>> i can't believe - >> most remarkable things. it moves you in a way -- >> it does it's transcendent. it's like art. people say things about art. really is it about art and transcendent but it is. >> i cried. >> you cried at finding dory. >> i did that as well. >> not quite transcendent. >> join us tomorrow. "squawk on the street" begins right now. ♪ is . good monday morning. welcome to "squawk on the street." i'm carl quintanilla with jim cramer and david faber will join us in a moment we look at the reaction to jeff immelt leaving ge.

our road map begins with ge, immelt is set to retire this summer the tech stocks are on track to tumble apple under pressure missolo downgrades apple first up, jeff immelt is resigning as the ceo john flannery will take over we have talked about immelt and ge's trouble just trying to keep pace with the dow. really since his tenure began. >> it's the worst performer in the dow since he came in apple -- he's down 31% some people can always argue at that moment that he came in it was a high water mark. others have said, listen, he did cut the dividend, but many who cut the dividend i think that's what's happened when you compare him to a honeywell, when you compare him to david cote, even to greg hayes at united technology, difficult to compare

very difficult to compare. >> meaning immelt does not meet their standard >> it's empirical. i'm not saying listen, i know the guys, i know them pretty well, and they were able to reshuffle the portfolios in ways that generated a much better return honeywell did a much better return on the s&p. the difficult thing -- my charitable trust owns it, what it is worth. if it were executing perfectly because what happened is that the -- let's put it this way because it's a delicate issue. okay we do know jeff. i don't want to say you know what, i did say last week i think the stock would pop if there was a change but the cash flow was abysmal the first quarter. i said that before i'm say it again. that quarter turned a lot of people not only negative but into fearful one of the things that had become part of the narrative was the very strong deutsche bank

sell where john -- we have known for years, i knew him when i was a hedge fund manager, talking about the parts, don't buy it for that talking anot being able to make the $2 number, that was said when i interviewed jeff not that long ago. and that the cash flow was a shocker. and the walk back from the $2 number for next year now, i'm presenting this all as a big pastiche which is basically that jeff said that 2018 would be better than 2017 and there was a belief that the baker hughes deal that would close in june not good put that in context of what the company does say, it was orderly, it would be talked about from 2013. you end up with a kind of a mixed picture of that they were always going to do this. that he wasn't going to stay for 20 years is the timing right for a change i think the time -- yes. and the stock tells you that. >> right hard know whether the board was actually thinking that four years ago as the company says. >> yes yes. i know that trian was not

thrilled with the walk back and thought there should be a lot bigger cuts. that's public. i'm not doing -- i have not said anything that is behind the scenes i have behind the scenes on flannery, he's a seemingly jovial man who is not. and, you know, that i'm getting that from a couple people. >> yes. >> you know, jeff is jovial. and jeff is more of an ambassador, a goodwill, be out there. i don't know if you'll ever see flannery. >> the narrative is that fran vi a tough guy. did a lot of -- that flannery is a tough guy. >> someone was adamant, he has a plan to break the company up, take that narrative off the table. a plan to be able to scrutinize every division, absolutely he came in health care wasn't that good. it wasn't. it had been a division that i didn't like. they had doubled down and bought i felt inferior assets

who knows what they can do with baker hughes. >> immelt is on a facebook live investor presentation right now. he said that the board did set this process in motion in 2013, that billion dollar the summer of '17 that succession would happen it's caused us to take stock of the times we had to chat with jeff over the last year or two here is immelt -- no, we'll listen to this for a moment. >> even though i love you all dearly, change is good we're standing up -- baker hughes a lot of the portfolio stuff is behind us and it gives john a platform from which he can lead in the future john is going to talk about himself but i had a chance to see john do five jobs in the last 16 years and gave me the sense of the kind of person who can run the company. first one was in -- one of the

ge equity businesses in the early 2000s. he was in a tough cycle. he spent a long time in my doghouse - >> that's immelt talking about john flannery. he has spent half of his career outside of the u.s and done a lot of deals and development. interestingly, the company pushing back on this narrative about a breakup. >> immediately. >> we heard from the barclays analyst this morning calling for an at&t style breakup. >> right you can call for whatever you want one of the things i mentioned recently that there was one of the analysts had come out and said that the dividend is in jeopardy i would say that -- that there were heat seeking missiles coming my way, that that was even being debated because one of the things was the deutsche bank analyst that said they're setting that up. as soon as you talk about a sum of the parts of a breakup, you're talking about the dividend being in jeopardy so i want to walk that back too. i do think that flannery is bog

to look at everything. did they buy things at the top -- look, i was there when they made the oil buy. oil had really run run run run but what i was most afraid, i was so heartened was they didn't come and run at the bottom they doubled down at the bottom. that was a very smart move by jeff at the same time, when you come in at the top you're averaged down like you would with a stock. that is something that takes a little while. >> yeah. >> i thought the baker hughes deal was brilliant, but again, oil is at 46 you need oil to be at 56 to make that thing hum it ain't humming the $2 number for next year, i would say that $2 number is no go. >> i think that's not necessarily out of the cards >> right a total ge reset would be dynamite, but that is going to make people a little uncomfortable. i think that flannery has to do that because i think he has to make cuts without the cuts you won't get to the $2 number.

>> there is flannery you want to hear this for a minute all right. john flannery, becoming the ceo august 31. you did talk to jeff immelt on "mad money" about the stock and the swirling bears >> last year, overall segment earnings roughly flat. we're forecasting 3 to 5% organic growth 100 basis points improvement good backlog and good momentum i think a strong 2017. i think the way we're positioned in 2017. you're going through the bears >> let's bring in david faber who of course, every time you go on a week's vacation, news breaks in which we need your insight. company this morning though insisting this is not a trian dynamic here. >> yes, they are and jim of course sharing that narrative as well.

as you guys know, and reported already. saying since 2013 this process began when immelt said that 2017 is when he'd announce an exit. at the end of this year, he recon firmed or confirmed that was the case and the board moved into serious thought and process around internal candidates already having identified that was where they wanted to go. as opposed to going externally simon nellie, bornstein the cfo and of course flannery the four they were choosing from. i guess during that meeting when immelt sent the stock down yet again, they were having the interviews right at this time and basically coming around to flannery flannery being the choice. but, you know, it's interesting to look back at the ten year from mr. immelt. he's lost the confidence of the

investors. i think he knows that. apparently did not lose the confidence of his board. and at least the way that they are narrating this for those of us who follow this company closely saying, you know, this was all part of a well thought out process in which mr. immelt said it was long enough and it probably was 16 years is a long enough time he came in a multiple on the stock price one week before 9/11 it certainly lagged and he did lose the confidence of the investors. it will be interesting to see if flannery is able to gain that confidence back. jim, i'm hearing the same thing. nobody is expecting him to break it up. if they are lauding his ability to turn it around health care, remember the deal. another asset that people said was bought way too high. >> yeah. >> from the earliest deals that immelt did he has successfully turned health care around the expectation is he's objective about all parts of the

company, but no plan to change it let's not forget, immelt is leaving a company that's group around industrial assets and 130 or so countries. he did completely and totally change the complexion of ge since he came in. >> right it's important, david, you know that when jeff was on "mad money" he still -- whole company is different than 15 years ago 15% financial service earnings, if you took out the last five years we have outperformed the s&p 500. if you look over the last five years they have outperformed, once they got out of finance the most important thing, when we look at the comparison of when he came in, remember the hedge fund and drag comments, you wanted hedge fund and drag and then jeff had come on "mad money" a bunch of times talking about how he was abject that it wasn't the right position. at the same time, i think that there's a lot of people who look

