ours this year is predicted to be 6%, which is at the high end of reits, and external growth to be approaching that, which is also strong. plus the dividends you get a pretty good return. >> all right >> better than investing in bristol-myers, right. >> thank you and sam, thank you >> you're welcome. >> melissa, thank you. joe thank you. especially for that throw up video. you don't do that -- make sure you join us tomorrow "squawk on the street" is next ♪ ♪ become to life back to reality ♪ good wednesday morning welcome to "squawk on the street." i'm carl quintanilla with david faber and jim cramer who is back at post nine of the new york stock exchange first full day of the new quarter and a lot to keep on the radar including north korea's missile test, president heads to poland and later the g-20. futures pretty good.

europe largely unchanged the 10-year just below 3.5 road map begins with the second half of the year kicking off in high gear, what to expect for the rest of '17. >> and north korea launches a missile with the capability of reaching alaska. this as president trump heads to europe to meet with world leaders. what the growing geopolitical tensions may mean. >> is the job of ceo not what it used to be many top executives departed in the first five months of the year than last the look at the changing face of the suite. heading into the first full day of the trading half the dow off an intraday high, nasdaq looks to avoid a four-day losing streak, wall street awaits the release of the fed minutes at 2:00 p.m. eastern and investors will be interested not only in comments in future rate hikes but perhaps the timing of the fed's planned balance sheet reduction. jim, welcome back first of all journal today suggests they may talk about some timing of balance sheet but might get indications of a december hike

and nothing until then. >> i think they're torn. i think the economy is okay. i think that inflation is lower than they want they definitely want to get off the emergency. i'm still sticking by the idea that there will be a september rate hike and some of that makes me feel is because not only did the banks go up off of the new capital plan which by the way i think dan stepping aside, he was the man in the fed who was against more capital being spent, we're going to talk to david about this jpmorgan and fight, but jpmorgan would never been in that decision to start buying something they'll buy back more stocks i think that the feds kind of -- it's in a unique place it can take a lot of action and not hurt the stock market. it can move and people will continue to buy the banks and they'll buy a lot of the cyclicals, it can not move and go back to the beginning of a tech rally after a bad sell-off that was based -- basically on stocks being marked up there's a great misperception in tech

it's not about fang. fang ended when everybody started talking about it there were many other companies that began you tweeted a great list of ten stocks in technology that were from the s&p they were not fang those stocks can rally again the overhang has been done watch oil. oil had too big a move but i come back and i say, europe's better, japan is a little better, and the fed has room to do what it wants sell bonds, i wish they would sell them first. that would raise rates do whatever it wants the dollar by the way, guys, is not asstrong as you think. >> yeah. well had a rough first half, that's for sure. rough six months. >> yeah. that keyante is more expensive than i thought it would be. >> you have to cut back a little bit. >> no cutting back when a monastery at the end of your block that sells wine for 7 euros a kilo >> nice. >> but overall, the tech sell-off that we've seen since you've been away and the return to financials, this ism number

on monday, are we in the throes of some return to an industrial transports record high >> transport record high confirms a lot of good things i think. this dichotomy i regard as a phony dichotomy, value or growth if we really left growth, why was health care so good? okay you say that's because health care bill is stalled no, because the market is in a rotational way, not a lot of new money in they're too granular, 10-year, 2.2, and 2.3 here it comes forget it. the strongest economies in the world right now is europe. europe has had a recapitalization of every bank in every single company country to make it so they can start lending. from doing business in italy you're afraid to put $100 in one bank it's like 2008 over there. the recapitalization which i visited over there, my bank, everybody is thrilled, it does matter, the oldest bank in the world so what i'm saying is europe is good, china is okay,

the united states is okay, and we certainly don't need the rates this low which is why the bank stocks continue to power higher but that rotation out of tech much more to do with a markup that existed until the week before of a serious markup of everything internet of things, everything video game, everything of artificial intelligence, and not social media, and not web services. look at microsoft. people talking about job cuts and look at, you know, alphabet which has come down and up to buy. >> 920 something on monday. >> a major hit i find it exciting maybe it's exciting to be back that's just -- my wife will think that means i put up for another 30 years pop had the second best month in the year before he died. important to remember, '92. >> you have a long time to go. >> it is good to recharge but better to have you back. >> people have to do that. i've been fighting vacation for

a long time. >> i know. you shouldn't. >> why >> because i want on my tomb stone he worked really hard. i don't know i get caught up, i love this group. all right. and the show is exciting in the morning and "mad money" -- >> i've never missed a day of vacation in 30 years. >> i'm digging a hole had here my wife is on a train. my wife admitted to everybody in italy she hasn't seen the show which i thought was terrific because, you know, i can just talk endlessly about her. >> she's busy working hard too. >> she's running a household which by the way is a lot harder than you think and you don't realize and you're compensated i'm not compensated. kind of the discussion >> speaking of working hard the president is embarking on his second overseas trip including a first stop in poland and then the g-20 meeting later in the week all of this on the concerns about north korea after they fired that apparently an icbm on tuesday. kayla tausche is in washington watching all of that. >> good morning, carl. the president departing the white house this morning on route no joint base andrews

where he's heading to warsaw expected to reaffirm the u.s. commitment to nato and discuss trade for u.s. liquified natural gas. last night president trump said the u.s. economy is doing well, but faces challenges he was asked this morning about the escalating challenge of north korea and said, quote, we are going to do very well. but simmering tensions with north korea reached a boil this week that game-changing launch by pyongyang of an intercontinental ballistic missile according to the country that could reach the u.s. and north korea says could carry a nuclear warhead. that was responded to by the u.s. and south korea with a show of force, launching a precision missile into nearby territory. an emergency u.n. security meeting requested by the u.s. and its allies takes place later this afternoon president trump on twitter again has put the onus on china to do more just earlier this morning he did say so much for china working with us, but we had to give it a try. he says, trade between china and north korea is up close to 40% in the first quarter we do know that china is the

only financial assist of import to north korea china this year put a ban on importing its coal and speculation that ban could expand to include oil too. a statement from yahoo! and china, though, a joint statement each of whose leaders president trump will be meeting this week, calls on all parties to deescalate tensions. now unlike president trump's first trip to europe, the g-20 attendance will be wider and more diverse, leaders of asia pacific countries who have criticized his withdraw from the transpacific partnership and now you have leaders from the european nations nursing a fresher wound from the u.s.'s withdraw from the paris climate accord but we'll see how the tone is set when the president lands in poland later today. >> all right kayla, thank you very much kayla tausche going to be a busy week watching the white house. how much market risk revolves around either north korea or tensions at this summer to the degree there are any >> it is interesting that korean stock market is so strong and

there's samsung, $18 billion, building basically a whole new complex that's going to produce all sorts of chips market lapping it up you would think if it was -- don't want to be too dr. strange lob here you would be buying apple and selling samsung. it's not happening no one is putting their money on this i think whenever it's existential enough they're talking about hitting the illusions you start thinking okay what do we do and the last thing you think about is your money. i think the tensions are incredible because korea is one of the worst -- south korea is one of the worst violators of trade. and when president trump is running for president he talked a lot about the need to protect steel dumping and protect from auto dumping and korea is probably the worst. >> which means what we're going to connect our defense of korea to their trade policy now? >> the opposite. he's just one more president not caring about the trade deficit, trying to show solidarity. i cannot believe that this guy got coopted too but that's been the way. 20,000 troops over there obviously that is to me my

focus. because there's 20,000 troops that we've been using to defend while we let them take our markets. my position pre-trump. >> understood. you've been definitive on your view of world trade to a certain extent to the geopolitical threats represented by now the possession of potentially a icbm by the north koreas, they haven't miniaturized it to put a nuclear tipped weapon on there, but that may be just years away, does it really change the dynamic in your point and at what point do investors start to pay close attention and react as opposed to just paying attention and sort of saying well, the landscape may change a bit here, but at the end of the day, the threat is the same. >> i mean it's still -- almost like we're still going with the cuba missile crisis plan where it's russia, therefore the analog china and pull the missiles back from cuba. those were russian missiles. this guy is insane and the insane -- insanity versus what i

regard as a defense department much more proactive, they are talking about going in and using our troops to finish off isis so to speak. >> yeah. >> makes it so i think that you wake up every morning and you wonder, i mean i don't think that this is idle. i think this is ongoing. i don't understand that gold doesn't spike, that people don't link this. it would make a lot of sense to link it, but it's not like in the algorithms. >> a lot of scary roads you can go down here if you choose to and a school of thought that says well, you know, he at least one thing we do know you may term him insane but he's 33 years old and doesn't appear to want to live and survive. >> on the other hand -- he's launched more missiles in one year than his father did in 17 years. >> yeah. >> it's telling. it's interesting by the way that if you read a book called "downfall" in the last few weeks of imperial japan in world war ii, truman said we're going to bomb hiroshima and nagasaki and

the imperial palace and interesting that war ended after nagasaki but before the dropping of the bomb on the imperial palace so there are no good roads, there are no easy solutions to this. >> none. >> none. >> and china, obviously, is either not using its leverage or is throwing its hands pup i have always felt that we have placated as long as we can plicate. this is not my strength. my strength is shorting samsung, going long apple, if we're serious why would the kospi be up 24% are people that wrong? >> they like vixby that's their new samsung's new effort in the audio. >> oh. because i'm so busy talking about what the new audio effort is in china. >> the speaker they will introduce. >> can they talk to each other and decide you know what i've had enough >> siri -- >> google assist. >> i would call mine john coner.

