. i'm saying without an offset, one time only is repatriation. so you would have to do this in the two or three year period. you cannot -- >> although if you go to the territorial system then the money will come back anyway. >> exactly right. >> we had that letter from the joint committee looking at what happens after year ten of a temporary cut. and it starts to cost you because companies will pull all of that revenue into the savings window. very complicated. >> yeah. one of the problems is that this is complicated. i know, even simple things that would make the tax return so much easier to do like the

deduction up. there are certain things that are bizarre third rails. right? >> so many large constituencies associated with seemingly small things. >> exactly right. >> that's why it's so difficult. >> it's the best government money can buy. >> we'll see. just to put it in perspective, we hear from the president. see where things end up in terms of the actual bill. >> although -- >> where do we get it in terms of a time line? >> the president is not expected to be part of the rollout today. the 1:30 press conference will be mnuchin and cohn and like ross yesterday talking trade, this will be left to the cabinet secretary. >> you know, again, we're looking at the fall at the earliest most would say. more likely even perhaps dumping into early next year as a possibility. and the senate is going to be key here in orrin hatch. >> where's the darn wind? where's the wind if you're the president? if you were the president, just give me something that brady -- go with.

ryan. give me something -- and mcconnell. give me something to win. >> it's not just signing something and holding it in. >> right. you talked about this morning on the "today" show you talked about home builder lobby. mortgage deductions. retailers the -- >> you don't take them on. >> can they breathe a sigh of relief on border adjustment? >> yeah, they would be a big beneficiary of the corporate tax decline. >> they're full taxpayers. >> big taxpayers. they could be a winner which by the way is very important. talk about 3 million people just who are threatened by amazon every day. i mean, you have amazon on the one side. then you've got the paul ryan national sales tax on the other side. you end up with apiness pincer . >> i think we'll end up with a lower tax regime for corporations. repatriation deal that will have occurred with money coming back. and, you know, territorial system where the rate is, who

knows? it's not going to be 15. >> once again, we'll talk this morning. other than the united technologies which did tell me directly that the u.s. is gang busters it's overseas orders that are doing incredibly well. there had been a bit of a pause in our country after repeal and replace was repealed and replaced by nothing. i think that other -- again, the united technologies whether it be air conditioners and heaters or the orders that were off the charts that's the first company i heard, you know what, the united states very strong. i think there was a pause and that's why i felt that the president needs a win because the pause is freezing american investment. at the same time, that your health care bill is just -- you can't look at it. >> yeah. >> can't look at it. >> we're going to cover tax up and down today. watch the markets, see if they can make more history after the nasdaq hit 6,000 yesterday. a lot earnings to watch. we have beats on boeing, utx, proctor, pepsi and some more. >> right. boeing and proctor is the old

kind of mcdonald's beat. those aren't wows. those are like -- you know? >> they're okay. >> not manufacturing. boeing did a good job. but just boeing did run up a lot. >> yeah. they do guide a bit higher driven by the lower than expected tax rate for the year. >> look, they have to do -- the dollar -- i interviewed paul poolman and he said i need your address. >> paul poolman is the ceo of unilever. >> yeah. i need to enroll you in the dollar shave club. he's selling you dollar shave club while you talk to him. the problem here is it's the emerging markets. unilever has a better business than the emerging markets. i think think that proctor does a terrific job, but not enough to move the needle.

>> tryon can be part of the second half. it's a never ending effort. what is dave taylor willing to commit to, where are they? it's early days between tryon and p&g's management. i think they have only just begun to get know each over. but keep an eye on them. >> when we talk about proctor, i want to talk about ecommerce. where are they with amazon? is walmart giving you a tough time, no. clorox is 60% of the ad budget is online, what are you doing with amazon? what are you doing with facebook? do you have anything? anything to offer the younger viewers? >> the battle for eye level. whether you're at eye level or at top. >> costco puts you nice front and center. but where are you at the point of purchase which is google, which is amazon, who's there at the point of purchase? because the world has changed.

we had that tide button. tide. tide. >> by the way people are tweeting to david faber llc. that's your new twitter handle. >> good. so that will justify when i do move. by the way i need a good tax attorney, if you're out there feel free to -- >> -- there was an llc between -- [ indiscernible ]. playing personal taxes over there. cinco de mayo -- like a double celebration. >> i'll take 25. i'll take 28. i'll take 30. >> i'm at 53% tax bracket. >> i think i'm right -- >> i'm a new jersey and new york resident. i'm trying to figure out which one but they have decided for me. >> i'll take any of those. i'll turn myself into anything. >> it's all about us. >> any number of initials. i'll llc you -- drs. >> how about the financials, how about the fundamentals here? >> how about the fundamentals of -- >> yes. >> express scripts coming back

after a bad day yesterday. user growth, we'll talk about that. and later on the trump tax plan will be in focus. we'll talk too jason fuhrman. s&p lies within half a percent of the all time high. we're back in a moment. the power of the nasdaq market. the power of 100 of the world's top companies. the power of an etf. the power of qqq. the thinking we put in, clients get out. power your client's portfolio at powershares.com/qqq. before investing, consider the fund's investment objectives, risks, charges and expenses. call 800-983-0903 for the prospectus containing this information. read it carefully. distributed by invesco distributors inc. containing this information. read it carefully. what?pony neighing] hey gary. oh. what's with the dog-sized horse? i'm crazy stressed trying to figure out this complex trade

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twitter is up sharply in the premarket after beating expectations with its first quarter results. the average monthly active users rising up to 300 million. daily activities accelerated as well. in fact, strongest monthly active user growth in two years. even as revenue dropped for first time since the ip. >> yeah. i really like this quarter. i liked the quarter because you kind of have this lull -- you have a gap where the ad rates went down 60%, but they got 32 new advertisers. i think it will matter. really has been quite a price cut in terms of what you're able to get. but that i think that these new users will wake people up. i think it's become more of a paper of record. i think that this is the quarter they're not going to say -- this was a quarter they did a couple

things. one is that it capitalized off trump. that's not my rap, but their rap. second, they show you they have made it a kindler, gentler site and far fewer complaints. that makes it so it's a more likely environment for advertisers. that want come until later in the year. but i did like everything i saw. this was an actual good quarter. and a return on investments. >> the revenues were down 8% year over year, but people are focused on the actual monthly quarterly increase in daily average users. it goes up 14% year over year. it was up 11% the previous quarter and 7%. so that's a nice looking move. >> four quarters of accelerating growth of daus. people checking in more often. >> look, i think you're getting a much better experience. now they did drop some products that failed. i think it's become more investable.

just become more investable. >> listen, man, did you look at the proxy, what they're paying these people in stock? >> no, i couldn't. because -- >> oh, my god. >> your buddy moto, adam bain, the other guy who left, wow. >> they gave money away out there. >> we work in the east -- no, they compensate too much. if you look at gaap versus nongaap, you would say this is the -- >> remember, adjusted ebitda by which the company is judged does exclude the compensation base expense. that's most of it, because these guys are getting paid in stock almost solely. dorsey takes no salary at all and hasn't -- because he owns so much already. but they pay their money big numbers. >> they overpay their people, no doubt about it. >> ad engagement, roi is up. they're bringing more machine learning into ad engage. >> it's a better site. this issue of pay, we don't care

if the stock goes up. we don't care how much they make. it's only because the stock did anything we care. do you care how much -- >> the performance of the company is less -- i'm saying optimal. >> suboptimal. >> yet, you're paying your people tens of millions. >> right, but if they were to do better and the stock went up a lot, it would be an asterisk. but it's not. i have to tell you that the stock versus the s&p there -- >> by the way, instagram just happens to pick this morning to put out a release saying that they have reached 700 million users. that's doubled in size in two years. >> that's 100 million they added since december of -- end of the year? wow. geez. twitter conference call is going right on now. these facebook guys -- they're like animals. >> it's a blood sport. >> velvet glove, man. these guys, i don't want -- like

the snap guys. the snap guys are like -- right? don't you think that? >> i just needed a gift of that what you just did right there. >> well, i just -- what can i say about this company? this company is the kind of company it reminds me of bill gates and microsoft. except for with the hoodie versus the really shlumpy clothes. >> right. >> right? justice department doesn't have anything on them though. >> no. apparently not. bill gates wore shlumpy clothes? >> i always thought he was shlumpy. i saw him when i helped to bring that deal in for goldman. that's an asterisk. >> we'll talk more twitter later on this morning. we'll get cramer's "mad dash." a lot more earnings we have not gotten to. plus some new release dates from disney. new roastery location for starbucks.

