we want to thank melissa lee for hanging out with us today. you can see her a couple of times today. back here later today. becky quick will be in omaha tomorrow morning. make sure you join us tomorrow. >> six hours. >> "squawk on the street" starts right now. ♪ good thursday morning. welcome to "squawk on the street." i'm carl quintanilla with david faber at the new york stock exchange. a lot to get to with jim today including his sit down with tim cook last night. a big day on capitol hill today. expect the house vote on the health bill. france is up nearly 1% after the macron/le pen debate yesterday. in fact, watch a lot of the commodities, oil breaks 47.

now the lowest since november. our road map begins with the atand the gop on the verge -- the president and the gop on the verge of a much needed win. plus apple making the $1 billion bet on manufacturing, launching a new fund to invest in u.s. jobs. we elle a -- we'll tell you what tim cook told jim. >> it's a big morning on the hill as the house is slated to vote on the health reform bill. it would give the president the biggest legislative victory to date. some gop congressmen have shifted from no to yes after an amendment was added to help cover pre-existing conditions. they're calling it the upton amendment, jim. the question is, what's the future for the bill, if it does pass the house and the senate and if that happens, does the reflation trade -- is the path cleared once again? >> i think it is. i think this would be rather remarkable if they get it through. just to get it to the senate so

they can start talking about economics. because yesterday, the fed issued a statement that was incredibly hawkish basically saying whatever weakness you see is transitory. if you've got this through and we return to the animal spirits we had in the first three months post the election then you could have a transformation. right now the domestic and almost every single case is the drag. and that drag started when repeal and replace failed. i think it's a big deal. i would love to see this done. >> all right, senator corker says he does not expect it to pass the senate in its current form. when the initial version failed to pass, you were kind of happy not to have to go through months of the senate wrangling over health care, but you're willing now? >> i think that -- yeah. look, everything was just such a downer after they failed. just to get it out of -- look, if you can just get this out of

the house, then i think you start talking seriously but the house is still going back to border tax. the house may not have agreement. but when you sit down and talk with tim cook the absurdity of our current tax rates it's so palpable. you have to believe that there will be some sort of unanimity between the president and congress. >> we'll watch the procedures all morning long on the hill, on the house side. keep you up to date on that. you mentioned tim cook, jim. what an interview last night as the president pushes for his push for job growth, tim cook telling jim that apple will start this $1 billion fund to promote advanced manufacturing jobs in the u.s. cook breaking the news to jim in an exclusive last night on "mad money." >> we're creating an advanced manufacturing fund, we're initially putting $1 billion in the fund. >> this i did not know. >> we're announcing it today, so you're first person i'm telling. and -- well, not the first person because we have talked to

a company that we're going to invest in. >> okay. >> already. >> but this is $1 billion of apple's $256 billion putting it in -- >> $1 billion of our u.s. money which we have to borrow to get. that's a whole other optic, but we're proud to do it. by doing that, we can be the ripple in the pond. >> going to make that first announcement later in the month. but to your point, you've got a quarter trillion of cash, but to do it here in this cash you have to money. >> look, the absurdity of it was palpable. throughout the interview there was a wry notion from cook about what the government does not to help. but you know what? i asked whether this is kind of a quid pro quo. you go out there and you answer the president's campaign promise that apple has to start doing more, what can the president do for you? he said, listen, worldwide we have to create more jobs. he didn't -- there was no real moment where he talked about trump. i have to be candid about that. but i think that this is a kind

of thing, you notice it's high end manufacturing. he's not trying to bring back these jobs that are never going to come back which is assembly. these are the kind of jobs we can do because we have a good workfor workforce. i thought it was meaningful. because we're doing our part. you said we weren't, here it is. $1 billion. immediately people said why only a billion? what is everybody else doing? nobody was doing anything until cook, i thought it was mean,f meaningf meaningful. >> and you have to borrow, and you did talk about the tax reform a bit later in the conversation if i remember correctly, jim, in reading it last night. >> right. >> but also goes to where we are right now. and the need for true corporate tax reform, whether or not we're going to get it the territorial system, $239 billion overseas for apple, but hardly any cash here. therefore, they end up having to borrow to a certain extend to fund something like that. kind of points to the absurdity

of the current subjeystem. we'll see what we ends up with this. the house being cleared because of the passage of the earlier vote. i know we'll get to facebook, they had a 10% tax rate. what are -- you know? what do we keep talking about 35% here? 10%, i think they took some credits so it might have been at 19% if you take it all in apparently. but that's still well below 35 the last time i checked. >> right. right. 19% is the effective rate of the corporate world. but we look at a lot of the retailers who are really struggling. a lot of the restaurants, they're struggling. they're the ones that would be the big beneficiaries. so disney is down. talk about cord cutting. and disney is a huge taxpayer and that would be meaning. for them. >> people are now take your interview and try to string it out a bit. is this about components or new

categories? i know 9 to 5 mac has a big think piece, your thoughts on that? >> look, it's great to do think piece. he was very opaque about it. but i have to believe a lot is involving artificial intelligence. is lot of it is about vr. one of the thing -- look, everybody wants to leapfrog past the form factory that we have. one of the things that you have to do is you have to get people to manufacture things that take advantage of the new technologies that really aren't in place yet. so i think that's going to matter. i think look maybe the next watch. maybe it's the phone after the 8. but i think it's meaningful. they're not going -- look, this is a company that's chatter -- they don't throw around $1 billion here or there. i think it's meaningful because they want to leapfrog whoever else is doing anything.

they're very competitive. people forget that. people think they're resting on their laurels. that's not the case. i think the billion dollars is not idle. >> yeah. you did try to get him to talk some pipeline. you even invoked your daughter on the timing of the phone. no dice. at least not yet. >> desperate. i mean, desperate. when you invoke the daughter, listen, i want to get it for the holidays you're the bottom of the barrel. how do i do it? total failure. total failure. i don't know who else to invoke though. maybe other people's kids. but i played it, i tried it, i failed. >> all right, not for lack of trying, jim. it's a great interview. we'll be talking about it all this morning. as david mentioned there's facebook to look at too. better than expected results. mobile accounting for 85% of total ad revenue up from 82. the social network continues to expect the ad growth rates to come down meaningfully over the year. it's whether or not the ad load has hit a wall. they have said for the last couple quarters. >> it's finney i looked back -- funny i looked back on the

november quarter and they said it will top out in '17 on the ad load so that's not unexpected for the company at this point. a company by the buy during the quarter generated $3. billion n in -- $3.3 billion in cash flow. the level of profitability is astounding. 41% margins. they did spend capex at $1.3 billion. net income is $3.3 billion. and it's a far cry from apple but not an insignificant sum of money. jim, what is your overall take away in terms of the quarter itself and particularly the guidance which again does seem to have the stock down a bit this morning. at least as we look 20 minutes before the open. >> i mean, this was a time when i felt that -- when they say meaningful, meaningful decline it was picked up by the analysts. yet, everyone did raise their price target. when you do $6.7 billion in mobile up, 58% it's almost