at the very difficult compari n comparisons who are in diversified industrials and jeff did have a tough class to go against, wouldn't you agree? >> without a doubt you mentioned it of course whether it was cote or hayes or george david a long time it was no doubt they had their share of tough competitors it will be interesting to see what flannery chooses to do. when it comes to trian, my expectations are they'll continue to focus on the promises that were made. delivering on the cost cutting they said they have wanted to and will be held accountable by trian regardless. >> right. >> it gives them breathing room, but it doesn't mean they're going away apparently they still have a constructive relationship. >> right right. >> one last point on the portfolio. we did ask about financials and the resurgence of financials, snag ge does -- something that ge does not participate in this is what he told us in

november. >> i don't regret not being in financial services even though bank stocks have had a great week i cheer my friends like jamie on say okay, you have earned it, but it doesn't make me say, holy [ bleep ] why didn't we get out of ge capital. we have a good vision for the company. we like the way the next few years shape up for ge and our job is to execute. >> do you second guess the financials exit? >> timing of everything was a little off everything i mean the oil buy the financial services look, i thought the financial services - >> and the sale of nbcuniversal at a low don't forget that. >> yeah. but you know what, david, there you can argue -- yes, first of all, that was a low. but that the people we worked for comcast made this asset into something much more. david, you know that jpmorgan, credit suisse and deutsche bank had turned against this man. i brought up that repeatedly

it was a difficult interview i had with him i want to be candid. i kept bringing up the bears but the bears were in the majority of this and that's a highly unusual situation. >> it is again, it goes back to fact that listen, immelt was frustrated by the stock price. he continues to be frustrated, i'm sure when he looks back on the ten year, despite everything he accomplished in terms of completely changing the complexion of this giant company he will continue to be frustrated by the fact that it did not get any respect in the stock market. >> didn't stop him though from making -- from making some big purchases. >> no. >> in the last few months. >> no, not at all. also to give you what the -- this is a credit suisse -- conversion at ge is erratic. there are analysts who say buy but the tone of the analyst coverage was as negative as i have ever seen from the big -- from three big firms what was really interesting was that i spoke with a number of

ceos in the industry who were shocked that the free cash flow was negative this quarter, including one who told me point blank, how the hell did that happen how did he let that happen i know that there were real issues that david, you know that free cash flow being negative, that's the holy grail of what you condition have happen at a major industrial. >> no doubt. no doubt interesting to note that bornstein the cfo who would be intimately involved in that as well is going to be moving up to the vice chairman, but did not obviously did not get the top job because he doesn't have the operating experience that he was up against, and flannery with the key operating experience and won that won him the job. >> look, it's huge news. it might have been in the works from 2013 but in the february interview i would have said that that is quite a surprise now, look, maybe you always have to keep these things close to the vest, but david you know that most recently -- maybe he's

laurence olivier i did not feel he was about to go. >> no. although, you know, timing would say that it was about -- that it was time certainly felt like it we talked often about it we saw it, i think, jim. i -- i mean, the pressure from trian might result in this end but might comeas a result of pressure, perhaps even being applied publicly the most important thing the board does is find the successor. and in this case, it does appear the board was doing the work behind the scenes in keeping it very quiet it does appear that they stayed in his corner. you know, he had the support of the board throughout and it does appear that he at least, if the board stayed behind him and did the work it was supposed to do >> yeah. total agreement. i don't want to -- you know, there are two narratives here. the narrative from the bears that said he had go and then the actual ge narrative. if we do not present the ge narrative i think that's not our

part the ge narrative is like, look i it was in the works. david is right brennan, chairman, very tough guy, the board was always in -- you know, much too close to jeff but to deny their view as some people did when they said when this analyst said they'd cut the dividend is to run the risk of saying, you know what, the guys at ge, they're not truthful. i'm not going to go there. that seems wrong. >> one last point is, the ongoing chain of multinational manufacturers ceos who have left, right. we talked about the few in a row. not too long ago claus and some others. >> i think if you spent a lot of time with trump, it does not seem -- now, ge was obviously, they wanted -- they favor -- pure free trade. i think if you're underperforming in this era, it does -- in an era by the way that there are activists even going after the largest companies, underperforming is more highlighted, how is that?

david, you agree that, more visible if you're not delivering the numbers. >> without a doubt listen, the summer is as long as he could have gone without getting significant pressure trian will continue to say we're focused much more on the cost an delivering on that, taking out $2 billion over the two year period but it was going to build, jim with all of -- and particularly as you pointed out so many times and correctly of course, the negative commentary, particularly the likes of coming from deutsche, talking about a dividend cut there was no doubt this was not going end any time soon. now they get a reset under a new guy. >> right david's absolutely right one of the problems that i think people don't understand, when you get the analysts turning against him, i saw it at procter & gamble there was a rebellion among the analysts and i regarded this as a rebellion. these are people they're not yahoos, they're serious people in the business. when you come in and you say,

wow, credit suisse, holy cow, jpmorgan, i brought this up to jeff and jeff shot them down but the problem is they were so vocal. it's so not a yahoo, very serious analyst. he reiterated sell every week he reiterated sell. >> you know, listen, it's still a situation where analysts feared they will be cut off from the company sometimes for not receiving as much information as they like if they go negative. that's the extent they were willing to do that. >> yeah. they have to -- i have to point out that barclay's came on, they called immelt's tenure an unmitigated disaster. >> unmitigated disaster and a lot of bad luck. >> there's bad luck too if you bet on 00. >> david, thanks david faber joining us on the phone. when we come back, tech on a track for a rough start after

friday's sell-off. apple getting slapped with the downgrade. we'll fill you in. look at the premarket. resqwkn e re" coinues in a moment. the moment turns romantic? cialis for daily use treats ed and the urinary symptoms of bph. tell your doctor about your medicines, and ask if your heart is healthy enough for sex. do not take cialis if you take nitrates for chest pain, or adempas® for pulmonary hypertension, as this may cause an unsafe drop in blood pressure. do not drink alcohol in excess. to avoid long-term injury, get medical help right away for an erection lasting more than four hours. if you have a sudden decrease or loss of hearing or vision, or an allergic reaction, stop taking cialis and get medical help right away. ask your doctor about cialis. and get medical help right away. ready or not, here i come.ek.) ♪ anyone can dream. making it a reality is the hard part. northrop grumman command and control systems

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they wanted. this is certainly -- they wanted this fast. i don't think they necessarily -- i would tell you that when i speak with the -- you know, periodically i speak with trian i spoke to them last week they'll focus on procter & gamble i think they got what they wanted. >> this is what they want. >> i think they got what they wanted i know -- i remember them saying that they like flannery but they're not going to call -- not going to talk to me. but what they will say, hey, they like the change now i think that proctor is going to be a major, major focus. i do think that this man flannery is known as being tough, but fair. i bet that trian guys will like him because he can lead to some shakeup on the board that's important board shakeup is what's going to have to happen this man flannery has very loyal followers. checking in with my ge people, procter & gamble is next. >> when flannery came into health care, he did some 80%

churn in management there. >> well, health care was -- i always felt second rate, second rate he brings in first rate people they get the margins expansion i know that there were a lot -- there was a lot of pressure on this board to make this move happen now but i'm really kind of struggling over the idea that there is a -- you know, the 2013 -- there was going to be a change i think that jeff wanted to see the baker hughes thing through i mean, that's coming in june. >> not far away. >> why would you retire now? but i do think -- i know that the trian people from the few times i have talked to them about this in the past, i wish they'd give you a heads up now is that you know what? this had to happen. >> yeah. >> i think a lot of analysts expected it to maybe have this conversation later in the year. >> you can see upgrades. >> on this alone. >> yes that's why the stock is up a dollar upgrades >> up 4% this morning. we'll get cramer's "mad dash"

