expectations today at 177,000. so we'll see if that tells us anything about what to expect come this friday. tomorrow we'll get the weekly jobless claims. not off this month's report, but another look at what's happening in the jobs market. >> okay. sunny, finally, get some light in here. make sure you join us tomorrow. "squawk on the street" begins right now. ♪ good wednesday morning. welcome to "squawk on the street," i'm carl quintanilla with david faber at the new york stock exchange. jim cramer will have tim cook tonight on "mad money." it's a reaction to apple's earnings that's driving the day today. futures on the soft side. don't forgot a statement is headed at 2:00. macron and le pen will debate this afternoon.

adp in line at 177. and our road map begins with apple's iphone sales disappointing. why the company says future product rumors could be to blame. private sector hiring slows. will signs of a cooling job market change the fed's potential rate hike plans? and a food rally, mondelez and yum brands beat the expectations. mcdonald's gets an upgrade at goldman up. the iphone shares disappoint and tim cook said we are quote we are seeing a delay in purchasing behavior that we think is a consequence of the number of rumors and reports about future products. that is happening outside of greater china. jim, it will be interesting to watch you get him to expand on that. it is going to be the smallest gap up or down for apple on earnings in a couple of years. >> well, look, i think that this is one of those where if we

looked at it as a consumer products company, wow, they beat by eight cents, look at this return of capital it's amazing. but you know what, that is not the way that the street views apple. i want to caution people, the street viewing apple versus the way people view apple, very different. they're counting a granularity of iphones that are sold. the inventory numbers you can say it's really been flat. then they look at greater china. they said you know what, greater china, not as strong, but better than before. all i'm saying is that when you put it together you have a company selling you 16 times earnings and if you get repatriation, why did i sell it? it was like 900,000 units, let's not get too granular. it was a good quarter. >> quarter of a trillion in cash, david. 93% of it overseas. and jim, we were reminded you youed what cook on on the -- you had cook on the show about a year ago when the stock was in the high 90s i'm pretty sure.

you said don't trade it, own it. i guess you feel the same way. >> between 93 and 94. i went over many of the notes of the analysts last night. a lot of people who didn't like it then, they had this kind of faux like. hey, it's not bad. they continue to diss it, continue to put out whatever is not good. maybe a watch number that didn't pick up after fitbit. maybe a cell phone number that didn't sell enough in shanghai. i look at it like this and say, wait a second. at 93, tim cook said, listen, we're not dead yet. we actually have a lot of innovation. turns out that's the case, but immediately people said wait a second, that's because samsung issued the fire phone and now they have a real phone it's difficult for them. i keep coming back to the same thing which is that there are objections to what this man and his company has done that i find almost to be laughable at times. 93 to 145? you know, that's kind of the move that you must catch as the largest company on earth.

but the analysts don't want you to catch it. they want you to trade it. they want you to be in and out and in and out. they think you're the world's greatest hedge fund. people at home, don't listen to them. >> they need a little activity. come on, everybody needs activity in their life. >> you know, david, if you can catch that move today from 144 say to 146 and book that, i guess you're a gene uius. call me a slow boat to china guy. >> you're a dinosaur, man. you're just living in the last -- >> yeah. serra tops or -- >> yeah. when you mentioned the size of the company. i know i do this every quarter, guys. but you have to step back and just appreciate the size of this company. how prodigious it is in terms of producing cash flow and the cash hoard itself. of course we go through it, $240 billion overseas. certainly an incredible beneficiary of some sort of

repatriation deal should and if and when we see it. but they're returning so much cash to shareholders as well. you know, it's not as though they're skimping there. they're the largest dividend payer of any company out there. >> displacing exxon. >> as an increase in both the buy back and of course in dividends as well. they are returning a great deal of capital, jim. but you know there's going to be continued talk and questions about well, if that money comes back, what are you really going to be do with it, are you going to embark on acquisitions? and what was the number in services this quarter, 7 billion, right? >> 7 billion, yeah. >> basically the size of time warner. >> yeah. i mean think of that. 7 billion in services revenues, where does that put them versus netflix, for example? running 28 bill a year. that is only going one way which is up. >> right. and right now it's the size of the fortune 100 company. i can see it going to the size of the fortune 75.

the lowest fortune 500 company. they can buy back a third of the company and with this buy back if the stock just stays here. tim cook said that the stock is cheap. don't forget warren buffett is on monday. i don't i this he'll change his mind and say, you know what i had a look at the samsung, time to exit apple. i think he'll tell becky quick i like it more than ever. it doesn't seem like it's worth the let's just say the tepid backing. the conference call's always the say. what are they going to with the cash and they maybe it sound like he's going to put it in a chimney and burn it, okay, or maybe he'll do something smart with it. how about buying it back all the stock so they had a good quarter and it really helped and there's a lot more behind it. >> you talk about the conference call, jim. let's take a listen to what tim cook said last night. in this case specifically about china and india. >> we continue to be very

enthusiastic about our opportunity in china. we set a new march quarter record for india. where revenue grew by strong double digits. we continue to strengthen our local presence across the entire ecosystem and we're very optimistic about our future in this remarkable country with its very large young and tech savvy population, fast growing economy, and improving 4g network infrastructure. >> all right, jim, if to the degree you had concerns last night and i have seen some people describe the quarter as a place holder quarter. what were they? >> place holder quarter. i love it. i love it. i mean, there's 6,000 -- 5,999 would love this place holder. there was a moment on the conference call that tim cook said something that josh lipton broke yesterday which is there's a bit of a pause because there's so much talk about the next iphone. i think that's completely

absolutely realistic. i mean, you have an iphone, i have this iphone. i love my iphone. but i have to tell you, if there's a blowout iphone, i surely want to buy it. if it's not a blowout, i don't know, this thing is like fabulous. so i think there's that problem. which is that is this so great, the 7 and the 7-plus which they were definitely in short supply of. they did not understand or read that market correctly, is it going to be great enough that i want to go to the next one? is it going to be great enough that india where they don't have the sprints and the t-mobiles and the at&ts vying for it they'll go for it. is it so great that the knockout chinese companies are going to fall behind? that's what the concern and that's a legitimate concern. >> all right. we look forward to tonight, jim, once again, jim has tim cook on "mad money" at 6:00 p.m. eastern. we have some data out of adp that showed the private sector added 177,000 jobs last month. as we await the interest rate decision at 2:00 p.m. interest

time. it will be curious to see how the fed characterizes all the slowing macro data we have gotten over the last few weeks. >> whether it's apple's call or the major industrial's call, we're obviously the laggard at this point. you saw some eurozone numbers that if you calculated for the year are actually twice what we would have. you do not have a situation where necessarily if rates were anywhere other than where they are in terms of just absolute lows, you wouldn't have people talking about the rate hike. steady as she goes, we hope the economy picks up. should be the line, but that would be dangerous for them because they have to stay on this two hikes message. >> meanwhile, some conflicting headlines this morning, jim. mnuchin speaking at a community banker's conference. saying that the treasury's studying the costs and benefits of ultra long bonds. at the same time, headlines that a treasury advisory committee said such long bonds are quote, not worth considering. >> well, this is something that

i think gary cohn came on our air and absolutely just said, listen, this is right on the table. i think the problem is, it's not necessarily in the white house whether something is on the table or off the table it's whether there's a table. i think the confusing -- look, we could get a tweet right now with just -- that just says we're thinking of doing a giant long bond but also not. david, the confusion is now so palpable that i find myself thinking, like senator corker, hey, figure it out, give me a jingle. >> no, i think that's true. we noted this yesterday certainly. especially given the president's tweet about a potentially welcoming -- welcoming the idea of a shutdown of the government come the fall. and i think people are more and more just putting him on mute. i do. which i think we kind of expected might be the case. >> yes. >> after we -- you know, a number of months sort of having our heads spun around and having a lot of investors' head spun