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♪ joe jackson. looking over your shoulder. you're a -- >> i saw him at pier 57. it was fabulous. >> did you really? all right. well, you don't need to look over your shoulder when it comes to people being upset with you about chipotle. they did a nice job. >> 18 months, that's how long it taco bell -- and jack in the box

to get over this. a lot of people said, listen, take profits but i have to tell you, i thought the call was terrific. they have lowered the costs. they have done a lot of things to simplify. they started online ordering. it's very good. people who are saying, hey, come on, it's had a monster run so let it come in a little and then do some buying. chipotle is back and bigger than ever. >> back and bigger than ever? >> they're not getting back to the earnings level they had a couple of years ago. i was watching mike santoli last night on "the closing bell" tell me. >> i think it takes some time. but the fact is that the comp store sales numbers are coming back. all the desperate calls to downgrade, sell sell sell, those were wrong. i think the cfo tells it straight and i felt good. and jack, when it was bad, he was saying that it was bad. yes yes yes, that didn't make

sense because we had the people who were brave right here. >> by the way, bill ackman was in there somewhere. remember when he got him in the stock? >> we haven't mentioned him in a long time. >> he was down 2.6%. >> i like the quarter. >> had a decent april because of this. >> by the way, so we're really clear they're going to get stronger and stronger as the year goes on. >> okay. all right. well, it was a good call, jim. we like to point that out. >> thank you very much. >> you're welcome. we have a lot more stocks to keep an eye on this morning including at&t and what's going on in telecom. ver got the brakes looked at?

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to help protect what you've earned and ensure it lasts. introducing brighthouse financial. a new company established by metlife to specialize in annuities & life insurance. talk to your advisor about a brighter financial future. the opening bell is brought to you by brighthouse financial. established by metlife. >> you're watching cnbc squawk squawk. "squawk on the street." the opening bell in under two minutes. busy day as the white house outlines its tax plan, both this morning and with some more clarity later on this afternoon. ten year gets back to 233. and there is some bubbling discussion of if we do get tax savings, if companies get tax savings how much we're going to pay back in the form of higher interest rates. >> you know, i really believe that a certain point we should be going up.

i think that there's still demand for treasuries everywhere. not calling for treasury shortage. this is when the federal reserve should be offering their bonds, but we don't have any inflation. i mean, the inflation is caused by the government with tariffs. but, you know, as someone was on today saying there's housing inflation, up in 12,000. i mean, please, the housing inflation is because they're not building a lot of houses but there is a no core inflation at the supermarket and wages. there's just not. >> the fear would be that if the trade strategy broadens, right, that things do get more expensive if with we add tariffs on to aluminum and dairy. >> the wood thing had been simmering for a long time. i had the huge steel user on yesterday. not yet, not an issue, i like that. >> let's get to the opening bell here. s&p at the bottom of your screen. at the big board this morning,

warrior met call celebrating the recent ipo. and an online auction company. 2400 and change if you're watching those numbers. >> wow. i mean, there's some stocks that are really popping here that i really like. i mean, a better mousetrap has been the theory because intuitive -- a better mousetrap. when you look at ew, that's don't crack the chest cavity, just put in your device, a life saving thing and the last quarter was missed but this quarter was not. costco, they have had a history of doing that they're doing that. we have seen the stocks that had blowout quarters coming back. but by pennies. i love the orders with otis, the orders were on fire.

greg case he's not an effusive fella other than it ain't gonna happen. but he was crowing about the orders. i was blown away. >> all of the business units. utx is the leading dow component at the moment. >> by the way, when you talk about air conditioning, europe is up big 9% on is some of the names. i mean, this is pratt & whitney plus 4%. otis, otis in this company i can't believe there are -- there's so much construction. a very positive story. >> it is. and utx and honeywell have both seen their stock prices rise nicely so far this year. >> good ceos. >> in stark contrast to that of ge which is down 6.5%. now, they don't overlap in all their businesses at all. i mean, obviously. but they do compete in certain markets when it comes to -- >> fair to say -- >> jet engines. >> they're a cohort. and they don't really measure up. ge. because these companies when you speak to them all talk about let

me tell you whether it's ed breen at dupont. let me tell you about my cash flow. >> you mentioned that, because when ge reported the numbers were not actually bad. but cash flow was lacking. >> yeah. >> that seemed to concern investors who turned on the stock after seemingly sending it higher in the initial response to earnings report from ge which we're bringing up only because -- >> why are we bringing it up? because by comparison. >> yes. comparisons. >> i own ge stock. does that make me a dope? >> possibly. >> you have starbucks in the charitable trust and i think you trimmed your position -- >> had to because here's why. howard schultz do not take this -- kevin johnson don't take it personally. but people are saying they'll have 5 to 6% domestic. that would be -- that would be a solving of all the mobile pay issues. i think those people have gotten ahead of themselves. a year from now, i think it will be solved.

maybe even six months from now. but just -- i mean, a big gain. when everyone was throwing it away, when we bought it for the trust, so now everybody clamors for it ahead of a quarter. kevin johnson's first one. i felt, hey, bulls and bears make money. hogs get slaughtered. like a tyson food getting slaughtered like the hogs. >> 61. >> high. >> go back to april last year. basically -- >> it's hot. howard is doing a lot with the rose three. he's right down the block. i hate all the hype of the quarter. when you get a quarter that's hyped that much, it better be like a netflix where suddenly you have china. china. >> china. >> did trump negotiate that? that was a return, right? they helped us in north korea and let our movies in. and we -- and the steel. >> and netflix and mcdonald's, these stocks that have been

doing great and then yesterday, pow. the afterburners -- >> well, this is why i talk about why easterbrook is underrated. that conference call was fantastic. people don't understand the makeup of that company. it's the people that you work for, the franchises. they love easterbrook. put extra people online. so the lines aren't so bad. simplify the menu so anybody can work behind the counter. >> now pulling back on their plans to sell the japan stake. >> i know. he's doing a lot right. >> we get a tweet from a viewer who asked about seagate which is having a bad morning. >> because they actually literally said that, you know, supply and demand is okay. we wanted to see supply tightness and demand overwhelming supply. because we get this call over and over again, that pcs are in such strong demand. steve lieu sew, a monster good ceo, but you needed to see allocation. that's the word i like to see when i see the cycle.