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with the microsoft cloud, we can analyze the data faster than ever before. if we can detect new viruses before they spread, we may someday prevent outbreaks before they begin. we take you to ge's facebook live investor meeting. this is on-flannery, the incoming ceo. >> we need to improve on and improve on i think quickly so no one's happy with the stock price right now. or some of the cash -- you know, pictures that we have had. we know we can be better at those things i want to focus on those things. so i'm going to spend basically

what did in the health care business spend a lot of time early on with investors, with customers and with employees listening, hearing what, you know, people think about the company. then really looking business by business and understanding competitive position where we're investing, what are the priorities inside each those businesses an i want to stitch that all together. we mentioned digital a few times. i know that's a key thing weaving through every part of those discussions and the san ramone team is vital to the whole company, but i want to go low the deep review with a real sense of urgency come back in the fall with a broader set of recommendations but it's building off a very, very strong base with great businesses and greatleadership team and we'll take it forward from there. >> that's important. remember, trian, they had been on record liking him bornstein too. not picking up today which is

unfortunate, but this man has lots of loyal followers. i think what's going to happen is that you're going to see one of these analysts break ranks in the next 24 hours and go from sell to hold to buy. >> we'll watch for that we have 60 seconds to do a quick "mad dash" here. >> someone wants to make a name and it's missow low, let's downgrade apple and panic everyone this says the service revenue is not that good. this is one of those -- this is a -- this is a statement downgrade which means you never heard of it, but today you have. and you know what i say? it was down on friday. >> i was going sayif you -- because friday gave them some cover. >> sunday downgrade. everyone is talk about it. i don't know, i think crosby was talking about it on the evening of the stanley cup, did you hear they downgrade

ge and missow low? >> at the big board this morning, it is goldman sachs celebrating the access investment grade bond etf. and then robo global celebrating the automation index etf so we have not had a chance yet in 30 minutes to tuck about what happened -- to talk about what happened on friday to nvidia and f.a.n.g. the worst day for f.a.n.g. since february of 2016. >> interesting look. andrew came on scott's show on "halftime. really reiterated the notion that the casino nvidia, it wasn't amazon flash crash at around 2:40 that really scared people i think a lot of people who feel that the group is now broken the way that these sell-offs have worked periodically is you

know if we get the down opening buyers then come in between 10:00 and 11:00. i think you have to be careful because the buyers are really clustered in the banks and finance. when the oil goes up, people have fled oil like you wouldn't believe. if oil can stay the course, that's going to cause a lot of money to have to come out. i think oil very, very strong today. just be careful. the one to watch, i'll just be abject about it. forget all your screens, watch amazon amazon had nothing fundamental that was said negative on it amazon is the one if amazon turns and turns convincingly then you're going to regret that you didn't make a move the apple downgrade really -- really kind of made it so that you don't want to come in band the first guy. >> right >> mizzou low did go from neutral. price target - >> yeah. a hatchet dollar. >> amazon is back below a thousand, but that's one to watch.

>> niece -- that's the one to watch. there were negative about different companies. the nvidia negative, it went up a great deal now andrew leff did say it's good pricing. the apple downgrade makes a lot of noise there's been back and forth about whether alphabet has moved too fast nothing negative about amazon. so that is the one, the second one to watch is a company called autodesk which had the finest quarter that i have seen this quarter and that is very important. then the third one to watch is western digital. my charitable trust owns it. western digital is getting the big heads up they might be able to buy the toshiba flash where they have to -- would they have to issue shares? people know they want that business very badly. i'm not saying it has to be up if they get it, it goes to 100. >> adam jonas with a note on tesla. they leave intact their price target at 305, but bring up the

bear case about 50 bucks >> interesting piece what they're saying they said something that the bears never ever want to hear which is that if this model 3 sells really well, their profitability could be -- when you hear the word profitability associated with tesla, listen, it will be sunny out and hot, but it will snow. >> his point though largely is that this is no longer a stock that's keyed off of what happens to the model 3. >> no. >> or semi-truck it's more about shared mobility and whether or not they can leverage data and everything else. >> yeah, it's about technology look, the bulls have tried to bake it into the technology store. you don't need the traditional price to earnings ratio. it's ridiculous that it's bigger than ford. i think that you can't get in the way of it. you can't short it it's a little -- you know what it's like i want to bring this up to really bother people

it's a little bitcoin. >> which cracks 3 k today. >> every -- there was a panel last week with four cyber security people. all who said that when you're hit, you have to pay off in bitcoin. the bitcoin people said that's blasphemy. i said, well, maybe it's part of a vast conspiracy. >> there's a look at bitcoin this morning, down about 6%. >> yeah. >> we mentioned ceo departures ubs weighs in on buffalo wild today. >> yeah. that's a tough one i think that -- you know, in the end you're still selling wings and beer and the takeout business has done well the basketball series, they were talking about you have to cut numbers if it was going to be a four game. obviously it will be longer than that it is levered to that. but what's happened, the dine in, the dardens of the world, the higher have done well. i talked about buffalo wild with my model, because bar san miguel i know if you can't get people

in there buying the margaritas and buying the beers you don't do well. but the source of profit is the beer and you don't take out an have beer. hey, let me have five beers for the road that stuff doesn't happen anymore. it's good it doesn't happen, frankly. >> i'm looking at the biggest laggards on the s&p. i would say the top 15 or 20 are all 30-plus percent gainers for the year. >> yeah. look, you'll get -- we're at a moment right now, you know, mid june where people want to take some profits i have heard people -- i came up with f.a.n.g people are saying, whoa, this is -- now, let's understand each other. a lot of stocks that are up, but a lot of stocks had great quarters when you mentioned autodesk, a lot of companies went to a cloud model and a subscription model the internet of things they have given you so many reasons to buy, if you go over the nvidia chatter, did it go up

too fast, yes. does nvidia have the best portfolio, yes and lam research they make machines for it. but goldman said, be careful, amd, don't buy it for bitcoin. they're buying it for gaming for esports. we had an esports guy on this morning. people don't realize how big it is because people for the most part who do this business are not 16 i mean, if there's some child prodigies that own mutual funds, you would see them go higher watch activision, blizzard, take 2. that's the theme watch analog devices because they're out of apple watch skyworks because they're in apple watch broadcom because they're in apple all will go down because of the buy to hold. kevin spacey did he mention it, i wasn't watching the tonys. did he mention the buy to hold >> you must have been watching hockey i guess right? internationally we should

mention, uk consumer spending goes negative year on year. >> and five star - >> prime minister may she's trying to hold her coalition together. >> i have to tell you, what she does is listen to wilfred frost and then shakes because wilf, he at 5:00 a.m., he's talking about theresa may, theresa may not i'm thinking the may not camp is bigger. >> the fed of course tomorrow. statement wednesday. >> yeah. >> more -- chances are, 95%, the odds. >> then people are talking about the september hike after you know, if you're in the banks and the banks had been moving for three days, you need multiple hikes i'm looking at jpm it's up again. i mean, boy, kind of a long streak now for the banks a lot of the high growth stocks are getting clobbered here but the dow is not filled with high growth stocks another one to watch is j&j. j&j is not kryptonite. >> ft this morning tries to argue that the june hike will be

