squawk box. good morning, welcome to squawk box. we're live from the nasdaq market site in times square. the united kingdom is preparing to observe a moment of silence for the victims of saturday's terror attack. [ clock tolling ]

again a moment of silence for the victims of saturday's attacks. reports continue to come out on this including some suggesting that one of the assailants appeared in a documentary called the jihadis next door. we'll bring you updates on this story. a check on the markets, we saw a down day for the markets. down by 22 points at the end of the day. s&p was down by 3 points and the nasdaq by 10. this morning things are stable. dow features down by 34 points. s&p futures down by 3. the nasdaq in positive territory. overnight in asia you'll see

that the nikkei was down by 1%. markets in china were higher with the hang seng up about .5%. and in europe, in some of the early trading this morning you'll see that things are slightly weaker there. the dax is down by .5%. ftse is flat. crude oil prices were under pressure once again yesterday settling at 47.40 to a nearly one month low. this morning down by another 9 cents. 47.30 among concerns of whether opec will stick to the production cuts. >> a couple of big stories we're watching this morning. the biggest shake up at j. crew. the company's long time chief handing over the reigns. mickey drexler stepping down as ceo. naming the former president of west elm as the new chief. the store struggled with prolonged sales slump. down for the past 10 quarters.

add to that $2 billion in debt. some will start to come due next year. $150 million in cash. in april cut 250 jobs mostly from the new york headquaters. during his ten year sales nearly tripl tripled. we should say he continues to be a huge shareholder in the company. he has a real vested interest in making this work but he was the merchant prince is the phrase i guess and the thing that's so strange about this, we have seen this, he built the gap in this remarkable way. it was hot, hot, hot and then j. crew was hot, hot, hot. is it one of those things? it goes from being hot to not? >> it's fashion cycles that resolve but it's also things are changing so quickly and trying to keep up with those two trends together. >> the same time.

>> past fperformances. >> guarentee future success. i'm sure he's good at what he does but babe ruth -- >> i love the guy. >> what's a great batting average in baseball. so he's better than that obviously but how about hedge fund guys. guys that supposedly know what they're talking about and they lose all of their money, lose their assets on a big bet. it's like whereon. he's obviously, retail, i mean, this looks good for this season let's buy a lot of this and put all our money on this and hope it moves. i can't imagine how difficult it is. i'm sure he was talented but it didn't work. >> there was a time he could have sold the company a couple of years back. i don't know if it was on the block but it was one of the japanese big companies wanted to buy it. ended up doubling down on the company.

so we'll continue to watch the story. >> i wouldn't count him entirely out. >> we're routing for this company but it's hard. >> wilbur ross extending the deadline for u.s.-mexico trade negotiations. the extra 24 hours was needed to complete final technical consultations for the deal seen as the renegotiation of nafta this year. >> i remember the last one. which one is this specifically? this guy, which one is this? >> i didn't want to try -- >> did you see that name? >> i have seen his name. i have tried to pronounce it and looked at it a couple of times. >> let's pretend becky is out -- >> why don't we not, since she

is here. let's talk also a little tech this morning because amazon offering a discount on its prime membership for people that receive government assistance. customers receive government benefits like food stamps can pay $5.99 a month for membership. that's a discount to the normal monthly rate of $10.99. it includes unlimited streaming of movies and tv shows and they have all sorts of forms of retail especially products that may not be sold in the inner city or factory towns or other place where is retail. >> very limited retail. >> exactly so it's a neat thing they have done. >> president trump looking to jump start his agenda. have we moved on yet. >> that was like 19 news cycles

ago. try to keep up with things coming out. >> that was a big one. >> it was. >> we'll see what other gifts he brings us. >> people are getting personalized license plates. >> did we agree that's how you pronounce it? i pronounced it about four different ways on the air. >> the iphone is very difficult to type on and then you said that crazy stuff. and if you use siri, you can lose friends with what siri comes up with when i dictate. she has no idea what i'm trying to say. >> they're going to deliver like a bunch of who knows. anyway. >> right when that story broke i tweeted those of us without typos in our feed should be the first ones to cast stones here.

we have all been there and wished we could get it back. let me bring you up to speed on the white house's legislative agenda. white house officials briefing reporters last night giving a sense of where they see the schedule now for the rest of the year. here are the bullet points and they think they can get this health care vote done over the course of the summer and then the tax reform will slip and they would love to get it done by august. that's not going to happen. they do think they can get it done in the fall. need to raise the debt limit by august and white house officials also said they would like to do the infrastructure bill before tend of the year. they'll roll out their idea. this is infrastructure week. they don't have a specific bill in place yet but they'll roll out ideas by the end of the year as well. meanwhile white house smokes woman sarah huckabee sanders announcing in the briefing room yesterday that the white house made a decision on whether or not to block james comey's testimony which is scheduled for

thursday in which the former fbi director is going to talk about those conversations he had with the president of the united states about the investigation. here's how she described it. >> the president's power to exert executive privilege is very well established. however in order to facilitate a swift and thorough examination of the facts sought by the senate intelligence committee, president trump will not assert executive privilege regarding james comey's scheduled system. >> it will go undeterred by the white house. some of the broadcast networks will be carrying that life ve o thursday. that's going to be a big one to deal with and then speaking of the russians, the intercept, the online news organization posted a story yesterday. they had an nsa document that was leaked to them that details apparent russian efforts to hack into voting systems in the weeks

leading up to the election. the department of justice announced a criminal complaint against the federal contractor. and they charged her with removing classified material from a government facility and confirming that she was the person suspected of leaking that document in the first place so you had a bombshell story and then within an hour or so you had somebody charged with being the leaker in that case. so the white house's effort to lamp down on leaks seeming to be effected in that case yesterday. >> sounded like she admitted to it too, right? >> yeah. sounds like they went to her because the document that the intercept had had been folded in a certain way when they looked at the document and the intercept showed it to the government to confirm it's authenticity and then they went and looked and saw inside the facility who physically printed out that document and that lead

them, they say, to her. a federal contractor in the facility that had been one of the people or the only person to print that document. >> if i say sources say does the daily caller county as a source, andrew? >> no. >> it does not. >> as a website. >> they're just reporting if you look at her social media that she was a big bernie supporter and bill maher, loves michael moore. >> but the intelligence community is enormous right? between the contractors and the intelligence agencies themselves. it's going to have every possible type of political view inside it. >> so the question is what motivates somebody to leak a document. as journalists i think leaks can

be effective and useful and they're important for america. >> in other cases it might put people's lives in jeopardy and be treason. >> these are judgment calls and they're tough to make. >> i haven't agreed with all the leaks that have happened over the years but as a journalist i'd like to talk with somebody. >> as you said in the past one word describes it. >> it describes something. not sure what it is. >> similar but different story, in the new york times a piece about all sorts of members of the state department that seem to be staging a quite insurrection if you will. this fellow from the american embassy in beijing announcing his resignation. >> yeah. >> the trump administration's

withdrawal from the paris accord and then the acting ambassador of britain tweeting out positive things about the mayor of london yesterday and last month the investor of qatar tweeting difficult to wake up know hoingw to explain our democracy and institutions. what happens do you think just to the rank and file here? >> it's a fascinating question. we're seeing something we haven't seen in decades in this country. administrations come and go but the foreign policy of the united states remains relatively stable overtime. this basic infrastructure of foreign policy. what we're seeing with the trump administration is a very different approach to allies and a different approach to foreign policy and a different approach to russia. a different approach to climate. these are fundamental disagreement with the way things have been done in the past.

so for those people inside the state department that spent their careers doing things one way and now find themselves working for an administration doing something different. >> 8 years is a long time. >> turnover over time and you know that every administration is going to have -- after 8 years you'll have hold overs that are absolute loyalists to the administration and -- >> i think that's totally the case. i do think we're seeing a bigger difference in foreign policy. >> yeah. than in previous administration changes but you're right people do have to make a decision about do they want to work for the new team given that the new team layed out what it's objectives are and what it's going to do and you're seeing people making that decision. >> we're talking about different

allies and the u.k. but yeah like allies like israel which really wasn't an ally the past 8 years. like saudi arabia. >> i don't think you can say iran became an ally instead of an enemy. >> we appeased a lot of our enemies in the last 8 years. >> right and it's a distinction as well and i think that all of those things, you know, add up to a decision for state department officials. do you agree with that? are you on board with that or not? and you're seeing some of them say you know what, i'm just not. i'm going to go do something else. >> certain of our allies are fairing better all of a sudden than they were. aman jaffers. >> aman e. jaffers that is.

>> it works for everybody. who are markets guests joining us right now. welcome to both of you. we haven't seen you in forever. >> long time. >> it's very good to see you here. >> tell us what you think about the markets? only because i have been talking so long about it. where are your thoughts about what we have seen with this rally and how much longer do you think it will last? >> we can always get the traditional 5 or 10% pull back for no apparent reason. it's driven more by domestic policy. whether that's in britain because of brexit or whether that's tax reform or regulatory reform in the united states. these are unique characteristics for each of the individual

markets. globally they're less correlated. but my biggest concern is i'm not sure why the fed is being so aggressive after all of this time. it's aggressive in interest rates. i have been doing this for a long time. all of a sudden out of nowhere there's no evidence of wage price inflation today and they seem to be on a path of aggressiveness and interest rates. any big correction would be fed induced. this is an earnings driven market that continued for sure. >> you think that this rally is getting long in the tooth but that doesn't mean you think it's about to die. >> the general trend is still upward but stocks are expensive. if you look at the history of the relationship between evaluation and future returns

it's widespread and not a good timing tool but at the end of the day it's high and low and is normal. so i thought to start this year we get an 8 to 10% return. we still have a half a year to go. >> just this calendar year we're up. >> does that mean your raising your estimates? >> earnings have been better than i thought. still tres of the year we're looking at 1 or 2%. maybe 1 or 2% return and given the historical risk of owning stocks that didn't look like a good place for me. >> jim pointed something out to me yesterday or the day before just saying that historically when you get above 3% on interest rates that's when you see valuations start to strengthen in the stock market because others look like a better deal. we're still long away from 3%

but that plays in with your concerns with the fed getting overly aggressive here. what would that be? >> we're going to reduce the balance sheet. we're going to raise every time this year and next year. despite the numbers. you can see you begin to wonder is the yield curve which is now in the ten year beginning to decline and flatten out is the yield curve pricing in a bit of a fed mistake here. we're near full employment. there's no evidence of high inflation so the science on their part would be overly generous. i'd rather they saw the whites of their eyes kind of thing. >> if you look at the history of recessions in the united states they're started by aggressive fed policy. plus you're taking most any

policy in history and that's a very tiff cut thing to do. >> do you think that's why we have seen this pause at these higher levels? >> i think the economy is slowing a little bit. >> pausing at new highs. >> new highs last week. there's some people that say yes you have fed meeting next week. are we going to see a little bit of a hold off? >> we just look at charts. >> there are people saying ahead of the fed meeting next week maybe we slow down and wait and see what happens. >> well the bond market and the stock market are telling different stories. >> yeah. >> 215. that's scary. >> it does say that you're worried about stocks being overvalued. there's still nothing else. there's no -- >> bombs look expensive and it's

a tremendous amount of money around the world for people our age looking for a home to finance retierm. >> are we the same age? >> we're about the same age. >> what happened to the hair? >> it's genetics i think. >> i think it is too. anyway, thanks. >> thank you guys. it's good to see you. >> i'm sorry. i got to get the canadian out of me. >> wow. >> yes. >> coming up business icons are meeting with visionaries in new york this week as part of the 2017 iconic tour. but next kate rogers gives us a sneak peek at a spicy start up success story. ♪