around too. >> yeah. >> you start to -- you know, maybe we shouldn't take him quite as seriously or as literally. i'm sorry, carl. >> the headline about breaking up the big banks, they were up 1%. then they closed down 1%. people aren't ignoring it outright. >> no, they aren't ignoring it outright. they did kind of come back in trading more or less. i don't know that there was a significant loss. but you're right. they're not completely ignoring it. and yesterday, you certainly got a lot of attention paid to the tweet about a potential government shutdown. plenty of column mentions devoted to it. certainly to date. but i don't know. in speaking to the people attending the conference i was at the last couple of days, milken, there were a lot of ceos there. there's not a focus on day to day on what's going on inside the white house. it's more, we'll take it when we believe there's something significant to consider, you

know, jim? that's probably a good thing one would expect. but it is lending itself to a bit more -- a bit more uncertainty. >> well, look, i can tell you in the multiple interviews i have had with ceos in the last two days the one thing they think will get through is repatriation. they think that this is a gimme. now, if it's a gimme then it would change the stock market. but the fact is, it's the only gimme and i don't understand why the president's not talking about it more. because it's instant revenue for the treasury. >> it is, but you know what, that's the one you figure you can't do anything else, you break the glass on that. okay, we can do a repatriation deal. that one probably you're right, gets through and gets done. but don't you think that leave that to the end when you have exhausted every opportunity to attack tax reform in a much broader way? >> yes, i think you do. but i'm not going to block the president yet. i still have his column up in twitter. i don't think we're to the point

that we don't want to pay attention. are you blocking him or sticking with him? >> no, i still like to listen. still like to hear what he's got to say. >> okay. >> i mean, if he were a little more presidential dare i say, i think we'd take him more seriously. >> on the subject on long bonds it was considered by the last administration and the treasury department there, they came out believing that the 30 year was sufficient to meet the demand that was there. sort of at the longer end. i know jim obviously disagrees and believes there would be a lot of demand at 40, 50 and beyond. but they did look at it and decide against it. >> yeah. going to be a fun debate to watch. we have a lot more movers this morning. it has been good one for some companies in the food business. we'll talk about mondelez and yum. got an upgrade over at mcdonald's. and we'll talk to the ceo of sprint later on today. the dow is going for the second back-to-back gains since the end of february. and the s&p coming off the best close since march 1st. back in a minute.

a bunch of movers in the food business today. mondelez had better than expected results. same from yum and taco bell.

and mcdonald's is upgraded to buy. what they call a reasonable valuation despite the stock being close to the all time high. it's not quite going to get there at the open. but they're basically talking about increased confidence. maybe the beginning of a multiyear cycle. >> yeah. the multiyear cycle began around '95. but i guess better late than never. david, is this one of those that you sense tremendous value added or you sense this is an egg mcmuffin with some ketchup thrown on it? >> i'll leave that to you, jim. the run in the stock price i'm curious to what your thoughts are at this point given what you have seen in the accretion of value that's taken place under easterbrook in the last year. >> well, you're seeing a re-energized group of people who run the company which is the franchisees. you're seeing great comp store moneys that have to do with the

more simplified menu and through put. through put has been very good. but this report is a verification once again that easterbrook has come in and changed the culture and made it so it's one of those things that you want to add a different shift. you want to put more people on, you feel more confident as a franchisee that it works. the ceo of mondelez, they're doing okay, they're doing better. once again, the domestic is the anchor to leeward. it's the case, whether it be mcdonald's or mondelez or cummings engine or united technology. except for some of the carrier and otis barrier. i would say international is so strong for everybody. food business, technology business. industrial business. u.s. is stalled. >> yeah. so are you now screening names when picking favorites here, companies that can outperform overseas and are resistant to an american slowdown or american

recession? >> exactly. >> how far do you take it? >> not a recession, but i have to believe that what we're seeing is the u.s. to be fair picked up last year and now you're starting to see a year over year situation where you've got europe and asia doing much better. when you look at the industrial companies you're struck by the fact -- and europe remains strong. they have the incredibly low interest rates. you have to understand they're subsidizing the euro. keeping it low. and business is really good. business for autos is much better here than there. why do they have a higher priced multiple than ford? it's stuck with the awful u.s. market. >> as for young, it sounds like they were able to get some traction not only on pricing but on transactions as well. >> yeah. i think we have to start thinking about this -- whatever is related to mexican is doing well. we know that chipotle has come

back. we thought that chipotle might be hurt by yum and the chipotle guys never want to hear that, because yum has a different chemical basis when it comes to taco bell. but taco bell is good. people have something they want to pick on yum so pizza hut is really anemic versus say a domino's. but i like the yum quarter. i think it shows that -- i was at a revitalized taco bell two weeks ago. i don't know, david, you have to go with me because you never go with me anywhere, but the taco bell was really nice and it had a good feel to it. >> i won't go to taco bell with you, but i'll go to shake shack with you. and wait in the long line. >> they taste good after a long night out. >> yeah, i haven't had one of those in a while. actually, yeah. i'll even go to chipotle with you if you want. >> you will? >> carl, the bigger question is what's going on in our economy. is there something substantive

that's going to continue for some time that even will show itself? i doubt we'll hear it today from the fed in the minutes. but in the june rate hike, do you keep moving ahead with the softness? >> restaurants and hotels in q1 gdp was the softest back to back quarters in four years. we'll get cramer's "mad dash." count down to the opening bell. we'll look at the premarket. interestingly our friend ryan dietrich said the last five days have been the smallest range for the s&p since '94. hey gary, what'd you got here? this bad boy is a mobile trading desk so that i can take my trading platform wherever i go. you know that thinkorswim seamlessly syncs across all your devices, right? oh, so my custom studies will go with me? anywhere you want to go!

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♪ all right. less than six minutes -- call it six minutes before we get to the opening bell. you are still out there, i'm back from the west coast, but you continue to remain there. you want to talk about though a company that went public here in june that's not having a good day today. >> no. twilio was the backbone of a lot of what you would call the interaction between you and the web. for instance, when you take an uber, how does that guy know you're there? how does he have the information to pick you up? that's all the backbone that is twilio. well, on this conference call, they dropped a bomb. jeff lawson dropped a bomb saying that uber is going to be moving away -- might be some business, but moving away from using twilio. the problem is when the fourth quarter twilio was 17% related

to uber. in other words, the revenues were 17% uber. this quarter they're going 12 and they're saying it's going to drop more precipitously. no other big client is as important, when your largest guy decides you know what, there are better ways than twilio it kind of takes your breath away. i had always that uber loved twil twilio, but they're using other methods and trying to optimize and if they're trying to optimize they don't want twilio's platform as much. some people say it's an overreaction but it took your breath away on the conference call. >> we'll keep an eye on it when the stocks open in less than five minutes. we're right around the bell, which is coming up next. back after this.