see allocation. no. we have -- it's been a great story. no, it was -- >> it was a recent high, but not an all time high. as you can see, just on the week what its performances is still well better than the loss today. but investors -- >> generate a lot of cash. look, everybody -- you really did hear over and over again -- even dupont saying yesterday, look that business is good. because they sell a lot into communications. by the way, can i just say that pepsico did not report a bad quarter? my charitable trust owns it. it was a very, very good quarter, kind of what we expect from pepsico and that wasn't enough this time, give me a break. >> got that all time high on the nasdaq. two days above 6 "k." people look on the 5 "k" nasdaq, we it go and then the next day

and then it took 15 years to get back to 5 "k." >> what was the cheapest stock in the -- in the price to earnings basis on 2001 numbers in the top ten in the year 2000 at the peak? >> what was the cheapest -- >> cheapest stock on a price to earnings basis in 2004 numbers when nasdaq hit 5,000? what was the lowest multiple stock of the top ten. not cisco, not intel -- >> not microsoft either. >> no. what story did you break? >> oh, worldcom? >> yes. worldcom was darn cheap on earnings but what did we discover? >> it was fraudulent. >> right. they had none. so the cheapest stock at the time turned out to have horns. >> i didn't know that. >> top ten. >> there's a study out bloomberg has the piece up. they look at historical valuations. and they argue that in this bull market we're at 97.

1997. where you had 2 1/2 years left to go. 60% left to go. >> cisco at 13 times earnings. what is that, expensive? look at the cash flow. >> guys are looking at trailing numbers and the multiples there and saying it's starting to get them a little concerned. i mean, there is not a shortage of people out there who are -- who believe that we're at high levels. >> alphabet at 19 times -- facebook less than 20. i'm not going there. intel is a big discount to the average stock. cisco is being incredibly undervalued in terms of the historical range. >> not akin to 2000. >> we can wait for korea and russia. >> it was a great couple of years. >> it was a great couple of years. >> wow. those were good years. >> at the end of the year, i paid myself and i was an llc. >> yeah. i know. >> happy days are here. >> well, i lost a lot of that. i wasn't in the market.

>> is it weird to have boeing be almost the worst dow stock and utx be one of the best? >> yeah. well, you know what? oh, for the best conference call, the hamilton of last night, it will play forever, steve wynn. from wynn -- i mean, it's unbelievable. look, the chinese, i'll give a summary of it, kind of like the play bill. the chinese are back to their old ways it's terrific. once again they're like -- like their corruption. and so people begin to return to normal spending habits and not influenced by public policy issues. what are they doing, buying new cars and shopping at louis vuitton and gambling at wynn. the good times are back. because the premier realized -- that was great, that was a terrific thing. wynn is back. and it's so great. they bought so much stock in the 50s and 60s. he dared people, buy with me. he gave you a double. you ever met him? >> yeah. >> 120. >> many years ago.

>> that was bananas. >> oh, my, he got long, but not -- look at my buys. look at my buys. that was when he was talking the chai coms. it's remarkable he got huge market share, palaces. palaces devoted to gambling. yeah. >> yeah. >> don rickles. >> don rickles, the late don rickles. >> fabulous. >> so some muted gains. seema mody has more. >> yeah, the earnings and politics dominating the discussion. dow up 18. but after a solid two day rally, the dow is up over 200 points and it's only wednesday. the nasdaq hitting that new all time high building on the gains after surpassing 6,000 yesterday. of course that's been one of the notable characteristics, the

outperformance of growth over value. the big topic today, trump's tax plan, cutting the tax rate to 15%. what that means for the federal deficit, definitely a big question. secretary mnuchin has said that higher economic growth will finance the lower tax rates and perhaps more details this afternoon. the other talker is repatriation. that tax holiday which would allow multinationals to bring capital back home at a lower rate. analysts say that's a win for apple, microsoft, cisco and ibm. it's been a great earnings season, but look at one loser today. that's u.s. steel. now down more than 25%. trading below its 200 day moving average. earnings disappointed, plus weak guidance. and not only has steel prices been under pressure, but base metals like iron ore and copper have come off their highs. that's due in part to growing concerns around china's credit situation and its ability to sustain growth.

speaking of commodities so much for recovery in oil prices ahead of the inventory data due at 10 a.m. the opec it will be interesting if the oil continues to slide. interesting enough, emerging markets down, buck certainly not out. still up around 7%. brazil up 7%. david, argentina, up 25%. given the move we have seen in commodities you would expect a market like argentina to be much lower. back to you. >> did not know that. thank you, seema mody. at&t, the stock is up, not a good quarter, but the stock is in the green. as is verizon after what has been a dreadful run for that stock after that company reported earnings. of course, what do we know? well, we know that things are extremely competitive in the wireless world that we live in here in this country. we also know that at&t has made efforts over the last few years to move away from it. buying directv. now in a deal of course to buy

time warner. diversifying away from what had been its core business and, well, can you blame them when you look at a quarter like the one they had where they had 191,000 postpaid net losses. 348,000 really the number there in terms of postpaid phone losses. those are big numbers. and remember during the course of its quarter, verizon had been done as much as 400,000 before coming back a bit before it offered an unlimited plan. where are they going? you don't need to look far. you can look at the numbers from t-mobile and back into the losses at at&t or even at verizon. and so perhaps not that big of a surprise for investors of at&t. interestingly, they also -- they haven't seen any growth in directv. zero. that was the number of additions there. they actually lost i think it was 233,000 overall net video subs. that was new verse, previous to buying at&t. on the conference call they talked about taking a pause in direct tv now, to fix some of

the bugs in that. over the top offering. then coming back with a marketing push there for directv now. they didn't give us any specific numbers on it. but it's an interesting world right now in wireless of course as tomorrow at 6:00 p.m. the ability of companies to talk to each other is once again something they can do. the collusion deadline having expired under that wireless auction that took place. we'll see. we'll see what happens in terms of consolidation. so much talk about sprint and t-mo, how do you get a deal done, given how much larger t-mo is, the willingness of deutsche telecom, but there's a lot of potential talk and then there's questions. but interestingly, at&t, its decisions to diversify away being embraced by investors.

but jim, when you look at time warner for the first time i'm hearing some of their investors say, you sold too cheaply. >> really? >> if you back into the numbers -- if you assume there's going to be a tax reform, now listen, you can't blame them for that, but he sold before the election. assumed tax reform. you can get to the low as 14 times forward earnings there and there is starting to be a little bit of a chorus -- not that it's going to matter that says, man, maybe -- not to mention, verizon is thinking of content. our parent company has some interest as you head into the back half of this year. maybe they would have been better off waiting. hindsight 20-20. to give the great american a break. it was a big number. >> bird in the hand. >> i'm starting to hear that. >> really? >> even after he turned down fox? said no to them. >> yeah. >> boy, there's no -- there really is no gratitude in this

world. is there? >> maybe not. >> this guy has given you a bunch of super bowl wins, but he didn't make the playoffs, i mean, honestly. jeff, he's great. >> but 14 times next year -- >> maybe too cheap. >> i have to tell you -- geez, i look at john legere and the lines about dish. and what they have. >> we have a lot more to talk about. more reporting to be done as that deadline approaches. and as we start to see things sort themselves out if they do when it comes to what happens in telecom. for now, let's change tacks, head to the bond pits and check in with rick santelli. >> good morning, david. if you look at the two days of two's, you can see we have extended. the fixed income treasury curve seems to be back into kind of the mode it was before some of the disruptions of lower rates