kay rogers joining us with a closer look at start up success stories. >> good morning, well, a company is doing it's part to change the bronx one bottle of hot sauce at a time. >> back in 2014 real estate developer and his partners were working to rehabilitate some of the worst buildings in the bronx but fixing the physical problems was only half the battle. enlisting the help of local community gardens a solution came in an unlikely form. hot sauce. >> our model is structured to help create economic resources for them by utilizing what they do best. mainly grow food for people. >> co-founded small ax peppers that donates to community gardens in the bronx. this year 2,400 plants were donated to 40 community gardens. the community works together to grow the peppers and then offers

to buy them back t at premium price. in partnership with grow nyc and the botanical garden. >> it's a bumpl of community partners coming together to make something great and hopefully tackle society's small problems. >> the hot sauce was created by the chef. a childhood friend of his with ties to the bronx. >> that's smoking. >> it has just six ingredients and is truly farm to table retailing at whole foods and farmers markets in the tri-state area as well as oregon and washington state. the company sold $100,000 in hot sauce which translated into $8,000 back to community forwardens. >> everybody feels great because they saw the ceiling, they grew it, we harvested it. made the sauce and bottled it and brought it back and ate it. it's just amazing. >> now the bronx hot sauce team slooking to bri is looking to bring that into a

second burough this year. we have a fantastic line-up tomorrow. so much more. if you can't join us in person please check out cnbc.com/iconic live. i'll be there live. i know you'll be there too. it's going to be a great day. back to you. >> i will be there live interviewing ariana huffington about her new business. we're looking forward to it. should be great. coming up look out alexa apple is getting into the home speaker game. we'll get a closer look next as we head to break here's a look at yesterday's s&p 500 winners and losers.

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every day the nasdaq seems stronger. it's up 15% versus 12%. >> is that since the election? >> wall street will be closely watching -- >> washington -- wall street is watching washington today as president trump tries to jump start his legislative agenda. president is going to discuss health care and tax reform with congressional leaders this afternoon at the white house and we're getting clues on the tile line. from my lips to somewhere but summer by health care and fall by tax reform sorkin? >> i heard that story before. >> one top aid expects lawmakers to pass health care reform and the 208 20 18 budget before the august recess and then focus on tax reform in the fall.

i'd like to hope for that -- >> holding my breath. >> i think it's a fantasy isn't it? >> how many tame ddays are left >> when yesterday he is working on all of this stuff and says i don't know we're still writing it. >> what do we like better mcconnell that says well i'm really not sure i'm going to get the votes? do we like the one that admits it or paul ryan that says we got it and then they don't have it. i like the liar better. >> how could you? >> you're trying to inspire other people to come along. if your self-defeating. >> you mean lead. >> mcconnell is leading? >> you're saying lying is leading. >> leading by being optimistic.

by being half full. not half full of it. but half full. but mcconnell to say well these other guys don't listen to me at all. >> but you know about the boy that cries wolf if you say it so many times -- >> can we agree it should be somewhere in the middle instead of saying no way we're passing this thing versus -- >> we're not going to do it. we're not going to do it. >> this thing is going nowhere. >> if that's the truth. that's the truth. >> reality bites. good luck wrangling these cats. >> very quickly, stocks to watch. shares of thor are getting a pop after better than expected earnings in revenue. points to stronger demand in the rv market. shares of therapeutics on the rise too. positive clinical trial data for a drug to treat parkinsons disease and beating on the top of the bottom lines.

the company also issuing strong guidance and that is up 2.4%. >> apple's worldwide developers conference kick off yesterday. tim cook took the stage way few key announcements. joining us now, managing editor and cnbc contributor. i want your views on what we saw yesterday. i only have one view which is that i clearly screwed up because i bought the new mac book a couple of weeks ago and now they just upgraded it on me. >> you got a price reduction on one of them too. >> i really messed this up. >> don't tell him that. >> anyway. >> what's the over under on what you saw? >> i think the over for me was just the different products and everything that was rumored came to fruition and more and i think

just incorporating amazon prime video is big. there's longer term running things around payments. around ar. >> this is one of the spookiest -- >> super spooky. >> the ar stuff that -- they have an ai kit for developers as well. point is, these products are becoming so powerful what apple is signaling to the developers is there's a lot of cool stuff you can do. even we don't know what it is yet. please come build it. that's a big part of it. spooky in a good way, right? i think the way ai is taking over devices is an interesting thing. it's connecting so that it knows everything or anticipate what is you want when you want it kind of a thing.

that's what i mean by spooky part and ultimately that is what will drive. >> it's ai though as good as it's competitors? meaning is amazon ahead of the game? is google ahead of the game? where is apple relative to everybody else. >> i talked to people in the industry that say siri is really, really powerful but not deployed in the smartest way from a consumer standpoint. alexa works well from a consumer standpoint but isn't quite as powerful on the back end and that will take time. that's another part of it as well. they want developers to tap into siri more so that they can see what you can do. >> how important is this home pod. by the way we should note it's not available until december. >> this is one of the first times i have seen them announce something so early in the game. in part to stoke developers but also consumer demand. >> it's a nice opportunity for

them and as tim cook says, know more about being best than being best. the proof will be in the pudding. how does the speaker stack up to other speakers on the market. it's positioned as a music first device which plays to apple's core legacy and strength. the price point is probably okay despite being at a premium to 300 plus dollars. you mieg think i like this better because it has smart capability so i can use it for setting timers and what's next on my calendar. >> sonos. >> what do i have. >> you have sonos. >> what's sonas? >> that's like bargain brand. >> president trump's typo in the

tweet. but i should note the good news for you joe is they are integrating alexa and siri and things into it. however my question for you is does this give the amazons of the world and the googles of the world a sneak peek of what apple is doing and are we going to see by december, prechristmas, an amazon echo that has amazing speaker functionality? >> there's no question. amazon is moving in that direction. they have product development and apple is going to continue to improve on the intelligence fund. continuing to up the ante with siri. >> it's harder to update hardware than software. you can't just retool to create like a better speaker with everything else. it's just a harder thing to do within the extended time line. it gives the competitors the

window. >> apple really helped further integrate itself. these are some key steps to get closer to that. >> one of the big questions and this always goes to are they ahead of the game or late? you see them get to potentially payments, right? just message the money. however they have a big part of the market. spotify is a big part of the music market. they got into music first and then got into music again by trying to reinvent it. it hasn't worked to the extent that they have been able to outmode the top of the platform. >> apple said they have 27 million apple music subscribers. so it shows they're behind but it's going to come down to is it just better? is it a better service? better product? even if they're a step behind -- >> they have hundreds of billions of users around the globe and particularly in the

u.s. and to be able to capitalize on that is a huge opportunity. >> here's the math question for you. what's the stock worth now? >> we have been at $160 target price which is more modest upside from here. with respect to the stock you look at 6 of the past 7 years the stock has performed well three months prior to the iphone launch. this is a stock you want to own. >> that has nothing to say with what you did yesterday. did you change any of your expectations about this company because of yesterday? >> overall, no. i think generally speaking, everything is still on track wi with, you know, where we thought things would be heading into the back half of the year. >> what's the new mac book? >> i got the macbook pro13 inch. >> what is the new one. >> they just put a new chip in it. four months later. >> if you buy an apple product a few months ago it's still going to be really good.

>> and it's cheaper. >> it's cheaper too. >> they lowered it by $200. >> joe needs the home pod. >> no, you have to get the new one. >> listen to me. everything i'm saying. i'm not getting it. i'm afraid. i'm afraid of the nsa. >> it's encrypted. >> when it's turned off. did you know that? >> i didn't know that. >> it's true. these guys are everywhere. people are listening to you. >> i 100% agree with you, yeah. >> i'm afraid to say anything right now. >> it's going to be fine. >> just as a clarification i got the 13 inch because i thought that the power of the mac book 12 inch one as good but now that they increased the power on it i would have preferred the 12.

>> you're right. >> that's how it works. >> when we come back, dodd frank reform bill for a vote in the house. he'll join us to talk regulation. the united states nearing a trade deal with mexico on sugar. a precursor to renegotiating nafta. at 8:00 a.m. eastern plus investing in stocks. join us next right here on the squawk set. stay tuned. you're watching squawk box on cnbc. got it. rumor confirmed. they're playing. -what? -we gotta go. -where? -san francisco. -when? -friday. we gotta go. [ tires screech ] any airline. any hotel. any time. go where you want, when you want with no blackout dates. [ muffled music coming from club. "blue monday" by new order. cheers. ] [ music and cheers get louder ]

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welcome back to squawk box. start with stocks to watch this morning. a federal judge ordering dish network $280 million in penalties and an 8-year-old robo call telemarketing lawsuit. this might be the largest ever monetary judgment in a robo call case. also retiring after 14 months on the job. drug maker says the search committee has been created to find his replacements and shares

of casey's general store slipping after earnings missed forecasts. the ceo of the chain of cop convenience stores calls the current operating environment challenging. he's not the only one these days. >> cnbc's the profit returns tonight with an all new episode. a family run swim care company has been pulled underwater by poor leadership. here's a sneak peek. >> i'm not going to stop until something finally breaks. you can't put in everything and have nothing to show for it at the end. i don't want to see you guys lose everything. >> i don't want you to worry about me. >> it just can't all be for nothing. >> it's a struggle just to survive to pay bills. >> that's a lot of pressure on you. >> it's insurmountable. >> it's not insurmountable. it's overwhelming. i do think the business needs structure. who is the boss of the business. >> well, that's. it's really me. >> you? >> i think so. >> i respectfully disagree. >> i respectfully disagree.

>> no. >> you can respectfully disagree. >> the boss is the person's names on the door. >> luckily it's my name as well. >> looks like some family drama there. the profit starts tonight at 10:00 p.m. eastern and pacific time. make sure that you don't miss it. >> health care stocks are up 2% since the gop and the house passed that first part of the bill. that's in line. we're going to take a look at what's working in the sector as the senate version is supposedly being worked on as we head to break here's a quick check of what's happening in the european markets right now. when this bell rings... ...it starts a chain reaction... ...that's heard throughout the connected business world.