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earnings last night. you men schenned twilio, but etsy is down almost 20%. chad dickerson leaving. >> yeah. josh silverman coming in there, a senior executive at american express who i happen to know well. but the market not reacting well to the numbers there, correct, not to the actual change in ceo at this point. i mean, i guess they're potentially connected. >> yes. we'll see. etsy did break even, missed by a penny. the revenue was a miss as well. jim, you have been consistent on etsy in the last six to eight months. >> yes, i have been. i felt they could be the craft oriented amazon. the last three quarters had been just okay. what i find most interesting, this is the largest employer in brooklyn. what i find most interesting, this was chad dickerson's company. he was talking about the greater good, doing greater things. being bigger than the company. well, the board obviously didn't feel that way and i think the board got fed up.

i think it was a shorter leash than i thought. david, cfo leaves, ceo leaves. almost as if they want this company to become a bigger company and not so seat of the pants. >> yeah. >> a serious guy with real experience. he knows how to run big companies too. i'm curious to see how he does. not a bad thing to have him in there. >> let's get the opening bell. the s&p at the bottom of your screen. at the big board it's brazil's banco doing the honors and the meet group. a mobile meeting apps company. got a new ceo at general mills. as jeff ham ai think in is appointed the ceo. he'll succeed our pal. >> well groomed. i remember ken is kind of my age. jim, it's time to retire. it was like, huh? really? i mean, we have to go now? because he was in school with me. but this is well telegraphed.

i think it's a lot in david's world. i think that people feel like this one has gone down down down. even though they've tried to be more natural and organic. they're still center store. when you hear center store it's a curse word in the business. but david, we haven't heard from the likes of kraft heinz likely. they're going to report. i don't think they can do anything hostile and jeff's ascension means it would be hostile if anyone went after general mills. >> if and when heismkraft heinz their next deal, it will be friendly from beginning to end. i think we can say that strongly. and so that's a good point you raised, jim. when you put a new ceo in place, and again, this was part of a well orchestrated plan. it was even last summer that we first learned that he was the front-runner for this job. he will take over i believe june 1st from ken powell.

but when you put a new ceo in, typically they like to do their own thing and have some time running their own company before they choose to sell it. not that kraft heinz is necessarily particularly interested in that name. but you may want to cross it off your list. mondelez, jim, another one. we were talking about it, of course premarket. after what were decent numbers except in the u.s. where ceo irene rosenfeld did say they continue to see some weakness. but that stock is up. again, that does have a little takeover premium in it as well and could not get done on a friendly basis. although there you have some large shareholder/board members who might look at things a bit differently. >> it would be interesting because you know this was the end of a five year plan to reinvent the company and it's clearly working. kind of reminds me how lucas got time warner to be the end of the

plan and then vox came in. this is right to be acquired except that's not what she wants. i have to hand it to rosenfeld. this is a company that's been able to turn itself into the positive growth. that's been very difficult for the food companies. it would be incredible. someone swooped in right now and said, hey, job well done. we're taking it over. wow. >> yeah. i don't know. by the way i have been dubious of putting back together kraft heinz and mondelez, i know they're different companies. heinz has been added into the kraft portion, but you wonder about strategy if and when you pursue something like that. what the guys at kraft heinz will do still an open question. then we they will do it, nothing says they have to rush into the next deal. they're best served taking their time after really what was that clown show. uh-oh, they're going to be mad at me on that one, jim. waiting for that from unilever. >> what's going on with the activists insurgents.

so you clean up arconic and then they go after klaus kleinfeld and he's gone. you clean up month delease and then loeb comes after them. why don't they give these people a chance? >> i'm not sure it has -- you know it's funny. certain situations are focused on the ceo. honeywell was not from loeb. we'll see how that advances as the advisers look at a spin of the aerospace division but that wasn't necessarily about we love the last guy, we're not sure about the new guy. you know, each situation is different. i guess the surprising thing to the certain extent that activism is with us in a robust way. it makes it into the headlines but so much is going on behind the scenes. i can't tell you how often i'll take to a banker or a lawyer or an executive who says, yeah, we

have been spending a lot of time on, you guessed it, activism. really. but they do. it's a part of the world we live in. >> well, it is maizes to see -- amazing to see what happened with panera. panera, people were in there pushing and yet there we go again. ron shaich reinvented it with panera 2.0. this idea that buffalo wild wings which has been hurt very much by the stay at home consumer, salary smith, time for her to go. is that sub rosen meaning you have to sell the company,ther buyers out there and it'sn -- there are buyers out there and it's not about the ceo? >> you would know that, whole foods is another name. that they're pushing hard for a sale even though you have had a change to a certain extent not that long ago in leadership. there are interested buyers that are being held at bay to a certain extend and they're trying to push the process

along. >> well, when you're out here, and carl, this is something that i think we can all recognize. the company that is not here that is on everybody's lips is amazon. and when you look at these companies, what are people telling me? i know people that were technologically trying to turn around whole foods and then amazon. they don't have to say what amazon is doing. they just say then amazon. it really is one of these cases where it's this really kind of gargantuan thing trying to destroy the industry. amazon. >> i loved how cuban said amazon is disrupting the world of work. have you ever met an amazon employee and it's true, right? think of the interaction you have with an amazon worker aside from the delivery guy -- it's u.p.s. >> exactly. right. you're not in contact with the person in the warehouse who

typically still is a person, although may be replaced by a robot. that was a huge issue at milken overall. the future of work. >> yes. >> and whether or not people will be doing a lot of it. hopefully they'll still have some ability to sustain themselves and buy things on amazon. >> yeah. jim, i want to take your temperature on apple as we look at the opening trade then i want to ask you whether or not you are starting to draw a line between the twilios, the akamais and the amds of yesterday. should we be set up for more disappointments in software or tech? >> well, i think that twilio and twilio is really a good example of an -- and akamai is too. you hear of to do it yourself. the companies that have relied on service companies that are cutting them out. you know what, we'll take control of our destiny. akamai was media companies doing it yourself. hard to see when you see diy in

a conference call but there it is. uber is going to do it itself, they have figured it out. that's a trend here that says it's gotten too expensive to use the other guys. we're going to control it. apple is really a case of a company that's a consumer products company that is really covered by people who are looking for a level of growth that is just not possible, whether it be procter & gamble or apple. apple has the finest technology within a product and you take an adobe or salesforce, those are cloud companies that people love. why do they love them? because cloud is growing rapidly. tim cook doesn't have that kind of growth but that doesn't mean that the stock is a bad stock. not every stock can be facebook. not every switch reports tonight. not every stock can be a google or netflix. there are -- there's room for companies who are buying back stocks, beat the estimate, this market is not that small that you can't have room for that company and this stock was up

very big yesterday. >> yeah. >> yeah. guys, i want to come back to a story that we have been covering now for years, but it is worth mentioning. isi has the numbers out this morning. we have heard from most -- most of the u.s. pay tv industry at this point in terms of their first quarter results, and what has been so surprising is the acceleration, the acceleration in how many people have been cutting the cord. 810,000 subscribers in the first quarter of '17 decided they no longer needed their pay tv subscriptions. and that was by the way versus a decline of 212,000 in the first quarter of 2016. just gives you a sense there. even when you take into account the directv nows of the world. what we call the virtual -- the slings of the world. soon to be hulu, google is out there. sony. there still was a loss overall of 395,000 subscribers.

meaning people who cut the cord and didn't go with one of those other packages. maybe they just had their broadband. they're happy with netflix and broadband and they're happy with them. this is not an insignificant issue for all of us. >> david, you raise a point that i think befuddled apple management and they're rarely befuddl befuddled. this apple plus which is the larger form factor it is being used to cut the cord. it is something that a lot of people feel you know what, that's the size of what i want for my tv. it didn't cannibalize ipads. but when you hear cut cords, you have to think of apple plus. did tim cook say that, he said they were in short supply but the apple plus is a cord cutter. when the devices keep getting better and better with fabulous screens i don't like my tv.