and we could argue all the various channels that pushed into that direction whether it was geopolitics in europe, french election, specifically. data that seems to be sub 2% on the annual gdp level. but things are popping a little bit. look at the one week of tens. what you'll see -- excuse me two day, a one week, back-to-back. because i want you to see the volatility we had around 8:32 eastern when secretary mnuchin brought up details about taxes. there can be debate, taxes, deficits, i get it. but in the end we had deficits and we had sub 2% growth so the notion of toying with the priming of the pump, maybe to try to get more growth is something the market's going have to tinker with. when it comes to deficits very counterintuitive. its effects on rates. probably because of central

banks. a lot of deficits lately and interest rates have had some historical passes at very low levels over the last several years. if we look at what's going on in boons, it looks on the intraday like it's moving to the different tune. moving a bit lower. but the one week chart shows it touched 40 and dripped away a little bit. the spread, you know, somewhat constant between tens and boons. one week of the euro shows you some interesting action. of course, that contract around the 109 level is fascinating but it gets more fascinating on year to date. if you look at the four tops and you imagine a nice ruler and a nice line its comes in where it's trading today. so some technicians are looking to buying the dollar index which is up about a third of a cent. carl, david, jim, back to you. >> thank you very much. when we come back, an exclusive with celgenes executive chairman who's met with the president on the future

of biotech and pharma under the trump white house. still awaiting the press briefing at 1:30. we'll get more clarity on the white house tax plan. back after a break.

we had a very successful meeting last night and i think it's clear that the house, the senate, the administration are all on the same page. that tax reform is a major priority to boost the economy. >> that was treasury secretary steven mnuchin this morning ahead of the white house tax reform announcement. we're going to keep an eye on capitol hill where speaker ryan and the gop leadership will be holding their first news conference in a couple of weeks. of course they have been on recess. the congressional agenda this week, government funding, health care, tax reform, the speaker did say this morning, quote, they have gotten a sneak peek and we're in agreement on 80%. and that 20% we're in the same ballpark. as the story will be about whether the house and the white

house see eye to eye. >> there are a lot of details. i don't want to bump people out, but i think that the details -- this is one of those devil in the details. it's going to matter tremendously. >> there's a lot, yeah. there's a lot of space between cup and lip as they say. >> i like that. not a seagate, but it could be a boeing, just to use the analogy. >> not going to be a seagate. >> see it's down -- >> yeah. boeing. okay. >> i think it will be hard. i just think these are issues that don't just get done. i don't know why anyone just thinks they get done. even with reagan. they didn't just get done. they'd recapture for every few months. that had to do with real estate. >> we'll get "stop trading" with jim in a moment. the dow is up 26 points, a lot to get to. don't go away.

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it's time for cramer and "stop trading." >> one of the best quarters will be a lamentable one. arconic last night, that was klaus kleinfeld who was the ceo until he was unceremoniously ousted because of the bizarre letter and they reported a good

quarter. this is klaus's quarter. the interim did a good job, but by the way, alcoa which is the other part that he's split up had a monster quarter. but klaus kleinfeld did not get to cross jordan to the way to milk and honey. >> unfortunate series of events for him. >> yes. look, what can i tell you? the letter was a bizarre letter. the change in the way he's split the company was brilliant. he didn't get much credit. you know, there's not a plaque, nothing. >> there's a lot of fighting going on between elliott and arconic. they're not agreeing to any sort of settlement and elliott wants four board seats. >> auto and aerospace was terrific. they did fix the problem with united technologies, on the big gear turbo fan which is really positive. they spent a lot move knee doing it. the company is set up for a great few years. charitable trust owns arconic. >> what do you have tonight?

>> well, some of the companies that have been fabulous are selling off. jim fish tells a pretty good story. then we're up all night because we have earnings. >> and we'll see what we get this afternoon. >> yes. >> we might talk to you before 6:00. >> thank you, cnbc for supporting lisa dettwiler for the brooklyn historical society. it meant a lot to us. >> very nice, jim. when we come back, the speaker and the house gop leadership hold a news conference on the day in which the president is set to announce his tax plan. the dow is up 26. hey, the future, 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 see trends to stay ahead of her competition.

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♪ good wednesday morning. welcome back to "squawk on the street." i'm carl quintanilla with sara eisen, david faber at the new york stock exchange. the dow is up 22 points. obviously most important theme of the day is tax cuts as we wait the white house tax plan this afternoon. other than that, a boat load of corporate earnings. we'll get to it top to bottom. >> our road map for the hour starts with president trump set to outline the big tax plan. we'll look at the proposals that matter most to business and investors. plus, stocks continue their

win streak after the quest two day rally of the year. the earnings are pretty upbeat. and pepsico beating on both the top and the bottom line. reporting first quarterly profit up 32%. we'll hear from hugh johnson [ but first, president trump is set to roll out his proposal for tax reform. our eamon javers has the latest on what a we can expect. >> a big day on the tax front and the treasury secretary already out in public touting what the president is going to unveil later on this averaftern. here's what the treasury secretary said. >> this is going to be the biggest tax cut and the largest tax reform in the history of our country. and we are committed to seeing this through. i will confirm that the business tax is going to be 15%. that is what the president said in the campaign. he thinks that's absolutely critical to drive growth.

>> so critical to drive growth. the treasury secretary says what's in the plan? well, our john harwood has obtained some of the details that we expect from senior administration official. here's what they're saying at least so far. you heard the treasury secretary there say a 15% rate on corporations. that's what's expected to be in this plan. along with 15% top rate for pass throughs as well. that's an important point. a top individual rate between 33 and 39.6% is expected. they're going to have a revenue place holder that could turn into a border taxpayer. bear in mind that term place holder. because that could be important in the political negotiations. then an expanded personal exemption or child care tax credit or even both of those could be in the plan. i can tell you, i spoke with sean spicer briefly a few moments ago. he sort of floated the idea that there might also be a repatriation piece in all of this. in terms of bringing corporate profits from off shore back to the united states.

that's something to watch for as well at 1:30. one of the keys to all of this is whether or not this is going to pass up on capitol hill of course. that place holder for revenue raisers could be an important point here. there are a lot of conservatives and republicans who don't want to blow a hole in the deficit and they will say, hey, wait a second, how are we going to pay for this? we love tax cuts but where are the pay forces? we're not expecting to see details on those today so that might be part of the mix of the negotiations. consider this, guys, opening bid from the trump white house in the negotiation. >> we'll see how investors and members of congress react. we are keeping our eye on capitol hill where house speaker paul ryan and gop leadership will soon be holding their first news conference in two weeks. of course we will bring you that as soon as we get some headlines. but for more on the tax proposals, potential impact on the market, let's bring in phil cam pa really from jpmorgan. and a chief market strategist at ab. so phil, the dow is up 14.5%

since the election. s&p 500 up 11 and the nasdaq up 16. how much of those gains have to do with hopes of tax reform? >> yeah, i mean -- as eamon said this is is an opening bid. so this starts the negotiation process. we believe tax reform is nice to have, but not a linchpin to the outlook. let's look at what really works for earnings which is let's get inflation rates to 2%. a reflationary environment that began before president trump got elected is what's driving earnings from what we saw yesterday. the beauty for us from the asset allocation perspective, sara, the u.s. doesn't have to do the heavy lifting anymore in a global kind of perspective. europe is up, outperforming the s&p by 10%. the s&p is up around 7. if you look at it from that perspective the opportunities are really outside of the u.s. that has nothing to do with the tax reform.