>> how come google assist doesn't have a name? >> transmog gra fide into a person. >> i think these things can talk together and we're just appendages perhaps useless appendages simulations. that's tesla we will talk about that later. want a simulation their profits. >> and volvo today when we come back a look at how shaky job security has been for ceos this year take another look at the pre-market we're coming off a record close for the dow on monday, the transport record high, the russell intraday record high but the nasdaq down 5 of 6 back in a minute i'm here at the td ameritrade trader offices. steve, other than making me move stuff, what are you working on? let me show you. okay. our thinkorswim trading platform aggregates all the options data you need in one place and lets you visualize that information for any options series. okay, cool. hang on a second. you can even see the anticipated range of a stock

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payment services company vantive announcing a deal to buy uk based worldpay a provider of payment technology and infrastructure for almost 4 pounds a share for cash and stock. it was approved by vantive and jpmorgan chase for a buyout. >> almost 19% over july 3rd, 20.7% to the unaffected stock price apparently before they're calling a broad sector consolidation speculation began. and it's a large deal. about $10 billion as you said, carl, about -- it's 3.85 p mostly made up in vantive shares

0.672 shares, 55 p in cash as well worldpay holders will own 41% of the combined company its board will be comprised of seven vantive directors and four worldpay directors jim. and you know, they're talking about everything you would expect, combined group expected to benefit from strong presence, substantial opportunities, integrated payments. globally e-commerce. benefit from what they call cutting-edge innovation, substantial talent, hubs in the uk, europe and the u.s also talking about opportunities for cost synergies again we haven't gotten the final release but more or less the details the market will work off this morning when it trades vantive shares. >> jpmorgan letting off a spinoff of fifth third in cincinnati. >> in a statement jpmorgan said they were in a response to an

invitation from worldpay, they were what they call a very early stage in considering whether or not to make an offer for the terms of any offer for worldpay. and then jpmorgan said following preliminary considerations, they don't intend to make an offer at all and, of course, they do have this deal with vantive >> i think that people don't understand the power of what we call a thin tech that's way too limiting. mastercard and visa have been incredible performers. paypal one of the top ten performers in the s&p. technology this first half. people should look at square it's up 63%. and it is the small/medium sized business, ever since -- this is jack dorsey, sara friar does a fabulous job at cfo. why has the stock been able to double payment processing is a hot area i think people have to start recognizing wherever it is, we still -- you mentioned consolidation. there aren't too many. paypal is a big company. i don't want to make -- square has good enough fundamentals someone should buy them, the problem is that well who would

do that? jpmorgan want it >> no. it's too small for jpmorgan. wouldn't move the needle this is a big deal. >> fairly large deal and again, of course, crosses borders and interesting how they're trying to do it on a governance basis giving 41% ownership by worldpay shareholders in the combination, co-ceos as well. it's not an moe. it's a takeover, merger of equals but it's kind of closer to that. >> i was surprised at this very surprised well, i think -- >> by the way, a lot of people don't know who these companies are. worldpay and vantive as you say a spin from fifth third. >> i looked at vantive and said geez, that was during the bad old days they spun it off. it's been terrific >> reminder, too, of how few $10 billion mergers we've had in this country so far this year. >> i know. >> i think that a lot of deals are, you know, kind of -- i try to bring them up and you say jim, that was something that no one has thought of other than you and maybe the ceo of one of the two. >> well you keep trying.

not both >> i try. >> you keep trying. >> i'm recharged from italy so you have to be careful. >> i'm sure you have your long list of potential deals. >> david, you're going to completely overlooking this rather remarkable deal with monogram residential, i think the symbol indicates we should talk more about it. >> that was gray star growth and income buying monogram residential. >> real estate investment trust. >> $12 a share of more >> that's a good symbol by the way. >> it's going to be retired. i would like to have that for my personal symbol. i've got nvidia as my symbol and that's going to come back -- >> you would be mo-o-a-r as they say on social media. we'll count down to the opening bell and take a look at the premarket this morning first full day of q3 back in a print.

♪ 6:30 before we get to the start of trading on a wednesday. got to remember that everything is sort of all over the place. you're finally back from italy as well. >> thank you. >> and in the mad dash talk a little auto parts. >> there was time if you told me an auto parts company would have

missed the numbers i would have said oh, really? o'reilly o'reilly missed badly. 3 to 5% comp stores what is their goal was they will come in at 1.7 they came in with a head of steam going into the quarter so there is tremendous disappointment advanced auto parts and auto zone have also been lagging. there's a lot of people wondering whether there isn't something structural or are cars doing better it's mild winter mild winter -- winter has determined these for a long time now that we're into the spring people will start saying wait a second potential amazon challenge i don't take it as seriously as others, but it's a big market. perhaps there is something going on in terms of competition i think we'll see mergers soon because we don't have -- we have too many of these -- >> people talking about that as a possibility for in time. they've talked about with o'reilly or even financial sponsor, in other words an lbo, none of it happened. >> because i think the stocks had been so great.

a longer term chart of this group would show auto zone, o'reilly, advance, they've all been fabulous, but david, they're not fabulous anymore it's taking people by surprise where she stops nobody knows >> auto zone still a lampert stock? >> no. >> sears. >> it was. >> sears had a very big move last week based on -- >> nothing. >> thank you >> you're welcome. see, still even two ekwes apart, the opening bell coming up stay with us

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adp mortgage apps and oil and gas inventories tomorrow we'll he get fed minutes this afternoon. lot of auto stuff today. you mentioned o'reilly at the wall volvo going all electric, goldman on tesla. >> i know tesla is such a battleground, goldman banker really trimming numbers, trimming forecasts talking about excess inventory want to mention for a moment that volvo, i am a long-term believer that the phase out of gasoline engines is going to happen i'm also a long-term believer in driverless this is no longer long term if volvo, owned by the chinese, is really saying hey, listen, you know what, electric is the future and the future is now. >> and has something of a rebound in the u.s., it's the most important market, volvo has. it's not about 590,000 cars a year or something like that. >> remember, nat gas powers electric so let's not think that we're

saying good-bye to fuel. we would be saying good-bye to gasoline over the next 40 years. 83%, 82% of our power is generated by fossil fuel, the lowest in many, many years, but it's not going away that fast. natural gas actually you'll find some of the markets are much higher. >> the internal combustion engine and slow, slow decline. >> how about that slash at disney, they don't like the children's -- people the long knifes are out for disney. >> "the wall street journal" doing a story on disney suffering ratings declines at its children's networks or two of its key entertainment networks i should say. >> people, it's open season on disney someone floated a rumor only thing i heard in italy was verizon to buy disney. >> "new york post" actually went there. >> they did. >> it was rumors making the rounds that's a new one rumors making the rounds that's from mcrumor face. >> rumoring everything if we're going to rumor that. tesla, half the people saying

it's great, that there's such a battery demand and the other half saying the numbers are flat here and don't get excited tesla remains an battleground like i haven't seen in my career. >> goldman by the way, touched their six-month target to 180 from 190 let's get the opening bell and the s&p at the bottom of your screen at the big board, tragedy assistance programs for survivors, helping families of america's fallen heros at the nasdaq the sifma foundation providing financial education and promoting financial independence >> i can't believe, you know, last week i go over the quarters as i spend some time, the nike quarter was really extraordinary. i think people should recognize that either that business is back, you know, pvh had a good quarter too, but the nike quarter shows you mark parker is just -- he has a plan. and then my kron had a much better expected quarter and the numbers were down, because of samsung add pg

