cost carriers, 28 inch pitch we need to be able to have a product we can sell to those customers. and we do now with something we call basic economy but most importantly for us we're trying to cater to the high end traveller >> thank you always great to see you. come on back, we'll do it again. join us tomorrow "squawk on the street" starts right now. ♪ good thursday morning. welcome to "squawk on the street." i'm carl quintanilla with jim cramer at the new york stock exchange david faber is off nasdaq futures are down about 1% on the back of a google downgrade. market continues to digest the hawkish some say tone from yellen yesterday europe is pretty red benchmark yield around 2.16. empire and philly fed. the fed hiking the rates, but

weakness this morning as we get set for the open tim cook wants to quote yell out and scream about ai. we'll fill you in. and the king of snapchat just went platinum. dj khaled is ringing the bell here first up, we mentioned the downgrade, how much of this is digestion of this new fed? >> well, i'm the one to ask that that's a dj. here's the deal. i think that the -- many people are ascribing way too much to the fed. i think the fed did business as usual. there's a vicious rotation going on it's a continuation of what we saw on friday. if you look at the last 20 minutes of trading yesterday you saw the repeat of what was friday which is a bang down of all the big high-tech stocks and then money back in to retail and to finance i think why people were fooled it didn't go back into oil low tech health care, also

higher valuation health care you watch celgene and biotech. watch illinois tool works which is a great tell for the industrial you can watch jpmorgan, you can watch the trading of wells fargo. there was a real rotation going on there was not a lot of money driving it everyone wants to attribute this to things that were said by yellen this is exactly what was going on on friday somebody wants out of these kind of stocks. we can be in the market right now where it could be somebody -- maybe a large mutual fund there's nothing going on in the companies. now today analysts who are -- who had been on the fence come out and now we have a downgrade of spelunk for competition and we got a downgrade of nvidia, competition. an interesting downgrade from canaccord about alphabet there's nothing. it doesn't matter. these are the days you do that very interesting because

yesterday goldman had to bump up nvidia nvidia is the ultimate battleground because it's doing very well. but tim cook, might want to jump up and down on artificial intelligence and they have nothing in their quiver. but they're throwing asset aileen on the rotation and janet yellen is trying so hard to be a nonevent and we confuse people she said that things are okay. we get the claims numbers, they tee best in ages yes, we don't have wage inflation but you know i have to tell you if you attribute the decline that we're going to see in spelunk and alphabet and nvidia toe anything that yellen said, it will be a real stretch. i'm not going there. >> so you don't think there's any deserved nervousness about the treasury market behaving like or preparing for a policy

error by the fed >> i would have thought that if interest rates were not going higher today we have a real tell. we have dramatic increase in rates. it's only about a third to where we were yesterday, but if rates had gone through two today i might have adjusted my thinking and thought that yellen is more powerful a couple days from now, when things settle down we'll forget that we attributed anything to yellen because in the end, the last half hour was about stocks that should have gone down if she was being a hawk all of the housing related stocks went up well, if she is going to wreck mortgage rates by taking then up what group should have been the most powerful decliner the group that went up we ought to be careful in relating yell on the what happened in the stock market given the last half hour's moves. the bakes start -- banks started to move up before she went to her rate hike. >> you think it's too much to

extrapolate yellen to market you don't put stock in the analyst downgrades mizuho on apple. >> no, they're nice people what does dj say we the best. he talks about keys to success the keys to success is to downgrade google on a day when it longs weak, okay? >> so the only thing that would move you would be these preannoun preannouncements - >> that would worry me jabril came out, yeah, they're yapping, yellen yellen, yellen, they're yelling yellen i listen to jabril because i'm a complete geek. i get home from a great dinner at a hotel with my wife, jabril, no, they do 24% of the business is apple first rule about apple you're not allowed to talk about apple, it's like a total fight club situation. jabil says if you look at it being on a sequential basis, on

year over year basis i think it's quite good but i can't add a lot of color bingo, apple is on target so they're the heaviest right now people want to knock down apple because it's like whack amole, boom in the end, carl, we may look at the stocks, nvidia cooled off, i want to get in there because gaming is good apple's come down to the level -- >> we have been there before. >> thank you. >> a couple months ago, right? >> we have been there before look, again, if you look at the industrials and the housing stoc stocks after yellen talk and they got knocked down, but i look at the employment number, it's looking good. i think yellen is trying to take herself out of the picture we should look at the t-stocks to see if they don't bottom between 10:00 and 10:30 today. >> claims at 2.37, another head shaker empire is the second biggest sequential jump in the history of the survey. >> i thought that was -- you know, thank you for mentioning

that i wrote that down. i don't usually mention empire, but empire is strong maybe new york in the last -- in the last 18 months has become an industrial power but what this is, there's business picking up. i mean, this could be corning -- >> it's a volatile - >> it's volatile, but volatile to the good side we have very few of the federal reports that are bad we had inventories lower yesterday. yes, i want to see consumer lending be stronger. but things are better than 1% fed hike 1% rate. things are stronger than that. when we get this employment number i keep thinking, there's one that's going back to 300 we a lot of layoffs in a lot of different industries we hear about, but no. the most disturbing thing today was kroger. >> which we'll get to in a bit. >> because they employ a lot of people. >> kroger -- >> a big employer. >> well, guides to $2 to $2.05 they were just on "squawk" a few moments ago. a margin story. >> this is a dogfight. and yesterday we didn't talk

about whole foods because john mackey, he's the ceo, he was saying that -- a bunch of greedy bastards that's janet trying to put whole foods in play. i'm not saying that's disingenuous, but remember walmart wants to own food. amazon wants to too, but there's only so much they could do although the packaging for cold foods isn't bad for amazon we order a lot of amazon food now. but this walmart is not to be reckoned with. i mean, they are just coming in with guns blazing. they're unbelievable. >> yeah. kroger is going to be the focus at the open for sure brief pivot to politics here special counsel robert mueller reportedly expanding his investigation beyond russia's role in the election according to "the washington post. the probe now includes an examination of whether the president attempted to obstruct justice. he tweeted they made up a phony russian story.

now you're witnessing the single greatest witch-hunt in history led by some bad and conflicted people he doesn't overtly confirm the obstruction report from "the washington post. he doesn't say who he means when he talks about bad and conflicted people. >> no but my problem is they appointed a special prosecutor to look to see if he was obstructing justice. that was kind of why they appointed him. they wouldn't have appointed him to kind of twiddle his fingers and that was the deal and whether there was a talk about whether trump would fire mule their's the game i mean, there's great gravity to appointing a special prosecutor. you appoint him because there's something wrong that you want cleared up this is no -- we're viewing this as being still one more surprise that's why he was picked so you know the futures did take - >> although gold is down 20 bucks. >> gold is really -- that's the one that stumped me.

all this worrying and hand wringing you're doing, be careful. it's not so bad. but like i said, we can easily craft really negative stories today. i'm not going there. i refuse to do it. >> you mentioned layoffs, jim. this week has been sears, imax, boeing, bank of america today and now nike has an announcement 2% i believe of the global workforce. >> wow >> that's -- >> wow, nike. >> a sizable number of people. >> holy cow, nike. that is -- that's very interesting. i have been waiting for nike to take some action i didn't think it would take that action. nike does not like its stock stalled between 50 and 55 forever. mark parker -- he's kind of a belichick figure in the business everyone assumes that kevin plank is the hard charger, but parker is the wolf in sheep's clothing this is a very interesting announcement he won't stand for that stock price being where it is anymore.