the last of the year. >> that's what they're arguing well, that's good. great that they have that argument out there i argue that the pink colors are done with. i like -- read it online listen, if you want to argue, whatever how can you argue that what, are they in the room i mean, honestly, steve liesman is the best reporter on this i have not heard steve liesman articulate that view yet if he articulates that view, i'll like that salmon colored thing. i'll go to the big salmon run in alaska if that -- just, you know, kind of accentuate it. >> there's the ten year, having come up a bit on the yield for the past few days. >> watch amazon, down 23 showing no sign of a turn yet. >> ge is your best gainer. almost a 5% move let's get to bob pisani. hey, bob. >> happy monday, everybody let's split open -- i want to show you what's going on in europe where we're not surprisingly getting some follow through to the second sell-off that we saw in the united states

some of the big chip names that are down there asml one of the big chip machine manufacturers is down. these all trade over in europe and obviously you can see some follow through on the down side. here in the u.s. we're seeing what we saw on friday which is rotations into values. so energy stocks strong again. today as they were on friday banks up fractionally. tech down. consumer discretionary down. two of the big market leaders on the year -- tech and consumer discretionary. what's stronger market losers, energy and banks that's rotation. of course your f.a.n.g., whatever you want to call them now, follow through is down. so the debate is over growth versus value this is what everyone was talking about over the weekend is it time to go and finally buy into value so if you look at the -- there's etfs for this obviously. ivw versus ivo

value has diverged from the growth really we haven't gotten anything out of value from most of the year and the growth stocks tend to be those who grow earnings and above average rate, are those that tend to trade at the lower pace they have slower growth prospects i. is all about growth this year. so time to buy value here. so if you look at value versus growth here, 13% for growth. 4% for value here's part of the problem hard to define exactly what you're talking about in general, growth has been this year tech, consumer discretionary and health care. value stocks have been financial and consumer staples not a completely hard and fast rule sometimes go back and forth. it's often debated that's the bottom line if you look at the top holdings if you own a value fund, guess what the top holdings are. this is the s&p percentage of holdings so apple is 7% of the growth index of the s&p 500

does this look familiar? it's the faang stocks they're all there. if you look at the value holdings, it tends to be as we discussed energy and banks that's why we noted so heavily on friday, energy and banks have been moving. that's again happening today this is fuelling this whole let's move and rotate into the value game so you see exxon, berkshire, jpmorgan, chevron's there. even walmart as a heavy holding in the value funds so it's a debate right now finally the big debate everybody stalk about whether apple is overvalued the oldest game that we have got going. i just don't get it because if you're looking at the simple p/e ratio for multiple for apple right now it's 16.7, and 14 times i have 2018 analyst estimates. now, these are estimates but that is not overvalued by

anybody's stretch of the imagination. apple has been chronically undervalued for a long time. the s&p 500 right now this is 2017 numbers is about 18 and maybe 17 on 2018 i just don't get the argument that apple is overvalued but some people are trying to make it today and we got a downgrade from one particular company. at any rate, the dow is down 31 points back to you guys. >> thank you very much it will be a busy week watching bonds and fixed income let's get to rick santelli at the cme. hey, rick. >> well, carl, you know, it's so fascinating that in front of the two day fed meeting, we are seeing some movement if you look at the two day of tens we're a bit elevated. look at the two days of bunds, not very elevated. therefore, the difference is getting wider, but wider is still under 200 basis points it's still having a huge effect. relative value trade and all of the quantitative easing and purchases by japan and europe are having an effect maybe the effect is a little

less, but maybe we'd be 20, 30, 70 basis points higher if it wasn't for that. journal has a good piece today regarding how the fed seems to be a coho salmon swimming upriver when the other two aren't going the program if you look at 2009, we're just several basis points away from challenging the levels but if you look at the year to date, chart, whether we're at 1.37 or 1.38 the fulcrum of the next wave of historic comps north, you can see it's accentuating if not underscoring the flattening of the yield curve we have seen finally, all of that's going on, we see one week of the dollar index still stodgy and there's also great articles today about how the uk with the big drop in the pound, well, you know, is that really a big panacea of wonderful things for exports? just make everything your people are buying cost more well, it seems like the latter

is a whole lot more in vogue and you know what, considering the better the neighbor in the '30s maybe that's a good thing. carl and jim, back to you. >> thank you very much watch oil prices this morning. we got crude back into the mid 46 level dom chu is at the commodity desk. >> looks like we have a bid, brent crude prices as you can see, just off of their highs north by about a percent and a quarter so far wti $46.50 you can see there brent crude around $48.75. that move of course comes after a rough week for oil prices. we saw prices drop by almost 4% last week. even with the bounce today many traders are still keeping a close eye on that supply and drilling data that's going to come out later on this week. we heard -- buy that baker hughes report that it was added to the number of active rigs for the 21st straight week that can continue to keep a lid on prices at least short term.

carl, for now, watch for some support around that 45, $46 a barrel mark. guys, back to you. >> thank you very much when we come back, former medtronics ceo bill george, he will speak on jeff immelt stepping down as ceo of ge the dow is down 32 back in a minute no splashing! wait, so you got rid of verizon, just like that? uh huh. i switched to t-mobile, kept my phone everything on it oh, they even paid it off! wow!

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uber's board of directors voting unanimously to adopt all recommendations from a report stemming from allegations of sexual harassment at the company. the report is the culmination of several months of investigations by former attorney general eric holder a board rep said the recommendations will be released to the employees tomorrow. it's unclear if any action will be taken against ceo travis kalanick or any others, but kalanick can face a three month leave of absence other reports suggest that would be up to travis, jim but they named a new nestle

executive to the board a third female hire in a week. >> look, this is -- adam lashinsky, he wrote a great report about travis and the company. you know what, the guys had a couple of res verial -- reversals with his mom, you know kind -- i read all the coverage and it makes it sound like he's a big jerk actually, i debated that with adam, how much of a jerk is kalanick that's been kind of the narrative with him, but when i think that you lose someone that really that close, i think you have to like accept the fact that maybe you take some time off. >> time to step away other reports suggest that the chief business office, a long standing number two to travis might resign today. >> look, if this were a public company we'd be shorting it right now. it's in disarray this is one of the advantages of not being public

i don't think the core business has been hurt at all, but i think that you would see this one down even more than amazon right now. >> which by the way as you pointed out is one to watch. >> yeah. you're getting -- it's getting killed here. it did peak at $1,016. the reason why i'm staying focused on it so badly is there's no negative story with it the other one i would watch, this is down 29, the other one to watch, if you want to see a term is alibaba. because there are four firms that raised price targets and alibaba had an excellent quarter. 160, 175 so watch that because that one is obviously just had a great quarter there are some value stocks as bob pointed out that are just on fire i mean, you know, i always felt that cbs and it's up $2. there was a piece about

paramount being a hidden jewel the money is going to where there's value. oil look -- i'm looking at the value stocks starting to scream here i would point out by the way that the deeper tech goes, the more likely you're going to have a reaction by friday maybe even before then money coming back. they're not able to resist this kind of growth they're not going to stay with it they can't avoid -- too hungry for growth the managers. if amazon is down 35, i bet you guys come in - >> so you think a dip is shallow? >> look, the rotation's vicious. you get people coming into retailers. one of them last week was kohl's people had a good laugh at kohl's, i happen to like kohl's very much t stock is up four points that's a lot these are outsized move for nothing. other than the nordstrom which i think i'm going reiterate is going to happen. but i just point out you think they'll be able to resist alphabet under $900?

this is the -- this is not their style. what i'm saying, big mutual fund managers are not going to abandon growth just on the basis that stocks went up a lot. they're not going to decide that nvidia is no good. they're going say that nvidia stock went too far watch nvidia, watch alphabet, watch lam research but continue to watch the big value stocks like the banks like the oils. the oils are value stocks. oil bottomed ahead of -- the stocks bottomed ahead of crude. >> banks had a good open up about 1%. >> nothing happened there. watch autodesk it will hold 100 i think. >> with all of that t dow is down 61. we'll get "stop trading" with jim in a moment. our brains so we can share our amazing trading knowledge. that's a great idea, but why don't you just go to thinkorswim's chat rooms where you can share strategies, ideas, even actual trades with market professionals and thousands of other traders? i know. your brain told my brain before you told my face.