>> by the way, we talked to ron howard our latest episode of binge guys, and we asked him how many meetings in hollywood apple is taking an original content. and i won't give away the answer. it's in our website right now. but let's just say they're actively engaged with creatives of all sorts. shouldn't surprise you given the commitment to that space. >> very interesting. what's the starts and the stops so often in terms of what we least know what their commitment has been to it. one last one here that's a mover this morning. beer. apparently people aren't drinking as much of it. molson coors, the ceo mark hunter is talking about this year being a transition year. of course they -- remember, they brought in miller as a result of the huge deal that anheuser-busch did. but first quarter revenues were below estimates. and that stock is down you see

it there a little over 3.5% right now. >> well, i think they're transitioning to mexican beer. at 16% growth, constellation. so maybe they have a beer that people don't really want to drink. also, craft beers are on fire. when i saw that number that was surprising because when you're on with rob sands from constellation, pizza and beer watching netflix, having the greatest time on earth playing call of duty is the new world. we have to accept the fact that's what's going on. and that reed hastings is right at netflix when he says the real competition is sleep. those of us who have a good form factor and don't want to sleep like i'm against sleep when i'm out here, it's a huge win. but i don't see -- i'm not drinking the coors light. >> guys, apple's taking the biggest bite out of the dow for the moment. let's get to bob pisani on the floor. >> good morning, guys. happy wednesday. important thing about today,

tech under a little bit of pressure but not that much. let's look at the sectors. banks still having a tough time. they're leading to the down side, but not that much here. semiconductor stocks also weak, i'm talking about the ssd here to this point. and consumer staples you see a more defensive tone. that second line there, that's the semiconductors. europe is mixed but you see the semiconductors a little bit weak. this seems pretty obvious. it's likely related to apple. ams and stm that are over in europe, some of the other ones like dialogue, also a bit on the down side. these are stocks that trade over in europe. here in the united states, some of the apple suppliers a little bit on the weak side starting broadcom, these are the usual names associated with apple. sir us logic. analog devices. all to the small downside with apple down more than 1% right now. good time to review those f.a.n.g. stocks for the year.

remember jim cramer coined that term a number of years and adding another one recently, he did, adding apple in there. so there's an fanga right now. it's not how much they're up on a percentage basis, but remember the indexing rules of the world. the politics of indexing about how they're built. market capitalization matters now. these five names account for $2.7 trillion of the market cap of the nasdaq 100. why is that important? because the total nasdaq 100 only has a market cap of about 5.6 trillion. these five stocks are 50% of the market capitalization of the entire nasdaq 100. you put up the nasdaq of course it's had a record year. the nasdaq has been the index leader so far this year. and the important thing is it's largely because of these five stocks. there's been an understandably large amount of concern about going in and saying the concentration is way too high

and we're at very high risk here. so far, these rule the world. that is not an issue today even with the slight disappointment on apple. i'll just point out, market capitalization now becomes very, very important with these names. nasdaq 100 of course at an historic high. let's talk about etfs. here's what's important. we have got a new one that was just approved by the s.e.c. two new ones here. this time, leverage and inverse. you're going to four times long and four times short. four shares daily, it can get you four times daily the performance of the s&p 500. we have other etfs who can give you two or three times. we haven't had a four time one until now in the u.s. that's an inverse one here. the short fund which is symbol dodn. four times the inverse of the s&p 500.

we have talked often as you all know i'm a big backer of ooefooeftetfs. they reset every day so over time you will not necessarily get four times up or down. you will not do that. these are specialized products, what's next, six or ten times? what i'd like to see the s.e.c. -- a good opportunity for them to create some new guidelines for the leveraged etfs. i think the s.e.c. can essentially guide more appropriately on when these products should be used. enough about that. right now the dow down 30 points. carl, back to you. >> bob, thank you very much. let's go its to -- let's get to the bond pits as well and check in with rick santelli. >> even though aren't looking at today's yield with anything spectacular with regard to the fed or the statement the market goes into this with a little bit

of a bias. you'll see what i mean in a second. look at the two day chart that are up one basis points versus yesterday's close. look at the two day of tens they're unchanged. two day of 30s, down three. 2.97 yesterday, hovered at 2.94. curve flattening isn't unusual for a fed day. granted, we have had some data, but i don't know that adp made huge difference. it came in as expected. if we open the chart up to the notion of the spread flattening, we can look at tens minus twos starting in september. you can clearly see that once again, we're hovering at what has been the bottom of the range with regard to tens minus twos. granted, a lot of channels moving both to short end and long end, but not unusual. if you look at the currency markets, one week of the euros, nice upward bias there and if you open up the chart to october 1st it doesn't look bad. it's the reverse image of the dollar index going down the other way.

but both of the markets are having a problem extending whether it's the euro versus the dollar above 110 or the dollar index below 9850 which many think may be the last of the big support levels below that market. carl, jim, david, back to you. >> thank you, rick. when we return, former gm vice chairman bob lutz, on dealing with the white house and an april to forget for the au automak automakers. tune in at 6:00, "mad money," jim's exclusive with tim cook. 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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♪ we talked about apple getting into the original content. have you had discussions with anyone about that? >> i think everybody has had informal conversations at events and so forth with people from apple and agents who have had meetings and so forth and so,

you know, everybody knows that there are conversations going on. >> ron howard in the latest episode of "binge" talking about apple's content ambitions. jim, you might ask tim cook about their aspirations in content tonight on "mad money." while we're talking hulu has announced plans for its own tv service. 50 channels, jim, for $39.99 a month. that includes cnbc. >> wow. everybody's got -- who has been unleashed. a billion hours per day on youtube. but carl, i want to talk about what you're seeing with ron howard who is a genius. there are more than 160 million subscribers to apple. you know what, they're hungry for more content. if you give them film, all right, it's original film and you have some hits like netflix has, that is going to be a stream of revenue that we are not going to think is ancillary. we're going to think it's actual. right now it seems so ancillary. people don't want to give it

credit. but when you start loading up films i have to tell you, the people are going to say this, this subscription is a bargain. i keep paying it, raise it by 10% and then you have a fortune 50 company. >> all right, jim, we can't wait for tonight, of course. we'll get "stop trading" with jim in a moment. "squawk on the street" will be right back.

time for cramer and "stop trading." >> all right, you know one of my themes, carl, you can't walk outside the house unless you look unbelievably great because of high-def phones. estee lauder shows me that people know that in china. cosmetics are back worldwide. estee lauder is the one that makes it so you can go outside and not look like you have bad skin. >> yeah. people wonder how they're doing this when they're leveraged highly to department stores. >> well, they're doing it i think because -- by way they're also in ulta beauty which has had a good number. this is due to growth overseas. as people get the new phones, holy cow, i look really bad. they go to estee lauder. they're referencing that on the call as being the most important

thing for cosmetics. i think it's real. i think the trend is back. i think the stock can go much higher. >> all right. jim, so we sort of know what's coming up on "mad" tonight. >> we have clorox too. there are consumer product goods, companies that do great. that's a much higher multiple -- isn't it interesting that bleach which i regard as being one of the great unbelievable commodities that sells at a much higher price than your cell phone. maybe that's the conundrum we have to figure out. bleach versus this. people like bleach more? i don't know. can't even drink it. >> what would you rather be without in your household. interesting question. we'll have tesla to toss around tonight as well. see you at 6:00 p.m. tonight. "mad money." when we come back, a lot more on apple's results and an exclusive with sprint's ceo, marcelo claure with the dow down 34.

♪ 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. dow's down 25 points. we await for the fed statement at 2:00 p.m. time. we have adp and tesla tonight. >> we have shares of apple slipping after the company reported revenues missing estimates on lighter than expected iphone sales. a deep dive into the results straight ahead. >> the stocks losing some ground. wall street awaits the fed's decision this afternoon. we'll hear from a former fed governor. >> sprint on the move. it narrowed the loss as it added phone subscribers. >> let's get to rick santelli. >> you know the biggest swath of the economy is the service sector and the number is 57.5. that's much better than expected and it follows 55.2. it is the second best number since october of 2015. because in february, we had 57.6. so that gives you an idea that

it might not be the best number of the year, but it's the second best number in a while. now let's go through some internals. since it's jobs week how did the employment index look? well, it was steady, but a little lower. last look was 51.6 and now 51.4. a couple of a tenths. but here's a shocker, new orders literally jumped from 58.9 all the way up to 63.2. so it's going to make it kind of tough to look at the data and not see some the strong aspects even though the employment aspect of this report on employment week did drift a bit. sara, back to you. >> all right, overall, pretty good sign for a rebound in gdp that we're looking for. rick, thank you. apple reporting earnings of $2.10 a share. however, revenue missed the mark on weaker iphone sales. josh lipton joins us now after speaking with apple's ceo, tim cook. hi, again, josh. >> well, sara, tim cook said

that iphone fans are delaying upgrading because they're waiting for new product. we are seeing what i would call a kind of delay in purchasing behavior that we think is a consequence largely of the number of rumors and reports about future products cook said. he also told me that if you look outside of china, iphone units grew very nicely. that apple had more upgrader ins the first half than ever before. still, china is an issue. revenue in greater china did slip 14% year over year. cook telling me at the high end of our line, the new product we are doing well. in some of the previous generation iphones we are not doing as well as we were in a year ago quarter. why is that? we're working on that. cook also mentioned on the call another area of the world he's very excited about -- india. >> we continue to be very enthusiastic about our opportunity in china. we set a new march quarter record for india.