wow. nike. >> from the release, organizational streamlining will speed up the execution. >> those who remember -- read the best business book, "shoe dog" know that phil knight ran that company with seven misfits. i think parker has taken stock in saying we have too many people and that's -- china sells it very good. they have nike espn -- all the guys spent too much money on sports. >> yeah. >> i don't know about the payoff right now. i do know that i have never made a lot of money betting against nike nike has been a phenomenal -- phenomenal stock has not been a phenomenal stock lately and maybe this is going to -- two quarters from now impact how much money they'll make. really interesting. >> this new alignment they talk about specifically driving growth in 12 key cities. new york, london, beijing,

shanghai, tokyo, berlin, some others do you see it as a company ahead, but trying to stay ahead? >> yeah. i mean, look, i think that everybody is trying to figure out whether they're bloated or not. when their stock hasn't done anything i find that this -- this is a remarkable story because nike is really unassailably the best. we have not talked enough about how nike stock hasn't done anything pvh stock has moved up skechers stock has moved up. under armour stock has moved up. parker not reacting to the stocks, but he says come on guys his conference calls are very good he doesn't like what's happening at his company, wow. direct to consumer is where he needs to do it i like him, he's trying do more personalization. let's watch this stock the stock gets hit first because people say wow, things aren't so bad and then it comes back to life mark parker, not to be trifled with. >> we'll take a break.

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got some breaking news on industrial production. rick santelli has that hey, rick. >> yes, more data. may industrial production if we look at that number it is 70 -- i'm sorry. industrial production is down -- everything is moving so fast, it's unchanged what i was really paying attention to the most was capacity utilization up changed we were expecting up 0.2 we did garner an extra 0.1 last month. utilization rates that's more my favorite and that one we expected 76.8. similar to the last look, but it was down at 76.6 but keep in mind, last month 76.7, okay is the best number going all the way back to august

5th of 2015. so utilization rates are still running on the high side and that i think is something to pay attention to carl, back to you. >> all right, rick, thank you so much we'll continue to watch the data by the way, dj khaled is making his way to the nyse floor. we'll talk to him in a bit not just about the music business or his nike collaboration. but the 3 million facebook friends, the 6 million instagram followers. the king of snapchat -- probably undisputed king of snapchat. >> what a great guest because one of the things that's happened in the last 18 months people going from having experiential i want to take -- taking pictures of themselves to wanting others to see their pictures who's done it better than this man? nobody that 2-year-old is huge. that's his son, right? >> yes. >> trying to keep up here. not easy thank you, dettwiler. >> i'm so excited about it, i

want to yell out and scream. that's tim cook describing his plans for augmented reality. cook suggested a plan to repatriate overseas cash with a reasonable tax rate and for future -- i come up with the simple system. i go for zero deductions, i would be draconian and say none. maybe it can get to 15%, that people are talking about maybe it's 20. that covers why the home pod is $349, all kinds of discussion. >> the augmented reality is one of service revenue the more augmented reality you have the more -- the more apps the more games the more revenue. and there was -- remember the downgrade that came the weekend -- the apple massacre, the sunday night massacre is whey call that from mizuho really questioned the service revenue. my contacts at apple say that would be one of the things you would not question augmented reality would mean a

great deal and the high pod, the apple ecosystem will get people to try it and the indian phone companies if they know that people want apple they'll find way to get those phones. so we can write off apple because it's down for four days, carl we should write it off, right? apple must be going bankrupt the best days of apple are behind them. tim cook hasn't given you any performances up from 50 to 140. what is that >> here's a line from the interview talking ar can we do everything we want to do now, no the technology is not complete yet but three's the beauty to a certain degree this has a runway, it's an incredible runway. it's time to put the seat belt on and go. >> but i have to tell you, this -- of course texting all my kids about dj so i have something to say so this is considered -- they're going to have it bendable. this is so -- he's got to come up with anything else, he's not come up with the -- this does not have wings, it will not take me to englewood cliffs by holding it up.

until he does, he's finished there. that is the whole arc of the analysts all right? i hold this up, carl, it does not beam me any any where, scotty you know what? if he doesn't get us to live long and prosper with the next phone, i'm telling you i'm going to switch to the company -- the fire phone fire phone they put that -- did they put that out -- arson phone is that done >> i love when we can wade in your sarcasm, jim. >> this watch, this does not connect me directly to the president that's also a mistake. >> he talks about serving on white house councils he says he and the president are dramatically different but the bottom line he feels there's more to be done by being engaged. >> who has committed hundreds of millions of dollars to american manufacturing? not the president. not the president. tim cook too bad he's finish and the company is in bankruptcy.

>> we want to take a short break. we'll count down to the opening bell of course dj khaled will join us after he rings that opening bell in just about ni mutneines at fidelity, trades are now just $4.95.

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♪ wee talk to dj khaled in a minute you want to watch that google down braid. >> yeah, i'll tell you why it's a downgrade about f.a.n.g

you can say what they do about google, canaccord, because it's talking about going too far too fast saying the gross margin is headed marginally lower. you can always make that case, but valuations stretch see, when you have analysts say valuation stretch there's no comeback, right? well, sure i wish i had bought it here. up here the valuation is stretched. you could have said, listen, head and shoulders -- a ton of reason to downgrade these. but here's the problem a hedge fund, yes. wants to catch down to 928 a person at home may be selling this company when they're $70 billion of waymo embedded, autonomous driving when search is doing really well they can train themselves on any area, so yes, a great hedge fund call but not for people at home. >> what do you make of the point that the increase in the ad load over the last couple of years on

youtube, on mobile search is going to be hard to maintain hard to sustain. >> you know, you're going against youtube, going against ruth porat who thought i through. i go out to california quite a bit, they have thought this through. like going to junk up the facebook feed no, he's going to get killed by snapchat and instagram is even better by the way i'm the only one who hasn't collaborated with him drake did, justin bieber did but we have to be careful. this is a generic -- what they did was they downgraded f.a.n.g., but chose do the "g" which is "a. there it is. like the weather board, it's hot light here here it's raining, this it is. it's a weather report downgrade. looking like there's going to be some storms but when the storms pass, buy. >> we'll get the opening bell in a minute don't gowa ay.

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busy morning, talk to dj khaled in a moment. we got bank of england, holding steady the vote at 5-3, jim, was the closest really since the crisis. >> they got real inflation over there. this brexit is not all wine and roses. i mean, geez, prices are high. that's really an expensive city. it was before hand so you know we're now seeing kind of the downside i bet you the voters are too. >> yeah. pound does surge a bit to 1.28 that 2.9 inflation number they got they think it will go 3 plus by fall. >> they're coming in hot, but that's not you're seeing here. by the way, i know the opening is going to be very bad. i am saying this is business as usual. please don't -- if you're a home gamer, please don't jettison >> at the big board it's dj

khaled, spokesperson for get schooled, that motivates students to graduate from high school and succeed in college. what a great cause. >> there you go. >> we'll talk to him in a few moments. at the nasdaq, tcgbcd, an investment company celebrating its ipo. we have covered a few movers but kroger is one of them. >> yeah. but kroger is -- it's amazing. you know, i read through the release. i know they absolutely cut their forecast i know that industry is tough but i know that kroger is tough. you want to throw away kroger over a couple of days that's fine the supermarket industry is very challenged but it's a very good company i just don't think it merits this kind of landslide selling it had been creeping up, maybe they'd talk about food deflation not being that bad

there's a huge seller out there. if you put away kroger at 25, i think you'll come back okay. the supermarket industry is challenged but they're a challenger. >> far and away the worst loser on the s&p, followed by a bunch of chips apple is one of your worst chips. >> microsoft is one of my favorites. the analysts will come out pretty soon, they have a refreshed cycle. doing so many things that are right. but you know what it moved from 53 to 69, then to 70 we're taking off a lot of -- remember we had a friday sell-off then we had a weird bounce on monday we should have been going down more we're replaying that let's watch the bank stocks to see if they don't catch bids because that's where the money is going very low valuations. some health care i'm watching united health can they stabilize what a stock that has been so i'm -- it's funny, because united health is up. the two stocks that went up on