last week in -- and general mills first quarter that ken powell handing over, but then does bring me to this idea there's lots of changes in the executive suite some guys are survivors and some guys i think are just tired >> so the journal took a crack at this and looked at 13 companies with -- over a certain revenue, with ceo departures, ge, uber, pandora, j. crew, aig cat, buffalo wild, csx, arconic, that's not even all of them. >> no. and you know, i think it's important to point out that caterpillar is the one most mystifying because it's been incredibly well. >> most bizarre was klaus kleinfeld. >> and also mystifying was mark fields agree or not >> i do. take a guy who worked a couple years at steel case. >> he did run the athletic

department at michigan. >> well, you know, that's near and dear and remember ford is located in michigan. >> i mean if you want that there's some guys like, you know, that oregon department, that oregon football team, that whole program is a good program. you know, alabama has a good program every year these are candidates for gm if mary barra gets tired? >> i think so. >> who else has had a real turn? maybe we should go process and look at the proser at the 76ers. that guy that set up the process is free. >> phil jackson is available. >> phil jackson is available he had a good biography. that ford is completely misfy ty psiing jeff feting, do you want to include him? whirlpool had a tough run. that article had -- it was a good article to read because it was like hey -- >> at love changes but for different reasons in many cases and often be times as we say the key consideration for board of directors is succession and many of these cases it has been a

fairly order early plan of succession even at ge if you listen and believe them, which i do, em melt was thinking about this as long as three years ago, now identified this summer as sort of time. >> that's a good point general mills the same thing i thought ken was dealt a bad blow from that because remember ken did have 11% comp turnaround during the period better than the s&p even though it's this center aisle of food has been difficult. >> and then guys who will never go iger, we talk disney, really he's never going to leave. >> right. >> jamie increasingly looks to stay. >> jamie dimon. >> cycling through as potential successors leaving, igor has nobody who is even discussed at this point. >> interesting. >> leslie moonves resigning for a long period of time. hard to imagine anybody new. there are ceos that will live on for a very long period of time. >> the journal's point is used to be a ceo was a ship captain,

right, and the board afforded him or her the chance to turn it around slowly. now you have to be a race car driver and board sent mentality is dead. >> i saw baby driver this weekend. i don't think you want those guys to be like that i do feel -- by the way, great movie. >> was it good >> great acting. a lot of action if you want that but i think that i look at kings, bob and jamie, they are kings. >> nobody is going to question their staying as long as they want >> meanwhile, look at jpmorgan the stock has been pretty good disney has been stalled but, obviously, short of verizon buying them, was that a stupid story, and then i just feel like there isn't -- you know, this -- these are companies that are run by people, that are run synonymously of which the most may be les moonves. >> one without a doubt, yeah.

>> these are less jamie and bob. they're kind of like cher. >> frank. >> how many ceos are by their first name. >> he was the chairman of the board too. >> i know. never a proxy fight there. >> no. >> i think -- >> nobody took him out. >> he would have been killed if he had a proxy. >> that is a fair point as well. >> a nibbling on tech today. >> yes. >> intel -- >> little early. >> helping to lead the dow. >> please, let, you know, let those guys who were selling it furiously on monday, you know, come back. i mean you don't just turn it around on nothing. let them come back let them knock some things down. and then come in but there's been a sense that the turn the algos on and look at the bonds and then immediately buy. so stupid. >> our parent company and we talk about tech -- >> is it down again? >> it's not down, but i mean this stock had been up, comcast i'm talking about right now, you're talking about a significant retreat of almost

10% from the highs in a matter of two weeks. >> well that was because that downgrade -- >> the downgrade. >> apparently allegedly had a lot of gravitas. >> yes. >> like comcast does parent company of this network i own the stock. i don't know don't really feel -- >> a month ago today 42 and change. >> yeah. >> now below 39. >> they call moffett like jack tatum, the assassin. >> in that case he was yes. >> jack tatum. >> unbelievable biography, by the way. sports biography. >> yeah. >> they call him the assassin. >> what did you think of the reports that banon wants to see an upper tax bracket with a four hand until. >> wasn't that amazing goldman sachs guy. although everyone says he had a cup of coffee at goldman and cites me the reason his dad sold at&t i would recommend at&t -- >> chapter in my book about why you view it. >> world view because of you.

>> if i were that powerful believe me i would never come back from italy because i would have taken over. >> fix that banking system quickly. you know, i just think that there's a disarray in washington that makes me feel that even repatriation doesn't happen this year that's how ugly it's gotten down there. >> that's saying something i mean because as we've said so many times whether or not the prospects for tax reform are in any way -- well, they are diminished but many people still believe you're going to get a cut and a repatriation deal. >> but there's -- >> you don't think we'll see that this year or ever >> oh, no. this year i think. there's no urgency to anything health care is just this cloud it's just a cloud. >> you know how many days working days there are left in congress this year >> that's the point. >> 61. >> that's all? >> yeah. >> for the year. >> can i get that in my contract i love you guys. >> which is why the calendar is focused on as it should be and

next year let's call it may, everybody is done, it's all about the mid-terms. there's nothing that's going to happen so you have 61 working days this year and then, you know, a few months next year and then that's it. >> how do you have an article this weekend about how your rates are going to go up under the republican plan. that's not -- that isn't how you get re-elected >> well, there's nothing that's happened yet. >> they haven't cut your taxes or given you a break. >> no legislation of significance that's come out. >> my point is that where in the q is repatriation? it's not mentioned doesn't come up. remember it used to come up a lot, now it just comes up on cnbc >> trump trade. >> trump trade. >> and i keep waiting but now i've shelved it. i thought about it over the weekend and i'm shelving it as something i thought could get done now i think they are so in the swamp, i mean -- >> ex-russia investigation. >> well, let's figures out health care. >> you could get that health

care bill out of the senate, boom boom. >> but i don't -- >> i'm just saying. >> bannon is writing it and they don't know -- >> health care, movingen on tox reform. >> what does boom boom mean? >> it's a legislative term. >> then in conference with the house and boom >> so you're to the president's desk. >> boom boom and the house is boom. >> i come back and find things i've never knew. what is nvidia. >> triple boom. >> remember boom -- >> i went to his favorite restaurant -- >> boom boom mancini. >> i went to his favorite restaurant -- >> whose >> berlusconi's favorite place in milan, he's got to up his game geez. >> didn't like it? >> that guy -- i don't know. i know he has other parts of his life cooking but his favorite restaurant -- >> you know who knows italy

well, bob pisani, on the floor good morning, bob. >> yes, sir. prefer southern cooking being a southerner myself but those milan niece, a little highfalutin i'llgo to italy with you any time. we started positive and slipped negative but that's not the case in the rest of the world i've been getting el-mails all morning doesn't anyone care about north korea. right now risk on around the world, korea up, korea at a historic high last week, and it's up fractionally today germany at a historic high two weeks ago, up fractionally most of europe up fractionally the s&p has slipped essentially into flat territory. look at the 10-year note yield, essentially on the flat side right now. crude is down but had a huge run. just recently, in fact, we talked early on monday about the reflation trade potentially coming back. i ink tit's still early to call that since the end of june here wheat and soybeans and crude up 5%, 10-year yield up 6.5%.