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♪ time for cramer and "stop trading." >> nothing like steve miller i'm going to speak about fedex right now. stifel comes without a note t president has met with the people who run fedex

this is happening over the next couple of days i think you're going to hear -- this is my own reporting that fedex is involved with the privatization of airports. >> interesting. >> yes that's a very good reason to own fedex beyond the numbers they report june 20th. i think it will be a good quarter. so you've got -- let's not be surprised if i wouldn't hear that the privatization of airports could be an opportunity for fedex. >> wow this is an all-time high going back to the ipo in 1978. >> in you go not in the stock i like the fact they're very close to the president doesn't mean that anyone is going to throw it to them, but they have better plans about privatization than any other public company. >> yeah. how about tonight? >> i have the hottest -- the hottest retailer no one has ever heard of but i love the company. ollie's bargains you're making a strong case for even, thank you, matthew boss for introducing me to ollie's army this is ultra low bargains i like retail here

i think retail can keep going. we were talking about ge, the upgrades are coming tomorrow. >> an interesting week. >> watch microsoft the cheapest of the nonfaangs. >> i have to do an evergreen, i told the wife, i'll see you tomorrow. >> "mad money" 6:00 p.m. eastern time a lot more to the reaction of jeff immelt stepping down at ge. the dow is down 64 your muscles look good, but we should be seeing more range of motion. i'm fine. okay, well let's see you get up from the couch. i'm sorry, what? grandpa come. at cognizant, we're uniting doctors, insurers and patients on a collaborative care platform, making it easier to do what's best for everyone's health, every step of the way.

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♪ good monday morning. welcome back to "squawk on the street" i'm carl quintanilla with sara eisen, mike santoli at post 9 of the new york stock exchange the dow is down 65 two big stories this morning one is the continued sell-off in tech we have stocks like apple, nvidia taking out friday's lows and of course big change, jeff immelt leaving ge. >> a big change at the top for ge jeffrey immelt stepping down, the stock so moving. >> financial reform gaining

momentum the trump white house unveiling its plan to ease regulations we'll get a live report from washington. >> tech wreck. the nasdaq continuing to fall. apple under pressure after a downgrade from mizuho. we'll discuss. >> first up, ge is announcing a major shake up jeff immelt is accepting down as ceo. morgan brennan has more. >> well, investors had been hoping for this some time, because the ge shares have dramatically lagged peers. they're down versus honeywell and united tech and they're up 250. flannery will take the helm, adding chairman to that starting in 2018. so who is john flannery? he's a 30 year company veteran who's held a number of top positions in the company including head of m&a and overseeing a turn around of the health care business as the ceo there. now he's helped to orchestrate

some of the biggest deals including thele ofston power deal and the synchrony of the ipo. immelt said last month it would take more cost cutting and that on the heels of other disappointing results like cash flow there's a lot of speculation that shareholder trian fund was pushing for a change there still, ge says this succession plan has been under way since 2011 with the summer of 2017 target in place since 2013 so this has been coming for some time so far, analysts are upbeat about this development that since flannery's seen as more willing to make big portfolio decisions than the others who had been floated as possible successors, they took to facebook live where flannery said he'd meet with investors, customers and bit whittle down into the businesses.

we'll be tuning into the meeting later on meantime, shares of ge are up more than 3% on this news today. guys, back over to you. >> morgan, thank you very much for that, morgan brennan the shares are reacting positively to the news this morning. flannery commenting on the company's stock price during the facebook live chat in the last hour listen to this >> no one's happy with the stock price right now. >> back in november we talked with outgoing chairman and ceo jeff immelt. this is what he had to say about the stock and purchasing more. you bought some shares in a couple of rounds this summer. >> yeah. >> doesn't appear to be any grant or options exercise. is that a statement you're making >> i love where the company is positioned i can never own enough ge stock. i love the positioning for the future and you know, i'm -- i am so

long i have a simple portfolio. ge so i keep buying >> for more this morning we're joined by citi's senior analyst, andrew kaplowitz you said it's too early to tuck about divestitures or spinoffs what's going to change >> look, i think that john flannery will bring a new perspective here i know he's an insider he's known as an executer. he did a really good job in health care in the last few years. i think he's going to come in. everything is going to be on the table. you know, as he said in facebook, he'll take his time. and he's going to sort of do this right but, you know, from our view it's been about optionality. he has a lot of great businesses i think flannery is going to look at the businesses carefully to see if he does need to change

the company. >> andrew, by all appearances ge has become a rather underowned stock on wall street, it seems a lot of emphasis on the dividend yield. what does the street want to see in terms of tangible moves besides this sense of urgency in exploring the operating divisions? >> i think a good question the street wants to see more cash flow. i think you mentioned it more cash flow they need to match earnings more i think some of that is pure execution from some of the major businesses i think flannery has done a good job in health care generating cash flow so bringing more of that mentality to some of the other businesses as far as a particular decision, i think, you know, investors look at this versus other companies. and i think that it is just sort of a big, slow moving ship something that will make it more nimble i think it's what

investors want some of this -- some of this is the cycle in the sense that it really has the long cycle businesses that take time to turn, but some businesses -- again too big and slow and lumbering. >> i'm curious about the activist investors rolling this. no comment today from trian, but with this sort of sigh of relief, you would think it sets them up to focus more on their bigger investor which is procter & gamble certainly a sales turn around needs to be had at that company. how much room on the ge side does this buy trian to focus on p&g? >> well, so i'm not going to comment on trian except that i think, you know, part of what they have said is, you know, needs to get the costs down. you know, cash needs to come up. i think that's part of the announcement today is again, maybe can accelerate that under

flannery over next couple of years. so that's how we look at it. in fact, you know, under immelt i think everything is being done slowly, but now maybe things -- in terms of improvement can be sped up. >> and do you think -- i mean, you say don't expect any type of bold strokes in terms of a spinoff, but what's on your list of things to examine in terms of the business mix >> look, i think it's a good question i guess i would say, you know, the obvious -- the obvious answer is do all these businesses need to stay together i mean, that is the obvious answer and i think, you know, that's what flannery is going to try to answer over the next several months you know, it does seem like portfolio management for all our companies has become more important. i think, you know, look, sort of buying the businesses -- combining the businesses together may argue that, you know, there are some significant

synergies to the businesses. that's why we kind of say, look, i think flannery will take his time because the whole mantra seems to be there are a ton of synergies between the businesses i think it's tough for me to speculate on, you know, which businesses, you know, they would want to sell or divest except to say that, you know, he is one of the last -- this is one of the last remaining conglomerates that has businesses like health care and don't have a lot to do with each other. >> andy, a lot of discussion this morning obviously about immelt's tenure and the timing of the adjustments he made in the portfolio. some this morning argued it would be years before we know if his digital focus pays off i wonder if you're bullish or bearish on that. >> so look, we're bullish on digital. i think that's one of the issues here is that you have to spend a lot to get a lot of return in digital. i think he's been aggressive

i think before a lot of competitors i think that will pay off over time. but unfortunately, immelt is not being given enough time to see -- you know, i think some of when you become a new ceo, you kind of have to, you know, sometimes timing is very important so he's been spending a significant amount on digital for the last five years. i think we'll start to see returns and to's how long it takes to get returns and unfortunately for immelt the timing wasn't very good around that. >> indeed. star crossed is how some people describe it for a variety of reasons. andy, thank you very much. watch the action today when we come back, the trump administration getting ready to unveil the plan to ease financial regulations. we have the latest from washington. and taking a look at stocks at this hour ge is the biggest percentage gainer on the dow, but it's the lowest priced stock. so not managing to lift the

index which is down a third of a percent. look at tech getting slammed again after a brutal session on friday down 1.4%. "squawk on the street" will be right back did you know slow internet