impossible to tamp expectations it's so bold. in order to say meaningful, in order to say that spending is ramping what you're really saying is it really possible that we can continue this rate given the size of the company? i think they're being smart saying this. there are people who bought this stock, somehow they thought they might have dropped that language. i mean, i think that's silly. this company is totally consistent. this company moves in the last two quarters between the conference calls, not after. those who were buying it for some sort of blowout, take a look at the last two times they did the exact same thing as you mentioned. the stock will go down, there will be insider selling. the brokers will chatter, hey, they're dumping, you have a three day rule, seven days later you can start buying. this is three days that there are a lot of selling, then we kind of -- you know, we level off. but people took it very seriously, david. kind of saying, yes, we know this is going to happen. they took it seriously this

time, but they still raised the price targets. >> total expenses are up 40%. they're up to 18,800. i'm shocked. you look at the market cap and divide that by the number of employees you get a big number. or any other metric that you want to use. >> adding 3,000 more next year. >> 1,700 employees in the first quarter and another 3,000. you know, we talked yesterday guys in terms of our continuing advanced intelligence, zuckerberg was asked about, well, why not use ai? he said, listen, the tools will get better, but there are certain things that ai can do in terms of understanding text and what's in a photo or a video. that will get better over time, but that will take a period of years to reach the quality we want. hence, they still need real people. >> with all of the human curators they won't catch anything you'd want to have off the platform. i thought it was interesting, eric schmidt in an interview talking about ai and the dislocation of jobs says i may

job eliminate -- i'm a job elimination denier. he thinks there's an aggregate net game of employment with robots even though every robot will take six jobs away. that's an increasingly fiery debate. >> it's a matter of dislocation over time. will the jobs be replaced immediately or will it take 30 years? i mean, i don't know the context in which mr. schmidt made the comments but there are many who believe the dislocation will be enormous. then eventually the jobs will be recovered and there will be growth again. but you go through some periods like the one we seem to be headed into and it's not clear you'll be immediately replacing the jobs. >> well, i think that the replacement -- i had the ceo of expedia on this week, can you give me an example of artificial intelligence. he said, right now you can tell siri any one of the devices to do something.

cancel the trip, call the agent and stop it. but what artificial intelligence can't do, here's what i want you to do. cancel the trip to bermuda and book it to cabo san lucas and say i want the best price. tim cook said that's within reach and i think that's great. because that's artificial intelligence bargaining for you, making it happen, we don't have it yet but that's the frontier are working on. >> you notice we talk about this ten minutes into the show every day? >> pretty much. >> there are some things that we talk about and i wonder about the importance but i don't on this. this is what we should be talking about. so let's keep it going. >> david, david, we could be talking about whether kellogg's sold a lot of corn flakes. you want to revert to that i'm game. >> we can talk about that later and talk about that kraft heinz quarter. and what they said on the call. we have to go over viacom

earnings. we have a bunch of things to hit. >> i could use a faber report. >> arconic, give you one on that. one of your favorites. >> i'm the only person who's not been invited to the board. i want that board invite. what is that? short shrift. >> we elle a get to -- we'll get to tesla down on the wider than expected loss and elon musk looking to clear up the confusion on the different model letters. we have to get to square. pretty good week for jack dorsey. the oil is lowest in five months and productivity was pretty pumped. "squawk on the street" continues in a moment. i like russo. his on/off splits are the best here. yeah, but his offensive win shares didn't even break 4. come on, check out that stop-and-pop! what do you think? my trade-off analytics indicate no one creates more space on offense.

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more or less orders -- people being confused about model 3 being the upgrade to model "s." and we took action to correct that about a month ago. but that message has not filtered down to all of our customers. >> jim, we pointed out yesterday it's officially the most painful short of the year and down 1%. people are making jokes. congratulations to the shorts. >> well, look, i think that this is a quarter -- i went over the conference call three times. the only way to really understand it, you must be on mind altering drugs. because you just can't take this thing in a straight value. this is a psychedelic conference call. sag aned did says maybe there's not enough demand, or excess supply, no. because they're giving high great loaners to anybody when you bring it in for service. this man has an answer for everything. he talks about how he would have

called it the model "e" so it would not be confused but no, ford sued him and he had to drop it. and he talked about when it's going to be $700 billion and he said it was not an issue. it was alice in wonderland on the call. the analysts play along, it's incredible. then the bomb for the shorts at the end was hey, china, stay tuned to tend of the year. this guy is having too good of a time on his conference call. one of the analysts said, hey, listen, how about an apple combination, he said i don't know. my favorite was when can you make a million cars in 2020? yeah. maybe more. maybe more. i mean, this guy is incredible. these analysts don't know what to do. they are literally being toyed with and they're supposed to be professionals. this is a nightmare for them. nightmare for anyone -- tony sag aneedy, you are right to try, but you failed. >> well, are the investors who continue to lap up the debt and

equity offerings being rigorous because it puts them in the position where they can keep going and that's got to be if key here. his ability to sell -- yeah, 10,000 cars a week. plenty of debt and equity. that's the way it goes. that's the beauty of the capital markets. i can tell kind of -- you know, where you believe it. -- where you it may. by the way, did you know about the e-3 thing? i didn't know. until i read about it. >> the confusion, no. >> it was supposed to be sex and then sexy and that's why they got the "y." all the different models. >> no, that was -- >> so you have to infer that it's sexy. >> it's so revelatory. this is one of those -- i mean, he says, listen, we'll make 1 million cars in china. this man -- this man basically has -- he toys with them.

and that's why i say look, maybe you have to get tuned up before you're in one of the conference calls. i mean, maybe you have to have like three gnts when you're asking questions because the answers are so hey, man, what are you thinking? i mean, i had more serious conditions with bar san miguel. >> you're mad at him -- what does he think you are again, musk? not an oldie -- >> an apparition? >> what's the word? >> i'm kind of a hologram. >> no. >> i'm not a real person. >> yeah. >> you're a simulation. simulation. >> yeah. >> you're a simulation. >> 50% chance. but brian from intel, he thought it was only a 70% chance i was a simulation. let's take that off the table right now. >> i'll take the under on the 20.

jim, with we'll get to your "mad dash" and count down to the opening bell. more "squawk on the street" in a moment.

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i think it was -- they have to do a deal but most important point on the call was when alexia howard from bernstein the research firm asked can you really do a deal given the fact that everyone thinks that you do scorched earth and wrecks the whole plan? talked about the idea of this is a company that no with unwants -- no one wants to sell to anymore. they said that's perception, not reality. but david, it was jarring. it was jarring because you do think that if they can't do a hostile, who the heck will want to go with them? as she said, literally, would you ever want anyone to undo whatever good you had done? david, i thought it was a stark moment on a very grim conference call. >> yeah, that's interesting, jim, because as i have reported many times, the idea of them being able to successfully pull off a hostile, you can completely dispatch with that. yet, the stock does have i would argue and many investors have

told me an implicit takeover premium in it for their ability to do deals. so if that really were to come out, you might see further downside given what was not a good quarter. also, jim, i would point to the fact that they continue to point to consumer broadly, not just food as the potential area of acquisition on the call. they said related to the unilever transaction, we believe in the m&a framework. again, if you go back in terms of consumer terms, brands with small market share, similar operation, so they think at the end of the day, they're very similar and that's why you see so many companies operating brands from consumers. sometimes food. sometimes personal care. sometimes health care. they're leaving the door open to different possibilities because they need to. >> i think they have to. they have to go to someone who's giving up. they have to have someone who says i can't take the walmart/amazon pressure. i don't know who that is. the ceos who are left, they sure