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it's been a month since the house gop passed its replacement for obamacare. the senate is still working on its version of the health care bill. meantime, the s&p health care sector is near a post-election high. for a look at what's working or what might work we're joined by anna gupta, senior research analyst covering health care services at leering partners. i want to quote one of your

comments here and get to the nitty-gritty. while large, diversified, managed care, mcos, is that managed care operators, okay, are poised for further multiple expansion, with the legislation of repeal and replace, and tax reform, i mean -- >> yes, good morning, thank you. >> that's a big, what is that a phrase, some kind of -- i don't know. but tell me what you think the chances are of that happening any time soon? and you have to think about that. we'll talk about your picks, because some of them will work either way. but where are we on this? is the senate really got a chance of doing this before the end of this year? >> it's hard for me to make a call and say definitely. i still say it's more than 50/50. i know they're making a call to get reform before august recess. and i'd like to just kind of reiterate, joe, that the multiple expansion from repeal

and replace is all optionality to the upside. the stocks have been working, the managed group has been working nicely. the two mega deals, fundamental investors are back in. we had a monster quarter, and it really showcased the strong fundamentals, cost trend is weak. they've gotten out of exchanges. they're renegotiating contracts with the stand-alone pbms like cvs and express scripts. united health is stealing share from the stand-alone pbms. getting better contract terms with managed medicaid and the states and all of that. so if repeal and replace is legislated, and then in future we have tax reform, there's the potential for a lot more multiple expansion. but i think the large caps are quite defensive here. some of the small mids, as well, you know, i think molina and valcaro are nicely placed, as well. i would recommend them not just because the senate's going to get repeal and replace through.

i still think it's a good shot. but i don't think any of us can count on it. >> remember how you said that because i would take it even further and say that the stock market itself, the optionality, is higher. and it's all gravy if any of this stuff goes through. and that's where i differ from a lot of people. i think where we are right now doesn't include selling it forward to these good things happen. i think it's there from deregulation. i think it's there from good things that were already happening. i'm going to use that term. say it again. the optionality of the health care stocks is all on the upside? >> i would agree. >> okay, good. excellent. you do have some -- i like what you say about anthem, though. because anthem, if there is -if there's risk. so if it isn't, you can play anthem because the exchange -- the exchanges are probably going to get -- have to have price increases, right? rate increases? >> you know, anthem's actually

come out publicly, and in favor of the repeal and replace bill. so as i've said in these talks i think in march and april, that the tax treatment is very favorable for the broader diversified large cap managed care. and does have exposure clearly to medicaid and exchanges but it's quite manageable. it's in the mid single digits for medicaid expansion. and exchanges actually have a contrarian view on repair and replace. i think in the next two years i really think there is substance behind the rhetoric from the house republicans that they're stabilizing exchanges. they're putting in a lot of funding in place in '18 and '19 and that should stop some of the exodus that the health plans are, you know, experiencing. >> stay near you phone. we need to check back with you. >> okay. >> i hope you were listening to that sorkin. anna, thank you. >> thank you, joe. >> when we come back, congress

set to vote on the financial choice act. the gop bill to roll back dodd-frank financial reform. congressman jeb hensarling is behind that bill. so we need tablets installed... with the menu app ready to roll. in 12 weeks. yeah. ♪ ♪ the world of fast food is being changed by faster networks. ♪ ♪ data, applications, customer experience. ♪ ♪ which is why comcast business delivers consistent network performance and speed across all your locations. fast connections everywhere. that's how you outmaneuver.

good morning. investors putting the rally on hold amid escalating tensions in the middle east. and awaiting testimony of former fbi director james comey. a complete rundown of what you need to watch is straight ahead. washington watch. the president meeting with members of congress today in an effort to try and jump-start his legislative agenda. we will talk about his plan to privatize the nation's air traffic system. plus we'll hear from congressman jeb hensarling on rolling back dodd-frank. and a shake-up in the retail

sector. j. crew making a change in the c-suite. details as the second hour of "squawk box" begins right now. live from the beating heart of business, new york city, this is "squawk box." good morning. welcome back to "squawk box" right here on cnbc. we're live at the nasdaq marketsite in times square. i'm andrew ross sorkin along with becky quick and joe kernen. take a look at the futures this morning. before you tell you what's going on in the news. dow looks like it will open up down about 34 points. s&p 500 off about 4.5 points. nasdaq looking to open down about 2 points. here's what's making headlines at this hour. president trump will meet with congressional leaders today in hopes of kick-starting his legislative agenda. the white house hoping to see a vote on health care reform they say before the august congressional break and focus on tax reform when lawmakers return in the fall. but as we've said now several

times this morning that seems unlikely. but hope springs eternal. exactly. general motors shareholders will vote today on a proposal to create two separate classes of stock. the proposal put forth by green light capital's david einhorn would focus one stock -- focus one stock class on dive zends, another on growth. however it is not expected to pass. einhorn has also nominated three candidates for the board of directors. and just one economic report on today's calendar today. the labor department will be out with its april jolts report at 10:00 a.m. eastern time. the measure of job opportunity and labor turnover expected to show a slight increase in job openings. a shake-up at j. crew. the clothing company's longtime chief is handing over the reins. mickey drexler is stepping down as ceo but will remain chairman of the company. the retailer is naming james brett as its new chief starting next month. the clothing store has struggled with the prolonged sales slump.

same-store sales have been down for the last ten quarters. you add that to a burden of about $2 billion in debt and less than $150 million in cash. in april the company cut 250 jobs mostly from its new york headquarters. before taking the job as president of west elm,williams-, urban outfitters and jcpenney. should point out that drexler is still there and still a major owner of shares in that company. as far as individual names this morning, shares of thor industries getting a pop. thor says positive results point to stronger demand in the rv market. and we're watching shares afterle this morning. tech giant unveiled a big bet on the home in an effort to take on amazon's alexa. and -- ooh. going to show you the daily chart. and series of new features and updates for the iphone, ipad mac and the apple watch. yesterday the tech giant was run of the bigger drags on the dow

this morning, it's basically flat. for more on the markets, we're joined now by david leibovitz, global market strategist at jpmorgan. david bianco chief investment strategist for the meshes at deutsche bank asset management. just going to continue a conversation we had earlier. we had a health care analyst on saying the optionality for health care stocks is all to the upside. that where they are right now is where they deserve to be. i made the point that my view, which is worth nothing, but in my view, the markets aren't necessarily discounting these great things happening legislatively. i think they're where they are and in a wait and see mode with not much more hope than we have that something gets done. but they're here and feel fine at these levels. you said before the cameras come on, 3% on the upside if something good happens, 5% or 6% if we don't get it done. so you don't think the optionality is on the upside. >> for the overall market i think for the short-term optionality is on the downside.

i think we're going into a part of the year where the market is more likely to fall 5% than move up 5%. but for health care, joe, i always appreciate your view and i very much agree that on health care it's to the upside. >> let's go back to january 1st. we were about 200 points lower, 8% to 10% on the s&p lower. 22 and change. you said 2400. >> right. >> by the end of the year. >> thank you. >> okay. >> so we're past there. >> we're past there. >> and your view is for it to go down 5% right to your original -- >> no, no. >> is that wishful thinking? it gets back to what you said? >> i can tell you -- >> why don't you raise your target instead of ruining it for the rest of us and saying it has to go down to 2400. >> there's a couple of exciting things to say. i do think the market's exhausted for the short-term. i think we get a little bit of a pullback likely during the summer and then we finish the year probably around 2450 maybe higher than that. assuming we get that corporate tax cut. >> so you need it? >> i do need it. and i need it to be simple.

25% corporate tax rate. i don't want to hear a thing about border adjusted taxes. but the more important thing is, particularly once we get that corporate tax reform done i think we have another two or three years of healthy returns out of the equity market. so, a pause that refreshes, let's get the policies sorted out. >> demanding, hensarling is going to be on. did you hear him, andrew? >> i did. >> got to be 25%. >> 25%. >> okay. all right. what do you think? >> i think you have a good point that over the next two to three years there's room for this market to move to the upside. i think about it a little bit differently. i guess i'm a little bit more bullish than you are. i think like joe the market is relatively comfortable with the fact that a lot of these policy changes may not happen. i think the market will sit tight on tax reform until the first quarter of next year. and any surprise from a policy standpoint i think pushes this market higher. because of the economic backdrop, corporate profit -- >> this -- >> you got earnings looking healthy. you've got an economy which is going to rebound -- >> been invited back. >> first quarter malaise.

i think there's more upside. >> i don't mind being outbulled. i'm optimistic generally myself. but look markets don't go straight up. this is the time of year where i think people are looking to see to what extent is there any further upside on the earnings estimates. i think that is dependent on the corporate tax cut. and then we need to be really selective sector by sector, style and region. and joe i do agree, health care's got a lot of optionality to the upside. both in terms of sales and earnings growth as well as valuation -- >> -- unbelievable. did you listen to her? isn't she? why don't you hire her? huh? >> we're always looking for talent. yeah. >> so -- >> i don't know what they're paying here. >> i think in addition to health care there's also upside in other cyclical parts of the market, financials which have gotten beaten up here. the fed which in my opinion is going to hike rates next week. i think they'll hike two more times in total before the end of the year. that could be good for the financial sector. so i think pro-cyclical -- >> what is happening with the 10-year? that scares. out of all the things can we

acontribute it to global money flows? >> you can attribute it to 3.7% unemployment rate. we've got fed hike, talking about more and no inflationary pressure. >> who in the world would have said we'll be at 4.3% unemployment and the 10-year will be at 2%? >> we said sub-three. i agree, i've been surprised -- >> ten years ago -- >> i big part is the phillips curve has flattened out since the early 2000s so you're not seeing the impulse of lower unemployment rates pass through to inflation. but i mean look it's the relationship. and we just haven't seen inflation pick up the way you would expect it at 4.3%. >> and we're not counting on 10-year treasury yields to jump in a big way to be attractive to financials. we think the big banks are more sensitive to the short end of the curve. we're looking at c-cart to get more dividend hikes and banks are amongst the lower exposed to benefits of a tax cut.

energy, industrials, materials, that part of the market on a cyclical sense, nothing to like at all. >> this is not your father's 4.3% either. why? are there people that can be induced to come back to the labor force that aren't retired, they're 30 to 54 or working part-time jobs? a couple of those? or is it because the jobs that are -- that are there to be had we don't have people trained for those -- those jobs? >> there should be cost -- there should be wage inflation. there should be all kinds of stuff happening now at 4.3% that isn't happening. why not? >> look, guys, i think you have price pressure at every business. at health care. at technology. at financial services. >> but downside price -- >> so the point here is that the productivity gains aren't there, the wage growth won't be there. and there's no way any business manager's going to risk their business by putting wage hikes ahead of any type of price gain opportunity. so look i'm optimistic that as the -- the labor force as you

add new workers, and they get to get accustomed to their job and better at it that we'll get a little better productivity than we've seen the past few years but i don't think we're going to have surging productivity. i also don't think we're going to have any surge in unit labor cost. and i think economic growth is only about 2%. >> i think to your point about if the policy agenda works out favorably for the market we're going to see higher nominal gdp growth, strengthening nominal gdp means a return in pricing power and that's the missing piece which gets wages to rise. you have corporations which aren't willing to raise wages given a lackluster outlook for nominal gdp. that's why rates are so low. because the structural components of the economy haven't changed. we're looking at a slow growth world despite what's happened over the past twelve months here. >> davids. two davids. thank you. you see how they do it here? thank you both they say. >> thank you all. >> thank you all. >> yes. >> longer conversation. >> about what? >> no, no.

you think it's a tight labor market? >> what did you say? >> you think it's a tight labor market. >> i think it is a tight labor market. and the wages are only going to go up if it gets tighter. not if people expect gdp. i mean it's not on expectations. it's on how tight it actually is today. >> i think that's a fair point. but i think the labor market, i would agree with you that it's tight but joe makes a good point there's a skills mismatch which is also keeping -- >> yeah. okay. >> yeah. >> thank you to both davids. coming up when we return the president endorsing a proposal to privatize the nation's air traffic control system. we're going to hear from a trade association representing the airlines after the break. i bet you know where they come out. and then financial services committee jeb hensarling is going to join us. the house getting ready to vote on this thursday on a bill that would replace dodd-frank. we're going to ask him about that plus talk tax reform. stay tuned you're watching "squawk box" on cnbc. [vo] when it comes to investing,