friday that people should be watching were ibm and united health a lot of money going into them today. this is the seller who's back. who ever was selling this is their game plan. >> buying ge and ross stores >> ross stores, kind of a good move on friday this guy is back who ever was selling is back today. i know people at home are saying what is cramer talking about this is a very ill liquid market if you have a guy trying to sell $5 billion of f.a.n.g., f.a.n.g. going down you won't have guys saying i can't wait to buy that lam research because the buyers have been convinced that it's got the absolute best animal health care no it's semiconductor equipment. it's lam, but not lamb. >> no. >> fellow travelers who aren't that very familiar that micron simple mu, it's not a cow

company. >> you talk about the financials catching a bit and will they. >> yep yep. >> odds of another rate hike this year below 50 right? somewhere in the 40s. >> i look at that job numbers. people are going to say what are they smoking that they're not tightening my whole view they should be selling their bonds furiously, not buying bonds that would be a better way get the rates up get an inflection in the curve they'll listen to me, not. no i mean, they'd rather go to hamilton and listen to what he was saying and not me. came out okay in the play. >> in the play you weren't -- we have three misses now in the core cpi >> you know, this thing again. this thing is -- making everything cost less you know, i do believe that the -- there's a lot -- people aren't buying like they used to. because they kind of have everything they want to take trips. trips -- they want to go on carnival cruise.

i cannot wait for dj 's an instagram economy. it's what people want. people are spending money on prestige, prestige makeup. so when they go out they're fine spending money on apple. and they're not spending a lot of money away from that. look, i'm not saying i'm heartened. i am saying this is a continuation of that rotation. except for oil is not making -- i think oil stabilizes between 40 and 43. i am literally putting my head in a guillotine. you know, i'm hoping - >> there's khaled making his way we think to post 9 in a few moments where we'll talk about a lot of the names we're discussing now all the gains we got from the opec cut are gone. >> a lot of panic. the algorithms really hit. i thought what the oil number was bearish. it wasn't like that we're swimming in oil. there is a lot of oil out there. but i did not regard the number nearly as badly as everybody

else did i think the algorithm has accentuated it we'll get a rig count that will show more. because there's a lot of companies that are making money at 34, $35 a barrel. they're selling the futures constantly trying to bring in some cash. but -- >> so you think there's a long way to go before rig count goes negative. >> can't go negative there's -- hanesville is doing well bakken is doing well there's a lot of areas doing well they're going to add more rigs so on friday, you know, between 12:00 and 1:00 another down in oil and i think that's the one that will stabilize. >> you mentioned some retail we got signet's up there they're nibbling at bed bath coach got a price target. >> i love this coach deal. i think the coach/kate spade deal is fantastic. coach is doing so many right moves. a lot of people in the industry i talk to cannot believe how shrewd that acquisition was.

i think coach is an up stock accessories, you know, remember, we're seeing pretty good numbers from a lot of the companies that sell in to department stores even though i don't want to own the department stores. but i'm remaining convinced -- i'm going out on a limb here a nordstrom deal gets done and gets done in the 50s there was a note this morning, very interesting, inevitably going to be wrong. but still interesting about dick's that dick's should go private. look, they have lat of capital, they have a really good balance sheet. i can say that about kroger, i remember when that company -- well, that company has done a lot of good stuff for their balance sheet. i do not think that dick's going private. but i do think this was a stifel note very aggressive but i think nordstrom will do the job. if i'm a kroger people, we're not that bad. >> do you know how hard a business this is >> yeah.

i mean, the board meeting. you know, we're not terrible but walmart this guy doug mcmillen who has been so low key he wants to own the supermarket. by the way, remember brian cornell at target he's trying to find relevance in the super market at the same time, kroger is a supermarket. they have to do the buyonline, bogus -- none of the guys love that, but walmart is going to do it walmart they have guys who will drop it off on the way home. i have to invite that guy in for a scotch he can't, he's driving. >> you're right about nike selling off. now the dow's worst stock. 2% plus. >> no pain without gain. just like the shoes. i like the company nike but it's been a -- a real dog remember they use flex technology >> meaning >> meaning that they have incredible technology to individualized shoes flex is a really good on demand technology company been a real winner this company is not -- again, i

think that nike is doing a reset. very, very smart very smart what happened with -- here we go ago, boeing. another one that acted great on friday this guy has tried to disguise his moves but i'm on the him whoever is making the rotation, he's saying, darn it, cramer sees our footsteps but -- i think it's one of those i'm one of the who are those guys, like at sundance i know i see your footsteps. >> we'll find you. >> yes and we will. not. great movie. >> dow is down 61. let's get to bob pisani to see what's move tong floor. >> downside, today, carl, particularly in tech let's look at the sectors. technology down led by semiconductors that's the highest beta group that's out there so that's down bank stocks a bit weak telecom is down fractionally a slightly more defensive tone to the market.

let's put up the dow for the last month i think the reports that mueller is investigating trump for possible obstruction of justice, remember that may 17th, there big drop, 373 points that was when reports came out that the former fbi director mr. comey had written a memo implying that trump asked him to stop the investigation of michael flynn the markets are concerned about anything that would interrupt the trump agenda i think that's a factor today. and the fed tightened aggressively yesterday i think it caught some people by surprise the hawkish tone after people listened to the press conference i think there may be some residual effect on that as well. let's move on and talk about things that are moving jim had a very good point this morning. he mentioned the home builders holding up the hxb hit a ten year high, yesterday hit a ten year high. this is the major etf for the home builders here and they're having a great month pulte is up. toll is up they're generally outperforming the market

up 5 or 6% nice moves there i think the knee jerk reaction here is to sell the builders when rates rise, but remember what's been happening with the ten year it's what's important is the ten year because it's tied to the mortgages. the shore -- short end of the curve is up but the long end has not moved at all you see the ten year rates that's an issue. on top of that, demand has been phenomenal i spoke with bob toll. he came down on the floor and rang the bell the other day. he said bruce toll said that business is phenomenal right now. so they have pricing power they've got strong demand, low supply rates are continuing to stay low. boy, this is about a perfect environment for the builders here i emphasize the supply and demand equation here in -- moving that forward. a little more tenuous to me in my opinion is the position of the banks. the banks have been holding up well the kbe, this is major bank etf, it's up 6% this month.