don't want to go to this meat cleaver. >> opening bell, guys. s&p on the bottom of your screen. at the big board it's antero midstream, celebrating the ipo today. over at the nasdaq, umpqua holdings, oregon based community bank. jim, big part of your conversation with tim cook of course involved the iphone and we continue to see the antagonistic back and forth between them and qualcomm. amid reports that qualcomm will ask u.s. trade agencies to what? limit imports of the iphone that's assembled in asia? >> yeah. i don't think that this is something that would have an immediate impact. i know to invoke tony saganidi again from bernstein, i think he was concerned about this. i think qualcomm has to complete

the deal. there have been some approvals, i think that's going to happen. in the end i think there's a settlement here. this is everybody trying to figure out what is the best rate that apple can get? qualcomm stock has been up during this period. betting that somehow they'll get an injunction. that's far afield. i don't think it's going to happen. >> certainly talk about big moves as cook said that's what courts are for. >> it's funny, when we see qualcomm i think of nxpi, one of the few pieces of good news you can argue for the company given all the litigation going on. nxpi had a good quarter and that's emboldening people, there's not a lot of downside there. if this were to trade on its own, given the success that the company is having, is some argue it would trade above the 110 that qualcomm is contracted to buy it at all, all cash. but it requires a shareholder

vote. >> well, absolutely, david. i think what happened, this was done at a street level for qualcomm. it's the other plays in that, whether it's skyworks, whether it be broadcom. delay are the other internet of -- they are the other internet. i thought the company was worth 120 on the walk away, but there's no way that qualcomm can afford this to happen, because nxp gives you the call. and one of the things is the autonomous car and how many chips are needed. nxp has the highest amount of chips in a car of any of these various semiconductors. in the autonomous side. >> jim, once again disney is the lag guard on the dow. this is down another percent and a half. take you to levels we last saw in february. >> cord cutting. there are concerns. i think it's overall the week. cord cutting. down 810,000 for the quarter.

the mppds not taking up the slack. i don't know, if you have a different take, jim. but that certainly seems to be hurting a lot of the content companies. >> i think people are taking what tim cook said at his word. he said this is accelerating rapidly. we even talked about the iphone 7 plus which is in short supply. being the cord cutter. no, i mean, cook is basically saying this thing, the way that we look at tv is over. now of course he has a dog in the hunt. you can say he talks about this in the book up. when he dropped, i thought this is really accelerating. that was right on the moffett na nathanson tale. he said you can't be in that current business. it won't look anything like it, but the time frame is really shortened. david, this is the here and now. >> yeah. by the way, you saw there -- that was beautiful, by the way, where you were with cook. we'll have hulu on.

we'll have the ceo on. mike hopkins. of course they're the latest entrants to the mpdds not really a skinny bundle for them. guys, i want to look at viacom because the quarter was not bad. in fact, generally a good quarter. the call is going on right now. there's mike hopkins coming up with us around 10:20 today. give me a look at viacom. down over 8%. now the call's going on. again, the numbers overall not bad. they outperformed certainly paramount's tv licensing fees were better than expected. operating income was better than many analysts had anticipated. revenue was up 8%. but on the call he's talking about cord cutting and he said we're seeing some softness too. now, i want to wait and see a lot more of what's being said here that is pressuring the stock but that may be part of

it. you know, there are some execution differences going on in terms of the distributors. remember, the losses were mostly from dish, directv. not as much from comcast or charter although charter did have some as well. but bakish the new ceo is talking about this very concern and apparently getting people more worried. we'll have more for you as we move along. advertising just down 1%. domestic down 4. but overall, not a bad quarter at all for viacom and yet the stock is down maybe i'll come back -- >> people are looking at earnings down 60% year on year. >> that may be. >> disney's now going -- not just the worst dow stock of the day, but of the month. early as it is. down 5% for the month to date. jim, paying attention to the ten year yield, getting back to 2.36. that'll take you back at least three weeks. >> well, look, one of the things

that happened i think there was a misconception, i bumped into steve liesman out here and we talked about how the statement from the fed says, look, don't worry about the first quarter. we are going to be accelerating. that was kind of an anomaly. i have seen it from some companies, obviously the international companies. not seeing it from the domestics, but i really want to go back to matthew boss' call that february was the trough for bricks and mortar retailer. the consumer is doing better. housing has levelled off and autos is the weak part. but i get it. they can come up with a thesis if tomorrow's number is strong. boy, they better be banking on that because they need that to keep their credibility frankly. >> speaking of some retail, square, 8 cents loss is about half of the expected loss. they raised their guide, payment up by a third. been a good week for dorsey when you put square and twitter together. >> i bumped into sara, she's the

cfo and the spokesperson i loved the square quarter. they are really starting to ramp with merchants. they have this great business where they look at the cash flow at the register so they can give you short term credit. this was their breakout quarter. they are now part of the vast scheme of payment processors that are doing well. let's include paypal. let's include visa. the mastercard quarter was magnificent. square is real. it's a real company. >> yeah. very interesting quarter, jim as you say, important one for the company. he's still running both companies. i don't know, can that just continue forever? you know, at some point does he say, well, look what i've got going here. i mean, some point maybe the market cap of square may eclipse twitter. it's not that far away now. >> i own this -- i own this restaurant. tomorrow is cinco de mayo. we use all the products in

square. they have a caviar product that you have to let people -- look, you have to deliver food. grubhub had a great call. one of the things that square -- square is smack in the middle of everybody who trying to deal with this notion of hey, the customer doesn't want to stay at the place. they want to take it out. in the meantime, the customer -- as a small business person, you want that low rate that they give you with the swipe of a card. this is also for people who are in business, the smaller businesses, that tim cook talked about, square is the de facto register. they have it going. i think dorsey should stay with this and give nodo -- give anthony nodo the twitter stock. >> really quick, jim on oil, below 47. got libya back on line. got rig counts up for 15 weeks in a row. nobody is paying attention to opec comments on cuts. is this where you start to get

interested or what? >> yes, exactly. every single day oil has done the same thing. it started up and then started going down. this is a break of the pattern. it got slaughtered at the opening. i think this is the level i have said between 45 and 47 is where it's interesting. i'm not going to going back on that because a lot of the oil companies in this country can turn off the spigot here knowing it will go back to 50 if they do. we're the swing producer. i like some of the oils here. now, a lot of -- everybody should know these stocks are getting slaughtered again and again. they're going back to the levels when we saw that oil was going in the 30s. i don't think oil goes to the 30s. >> couple of quick things to mention before we get to bob, sprint shares were down 15% yesterday i'm sure you saw that after the conference call. the company was a little surprised at that. they had masa come out and talk about the magic box and gha it will do in term -- and what it

will will do in terms in sending the more robust signals. they saw that as an opportunity to inform broadly speaking a group of potential buyers for the company and say, hey, look what we've got. they thought it actually would be seized on by investors in a positive way, but instead the take away was we didn't hear anything that will happen and in fact we heard a little bit that indicates you never got a greenlight on antitrust. why anyone would believe they had one from the one meeting in trump towers, but the gullibility of some hedge fund managers surprises me. but i did want to share that. they went into the call with the idea of introducing magic box would be seen as a positive by potential acquirers. marcelo claure say they're fully engaging in a wide array of possibilities over these next few weeks, jim. that stock only up 7 cents. that was a big market cap loss for them yesterday. >> oh, yeah.