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expected to come from the treasury department is the result of a february 3rd executive order that the president asked treasury secretary mnuchin to evaluate all the regulations reportedly hitting the sector and they're lifting the threshold for significant scrutiny on banks, changing the jurisdiction and exempting banks of less than $10 billion in assets from certain provisions of the volcker rule we'll see what's in it when it comes out later today. the other big agenda item is health care. with a senate bill surfacing as early as this week the leadership is currently deciding whether or not to include defunding for planned parenthood in the bill and potentially risk losing two republican senators' votes we'll see what happens there for the white house's part it's trying to regain the policy footing this week after a drum beat of news around the russia investigation and the comey testimony last week.

it has labelled this week a week themed for workforce development. the president tomorrow will travel to wisconsin with key cabinet members. and with lawmakers in wisconsin and community colleges executives he'll talk about apprenticeships. the president will then go to the labor department to spearhead a labor department initiative on that we have seen support for these types of programs from the likes of ibm's jenny rometty and marc benioff. we'll see exactly who from corporate america backs the initiative this time around. but we will see whether the messaging changes for the white house as attorney general jeff sessions is slated to testify in front of the senate intelligence committee. likely a closed hearing tomorrow on capitol hill. and whether these calls for the president to testify continue to ramp up. and whether the president

himself can stay on message this week republican senators like lindsey graham have said that the president is his own worst enemy. they have called for him to get off twitter but yesterday he tweeted nine times alone on a variety of issues. so we'll see whether that messaging stays on course this week guys >> yeah, whether his tweets focus on workforce week more than infrastructure week last week kayla, thank you for the set-up in the white house this morning. for more, out of the news in washington, let's bring in terry haines, head of political analysis and a chief investment officer. kayla talked about the financial deregulation there does seem to be movement on this front and banks are up again. they're up again i think 4% over the last week. is this a role reversal between technology and banks >> it could be especially given the fact that interest rates have come down in the time frame so, you know, here it is, an

environment that would be more difficult for financials at least in the interest rate side but i think finally some policy may be coming along that could get through that's lifting those shares >> so terry, what's realistic to expect in terms of policy on the cfpb, the consumer finance protection bureau and other forms of deregulating the financial sector from the executive branch >> good morning, sara and everybody. what's realistic is that you have a situation where the white house cannot wave a magic and with and -- wand and make the regulation goes away to make them go away, you have do what you did to put them in place in first place, deliberate and finalize i'm sure it's welcome news that the white house is continuing its focus on deregulation. but investors should not expect quick action on any of this stuff.

they should expect the administration to take six months to a year to finalize any of these things. and so there's not immediate relief on the horizon. >> well, terry, what about more broadly on the policy front, whether in fact there is any more clearance to get things done on health care and then whatever else remains of the agenda in the next few weeks and months. >> well, mike, i think that the next few weeks tell the tale on that as everybody knows, the aca and tax reform are inextricably linked by both republicans in congress and the president and it's imperative for those in the senate to come together around the aca plan, actually get that done and then actually finish that up in the congress get the president to sign something so they can turn to health care. if they're going to keep to a late 2017, early 2018 time frame for tax reform, which remains possible they have to get aca finished and, you know, as kayla

noted a minute ago, there are some promises signs that might happen but it's a tough slog. >> so jack, what have we learned about the broader market and how it reacts to political risk? just in the last two weeks for instance, comey testifies last week the market runs up to the record high how you take that going forward to figure out what kind of risk or what kind of imbedment to the tax reform or the agenda to cause the mar market to shudder? >> i think they're taking foyt ar grain of salt look at treasuries when trump was initially elected the ten year treasury went from 1.8 and got as high as 2.6, 2.65 now we're back down to 2.2 that would argue that, you know, roughly half of the anticipation has kind of worn off same thing with municipal bonds. munies are underperforming

taxables that seems counter to what you'd expect if you thought that personal income taxes would be cut. lastly of course, mid cap stocks which would be the huge beneficiary of a corporate tax reduction trailing large cap i think that investors, you know, started off out of the gates with almost 100% assumption that all of these policies would put through and it seems that somewhere between half to two-thirds of that assumption has been retraced. >> is that the right bet, terry? >> well, i think jack describes very well two things one, the rationality of the market, the hubris of the market earlier this year. and i think the lack of hubris right now. we're still a little bit more positive than consensus that aca and regulation gets done.

>> thank you for joining us. >> when we come back, where you should be putting your money to work the fed making its announcement on a possible rate hike this week goldman sachs's asset "sawk tswl wh e elisit quonhe street" will be right back who's the new guy? they call him the whisperer. the whisperer? why do they call him the whisperer? he talks to planes. he talks to planes. watch this. hey watson, what's avionics telling you? maintenance records and performance data suggest replacing capacitor c4. not bad. what's with the coffee maker? sorry. we are not on speaking terms.

let's get over to seema mody to get a quick market flash. >> hey, i want to point your attention to shares of transdime. cnbc has obtained a copy of a letter sent by elizabeth warren to the u.s. department of defense asking for an investigation into transdime's business that was dated on may 19th as a member of the senate committee on armed services i have also been monitoring reports that suggest that transdime has used a variety of tactics to avoid sharing cost information with the government for parts for which it is the sole source supplier now keep in mind the call for a probe follows similar requests from other representatives we're looking at shares down more than 2.5%

keep in mind though the stock is still up year to date and carl, it has been a popular battleground stock for a lot of hedge funds in 2017. >> all right, seema, thank you very much. goldman sachs asset management announced the launch of the new etf for corporate bonds. joining us is mike well, the portfolio manager of the hedge fund sounds like an interesting product. trying to smooth out the bumps talk about why the demand is there for something like that. >> sure. we're excited about it it's kind of interesting because bonds have been much slower to make its way to the etf market fixed income you have seen that active managers have had a really good history of beating benchmarks the question is there is a way to construct the etf that brings some of the same principles of active management to the bond market i think right now when you're kind of in the late stages of the credit cycle's important that there's a smoother ride what we have done is we have done something simple, something

we have been doing for a long time look at the two variables. one is margins and the other one is leverage. two very obvious things that have an impact on the credit worthiness of the company. what we do is we look at the two variables. look at the worst 10% based on the variables and kick those out. if you look at history, look at prefinancial crisis, they cut out the financials very early. and then you see like in the energy crisis, yes see a very similar pattern where you take that out smooth the ride for the investors. >> you talked about the explosion of stock etfs. the fact that bonds have lagged behind it is for good reason they're traded less so if you get a mass exodus it would be very hard to manage and to sell. >> i don't think that's a very good structural reason why it's been slower to make an impact in the fixed income markets i think the main reason why it's changed the active fees and the passive fees have normalized they're about the same now

you find active managers like ourselves this is good business us for if we can earn similar fees than in the active business and actually expand our universe of investors to be some of the financial advisers that used fixed income for asset allocation purposes. >> you referred to it as being in the latter stages of the credit cycle here. a lot of people look at how strong the bond market is that gives us reassurance that you have support for the equity markets that we're not close to a recession. can the corporate bond market get kind of verconfident and g too far and sending a false signal there or is that a comfortable signal >> it's a comforting signal until it isn't anymore i think it's a concerning sign that companies have incredible access to credit the leverages are going up forever. everybody wants to buy the corporate bonds. you have seen yields and spreads compress massively yeah, it feels a little bit --