just a week, but it's pretty impressive moves and helped certainly one of the old value plays out there, which is energy stocks, do a little bit better value has generally done much better in the month of june. so we've seen banks up now about 5% this is again the last week and a half or so energy these are the two classic value names in 2017. banks and energies are starting to outperform and, of course, your growth name technology has been to the downside a clear rotation going on. i wouldn't say it's vigorous overall but noticeably there happening again today with generally u.s. banks on the upside so citi at a 52-week high last with week, well you can see the slip all these open positive key u.s. bank corp and wells fargo opened positive and slipped into negative territory the trend has been up. european banks are definitely on the upside you heard about the story, the eu clearing the way for a bailout. $6 billion bailout for monte

they will own italy. the state of italy will own 70% of the bank. that doesn't trade db -- monte hasn't traded since december most have been trading up in the last couple weeks. deutsch bank turned negative another factor helping the market fund flows and we have seen i mentioned this at the end of last week for the first six months of the year, record inflows, about $50 billion a month going into exchange traded funds. nearly $300 billion. for six months assets under management are essentially $3 trillion. that's been an elusive number for a year now we did hit it. inflows overall have been positive for 16 straight months. the majority, of course, are in passive investment vehicles but there are active investment funds. they're not attracting much money. when you get cheaper active investment funds, they're not overall attracting as much money as the plain vanilla s&p 500, russell 2,000 funds we talk

about. it is very early in earnings season only about two dozen companies reporting but those that have reported have done a really generally good, oracle, nike, darden had good numbers last week next hour i will look at the first reporters, these first two dozen and tell you the early signs are very, very positive and analysts have been responding by generally upping numbers for second and third quarter. we'll talk about that in the next hour. right now carl, the dow down 20 points back to you. >> thanks so much. bob pisani bond pits and check in with rick santelli at the cme group. >> good morning. as we look at the market and treasuries it isn't exploding but slowly climbing. look at october 1st of the short end of the curve, two year notes, october 2008, the last time we were settling above the 140 area as we are now at 141. i heard bob earlier referring to how many percent the 10-year note yield moved up. always valid and yes, there's a year to date chart that hasn't

moved up year to date, closed at 244. ten basis points down. one reason i never use percentages on low interest rates. here's a bund, 48.5 basis points, just enough to eek out its latest closes in 2017 to put it at early january 2016 since last time we closed here and since it settled at 22 it's around 48, 49 as i said, it's up over 100% for the year they've had days there where we move from 7 to 20 basis points a couple years ago percentages when you're this low, they say something large, but really the meaning here is, is that we've been very low and normalization is occurring and it makes the math a little bit crazy. look at the shots, the two-year european note minus 59 basis points it's hovering in a neighborhood of yields that hasn't been in since the summer of last year finally, here's where the money ball is for traders. one week the euro versus dollar,

today it is down a bit, but if you open it up to april of 2016, what you'll see is, many were looking for 114 as an area to start selling. made it up to 1.14 and a half. this is an area to pay attention to back to you. >> rick, we'll see you in a bit. rick santelli. check in on the energy complex as well jits jackie deangelis at the commodity desk. >> good morning to you, carl it's not a surprise to see a drop in crude prices this morning. about 2% we saw some strength going into the fourth of july 8 straight days of gains and crude's best win streak since 2012 part of it was that seasonal strength holiday weekend, nice weather, encouraging motorists to get out. the other part was the recount decline we saw last week only two rigs came off but that broke a 23-week win streak so now what? the fourth of july euphoria is wearing off and there's likely to be some profit taking remember some of the gains we saw were from short covering the market is going to come back to reality a bit reuters headlines reporting that

opec exports increased in june, that's the second month in a row, and the strengthening dollar as well, bearish points the supportive trends have been encourage bugts they have to continue for that support to remain all eyes will be on the inventory numbers this week. those numbers are out tomorrow due to the holiday carl >> all right jackie, thank you very much. alibaba is unveiling its smart speaker to take on amazon, google and apple it's only available in china, will cost less than the rival devices, $73 for the first one, 1,000 people purchasing the product during a one month trial when it goes on sale august 8th. everybody is in this game now. >> by the way, you're seeing nvidia up. remember the key to artificial intelligence and voice is often nvidia it's their chips, one of the reasons why the stock has been red hot. down more than 20 points from its high which was reached really about a month ago i think that when i spoke to who

has found the artificial intelligence in adobe it's in nvidia they have the chips. what it can do, they've got the hammer lock. if you go back and read the quarterly conference call you will read that they really have the way to be able to do it and voice is so important. we underestimate how important voice is. >> we just mentioned samsung also now introducing its effort with its bixby personalized service, whatever you want to call those people. we don't talk as often as tensing in china, but talk about alibaba, but it's an equal giant. of course, in messaging and gaming interesting a bit of a crackdown by the chinese authorities on the time that kids will be allowed or they want tensing to actually cut off their ability to play the game after a certain amount of time has passed. >> yeah. >> good luck with that. >> they have a popular game with 50 million users >> i mean i just think that just

makes -- memo to the chinese government, when you tell your kids not to play a video game, it's up 20% almost instantly right. don't play that candy crush. okay dad. watch this >> right >> it has been a big buyer of a lot of different gaming companies around the globe. >> oh, yeah. enormous i mention it because so often we seem to think alibaba is monolithic, but it's got some competition. they don't compete with each other head-on but they are the two giants. >> i mentioned nvidia possibly in a moment. take two is going up here. now a lot of people are concerned about the video game stocks take two held a game which is a fabulous game, why, in part because the chips are so great from nvidia they need to be able to adjust their games to be able to show more life-like circumstances, e sports based on nvidia and don't talk enough about bitcoin. >> goldman on bitcoin. >> krypto currency. >> it could -- this is one of

their tactics could drop to 1800 before a climb up to 3900. >> that's always good to have those range bounds but i think that you have to mine -- if you want to mine krypto currencies you need nvidia i keep saying it's come down a lot but of great interest to me not unlike intel from 95 to 98 i don't want to include the last two years. >> our friend josh brown last week said in a gold rush, helps to sell shovels. >> it does. >> nvidia. >> and that is, you know, amd was down badly and i think these stocks got overheated and they will surprise people because they can come back it's not because they're bubbles. it's because they have the right chips. intel by the way, a lot of people feel has stumbled again, i think brian is doing a good job but nvidia is in every right market and so is advanced micro with a lot of good chips the gaming markets the chinese might want to crack down but this is a worldwide phenomena

that you will see the fastest growing scholarships in college will come from e sports players, kind of the opposite of what my kids do. >> it's not a joke. >> no. >> tesla is at an interesting level down 4%. first time it's touched the 50-day since the late march on that goldman note which was already at a sell but cuts their six month target. >> i think tesla once the bulls will come out when you have the model 3 but i thought the inventory moment, the inventory portion of that note is daunting basically makes you say listen maybe you want the 33,000. you want more inexpensive. maybe the market is pulling back as people see the more inexpensive cars coming that frees the park the bulls have not minded that the number of cars that tesla has produced for a long time now are pretty much the same per quarter. it's a wonder story and as someone said to me on the plane, just -- comes up to me and he goes, just wait for the

gigafactory. okay >> you're referring to musk's argument that sales go algorithmic. >> giga factory. how about hello, how are you just wait for the gigafactory. okay gigafactory. am i like known as someone who's castigating elon musk's grand plans. >> to the contrary. >> no. i'm waiting for the gigafactory like everybody else. >> i'm waiting for the tunnelling devices, more focused on the boring company, i think that's what he calls it. >> boring company. >> going to tunnel under our major metropolises >> going to supply all our electricity, that's going to happen too. >> the gigafactory has to start. >> i apologize to the person on the plane that thinks i disparmged the gigafactory i'm all-in the guy yesterday nailed me at macy's, macy's and wanted to know krypto currency hit you in the shoulder and say krypto

i prefer hi, how are you krypto currency. a little bit of matters goes a long way krypto currency. >> they feel like they know you already, so there's no need to say hi. >> well -- >> but i got the new thing to say when they say it, boom boom boom >> boom boom. >> going with three booms? >> i have to because -- >> took my two and took another boom. >> 50% boon premium. >> there i go. >> we'll get stop trading thwi jim. dow down 38 to start the day don't go away. the power of a low volatility investing approach. the power of smart beta. power your client's portfolio with powershares. before investing, consider the fund's investment objectives, risks, charges and expenses. call 800-983-0903 for the prospectus containing this information. read it carefully. distributed by invesco distributors inc.

don't go away.

good to have jim back in stop trading. >> we talked about the autos, auto parts and how they're getting hurt debold, dbd, and their statement they're talking about complex bank software and how the orders aren't coming through and hurting ncr. this is a company that has the best technology to be able to swap, you know, look at your iphone and wave and they were talking about getting rid of 3 million checkers, making them

into sales associates when they were on "mad money" but this is a merger that was working very well and now people are really calling into question and there isn't a lot of value there i wouldn't be quick to just completely throw it away but the statement that they made is daunting and disappointing. >> what will you do on your return tonight >> where i think oil is going. i think it's time. i've got the best oil person in the world who has been right on every turn talking tonight with me. >> yeah. down today for the first time in nine sessions. >> maybe wrong but fun >> yeah. >> but i was talking to some of the bosses during the break, i think the congressional calendar may not have to be our calendar. just getting a sense that perhaps that's a loyittle vile legal papers on my desk like this that indicates that's not the case i missed you guys and i often had a really good glass of k

chianti and fava beans to toast david. >> we'll see you tonight on "mad money" at 6:00 p.m when we return the president traveling to poland ahead of the g-20 and with north korea's missile launch getting the world's ascension we'll talk to richard haas on the council of foreign relations. don't go away.