look, t-mobile turned out on to the star of the show. sprint took everybody down. i understand you're absolutely right, they have a lot of enthusiasm. but it was too much magic box. we don't want to see the magic box. we want to see them taking a lot of share from at&t and from verizon. we didn't get that, david. that's been the way you move your stock up. is to take share and keep it. >> all right. guys, dow is basically flat. paris remains up by more than a percent. let's get to bob pisani on the floor. >> good morning, carl, happy thursday, everyone. very tight trading range. this is the story all week for the last couple of weeks, but europe, carl is right. europe is breaking out. not just france here. we have had a good day in germany. germany is poised to close at another historic high today. we had very good european services im, they were at a six year high. that set a record high. the euro is at a 1.09 right now. that's the highest level of the year.

let's not quibble too much. so the markets are all up there. european earnings have been good. i have been emphasizing all week we don't bring up the european stocks but their numbers along with the u.s. counterparts are coming in well. adidas, bmw, siemens had good earnings overall. so the story in europe is somewhat similar to the story in the united states. we have improving data and improving earnings in europe and generally lower geopolitical risks in the elections. the big story here is that the banks are moving again. banks are now up 2% this week. consumer discretion on the flat side. industrials up a little bit. and there you see energy. that's the big problem. you heard carl talking about oil below 37. they have to cut the estimates for the big names here. the overall story, the u.s. is improving earnings. we have movement on taxes and health care and we have the

productivity numbers that showed improvement. so the narrative is q2 is better. the market is in a hopeful mood. is there anything that can mess this whole narrative up? the stocks are all clear. there are three things right now. first is china where we are seeing slower spending. we are seeing some impact on commodities already. the second is north korea. it's the potential back swan out there and then the oil dropping. a big issue, this could be the fly in the ointment for the big earnings reports we are getting. it's affecting this oil story. some of the ipos, we're expecting a big fracking company tomorrow. this is liberty oil field. they will probably go public tomorrow but they had to cut the terms of the deal rather dramatically from $22 million at 16 to 19. now they're 20 to 12 to 14. that tells you the market is getting nervous about whether or not oil is sustainable given the sagging oil prices. we have an mlp. and terra resources they are in

the middle here. they're yield plays largely. this is going all fine. still waiting for indications. finally we talked about the five f.a.n.g. sftocks out there. the five stocks are 50% of the nasdaq 100. $2.7 billion at the market cap of the nasdaq 100. $5.4 billion. that is an amazing number. a lot of people argue if the market can keep going up you'll see some diversification of the faang stocks into the rest of the market. that has not happened yet but keep an eye on that. carl, back to you. >> i'll take it bob, bob pisani on the floor. we want to arconic. there's some news this morning on this very heated battle between of course arconic and the 13.2% shareholder elliott management which is trying to seat four new directors on the board. we do now -- know when the annual meeting will be. so we have a sense here as to how many weeks they have left to

fight. about three i guess or so. may 25th is when they have set the annual meeting for. that's the date at which shareholders will make a decision in terms of -- or by them the proxies will be in in terms of what they see for the future of this board. the other news this morning though is that arconic -- you have to remember last week, telling us they tried to get a settlement with elliott. offering them two seats. willing to put qualified people on the board. sort of a total refresh would have taken place. but elliott didn't want to play ball. well, they move ahead this morning and tell us they have nominated two new directors. former boeing airplanes president and ceo james alba and air force retired general janet c. wolfenbarger. both of whom are going to be nominated to take seats on therd bo of -- on the board of directors. that will mean nine of 13 directors have been seated in

the last few months. that makes it one of the freshest boards out there in the s&p 500. it has 12 independents, three of whom who have been nominated remember. elliott won a proxy contest a while back or it wasn't a contest. they were able to seat three board members previously. arconic does go on and talks about how nasty it's all been. of course the knows -- the most unexpected part of this entire battle was the sudden resignation/firing of long time ceo klaus kleinfeld, who created arconic, after he sent this bizarre letter to paul singer, the founder of elliott. they published known falsehoods to damage reputations, they have unleashed private investigators on us. and all sorts of ways they have been called dozens of people. they have had cartoons that have depicted our executives as

criminals and bank robbers. now, i didn't see this in the published materials that were available broadly from elliott but they claim these were more specifically targeted. here's one comic that i think we have that they take issue with at arconic. taking, you know, out all of sides of his mouth, i guess. is what they said at elliott. but he's gone now. you know, i don't know, jim. these things are pretty nasty. you have to be ready for it. clearly, mr. kleinfeld reacted badly and that cost him his job. >> yeah. sometimes the pressure gets to anybody if they really go after you. but you have got to -- that was an ill-advised letter. would you regard these two new board members as the hail mary pass by management to stay more entren entrenched? because is this a sign that maybe they were going to lose, that the votes are going the other way? going toward elliott and against arconic current management?

>> i think so, jim. you know, listen -- >> you do? >> i don't believe we have heard from the proxy advisory firms yet, whose influence is more significant than in the past. but given how large passive investors are on -- how important a role they play in the proxy contests, but given everything that arconic is doing they saw themselves in the vulnerable position. at least we know when it will end. may 25th. it will end. i will end right there. and send it over to the bond pits and rick santelli from chicago. >> hey, david, how are you doing today? i love to be the sherlock holmes of the markets. it's what i have been doing for almost 40 years. why do markets move? well, sometimes the why is two fold. first you have to look at the logistics and see how traders positions are packed in. then you have to look at fundamentals. and try to marry the two together. let's consider this. we had what i considered a

headline number that wasn't too spectacular for the first look at the first quarter productivity, up 0.6%. but if you look at the last quarter, 1.68 and the one before that was pretty up as well, i mean, you can create jobs but if the jobs don't translate into why you monitor them kind of all is lost. that combined with the fact that everybody was tightly packed looking for us to break and stay under the 230 range and everything was explosive. let's look at the one week of twos. it's popped. today's the first day after two-day fed meeting. march 16th was the first day after a two day fed meeting. if we look at the year to date of twos, it looks like it's changing the overall week. one week of tens and year to date of 30s. tens could be at the best close since the 10th of april. 30 since the 7th of april.

it isn't only us. we're all the hip. look at first of boons. boons are at the highest yields since march 27th. one week of the dollar index. it popped through its range. it had the logistics. but the year to date chart shows it's throttling and slipping as we speak. carl, jim, david, back to you. >> thank you, rick. rick santelli. still to come this morning the cloud wars are in focus. stay tuned for an exclusive with oracle's mark hurd. the dow has settled into the red here. disney the big laggard. back in a moment. you totanobody's hurt, new car. but there will still be pain. it comes when your insurance company says they'll only pay three-quarters of what it takes to replace it.