very similar to what's going on in the market. when you first start investing at 2 or 300 over that feels okay because you have a lot of spread there. then when you get to investment grade spreads about 100 over or treasury yields at 2%, they're only a couple of chairs left when that stops and the fed decides to change the way it's approaching monetary policy we think it can have an impact on the credit market as well. >> the fed, doj, bank of england, how would you characterize the fed's pivot this month if this is it >> i don't want to say this is it but this year is the beginning of this is it. whether it's this year or the combination of this year and next year, the game going to change for investors pretty significantly. the fed is doing a pretty good job of being transparent in the last minutes they talked about the desire to reduce the size of the balance sheet and they talked about it's almost unanimous. most members want to change the

size of the balance sheet. and trump and his campaign pledges talked about a chairperson that would be very, very resident to actually continuing to grow the size of the balance sheet. and actually want to reduce it so i think that's the big game changer. i think you will see potentially as soon as september a plan from the fed about reducing the size of the balance sheet so it won't only impact short term rates but have an impact on the longer term rates as well and then the viewer t volatility like we see no volatility. on one way decline once the fed starts to shrink the size of the balance sheet we think it can bring some volatility ack. >> it will be like watching paint dry like some have argued? >> we have been watching it for a long time and those of us have the gray hair we know it's calm until it's not calm anymore and then the game changes. i don't think it's with this statement coming this week, but i think there's some balancing factors with the employment numbers as well as a little bit weaker inflation but not overly concerned of two

months of inflation. i think the fed wants out, and i think we'll start to see -- it's in longer going to be an environment where you'll make money watching the paint dry. >> i wanted to ask you about a few pain points within the market and what you see in the corporate bond market in places like retail for instance auto loans even energy which has turned for the worst. >> those are the initial sectors that are feeling some pain you are seeing some companies actually in the sectors getting downgraded and losing access to financial markets and i think rightfully so you have a lot of companies that were overlevered they were not sized appropriately. they're in sectors of the market that are being disrupted by technology and the internet. those are old school what you find is those companies are losing access to finance those are somewhat concerning signs but i would say not yet systemic i don't think the size of the auto sector in the corporate bond market or the size of the retail sector is enough to give

you enormousconcerns but they are some concerns. once you have a couple and then a third and a fourth and i would say the big one is if rates change and you have companies that are really relying upon the low rate environment that could change the credit outlook. >> are those the areas that your methodology and in this fund -- and your fund are turning away from >> those are sectors that are turned away. in case of rates, rates have stayed low for a while though we're concerned from the fundamental perspective you haven't yet seen margin compression in the rate sensitive companies. you have seen live ran pick up in a lot of -- leverage pick up in the sectors no question you saw it in the energy sector and this fund would do that and retail as well the margins have declined and leverage picked up. >> we look forward to watching the performance. ticker gigb. >> gigb is the fund. we also have a treasury bill fund more like a money market alternative. and gibl we launched recently.

>> thank you. >> look at the shares of apple, falling down 3.25% mizuho securities yesterday downgraded the stock to neutral from buy we'll talk about the tech wreck next. plus, the story of the morning, jeff immelt stepping down at ge in a move that faces activist pressure from nelson pel peltz. "squawk on the street" will be right back

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appeal for information into the investigation into the manchester bombing they show the bomber at different locations ahead of the attack another photo shows a white nissan a plane heading for shanghai returns safely to sydney after there was a gaining hole left in the engine casing. passengers reported hearing a massive noise and smelling something burning. former president jimmy carter was aboard a flight to washington last week and thought it would be a good idea to meet the passengers so he walked up and down the aisle, shaking hands with each of the passengers on the flight. can you even imagine that's the news update carl, back you. >> thank you very much jeff immelt announced he's stepping down, a move as the company faces pressure from nelson peltz our leslie picker has more welcome home. >> thanks so much. the relationship appeared amicable at first.

trian disclosed the stake in ge in october of 2015 -- at the time it was the largest and at that time came an 81 page white paper saying that they're aligned with trian to enhance the shareholder value. and then immelt wrote, to be honest, i don't think activists are necessarily bad for companies. the relationship garnered a bit more heat earlier this year in march trian put out a statement saying it had intensified its dialogue with senior management and ge agreed to ramp up the cost cutting efforts and change the executive compensation structure, a move that trian applauded. still, the ge investor base remained fatigued as the stock price lagged the news that flannery would be the ceo made the stock price go higher he can make bigger, bolder moves with the portfolio and ge would not explicitly discuss trian's role in the announcement and

they declined to comment but ge did say that the succession plan has been in the work pors six years and -- works for six years and that in summer 2017 would be the appropriate time for immelt to retire. trian said in 2015 they believed ge could be worth upwards of $40 a share and it's trading at $30. roughly the same level it was trading at in 20150. ge still needs to show about 33% upside in six months to appease trian. guys >> leslie, thanks very much. that $30 a share market has been tough for ge, up 3% though the leading stock on the dow not enough to offset apple on the downside apple is at the center of the stock reversal you're giving up anywhere from the last three to four to five weeks worth of gains it's happened in about two days. it was interesting on friday, most of that was kind of offset

by rotation into financials and energy and some of the other laggard groups so right now it looks like taking a lot of money in a pronounced way out of the winners. going into some of the laggards but i think the question is we spent so much time talking about was the market too dependent on a handful of very large tech stocks at the moment it's not entirely dependent on it, because we managed to recycle some of that money. but nothing really seems to have prompted this. nothing specific obviously apple you have people cautious about how far it's come. but we have a ton of nasdaq stocks up 30% year to date that's kind of a logical place to maybe take some out well, look, if you are seeing the money going into staples and utilities and very defensive groups, that's when you want to worry. >> right. >> but now you're seeing financials and energy do okay. so we have to watch that dynamic. >> more clouded than that. even though 7% in two days on apple will get your attention. >> it's -- apple in particular hadn't made a new high since may

12th so the rest of the nasdaq kept going up maybe that was telling you something. apple typically peaks on the day and the past couple of times the day of a new iphone release. it just had so much upside well ahead of that. it seems like people are willing to back away. >> you had the chatter around goldman sachs's report saying that the five tech companies and they included microsoft have added the market cap of the gdp of south africa and hong kong. we have been talking about it every day, but maybe some saw that as a trigger. you had the talk about nvidia. >> because of the overlay about mutual fund and hedge fund ownership. >> you can explain why they were performing that way. why all this market value was added. but it doesn't mean it has to continue and doesn't mean it was really matched by fundamental improvement every step of the way. you know, alphabet is a great company. compounded at 26% a year since it's ipo

but you got 26% in six months so that's just by definition telling you you kind of pulled some forward. >> what's your take, the market can rally -- >> i think the market can absorb this for a while this is the early sign of a retrenchment for the broad market we don't know just yet right now it's not telling you that necessarily it's a broader liquidation. see what the fed says this week. >> on wednesday, that decision is out coming up, distress deepening in the retail sector. we'll break down everything from store closings to job cuts what else is on the horizon here and stocks at this hour as mike just mentioned technology is the big loser on the session and the s&p with the nasdaq down a full percent the dow is down 0.3% ge, goldman sachs helping to offset that a bit. "squawk on the street" will be right back