>> still, we could be talking about a big earnings boost as a result of a lower tax rate. how do you model that at this point? can you assume a 15% rate and if so, what kind of boost is that for corporate results? >> if the 15% rate were to pass through and it was made permanent, the earnings would be lifted by around 8 to 10% which is not really significant given the rise in the market we have seen. the much more important issue is the second order effects. the actual detail of that plan. there are two that are really critical. one will be made revenue neutral. where is the revenue going to be -- >> forgive me for a moment. let's hear the speak. >> nearly half of the measures are measures to take excessive regulations off the book so we can grow this economy. after years of workers and industries bracing for the next regulatory onslaught, all the unpredictability that's coming with that we are providing relief for energy jobs and for small businesses and retirees.

it's estimated that the steps we have take within this administration will save families and businesses more than $67 billion. that is real relief. that promotes real economic growth. we have been trying to cut red tape for years and now it's happening at record levels. the president has signed bills making it easier for women to pursue s.t.e.m. careers and to become entrepreneurs. to help our veterans, the president has signed a bill to lower out of pocket costs and to take steps toward fundamental v.a. reform very much in need. we're going to keep building on this record. right now, we're working on a government funding bill that addresses some of the country's core priorities including strengthening our national defense. last week i was in europe visiting some of the key nato allies and across the board allies are ready to see america step up and lead again. a big part of that is rebuilding our military which is something we're in the middle of doing right now. we're also working to fix our tax code. today the administration will

outline its principles for pro growth tax reform which is a critical step forward in this effort. pro growth tax reform means that we will have lower rates. we will have a simpler tax code with fewer brackets and we'll have an irs that exists only to serve the taxpayer. and we'll continue to work to keep our promise to repeal and replace obamacare. so that we can lower costs and create more choices for families. we have undertaken some very big reforms to tackle entrenched problems. that's a lot of work left to do. but under the president's leadership this unified government has made a solid start. thank you. >> good morning. welcome back to many of you. as -- >> that is speaker ryan, as we see congress coming back to work. reacting to a little bit we have heard about tax policy from the treasury secretary this morning. of course a lot more clarity we hope will come around 1:30. you point to tax being nice to have. but that aside, what kind of chances do we give it as vadim

said earlier knowing that the intricacies of the policies are so hard to get to. >> we saw this with health care, so the opening bid was really important. what the market can get from speculation to specifics and we took a step towards that today. i think that's good for the market. you know, he's -- president trump wants to make it happen. so if he makes it happen, if they can get it through congress, if there's more cooperation, that's really good. from the sentiment of the administration. >> you were giving us some numbers on how it can impact corporate earnings. can you break that down further? who are the winners and losers based on what we know so far? >> so based on what know so far, the biggest winners are domestic companies because they would be the ones most affected by the cut to the domestic interest rates. the global economies which have a lot of earnings coming from overseas would be less affected. also, a lot of detail that are going to be important, for example, are you going to am low

expensing of the capital spending. to the extent that's part of the proposal which is a critical part of the tax bill, it will affect capital intensive corporations. >> to dig into this further, phil, is this a one time boost for earnings? is it sort of front loaded? >> the -- the investors should think of it as a pro kind of business sentiment. and maybe front loaded, maybe after 2017 we'll what happens with the individuals as well. but if it changes from gridlock to something good that happens that's very important. >> vadim, you have a thought on that? >> yeah. there's something far more dangerous looming potentially. one of the things we have seen year to date is a surge in soft indicat indicators. a surge in sentiment. capital spending expectations. at the same time, the hard data has not really kept up. and the economic surprises have been neutral to somewhat

negative. if the tax bill disappoints, if there's not enough clarity in terms of the detail, you do have a risk of declining sentiment. so i think while the base case is for some passage of a tax bill which would be positive for the earnings, there is a risk that the sentiment side of the equation could deteriorate the absence of detail. >> it's going to put a lot of pressure on the q1 gdp number we get on friday, don't you think? >> right. for us it goes back to the inflation target. the fed from the beginning, from chairman bernanke in '08 wanted to get to the 2% core target and that's a good time for earnings. if we get to that point and the fed is moving another two times this year, that's going to be really good for earnings. >> just this week, the journal makes a big case for peak deflation. do you think the fed continues to rise in the environment where car prices, telecom, food, all have brewing price wars? >> yeah.

so the cpi number in the last print was a disappoint. one number does not make a trend for us and everyone is in the mode of moving more this year. that's a left -- the base case is the fed hitting the 2% goal and again the heavy lifting doesn't have to be done by the u.s. the u.s. is fun to talk about but it's europe in the end that's where it is for us. >> is inflation in this country is hard to get to, as it's always been? >> i think it is, but i think there's a critical point. one of the things we have noticed is obviously the tightening labor markets and really absence of a pickup in labor participation. in the current trends persist, the unit labor costs are going to rise probably around 2.5, 3% by the end of this year. even if we were to get core inflation at 2%, that may not be enough to cover the rise in labor costs in which case you'll start to see pressure on the corporate markets in the united states. so i'm less optimistic about the u.s. outlook in terms of the

equity markets. likewise, i think outside u.s. is more attractive. >> yet, we heard again from treasury secretary mnuchin this morning that 3% economic growth is quote, very achievable. that is what they're building their case, this entire tax plan around. >> yes. >> is that realistic? >> that is realistic. if we can get there, think about where we have been in this 2% malaise in this economy. it's hard to get into the accident with the economy running at 2%. if we can get a boost on the gdp numbers we think that's aab achooechable going forward. >> what other provisions are you watching within the announcements that could impact business? the interest deductibility is one i can think of. carried interest. what else are you listening for? >> the biggest one is the permanent. if it's permanent is it going to be revenue neutral?

even though there was a claim of a place hold fore the revenue side of the equation, any hint of where that could come from, whether it's real estate deductibility, special fees, i think could have the unintended impact. that's the key thing to watch. >> vadim, thank you for that. we're going to listen to ryan take some questions here. >> i wanted to ask you about the choice act and this weekend i wanted to know where that fits in the priority? when you think you can -- >> yeah, i'll defer to kevin on the timing of the choice act. that's the regular budgeting process, but we want to look at every avenue. but we think reconciliation is the preferred process. we think that's the most logical process to bring tax reform through. and chairman hensarling is marking it up. we want to move it to the floor as quickly as possible. that's the schedule. casey? >> is the white house overstepping their bounds here

on tax reform -- bringing this proposal to you? is that part of the failure of health care -- >> no, this is something we have been talking about all along. the house ways and means will make sure we can get a bill together that's unified. we have been briefed on with what they're going to do. it's basically a long -- along the same lines we want to go. this progress, showing we're moving and getting on the same page. let's do that again. we're on the same page. very interesting. so no, we see this as a good thing. we see this as a good thing. >> on health care, does the mcarthur amendment gets you to 216? >> we -- tom mcarthur one of the leaders of the tuesday group he has a lot of experience in insurance. he knows insurance markets inside and out. worked in high risk pools. so we think the mcarthur amendment is a great way to lower premiums, give states more

flexibility, while protecting people with pre-existing conditions. those are the three things we want to achieve. you have to remember, obamacare is collapsing and people are getting hit with double digit premium increases. whatever we can do to get the premiums down and make sure that the guarantee for people with pre-existing conditions is met -- every state is a little bit. we had a high risk pool in wisconsin that worked real well and in maine that worked well. we want to give the states the ability to customize their reforms to maximize the ability to lower premiums and protect people with pre-existing conditions. that is exactly at the heart of what the mcarthur amendment does. i think it helps us get to consensus. >> susan -- >> blurt it out. i won't do it. >> i'm following up. >> [ inaudible ]. >> we're getting close, our appropriators are down to the last final things. i think we're making good progress. obviously, csrs we're not doing