regionals like comerica is strong citigroup at a new high. this is harder to justify. i know what the idea is. keeping the banks up there's hopes for a steeper yield curve. that's obvious there's hopes for a dismantling of dodd/frank. there's hopes for corporate tax cut. and there's a lot of hopes for more dividends and more buy backs. remember we'll get the ccar at the end of the month here. not a lot of priced into the disappointment here, i guess what i'm saying here they're hoping to be raising the dividends after the ccar results come out i don't know, we'll see. but the point is none of this has happened yet you can see the banks are moving on it. finally, i want to mention all of the semiconductors down notably mere carl, do remember something, these are high beta names. so if the market is down 1% these stocks are going to move 2% carl, back to you. >> thank you very much, bob. fresh from ringing the opening bell his latest single went platinum. dj khaled is a social media

phenomenal music mogul, producer, the so so-called king of snapchat he's helping to ring the opening bell for get schooled to help students graduate. >> dj khaled. >> get school. we were applaud whg a great cause it is. >> i love it i have been with them for almost like two years now a year and a half. i think it's closer to two years. and it's such great energy inspiring the young world, motivating the young word and giving the young world keys. we have khaled, keys program for get schooled it actually won awards it's really big it's exciting, man i used to go city to city, but it all started in miami when guy to the schools and i have been a principal for the day. giving back to the community also buying instruments for the kids you know, just uplifting them. let's take this national, you know what i'm saying >> a major key to your success,

i think, is that you're upbeat we listen to you as a family. >> thank you. >> and i want to know -- i mean, you seem to be -- you want to help more -- you want to help the schools but this 12-year-old that you helped with selling shoes. i mean, you seem to be a person who wants to create happiness. i mean, i don't mean that in a simple way. >> you know, you know, i believe in having joy and happiness and love it's special because sometimes we take it for granted and we've got to realize we have life when we have life we can accomplish anything we wanted to now i'm a father so i have experienced another joy and love on another level and also i'm a young mogul, young executive, young ceo i just want to inspire the world to let them know we can do anything they want to. i'm about to drop my tenth album coming out june 23rd my son he's executive producing it and he's only 7 months old.

like it's his first album. you know what i'm saying this what we do. we the best. you know what i'm saying >> yes. >> let's talk about your reign of social media. >> >> how you did it and whether or not you now have favorites. because you're everywhere. but you must have a stack of what comes first, second, third. >> well, me, you know, i put out love and my social media, i use my platform to put out love and good energy. when you put love and good energy out, you receive it back. the more blessings you give, the more you get back. if you put something else out there, that's not good energy you're going to get that back. i try to use everybody use the social media for uplifting an motivating people and for getting your message across for love. >> which platform is best for that >> i'm real good at snapchat you understand i like instagram as well twitter, i think all of them if you know how to use them all right, you should have them all

link up and go at the same time. >> now, do you think that speaking just granularly that facebook is an -- facebook's imitation of snapchat is a winner or are you always on snapchat because you have great loyalty? >> i have love with snapchat, we made history together. but at the same time, you know, it's about staying when it's time and staying ahead of the game so all of the outlets and devices everybody got to be on their game everybody got to be stay -- and there's competitors throughout, everybody has to step it up. that's part of doing business. part of being in the game. me what i do is it's a blessing. you could actually link all those things from facebook to twitter to snapchat to instagram, all at one time i could take my snap and post it on instagram i could take my instagram and post it on snap. i can take all that and post it on twitter you know what i'm saying the good thing is if you know

how to do it, use it all. >> interesting i'm listening and i'm thinking if i were one of the execs i would be calling all of them, let's do a collaboration we don't always have to be enemies. it would be great for someone who has a good message like they could influence the good messagers we're going to cop rate with. it would be a nice change of pace versus the partisan and anger. >> i think it would be genius if the ceos got together. i know everybody is competitive and doing what they have do. but if they got together and made maybe a switch where we didn't have to actually put it and post it. but find a way to way to break it off that one switch, the fans and the consumers use that one switch find a way to break it down for all of them. but it would -- maybe i can pull it off. >> honestly, you could. >> maybe i can call all the ceo's and have one roundtable.

>> the younger people tell me if anyone can pull it off, it would be you it would be the major key to cooperation. >> that's right. >> what would you say is the secret to being good at snap >> well, my secret and it's -- it's not a secret. but being yourself that's the key be yourself. you know, with my snapchat, all i'm doing is being myself and real -- being authentic always wins when people see somebody that's just real, they love it. it ain't no act. ain't no faith you know what i'm saying just real. real >> you know, i mean, the 12-year-old's name you were able to make the shoe mogul is something that you'll do - >> you - >> you inspired a lot of entrepreneurs. who are the next entrepreneurs you'll work with >> obviously my son. i'm just raising him to be the -- bringing in the family business the way my family

brought me into the family business just kept me around family, but also kept me around the business because i have to show our children how we have to pay the bills an feed ourselves and our kids i want my son to be around my family business. >> wow i like this. >> you have advised young up and coming moguls to invest in real estate why? >> well, i have been blessed to be successful and i'm making some good money right now. i'm using my money instead of buying more watches and more cars i'm buying more property. more houses. so what i believe in, i want to buy a lot of mansions. and i want to enjoy my money i want to live in them i want to buy them in different states but at the same time, it like a bank. the money is sitting in the house. if you need to take money out of it, take money out of it if it's a rainy day you can sell it if it's not rainy day you might make a profit.

>> you're not buying facebook or buying snap? >> i'm not saying that i'm definitely going to get into investing in the techs. >> okay. >> but the reason why i'm saying buy homes, me i have a different perspective. as money -- it's money but i can enjoy it i can -- >> you can't live in a stock. >> i can enjoy it, you know what i'm saying that's my personal opinion, of course i'm investing i have a lot -- i'm in the restauranted by now. >> oh, yeah? >> finger lickin' which is in miami, very big. i have some top secret investments i have done in tech. i can't -- >> oh, come on just give us one. >> i'm a silent partner. i'm a wait until it's the biggest thing on the stock market and i'm going wave my hands like hey, i'm part of that you know what i'm saying >> but listen it's justin bieber and drake, you have not collaborated with carl yet. >> we're doing it right now. we're doing it right now making history right now. >> music business, all right, we have -- every day it's a war spotify, pandora, apple music.

do you have a sense of who are the winners in five years? >> you know, me as an artist, you know what i'm saying, all this excitement this shows that the music business is doing good there's a new life to the music business i'm going to speak as an artist and as a ceo, you know, i have been blessed to do a lot of great things with apple music. you know what i'm saying >> with apple. >> with apple. >> i was going to ask you if you're samsung versus apple, you're definitely apple. >> i have my apple. >> samsung, forget that. >> i'm -- i have my mac book got my apple iphone. i love their technology. and then the story is inspiring for apple. always look at the story, how he started apple. you know, you look at the stories and i look at my story i look -- big successful mogul story. i'm inspired by the story as well >> you like the -- obviously the resolution you see what's happening, people

are look better. my new theory is for a long time instagram, initially it was about you looking good now it's about you getting more followers so they see how good you look that's a little vanity but i think it works that's kind of the second iteration of the instagram. >> the instagram thing it's special because, you know, you get to post a picture up then you can put an image up you can put a video up there's no more middle man. >> right. >> the game has changed. no more middle man back in the days you had to get in touch with somebody to get in touch with somebody to try to get to the main person there's no more of that. it's called -- you can put a picture on a message, hey, and the message is out but my key is, make sure -- major key. make sure it's a good message because that's what we have to show the young world, good messages out there some people use the social media for negativity and it's disgusting thank god for the block button.

>> yes. >> you block people? >> if it's so negative i have to because i refuse to let that in my blessing and my surrounding you know what i'm saying as kids we're on this -- let's not get it confused. we live on our phones. we watch tv on our phones. they're watching this on their phones like it's just -- so we have to be -- we have to have some type of censor when it comes down to protect our kidding. >> another thing you can do. >> negativity. >> how about the charity, how many kids have you gotten in a year or a year and a half. give us some statistics. >> me, every day i'm giving. you know i'm giving back every day. if it's from, you know, support charities or giving money. but also giving knowledge. also hugging and also just touching, you know what i mean it's so much ways of giving. you know what i'm saying that's a major key that's why i'm so blessed too. i believe in the more blessings

you give, the more you get back. >> yeah. your message is -- i mean, it's much needed in this environment. and we talk here about politics and not just here in this country. all around the world do you sometimes feel like you're pushing a rock up a hill? >> you know, climbing the mountaintop they never said it was easy to win, you know what i'm saying but there's the beauty, the victory when you get up top. that's the beauty. when you see khaled, you know khaled work hard if you see a success, people that know me say that man worked hard. >> but the millions of followers tell me that there is an undercurrent in this country that really wants to go away from the anger you would not have these -- this massive followers growing every day if there weren't people that wanted a real positive message, that didn't think it was uncool or think it was like that's my parents talking. you have young people who want that positive message and they're not being reflected in a lot of the stuff i see.