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the major indiss in the red, but banks are bucking the trend. finding some narrow gains. the ten year finds its way to 2.62. we'll get to "stop trading" with jim after a break. did you know slow internet

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i hope why uber has decided to move away from them. that was the 17% client in q4. >> remember, guys, we started the hour talking about ai and the disruption of jobs. mark cuban was listening and tweeted to us, if you want to know the impact of neural networks, create an index of total domestic employment across spx companies. i guess we know where mark starts. >> and neural networks are important when it comes to ai. computing power and data, but that's not what we're talking about when we talk about the true advances in ai. we talk about being able to think. that means creating neural networks and i think we know exactly where he stands. >> yeah. >> jim, see you back here tomorrow. >> we'll go to "shark tank" and get $1 million. tomorrow, yeah, i'll be back. take the red eye. see this suit, you may see it again, but a new shirt. >> it will be a big day with

jobs and yellen speak. see you at 6:00 p.m., "mad money." keep an eye on capitol hill. looking for a vote on health care, about 1:15. that's according to representative collins who said we have the votes. back in a minute.

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good thursday morning. welcome back to "squawk on the street." i'm carl quintanilla with sara eisen, david faber at the new york stock exchange. take act look at the markets. we settled into the red. the dow is down 30 points led by some media stocks. we are keeping an eye not just on commodities under pressure, but capitol hill as well where we're expecting a health care vote around 1:00 p.m. eastern. >> yes, our road map for the hour begins with that. d-day for obamacare. house republicans say they have the votes to pass their american health care act bill. we'll take you live to capitol hill as the voting gets under way. >> shares of facebook are slumping this morning. they're warning of slowing ad growth for the rest of the year. we'll dig through the numbers. plus adidas outpacing nike in the u.s. and in china. shares of the company hitting a record high. you will hear from the ceo this hour. first up, some economic data

crossing the tape. let's get to rick santelli. >> thank you, carl. remember the word transportation. factory orders for march were up 0.2 and last month we gained 0.2. but the 0.2 stands as the weakest since november when it was minus 2.3 of last year. but a lot of transportation strength because ex-transportation the number falls to minus 0.3. and now 0.9, well, let's put it this way, the first two months of the year were over 2%. you get the picture there. but it was still better than expected. it follows up 0.7, but when you pull out transportation the number goes to goose egg, to zero. and nondefense orders capital goods error, exaircraft a proxy for capital spending finally we

get some strength there. up 0.5 isn't bad. over double the last look at up 0.2. if you look at the shipments versus the orders that was also up 0.5, following the up revised 0.4. so transportation might have resulted in a false read, but some of the internals look okay. carl, back to you. >> all right, rick, thank you very much. rick santelli. let's get back to the big story, kevin mccarthy calling for a vote on the health care bill right now. we have a busy morning ahead of us. >> good morning. carl, that vote is expected to come this afternoon. though i caution you it's already been pushed back at least once. but house republicans said this morning that they are confident they'll get it through this time. >> i would have prefer to have -- but other than that we'll get it passed. >> do you think it will pass? >> we'll get this bill passed.

>> how are you feeling? >> great. happy today. >> getting the votes? >> yes. >> now according to the breakdown from nbc news, there is 16 republicans who are still opposed to the bill. but republicans can afford to lose 22. so right now, it does look like they have those votes. president trump also weighed in on this issue this morning. he tweeted, death spiral and he li linked to the story on cnbc that showed that aetna is pulling out of the virginia market because of heavy financial losses. now the compromise that has been negotiated between conservative and moderate republicans would allow states to opt out of providing certain health care benefits but would also add money to a federal fund that would protect those with pre-existing conditions and allow them to better afford coverage. guys, we'll follow this story all day. >> thank you very much. we'll be coming back to you, i guarantee it. hospital stocks sinking a little bit today as we await the historic gop vote.

for more we are joined by jeff meekens and good morning to you both. chris pethokoukis, you think this gets done in the house? >> no question. they need 217 instead of 216 so in the next election they will not only have passed it by two votes but one votes. that way they can't say you were the deciding vote that cut all this funding for medicaid patients. >> that's how it works, okay. jim, do we need to start talking about -- in that case it's chances in the senate? corker skeptical on msnbc this morning. >> yeah, listen, there was a long way to go. i don't think it's possible to overestimate what a rocky road this has in front of it. there's a lot of senators who haven't paying super close

attention to the bill since it's been evolving and there's a long way to go. because there's no senate bill. this is really a vote to keep the conversation going. and get it out of the house. >> chris, you framed this as a must do for republicans for their party. but isn't it equally politically risky to pass this thing, cram it through without knowing how much it costs or how many people get or lose inshufrnss -- insurance? >> yeah, their big focus is on bringing the health insurance costs down. there's a risk for them either way. they either alienate that are base. for six years they were making a promise they'd repeal and replace the affordable care act. if they fail on that promise then their base has no reason to show up in 2018. or they can pass something controversial like health care reform. maybe the public isn't super on board with it. but then get to things that are going to be more popular like tax reform.

like infrastructure that they can really deliver for individuals across the country. >> yeah. sort of rings alongside what ann coulter wrote yesterday. if they can't get this done, there's no reason to vote for a republican ever again. does it clear a path to things that are -- i don't know. ostensibly easier than this? as a corollary, does the market follow its way along that path? >> what's easier than this? tax reform looks just as hard but you make a good point that this is the admission ticket to focusing more on the other things. particularly tax reform. if this thing ends up passing, it does clear up a little bit of room for tax reform, which obviously issing go -- is going to be a bit of a budget buster, to keep this going. for this to collapse, again, would make me worry more about the rest of the agenda. so incrementally this helps the republicans move forward to some

things they'd rather be talking about, particularly taxes. >> chris, how much risk is involved to sara's point about no bill text, no cbo score? i assume we're going to get a score eventually. if that comes in dark and gloomy what happens to those who voted yes? >> the people who voted yes will be hit regardless of what the cbo score they have. the cbo score said 24 million fewer people would have fewer insurance coverage base on what projections say otherwise would have ten years from now. not based on how many have it today, but how many have it within ten years. it's a problematic vote for anyone who votes in favor of this. no question about it. the bigger belief they have is that not doing something hurts them more than any negative impact from this vote. >> and the other risk here, jimmy, ax owes has called this the new third rail, which is

coverage for pre-existing conditions. based on what we know -- all the compromises that went into the final vote to get there, what's the verdict on how that's going to play out? >> the verdict is that's not going to fly in the senate. you can do what republicans want to do which is really fund these -- you know, the new sort of separate high risk pools, but it's money. those can work. i know they're skeptical and the reason is because they don't think there isn't enough money. there isn't enough money. there needs to be multiples higher than what republicans are prepared to spend right now at least in the house. but if senate republicans want to come up with more money for that, for the subsidies, something can pass. again, the big problem here is do republicans view this as a spending reduction bill or a coverage -- a coverage bill? if it's a coverage bill they're going have to spend more money than what they're currently prepared to do. >> one last thing, chris. as you point out this has been a six or seven year journey for

republicans and it seems like the tide finally got turned by this one amendment providing $8 billion over five years. does that -- is that surprising to you? >> i mean, that amendment they had to give something to the more moderate members after the freedom caucus got a big concession in the bill. so that was more about positioning internal in the conference. the $8 billion i completely agree. the amount of money they're putting in the high risk pool is nowhere near enough. but any type of legislation like this always looks like it's dead before it passes. this bill will have nine lives in the senate. and once those insurance rates for 2018 come out and you have 40% of the counties with only one insurer, you know, 3 to 5% with zero insurers, i think that creates a crisis for the senate to do something and we can see action before the july 4th recess. >> certainly been the president's message. we'll see what happens this afternoon. chris, jim, thanks very much.