♪ ♪ good wednesday morning welcome back to "squawk on the street." i'm carl quintanilla with sara eisen and david faber. markets down to start the first full day of the second half of the year dow is down 38 points. we're watching that closely. geopolitics to watch as well. >> that is where our road map begins for the hour. markets kicking off the first full trading day of the second half of the year in the green. shrugging off geopolitics as north korea launches its first sbo intercontinental ballistic missile. >> president trump leading for the g-20 summit. what's on the agenda. >> volvo going all-in on electric the details on the automaker's plans straight ahead. >> economic data coming our way. let's get to rick santelli rick >> doesn't it feel like a

monday but it isn't here's all of the data points that you really want to be paying attention to. factory orders for the month of may expected down half a percent, down a bit more, 0.8% and lost a 10 from minus 0.2 to min minus 0.3. may final all the may reads tossed out, mid-month reads on michigan down 0.8% as well. that's close to expectations and the last time we were down 0.8% you would have to go back to november down 4.6 because the minus 1.1 our last look disappears minus 0.3 when you strip out transportation and capital goods orders nondefense ex-aircraft, a proxy for capital spending w i is key right now, was up 0.2 that beat last month when it was down 0.2 but does underscore how weak this area has been. the high water mark for the year is january up 1.3, prior to that

you would have to go to july one year ago up 2.7. we need bigger numbers in this area yields have down ticked a bit but the two year note yields 1.40 or higher back to you. >> all right rick, thank you. president trump departing this morning for his second overseas trip, first he goes to poland and then g-20 in germany this week. the president's agenda includes meetings with russia's vladimir putin, china's xi and germany's merkel and on the heels of north korea's successful first launch of an intercontinental ballistic missile. a statement released from the u.s. forces korea says, quote, despite north korea's repeated provocation, the u.s. alliance is maintaining strength. we may make resolute decisions any time and whoever thinks differently is making a serious misjudgment. of course that again from the u.s. forces korea statement.

we're joined on the phone by former u.s. ambassador to the u.n. governor bill richardson. perfect guest on the topic also from washington, former deputy commerce secretary bruce richards now with the consulting firm rock creek advisors, gentlemen, good morning to you governor richardson last time we talked to you it was after the tragedy of otto warmbier one escalation by north korea and now we have another one to talkabout. what message is this nation sending right now and how does the u.s. respond >> well, the message that north korea is sending is one of defiance he's getting into president trump's face, defying him with this icbm launch which shows a significant increase in their capability now, what response there's two options now that don't look very good one diplomacy, because of the otto warmbier treatment of north korea, the terrible treatment, no one is really in the mood for

that the other is, short-term [ inaudible ] which i think would be disastrous. so in between you have to talk to the chinese about them being tougher on north korea, you have to look at more cyber efforts to degrade their nuclear and missile capability, and then eventually you have to set up some kind of [ inaudible ] discussion perhaps the six party talks, perhaps china being an arbitrator and mediator. right now the options are not good >> and president trump is tweeting about china again, bruce, to your expertise he talks about the trade increasing between china and north korea and the fact that china has not been helpful on this why not and is that true, that china has actually increased its economic partnership with north korea? >> well look, the chinese and north korea have a long trading relationship and one that the chinese do have a great deal of

influence on north korea and their ability to influence their actions and that's one of the reasons so important for the president to look at the bilateral trade relationship in the context of a security relationship as well, and use the tools that we as the united states have used them wisely >> when you were going through some of the options, governor richardson, i'm not sure i heard much on military action, which is something investors i know are pondering the likelihood what do you think the probability is at this point i know it's something the u.s. has been considering, what, since the '90s >> well, i don't think it's a viable option because what you don't want to do is start a huge international brush fire there we've got 50,000 american troops in japan we've got 30,000 in south korea. we've got 25 million south koreans on the dmz in the city of seoul you've got china out there being

a geopolitical foe i think what you want to do is find some kind of diplomacy. i think previous administrations have rejected the military option for good reason now, you know, if it really threatens the united states at some point, which is not there yet in terms of the nuclear warhead, there is the icbm missile development streaking across, i think you have to look at all options, put it on the table, but right now, there are no good options. increase sanctions, i think that makes sense. chinese banks, put more pressure i think as the deputy secretary said on china because they have real leverage and they're not willing to exercise it, and then look at a diplomatic path. maybe those three americans that are still detained, find a way to start talks based on their potential humanitarian return to the united states. and one from canada, by the way.

>> bruce, you talk about the president looking at trade along with security. i wonder, this tweet about had to give it a try, we got today, does that suggest some sort of finality, that the president and china are reassessing each other from here on out >> well, you know, the u.s./china relationship is one that's remarkably complicated and multifaceted and i think the important point is, we have some levers but the -- it is the most important thing -- well twofold. one is to build an international coalition to work with our trading partners so work with the europeans, work with the japanese, work with the koreans, to push the chinese not just on the north korea issue, but also some of their bad behavior in the trade space generally, whether that's steel over capacity, whether that's what they're doing on semiconductors, or the significant limitations that they impose on american companies in terms of entering their markets.

>> yeah. bruce, how does this overall, the north korea development over the weekend, impact the president's g-20 he wanted to talk trade. he's already tweeted about steel. maybe germany wanted to talk about withdrawing from the paris climate accord there are all sorts of moving parts. a meeting with putin we don't know what it's going to be about but how does north korea influence all of it? >> north korea adds one more complicating factor and the risk here is, obviously, north korea has to be a high priority for the american president, but what we also need to do is keep our eye on the ball on the trade issues i think, you know, earlier on the president had implied that there was some kind of deal potentially to be had between north korea and our trade relationships. and we really need to delink trade and the north korea situation, but this is going to add one more complexity at a time that we want to be pushing, particularly the chinese on these important trade issues. >> governor richardson, what

will you be watching for in president trump's meeting with president xi >> well, exactly what we're talking about. in other words, he's going to say to the president, china, look, your pressure on north korea hasn't worked. are you going to do more are you going to step in or are we going to take an important step that you may not like, like some of the benefits we've talked about with you on trade are not going to happen, or some sanctions on steel, on many other issues what i would watch is the putin/trump meeting. i think that's going to be the key. syria will be a big issue. will we work closer on syria will we work closer on crimea and ukraine? will we work closer in light of all these investigations that are happening? i don't think the prospects are very good, but the relationship right now, u.s./russia is rock bottom, but maybe there can be some kind of understanding

possibly the best one might be on syria, some kind of effort to ease assad into a transition i doubt that, but maybe something can happen that allows more military cooperation with the russians instead of all these altercations that we're having over flights and bombings in syria. >> you think that would be a good thing, more cooperation with russia, even if the president doesn't bring up the election hacking that so many members of congress want him to? >> yeah. i think he should bring that up. obviously, he's got to get some kind of answer and show the american people and the congress that this was an important deviation from rush why, but if there's some progress on the syria front, some kind of understanding on a political settlement or some more military cooperation or basically an understanding that syria, if they use chemical weapons,

there's going to be very serious reactions from both countries, something in the geopolitical field, we have a lot of trade and economic issues, energy, with the european union and the g-20, but this summit will be dominated by geopolitical issues north korea, u.s. relations with russia, with china, that's what it's going to be >> yeah. the list is long gentlemen, thank you good discussion, governor bill richardson and bruce richard former deputy commerce secretary. bruce andrews, sorry >> dow down 57, nasdaq turned red. the dow down this morning the first full trading day of the second half of the year coming off the intraday high on monday. also awaiting the release of the fed minutes at 2:00 p.m. eastern time later today let's bring in steven wood, chief market strategist at russell investments who joins us at post nine >> thanks. >> you've been pretty -- i should mention we have brian jacobson chief portfolio