where revenue grew by strong double digits. we continue to strength on our local presence across the entire ecosystem and we're optimistic about our future in the remarkable country with the very large young and tech savvy population, fast growing economy and improving 4g network infrastructure. >> cook also reiterated his call to double the services business is over the next four years. he told me that the services business is on target to be the size of a fortune 100 company this year. guys, back to you. >> josh lipton, thank you. for more on apple earnings let's bring in a senior research analyst at sioux hue and a portfolio manager at alliance technology trust. welcome to both of you. so the stock reaction, let's start there. it's down about 1.5%. that's after a pretty strong run-up of more than 50% in the last 12 months. how do you read the reaction? >> you know, it's not that

surprising. the stock had gone up and if you look at the numbers, yeah, it's lacking below consensus but largely in line where most people thought they would be. we have to look beyond these results. we have to look into the next product cycle. and as josh just pointed out, you know, there's slowdown in the iphone right now, but that probably bodes well for the strength of the upcoming cycle. we see this as a positive sign for the upcoming cycle. >> do you agree with that, that cook spun it himself, built up anticipation, pent up demand, all bodes well for the 8 cycle coming this fall? >> well, the company still has to execute on the product. but if it's a good product, as we suspect it will be, then i think it's going to sell really well. >> is it too early to put out estimates for revenue growth on the iphone 8? >> it is, because we don't know

what the supply constraints are going to be as he just pointed out. the need to execute. i think all those factors are in play, but this could be a really big cycle given there's a lot of iphone users out there and it seems like the slowdown is coming a little sooner than what we have seen in the past. and the product features that can cause many people to upgrade. but it's too early to put those estimates out there. and we are expecting the unit volume to grow as we go -- get into the product cycle. how much growth we'll have to see. >> walter, can we put to bed some of the cycles going into print that lodgistics and supply worries would limit the timing of the 8? >> i think there's still some controversy about that. if you asked most analysts i think that at this point they think there will be a little bit of a delay in the 8 because of the supply constraints and the

difficulty of getting all the new technologies to work. we're more optimistic than that. we don't think that the delay is going to be significant. >> so what about the weakness in china? i did -- it did catch some by surprise. how much of a handle does apple have on reversing that? >> that's an important market for them to rework and one of those things where i think the new products are doing well like josh just pointed out, but over time they need to get the overall portfolio to grow. that's an important market. they need to focus on execution there. they're talking about india. india i would think -- they can grow. but that would remain too small for them in the overall scheme of things. >> yeah, how should the investors think of the opportunity for apple in india with the high priced premium phones. how big of a market is there going to be? >> india is a huge market. you're talking about over 1 billion people. so you can find i think 50 to

100 million users that can afford an apple iphone if it's significantly good product. which we think it will be. so we think at the high end of the market, they're going to do really well with the iphone. >> and walter, what about the services revenue, how far do you see that moving the needle, continues to post double digit growth. it's a factor that a lot of the bulls point to. where does apple need to get that as a percentage of overall revenue? >> well, we think that they'll hit their target of doubling that revenue over the next four or five years. i think, you know, it grew 18% this quarter. you know, i think that their music services are getting traction and we expect them to continue to add services on itunes is doing really well. so we're optimistic about services. >> and i read in a research note this morning that some say that apple is one of the most

underappreciated stocks in the world. can you still make that case with the strong run-up it's had over the past 12 months? >> we do think there's more a little bit upside to it. but we're not sure if the products cycle is going to continue to help them on the multiyear basis. i think they need to deliver on that. if they can deliver on it, then those comments could be true. but they need to execute on the services revenue side for those comments to be true. having said that, we do see near upside to the stock at least from the product cycle. >> you upgraded today up to 160? >> no, we upped our price target to 160 from 150, yes. >> right. got it. the stock right now, trading at 145. gentlemen, we will leave it there. thanks for joining us on apple. by the way a quick programming note, tonight on "mad money," 6:00 p.m. eastern

time, jim cramer will talk to tim cook. as we're talking, facebook has made an announcement that mark zuckerberg in a post says they'll add 3,000 jobs to monitor live video and other content. he starts off by saying over the last few weeks we have seen people hurting themselves and others on facebook. and he talks about how we can do better for our community. this is going to happen, guys, over the next year. at least by some estimates doubling the size of people who do this kind of work. >> which is a step in the right direction. we knew they were working on this -- after the development conference came at the same time as that awful video was posted of the murder. so clearly facebook is working toi to tackle fake news, bad content. this will continue to be a problem as more -- as billions of people use the service. >> still need people to do it too. ai can't take the place of human eyes to understand what you're looking at. at least not yet.

>> score one for the humans. >> there you go. >> the stock did hid an all time high this morning before settling back. of course earnings tonight there as well. as we take a break, look at sprint on the move after reporting it narrowed the losses. cut some losses. added some subs. we'll talk to the ceo straight ahead. the dow is close to set lows, down 46. stay tuned. more "squawk on the street" coming up. last year, he said he was going to dig a hole to china. at&t is working with farmers to improve irrigation techniques. remote moisture sensors use a reliable network to tell them when and where to water. so that farmers like ray can compete in big ways. china. oh ... he got there. that's the power of and.

adp out this morning, private payrolls up by 177,000 for the month of april. that's ahead of the fed's rate decision today. the jobs number coming on friday. our senior economics reporter steve liesman is watching all that. hey, steve. >> good morning, carl. the fed has some uncertainty to deal with. as the consensus is no action today, but pretty good certainty about a june rate hike. here's what's on the fed's watch list. weak consumer in the first quarter and weak gdp as well. some less than stellar auto firms. fiscal policy i think muddle is the right word for forecasters trying to figure out what happens this year, if at all and the effects being next year. soft inflation numbers. it fell for the first time in march since july. and falling beyond yields since the last fed meeting. now, goldman sachs saying in a commentary we think the fed officials will view the slowdown as temporary in nature with underlying momentum considerably stronger. the bond market though a bit more tentative since the last

fed meeting in march. yields have fallen in the gauges of the economic growth and look to waning prospects for fiscal stimulus this year. down about 30 basis points since the last meeting. the fed got some support this morning. the adp jobs report, 177,000 is more than most fed officials think is needed to lower the unemployment rate. you have that strong ism services number. here's the first look, a tentative look at the growth. tracking 3.8 and the real auto number is the data in there. amherst and moody's at 3.8. action at 3.2. and bank of tokyo at 2.9. look at the futures market, the uncertainty shows up. not in june expectations which is around 60% for that hike. but in expect anxiouses for the -- expectations in september. you have a bun of people who think it happens, a bunch who thinks it doesn't.