>> thanks. >> see you soon. our other top story, facebook reporting another solid first quarter. the social media giant beating on both the top and bottom lines. shares however are dipping more than 1% this morning. as the company warns again about slowing ad growth for the rest of the year. joining us is morris mark, president at mark asset management and the senior media entertainment analyst julia boorstin. set us up with the highlights from the call, the message that facebook is trying to project here from sheryl sandberg. >> that's right, i spoke to sheryl sandberg after the numbers crossed. we talked about what was really driving the results. facebook beat on the top and the bottom line. reported better than expected growth. 2 million monthly active users and sandberg said this is about advertisers making the shift to mobile and facebook and instagram is where mobile users are right now. they're benefitting from the trends.

and she said that they see a lot of opportunity to keep growing instagram, but then also down the line to start making money from messenger. that's also something that mark zuckerberg talked about on the earnings call last night. now, i think the reason why the stock went down really comes down to the same concerns that analysts have had for the past couple of quarters. facebook has made it very clear they have not been able to continue to grow the ad rates so they'll see it slowing in the second half of if year. they're investing in the growth, hiring more employees, et cetera. >> julia, thanks. the stock has run up about 15% in the last three months. had a banner year overall. do you share those concerns as a growth investor? >> it was a typical facebook conference call and mostly positive respects. great numbers, fabulous strategy in terms of building user time. fabulous strategy in terms of attracting advertisers and conservative guidance from the

cfo. i think you have to give them credit for what they're accomplishing. the fact they're making friends. you keep adding friends. >> 1.9 billion active users. >> which doesn't include instagram in terms of the growth rate and the usage rate. i think we see it's a superb investment. i know it's got a big cap, but these are companies that operate through the world. outside of china, facebook is just growing. and if you took a look at the numbers that they reported on the more granular basis, it was faster growth in advertising revenue outside of the world than in the north america and north america growth was better than 45%. so i think it's a solid quarter and a really, really interesting company. part of something much broader. >> so if you're buying around here, is it more of a bet on the growth of the existing business or is it a bet on these long term initiatives that they admit are going to weigh on operating

margin? >> i think you're getting the long term initiatives for nothing. sheryl put it really well last night, she crystallized i think the importance of this to everybody. >> your phone. >> right. we are shifting out of the advertiser's view from i have to have tv advertising, that i have to be on mobile. that's where people spend their time. that's where the younger members of my family spend almost all of their time. they don't even know what regular television is. >> yeah. speaking of that, what 85% of ads are -- ad revenue is already mobile there. so they have made that transition almost completely at this point at facebook. >> working on the brands. and at the same time, they're working on locals. is there a vehicle for a local business to get targeted advertising right in front of viewers' eyes. i think this goes beyond facebook. it goes to alphabet which is going. -- which is google.

and it goes to apple. apple is the producer of the best product and they're not asleep. so i think it goes to a lot of people. >> while we've got you here though, somebody who has been around the media sector for a long time, this also goes to the larger issue of cord cutting. of your ability to get what you want on your phone to a certain extent if facebook really wants to go that way. viacom is down today. all the content companies have been hit because cord cutting is picking up. viacom shares have come back dramatically. they were down almost 9% because bakish said something in the call about cord cutting as well. >> i think you have cord cutting, cord shaving and now cord nevers. it's a process -- i think it's going to accelerate. i don't think it's going to happen overnight. but i think it's going to accelerate and there is also a by-product. one of the by-products is you have all of these -- how would you say it, networks on broadband. i think they're going to be very useful. they will cost relatively less money.

give you some or less choice, but in a world where you have other choices they'll be easier to use. so some teams won't make the cut, some teams will make the cut and i'd rather be the team that makes the cut. >> thank you, morris mark. thanks to julia boorstin out west as well. when we come back this morning a lot to get to. as we see dow's down 19. we await tomorrow's job number and the health care vote on the bill at 1:15 eastern. we'll talk to byron wien in a moment. and hulu's mike hopkins is with us as they announce a new live streaming business. don't go away. online u.s. equity trades...

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those with pre-existing conditions. the second is the tax plan. and i hope it's as close to revenue neutral as possible. if he gets his pro growth program through and it includes the tax plan dismantling regulation and spending money on infrastructure, then i think the economy can grow at 3% or close to it rather than 2%. that would be a big change. >> now, you have said at the beginning of the year that you did expect trump's management of his agenda to -- how should i put this, solidify, pick up steam in the middle of the year? we create all the artificial deadlines on a hundred days, but would you say it's relatively on track? >> no, i don't think it's on track. i think it's behind where it should be. but on the other hand, i did say at the beginning of the year

that trump would ameliorate his more extreme positions. that he would pull back from some of those. and he has definitely done that. so i think his thinking is headed in the right direction. it just hasn't been brought to bear on the economy yet. >> yeah, you also i think predicted the ten year yield would hit 4%. we're a long ways from there. we have gone the other way, byron. what do you think is holding down yields and do you have to bring that forecast down for 2017? >> no. look, i never get them all right. that's one i have gotten wrong. and what i think i underestimated was all of the liquidity that's been put out there. in 2008, the major central banks around the world had $3 trillion on their balance sheet. they have $13 trillion today. that $10 trillion is looking for

a place to park. it's parked itself in british gild, german bunds and it's held the rates low. i underestimated the power of that liquidity. >> what about economic growth in the u.s. would rebound, may still rebound from a weak first quarter and that was what everyone was so hopeful to bring yields up. that and some of the implementation of the pro growth policies. if we do get this health care vote today, doesn't that make it more likely that we can get to better economic growth, higher yields, higher inflation? what you and many others were expecting this year. >> well, i hope so. but the health care bill isn't perfect. so i don't know -- i guess it will pass the house. i don't know how much trouble it's going to have in the senate. but you have to get the health care bill passed before you can attack the tax reform program. and the tax reform program is

critical to restoring economic growth at a higher level than 2%. >> byron, to sara's point about the macro, so many examples of a slowing consumer in the past couple of weeks. gasoline demandz yesterday. we talked auto sales to death, consumption flat for a few months here. can this all be seasonal? are you looking for a big snap back in q2? >> i am. first quarter traditionally is low. i think we'll see an improvement in the second quarter. i don't know how much. it will definitely be in the twos. i'm hoping we'll head toward three by the end of the year. >> then finally, this tech rally which is obviously the nasdaq shouldering equities, even software shouldering that index. how long can that last? does that worry or you do not

mind right now? >> i'm always worried, carl. i think what we're seeing now is a high degree of interest in companies with open ended earnings. morris mark talked about what's going on at facebook and it's true at google and a handful of other companies. people want companies with long term growth outlooks that are favorable. and a handful of tech stocks including software companies have those characteristics. >> byron, good to get your take on a busy week. we're nowhere near done. ahead of that jobs number tomorrow. thanks. >> good to see you. >> byron wien. the white house is responding to apple's big jobs announcement. the billion dollar investment announcement that tim cook made

with jim cramer. eamon javers has that. >> yeah. a reaction to the cnbc's announcement said that the president has provided the confidence needed to foster such investments as apple is. >> melissa:ing -- is making. clearly, the white house is embracing the $1 billion to invest in a manufacturing fund, but the white house didn't request apple to do that. one thing that i don't have an answer on is whether anyone here at the white house knew about this decision by apple before it was announced last night to jim cramer. it would be good politics for apple to send a heads up to the white house if they were doing something like this. it's always good when you're a company and you're making an announcement that the white house is going to like, to tip them off to it in advance. we'll do more reporting and find out if that happened yesterday. but obviously this being looked at through a trump era political lens. this is something that apple would be doing to get in step

with the current political climate of bringing back manufacturing jobs to the united states, guys. >> yeah. i think that president trump can claim it as a victory, eamon. thank you. >> absolutely. >> see if he tweets about it. eamon javers at the white house. hulu announces a new live streaming service. mike hopkins is joining us next. plus shares of adidas hitting an all-time high after earnings. hear from the ceo on what's driving the growth. stay with us. the dow is down 12 points. horse? i'm crazy stressed trying to figure out this complex trade so i brought in my comfort pony, warren, to help me deal. isn't that right warren? well, you could get support from thinkorswim's in-app chat. it lets you chat and share your screen directly with a live person right from the app, so you don't need a comfort pony. oh, so what about my motivational meerkat? in-app chat on thinkorswim. only at td ameritrade.