>> right well, you know, at the end of the day is we can't fall for the trap either. meaning as in, we have to continue doing what we do on the positive level just because maybe over here they are not accepting it they keep putting this negative energy we have to learn not to fall for the trap don't fall for the trap. you know what i'm saying the key is to stay focused i'm focused. no way you will met fall from the trap and no black clouds are around me. no bad energy around me. i just won't i leave the building and not you have to leave the building >> i hope you think we have good energy because we're fans and my kids think that dad is not just a complete goofus moron. >> you lit up this room. thank you. >> thank you i appreciate it. let's get over to rick santelli in the bond pits in chicago. >> hi, carl. you know, i have had a fascination in the last ten months obviously somebody's doing something. are they buying or selling vol they're buying it for a change

listen, i have been fascinated with the dollar index. look at the june 1st dollar index. one of the better turn arounds maybe it's going to firm a lot of good signals there. hard to make the definitive call but let's do something fascinating. pair it up with tens for one year what do you think of that chart? let's just look at it since may and look at how the relationship looks. i'm telling you traders always like to find the horse that's winning and they always figure it's pretty easy because all the other horses are following it. now, if we look at the november start to the shot two year in europe guess what? the yields were getting less negative rather quickly. if you look at the june 1st start to the bund, that end of the curve isn't as responsive. they kind of have flattening issues as well but really it's one of the few times where it looks as though those holding the paper that is being supported by the ecb are starting to scratch their heads a little bit carl, jim, back to you

>> all right, rick, thank you very much. just from the positive -- just the positive message. how different from yesterday it's great. >> what's coming up on "mad money" >> i have a drilling company, patterson, we'll put this in perspective. everybody thinks that the world is coming to tend in the oil patch, i don't know, mark segal's numbers, he has a good view they're not giving up on us, but we're giving up on them. dj khaled. >> did he impress you? >> major key, man. >> a full throated endorsement of apple. >> oh, geez, tim cook, that's what he should be jumping up and down about if this man says that apple is the one the other guys, the other guy -- i mean, no. sam -- sam i am. i am sam what is that? >> jim, we'll see you tonight. nice hour. "mad money," 6:00 p.m. eastern time when we come back, alphabet

getting slapped down with the downgrade at canaccord the dow is down about 70 ♪

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♪ good thursday morning. welcome back to "squawk on the street." i'm carl quintanilla with sara eisen, mike santoli at post 9. david faber is off the market having troubles get it of the gate the dow is 26. nike one of the dow's laggards with layoffs of about 2% of the global workforce. >> our road map for the hour starts with president trump reportedly under investigation over possible obstruction of justice. we'll get a live report from the white house straight ahead. and we'll take a deeper dive into the rising of the interest rates decision and alpha get got slapped with a downgrade we'll speak to the analyst

behind the call next. some economic data diana olick has the numbers for us. >> home buyers sentiment dropped to 67 and may's reading was revised down by 1 point. anything above 50 is considered positive, but confidence has been falling steadily after a big surge following the presidential election and the first executive order lifting some environmental restrictions. given the shortage of housing builders should be happier but they continue to struggle with shortages of labor and buildable lots costs for materials, especially lumber are also going up of the indexes three components, current sales conditions fell to 73 and sales expectations over if next six months fell two points to 76 the traffic dropped two points to 49. that one the only one in negative territory i asked the ceo of the home builders association this morning if the drop in sentiment has to do with the lack of more

deregulation from the trump administration he said no he said builders are looking forward to financial reform in banking if the trump agenda stalls though, that may bring confidence down even further all the numbers are online, realty check.cnbc.com. >> i was wondering if it was a trump confidence bump starting to fade. speaking of trump, "the washington post" is reporting that the special counsel is starting to investigate president trump for possible obstruction of justice our eamon javers joins us outside the white house. >> good morning. i have been talking to folks inside the west wing about this story. let me bring you the highlights. they are saying that the obstruction of justice investigation into president trump began days after his firing of the former fbi director james comey they're reporting that the director of national intelligence dan coats and the nsa director mike rogers and

director richard leggett have agreed to be interviewed by mueller's investigators into this they're looking into evidence of possible financial crimes among trump's associates aspokesman for the president's private attorney issued a statement last night about all of this. saying the fbi leak of information regarding the president is outrageous, inexcusable and illegal. that despite -- not being entirely clear that the fbi did leak this or that if anyone discussed that with "the washington post," that it would in any way be illegal. all of that's got the president's attention this morning. he put out a couple of tweets. they make up a phony collusion with the russian story so now they go for obstruction of justice on the phony story nice then the president following it up, you're witnessing the single greatest witch-hunt in american political history led by some very bad and conflicted people

#make america great again. i was just inside the west wing talking to some of the president's staffers here about those tweets this morning trying to get a sense of who the president is referring to when he says that the investigation is being led by bad and conflicted people, is robert mueller one of the people he's referring to as bad? they won't discuss it. in fact, they traditionally have said that the tweets stand for themselves, they speak for themselves now what they're saying they can't talk about any tweet that the president makes related to russia at all. they refer all of that to the private attorney several weeks ago, when the white house was asked whether or not the president was under investigation they would refer to former director comey's statements that he was not now they have stopped doing that they're simply referring all of the questions to the president's private attorney the white house press shop here is entirely buttoned up, guys, on this topic. >> wow we will await for any information separate from the president's own tweets this morning. thank you very much. eamon javers at the white house. markets meantime are

cautious after the fed raises interest rates for the second time this year yesterday central bank signaling the next hike could come in december. joining us is phil campanelli, and ethan harris, b of a, head of the global economics research guys, good to have you both with us. >> good morning. >> ethan, a lot has been written about yellen and relative to her initial reputation of like this dove from san francisco sort of flying in the face of that is that how you see it >> yeah, i mean, that story was always overdone. i mean, yellen is a situational dove she's dovish when the economy really needs it and she will hike rates when necessary. i was a bit surprised however at how hawkish she sounded yesterday. the economy has slowed down. she gave a glass half full version of the world i think it's out of sync with what we're seeing in the data.

>> was she boxed in by expectations this meeting and do you expect that to reverse later in the year? >> yeah, i think going forward is -- the fed will have a big challenge here the big market is saying that the fed will do almost no rate hikes going forward. they have given her a free pass, then the balance sheet shrinkage announcements. but going forward the market is pricing in no hike the fed is going to deliver on the hikes it will create pressure in the bond market. so the environment is much more challenging going ahead. >> what do we need to know about that shrinkage of the balance sheet? when, how it will work, whether it will impact the bond market and hur the economy. >> well, i think that they have laid out a pretty clear plan here and unless something quite bad happens, they probably move forward, by cutting by $10 billion a month and then slowly escalating that every quarter. they probably end up shrinking

the balance sheet down to about $3 trillion from $4.5 trillion so the shrinkage is much less than in the first place. i think it's wishful thinking to think that's no impact on the bond market or the economy here. you know, so far the fed has been able to announce these changes. with very little reaction in the markets. you know this is a significant policy change. it did help the economy. and stimulate the bond market when the fedex banded its -- fed expanded the balance sheet it's one reason to be very cautious around the bond market going forward. >> i think it's amazing too. i mean, they compared their çw