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spl >> welcome back to "squawk box" everyone. the futures this morning, they have been mixed throughout the session. the dow futures are essentially flat. nasdaq still down a little bit. i'm sorry, dow futures down by 37 points. s&p futures down by about 5 points. the nasdaq off by 3. >> okay. this is an important story. the president unveiling plans to lift air traffic control oversight away from the federal

aviation administration and put it into the hands of an independent organization. joining us right now is nicolas calio president of airlines for america an airline trade association. good morning to you. >> good morning. >> make the case. explain why it's so important to set up an independent what i think will be a nonprofit organization to run the airlines? >> it would be a nonprofit -- >> air traffic, rather. >> air traffic operation. it would be a nonprofit. independent organization outside of the government, not subject to the fits and starts of government funding. which has been a real problem in the past. also, it would allow us to -- allow the faa to focus on what it does best, to regulate safety, and not run an air traffic operation. in over 60 countries across the world, the international standard is, you should separate the air traffic operation from the safety regulator. to make the case, if you look at what we're doing right now, we are flying on antiquated,

inefficient, world war ii radar system. our air traffic controllers track our airplanes by paper strips. they pass these strips off to track the airplane. you have more technology on your phone, with gps, than we have on our radar tracking our airplanes. that's really inexcusable. next gen has been going on so-called, you know, next gen of tracking air -- been going on for over 30 years. the progress has been slow. the delays enormous. you know the faa is a great safety regulator. but it's not really capable of running a 24/7, high-tech business. nor is the congress capable of running that on a day-to-day basis. >> let me ask you about the implications of the cost. most of the airlines are on board with this and proponents of this. delta has separated itself out and has suggested that the cost to the consumer could go up as much as 30%. it's looked at a number of other

situations, where effectively air traffic has been privatized. in europe and the cost has not gone down or even stayed steady, it has grown remarkably. why? >> it has not, actually. i know that delta, and they might be, you know, i think you need to look at their position currently. but they say cost in canada went up 30%. that is just misleading. absolutely misleading. what went up in canada were the rates and charges at airports because canada privatized their airports. this is apples and oranges. canada just announced another rate reduction this year. a reduced rates last year. they've created huge efficiencies in their system. they are creating cutting-edge technology the rest of the world is buying and we are way, way behind them. if we created this nonprofit independent corporation we could get ourselves in the 21st century, have better flights, more efficient flights. a flight 20 years ago in 1990 from new york to washington was

scheduled for 55 minutes. today i'm sure you fly it, it's scheduled for 80 minutes. why? that's called block time start to finish. we have to build that time in to account for air traffic control congestion. which is why traffic is bottled up all the time along the northeast corridor and los angeles, and chicago. >> nick no question i don't think there's anybody on the planet who would argue we don't need this upgrade. we've been arguing it here for years. i wrote an article for fortune probably five years ago saying this needed to happen immediately. at the time it was like a $60 billion price tag to fix it and get it updated. the question becomes why do we need to privatize it? what's the advantage to privatizing it? and why couldn't we have done this and why can't we just do this by putting the money down for this and continuing to operate it under the existing form that it is but making sure we put the fund there's to provide for the update? >> i don't think under the current funding structure you can really do that. we need to take politics out of

it. you've got congress involved. you know, they look at it. there's a problem, there are hearings. they mandate that certain things happen in terms of management of the system. it's a system that needs to be controlled by someone who could pay attention to it on a day-to-day basis, without political interference, can make judgments, can also make long-term capital investment. if this corporation is set up, it would be able to go to the capital markets -- >> so kind of like an amtrak? is that what we're thinking of setting it up as? >> no, not at all. >> not at all. >> this would be totally outside the government. and run by an independent corporation. with, again, without the political interference. >> and -- >> congress would always have the oversight. you know in our own system you've got the national highway transportation safety administration. the federal maritime commission. the federal railroad association. they all regulate the safety but they don't try to operate the system out of the government. >> but nick help us with this, some of the critics suggest this

is the flyer's rights group saying this is the creation of an airline controlled corporate monopoly, the board of this nonprofit would be largely controlled by the large airlines, which oddly enough, and i did not know this, i thought the commercial airlines were actually the most planes in the sky, they're not. >> well, we use about 77% of the air space we pay 94% of the cost currently. the notion that somehow this board would be controlled by the major commercial airlines is a total red herring. in fact, it's just misleading. that's put out by the business jet people. the business jets and the general aviation use 10% of the air space, pay 2%. last year the board was set up in chairman schuster's bill in the transportation infrastructure committee. commercial airlines have four seats. general aviation had four seats. they were exempted from any increase in fees. and yet they opposed the bill. that's driven mainly by the

business jets. what we said was put all that aside, let them keep paying what they're paying. we need a better system for our customers. because we don't need our customers sitting around on the tarmac. that's about customer service. we want our customers happy and long delays, 50% of the delays on flights are caused by air traffic control congestion. >> right. >> that doesn't have to be that way. we could be like other countries. shorter flight times, better -- >> and nick we all agree on this front we completely agree with you. i have two quick questions i want to get to, though. one is just about lap tops and laptop safety and what you think needs to happen there and who should pay for it in terms of making us -- making airlines safer when it comes to actually having people be able to bring laptops on the plane. >> well, you know, we respect the government evaluating security threat. but there needs to be more consultation. we evaluate security threats every day, too. we're very worried about that. but we have ways to make -- we can help with the technology to

make things safer. we're willing to pay for that. we are worried about laptops being lumped together in the hold of an airplane. there's a safety risk there from lithium batteries. but, things work best, look at the delays last summer. we worked with tsa to figure out how to handle those delays. we put millions of dollars in to it with our own employees. but there was a consultation process going back and forth between the airlines and the government. we do this every single day. our interest is in our passengers, and keeping them safe, and secure. but we can help the government figure out ways to do it that will minimize the impact. >> and, nick, before i let you go, got to ask you, you had mentioned congressman bill schuster before. we should say he's the chairman of the house transportation infrastructure committee. he's been very involved with this. apparently he's been in a relationship with one of the top lobbyists for the airline industry, and he hasn't recused himself. do you think he should? >> no, i don't think he should. because that person, that

individual, does not lobby the republicans on the committee. that person has a long-term standing with members of congress, and so i don't think that he should recuse himself. >> okay. we're going to leave the conversation there, nick. i'm sure we'll be talking a lot more about this. we all want both better air traffic in terms of efficiency, and safety, and we look forward to it. >> hope so. thank you for having me. >> you bet. when we come back, house financial services committee chairman jeb hensarling on taxes, and his effort to replace dodd-frank. and later former nato commander james stavridis on what the u.s. military is lacking on the high cease. he'll join us to talk about his new book, the london attack and the new u.s.-led offensive to capture key cities in syria. ty - ty - down to each piece of equipment, so they can protect their teammates and the surrounding wetlands, too. because safety is never being satisfied.

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its prime membership for people who receive government assistance. customers who receive government pen fits like food stamps can pay just $5.99 a month for membership. prime membership includes free shipping and unlimited streaming of movies and television strips. a former nato commander james stavridis is going to be here to talk about his new book and the latest developments in the war against terror. plus rolling back dodd-frank. house financial services committee chair jeb hensarling is going to join us to talk about his bill up for a vote later this week as we head to a break take a look at futures right now. we are down. dow looks like it would open off about 54 points. ♪ it's been over 100 years since the first stock index was created, as a benchmark for average. yet a lot of people still build portfolios with strategies that just track the benchmarks. but investing isn't about achieving average. it's about achieving goals. and invesco believes doing that today requires the art and expertise of high-conviction investing.

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make dinner-time device free. [ music stops ] [ music plays again ] a smarter way to wifi is awesome. introducing xfinity xfi. amazing speed, coverage and control. change the way you wifi. xfinity. the future of awesome. good morning, everybody. welcome back to "squawk box" here on cnbc. we are live from the nasdaq marketsite in times square. among the stories that are front and center this morning, kenneth feinberg is likely to be appointed to oversee a $1 billion compensation fund for

victims of defective takata air bags according to court officials. feinberg has overseen a number of high profile compensation funds related to cases like the bp oil spill and the gm ignition switch recall. seattle is the latest city to levy a special tax on sugary drinks. it will be signed by the mayor today after the city council approved it yesterday. philadelphia, san francisco and chicago are among other cities that have taken similar steps. tesla will resume selling rooftop solar 357b8s in nevada after the state assembly restored a bill for electric utilities to purchase excess power generated by those systems. it had been scrapped at the end of 2015. a big political battle on whether you should have to pie those back and what rate should be set for those things. u.s. house of representatives gearing up this week to vote on a bill that would roll back much of the dodd-frank wall street reform. joining us now, the lead sponsor of the financial choice act, financial services committee chair jeb hensarling.

mr. chairman, it's good to have you here. >> good morning. >> you know, i like the house now. you guys are doing things. i like it. >> we are doing things. we need to do more this week. >> and you're going to do it and then what? is it going to be like the repeal and replace and then it goes to these brahmans in the senate and maybe they'll get around to it some day, maybe they won't? depends on whether there's a camera in their face that they need to bloviate on? >> well i'm not a soothsayer for the senate so all i can do is do what we do in the house. but my senate counterpart chairman crapo i'm optimistic that he will get something done and then, again, you know, the way this is supposed to work is we pass a bill in the house, they pass one in the senate, we go to conference. but the bottom line is, 1.5% to 2% gdp growth ought to be unacceptable in america. there's been no greater wealth creation machine in the american free enterprise system. you can't have capitalism with capital sitting on the sidelines, and dodd-frank has put a lot of capital on the sidelines. we plan to get it out.

>> so, when it goes to the senate, will they look at it and say, we're starting from scratch? or is it different than repeal and replace? >> well i don't know the answer to the question. i think there is a growing consensus that dodd-frank is not working. number one, dodd-frank said it would lift the economy, and yet we're stuck in 1.5% to 2% gdp growth. dodd-frank said it would end bailouts and cynically they got them into law. dodd-frank said it would give us greater financial stability, the big banks are bigger, the small banks are fewer, our corporate bond markets are seeing historic levels of illiquidity and volatility. dodd-frank said it would help the consumer. free checking has been cut in half at banks. bank fees are up. the ranks of the unbanked have increased. mortgages cost more. hundreds of dollars more to close. they're harder to come by and the list goes on. and because of that, i think the pressure is increasing for the senate to do something. >> will it be all republicans? >> i think it will probably be all republicans. i think that's unfortunate, in

private conversations i have with democrats they admit that a lot of dodd-frank needs some serious work. frankly to some it's become a matter of religion. it's almost like -- >> like everything else. -- >> like the tablets came down from mount sinai. >> the democrats have been your problem any more than they always are. >> they are a problem. >> but you've got your own problems. is the -- are the moderates in the senate not going to go for this? are or they going to make a name for themselves by saying i'm not going to back this? you need all of them, right? >> again i don't know the answer to the question. >> what do you think? >> i know that parts of the financial choice act that again will replace complexity with simplicity, and replace bailouts with bankruptcy and replace regulatory fiat with discipline some of it can be passed with a simple majority in the senate. >> never simple with this senate. >> well the math is simple. perhaps getting to the math is a little bit more complex. >> what do you think? is it the same as these other

pieces of legislation where you've got some of these moderate senators that aren't going to go along with the more conservative house? >> they're not going to go along because their constituency is a broader constituency. >> whatever. but maybe they need two-year terms. >> again i serve in the house of commons, not the house of lords so i'm not sure i'm you're best expert. but i'm encouraged increasingly. nobody really wants to support bank bailouts. which is a major foundational issue of dodd-frank. and increasingly, for example, we -- >> foundational because you believe that we're still in the bailout business? >> i know we're in the bailout business. the dodd-frank law. we have codified into law the ability to designate financial firms too big to fail backed up with something called the orderly liquidation theory that has almost a blank check from the u.s. treasury. so yes we are still in the bailout business and the proof is in the pudding. the big banks have gotten bigger. after dodd-frank. >> you've heard from experts who have suggested that without that

provision, we could put ourselves in real harm's way if, in fact, we do get to a point where we have to -- where we have a major bank that's falling out of league? >> one, i believe that an ounce of prevention is worth a pound of cure and that's why we need market discipline and that is the appearance and reality of having your own money at risk as opposed to the taxpayer money at risk. if the big banks are bigger so in many respects dodd-frank is making the system less stable we want to prevent it in the first place. >> if this was passed and the senate was signed into law by the president what do you think would happen to bank of america or jpmorgan? what the implication would be to a big bank? >> i think that the possibilities of them failing would be much lower. also, the key component of our bill is that in order to have a dodd-frank offramp you need a 10% simple leverage ratio which is far more capital than was required either under the boswell accords or under dodd-frank.