that. that's in not if appropriation bill that's something separate that the administration does. we're close and now it's down to the final details. >> do you need a stopgap -- >> that's not our intention or goal. we want to get it done on time. >> will we see a vote on health care next? >> we'll see. we'll vote on it when we get it. >> that's speaker ryan talking about the tax policy being rolled out by the white house today. in his words we see this as progress. and shows that we're heading -- or getting on to the same page. let's get to kayla tausche who is watching this from capitol hill. >> yeah, carl, you heard the speaker talking about deregulation, talking about tax reform and talking about everything that congress is doing. the republicans in congress are trying to do to advance their agenda and the agenda of that of the white house. he was very bullish on tax reform. said there was very a good meeting yesterday. he had said earlier this morning that there are about 80% on board with the principles they know that the white house is

going to put forth. he did acknowledge that health care is very close, but that that might be one reason why the white house is trying to push them on health care. he said they're not overstepping, but then wouldn't go any further to say, you know, exactly why the white house is taking such a lead in this way. when he was asked whether specifically the changes that had been made to the american health care act would actually get them to 216 votes he didn't say specifically. he did say they're very close. he said they're going to vote when they have the votes and he is optimistic that the experience that congressman tom mcarthur of new jersey has in working in insurance that the changes they made will bring premiums down. we will see what that means for that bill. whether they can schedule a vote. but of course the white house has changed the agenda up on them. last week the white house wanted a vote today on that health care bill. then they said no, we'll be outlining tax reform. so the conversation here has changed a little bit. he did say he was optic about not only health care, but tax

reform and the financial choice act. about the replacement for dodd/frank. a lot of irons in the fire for congress and speaker ryan said he's optimistic that progress can be made. >> thanks for that. the rules committee chair is son the tape this morning saying they'll take up spending before saturday, but will not take up health care before saturday. so we'll keep our eye on that. we're joined this morning from washington, fresh from a breakfast with house republicans our senior contributor, larry kudlow, who essentially called what we're learning about with regards to border adjustment, larry, nice call yesterday. >> well, sometimes you get them right. sometimes you don't. sometimes kudlow forecasts pan out. sometimes they don't. >> so reflections on this morning so far. >> by the way, i do want to say, carl, i'm not expecting treasury secretary mnuchin to have a

definitive statement on b.a.t. he may, but i wouldn't bet the ranch on that. there are a lot of issues, however. he's particularly concerned about currency impact as well as more overall issues, imports and exports. but i think they're leaning against and i think it's time to move on. get off that. let's get down to it. man, we're going to lower business tax rates across the board. we're going to -- large companies, s-corps, llcs. 15%. expensing, repatriation, you're going to get some stuff about infrastructure and then comes the battle of the scorecards, okay? 3% growth creates my judgment about $4 trillion in extra revenues. i call it the mother of all pay fors, but there's a debate in this town. i heard it last night at dinner, i heard it this morning. i'm speaking to the senate luncheon today. this is going to be a battle of the scorecards.

i don't know, like golf or gin rummy or something. >> i know you're in d.c. to have the meetings. what's your take on how this is all going to go down in congress if the republicans can swallow enlarging the deficit to get some of the massive cuts? >> well, you know, here's the deal. i don't know that they're going to get larger deficits. maybe the first year or two. okay? or even the first three. i'm here to say -- a lot of republicans believe this, not all, but many. i'm here to say that the business tax cut side is going to pay for itself, give it a couple, three, four, five years, okay. that's what i believe. now, you want additional payroll -- you want to pay for by eliminating certain deductions, so called loopholes, fine. limit deduction. the individual side is going to be much tougher with respect to deductions. but the business side, no. that's not going to enlarge the

deficit. the greatest antidote to budget deficits is economic growth. we have proved that in the '60s, we proved that under kennedy and reagan and clinton. the reason deficits are so huge, we haven't grown in 15 years. the revenues haven't come pouring in. we're not getting enough new investment. that's the key. >> well, larry, when you have a debate as you i'm sure will with others who differ with your view point and they say, well, gdp growth is a function of productivity increases, i want to understand how it is that a lower tax rate is actually going to bring that about. what is the answer? >> the very fair question, it's a very important question. my judgment is productivity moves because you are creating more capital formation. because you are incentivizing business investment. look, we haven't had any productivity -- actually in

about five years. going back to the year 2000. productivity has been on a downward slope and thin flattened out. practically zero right now. one of your progress guests mentioned that and he's right. here's the deal. business investment. it will renew the capital stock. that has not grown. the capital stock in the last 15 years has grown at one-third of the pace of its long run trend. if you fix that, with lower marginal tax rates, create incentives and by the way roll back some costly regulations, you need more capital in the system. you can't have a good job, you can't have wages, you can't have productivity unless you have a healthy business funded by capital. this is all about capital. and at the end of the day, the biggest gainers are going to be the wage earners. that's what the evidence shows. that's what the research shows. you have to think about this. this is supply-side postulate. what we're trying to do here is lower tax rates to generate more

capital formation. that's the simplest way i can put it. then you'll get your productivity and then you'll get your economic growth. >> larry, a lot of people trying to take what you just said and look at it through a reaganesque prism. others make the point, reagan called for cuts when department to gdp was 25, not 80. when boomers were turning 35, not 70. is that a fair point? >> well, you know, it's a fair point but i don't know what it means. i mean, deficit to gdp at 25% which is where it was hovering in the middle '70s, the economy was stuck with stagflation. there's no direct evidence between deficits and gdp and economic growth. in fact, it's really kind of the reverse. economic growth expands gdp in the denominator. that makes the debt lower and the deficit burden lower. you cannot balance the book unless you're at full employment and unless you're growing at

full capacity which i believe is 3% plus and we can regenerate that. as far as the baby boomers go, i'm still kicking. i don't -- unless you're here to give me a bad message, i love my work and i love doing this show. and can what -- what else? >> a good point. but we know you're still kicking. >> i'm still kicking, i'm having the best time of my life. the whole point is that incentives work. this is reagan. this is supply-side. also john f. kennedy. so yes, you're going at this in a very direct way by helping business capital cost reduction. and -- >> capital has not been particularly expensive for much of business. look at where rates are. you know, what's to say that a lot of the savings here so to speak from a tax cut will not simply end up in increased dividends and buy backs that

flow through the investor class that don't make their way back into the economy? >> well, look, you measure interest cost to capital and you're right. it's very cheap. but i'm measuring the tax cost of capital. which i think has a greater impact. that's really what this is about. the tax cost of capital. which responds to immediate expensing. lower corporate rates and by the way response to the capital tax rate which is scheduled to come down in the new plans. the other point, dave, share buy backs, dividends, put cash in investor hands. that's good. it's not mattresses. this is not 1934 or something. that money will be put to work. it may be reinvested in the stock market or it may be invested in a new business venture. we don't know. venture capitals have a pretty good run. this may make it better. i can't predict these things. but what i'm saying is there's nothing wrong -- there's nothing wrong with the company taking