>> so you kind of stage this, and does the equity market in particular -- look at the past three rate increases if nothing else you had a couple of weeks where there was a downward bias. the markete flattened out had to absorb the prospect here. what message are weñrgetting -- and they're telling youjfxddd there's -- >> with global growth, maybe bailing out.w the last couple of times they went throughe decemberçó-- >> that's something to pay attention to.ñ europe is outperforming the s&p.

a lot of consideration to. and i think what gave them as ethan said a free pass to ñ yesterday. >> do you think thefá market's reacting atqall toç what eamon just myreported that mueller is looking into obstruction of justice i remember the last time we saw more than 300 pointt(dow sell-off, that came afterçóthe revelation that the firing of director james comey had to do with russia. (t&háp &hc% of justice or is it just a correction from what where are we?o a few whispers awayó[2%uzthe record high? >> i think that the new news back when the market dropped over 300 points was appropriate. today it's a little bit of rehashing of that news i think the market down today is misplaced if it's based on the fed. it really isn't much new news out of washington today. >> you think about it's more about the equity downgrades. >> yeah. we continue to look at the first quarter of earnings. first quarter of earnings was arguably the best earnings we have had globally in the first quarter. especially in places like -- we're talking about 10% sales

growth after negative sales growth last year our global portfolio has the em. >> so q1 earnings peak earnings in terms of growth?w35ñ

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canaccord downgrading alphabet, citing recent growth on mobile search and youtube, which they argue is hard to repeat michael graham an analyst with canaccord. he made that call today. good morning. >> thank you, good morning. >> been talking about peak ad load for years really. why is this time different >> well, it's been a really intense time over the last two years for google in terms of the ad load. they effectively doubled the ad load on a lot of mobile searches going from two ad units to four. and that's probably the biggest thing that's going to be hard to repeat going forward and they also really increase the ad load on youtube youtube ad load can probably go up a little bit, but i think overall the really easy growth for this, you know, ad business has sort of, you know, passed us by over the last two years i still think that the core google properties revenue growth can stay at 20% or more for this year and next year and that's a

key psychological hurdle for a lot of investors but i think, you know, much beyond that and looking out past 2018 thank growth might get a lot tougher. one other key point to our call here today, the gross margin profile for google is changing a bit. some of the revenue streams that are growing the fastest like youtube and mobile search come in at a lower growth margin. we're not calling for any kind of, you know, big negative event for google, just more it will be a little bit harder to raise the estimates going forward. >> you make the caveat that if we do see a broad sell-off, google might have some protection in the defensive stance which will make your call look too early is that why you're maintaining the price target >> well, in some sense, yes. our price target is $1,000 you know, this is more of a call

that the stock has worked well up over 30%, it's gotten close to our price target. do we have a really good justification for raising our price target further and we felt like with maybe a lack of earnings upside and then with the multiple which is at 24 times, you know, gap earnings it's at sort of an all-time high for google so we felt like we couldn't really raise our price target. that said, among the f.a.n.g. stocks google is one of the more reasonably valued. you could argue it's the cheapest stock in the same group. if we do get a pull back in tech in the short term, google may outperform we're looking out a year and say and saying that the growth in google is going to be lacking relative to the other f.a.n.g. stocks >> you point out in the note that all the f.a.n.g. stocks are up roughly a percentage year to date is it your sense that investors have been essentially hiding in this group and in alphabet, maybe more than the other ones and in the absence of other things in terms of seeking

growth >> you know, one of the things that's really interesting is we did a screen for all of the large cap tech stocks that are growing revenue by greater than 15%. and if you look at that in 2017, these four f.a.n.g. stocks represent about 25%, there are 16 total stocks. but if you look out to 2018, four of those stocks drop off and a there are only -- and there are only 12 left and the f.a.n.g. stocks are in there they represent the best options for large cap growth managers. you know, we look at the group as a whole and just think facebook, amazon, netflix have more dynamic upside in our view. >> you know, one thing i was wondering michael was about the timing because in your note, you attribute the rise in f.a.n.g. stocks to two key markets. the rise of the pass give

investing -- massive investing i'm wondering what has changed on that front along with the fact that this has a group that has earning power, it's going through big disruptions like ai and digital video. a lot of other rising trends. >> well, it's a great point on google that, you know, google has its own bet segment which has some interesting and probably prophetic long term bets you mentioned, you know, ai is one that really weaves itself throughout google's business then you have things like self-driving cars and fiber. you know, our view on those is that google and facebook and amazon are some of the best companies in terms of positioning to allocate capital to some of the big future bets and google has done an admirable job in that respect. when we look at the actual impact on earnings and cash flow for the next say three years, we just don't really see much impact from those other bets with google which is why we don't give them a lot of value in our thinking currently.

>> so when people talk 70 on waymo, do you have a number in mind or do you just think that number whatever it is is too high >> well, we -- again, you know, we feel like all of the contributions from waymo and the other, you know, -- other bets and google they're too small to move the needle on a business that's generating tens and tens of billions of dollars every quarter in revenue it takes a lot to impact that from some of these, you know, early stage bets >> finally some today said your call was really a veiled attempt to downgrade f.a.n.g. at large by using google as a poster child. would you push back on that? >> i would just say that we still like the f.a.n.g. group in aggregate. we looked at all four stocks to make sure that we could justify stock price appreciation to a price target that we felt we could defend

we think we still have that with the other three stocks and we felt like with google we're sort of closer to the end of that run than at the beginning. so i think it's fair to say t t that, you know, i don't think we're downgrading the f.a.n.g. group. i think we like the f.a.n.g. group in general you know, just that we tend to like the other three stocks now more than google. >> michael, thanks for coming on and talking about the call got a lot of attention today, thanks so much michael graham over at canaccord. let's talk about shares of nike they are on the move moving lower biggest loser in the dow right now. the company announcing it will cut 2% of its global workforce it's reaching the target consumers more efficiently it will cut the number of business segments from four to six. reduce the number of the shoe styles by 25%. guys, it's making some moves to go more at direct to consumer, which is where the growth is

nike gets hurt by the retail weakness and the wholesale business, the declines and discounts. so it's focusing on nike.com and some of its stores and it's adjusting the business to right size the number of staff, styles and cities that it targets to just focus on core growth. why don't investor like this move why are they reacting negatively to this? it's two weeks before earnings and growth is declining. the stock is down about 2% over the last 12 months the toughest competitor clearly adidas that stock is up 50%. i'm told though that the company made the announcement now because it wants to right size the business when it comes to the 70,000 employees that it wants to start getting the layoffs done over the next few months so the stock is down, but some of the moves are in an emphasis, it seems like what investors are

focused on that the growth at nike has slowed in the past year. >> yeah, it's been almost a two year process when nike -- i mean, the stock has flattened out and had a downward bias. it's not just that the competitors are rallying on this adidas, under armour, even footlocker, people are worried about what it means for the category or a symptom of what's going on, that them being in a phase to sort things out. >> check out stocks like dick's and footlocker that are big suppliers of nike, and this is clearly an effort to focus on the own business to the consumer less so in the stores. >> keep an eye on that and coming up, financials after the fed. a look at the big banks. that's coming up next. you see those stocks are to the down side. they rallied yesterday but they're giving some back the stocks in general, you have the dow down half a percent and the tech is dragging the nasdaq

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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. mmm, blueberry? tap into the knowledge of other traders on thinkorswim. only at td ameritrade. markets overall and financials specifically reacting to the federal reserve's rate hike opening on a weaker note

for more on the banks let's bring in the morning star equity analyst and from oppenheimer chris, what's the take away for the financials after the fed rate hike decision and the tone that janet yellen struck in her news conference yesterday? >> i think the basic fact is that the super low rates hurt banks and anything you do to get us way from super low rates helps banks. you know, so i wouldn't read too much into the near term day to day trading pattern here what happened we saw last year between the brexit vote and the year end, the bank stocks outperformed by 2500 basis points so far year to date you have given some back. that's natural and normal. now the stocks -- they have lagged a rising market so far this year.

