what does it mean? what is it all about i guess it's still a global world in terms of interest rates, but it's still -- >> but everyone from the banks that were expecting two more rate hikes, well, it's flattening this morning. >> thank you both. have a great weekend pleasure is all mine thank you. make sure you joino us on monda. "squawk on the street" is next ♪ ♪ does it almost feel as nothin changed at all ♪ good friday morning. welcome to "squawk on the street." i'm carl quintanilla and david faber. jim cramer is off today. futures just short of the flat line today we'll get high-profile upgrades of walmart and boeing. and rates and the economy. europe is mixed, and the

ten-year yield did fall below 2.3 on the third miss in a row largely better than expected from jpmc and wells and earn,s season kicks off. >> a big week for retail walmart gets an upgrade from goalsm goldman sachs. >> financials are driving, but is the real consumer economy primed for a rebound >> jpmorgan chase falling despite posting better than expected quarterly results the bank got a boost from lending but hurt by weakness in trading. jamie dimon says, the u.s. consumer remains healthy, evidenced in our strong underlying performance in consumer and community banking wells fargo with an earnings beat and a revenue miss and citi exceeds on the top and the bottom line. all these names have had quite a run since the election not hard to know how much they deserve today in light of what the macrodata said

>> the results would give me the message that things are on track. going roughly in the direction expected and there's improvement there. jpmorgan, 12% return on equity that's one thing that stands out. that's a little bit of a notch better than the bank has been capable of more like 10%. but, you know, the stocks have built in a lot capital return all the other stuff that's on the come so i do think right now, they're going to probably trade on the bond market, right day pointing data. yields are coming down and that's the immediate link in terms of reaction. >> that roe num sber something to marvel at i can remember not that many years ago there were those who believed perhaps we'd never see a double digit roe from these bigger banks they don't seem to trade as much on that as they will on the prospects for the net interest margin, nim. still makes me wonder what we'll see as we get goldman and morgan

later in the earnings season given goldman's significant variance from its competitors such as jpm. >> people always look for the trading to see if that's a leading indicator. but often in a given quarter, some are leaning one way some have a different franchise and so it doesn't tell you one way or the other it was expected to be relatively soft on the trading side and the response it looks like is the yields are going to drive these in the short term. >> on the call, they did point out trading down 14. fixed income trading down 19 mar ann lake said markets need volatility driven by events. although june was relatively quiet, the latter half of the month improved a little bit. one quote that stood out from some reporting on the call, dimon, who cares about fixed income trading in the last two weeks of june. he's got bigger fish to fry from a policy standpoint. >> certainly in terms of what he wants to focus on going ahead.

talk about anniversarying a period when you had more opportunity. anniversaring the brexit response and the market has to be turned upside down. you complained about that, too, because nobody dacaught it perfectly right. we didn't talk about pnc which is also going to trade down. pretty good performance on the pnc front. they still have a big stake in blackrock. it ends up being different than a superregional bank >> one dynamic covering all the banks will be cost control at wells, up 5.2 expenses as a percentage to revenue. 61 is above their efficiency window they try to keep twinebe 55th in 59 >> that's the battle you can fight. jpmorgan has telegraphed it that expenses are going to be up because they're going to invest in a lot of new stuff, and it did happen in this quarter rose faster than revenues. wells fargo is still deal with

this situation where it's a premium valued stock the franchise is a little bit under question and new management and all the rest of it it has not really traded that great relative to the overall group. >> we heard elizabeth warren continuing to go on about the bank's board of directors. not sure that's going to get anywhere doubt it will going after yellen as she was testifying yesterday. but wells has been something of an unperformer versus the peer group. continues to be. >> the big question with them in general, you came into the year thinking, wow, it's been this long year's long stretch in the desert for the banks now investors are rediscovering them but they've outperformed the mark oat aet them but they've outperformed the mark oat ae on a 1, 2, 5-yer basis. you look at jpmorgan, that's where it traded in '06 higher returns on equity on a p/e basis. it's been accounted for and how the stocks have -- >> they had that -- just that takeoff right after the

election people year to date returns and say it hasn't been the various groups it has lagged. but the numbers from november 9th until the end of the year were -- >> tremendous. >> we're going to watch, obviously, for their activity today. some of the macro stuff. retail sales did fall unexpectedly in june by 0.2 hurt by weaker spending at department stores, restaurants and gas stations they upgrade the dow component from neutral to buy. walmart is well positioned to succeed and weather competition from amazon. jpmorgan adding gap to its focus list it's the second monthly decline on retail sales. we were looking for plus 0.2 got a negative 0.2 in addition to cpi, which is gone prior was 19 now 17 we'll wait some probable gpd estimate cuts. >> obviously the story of a hot-running economy has not really been the case for a while now.