strategist at wells fargo funds. you've had sort of an ink link of skepticism on the u.s. pretty much all year long. >> correct. >> at the expense of say europe. does this factory order and durable number today add fuel to that fire? >> i think it does the thesis we've had is that the u.s. is doing well but mediocre continuing recovery and hitting a soft pocket right now. does that soft economic pocket really continue? we think it's a nonrecessionary environment in the u.s things will continue on pace but the softness is probably going to put the feds on the sideline and it's increasingly a valuation story in the u.s. so given okay, fundamentals in the u.s. with these valuations we've been taking a multiasset and global perspective and that has been borne out not only by the market movement but the fundamentals ex-u.s. are supporting more the markets both in fixed and equity space globally. >> brian how about you, this rotation we've seen in the past week or so, is that short lived or is that something real for

the second half? >> sure. well, i think he's kind of preaching to the choir here. i agree with him quite a bit, although i think that the fed is probably going to kind of go full steam ahead with the balance sheet reduction september and another hike in december but outside of that i think that we are sort of in the leapfrog kind of market environment where from the election to the end of the year it was all about small caps and value stocks, tech was lagging, so was emerging markets. the first half of the year tech leading, emerging markets have been plowing ahead where i'm seeing more of the rotation, another leapfrog opportunity here is now with a more small cap value in the u.s. i think that the emerging markets story still has legs here, though, because their fundamentals are a lot better. the u.s. we're seeing the economic numbers, slowing down the factory order numbers that came out were disappointing, whereas in most of the emerging markets those numbers are actually improving >> yeah. and here we're getting -- you mentioned the numbers today but ism is survey numbers continue to be strong

we're back to the soft data hard data thing. >> when in doubt go with the harder than softer data and the bond market over the equity market we're getting a mixed message there. what we're seeing in the bond market is the growth, a little bit of softness right now, to build on his comments about emerging markets i think that's a cyclical call as well. so valuations are more of a tailwind elsewhere ultimately they matter but you're right the divergence between not only the soft and hard data but the bond and equity market provides an investor an opportunity to be planful, disciplined and rebalanced globally in this environment. all-time highs are not a bad time to be disciplined. >> halfway between 220 and 250 on the 10-year which would you say comes first? >> 2.20 or it 2.50, likely to see a downside on yields bonds could rally into the softer data. we're moving into the summer not a lot of fiscal policy

inch information coming out we think the trump agenda will be pushed into the latter half of this year slowing information that could cause the bond market to rally and compress yields a touch. >> speaking of event risk how do you plan for north korea we've talked to a number of investors here that say that is a big risk factor for this market, though it doesn't seem to be shaking confidence just yet. how do you game out the scenarios that could be problematic when it comes to throwing this market off its records? >> that's one of those types of risks i think that it's like a known/unknown to play out. the best way to manage that risk is be diversified and number two be patient recognize that if something does happen you really don't know how it is going to play out. you can make your best guesses but as far as how the investment implications the markets were soft but rebounded from there. you know, in the past it's just been saber rattling, what's the response going to be but just stay diversified, globally diversified and make sure that you're patient with

your investments here and recognize it doesn't pay to bet more than what you can afford to lose. >> you know, today, greg from "the wall street journal" takes a crack at if you were going to have a list of conditions for a meltdown or a recession even, you would have labor market at full strength. >> yep. >> soaring asset prices, banks tightening and low volatility. we have it all why is not a recessionary lead in >> those market base indicators are one thing. the macro economic data are okay and we don't think this is necessarily a correction phase but if the market were to move 3, 4, 5% i'm not sure it would be a headline worthy event given how volatile markets have been that is part of our thesis sell some of the rallies, trim into strength, you don't want to do anything extreme and i would say just tangentially on the political risk politics has been a sucker's bet for a good long while. geopolitics and political headlines have been bad methods to invest one's portfolio for a

good long while. keep your eyes on your instruments and look at the fundamental factors which you think valuations will exert there. >> my only other question was on the composition of this market rally. the fact that it's been rotating from tech to now banks and energy, taking the mantle and keeping stock prices elevated. do you expect that kind of rotation to continue here? >> i do. i think that really we're going to probably -- the pendulum has been swinging from worry to relief and i think that perhaps that pendulum is going to swing a little more rapidly now. and as a result you should expect more of this leadership rotation which to me means that investors they can think about don't let your winners run so much think about trimming your gains, reinvesting to the losers, a little more aggressive rebalancing in this environment. historically pays to let your winners run. i don't think we're in an era that's going to pay off right now. >> brian, steven, thank you, guys it's going to be a fun thing to watch the second half of the 2017 dow is down 68

to bob pisani who joins us with a closer look at the quarter ahead for earnings. >> i don't normally talk about earnings this early but unusual trends that warrant positive trends we've had very good numbers for the earliest second quarter reporters only two dozen, nike, oracle, darden, very good numbers last week. the numbers were surprisingly strong look at the second quarter so far, 23 companies reporting so it's 5% of the s&p but earnings are up 12%. that's an excellent number overall for the ones that have reported and revenues up 9% and nearly 90% of the companies that have reported have beaten the revenue numbers. that's very important. remember, everybody says, oh, it's just all cost cutting and buybacks the revenues haven't been growing. that's changing. revenues are becoming an important part of the bottom line mix in terms of where companies are getting their money from on the bottom line. that's a big change. now, 5% is a small sample. what about the other 95% well so far, in the second

quarter estimates, we're about 2% lower than the start of the quarter. in other words, total s&p 500, on april 1st, compared to where the estimates are today, they're about 2% lower they normally lower the numbers 4, 5% as those analysts are too optimistic this time they're lowering them much less, only half as much, 2% rather than 4% not only are analysts more optimistic about the second quarter but companies are more optimistic because they would have talked down the numbers by now and normally they do so that's a good sign. the third quarter, here's something interesting. 43% of the companies are getting increases in their estimates from analysts. that's the highest number of positive increases in five years. and remember normally those will also start coming down as well so these are very early signs, but this is optimistic because there is an indication that analysts and the heads of the companies themselves will not try to talk down the numbers for

the second and the third quarter. we'll get the earliest big reporters, jpmorgan and wells fargo, that will be on july 14th so far, carl, i like what i'm seeing back to you. >> all right bob, we'll see what the quarter brings when we come back walmart's getting the green light over its acquisition, plus another filing for bankruptcy in the retail space. we'll tell you who and what's in store for the second half of the year shares of antivad started trading after the halt the company announced a tentative deal to buy fellow payment technology worldpay for about 10 billion nasdaq looking at its fourth straight day down, that would be fit time this year if we close in the red back in a minute approach. the power of smart beta. power your client's portfolio with powershares. before investing, consider the fund's investment objectives, risks, charges and expenses. call 800-983-0903 for the prospectus containing this information. read it carefully. distributed by invesco distributors inc. hey. hi.

hi. you guys going to the company picnic this weekend? picnics are delightful. oh, wish we could. but we're stuck here catching up on claims. but we just compared historical claims to coverages. but we have those new audits. my natural language api can help us score those by noon. great. see you guys there. we would not miss it. watson, you gotta learn how to take a hint. i love to learn. number 360™ smart bed. it senses your every move and automatically adjusts on both sides. right now save on sleep number 360™ smart beds. plus, it's the lowest prices of the season with savings of $500 on our most popular p5 bed. ends sunday.

. as we mentioned the first full trading day of the second half of the year amazon continuing to disrupt the retail sector as it spreads into grocery and now apparel with amazon wardrobe. for more on how to play the second half on retail we are joined by ubs retail analyst michael laser and insta net retail analyst simeon siegel we'll talk about amazon an your note you published on it true religion, filing for bankruptcy protection. is it a sign of denim being dead or more department store pain? what does it tell us >> a little bit of all of the above. up until the past few years it was hard to kill a retailer and all of a sudden debt started

building up, sales started coming down and what you started seeing was the series of companies that were allowed to fail so for true religion i don't know you'll start seeing some massive bankruptcies because denim isn't working. there are others selling it. as the list grows, the appetite to just allow cash flow to fund businesses that may or may not be around in a while, they're finally being allowed to fail. >> what does that tell us about where we are in the cycle of wave of bankruptcies and whether they could get bigger and recognizable names. >> an imbalance of a place to buy physical goods and the demand to buy goods through physical places. until we see better alignment between those two factors, probably going to continue to see a lot of uneven trends across retail and a very precarious time investing in the sector requiring a lot of selectivity to outperform.