its cash and putting it out to the investors. let them have a whack at the ball. a lot of the core pock asies are not very creative. let others have a crack at it. >> half of americans own stocks so i take your point. on the individual side i know you're focused on the corporate tax cuts. the president and the treasury secretary have said this is the biggest tax cut ever. in 1986, the individual tax rate was cut by 22 percentage points from 50 to 28%. isn't that going to be a high hurdle? >> yeah. it's going to be a very high hurdle. i mean, to me, the guts of this has always been the corporate tax rate reduction. okay? now, the individual tax rates, the marginal rates will come down. i don't know the details. i think it's going to be close to what we did in the campaign as -- and the corporate tax as well. standard deduction is going to

be widened. the treatment of a lot of the individual deductions i don't know. and i'm not sure you're going to get that information from the white house today. i don't know. i think that's still under discussion. i'm not privy to that. i may learn more as the day goes on and we meet with more people. but i think when the president says the biggest tax cut, i really think he's taking it ensemb ensemble. individual stuff and the business stuff. i can tell you this. we never had this kind of direct business tax relief so far as i know. the corporate rate came down in the '80s but we didn't spread it out, it didn't affect the s corps or the llcs. now you're down towards 15 or 20% so i think in that sense the president is right. on the individual side, a lot of details to be filled in. >> as there always are. larry, stay close. we're going to come back to you as much as possible.

larry kudlow. >> appreciate it. pepsico reported earnings this morning and the stock is under pressure despite a beat on the top and the bottom lines. you will hear from the company's vice chairman and cfo, hugh johnston on future growth, trump's new tax plan and whole lot more. the dow is up 25 points. stay with us on "squawk on the street."

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okay, let's go. find your awesome with the xfinity x1 voice remote. that's amazing! pepsico out with q1 results this morning. it was a beat with higher pricing really helping fuel sales. stock is down about a percent and a half right now. here is cfo hugh johnston on the quarter in an exclusive interview a few moments ago. >> a couple things, sara. number one up, as you pointed out, giuilt free is a driver in our portfolio. they're up to 45% over the entirety of the pepsico portfolio. when they want to indulge, we have terrific indulgence snacks for them. when they want healthier eating we have terrific healthier beverages and snacks. so that's big take away number one for us.

big take away number two in the quarter i think is developing in emerging markets. overall, we saw 5% of the dne growth in a choppy environment and most notably russia and mexico with high single digit revenue growth led the charge for us in developing in the emerging markets. overall, we felt it was a good quarter and a reasonably challenging environment. >> you mentioned the macro environment looked better especially in key markets like russia and mexico. what are you seeing in the u.s. in particular around march and into april. >> yeah. as we gotten into march and april, we have seen the consumer bounce back strongly. another factor that played into the first quarter certainly for most consumer products companies was the delay in the tax refunds. tax refunds for certain payers were delayed until february 15th. we saw it in our business in the first six weeks of the year. as we exited march and now are

about to exit april, the business has really bounced back strongly in the united states. so overall, i think the consumer is optimistic, but a bit cautious in the united states. and that's not a big change from where we have been before. if anything it's probably slightly better. >> let's talk about your own tax rate. in the 22% range, that actually helped to drive the eps rate on a day when president trump, his administration, is likely to unveil a 15% corporate tax rate. how does this corporate tax reform impact your business? >> yeah, it's a great question. i wish i knew the answer to how it was going to play out legislatively. yeah, our guidance for the year -- we'll see taxes come in about 24, 25%. with the current tax schemes that are in place. to the degree that there are changes in taxation policy coming out of the united states, hopefully that will be an upside for us, but it remains to be seen. right now we're just planning for a continuation of what we

have had over the last several years. >> are there any specific provisions or deductions you're going to be listening for when you hear the details of the plan today? >> no. i think that the things we're going to be watching for, number one is the rate and then number two is what will happen on taxation on international cash and international earnings. so it's certainly a big variable that everyone is interested in. we all certainly look forward to hearing the trump plan but obviously it needs to go through the legislative process. i expect it will be quite a bit of back and forth negotiating before we see a type of a deal coming out of washington. >> hugh, i wanted to get your take and your reaction to 3g making a failed bid for unilever which is a big competitor for you in the food space. does that change the dynamic at ail a-- at all? >> i don't know that it does. unilever is a significant partner for us as well.

we have a global joint venture with them on bottled tea under the lipton brand. they have been a terrific partner in that regard. regarding 3g it will be too speculative to comment on anything in that regard. we're largely focused on running the business to try to drive good margin improvement and good disciplined capital allocation. when we do those things, investors have tended to be rewarded very well. i would say we have more of our energy focused on that, what happens in the balance of the space, kind of is a tbd. >> and part of that is marketing. this is the first chance we have to talk to you after the ad that went viral. can you give us a little more color into how that happened and what's changed internally as a result of that marketing misstep. >> yeah, i think we missed the mark on that. we certainly put some process in place to ensure that we don't do that again. we have apologized for it and took it off the air as quickly as we possibly can. so i'm not sure there's much

more i can add to that beyond what we have already said. >> any change in business or sales as a result? >> no. we really haven't seen a significant change in trajectory on the business. i think we've responded quickly and responsibly. so the business continued to go as it was. >> our thanks to hugh johnston, the cfo and vice charge of pepsico. a little reaction pinned down to north america volume declines for frito lay. that came as a bit of a surprise though we talked about that and he chalked it up to seasonal factors. for instance, the easter shift and overall, pepsi continues to post better than organic sales growth than the food and beverage industry. not a ton, but still a little bit better. it doesn't really change the thesis what we saw this morning. >> sometimes we try to get in on the twitter question. he's on the board. not today. >> he never bites on that.

so no problem. whether twitter is having a good day or a bad day -- yes, he's a board member. he never comments on that. >> very good stuff, sara. let's get a news update with sue herera. >> good morning. here's what's happening at this hour. president trump is criticizing a federal judge's decision to block part of his executive order withholding funding from so-called sanctuary cities. the president ruled that the executive order overstepped his boundaries. this morning mr. trump tweeted, see you in the supreme court. french officials say they have proof the syrian government was behind the chemical weapons attack in syria earlier this month which killed 89 people. the foreign minister says samples taken from the attack match those from a previous incident. police in turkey have reportedly detained as many as 1,000 people with suspected links to a u.s. based cleric

blamed for last july's failed coup attempt. that cleric is a former ally of president erdogan. and pope francis is the first pope to give a t.e.d. talk. it was a surprise appearance. he warned the audience about the dangers of too much power saying it needs to be combined with humility and tenderness. that is the news update this hour. carl, i'll send it back to you. see you in an hour. >> thank you. when we come back, the president getting set to unveil his tax plan. ma maya mcginness will join us. and then u.s. steel suffered the worst day on record as they dramatically slasher that earnings forecast. stock's down 25%. posting a miss on the top of the bottom line. back in a minute. think again. this is the new new york. we are building new airports all across the state. new roads and bridges.