that's the tradeoff. it's the tradeoff with private equity capital and the analogy is basically a privately financed insurance policy against bailouts -- >> but if you have a strong billion sheet -- >> but at the same time you're arguing we need to make it easier for banks to loan money, to offer mortgages, et cetera. you don't think that this law would make it harder for a bank of america to offer a loan or a mortgage? >> make it more difficult -- >> given the capital requirements you just talked about? >> one it's a voluntary capital requirement. if they don't want to take the voluntary capital requirement, they don't have to do it. it's one of the reasons that we called it the choice act. they have a choice. but i would also point out that 98% of all banks, according to fdic data that had a 10% simple ratio survived the second worst financial panic in america's history. so if you achieve that level we think there will be greater stability. but at the same time we want freedom to have banks make these decisions.

we don't want credit allocation politicized in washington, d.c. and ultimately i fear that is the goal of many on the left. with this regulatory onslaught. and dodd-frank represents a greater imposition of regulation on our economy than all obama era regulations combined. it's that bad. >> back to the politics just to get something passed to make some changes that the senate will pick up on, what would you have to do to change the bill and what would you be willing to do just to get something -- >> becky, i'm willing to negotiate but i'm not willing to negotiate against myself. so i'll wait to see what the senate will produce. again, part of the choice act can be done through reconciliation. >> right. >> other provisions will have to be negotiated. i stand ready to negotiate in good faith with democrat colleagues in the senate. but they're going to have to get something passed. and i think increasingly, the mere fact that we would pass the financial choice act will create greater momentum for this to get done. and i know it's still a priority of the administration. i met with the vice president

last evening. reiterated it's a priority to get it done. i mean this, long with health care reform and tax reform, and reform of our banking capital market system is what's key to getting america back -- >> part of that can be done without even passing legislation. i mean, randy squares, he's approved and put in place -- >> well you're right. frankly a lot of dodd-frank not unlike obamacare we've done with pen and phone and a lot of it can be undone with pen and phone. >> what's the holdup then? >> i look forward to the administration getting their pens and phones working to get a lot of this done. a lot of it does need to be legislatively based as well. they're complementary. >> tax reform will be better. but go ahead, try and do this. maybe you can do this one. >> both are important. >> let's talk about the rube goldberg -- if rube were around he would -- maybe he is. i don't think so. but he would design this crazy system where you got to do repeal and replace before you do tax reform. tax reform would be so easy. at least to go to 25 or something. everybody wants to do it. you could do it.

but you're stuck trying to completely change obamacare. or are you? will that be the sequence? will it be obamacare first? then tax reform? >> i believe so. we have more momentum -- >> it's so hard to do that to get the senate to write a whole new bill on this. and we're waiting around for tax reform which probably could get done. >> well, obamacare, repeal, has so many different ben fifths. but one of course is creating more revenue -- >> but doing it is so difficult. because you've given the left this 24 million or the cbo has suddenly people think the rug's going to be pulled out from 24 million people -- >> i'm going to go out on a limb and i know that's a mixed metaphor but we're going to get tax reform done. the only question is it going to be good, better or best. >> but after -- >> and when? >> after obamacare -- >> i don't know the sequencing of the two. i would still think that health care would probably go first. you would have a more robust tax reform package. >> i know but it's so hard --

>> but the bottom line is there's -- >> depending on the senate. you're depending on the senate to redo your bill from scratch, as they keep saying. and are they working on it? do you -- >> they're working on it. they're working on it. >> really? are you optimistic -- >> i've got to be an optimist. >> that's what i said. >> i've got a reason to crawl into a fetal position and weep every day so you've got to be an optimist. >> you do. >> listen, things -- tax reform is going to get done. the united states senate will move on some package. we're going to move a package out. i met with chairman brady over the weekend. he's optimistic. but there is a reason. i mean this is hard work. >> it is. >> there's a reason it hasn't been done in a generation. but at a bare minimum i think you're going to see a significant reduction in corporate tax rates and significant stab at simplification. but i hope we can do something -- >> it's just, if you, like i said, if you were designing it from scratch and you said we're going to do tax reform but first we have to fix the nation's health care system. we're going to do that first, and then we're going to do tax reform.

that's not the way you would design it -- >> again it just -- >> it's hard to fix health care. >> it goes to the quality of how robust this tax reform package will be. but it can be done without passing the health care package. and again, that -- the decision on the timing is going to be made a pay grade above my own. >> it's unfortunate that one, it really does make sense to do it that way. it just makes it that much harder. >> in the meantime i'm trying to repeal and replace dowd frank and get capital moving in our system again. >> you're trying to make sure everybody knows your name is jeb not jim. i got it now. right? it's jeb. >> it is jeb. >> not everyone knows what we're talking about. >> no. probably -- >> probably leave it? >> yeah. >> if you saw president obama do you think he'd call you jim now or do you think he'd finally say hi jeb? >> towards the end of his administration he finally figured out what my name was. >> he finally -- okay. >> inside joke. >> it is an inside joke. it's a good one, though. congressman jeb hensarling. thanks. >> coming up when we return.

military might on the high seas. former nato commender james stavridis is going to join us on the need for the nation to improve the nation's naval fleet. check out the futures at this hour. we are in the red. dow looks like it would open off about 58 points. with the menu app ready to roll. in 12 weeks. yeah. ♪ ♪ the world of fast food is being changed by faster networks. ♪ ♪ data, applications, customer experience. ♪ ♪ which is why comcast business delivers consistent network performance and speed across all your locations. fast connections everywhere. that's how you outmaneuver.

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our next guest says that the key to global security is through our power at sea. for more on this let's bring in james stavridis, retired u.s. navy admiral and former nato commander who is now the dean of the tufts fletcher school, also an nbc news analyst and he has a new book out called "sea power: the his tremendous and geopolitics of the world's oceans." admiral stavridis, thank you very much for being here today. this is a really fascinating look at major problems that are confronting us right now. let's start with what we've seen already in just this last week with the london terror attack. how does this kind of play in to your thesis? >> well, first of all, the oceans connect us all 70% of the world are covered with water. 95% of the world's trade goes. and to the terror point it's the one area the terrorists actually haven't tried yet. they've done air, 9/11. they've done plenty on the ground, a la london last week. but they really haven't moved on

a big cruise liner. they haven't moved on putting weapon of mass destruction in a container. at the end of the day kim jong-un probably isn't going to launch a missile at us. he's going to put a nuclear in a container ship and drive it into long beach. >> and where are we as a nation in terms of protecting our borders on this? >> wow, well there's the gut question. that's the reason i wrote the book to make the point that in the end we're an island nation. we're covered two massive coastlines, and two -- >> that made us feel a lot safer because we're not in the position europe's in right now. >> exactly. and it's a false sense of security. the british used to say the oceans are one. they connect everywhere and that's really the case. so we need to increase our game in the maritime world. and it's not just counterterror, becky, it's also geopolitics. we're seeing russian navy rise, chinese navy rise. >> do we know where every ship is right now? every boat on the water? >> there are 50,000 ships at sea. we have a pretty good sense of

the vast majority of them. 50,000 of 100 dead weight tons or more. we contract them but we don't know what's going on inside each of them. in the end, though, andrew, it will be a surveillance game. >> we are already looking at, and since 9/11 they've been talking about the cargo that comes in to every port. >> yeah. >> we only surveil like 1% or 2% of those that are -- >> less. and we are going to have to increase that. and it's not going to be just a manpower thing. it's going to be a technology piece. to be able to do that more effectively. and it's got to be at sources, we've got to use big data to get at it as well as combining that with the kind of overhead surveillance that andrew was referring to. >> when you look at wikipedia or google and you look up our navy it says we're a powerhouse, 430 ships, 170,000 reserve personnel, and that sounds like a pretty amazing force. what's wrong with that picture? >> that doesn't really track our number of war ships. so we have 275 warships that can

deliver offensive combat power. the rest of that is support, auxiliary, ports, what we really need are 350. we have 275. we need 350. trump administration has talked a good game about this but we haven't seen a navy secretary appointed yet. the budget doesn't really -- the first budget doesn't really step us up. we've got to get up to that 350 number. that's not me. that's a wide scope analysis done by any responsible security panelist. >> is the british -- do they have a navy left? >> they do. it's small. it's got a lot of tradition. they do have a couple of nuclear submarines. they have a ballistic missile submarine. some capability. but you're on the right point, joe, which is combined with our allies we can make up some of that gap. but at the end of the day we have to depend on ourselves. >> you said the nato guy, you know that they're not -- they couldn't defend themselves, all of nato, without us. >> correct. >> and that's why, to pillory and disparage trump for pointing that out and saying it caused a

rift with germany, it needed to be said finally. >> i think we need to go after the nato allies to pay their 2% of gdp, absolutely. the question is, do you want to do that in a very public way or do you want to kind of pull that -- >> i think it's the right move to move publicly at this point. >> you do? >> i do. >> how long will it take us, or would it take us to come up with another 75 warships? >> that's a 10-year process. you go to war with the navy you have. to kind of paraphrase don rumsfeld and at the end of the day we've got to start building now and it's going to take us about a decade to get there but that's worth doing because our opponents the russians and chinese, also it's a slow building process. >> one thing to clarify, when you talk about our opponents. >> right. >> you're talking about state actors. >> i am. >> which is different than isis. or different than a terrorist organization. in part because i'm assuming the cost is just so high. >> we've got to do both. >> okay. >> so, we had a free ride for 20

years. since the end of the cold war. now that the russians and chinese are back at sea in a big way, we have to step up the geopolitical game. but at the same time we've got to cover that terrorist flank because that's the one undone piece of the terrorist -- >> what would be the cost for a terrorist organization to follow through with a naval effort, if you will? >> well, the thing to look at -- >> or by sea. >> the thing to look at, andrew, is how are the drug cartels moving tons of cocaine into the country? they're doing it quite easily using semisubmersible vessels. in fact, you could see a scenario where a state, like north korea, could hire a cartel -- >> don't, don't. >> -- weapon of mass destruction. >> i'm worried you're giving people ideas. scary stuff. >> it's the reason we think the navy is like antiquated compared to the air force and what we can do with planes. but you're moving our forces where they need -- it's the only way to have a mobile force that

you can move. it's never going to be replaced by anything else. and we forget that. >> especially the aircraft carriers joe. these are seven acres of sovereign u.s. territory, 80 aircraft, they move 1,000 miles a day. >> right. >> the british had the greatest navy in the world, didn't they? >> they did. they lost it. and they fell. let's not see that happen to the united states of america. >> admiral, thank you very much for your time. >> thanks a lot, everybody. >> coming up, stocks to watch. at the opening bell in the next hour we're going to talk tech with well known tech investor ann winblad. ll wait. what did yk about her? it's definitely a new idea, but there's no business track record. well, have you seen her work? no. is it good? good? at cognizant, we're helping today's leading banks make better lending decisions with new sources of data- so, multiply that by her followers, speaking engagements, work experience... credit history. that more accurately assess a business' chances of success. this is a good investment. she's a good investment. get ready, because we're helping leading companies lead with digital. at crowne plaza we know business travel isn't just business.