>> everyone after the nike announcement on earnings last week and the confirmation of the amazon deal is looking at which brands sell directly on amazon you recently did a note on this. who within your coverage space is getting the biggest bang for the buck and who is most vulnerable there. >> interesting to michael's point and the way he outlined the supply and demand of retail. we talk about the death of retail people don't call it death of commerce the issue has been up until amazon gives you this platform if people aren't going to the mall and department stores, they're just not going to pick up the product if you give them that platform, amazon growth has been happening, so what was interesting and maybe we were a little surprised by is within our normal universe of 25 recognizable big brand names, at least nine were already selling in some capacity directly to amazon, everyone has products on amazon via third parties so the fact that nike came to the table now while adidas and under armour are already there, if you think about brands, the

brands talking about the issues with ubiquity handbag companies they're already there. so what's interesting is when you think about what amazon is doing right now, that nike announcement and the wardrobe announcement to us, actually suggests that they might be plugging this department store gap and we haven't had a channel where people are willing to buy at let's call it full price in air quotes in a while. amazon may be just that. >> even though some brand mace not feel their goods look nice enough or high-end enough on amazon thn they do at nike town? >> when you started right before it was walmart buying bonobos. walmart did this already go back decades the idea of one large conglomerate saying to the brands we will own your reputation you will be party to it or not, and brands worked haynes worked well in the walmart machine. figuring out how to do that and where the leverage lies will be important. one important part of this amazon relationship to your point is the idea right now if you search for nike on amazon there's 70,000 things that pop

up none nike sanctioned. if nike comes to the table it allow ys you to work on that the image is happening whether they want it or not. if they have a hand in that presentation, it works in their favor. >> michael, i'm curious how you're hearing this conversation as someone that kvers not the brands but the big box retailers and department stores all that have been threatened by recent amazon moves like walmart and kroger, target, cosco, et cetera what all of the changing landscape is doing is pushing the traditional retailers to get better to service customers better. do it in a way they want i think that will continue as far as walmart buying bonobos, that was about three things that was about acquiring institutional knowledge on how it is to operate on-line, two, to appeal to that more affluent customer base that has a higher penetration of spending on-line, and three, to pick up share within the apparel category which is important because given

the gross profit dollar profile of an apparel transaction it looks more attractive when you sell that on-line compared to some other categories. i think that's the rationale behind what walmart is doing and what it will continue to do as far as pushing further on-line. >> is that your pick who's your second half we're doing playbooks here second half retail playbook pick here out of the space? >> we like two ideas within the retail sector for the second half home depot, more insulated from the competition given the tactile nature of buying home improvement product the an the immediacy of the need of these transactions home depot is taking share witness category and should -- within the category and should continue into the second half. second is dollar general this is serving a low-income consumer that tends to be under indexed on-line, 55% of its transactions are in cash or on debit. that doesn't fit the profile of ap on-line customer.

plus it should maintain double digit earnings growth over the foreseeable future as it opens new stores, generate stable comp growth and stable margins and buyback stock. those are two stocks we think are very well positioned for the second half of this year. >> certainly home depot has been a winner we'll give you the final word with your picks for the second half. >> the point they've been a winner is really important another thing that amazon buying whole foods has done is taken the cross hair away from retail and staples into other categories i have a lot of companies that we look at that have been viewed as dead, right, and there's a group that has worked. off price has worked, ulta what's interesting is the companies that have worked in this process actually might become more investable because as people take some of the hatred the amazon fear and apply it elsewhere, the companies that have succeeded when going up against the amazon machine, become interesting so for us, off price is taking a nice sell-off, nice beating on this we're buyers there and ulta

has a defensibility to it. >> that has been amazon proof at least for now. simeon thank you and michael, thanks to you as well. good conversation. >> speaking of big changes in industries volvo is going all-in on electric cars our phil lebeau joins us with more details on that. >> carl, this announcement is not a huge surprise given the fact that a couple months ago volvo's ceo said look we will be phasing out diesel and emphasizingelectrics more. now that they're committed to making a change starting in 2019, let's explain this to everybody. it's not that they're going to completely abandon building internal combustion engine vehicles it's all vehicles will be offered with either fully electric or hybrid electric engines starting in 2019 and then they will gradually phase out internal combustion engines making this announcement the ceo of volvo says this announcement marks the end of the solely combustion engine powered car. and a lot of people are saying, why are they making this move?

remember who owns volvo. gili out of china. what country is pushing electric vehicles harder than any other in the world, china. so as you take a look at shares and by the way, this is shares of geely traded in hong kong keep in mind that geely is worried about china and northern europe and where are electric vehicles hot, northern europe. a smart move on the part of volvo and by 2025 they hope to be 100% electric this is a phase out starting in 2019. >> thank you phil lebeau. on, of course, potential for electric cars coming let's get over to sue and a news update from hq sue? >> good morning, david good morning, everyone here's what's happening at this hour new york city police officials say one of their own was gunned down last night in an unprovoked attack the female officer was on duty in a marked car when alleged

suspect john bonds fired a handgun through the window bonds was killed nearby in a shoot-out with police. germany is stepping up security efforts ahead of tomorrow's g-20 summit in hamburg. 20,000 officers will be patrolling the streets and nearby waterways while tightly secured corridors are being created to ensure convoys can keep moving. >> cell phone video on a pennsylvania highway shows the moment that a tractor trailer loses control and flips over good samaritans rushed to pull the injured driver from the cab. the accident closed the roadway and forced major cleanup. and feeling guilty about how much you ate at yesterday's holiday barbecue well, rest assured it can't be as bad as the record-breaking 72 hot dogs that joey chestnut gobbled down to win the nathan's hot dog eating contest it is his tenth win. i don't know that's the news update this hour david, back to you >> i can't keep watching that

video. >> i know. >> it's making me nauseous. >> it's kind of stomach turning. >> i want to see the hours after. i need to know what happens. >> and you notice -- >> do not want to see that. >> i was going to say. might not want to see that david. >> you're right. i'm thinking better of it as i visualize it. >> how many of those come out. >> i want to know, where do they all go >> don't go there, david. >> all right just don't >> thank you, sue. >> see you later >> yeah. all right. when we come back, no laughing matter, north korea firing its first intercontinental ballistic missile as president trump leaves for his second foreign trip as commander in chief the president of the council on foreign laonriarharetis chd as will join us next.

the president heading to poland and germany for his first g-20 meeting amidst the rising threat from north korea expected to include a formal bilateral with putin richard haas, president of the council of foreign relations, good to have you, good morning >> good morning. >> interesting times we've had merkel in the past week or so make veiled swipes at the president. obviously i think reuters this morning says it's going to be a tense summit for him is it? >> the short answer is yes at least with the europeans. you have real disagreements over trade, real disagreements over climate change, questions about america's willingness to stand up to russia probably the europeans won't be as muscular as we would like them to be when it comes to north korea. plus the personal dynamics between chancellor merkel and president trump shall we say are less than ideal.

>> so do you see a concerted, coordinated effort to push back or confront america first among eu leaders >> not in a sense of america first. they'll do it issue by issue and i expect they'll have something of a road block on trade or climate i don't know what's going to happen whether you can get some language on russia that is one of the most interesting questions. and how robust collective, you know, stance will be on north korea. you know really at these summits you don't engage the rhetoric about america first, no one will be asked about that, that forms part of the backdrop and one of the reasons you have such unease across the atlantic because it's inconsistent with the idea we're all on equal footing >> another source of unease richard could be in the form of tweets 140 character shots that the president has taken at journalists, at ceos, but also at some of the countries that he's going to be holding

bilateral meetings with. germany has been the subject, china has been the subject as recently as this morning how do you think that impacts diplomacy with these countries and many of them are key allies? >> i'm not a big fan of twitter as a diplomatic tool there's a limit to how much depth or nuance you can fit into 140 characters plus also the whole public nature of it i'm not sure, for example, some of the language recently about china makes it any more likely that china will do what we want them to do when it comes to north korea. you know, what's good about twitter at least potentially good is it allows you to connect directly with the masses shall we say, but i think the downside is when it comes to diplomacy outweigh any conceivable good. >> north korea something we've discussed this morning and will be on people's minds it would seem for some time to come there don't seem to be any viable solutions that don't

involve potentially massive loss of life to put it bluntly. do you agree >> well the word solution and north korea probably have never been mentioned in the same sentence before. the options are all pretty poor or unattractive. you've got to live with it with all the risks and uncertainty and precedent of that, or you've got to think about using military force that could lead to a significant conflict the only approach is a diplomatic approach, increase the sanctions against chinese entities and try to get some kind of a freeze with north korea. it's not going to solve the problem. but may put a ceiling on it. and the question is, are we prepared to live with it and are they prepared to sign up to it. i would say that's at least worth exploring before we think about the other two basic alternatives neither of which is at all attractive. >> we've been asking people about his tweet today. trade between china and north korea grew almost 40% in q1.