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the white house rolling out its tax reform priorities later today. for more on what we can expect we're joined by maya macguineas,

and terry hanes, the head of the political analysis and managing director. good to see you both. >> good morning. >> important day. we have heard from mnuchin this morning. we'll hear from him again in a few hours. terry, i would sounds like we'll be talking about this in your view for the next eight to nine months. >> oh, absolutely, carl. one thing that's happened over the last few weeks is the decision that's important here for timing. is the decision by the president to prioritize the affordable care act reform to get additional budget savings that will drive aggressive tax reform. what that means in terms of the congressional calendar very simply is that the fastest that the markets can expect tax reform action in washington is at the end of 2017. i would say november and december. >> so you still believe there's no way to leapfrog health care, that that in fact needs to come first and still will? >> well, what i think is that the policy mamakers have made t

decision. that's the priority of the house. the president flirted a month ago with leapfrogging tax reform and then the first week of the congressional recess he said what he was interested in doing is making sure they got health care done first. that's how everybody is proceeding. one of the president's good skills is the art of impatience and i have no illusions that if health care bogs down then tax reform will take center stage. but for right now it's health care first and then moving on to tax reform with the additional budget savings. >> maya, regardless of what the base line is, is deficit neutrality dead? >> well, the secretary of the treasury indicated they planned to pay for at least part of the tax reform bill with the growth effects from it. and so that is a different story than during the campaign where the plan was to take the big growth effects that they were calling for and hoping for from

a variety of policies and apply them to getting our record level debt under control. now they're talking about big growth effects and they would like to use those to off set tax cuts. it's good to hear about the tax reform they're going to push and i think to the points about sequencing we'll see movement on health care. but they can be doing a lot on tax reform starting today. a lot to do to get everybody on board and the structural changes that they're talking about all seem to be in the right direction. but part of actually having tax reform grow the economy is making sure that it doesn't increase the debt. tax reforms that are revenue neutral are more pro growth than those that aren't. the hardest piece of this i would easily acknowledge is where you find those offsets. but there's a huge tax base with $1.6 trillion in tax breaks that they could be looking through which ones could you shave, trim, eliminate to use to bring those rate reductions down in a revenue neutral way and then use

that growth to help deal with the big fiscal challenges they are facing. that to me would be the strongest recipe for growth. i hope they use this time to come up with the structure of the package and also those pay fors. if they jettison them that will undermind the growth. >> i know we don't want to saddle our kids and grand kids with more debt but it's important for the procedure here. can you go into the technicality of how they could make this more permanent if they are able to achieve revenue neutrality, right? >> yeah. excellent point. because there are so many reasons we do want tax reform, anybody who dealt with the tax code knows that. a big one is growth. another big one is stability. people in the business world are trying to work in an environment where tax -- their tax policies that affect them tremendously change constantly. they can't possibly be expected to do the long term planning that we need them to do to help the economy grow in a sustained

way. if they have a tax reform that loses revenue after the ten year window, because of the procedure they're using called reconciliation, it would have to expire after ten years. that's what we faced with the bush tax cuts. anybody who remembers the fiscal cliff, all businesses were left scratching their heads with no idea of what they were going to be facing. that means they can't plan, they can't invest. they can't do all the things that would be good for the economy. so permanency is key here. giving a tax reform plan that is going to last and not expire arbitrarily is important. then we can make it permanent and add that stability that we need. >> terry, let's get back to the execution here and what we'll end up with. the speaker this morning i think described the house ways and means plan as 80% of what they're saying in the bare bones stuff we've got from the trump administration. i don't necessarily see 80% there given no border adjustment tax, no write-off in capital in

year one. no nondeductibility of, but where do you see this playing out in terms of the house which has a much more refined plan we can look at versus what we'll get from the administration. >> well, it's important to understand i think that the -- on the big things the most important things, the president and congress seem to be fairly closely aligned. there's a desire to want to get us out of the 2% or less growth new normal of the last decade. and on that, they all agree. that's -- so that's an important driver. on some of the details in the house blueprint for example, border adjustability being the central among them, our view was always that that was very unlikely to happen. we have about 10 to 15% today. and, you know, the math is pretty simple. if you don't have full throated house support and you don't have anybody in the senate that's willing to go along with it and

certainly senators happen and portman don't seem to be interested in doing it, then what you'll have is a different path on some of those issues. but those kind of details get fleshed out down the road. and part of what i view today's action is being -- as being is a desire to really focus and hone in on the most important parts of tax reform and work the legislative process over the next six months or so in order to fill in some of the details. >> finally, maya, our reporter eamon javers suggesting there could be a tie between repatriation and infrastructure regardless of what the treasury secretary hinted this morning. how important is that, how likely is that? >> so i agree with eamon, i think that's still at play. the reason i think is if you decide you want to have a bipartisan bill and that's very favorable to have one for the durability of the bill, then infrastructure is clearly

something that i think republicans correctly think democrats are interested in. i would just make the case one more time that pro growth tax reform is paid for. it actually turns out pro growth infrastructure spending is also paid for. if they're both deficit financed, you've got good tax reform, really bad expansion of your debt, you have undermined the growth you could have. so i fear the political calculation of let's not pay for anything could beat out the smart calculation of let's spend and tax wisely and get our debt under control and really unleash some prosperities in a sustained way in this country. i hope that's the path they go if they were to include paid for infrastructure i think they could get bipartisan support and would be better for the economy but politically a heavy lift. >> we'll get a sense of how heavy when cohn and mnuchin speak to the reporters in a few hours. good to see you. let's get a quick check on the crude.

seeing a nice spike after the draw in inventories. not quite back to $50 a barrel, but $49.85. when we come back, one stock we're watching today, twitter, it's soaring for a change after reporting a big earnings beat and adding more daily active users than analysts were looking for. we'll take you through the numbers with the s&p just a few points away from a record closing high. "squawk on the street" will be right back. ven more value. and at $4.95, you can trade with a clear advantage. fidelity, where smarter investors will always be. and at $4.95, you can trade with a clear advantage. at crowne plaza we know business travel isn't just business. there's this. 'a bit of this. why not? your hotel should make it easy to do all the things you do. which is what we do. crowne plaza. we're all business, mostly.

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beat was accelerating earning growth to 328 million, 7 million more than expected and 9 million more than last year. they said daily use was accept sell rated to grow 14% from last year, thanks to a better user experience with less abuse as well as better tools to browse and find content. by focusing on the timeline,

we are displays a broader set of tweets from a person's network. we are applying more deep learning models to make sure we are showing morrell vanity tweets first. the other area we have been focusing a lot of our attention on is notifications, making anymore a whole lot morrell vanity. he was bullish on video to twitter. saying that they streamed over 800 hours of live video last it was really good.

december 1st. let's go to my white board. basically, the same chart. it doesn't work out perfect, this line. it does come in right around 109ish. you have to balance that out around 9915. finally, so much talk today with the tax reform with deficits. one air wrea i never hear anybo talk about is the balance sheets of central banks versus the gdp. we are about 25%. ecbs, 36%. bank of china, 100%. why is this important? everybody is so interested now. i have always worried about it. this robbed the market of religion. if there is no cost detriment toish uing debt, to run your deficit, you are going to get in trouble. that's the trouble nobody has been talking about. david, back to you. >> i'll take it, rex. thank you. let's send it out to john

with a look at what's coming up on "squawk alley." >> we are going to continue to talk twitter just does video strategy make up for a lack of growth compared to instagram. also, celgin's ceo is going to join that. all that coming up on "squawk alley." who's the new guy? they call him the whisperer. the whisperer? why do they call him the whisperer? he talks to planes. he talks to planes. watch this. hey watson, what's avionics telling you? maintenance records and performance data suggest replacing capacitor c4. not bad. what's with the coffee maker? sorry. we are not on speaking terms. what's with the coffee maker?

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welcome back. i'm dominic. chew. keep an eye on those shares. back over to you quis guys much good morning. it is 8:00 a.m. at twitter headquarters, 11:00 a.m. on wall street. "squawk alley" is live. sfoet snet ♪ ♪ when you wish upon a star