>> did we expect the discussion to begin about shrinking the balance sheet and what do we need to know about that? >> when and how much and how it proceeds. we have some general statements from the federal reserve that they're having this conversation now. we expect to know more say by the end of the year. maybe as soon as the fall. does it taper the reinvestments? you have a statement by the way from the treasury. which said, hey, we're getting ready for this. that means we have to sell more to the public because the fed won't be buying. it's interesting to see how the bond market reacted which is not at all. it suggests to me that the bond market is ready for the reduction of the balance sheet and if the fed plays its cards right it may not be have a big market impact. >> all right. steve. we'll leave it there for you. steve liesman joining us from d.c. when we come back, print ceo marcelo claure will join us. we'll get his take on the

earnings and the consolidation in the industry of which he's a part. "squawk on the street" will be right back. businesses count on communication, and communication counts on centurylink.

let's[ whimpers ] dog. find ping-pong. okay, let's go. find your awesome with the xfinity x1 voice remote. that's amazing! sprint was out with earnings this morning the company did

beat big on revenue. but missed estimates for earnings per share. sprint did add more than 40,000 postpaid phone subscriberers for the quarter. marcelo claure is the ceo of sprint and he joins us from overland park, kansas. always nice to have you, marcelo. i called a urge in of your in -- a number of your investors to talk about the quarter, get their sense. all they wanted to talk about is the possibility of consolidation in the industry so let's start there. then let's move on to the quarter. and get this out of the way. you were on the call. you even said some things about it in terms of the potential of doing acquisitions and being open to it. how likely though do you think it is that sprint will be able to do a deal with the likes of a t-mobile or perhaps something else in the industry that many do expect needs or will have some consolidation? >> well, thanks for having me. it's always a pleasure to talk with everybody right after earnings. well, consolidation is

definitely the hot topic. you know, especially after sprint has created a lot of shareholder value in the first two years of our turn around. you know, we are -- we're open to many different options. we're exploring different alternatives. we're in the market to potentially do acquisitions. if the right opportunity is in front of us. we analyzed with potentially merging with other type of companies and, you know, it's -- we're always in the market to listen to offers. so the good thing is we can be patient. the company's performing quite well as you have seen from the results we just announced. so we can be patient and figure out what is going to be the best strategic option for sprint. >> right. you just said you're open to potentially buying or at least selling or at least consider giving up some control certainly which would potentially be the case with the t-mobile if that were to happen. does it need to happen? do you feel like you have the

scale and the financial firepower to survive as an independent company given what is still in part thanks to you an incredibly competitive industry in which basically growth has been hard to come by. >> i think it's all about choices. yes, there is the potential to be a stand alone company. however, we're going of to look at choices in terms of what would create more shareholder value. you know, i think the results speak for themselves. when you look at the subscriber of what we just announced this year, we beat at&t by 2 million subscribers and verizon by 1 million subscriberers so i think we're doing a good job. we have delivered the best financial performance of sprint in the last ten years. or operating income was the highest in ten years. sprint was doing really well ten years ago and the fact that we're back to those levels gives us a sense of optimism. however, you know, we are open to options. in a world where there's a lot of speculation and every company

needs to make a move we're evaluating. i like the place where we're today and one thing is we have choices and that's a good place to be. >> it is. but it can add a level of uncertainty to your shareholder base, and those who anticipate something will come. how long do you give yourself? how long do you go through the process in which you figure out what's available to you, what makes sense, what delivers the most value before saying, okay, you know, we're done sort of evaluating one way or the other? >> first, we're running the company like we're a stand alone company. my employees and i many partners -- and my partners are devoted to winning the marketplace and as you can see in the results we're winning z and we'll continue to win. now secondly how long do you give yourself? it's too early to tell. we weren't allowed to speak to anybody because of the spectrum option until a couple of days ago so i think the next few weeks are going to be busy. i think we have a lot of people calling.

we've got -- we have spoken to a lot of people in the last couple of days and this will continue. we'll evaluate the options but more importantly, so our employees are committed to running a stand alone company and continuing to deliver the results over the last few years. >> so you have a lot of people calling. so it's not john legere on line one, charlie ergen on line two. how many people do you think you're interact with? >> i can't tell you for obvious reasons, but there's a lot of activity and also what is best for the future of sprint. so you know, there will be busy times ahead. we look forward to those. >> all right. now we'll get back to the basics here. on the call, moss is a joined and people thought he'd say some things about acquisitions but he was focused on something called magic box and sort of delivering i think this message that you guys -- despite what's the

lowest capex expenditure amongst your peer group can still deliver improvements in the technology and get to be number one or two in data in most of your markets. why? >> well, it's quite simple. if you look at where we have come from in the last two years we're number one and two in voice in pretty much every mark. that was the weakness we had. jd power had the rankings and we're number one and two. and more importantly, when you're sitting on 204 megahertz a spectrum, you can build out things and masa spoke of magic box. we'll put them in the customers' homes and the advertibusinesses they can see an improvement to their coverage. we can do that and you don't need to plug it into any cable box or any -- all you have to do is plug it in and get power and

it will self-adjust. no other carrier in the world can do that because they don't have the spectrum to do that. we don't need to connect, we use the wireless which is a huge technological improvement. think of deploying millions of small cells all over the country to the existing and new customers that's a huge technological break through. when you look at that -- >> marcelo? sorry. finish your thought. i was a separate question. >> no no. i said when you look at this and we look at how good the network is performing now, that's what -- we wanted the chairman to speak pretty loudly in terms of we're continuing to improve our network improvement. and we have jointly developed the network. >> yeah, a lot of people are taking note that he was in on the call. i wanted to ask you for some color as to what you sering from the clients. so we hear that samsung is back. but we heard on the apple call that people are holding out for

the new iphone launching this fall. what are you seeing? >> so we have had our best galaxy launch over the course of the last -- since galaxy was invented. i don't know if sprint is doing well or samsung is doing well or we're both doing well. we have had a great, great launch of the galaxy s-8. now apple we're doing great with apple. i don't know why you know everybody gets so concerned about iphones. iphones are selling, you know, right now we have a great promotion on iphones. and, you know, iphone has a tremendous loyal base that when the new iphone comes out, there will be another record launch. you know we're continually talking to our customers and our apple customers are waiting for the new iphone to come out. and our galaxy customers are so happy with the new galaxy s-8s. so this is an industry where consumers get innovation every single year. we continue to see record launches every time. either one of these two manufacturers go to market. >> marcelo, we have to leave it

there for now. but we know we'll be paying close attention, perhaps see you again soon. marcelo claure from sprint's headquarters in kansas. >> thank you. we take you to washington, d.c. and the fbi director james comey testifying in front of the senate judiciary committee. >> i promise to give you that kind of answer today. i appreciate the conference we'll have today -- the conversation we'll have today and over the next few months about reauthorizing the foreign intelligence surveillance act that you mentioned, mr. chairman. this is a tool that's essential to the safety of this country. i did not say the same thing about the collection of telephone dialing information by the nsa. i think that's a useful tool. 702 is an essential tool and if it goes away, we will be less safe as a country. and i mean that and i would be happy to talk more about that. thank you for engaging on that so we can tell the american people why this matters so much and why we can't let it go away. as you know the magic of the fbi

that you oversee is its people. and we talk as we should a lot about our counterterrorism work, counterintelligence work and i'm sure we'll talk about that today. but i thought i'd give you an idea of the work being done by those people all over the country, all over the world, every day, every night, all the time. and i pulled three cases that happened and were finished in the last month just to illustrate it. the first was i know something you followed closely, the plague of threats against the jewish centers that the country experienced in first few months of this year. children frightened. old people frightened. terrifying threats of bombs at jewish institutions especially the jewish community centers. the entire fbi surged in response to that threat. working across all programs, all divisions, our technical wizards, using our vital international presence. and using our partnerships especially with the israeli national police.

we made that case and the israelis locked up the person behind those threats and stopped that terrifying plague against the jewish community centers. second case i wanted to mention is all of you know what a botnet is. these are the zombie armies of xutders that have been taken over by criminals lashed together in order to do tremendous harm to innocent people. last month, the fbi working with our partners with the spanish national police took down a botnet called the kehl yoes botnet and locked up the russian hacker behind that botnet who what ed a -- who made a mistake by leaving russia and visiting the beautiful city of barcelona and now he's in jail in spain and the good people's computers who has been lashed to the zombie army have been freed from it and are no longer part of a huge criminal enterprise. the last one i'll mention is this past week for the first time since congress passed the statute making it a crime in the united states to engage in

female genital mutilation, to mutila mutila mutilate little girls, we made the first case last week against doctors in michigan for doing this -- >> fbi director comey in front of the senate judiciary. going to get an earful of handling the clinton and if trump investigation from last year. the fbi is still unable to access 3,000 mobile devices and will be asking for some help in that regard. that takes you all the way back to apple versus fbi and whether or not we see instances -- showdowns like that again. so we'll watch that. >> i think we'll watch for headlines after hillary clinton yesterday came out and made those comments to christiane amanpour, about the election that -- she partly blamed comey and that letter for turning voters away. that and the wikileaks. >> the s&p is down about 5. to 2386.