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let's[ whimpers ] dog. find ping-pong. okay, let's go. find your awesome with the xfinity x1 voice remote. that's amazing! good morning, everyone. i'm sue herera. here's your update at this hour. the former president barack obama throwing himself into the french presidential election which will take place on sunday. he endorsed centrist candidate emmanuel macron whose campaign released the video on twitter. >> i know that you face many challenges and i want all of my friends in france to know how much i'm rooting for your success. because of how important this election is, i also want you to know that i am supporting emmanuel macron to lead you

forward. en marche. on the other side of the world a sand storm has enveloped a huge area of central and northern china. the sand storm is expected to linger into tomorrow and tens of millions of people have been told to wear masks when they are venturing outside. i'm not sure why you'd want to go outside in that. and buckingham palace announcing that prince philip will stop carrying out public engagements beginning this fall. his last engagement was on wednesday at a renovated cricket club. that's the news update this hour. back downtown to you guys. david? >> okay, i'll take it, thank you, sue. hulu jumping into the live tv streaming service or space with the launch of hulu with live tv. the service costs $39.99 a month. you get 50 channels including

abc, nbc, cbs, fox. mike hopkins is the ceo of hulu. this of course has been in the works for some time. unveiled yesterday. what differentiates it from what has become quickly sort of a crowded space between the likes of sony and directv now and google's offering and sling which was first out? >> sure, thanks for having me. we did launch our new live tv service and the entire new experience for customers and i think that the two things that are really going to differentiate us is one, this experience. which is cinematic, personalized and elegant. but also if fact -- the fact that you can get our extremely large catalog of on demand titles. we have 3,500 tv and film titles that comes along with the 50 or more broadcast and cable networks. we think that package is unique and something we can only provide. >> are you still committed to the stand alone service or does this transform overall hulu as

it moves forward? >> we are committed to the s subscription on demand space, it's the lifeblood of our company. we're excited to enter this. >> you said it's not a skinny bundle, you're offering a lot. but at 40 bucks can you make any money? >> yeah, we can. when you look at the entire package when you have the subscription on demand which is a fixed cost business by and large, package it with the variable costs over the top pay tv business and then infuse it with a really powerful advertising platform i think when you put that together i think we have something pretty powerful economically as well. >> when i add up the cost of the networks alone and you get to a big number right there, it's almost the number you're charging. does it come from advertising? where does the additional revenue come from to make this profitable? >> we have a very big powerful and enhanced cloud dvr you can update to. you have premium networks and then the underlying hulu with

all of the advertising opportunities there. i think when you put that together we'll be in a great spot. >> why didn't you give us an updated subscriber account yesterday? a number of investors and people who follow are surprised because you have done that in the past. they're wondering if subscribers are down? >> subscribers are double digits, but they aren't the way to measure us when half of our revenue is advertising. what our advertisers want to hear is how many viewers do you have, how many people are going to see our advertisements? that's a really healthy number. we're up to 47 million unique viewers. 33 of them get advertising. and so we're really in a good spot. >> where does exclusive content -- how much of the equation is that coming? hbo is taking some stuff off of amazon later. how much will go to the platform because they can't get the show anywhere else? >> that's what it's all about. we're investing heavily in

original programming. that's what people are coming for, they're coming for content you can only get in that particular location. that's why we did the hand maids tale and announced five new originals yesterday. we have a lot more coming on top of that. >> people are obsessed with the the hand maids. everybody is buzzing about the new report that showed pay tv subscribers fell 762,000 in first three months of the year according to moffett nathanson. those numbers are ugly for some of the big tv networks. how fast is the cord cutting happening in your eyes? >> we don't know exactly. i think that's a hard number to put your finger on. we know the vast number of our subscribers have a paid tv service. but as we look down five or ten years down the road, we think that as people's tastes change, as people want these different experiences, we need to be there to capture them as they're coming out. i think we can actually get people who opted out of the system back in through a system like hulu --

>> that's the question i had. the numbers that sara referred to it wasn't nearly made up by people cutting the cord and then going with the service like yours. there seemed to be plenty of people who were simply cutting the cord and they're done. they're not paying the 40 bucks. >> well, our hope is not just with hulu and live tv, but the emerging over the top platform that has all of the channels will be a place that when you look down the road as a industry we can bring people back into pay tv. i think it will work. >> from the economic proposition, you know, i have had this actually occur where i thought, okay, new cable sub or a new home, what do i put in? do i go with just broadband and one of the new offerings? but the cable operators offer a skinny bundle economically at a similar price point when you add in broadband. are you at a price point that's competitive when they come with skinny bundles that make the cost equal or a little bit lower with broadband and a service

like yours? >> i do. when you look at the entire package, i think the average cable bill today is $100 when you exclude broadband. if we start off with $40 for our live service plus our on demand offering i think when you start to add up the numbers i think it will come in favorably. i don't think that's the only reason people want a service like this. when you look at the experience, in fact, i'm -- they wouldn't let me bring the phone over here, but i'm recording this on my phone and i can watch it on any device. we have the enhanced cloud functionality that's unique in the marketplace. even with the traditional provid providers, i think that will drive people to the hulu flat tv. >> how hard was it to pull together? was it more of a push and a pull than it would have been ordinarily? >> not really. this is something since the beginning of hulu we have been around for about a decade. we have been doing subscriptions for five or six years now. this is the number one requested thing that customers have asked

of us, bring me live sports and live news so we're answering that call to our customers. our ownership is very supportive of this effort. i think our success is their success as well. >> finally we mentioned the new content offerings, but i wonder when you go into the marketplace and competing against netflix and amazon, they're global now. does that hurt you in getting the audience -- not the audience but getting the producers of this conteptsdz to say okay, we'll go with you? >> in some cases it helps us. when you look at the space, creators and producers of tv oftentimes want to have more control of their international distribution. so the fact that we're just the united states today actually is a benefit more times than it's not. but i wouldn't be surprised if we're sitting here in a couple of years and we have launched into additional territories as well. >> we'll follow this closely that figures prominently into so

many different things in terms of the producers of the content. mike hopkins, thank you, ceo of hulu. when we come back, adidas hitting an all time high after a big earnings beat today. you'll hear from the ceo, next.