you have essentially these really moderate to weak numbers. especially on the consumer side. business to business stuff is doing okay ism is holding up. retail sales and then not unrelated to that, of course, the inflation numbers on the consumer end can't pick up at all. what's interesting about the goldman sachs call on walmart, conviction buy they see 12% upside which is fine because goldman is looking for a flat market for the rest of the year. but it just shows you it's a defensive idea and why do they like walmart in this environment because they are this big, tremendous ship that can invest to protect its franchise not so much that growth is going to be really kind of picking up from here. so that's kind of telling you what kind of retail environment we're in >> the price target is raised. $84 a share to give you some senses too where the stock is. to jim cramer's credit, he has been talking positively about walmart of late saying don't penalize that while you extol

the virtues of amazon. it is amazing to think, though, overtime, and you and i have been doing this for a while. i did a documentary on walmart a long time ago. it was by far the most powerful name in rekale and every single way, and its power was completely feared. >> you could almost substitute walmart for everything said about amazon today >> control over suppliers. the largest of everything. 2004, thank you, we did our first documentary on walmart now here we are 13 years later and so much has changed. >> one of the interesting things on the goldman note, it may be relatively protected from an amazon, whole foods and other grocery competition because they are in such small markets. 4,000 stores or something. they're not obviously in the whole foods metro areas. >> they have been making the investments that many people think of necessary to be able to effectively try to compete and as we pointed out, they have essentially controlling shareholder in the form of the

walton family, broadly speaking, that allows doug mcmullen, the ceo, perhaps latitude to do things that others might not be able to in terms of taking short-term pain for what he'd hope would be long-term gain >> exactly >> gap, too. that's a defensive, like, look, these guys are going to be one of the big ones standing in the apparel category gap has been shrinking for years. it's not new to them that the mall is dying and now we have to go from growth to getting smaller and trimming down. only 1 out of 7 analysts has a buy rating on it it's not been a light stock for a long time. financially pretty strong. 4% dividend yield and that's basically, i think the quote from art peck, the ceo in the jpmorgan note was nothing that's happened this year has been surprising to us baseod what we expect meaning in the environment so they weren't looking for great things >> eyes wide open. ulta is part of this retail sense and gets an upgrid to buy from neutral at goldman.

they cut their target from 321 to 310 again. an example goldman believes where they can weather the phenomenon of amazon a name which hasn't been shrinking as much as gap has >> the stock faltered recently after this incredible run. >> this story about department stores starting to discount cosmetics. the stock had been rolling over. before that. but mostly that's been about, everyone looking at retail and how depressed the traditional mainstream retailers were and saying, well, how much of a premium can we sustain with ulta, ross stores, all the ones people were hiding in. it's interesting you get this call the market gave you an opportunity to pick this one up. the up trend or macro remains intact for the stock >> we have caplan making news on the tape brainerd and bullard saying the cpi inflation data is causing them to reassess the path of hikes.

yellen yesterday talked to more about transitory nature of inflation and factors like wireless services that are distorting the overall number. >> they certainly don't want to say, hey, it's a new ice age for inflation, and, therefore, our plans are completely up ended. but you have to acknowledge, the market is pricing out the idea of a september hike. >> it's a popular treat today. >> so you can say what you want. you hope inflation picks up. the market was worried about the central bacnkers are going to ignore it altogether we'll not try for 2% we'll start hiking even in the absence of a trend in that direction. >> when you look at competition amongst the wireless players resulting in fewer price increases and/or price decreases, then you wonder whether or not there could be any consolidation allowed. that's where i always go when i wonder would 4 ever be allowed to go to 3 when you had the fed chair talking about that

>> more data to come we'll get industrial production later on university of michigan and the rate count at baker hughes when we return, wall street versus main street what it could mean for a record run for stocks also a ge company has begun trading as a public company. we'll talk to lorenzo simonelli after he rings the bell at the big board. nasdaq is riding a five-day win streak best day for the dow and the nas since may 26th, seven weeks ago. more "squawk on the street" in a me." listen up, heart disease. you too, unnecessary er visits. and hey, unmanaged depression, don't get too comfortable. we're talking to you, cost inefficiencies and data without insights. and fragmented care- stop getting in the way of patient recovery and pay attention. every single one of you is on our list. for those who won't rest until the world is healthier, neither will we. optum. how well gets done.