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containing this information. read it carefully. distributed by invesco distributors inc. let's get over to santelli and get the santelli exchange. good morning, rick. >> good morning, carl. happy fed week and to that end we'll be discussing lots of fed issues starting today with dr. shelton. judy shelton, thank you, doctor, for being my guest today. >> thank you so much for having me. >> you know, this morning in the journal, just rhetorical questions. can our fed not see that other central bankers' policy is negating what they're doing? you wrote years ago, what if janet yellen's wrong i have been speaking since 2010. it seems to me like double or nothing central banking is a dangerous path to be down. you hear all the questions reporters ask.

an entity in a small group of other entities controlling the capital, the value of what we labor for. not a peep, crickets your thoughts, dr. shelton. >> well, mr. santelli, you certainly have been a voice crying in the wilderness about this and i agree with you i'm not someone who thinks that the fed is omniscient. quite the contrary we have put the free market economy that believes free market outcomes are much better than central planning we have put that in the hands of a very small group of people who increasingly want more discretion and i think have seen that the model they had in mind in making money available so cheaply has not panned out as they would have hoped. we have not seen the growth, the productivity the increase in wages that we

would have thought might have come maybe it's because the corporations didn't use that cheap money so much to expand production capabilities, but instead bought back their own shares wealthy investors used it to bid up markets and governments used it to borrow cheaply and finance deficits that's not how you get economic growth. >> no, as a matter of fact, it kind of reminds me of all those parables an cartoons we saw as children, where somebody finds a lamp, they rub it and they find a genie. if you don't ask a good question, you get surprised at how things are taken literally yes, they have models, we have population models, we have climate change models, we have banking models we're not supposed to question the outcomes of any of them. and yet, the assumptions are as big as the grand canyon. and your final comment, they wanted to create capital their models created capital, but isn't the important thing what was done with it and they're still paying interest on

reserves an we still have balance sheets around the globe holding many of the marketable securities that we call sovereign debt finish this up how will this end and how do we get control of our wallets back from a small group of technocrats? >> i would love to see monetary policy connected to the real economy, but the prospects aren't very good for the reasons you just said. when they start raising rates, now out of a bit of a sense of desperation to do something, they do it by giving banks even more incentive not to make loans to the private sector. not to finance small business, not to have more jobs created by real entrepreneurs they give banks every incentive to play it very, very safe and make more loans to the fed and to the federal government. and that is just the opposite of what we need we need to get back to real financial intermediation where savers get compensated for making the savers available for productive investment in the kind of things that generate

jobs. >> thank you dr. shelton, it's a real pleasure having you on. >> i'm honored, thank you. >> back to you. >> all right, rick, thank you very much. now let's accept it over to jon fortt with a look at what's coming up on "squawk alley." >> hi, mike, we're watching the tech stocks and nasdaq off the lows but apple is among the hardest hit. and uber with some news and we'll find out what's going to happen to the leadership there in the wake of this holder miport and finally, esports and gang some news coming with this week. all that and more coming up on "squawk alley. and a team of experienced traders ready to help if you need it. it's like having the power of a trading floor, wherever you are. it's your trade. e*trade parts a and b and want more coverage, guess what? you could apply for a medicare supplement insurance plan whenever you want. no enrollment window.

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uphill battle as the number of distressed retailers rising. are there any bright spots in this market. turning us now is john kernen managing the director and retail analyst. gentlemen, good morning to you >> good morning. >> good morning. >> john, your recent research report caught our attention in terms of traffic declines. off price and outlet retail is one of the bright spots pup see this turning in that sector? >> sure.

i think the traffic issues in retail have been widely discussed by many. certainly structural in nature the consumer embraces digital commerce some of the survey shows out let traffic and off line traffic held up will versus traditional brick-and-mortar retail. >> so which stocks are most vulnerable there >> certainly the big off price retailers would be immune to that as well as all the brands that have heavy out let exposure whether it's nike or under armour if out let traffic gets worse they will feel the brunt of that >> what's driving it are there better discounts and cheaper options online >> i think that's part of it certainly traffic issue and retail certificate structural. the consumer is embracing digital and mobile commerce.

that incremental trip is under pressure >> so, patrick, the consumer is embracing mobile consumer pup have a few winners big department stores and others, walmart certainly is one of them. costco is another. what are some of the best practices we can take from those quarters which were a lot better than rest of your coverage area. >> walmart has had eight or nine quarters in positive traffic not up very much about 1%, 2%, 1.5% that's respectable in this environment when so few retailers are generating positive traffic walmart has been doing better in its perishable food business that's helping that's more than 55% of the company's total sales grocery. if you don't have that to drive traffic, you might have a hot product. really the only other company i covered that had positive traffic in the first quarter, was a chain called five below.

and it's a great concept, i love it it's about 550 stores going to probably about 2,000 over time and right now they are seeing broad based strength but benefiting from that fidget spinner trend. 2.6% increase in same store schools and that was entirely driven by traffic. >> patrick i heard about this five below story who are they taking share from dollar stores? at best a zero sum gain maybe a minus sum gain who is the loser on that front >> it's very broad to some extent toys "r" us, they probably take a little bit from target, from michael's stores. that's one of the beauties of the concept is that there really isn't a direct competitor. it's a targeted -- it's a targeted merchandise assortment.

they target teen and pre-teen consumer and pull in a lot of really fun products all for $5 or less under one roof it's fairly broad based. i don't know that they are taking share from online, but probably some of those other retailers that i mentioned >> john, i don't think any of your athletic apparel retailers that you follow sells, what is it fidget spinners >> no. >> are there any big changes happening? some analyst notes focused on fact that nike may be at a ripe point for buying pretty much flat over the last year, under performing certainly adidas which has been crushing it under armour made a move higher. are there any changes or reflex points when it comes to these three stocks >> we still like adidas. we think that stock, the company generates 12 euros if you can sustain a mid-20 pe

multiple which it has been the average you're pushing well into the $200 range stock in the next two to three years the ceo has a big efficiency, improve their operating marketing structure more in line with others in the industry. adidas we still like avoid nike expectations are too high in terms of sales and grows more gain q4 earnings release in a couple of weeks will be negative. avoid nike under armour, stocks had a short squeeze. up double digit percentage wise. one of the shorted names in the entire retail sector people are underweight in retail we would stay on the side of under armour they are aggressive. you could see potential guidance revision in the back half of the year lower >> all right thanks guys for joining us not all doom and gloom in this

sector john and patrick good to see you both talk about an out performer. bitcoin falling after it surged above $3,000 for first time ever yesterday. bitcoin has now more than tripled in value since the beginning of the year. gained nearly 30% in june alone. it's interestingly rise ago long with stocks, bonds and gold so for those, some people say it's the alternative to assets because it's not regulated or backed by any government or central bank it's outperforming all of those but rising at the same time. there are a number of reasons why. we talked about demand in china, japan, more legitimatization by governments. >> institutional support some banks trying to align products parallel to it in some ways >> now of course, bitcoin is cast as being the stodgy old guy. >> in your family, numbers start calling you and asking you if

you should buy bitcoin you just wonder. mark cuban said on twitter last week it's a bubble very hard to value something like this -- >> because there's no correct or incorrect value. >> when we come back we can talk about it forever uber board adopt agnew series of recommendations from eric hoerld we'll discuss all of this with kara swisher she's been breaking story after story on uber. she's with us next i caer to have that college experience that i had. the classes, the friends, the independence. and since we planned for it, that student debt is the one experience, i'm glad she'll miss

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the street". things have shifted. check out financials still in the green, fraction swral fractionally higher let's sends it downtown for the start of "squawk alley". good morning it's 11:00 a.m. ge headquarters in boston. 11:00 a.m. on wall street. "squawk alley" is live