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take a look at some stocks to watch this morning. hd supply holdings is reporting quarterly profit of 63 cents a share. that was three cents below estimates. revenue, though, did beat forecasts. separately, the industrial distributor announced the sale of its waterworks division for $2.5 billion in cash. arts and crafts retailer michael's missed estimates by a penny. quarterly earnings of 38 cents a share. just slightly lower. revenue was also short of forecast and same-store sales fell 1.2%. stock down 5%. g3 apparel lost 18 cents a share from the latest quarter. but that was less than half the 40 cent loss that analysts were expecting. this was a -- the i guess donna karan, this is the parent of donna karan. and revenue at this company beat

expectations. talking about wilson's leather, and calvin klein. as part of its stable. company also raised its full-year forecast. >> okay, coming up when we return the u.s. nearing a trade deal with mex consugar. viewed as a precursor of renegotiating nafta. then tech investing. ann winblad joins us in just a little bit. manage my portfolio. since i added futures, i have access to the oil markets and gold markets. okay. i'm plugged into equities- trade confirmed- and i have global access 24/7. meaning i can do what i need to do, then i can focus on what i want to do. visit learnfuturestoday.com to see what adding futures can do for you.

a closer look at what the charts are telling us is straight ahead. >> a sugar showdown. trade talks go in to overtime as the u.s. looks to strike a deal with mexico. the country's economic secretary will join us. plus forget airbnb. the man behind studio 54 unveils a new concept that could upend the hotel industry. we're going to check in as the final hour of "squawk box" begins right now. ♪ live from the most powerful city in the world, new york, this is "squawk box." good morning and welcome

back to "squawk box" here on cnbc. we are live from the nasdaq marketsite in times square. i'm joe kernen along with becky quick and andrew ross sorkin. the futures right now are lower and they've been getting a little bit lower. they've bounced back ten points on the dow. they were down over 50. now down 46 on the dow. the s&p indicated down 6 and actually the nasdaq finally showing some weakness down nine points. not stronger on a relative basis. there's the 10-year below 2.15. below 2.15 now on the 10-year. could it -- >> why? >> could it go below 2? >> i mean, we're waiting for a fed meeting next week. and we expect that they're very likely going to hike interest rates. so what's this signaling? >> who knows. could it go below -- maybe it turns around here. maybe we're getting down near the highs for the market lows for the year. >> among today's top stories, general motors shareholders will vote today on a proposal by investor david einhorn to create two different classes of the automaker stock. one focuses on growth, the other one on dividends. there will also be a vote for

the company's directors. einhorn has nominated three board candidates. long-term j. crew ceo nikki drexler is stepping down, he will stay on at the company as chairman but the retailer's naming james brett who is the former president of west 'em as its new chief. the clothing store has struggled. comp-store sales have been down for the last ten quarters. add that to $2 billion in debt and less than $150 million in cash and you see the difficult situation. in political news, president trump will meet with congressional leaders at the white house today to talk about health care and tax reform. the president tweeting big meeting today with republican leadership concerning tax cuts and health care. we are all pushing hard. must get it right. ee top aide to the president telling reporters that he expects lawmakers to pass health care reform and the 2018 budget before the august recess so that they can then focus on tax reform in the fall. >> some stocks to watch this morning, shares of g-iii apparel group soaring.

the parent company of brands like d kchlgt ny and calvin klein beating analyst estimates and raised the full-year forecast. the company says it continues to make progress in cutting costs. the brands are performing well in a challenging environment. one of the few good story standouts in a retail world which is, of course, been just challenged across the board. >> decimated. >> may be a better word for it. different story, though, at michael's. which is the arts and crafts retailer. they did miss estimates by a penny. revenue also came in shy of expectations while comparable store sales fell 1.2%. the company said a weakened canadian dollar will impact its full year results. >> decimated is win out of ten. i think it's much worse than that. >> decimated -- oh, right because of the -- i never thought about that. >> you lose one out of ten. which is bad when you're army. but not bad if you're a retailer. they wish they were only -- >> while you do that. i'm going to look up the deaf nation. >> we need obliterated.

out of a retailer, better than 50% >> it's been the rarity where we've seen a retailer who has performed well with earnings. >> it's -- >> and guidance -- >> just to clarify. joe is correct. the second definition -- >> literally. >> the second definition which is an historical definition, to kill one in every ten which makes sense. a group of soldiers or others as a punishment to the whole group. however today it's considered kill, destroy or remove a large percentage. >> i agree. >> and that probably is a good description of retail. >> except it's not literally correct but you know we strive for -- >> it is literally correct because now that's the first definition, not the second -- >> historically the single best definition. >> at the end of the day. >> at the lend of the day. i'm going to ask someone. next time someone says it i'm not going to be rude, not picking on them, i'm going to say can you start at the beginning of the day -- >> i used it earlier this morning and i heard you go like

this but i was using it properly because i said at the end of the day the markets yesterday -- >> i just want to go back at some point to the beginning of the day just to see get the whole story -- >> i was talking about the close of the markets yesterday. it was the end of the day. >> no, that was somebody else. it was bianca or somebody. >> commerce secretary wilbur ross extending the deadline for u.s. mexico's sugar trade negotiation. those talks are seen as a precursor to the renegotiation of nafta which is expected later this year. let's bring in mexico's secretary of the economy, and sir, thank you for joining us today. >> thank you, becky for the invitation. >> you know i went to bed last night thinking that this trade deal on sugar was done. i woke up this morning seeing there are another 24 hours, an extension here. what are the sticking points? >> well, basically, there were some minor technicalities working through the night. and i believe now the department of commerce has announce d we'l

have a joint press conference at 1:30 p.m. today. so probably by that time we'll be announcing that we have reached -- made an agreement. >> great, so there's not an official agreement but you do expect to have one by 1:30 this afternoon. >> we hope so. we hope so. there are minor details being worked. >> all right let's move on to nafta, then, a much bigger negotiation and one that we have heard so much about just in the last six months or so. i know that you and the commerce secretary have both said this would be good if we could get something achieved by the end of this year because in 2018 there are the midterm elections here in the united states, and you have a presidential election in mexico. so where do we stand on any type of potential progress for renegotiating nafta? >> well, as you know, we already are set to start any time after august 16th. even the fact that the u.s. has already completed all of the requirements that are necessary under trade promotion authority. now the point basically when we

talk about dates, as you know, in a negotiation you cannot have any precise dates but at least there are incentives on both sides given elections in the u.s. and elections in mexico to try to package these as the sooner the better. and in mexico we do believe that having clear objectives, there is room in a way to try to do these with the remaining months from august to december, january, but the idea is to really be very effective, not just only because of the political calendar, but sending the right signals to investors. this time of uncertainty is not good for investors and we have to really make the best effort to put this together. >> we've heard from commerce secretary ross here on this program where he's told us that one of the things he's concerned about are the pass-throughs. he talks about how much china is sending its goods to mexico, and how those goods wind up here in the united states, kind of getting passed through nafta after winding up there. he says that's something he'd like to crack down on. what do you say to a proposal

like that? >> we're having a conversation with a group of businessmen on these items. but let me tell you one thing, i think that if this idea that mexico is being used as a back door for chinese import into the u.s. is not right one. give you an example. 30% of our exports to the u.s. are cars. and when you look at cars, the chinese content in cars being traded with america is less than 3%. when you analyze the u.s. deficit vis-a-vis china and the mexican deficit vis-a-vis china basically we're importing the same things and those are things that have not been produced in north america for the last 25 years. those are production chains that left this original world like electronics, transistors, tv screens, and we have to find a way how to strengthen our productive capacities in north america to bring back some of these activities here.

but it's not the fact that mexico is being used as a front shipment of chinese goods. >> if it's not the case would it be a problem to say that anything that's coming to the united states from mexico must be at least 80% produced in mexico? if it's not a problem, that's probably not a big deal -- >> but, the point, remember, the u.s., and mexico have very strong links with japanese investments, or are german investments. the same happen in mexico. they have invested in plants, and they have been creating jobs in the u.s., and they have been creating jobs in canada and mexico. and you have some parts coming from europe, and from japan. if the problem is china, china does not play a big role in this type of production chain. now -- >> let's forget about just china as being the red herring on this. let's say from any other country. i mean neither country, the united states or canada or mexico for that fact, neither country should be getting things shipped in to their borders, and then shipping it across the border to one of its partners in nafta, correct? isn't there a way to just

prevent that from happening by saying if you're going to be shipping things back and forth it must have been manufactured there or 80% of the parts should have been manufactured there? >> well, we have to understand the global production chain which means the world today is basically linked into how to do things more efficiently. and today we trade in intermediate goods and that's what makes things highly effective. now we do agree that we have the strength -- which is the part of the product being made in north america and we can make an effort to strengthen that, no question about it. but if you go too far you may be shooting yourself on the foot because you're reducing competitiveness. i'll give you an example. a tv screen today in north america has 70%, 7-0 percent of content formation because we are not building screens in north america. if you want to bring those activities here we have to make a big effort between u.s., mexico and canada to recover those production chains.

if today you decide not to go to 80%, you don't have the production facilities to do them tomorrow. >> i made up the number 80%, mr. secretary. generally i'm a free trader. but i understand the commerce secretary wilbur ross' point that look, if things are getting imported and mexico has 44 other trade agreements that you've already cut individually for mexico, if there are no kind of checks and balances on these things, if we don't concern ourselves with the rules of origin it's easy to make it a back door into the united states without us actually having any authority over those trade agreements that we would individually tie ourselves with other nations to. >> yes. but, any other units that we have, they don't need the nafta rule, they would not come into the u.s. >> right but -- origin must be strengthened. >> the auto industry has 62.5% rule of content in north america. remember the korean agreement that you have with korea. you have 30% of rule of content

so nafta has a much stronger rule of content than any other of the other agreements the u.s. has with the rest of the world. >> all right, let's talk about what happens if this agreement gets ripped up as president trump has threatened in the past. if we were to rip up nafta, obviously that would have repercussions on all three countries, particularly on some industries. but 80% of mexico's exports right now come to america. you have pointed out in the past that with visits from china, china is a valid alternative. what would you do if this renegotiation is not successful and if nafta fails at some point? >> first of all, i believe that there are 130 days in this new administration we feel very positive that there are good planning grounds to get a renewed nafta, an improved nafta and we're working towards that. now, you always have to have an alternative when you're negotiating. and that alternative is plan "b." plan "b" is to at some point it is not convenient for mexico to

continue. you have what is wto which is the most favored nation type of agreement on that for instance, even example, if we don't have nafta at any point at some point we can export cars to the u.s. with 2.5 target which is obviously a little bit more expensive but it's not the end of the world. so we have to be prepared for alternatives. just in case this negotiation gets nowhere. but we are very positive that we are advancing at this point towards a possibility. because nafta has to be renewed. there are many advantages that we can change like the energy sector is a sector that is highly competitive in north america and there will be a lot of -- to really strengthen energy in nafta. >> so you are optimistic that we will reach some sort of an agreement on nafta by the end of this year? >> i am positive but there are ways we can find common agreements, that's the only way an agreement is going to be

approved in the three branches of mexico, canada and the u.s. and i think that we should target for convenience to try to do it the sooner the better for stability of financial markets. and for the future. you see now the peso, the peso just went back to the same levels before the november election in the u.s. which send you a signal that the stake holders are very confident that we can reach an agreement. >> that's a very good point. secretary, thank you very much for joining us today. and we look forward to seeing you at 1:30 this afternoon. >> thank you. thank you becky. before we go to break, a third tweet from president trump this morning goes like this. during my recent trip to the middle east, i stated that there can no longer be funding of radical ideology. leaders pointed to qatar. look. earlier he said, this was my favorite so far, the fake msn is working so hard to try to get me to stop tweeting. to try to get me to not use social media, they hate that i

can get the honest and unfiltered message out. >> so what does that mean to advisers like kellyanne conway who was on the "today" show yesterday saying stop paying so much attention to the tweets. >> that's the downside. you can't control the message. but you're not -- >> seems like the people on his own staff are the ones -- >> -- i look at coverage. >> right. >> 90% of the time, is negative. and if i wanted to speak directly to my supporters i would use twitter. >> but that also speaks to the idea that don't disregard the tweets because that's what he really thinks. >> and then big meeting today he says with republican leadership about tax cuts and health care. we're pushing hard. we must get it right. a lot still ahead on "squawk box." up next, facebook, amazon, netflix and google parent alphabet. so that's fana. and we're going -- >> we've got to add the "c." comcast should be in there.