they have underperformed by six percentage points and now they're cheap again. banks trade between 60 and 80% relative p/e thing is the point that we bounce off it. >> so do you agree, james that the federal reserve, raising interest rates and signaling they'll continue to do is net positive and who thrives in the environment? >> i wouldn't rush to say it's a net positive i think the tone for me is what is the rush. when we look at the data, yes, rising rates are good for banks. but we're not seeing anyone hiring your last two segments are about nike cutting jobs and about google investing in artificial intelligence there's very little in the way of inflation coming through in the data you know, i think bank investors would like to see raising rates that the sign that the economy is getting back to normal. i don't think it's back to normal yet we have seen the long term rating falling since the

beginning of the year. i think that's a bigger cause for concern than the enthusiasm you're getting from 25 basis points out of the fed. >> so chris, are you taking the other side of that james sounds like he's speaking on behalf of the bond market which doesn't believe that the federal reserve can raise rates more times. >> yeah, you know, these things never happen in a linear, problematic way. i'm sure it will be based on facts and circumstances but from where i look, unemployment is 4.3% something like that you know in addition to covering banks i cover all the private equity companies and these are people that have, you know, realtime data to literal i -- literally thousands of companies where they see, you know, daily and weekly and monthly p&ls. in general, the read i get from the private equity companies is that the economy is doing okay so, you know, i think the likelihood that we go back down and have really super low rates.

also i want to stress, it's the short rates that will matter more for the banks the short rates help the basic spread between, you know, deposits and loans that's where the short rates operate. the long rates, they have an impact that is much delayed, and may be impact trading results. but the short rates are the ones that really matter >> james, another catalyst, you have the bank stress test coming out next week. is there anything that investors might benefit from there with particular names in terms of the returning capital? >> yeah, our two favorite names are the least rate sensitive, citigroup and wells fargo. one of the problems that's fairly easy to fix for citi they're holding too much capital. now that they're back to earning money at a reasonable rate, now that the regulatory environment is easing marginally, we should see much better capital returns out of city.

i think that's good for the stocks post stress test. >> you want to give us your picks ahead of the stress test, ahead of the financial dereg, anything else? >> citi is one of our top picks and bank of america. last year bank of america was only allowed to return 50% of the earnings when everybody else was between 80 and 100 if they return 70, 80% i think it just will say, okay, you know, they're no longer in t the -- in the sick ward that they're -- that their regular bank and, you know, then they can have a valuation kind of like a regular bank. >> all right, gentlemen, we'll leave it there thanks very much let's send it over to sue herera now for a cnbc news update at this hour. >> hi, mike, good morning, everyone here's what's happening at this hour we start out with bill cosby

arriving for the fourth day of jury deliberations in his sexual harassment trial the jurors have been debating the charges against cosby for more than 27 hours they have paused about half a dozen times to revisit key evidence north korea says it released otto warmbier on humanitarian grounds after it held him prisoner for 17 months he was medically evacuated to the u.s. in a coma the u.s. official said moments ago that warmbier has a severe neurological injury. former nba player dennis rodman meeting in pyongyang and he presented the minister with gifts including a copy of president trump's book "the art of the deal. both countries said that rodman played no role in warmbier's release. theresa may visiting the site of a devastating fire in london at least 17 people were killed, 74 injured in that blaze which broke out early wednesday. entire families are still missing.

she ordered a public inquiry into that blaze. that's the news update this hour carl, back downtown to you. >> all right, sue, thank you very much. sue herera eia inventory report is out. let's get to jackie deangelis. >> the natural gas prices are around the $3 market after we got a build in natural gas here for the week ended june 9th. let than expectations, less than the five year average. little bit higher than what we saw last year at this time but it's really about total stocks right now we're standing at about 2.7 trillion that's the total that's a little bit less than we saw last year at this time it was about 2. 9. that's what people are watching. expect the builds to keep contracting as we head into the hotter weather and people are using more air conditioning to cool their homes you will start to see the prices go up. but about the $3 range right now where we're trading traders tell me they feel comfortable with as

this a fair value for this time of the year. back over to you. >> all right, jackie, thank you very much. when we come back, we'll hear from the ceo of medtronics. the shares run 23% for the year. and we'll hear some sound from dj khaled this morning here he is on another tech company this morning >> i've got my mac book, apple, i love their technology. and not only that, the story is inspiring. i always look at the story how he started apple lot look at the stories. i ok amy story big, successful mogul story. i'm inspired by the story as well think again. this is the new new york. we are building new airports all across the state. new roads and bridges. new mass transit.

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after another day of record highs yesterday, stocks are moving decidedly lower this morning day after the fed raised rates for the second time this

year for now we're joined by ubs floor director of operations, art cashen >> good morning. >> is it the digestion of the fed rate hike and everything else that kind of comes with that or the reports about the obstruction of justice investigation from robert mueller? >> well, i think the obstruction of justice is a factor here. it's -- i don't think the overall wheming -- overall factor, but another turn away from the trump agenda that washington going to be occupied with the investigation we won't get to see tax reform and we won't get to see any of the things that they were hoping for. and that have buoyed the market. the other thing that is equally important is we're seeing renewed weakness in the f.a.n.g. stocks and people are hoping that that was over and we were moving on. the fact that it is renewed and not quite as bad as it was that friday but a little harsher than people

had expected i think oil can't seem to get its act together i think if oil sells off again and breaks $44 it will have a negative influence on the market. >> putting some of that together, art, it seems like the market has to get its head around the idea and maybe this is true or not, that we have a fed now that's overlooking reasons to sound more dovish whereas for years it seemed like they were grabbing at any excuse to see more -- to seem more dovish it's in the market's head. >> i think you're right. i think the market was to some degree surprised that yellen sounded quite as hawkish as she did yesterday. and they were a little disturbed. you can see the down tick when she said it would be years in adjusting the balance sheet. i think that was of some disappointment i think you have those factors and the fed is not to be dismissed for sure. >> is the treasury market to be

dismissed? who's going to win that standoff >> i'm on the side of the treasury market. i think you may not see another hike this year. >> again, we're back to this. >> yes and i think the fed is going to have to wake up. i don't think the economy is as good as it looked. i mean, the inflation numbers are not good the retail sales were not good so this -- it's not that the any is on life support, but it's not robust it's not ready to do a marathon yet. >> are you a believer in these -- they're no longer theories now they're huge white papers, books about suppression of inflation because of automation. obviously, aging demographics. are we coming to terms with some of the trends that may be with us for the next 10 or 15 years >> it may be we noticed it first in japan and now it seems to be spreading to all the mature economies and

demographics is clearly a factor in that. >> you mentioned at the beginning questions about the trump agenda given the new revelations about the investigation. how much of the trump agenda is priced in at this point into stocks >> well, i think probably about 60% or so. i really think that they felt that coming down the line you would get some form of deregulation and you're beginning to see some of that. they're making adjustments in dodd/frank and a variety of other things so i think the market was hopeful. it was putting up with the idea that the agenda looked like it was being postponed. but if the new investigation becomes an outright obsession of not only the white house but all of washington, then i think the market will have a hard time - >> do you think more than 50% odds in this market that the tax

reform is happening? >> that some form of tax adjustment if it's not full reform, at least a generalized tax cut, some adjustment in business taxes. i think that belief is still out there. >> let's see what we get art, thank you as always, art cashin, ubs director of floor operations at the nyse. >> when we return, shares of medtronic on a tear as you can see. over the past few months we'll hear in the ceo straight ahead. the dow is down 88 and biometrics. in 574 branches. all done by... yesterday. ♪ ♪ banks aren't just undergoing a face lift. they're undergoing a transformation. a data fueled, security driven shift in applications and customer experience. which is why comcast business delivers consistent network performance and speed across all your locations. hello, mr. deets. every branch running like headquarters. that's how you outmaneuver.