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is this year's worst performing sector also the most overvalued? we'll drill down into the energy trade on trading nation.com cnbc.com. more "squawk on the street" coming up.

fbi director comey with judiciary chair grassley. grassley asked if comey has ever been an anonymous source. he said no. let's take a listen. >> moving on to another subject, "the new york times" recently reported that the fbi had found a troubling e-mail among the on ones -- from the democratic operatives. the e-mail provided assurances that attorney general lynch would protect secretary clinton by making sure the fbi investigation quote/unquote didn't go too far.

how and when did you first learn of this document, also who sent it, and who received it? >> that's not question i can answer in this forum, mr. chairman, because it would call for a classified response. i have briefed leadership of the intelligence committees on that particular issue but i can't talk about it here. >> you can expect me to follow-up with you on that point. >> sure. >> what steps did the fbi take to determine whether attorney general lynch had actually given assurances that the political fix was in, no matter what? did the fbi interview the person who wrote the e-mail? if not, why not? >> i have to give you the same answer, i can't talk about that in the unclassified setting. >> then you can expect me to follow-up on that. i asked the fbi to provide this e-mail to the committee before today's hearing. why haven't you done so? and will you provide it be the end of this week?

>> again, to react to that i have to give a classified answer. i can't give it sitting here. >> so that means you can't give me the e-mail? >> i'm not confirming there was an e-mail, sir. i can't -- the subject is classified and in an appropriate forum i'd be happy to brief you on it. but i can't do it in the open hearing. >> i assume that other members of the committee could have access to that briefing if they wanted? i want to talk about going dark. director comey a few years ago, you testified before the committee about going dark problem and the inability of law enforcement to access encrypted data despite the lawfully issued court order. you continued to raise this issue in your public speeches. speeches most recently, boston college. my question, you mentioned at the beginning of your testimony briefly but can you provide the

committee with a more detailed update on the status of going dark problem and how it affected the fbi's ability to access encrypted data? has there been any progress collaborating with the technology sector to overcome any problems at our hearing in 2015 you said you didn't think legislation was necessary at that time. is that still your view? >> thank you, mr. israel cha. -- mr. chairman. the shadow created by the problem called going dark continues to fall across more and more of our work. take devices for example. the ubiquitous default, full disk encryption on the devices is affecting now about half of our work. first six months of this fiscal year, fbi examiners were presented with over 6,000 devices for which we had lawful authority. search warrant or court order to open and 46% of those cases we could not open those devices

with any technique. that means half of the devices that we encounter in terrorism cases, in counterintelligence cases, in gang cases, in child pornography cases cannot be opened with any technique. that is a big problem. and so the shadow continues to fall. i'm determined and continuing to make sure that the american people and congress know about it. i know this is important to the president and the new attorney general. i don't know yet how the new administration intends to approach it but it's something we have to talk about because like you, i care a lot about privacy. i care a lot about public safety and there continues to be a huge collision between those two things we care about. so i look forward to continuing in that conversation, mr. chairman. >> you didn't respond to the part about do you still have the view that legislation is not needed? >> i don't know the answer yet. i think i said -- i hope i said last time we talked about this it may require legislative solution at some point. the obama administration was not in a position where they were seeking legislation.

i don't know yet how president trump intends to approach this. i know he spoke about it during the campaign, i know he cares about it, but it's premature for me to say. >> senator feinstein? >> thank you. director, i have one querarding my opening comment and i view it as the most important question and i hope you will answer it. why was it necessary to announce 11 days before a presidential election that you were opening an investigation on a new computer without any knowledge of what was in that computer? why didn't you just do the investigation as you would normally with no public announcement? >> a great question, senator, thank you. october 27th, the investigative team that had finished the investigation in july focused on secretary clinton's e-mails asked to meet with me.

i met with them late morning in my conference room. they laid out for me what they could see from the metadata on this fellow anthony weiner's laptop that had been seized in the unrelated case. what they could see from the metadata was that there were thousands of secretary clinton's e-mails on that device, including what they thought might be the missing e-mails from her first three months as secretary of state. we never found any e-mails from her first three months. she was using a verizon blackberry then and that's very important because if there was evidence that she was acting with bad intent that's where it would be. >> but they weren't there. >> can i finish my answer? so they said we can see thousands of e-mails from the clinton e-mail domain including from the verizon clinton blackberry domain. they said we think we have to get a search warrant to get these and the department of justice agreed. i authorized them to seek a

search warrant. you avoid any action in the run-up to the election that has an election, whether it's a dog catcher election or the president of the united states. i could not see a door labeled no action here. i could see two doors. and they were both actions. one was labeled speak, the other was labelled conceal. because here's how i thought about this. i want you to know my thinking. having repeatedly told this congress we're done, there's no case there. there's no case there, to restart in a hugely significant way potentially finding the e-mails that would reflect on her intent from the beginning and not speak about it would require an act of concealment in my view. and so i stared at speak and conceal. speak would be really bad. there's an election in 11 days, that would be really bad. concealing would be catastrophic. not just to the fbi, but well beyond and honestly, as between really bad and catastrophic, i said to my team we've got to

walk into the world of really bad. i have to tell congress that we're restarting this. not in some frivolous way. in a hugely significant way. and the team also told me, we cannot finish this work before the election. and then they worked night after night after night and they found thousands of new e-mails. they found classified information on anthony weiner. somehow her e-mails are being forwarded to anthony weiner. including from huma abedin. so they called me the saturday night before the election, thanks to the wizardly of the technology we only had to personally lead 6,000. we think we can finish tomorrow morning, sunday. i met with them. we found a lot of new stuff. we did not find anything that changes our view of her intent. so we're in the same place we were in july, it hasn't changed our view. i asked them lots of questions. i said okay if that's where you are, then i also have to tell congress that we're done. look, this was terrible. it makes me mildly nauseous to

think that we might have had some impact on the election. but honestly, it wouldn't change the decision. everybody who disagrees with me has to come back to october 28th with me and stare at this and tell me what you would do. would you speak or would you conceal? and i could be wrong, but we honestly made a decision between the two choices that even in hindsight -- i would make the same decision. i would not conceal that. on october 28th, from the congress. and i sent the letter to congress. by the way, people forget this. i didn't make a public announcement. i sent a private letter to the oversight committees. i know it's a distinction within the world of leaks but it was very important that i tell them instead of concealing. reasonable people can disagree. it was a hard choice. i still believe in retrospect the right choice as painful as this has been. i'm sorry for the long answer. >> well, let me respond. on the letter it was just a matter of minutes before the world knew about it.

secondly, my understanding and the staff has just said to me that you didn't get a search warrant before making the announcement. >> i think that's right. i think i authorized and the department of justice agreed we'd seek a search warrant. i don't see it as a meaningful distinction. >> well, it very -- it's very hard -- it would have been -- you took an enormous gamble. the gamble was that there was something there that would invalidate her candidacy. and there wasn't. so one has to look at that action and say, did it affect the campaign? i think most people who have looked at this say, yet it did affect the campaign. why would he do it? and was there any conflict among your staff, people saying do it, people saying don't do it?