welcome back to "squawk box." facebook, amazon, netflix and alphabet known as the fang stocks, they're all soaring. just mention joseph, i think we maybe screwed it up yesterday, when i say we, i'm looking at you. apple is not part of the fang stocks. >> fanga. it should be. i said comcast should be too. >> fanga -- >> i don't know why comcast should be there. >> and why should netflix be there when it's a $60 billion and the others are all -- >> we have a guest who can answer these questions for us. the four stocks are all up about 30% to date. joining us right now is anna winblad, co-founder and managing director, managing partners. first of all do you think apple would be part -- do you think netflix should be part of the fang? >> it's too small. >> i think it's pretty small. it's a fantastic company. doing well -- their numbers are great, but i think you have to include apple, and microsoft.

microsoft is a 40-year-old company so it's not part of the youthful gang -- >> by the way, talking about apple did you hear anything yesterday that made you excited or not? either way? >> home pod did not make me excited. >> did not? >> no. you know, i -- i think that's an also-ranking at this point in time. i just got back from london, and everywhere there are bill boards, and signs for the amazon echo, i mean that -- that's everybody into the pool race. >> but the device itself or the technology behind it? is it did >> well they mostly focus on the speaker quality. >> right. >> and you know, versus the interaction quality. or the intelligence behind the machine. so, i'm going to wait and see. >> so we had a guest on earlier, ed lee was the one who said it that siri, even though we give siri a hard time may be a better technology than what's in the amazon echo. >> a deeper technology.

>> deeper technology. just -- is not as consumer friendly at the moment. >> i don't think it's as much about technology these days. although the depth of technology here, it's the user experience. >> right. >> and this is where amazon is so far ahead, i mean they probably have comedy writers there for the amazon echo. every day there's a new feature of this. kids love it. >> apple is like the aws where they had such a lead time and such a long runway ahead of time that it's really hard to catch them. >> i agree. >> and so among all these stocks, what do you want to own? >> i own microsoft. google. are my top picks. also, i think that -- >> that hasn't changed for quite awhile? >> it has not. >> and amazon -- >> where are you on facebook? >> you know, i own on facebook. but i'm more bullish on google, amazon and microsoft.

>> because -- what's the problem with facebook, just so we understand? >> i think the other companies have a richer platform. and more ways to maneuver. and they're companies that are firing on multiple themes. enterprise, and consumer. i do think that facebook is -- >> $63 billion? facebook. >> yeah, i mean i like facebook -- >> i don't know anything about it. i'm not on it. but $363 billion? >> it is the largest media platform in the world. >> media platform. >> media platform. it's an unintended consequence. it's not a social platform. it is the media. 2 billion people on daily, 5,000 monitors of what we see. >> check it out. >> it's -- you know, it -- i will tell you that every day i look at facebook in the morning because i have a lot of friends who are journalists and they call the news for me. locally. so -- >> i don't want to see people on vacation. >> i've bought stuff off of the ads that facebook pitches. i've never bought an ad on

twitter. i've bought things on what facebook pitches me. >> clearly, for an advertiser, you have to do placement on both facebook and google. because, all roads lead through them. i mean, they control advertising at this point in time. >> it's amazing. >> do you have concerns at all that these things have run up so much that there's not as much room to run? >> yeah. i think people are buying into the future. i mean they, you know, the news is out. hey, look at the top five most valued companies in the world. they're tech companies. >> right. >> so what are the small tech companies you put your money in right now? companies you say to yourself are the next version of this? or no? >> well i think the enterprise space is really interesting. look at sales force. that's had a great run as well. workday. it's more boring than the consumer stocks or, you know, the top five, or the, you know, favorite five, as people are calling them, or the scary five. >> right. >> people like calling them, but you have a digital transformation of everything going on right now.

it's all digital. and the infrastructure itself is very interesting. so the infrastructure companies recent ipos, octa, we're big investors in meal soft which went public recently. those are all rebuilding infrastructure underneath all of these companies. >> ann you've been a long-term investor as you pointed out in stocks like the amazon, like the microsoft, like the apple. what would it take for you to lose interest in one of these companies? what would make you think, okay, this is not the place i want to be right now. >> i think in the near term it's going to be hard to lose interest in these companies. they have so many vectors coming at them that are positive from demographics to technology streams to where they planted their early flags. we look at cloud. that's really early. and you've got amazon in the lead there.

microsoft is second place. google fourth place. ibm. you know -- >> where are you on ibm? >> i think ibm, and companies like ibm and oracle are doing the right things but they've got a lot of work to do. it's great that ibm has decided that data is the future, that intelligence and machine intelligence is the future. i think companies like accent your and ibm's systems group have a lot of opportunity here to help large companies transform. but they've got catching up to do, with some very -- >> -- on ibm? or oracle? >> i do not. >> is there something you could do that would entice you? >> they could be faster growing companies. >> so no. >> i mean, the differential between the top companies, and other companies is huge. and their ability -- their wealth is huge.

i mean, look at what these companies can do in chess moves. they can buy anything. $92 billion in the treasury at google. the treasuries are huge here. >> you told me social media was going to be the next big thing ten years ago, i would -- well i still don't understand. what's going to be the next big thing now, and does anyone know? >> no -- >> anything left? >> no one really knows. >> is it going to be like the internet of things or something? and my blood pressure is going to be sent to my doctor? >> definitely we have intelligence creeping in everywhere. and it's not like the future -- >> -- journalism. >> so when you look at things like autonomous vehicles, you look at the news i see. there's machines, as well as monitors, in charge of that. i look at look at these home devices. my nest cam i can buy next week can figure out i'm a person that lives in a house, and this other person who broke in has never

been there before. >> right. >> i mean that's facial recognition. >> i still want something -- i want flying cars. i want anti-gravity. can we do that? >> you'll have to talk to -- >> musk? >> to musk about that. >> would you own tesla? do you own tesla? >> i don't own tesla but i like tesla. >> do you like tesla as a consumer, or you think as an investor? >> i like tesla because we're thinking big. and i like companies that have the ability right now to take a lot of risk. that's probably the biggest challenge for some of the older companies. they're not in a position to take a lot of risk. you know, cashwise, leadership -- they have great leadership, their own shareholders don't want them to take that much risk. >> ann do you believe in singularity? >> the singularity? no -- >> when we get to -- >> machines know so much that we don't even know what they're going to design next, that there's a point where anything is possible and we -- as humans we have no idea what to design

and they have a billion times the sum of all human knowledge. >> machines will get pretty intelligent. >> okay. >> i don't know if the singularity will be there. definitely -- >> i want to wait and see. it's 2040. will i make it? >> yeah there's actually the innovation in -- >> health care. >> digital health will probably be faster than singularity. there you go. >> thank you. it's always great to see you. stick around folks.

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good morning, everybody. welcome back to "squawk box" here on cnbc. we are live from the nasdaq marketsite in times square. among the stories that are front and center this morning blackberry is shrugging off a move by toyota to use rival software for future vehicle consoles. black bury software had been used for toyota's in tune entertainment app. toyota's now going to be moving to open source software developed by consortium of about 100 companies. blackberry says it's now more focused on autonomous driving software. new jersey voters head to polls today to begin the process of picking a replacement for governor chris christie. primaries are being held for both republican and democratic

candidates. christie's term runs out at the end of this year and term limits prevent him from running for a third term. >> have you seen the commercials at your house? >> a lot of them. >> the republicans are attacking each other and the democrats are attacking each other. >> and they'll flip sides -- >> and they're really sarcastic, and the music playing -- >> it's the scary -- >> terrible. >> the white house in the meantime has put a new rule in place that would impact visa applicants. the rule will give officials the option to ask applicants for five year's worth of social media profiles and 15 years worth of bib low graphical information. state department says this likely would affect only a small fraction of all those applying for visas. take a technical look at the markets. joining us is katie stockton, and carter worth. what a good name -- >> i made it up.

>> like net worth and large net worth -- anyway. start with katie, because this is -- you're not as episodic as katie is. she comes on and she updates what she said from last time. we got through some of your overhead. >> we did. >> on the s&p. >> final resistance is gone. >> it was 2420 wasn't it? >> it was about 2400. that's the march high. and we plowed right through it. so the s&p 500 broke out confirm that breakout, really sat there for enough times, more than just something that could be a false breakout. and we saw a follow-through. so that's -- >> i get excited when you talk like this. so we clearly got through that resistance, so higher levels are warranted? or expected? >> the path of least resistance is higher now. >> what was your objective like 2650 or something? >> about 2640. and i know, it sounds a little bit aggressive. but what it's doing is looking at the rally off of the november election low.

>> i looked at it -- you aren't afraid to say it because that's just what it says but the guys not follow fundamentally, they're so worried about covering their predictions. it's always about, you know, they go up like 5% or 10% with a 5% or 10% downside and raise it when they get to the last one. they never really make any calls. they never go out on a limb. but you're saying 26 -- >> 2640. and it really has momentum. the momentum has been the key. and i think it will remain the key. it's not to say you won't see pullbacks along the way. i think it's the path of least resistance to these breakouts really and we have to be mindful of that. >> she's looking at charts. do you see the same thing? >> well it's funny. there's all sorts of ways to look at what you call a measured move. and i know 2400 is one of those. if you look at actually the long-term chart, the lows of 2009. and the peaks of 2000, 2007 and do a measured move off those tops and call it 1575 really it starts to imply not much more

than 2480. the width of the range that precedes the breakout. we think the really important thing is this, even as the market is going higher it's always off. so all year long has it been right to be offensive or defensive? offensive is buying cyclicality. yet it's underperforming. financials, industrials, energy, and so forth. in fact, what's performing is defensive. which is growth. when things are soft you want to go avid yo sin contractic growth. growth is working. staples, utilities and otherwise. so even as the market is going higher it's all risk off trade which is the real way managers are having to cope with an index that just has nothing but up. >> he said that going -- you're not using that, the '07 numbers to -- you got to what 24 what? >> 2480. >> how do you get to 26 -- see that disappoints me. >> that's not high enough. >> you're disappointing.