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does robert shiller still see the possibility of a 50% gain for stockorilrains wl isg rates squelch that find out at tradingnation.cnbc.com is more "squawk on the street" coming up. --

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beaderman, beaderman, charles, thank you for taking the time. >> yo, ricky >> all right listen it's all about flows. follow the money and charles, there's an interesting story to tell about flows. why don't you start in my favorite sector of the fixed income area. >> well, we're seeing huge inflows like -- it could be a record inflow in june and to bond funds for some reason mainly because prices are up and yields are down. so it's 2.5 billion a day going into bond funds and at the same time, also a very large inflow into u.s. equity etfs. which is of concern because it's a contrary indicator lots of big inflows into stock etfs, which is typically a contrary indicator and also with flows we have seen huge inflows into financial etfs as the price of banks had been

going up and we since -- since friday we have seen significant outflows from tech etfs as prices have come down. so flow follows performance. >> so huge inflows in the bonds, huge inflows into the etfs, it sounds like the japanese bank of japan strategy for '14, '16, '17. i see 2261. 89 for the dow, but it seems like equity traders are depressed. i don't think they have anything to be depressed about. reading your work the inflows into the fixed income bond arena are potentially you said the largest historically probably since october of '09 the stock market bottomed in june of '09. so coexistence of these funds especially as we make a transition from active to

passive management shouldn't be shocking, should it, charles >> no. you know, flows are -- bonds are very attractive to the rest of the world. you've got to remember as long as the ecb and the bank of japan keeps printing 2.5 billion a day of new money that's going into equities and bonds, it's hard to see a major down turn in either stocks or bond prices any time soon. >> got it. >> doesn't mean -- >> we have 20 seconds. i want your opinion on something i have been hitting all my good trading buddies with the following. if the markets are managed and rates aren't really where they appear to be globally, then why is it that the backbone of most models including the fed's uses the fundamentals as if they're the same in terms of accuracy is before the crisis? your final thought. >> well, just because they're a fed official doesn't mean they know what they're doing.

why is an economist considered smarter than the traders who make a lot of money and the -- and then the economists haven't been right in several -- in six years. >> you know, i got it. charles, that's about the most perfect spot to leave it thank you, buddy i hope you can exist outside the oahu state mike santelli, back to you. >> going back soon thank you. can't wait. >> all right rick santelli and charles, thanks let's send it over to jon fortt with a look what's coming up on "squawk alley." >> i continue to watch the markets. the nasdaq, the worst off of all the indices. also, a peek in at apple they want to turn your iphone into the repository for health records. finally, number two at softbank has some harsh words for regulation to get net neutrality all that coming up on "squawk alley.

welcome back to "squawk on the street." let's send it over to our meg tirrell at the piper jaffry heartland health care summit in minneapolis. she's sitting down with a special guest. hi, meg. >> hey, mike i'm joined by the medtronics ceo

omar ishrak. thank you for joining us. >> pleasure. >> how are you looking at the gop health plan, at least of what you know of it so far and how that will affect your business >> i think by and large our business is a matter of creating value in health care by improving outcomes and by using technology to create those outcomes. by and large improvement in outcomes at a lower cost will actually provide a cost benefit to the health care system, which should if you think about it wholistically at the end of the day help with the coverage issues that everyone's kind of dealing with. >> so in terms of the reforms that are being discussed now, does that address that problem do you see things in the bills that have been proposed that would affect you >> i think it's not being directly addressed i think there's some interest in payment models they reform so that the value is acknowledged i think they're still fairly

fragmented and i do think that a stronger focus in that area and a direct linkage and expectation for cost benefit in that area might well help with the coverage issues. because that is a cost problem in the end. >> well, speaking of coverage, we've got some show and tell here this is one of your newer products. >> that's great. >> the world's smallest pacemaker, i understand. and you just got reimbursement for this, right? >> that's right. >> tell us about that development. >> let me tell you about that product. this is the pacemaker. the traditional pacemaker is much bigger than that. it's about half the size of this thing. so the traditional pacemaker is a much bigger device medtronic was founded 60 years ago with the invention of the pacemaker, which was an even larger device at that time and the fact that this company organically can reinvent that market and can disrupt that market potentially with this device is a matter of pride for us so, i mean, that's a big symbol

of what this company can do. and where health care can go where from a large device you can get to something as miniaturized as this an area which we all thought was getting commoditize in many ways is being disrupted and reinvented. >> so how much does this cost compared with an older pacemaker? >> it actually costs more, but it has tremendous benefits in the sense that in a normal pacemaker there's recovery time for every patient, there are leads which come out that's potential for infection. what this product has delivered through a catheter the recover is instant the patient has this lodged in the heart, has a ten-year battery life and it essentially embeds itself in the tissue and the patient after it's implanted doesn't even know it's there and they feel better. >> was it a challenge getting reimbursement for a more expensive product even though it's smaller >> no, that's great. but to prove there's a real quality of life benefit, there's

potentially a cost benefit in terms of reduction of infections in certain patients. it's critical to people who otherwise couldn't get a pacemaker because of other conditions they may be in. so we have to prove at least in principle what the benefits were and provide data, clinical trial data that supported that and we're going to be continuing to track that, monitor that and show that actually comes true. >> so what are you expecting in terms of pickup in uptick of sales of this product now that you've received reimbursement? >> we're getting very good sales. there's a lot of excitement. the patients love it the physicians like it it's a new product with new features but that's only a single chamber device right now the single chamber is only about 20% of the total pacemaker market and we think it will pick up share in that market very quickly. >> well, i also want to ask you of course about diabetes because you've just actually brought to market something that's kind of the first of its kind. we have here part of this, what

this is kind of known as is an artificial pancreas. this is the insulin pump connects to that a patient doesn't have to be doing those things separately. it kind of thinks on its own, it responds to what the body's doing. tell us about this and what kind of sales you're expecting here. >> yeah. i think that is really another product that we're also very proud of i mean, this is a journey that the diabetes industry has been on for the last 20 years that we've been on for 20 years in trying to develop this closed loop automatic pancreas sort of system for diabetes. the way it works is that there's a sensor that's associated with that device that's also implanted in the body. and then that sensor measures the instantaneous glucose level at any point in time and if the glucose level in an individual is high, then that sensor instructs the pump to deliver insulin. if the level is low, then the instructs to do the other way.

>> right. >> so in that way this is an automated system and it allows the patient to be in range of the right level. >> right omar, i'm so sorry i'm being told we're out of time thank you very much. we look forward to hearing more. sarah, back to you. >> meg, thank you. when we come back, apple's working on a new project to help users monitor their health as well cnbc h t dai owh tasheetlsn athe company's up to next

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welcome back to "squawk on the street." i'm dominic chu. investors are turning more defensive and cautious you can see telecom, utilities and real estate driving the trading today so far with the markets down in early trading any way. and that does it for this hour of "squawk on the street." let's send it back downtown for the start of "squawk alley." back over to you guys. >> all right, thank you very much, dom. good morning it is 8:00 a.m. at apple headquarters in cupertino, it's 11:00 a.m. on wall street and "squawk alley" is live ♪