adidas shares hitting a record high after a beat on the top and the bottom line. the german sportswear maker confirming the outlook saying it expects sales to rise by as much as 13%. earlier this morning i sat down with adidas group ceo kasper rorsted and i asked him what's driving the growth and the outperformance considering the sluggish performance by under armour and nike. >> we have built a strong pipeline with a very clear -- where we'll take the brains. as you can see, adidas business

in u.s. grew 36%. in china 31%. so in the two biggest sports markets in the world we're by far outgrowing the market. i think we have right now the right balance between our sporting products where running is growing 27%. women are growing 25% and then the originals business which is very strong. so it's a mixture of many things that are coming together right now and really outpacing the market. i think we are taking the market share in all the markets we're in right now. >> i wanted to dive deeper into that especially in the u.s. that 30% growth number. nike is still clearly the category leader when it comes to sneakers in the country. how much market share though are you taking from the giant? >> so if you look as i says, we grow 30% in the u.s. and we grew 36% with the adidas. the actual number i don't know. the numbers aren't out yet. i think it's good to eat humble pie. we're happy with the progress.

we still have a long way to go. we think we can get a much bigger position of the u.s. market. >> nike's got the big athletes in the sneaker market. lebron, kobe, jordan. i know you have made an aggressive push with harden and others. how much more aggressive are you going to be when its comes to sponsorship? >> well, we grew 30% last year and the year before, right now we're growing 30% and our aim is to have a $5 billion business by 2020. we'll add more athletes, but i want to say that the west relationship we have is hard hitting. step by step, but we have to continue to grow the business and really the athletes and the celebrities into our business model. >> yeah, you know i'm interested in the easy line. what kind of plans do you have for it? are you planning to take it more mainstream or are you going to continue this exclusive release?

>> no, we think the creativity is exceptional so we'll keep it rare. it brings a lot of goods on the brand and it's equally attractive. i have been out in the last five weeks in three continents and every continent you see the young consumer or even, you know, guys my age that want to have these products. so we'll keep it rare, but make it accessible for small select number of people who will stand outside our store in line. >> we talk about the growth right now, in some of your retro styles like sam smith and the superstars. what other styles are you looking to take out of the vault and start promoting? >> if you look, sam smith and superstar is only one part of our original business. 50% of the original business is coming from new franchises so we are taking our equipment, so we're taking the models from the '70s and '80s and '90s using new

technologies. mmd is a great example of that. from the late '80s and '90s. its not just the iconics that you spoke about but the new ones. we have 50% of the original business from new franchises. >> can sneakers ever be manufactured in this country, in the u.s.? >> of course we can. we're in the process of opening a plant in atlanta, georgia. but you have to be realistic. the size of the global sneaker market is probably $1.4 billion. the size of a plant is $1 billion so the vast number of the sneakers will be imported from asia. you have a smaller set that you can customize sneakers to consumers but not is covering the entire market unless you pay two or three times of the price today. >> we've talked about that before. finally, i have to ask you about that marketing mishap. the e-mail congratulating boston marathon runners for having

survived. how did that happen and what's been the fallout? >> first of all, we deeply apologized for this mistake and we're very, very sorry. which we immediately said. if you live in the community that everything happens realtime, you have people engaged that you empower to make the right decisions in the realtime environment like on television. sometimes mishaps happens and as unfortunate as they are, we have to live with those. we're deeply sorry about the mishap but that's the consequence of living in a realtime environment. we hope that things like this did not happen. we apologized and we hope also that the consumer will forgive us for that mistake for which we're sorry about. >> caspar rorsted took over in october and remember that story i did a few weeks ago about the next project being adidas and having to turn it around, going back to some retro styles to the '80s and '90s? 13% growth in adidas, this was a

dog for a lot of years. they have picked up on the retro chic and reebok is starting to yield results. >> anybody who was around for the heyday -- >> and the young kids too. they like to think they can rock it again. >> yes. when we come back, boeing is responding to the president's talk of increasing military spending. our morgan brennan is inside one of the production facilities. morgan, good morning. >> good morning. not only am i inside the production facility, i'm inside the cockpit of an ea growler. this is one of the planes in the f-18 line. we'll talk about the fighter jets, the future of the f-18 project when we get back.

what's the best way to make money just ahead of the jobs report? our traders will weigh in on tradingnation.cnbc.com. more "squawk on the street"

coming right up.

taking a look at shares of tesla the automaker nearly doubling the quarterly revenue from a year ago. but it posted a bigger loss per share than analysts had expected. the stock is down almost 6% this morning. morning. hard to tell if that's on some of the delivery, some of the confusion around the new models. now let's send it out to john with a look at what's coming up. >> we have oracle's ceo going to join us from headquarters in silicon valley. it's the morning after facebook earnings. strong numbers with the guidance has some people spooked. tim cook talked to jim cramer. we will dive into what he said. that and more coming up on "quack alley."

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want to direct our viewers' attention to shares of general mills and kraft heinz, both of which are up on a news wire report from a source i'm not familiar with called mt news wires. what i want to tell you is, it's not true. there is no truth to the rumor that 3g and/or kraft heinz is

involved and has agreed to a deal to be acquired. general mills announcing a ceo change yesterday. again, i can tell you there's no truth to this report. not clear as to the nature of it or to the source itself. in fact, you and i were going to discuss kraft heinz's quarter which was not good. the stocks moving so much on this story from an unknown news wire. >> there they go back down after he refused it. kraft heinz came out with a negative organic sales growth. it's leading to questions about 3g managing big food companies. yes, we know they can do the financial engineering and get the margins up. that's why wall street so enamored.

>> they were asked about it on the call. they continue to indicate interest. broadly speaking in consumer names, even health care and food. but again, as we have outlined many times, a difficult road for them given the failure in their unilever bid. more as we go along. we did want to bring that to you. let's head to morgan brennan. you are always in an interesting place. take it away. >> thanks. certainly never a dull moment. i'm inside the cockpit. this plane is going up for its first test flight tomorrow. both planes, the growler and the super hornet, are made here if st. louis. boeing is ready to make more. more are needed. earlier this year, the navy disclosed that on any given day, two out of every three of its f-18 fighter planes are offline and awaiting repairs. why? they have been flown hard in a

post 9/11 word with classic hornets exceeding flight hours by 30%. couple that with maintenance backlogs caused by budget cuts, there's an inventory shortfall. when president trump talks about rebuilding the military, it's replacing weapons systems like f-18. boeing and the navy have been hashing out how to address this for several years now. >> to address super hornet capacity, we have three lions of action. new airlines, super life modification, where we take the existing flight from 6,000 to 9,000 hours and traditional sustainment. >> there's a service modification program. but also, the company expects that the navy will buy more than 100 planes through 2022, including 14 super hornets that are in the 2017 budget going through congress now. >> morgan, thank you very much. showing us and not just telling us. dow is down 41. ♪

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welcome back. markets right now drifting a little bit to the down side. despite the modest losses, the

major averages on pace for a third straight week of gains. crude oil below $37, trading at five-month low. fuelled by smaller than expected drop in oil inventory. energy the worst performing. most of the stocks leading the decline. that does it for this hour of "squawk on the street." balk downtown to the start of "squawk alley." it's 8:00 a.m. at facebook headquarters in california. it's 11:00 on wall street. "squawk alley" is live. ♪ ♪