>> it's not as euphoric. >> why do you see 2640, what -- >> the defensive sector rotations, i want to address that point, it has been an issue most of the year and obviously yields are in play there. i think that's actually going to change in the very near term. so, yields have countercode signals that suggest moving higher from here and i think we'll see some outperformance from the financial sector which was really the leader in q4 of last year which was the launch of the rally that then gets to that 2640 target. >> you would need the industrials and financials and energy to come back. at this point energy is making a 14-year low in the market. and rates are making new six month lows. the curve is flattening. these are all deflationary things. zing, nickel, copper, tin, shanghai is struggling. that is all a risk off kind of behavior even again as the s&p is managing to probe to new highs as a so-called breadth issue. >> where would you say oh, my

god, on the -- what number on the s&p would you say go to cash? where would we have to go down to? >> it's not really a number. looking at the market from more of a bottom up perspective instead of just looking at the s&p 500, you look at a lot of stocks. and if you start to see them taking out, support levels, moving averages, on the charts, that's when we take issue with the market -- >> right. at one point just what katie has said in order to have the market continue, i think you need to have a resumption of strength in industrials, financials, energy, materials. it cannot just be led by the top big tech names. >> how long have you been saying this -- >> no, no, internally. this has been going on almost -- >> predicting it? you're saying we need these to do this or -- >> meaning i don't -- it's all very suspect. in fact -- >> you've been wrong? >> you could say that. >> you've been wrong -- >> hold on. i would say -- >> we've got to go. >> what we know is this, that the -- we had a bear market.

we had an earnings recession, and the average manager underperformed for the worst time in his career if you look at, and that's because we had a bear market that's barely finished. it's a big subject. we'll talk about it. >> all right. thank you. >> thank you. >> okay. coming up, amazon taking on walmart again. this time for low income shoppers. that story is next. "squawk box" will be right back. think again. this is the new new york. we are building new airports all across the state. new roads and bridges. new mass transit. new business friendly environment. new lower taxes. and new university partnerships to grow the businesses of tomorrow today. learn more at esd.ny.gov the power of a low volatility investing approach. the power of smart beta. power your client's portfolio with powershares.

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welcome back to "squawk box" everybody. amazon unveiling a discount for low income shoppers. the e-commerce giant will focus on offering a discount of its prime membership for customers who participate in government assistance programs like food stamps. those who qualify can pay just $5.99 a month for membership. lower than the normal monthly rate of $10.99. prime includes free shipping and unlimited streaming of movies and television shows. as andrew pointed out earlier, this is something that could help inner cities, places where there aren't a lot of choices of what you could be buying if you have prime membership. >> coming up next, the man who took boutique hotels is back with a luxury for less concept. we're going to talk to ian schrager about lodging in the

airbnb era. next. you think traffic's bad now, the future's going to be a nightmare! does nobody like the future? c'mon, the future. he obviously doesn't know intel is helping power autonomous cars and the 5g network they connect to. with this, won't happen in the future. thanks, jim. there's some napkins in the glovebox. okay, but why would i need a napkin? you could have just told me a bump was coming. we know the future. because we're building it.

welcome back to "squawk box" this morning. a luxury hotel room in new york city for under $200 a night. that's the bet that veteran hotelier and entrepreneur ian schrager is making with the public. it's a manhattan hotel that is far from traditional. ian schrager is the godfather of the boutique hotel room, co-founder of studio 54 and he joins us now this morning.

good morning. >> good morning, andrew. >> what is this about? we can actually get luxury at a cheap price? >> how? i don't understand. >> great idea by rethinking luxury. everything else has changed. why shouldn't hotels change? it's a new era of luxury. and it should be available to anybody and everybody. >> but what is -- what can you get at that price point in terms of what -- what does luxury look like at that price point? >> it looks at sophisticated as anything ten times more expensive. it has an elevated experience with great entertainment. and the style is really sophisticated. but it's available from $150. >> right. >> and i think that's such a kind of modern idea for people. to make it really accessible to everybody. >> does it have to be a really tiny room? i'm trying to figure out how you can even offer it at that price point in manhattan, knowing what rents are here, knowing how much labor costs. >> it's not a tiny room. but it feels like a cabin on a yacht where the finishes are

very high level. it was designed by world class architects, so everything is really thought through, and but the idea is we rethought the model. we don't have to provide those telltale luxury amenities from a bygone era that people don't really care about. >> what are some of those things we don't care about. >> everybody's suitcase is on wheels, like serving your coffee in fine bone china and sterling silver when all people care about is getting it fast and hot and it's good. >> that's true. >> just relooking at all of that. >> you do room service? >> no room service. our version of room service, you have two choices. you want room service, you can sleep in the lobby. >> right. >> no problem. we kind of do it on a different way. you can order on a chat bot or over your computer and it's put on a shelf right next to the elevator. you don't pay delivery charge. you don't pay $30 for a pot of coffee. and you don't have to wait 45

minutes -- >> is it true that room service which is always so costly to begin with for the consumer oftentimes costs the hotel money? that it's not a profit center? i always thought that room service was a profit center then i heard recently that it often is not. >> most of the time, like most food and beverage in hotels it's a money loser. >> really? >> it's just an amenity. but if you're in the hotel business for me you can't do anything that's a money loser. everything has to make money. it doesn't make sense. >> is the public in your mind an experiment? are you going to be doing more of this? >> it's not an experiment. i'm kind of convinced about it that this is the new wave. and we're going to do a lot more hopefully. >> what's the capital cost of putting this together? >> probably be at the end of the day, we have 370 rooms, about $400,000 a key. which in new york city is a real great deal. >> how do you differentiate all the different projects you have? because you've also worked with marriott. you have lots of different

things going on and lots of different partners. how often do the ideas -- does any partner ever say i like that idea i want to do it at my place? >> everybody gets comfortable. everyone's a little nervous in the beginning. but then they get comfortable. you know, the only thing we care about, i'm not in the distribution business. every hotel is unique. every hotel is original. and they all are different price points. they're not competitive with each other. and i'm going to cannibalize my business so if one idea is one hotel someone else can't have it. >> i might as well raise the issue, president trump's family announcing yesterday that they're starting a new hotel chain, a chain in sort of middle america, some people thought they were a lot of the states where they won -- >> to compete with budget, too. >> to compete with budget -- >> on the campaign where they thought they were staying in some crappy places. >> called the american idea.

they're going to put old coke machines, taking a little bit of a rip off the make america great idea sort of bringing that back. what do you think of that? >> well, i assume this is off the record. >> off the record. i think we're on tv, but -- >> look, i think that space in the market is a really, really attractive space. i think it's about time that we recognize that you don't have to dumb something down in order to make it accessible and less expensive. so i think it's a good idea. you know for me i'm not that interested in old coke machines. or old coke bottles. but i'm sure they'll do a good job. >> and then the other thing i was just going to ask you about is what you see in terms of tourism in new york and the united states. given the elevated threats, given the issues around getting visas. we had jonathan tisch on, arn sorenson on they've raised these issues and said they haven't had the same type of access that they thought they might with the white house relative to the access they had under president

obama which i found surprising. >> you know i saw the show and i think john and arne, really bright guys, but i think there hasn't been, except for mexico and cuba, there hasn't really been much of an effect on travel. it's been flat. i think people become accustomed and get used to things we have to deal with. even with, so becky kept questioning about the computers in the cell phones and all. i think if that comes to pass, it will be an inconvenience, we'll get used to that, as well. we'll figure out something, maybe take sim chips put them into new phones when we land. >> were you preparing for your appearance today, were you -- why were you watching -- >> he's a viewer. >> this is the only show to watch in the morning. >> let me ask you this. >> i'll tell you that. >> god bless you. studio 54 i couldn't get past

that velvet rope if my life depended on it. i dressed differently, acted differently, i tried everything to get into any velvet rope anywhere and never got by one. could i get in now because you know me? >> of course you could. >> but it's not open >> we're opening up another one. >> where? >> down at public. >> your guy at the rope won't know me. >> no rope. >> i don't want to go to a place that doesn't have a rope and i don't go into a club that would let me through the rope. that's the thing. >> the one and own ian schrager, thank you for joining us. oappreciate it. >> could never get in, ever. when we come back, jim kr cramer will join us live from the new york stock exchange. "the profit" tonight 10:00 p.m. eastern time and pacific. stick around. "squawk box" will be right back. [vo] when it comes to investing,

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let's head down to the new york stock exchange. jim cramer joins us. apple is the place we want to talk. i don't know, jim, that does kind of look like it's, i don't

know, it's equilibrating? >> i'd love to check it out. the sound quality is not that great, the ability to talk to it is superior and people worry about the price point but as far as i'm concerned if this is a fabulous so-called stereo and i can get rid of sonos i'm happy with it. people immediately -- i think whatever apple does people say they're stupid and then they go buy it. >> you can get rid of sonos? i thought it was sonas. >> that's what people are saying. >> that would be a disruptor. i like what i have. i play my apple music on the sonos at home. >> so do i, exactly what we do. i find that's been my our go to. >> jim the over/under, sonos is trying to integrate with amazon echo, google home and siri so

you will be able to be platforming agnostic and hook one true stereo, in the apple version you just have the speaker and can connect a couple up but it will be different, just putting it out there. >> if they're doing everything that's fine. that would be a big deal, andrew. i don't know. i think, i got to try it. i want it for a week and make a decision. that could help me make this go a lot easier for the holiday season. >> so 2.13 on the ten-year? >> i think there's more economic activity than people feel like but i think there's something going on in the world people want to own our bonds more than anything else in the world and i got to tell you, i think that europe is a terrible place to invest in bonds and i think that we're the big winner, but a lot of people feel this is all about economic weakness in our country. i don't see it. i think that employment number wasn't as bad as people thought but people are negative. they're negative all the time.

they get up in the morning, they're negative. hey apple, i can't believe how horrible that is. how much does it cost? i want it. >> right, right. all right, jim, thanks. we'll hear more from you in a couple minutes. tomorrow on "squawk box" our guest host former honeywell ceo larry bossidy at 7:00 a.m. eastern time. we'll be right back. this is the new guy? hello, my name is watson. you know wine, huh? i know that you should check vineyard block 12. block 12? my analysis of satellite imagery shows it would benefit from decreased irrigation. i was wondering about that. easy boy. nice doggy. what do you think? not bad. what do you think? when this bell rings... ...it starts a chain reaction... ...that's heard throughout the connected business world. at&t network security helps protect business, from the largest financial markets to the smallest transactions,

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all right, the walter white saga may not be over yet. vince gilligan the creator of "breaking bad" is teaming up with sony playstation to create a virtual reality game. sony will not confirm bryan cranston is involved in this project or not. this exciting news for fathers everywhere. americans are expected to spend a record amount on dad this year. the national retail federation says people will dish out on average $135 on father's day gifts a 15-year high, the type of gift is changing as well, ties and socks are out. we'll get better stuff with nearly half of consumers opting for special items, dinner or tickets to a concert, or a sporting event. becky quick, have you bought

father's day gifts on behalf of the children yet? >> i have not. >> you have not. >> well is it, not this sunday. >> no, you got an extra would ek ahead but ordering stuff online you're getting close to the deadline. the average for mother's day. it was a record for mother's day, too. >> get more or less? we have to go. >> 186.39, we win. >> mothers get more. >> time for "squawk on the street." >> as it should be, yes. ♪ good tuesday morning. welcome to "squawk on the street." i'm carl quintanilla with jim cramer who is back, david faber. futures are lower after the secondest tightest raping. the president meets with gop leadership on health care and taxes today. comey's testimony two days away. europe is weak. bond yields now testing election day levels ten-year g