so much for china working with us, but we had to give it a try. his meeting with xi was what a few months ago branstads in the ambassadorship for six days why would you say something that sounds so determined. >> china has incentive here, not just to see north korea continue to be an entity to exist but it lot has an incentive to avoid a conflict, breakdown in relations with the united states, to avoid all sorts of new economic sanctions so china is not sure which way to go here, how to handle this. i think it's worth making an appeal to them, putting more pressure on them also looking to reassure them. there's things we can say about the future character of a united korean peninsula if it comes to that things we can say about our goals there that sends some messages of reassurance to china mixed in with the pressure it's worth having that conversation because china remains the single most

influential outside force on determining north korean policy. >> quickly, richard, these sort of sideline meetings and the body language and photo ops are important but does anything come out of g-20 meetings >> they get highjacked by an issue, sara. i don't know what will hijack it the putin meeting and all the dynamics of u.s. and europe and russia, it could be trade or climate or might be north korea. but the g-20 and the formal sense, to use the technical phrase, tends to be something of a nothing burger what matters is one or two side issues or whether the entire thing gets hijacked by the issue de jour and any number of possibilities this year. >> by the way, richard, congratulations on your book becoming an hbo vice documentary, will air on july 21st that's a good move richard haas, thanks again >> appreciate it. >> getting some headlines out of the martin shkreli trial

meg tirrell is outside the courthouse with the latest what do you hear >> hey, sara, well the trial was off on monday for the long july 4th weekend, but we did get some news monday night, the prosecution had asked the judge for essentially a gag order on martin shkreli and all can counsel in the case about talking about the case outside of the courtroom this morning they reconvened the judge essential will you asking shkreli if he would agree not to talk about the case in the perimeter of the courtroom and essentially not going so far as to issue the gag order on everybody but saying that since shkreli did agree, quote, i would like to so order the agreement he will not make comment in the courthouse about the evidence and the witnesses and this also includes the perimeter roads. i think it's inappropriate and all the work we've done to select 18 men and women to sit on the jury would be jeopardized if he continued to do this it is the agreement. ben brafman, shkreli's defense attorney, agreeing saying that this is an isolated incident this is after on friday when shkreli came into the overflow room to talk with reporters during a recess from the trial

brafman blaming shkreli's behavior in part on the media. including me saying essentially that shkreli is a nervous, anxious guy, getting these questions from the media and saying it won't happen again. but that is the news from inside the courthouse this morning they've now returned to the with witness questioning. sara, we'll bring you more updates from here. >> and what a turn in this trial. meg, we'll come back to you later on meg tirrell covering the shkreli trial. as we go to break some of the auto part stocks really getting spanked as o'reilly guides lower. looking atnegative comps previously guided up 3 to 5. thseiodoofing up off the lows e ssn wn 30p we're back in a moment.

where can investors find the best opportunities traders weigh in at tradingnation.cnbc.com more "squawk on the street" coming up.

let's send it over to rick santelli now at the cme group in chicago for the santelli exchange as always rick >> thanks, sara. i would like to welcome my second first guest of the week, david ator thank you for taking the time. >> good to be here >> all right later on today we get the minutes to the mid-june fed meeting. do you expect anything in the minutes that hasn't been discussed or priced in by the markets? >> well, yes, of course, we're going to be looking in detail for and i think the first thing is the specifics of the timing of the balance sheet reduction it's a question of september or december, which i think is in conquenshal nuance so we'll get

that, but i'm looking at the more subtle aspects to it. of course, how are they talking about inflation. is it still transitory or is this weakness still transitory and i'm very interested to see more discussion of risk assets obviously in the last few weeks, yellen has talked about it fisher has talked about it they're not the only ones. their concern with risk assets as a reason to continue normalization or hiking i think is going to be first and foremost for me to look at. >> you bring up a great point, david, you know, we could make it sound simpler for viewers on this kind of lazy wednesday morning, risk assets, maybe there's some bubbles, maybe things have priced too high, junk yields on the spread are too tight. when we think about all of that, we also have a tendency to think about data and what's going on with the economy domestic and global when i look at the data we can make a case that has stretches of soft, stretches of not soft, but that's been the modus

operandi for many quarters my final question to you is, do you think some of the recent movement in rates mostly to the upside has been due to data or due to the notion that europe may be embarking on the same type balance sheet issues as our fed and their rates moving up is dragging ours? your final thoughts? >> can i add a third element you know, when we started, when they announced they were going to stop qe, ten-year yields were 234. the first time they hiked ten-year yields were like 230. it's a range and i think that in the last few weeks before the sell-off, we just got -- draghi coming out there. >> let me stop you there, david, because we are almost out of time the guild is moving up, the shots, the boons, the italian numbers moved up and almost the

same kind of percentage range because yields are so different. you think all of that is just because of some of the things of normalization with our fed >> i absolutely think that is the case we started and i think we're continuing a pace. obviously it was a scare of draghi's comments about that, but i still think it is more of a tactical movement that is overbrought and now is trading a range. >> gotcha. david, always interesting to hear your thoughts you have been watching the markets a long time. thanks again let's go back to sarah we'll see what the fed minutes show later this afternoon, rick, thank you when we come back, new changes going into effect that could make it easier to get a mortgage we have details when "squawk on the street" comes right back

as mentioned new changes going into effect this month that could make it easier to get a mortgage, but could be riskier

for markets. diana olick is here with the latest story >> reporter: two changes in underwriting mortgages go into effect this month. both are designed to help people qualify for a home loan, but both will add risk to the market first, the credit agencies are drop i droppi dropping tax leans if they are not fully documented about 7% have the credit hits. without them, the fica credit scores could go up by 20 points. that's according to a study by sarah isaac. and fannie me a and freddie mac will increase their dti limits to 50% due to today's high student level debt the fannie may chief economist says the risk to the overall

system is low, but others say the market's appetite for risk hasn't changed so lenders tighten elsewhere. >> there's a belief there's a windfall for consumers that consumers will be able to get more credit. well, the reality is the risk in the marketplace has not changed. the information that is used to assess risk is what is changing. so for banks and others extending credit, if they want to maintain the same loss rates, they have to tighten credit somewhere else it is pure math. >> and yes, we are near record low default rates on loans right now. so maybe there is some room for risk and also there's a lot more competition among lenders right now for a shrinking pool of borrowers. back to you guys thank you, diana olick we'll get to deal news this morning in the payment services sector vantiv announcing a deal to buy worldplay, a provider of payment technology and infrastructure. it's about or close to 4 pounds per share.

a cash and stock deal. worldpay said it was approached by jpmorgan chase or at least appeared to have invited them in about a potential deal according to uk takeover code, vantiv has until august 1st to come forward with its formal offer, but we have the details here as i said, largely in stocks, .0672 and 55 pence around a 20.7% premium to the unaffected stock price of worldpay worldpay became public a couple years back vantiv has been public for five years. but the two companies together hope to, they say, provide what would be a scale world class payments group and a dynamic market, particularly looking, of course, as you might expect to global e-commerce as one of the opportunities on amazon, for example, and things of that

nature 41% of the combined company will be owned by worldpay stockholders they are splitting the board seven vantiv directors from worldpay and also have a co-ceo arrangement. so a large deal. jpmorgan said they were invited in but did not choose to actually make any sort of an offer. and will not make an offer >> also gives a ton of global exposure now something vantiv was only domestic when we come back, it is alibaba versus amazon. jack ma veinunilg a new voice-activated speaker in the fight for your home we've got the details, next

it is time for "your business" of the week. have you ever walked in and smelled baby oil we sat down with those behind this to learn more, watch "your business" on msnbc

welcome back to "squawk on the street." oil falls more than 3% on concerns over supply the sector is lagging the most in the s&p 500by a fairly wide margin in early trading. chesapeake energy, also newfield range resources and hess down.

we'll keep an eye on that and many of the etf attractions as well this is certainly a big focus and very widely traded that does it for this hour of "squawk on the street. now downtown for nyse for the start of "squawk alley." good morning, 11:00 p.m. at alibaba headquarters in china, 11:00 a.m. on wall street. and "squawk alley" is live ♪ good wednesday morning welcome to "squawk