as has been reported. >> no. there was a great debate. i have a fabulous staff at all levels. one of my junior lawyers said should you consider that what you're about to do may help elect donald trump president, and i said thank you for raising that. not for a moment. because down that path lies the death of the fbi as an independent institution in america. i can't consider for a second whose political fortunes will be affected in what way. we have to ask ourselves what's the right thing to and do it. at the end of the day, everyone agreed on my team said we have to tell congress we're restarting this in a hugely significance way. >> well, there's a way to do that. i don't know whether it would work or not. but certainly in the classified way, carrying out your tradition of not announcing investigations. and, you know, i look at this exactly the opposite way you do.

everybody knew it would influence the investigation before. that there was a very large percentage of chance that it would. and yet that percentage of chance was taken. and there was no information and the election was lost. so it seems to me that before your department does something like this, you really ought to -- because senator leahy began to talk about other investigations and i think this theory does not hold up when you look at other investigations. but let me go on to 702 because you began your comments saying how important it is and yes, it is important. we've got -- i think a problem. and the issue that we're going

to need to address is the fbi's practice of searching 702 data using u.s. person identifiers as query terms. and some have called this an unconstitutional back door search. while others say that such queries are essential to assuring that potential terrorists don't slip through the cracks as they did before. so could you give us your views on that and how it might be handled to avoid the charge which may bring down 702? >> thank you, senator, it's an important issue. the way that 702 works is under that provision of the statute, the fisa court, federal judges authorize us as u.s. agencies to collect the communications of non-u.s. people that we believe to be overseas, if they're using american infrastructure. the criticism that the fbi has gotten and the feedback we have gotten consistently since 9/11 is you have to make sure you're

in a position to connect the dots. you can't have stovepiped information so we have responded to that over the last ten years. mostly to the great work of my predecessor, bob muller. we have confed rated databases. if we collect information in 702 it doesn't sit in a separate stovepipe, but in a single cloud type of environment. if i'm opening the investigation in the united states in a terrorism matter, intelligence matter or criminal matter, i have a name of the suspect and their telephone number and their e-mail addresses, i search the fbi's databases. that search necessarily will also touch the information that was collected under 702 so we don't miss a dot. but nobody gets access to the information that sits in the 702 database unless they have been trained correctly. if there is -- let's imagine that terrorists overseas were talking about a suspect in the united states or someone's e-mail address in the united states was in touch with that

terrorist. and that information sits in the 702 data base. when we open the case in the united states and put in that name and e-mail address, it will touch that data and tell us there's information in the 702 database that's relevant. if the agent doing the query is properly trained on how to handle that, he or she will be able to see that information handle that, he or she will be able to see that information. if they're not properly trained, they'll be alerted that there is information and then they have to get the appropriate training and appropriate oversight to see it. to do it otherwise is to risk us where it matters most in the united states failing to connect dots. so my view is the information that's in the 702 data base has been lawfully collected, carefully overseen and checked and our use of it is also appropriate and carefully overseen and checked. >> obviously an emotional fbi director comey in front of the senate judiciary committee saying the thought of concealing the discovery of the new clinton

e-mails last fall before the election would have been catastrophic in his view saying it makes him mildly nauseous to think the fbi might have had an impact on the election calling it one of the world's most painful decisions. obviously questioning nowhere near being done. >> saying if he had to do it kb again, he would make the same decision walking those members through exactly what he did and why he did it. of course, this comes after hillary clinton yesterday speaking in a rare appearance partly blamed him for releasing that renewed investigation 11 days before the election. we'll keep an eye on this as carl mentioned. as we head to break, look at crude oil. reversing an earlier gain up this morning touching its lowest level since march 27th back below $48 a barrel. this comes after we saw a smaller than expected drop in the weekly oil inventory data. that sent crude falling once again. dow down 58 points.

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tesla reports earnings tonight as you probably know. it's more valuable than gm, ford or fiat. auto sales missing expectations. for more, let's bring in former vice chairman who joins us at general motors and cnbc

contributor. bob, good to have you back. >> good to be here. >> reuters has a piece up that tesla is the most painful short of the year. 3 billion in losses for short sellers of tesla. we know where you come from. how long can this last? >> i don't know. i mean, how long can you defy gravity? it just shows that nowadays dreams of the future and hyperbole and a convincing salesman which no one doubts that elon musk is the master, it trumps reality and fundamentals that we used to look at when we evaluated the future of a stock. a lot of people have lost enormous amounts of money shorting tesla, but, you know, some day, gravity is going to take over, fundamentals are going to dictate what happens to tesla and the whole thing will

crash around everybody's ears. >> how concerned are you about either the sales numbers we just got, the incentive levels we see, the financing concerns we're hearing about? >> well, i think we are definitely on a plateau. demand is not increasing. i think i've said for years that one of the things that worried me about what the industry was doing was the so-called 80-month paper, which is 80-month financing which will permit many people who can't normally afford it, it permits them to buy a $60,000 vehicle and that explains a lot of the expensive truck and expensive suv sales. the problem is the depreciation curve is much steeper than the payment curve. so after four or five years, these people are going to want to trade their vehicle. they're going to go to the dealer and the dealer is going to determine that the vehicle is

worth $5,000 or $6,000 less than what they owe on it. that's what the industry calls being upside down. the only way that can be corrected is for the manufacturer to kick in the missing amount to be able to get the person to trade. so i think a lot of what we've been doing over the past few years also financing people with poor credit ratings although so far that threat hasn't materialized, but that's also a dangerous practice. a third really dangerous practice is an excessive reliance on lease. you have a lot of expensive vehicles if they aren't being financed for 60 months or 80 months, they're going out on so-called subsidized leases. and the problem is you're planned residual value after the two-year lease or the three-year lease is kind of based on current conditions, but if

conditions worsen and you take too much advantage of the leasing opportunity, then all those lease vehicles come back to the wholesale market at the same time, create a glut and values drop like a stone. you know, when late model used car values drop, it's a big problem for new car sales. >> certainly a lot of viewers know what you mean in terms of bringing those leases back. bob, we got to keep it tight today. we got squeezed because of the comey hearing. we hope to talk to you soon. >> okay. thank you. >> let's send it out to rick santelli. rick? >> thank you. welcome our guest. former fed governor mark olson. thanks to taking the time. >> happy to be here. thanks for inviting me. >> i'm going to ask you what you think of today's fed meeting but couch it in terms of what you said the last several times you were on. they have good firing power in terms of 200 billion in

short-term securities less than one year to maturity, plenty of firepower. do you agree and what observation for today? >> well, i definitely agree with that. i think that's on the table. it was very instructive to go into the details of the last minutes where the fed outlined pretty carefully how they're going to go about it. there were a couple key points. they said later in the year and after the increases are pretty well full in effect and will describe the manner in which we are going to do it. what the triggering events will be. that's what i would look for today. the bottom paragraph tells you what the decision will be on interest rates and i think that will be -- i think there will be no change, my guess is. i think in the first and second paragraphs, we may get a better indication of how they're going to use the normalization strategy of allowing roll offs to not be replaced. we'll learn more about that today. >> excellent. now, i know that interest on reserves doesn't get talked about much. i bring it up every now and

again. many out there including chairman of the house financial services committee in the past called it a subsidy. in 2016, 12 billion out of 102 billion interest fed earned was paid on interest on reserve to big banks. is that something to look at? is he ride it's a subsidy or not worth discussion at this point? >> he's both right and wrong. number one, it would be the most effective -- it would have the greatest impact if they could pay interest directly but optics are all wrong. essentially the way it would play out is they're paying the banks interest on those reserves so that then that will reduce incentives to lend money to corporations or individuals. so i think the optics of it make the most pragmatic option they have a dead issue. >> i got you. mark, always interesting to hear your opinions. thank you for being my guest today. and now it's time to shoot over to the "squawk alley" team. >> thank y