♪ big day for macro data let's get to rick santelli >> yes, june read on industrial production should be hitting the wires now. finally we get a good number we were expecting up 0.3 up 0.4% and gain 0.1 on a revision into actual positive territory from unchanged to 0.1. 76.6 a couple tenths light and a couple of tenths lighter on our last look from 76.6 to 76.4. we are hovering under 2.30 we want to pay close attention to this because of the spike in rates a couple of weeks ago with europe and some of the issues there. and, of course, the drop baseod

yellen let's see how it all pans out. carl, back to you. >> we'll see you in a few minutes, rick santelli, watching the data for us today. stocks aiming to end the week on a positive note after the dow set the roecord close for the 24th time this year. s&p on pace for its fourth positive week in five. we had the vix under 10 for the 23rd time yesterday. and mike today is writing about this notion of whether or not meat and potatoes sort of needs to outperform now. >> that's the question as the macro data has cooled down it's not been a story about inflation picking up and wage growth in particular, the main street economy doing better, you know, the market has essentially said that's fine we know how to trade this. we go to the wall street beneficiaries. the asset managers, brokers, discount brokers all leading junk bonds flying off the shelves at generous terms in the economy. the financial asset economy doing great, holding the fort on

the market while we know retail stocks getting pounded and everything that's a proxy for how households are doing is on the edge the question is, can you stretch this much farther without having some rebound in the retail that's why the upgrades of walmart and gap are interesting. somebody saying, look, maybe it's gotten pulled too tight in that direction it's hard to say that it's bearish for the overall market when you have asset managers and brokers and exchanges and emerging market stocks and other global indexes confirming this positive story so it's not as if we're saying, look, it's got to fall apart unless the data get better but i do think that there's a tension internally in the market here where it's mostly been about paper. the paper economy, not the real economy. >> you point to target, for instance, this week and the guidance that maybe sentiment got overstretched to the down side >> target didn't say anything is going to be good it's a still pretty negative result they're forecasting

just less negative than they're expecting. if you look at the valuations of macy's, kohl's, gap. enterprise value to cash flow, it's not that far above the '08 trough the market is saying this cash flow is shrinking or impaired so you already have kind of priced that in. if you get any relief on that front. that's the internal question, i think, that's happening in the market right now >> you look at that macy's yield. i was asking you about it at almost 7%. they have the ability to continue to maintain that kind of a payout. the question, of course, becomes for any of these companies in terms of their future capital, does it make sense to continue do do a payout that represents as much as 7% of the stock price pmpt >> it turns out to be a red flag in a way a yield that's that conspicuously higher it almost creates more questions about the company than it answers.

and, you know, but it does also reflect the sentiment. even with a 7% yield, people are not rushing to own this thing, even though they've covered the dividend reasonably well. >> what was your take on yellen yesterday saying that 3% in five years would be really challenging. quite challenging. >> i think the gdp math puts you in that position if you are an exist like yellen of saying the population grows at less than 1% productivity, even at '90s levels is barely going to get you to 3%. so how do you flip a switch and get us there on a sustained basis? you have pops in that direction. third quarter of last year, gdp for that three months was 3.3% coming off a really weak number. i feel like she wasn't really saying anything the market doesn't get or the economists community doesn't understand it's funny, though we anchor ourselves on that 3% number thinking that we were doing something right then, doing something wrong then as

opposed to de ed td to being in circumstances. >> policy is a big piece of that we'll talk this morning about the push to repeal obamacare and the ramifications for tax reform we'll talk to grover norquist, of course. well known anti-tax crusader more "squawk on the street" from the nyse straighahd.t ea thank you so much. thank you! so we're a go? yes! we got a yes! what does that mean for purchasing? purchase. let's do this. got it. book the flights!

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♪ we've been listening in on the banker calls word is that the jpm call got a little colorful. >> rarely it does, but it did indeed one particular question that jamie doesn't like low growth over the last eight years was down to bad policies citing recent trips he's made to france, israel, india and others he said this >> every single one of those countries understands that practical policies promote business and growth is good for the average citizens of those countries for jobs and wages, and somehow this great american

free enterprise system we no longer get it. >> if the current gridlock goes away, we'll grow faster, but if it continues, we won't, in fact, actually grow slower he's seen a sea change in the eu he applauds president macron of france who he met this week for clearly making france more attractive for banks and for business jpmorgan's numbers beat on the top and bottom lines but have seen share price declines today. jpmorgan, this is down to less net interest income in favor of a rate hike. they lowered guidance from $4.5 billion to $4 billion. but cfo marianne lake said the long-term effects of rates normalization are still very much coming through. loan growth of 8% while strong was also lower than the previous guide anance of 10%. trading down 14% year on year. slightly better than the decline of 15% expected.

wells fargo and citi's net interest income was resilient. overall trading for citi was down only 7% versus earlier guidance of down 12% investment banker fees and lower provisions also helped city. wells fargo, shares under pressure due to softer loan growth down 1% sequentially compared to up 0.1% last quarter. wells down. >> we'll come back to you for updates on the calls that continue as we speak opening bell just a few minutes away we'll talk to the ceo of baker hughes, a ge company he'sbo to ng autri it. he'll join us in a moment. whoooo.

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switch to at&t for the only unlimited plan that gives you 60 channels of live television on any screen all for $70 a month. you're watching cnbc "squawk on the street. live from the financial capital of the world the opening bell in about 90 seconds. busy morning bank earnings come in. we mentioned high-profile upgrades for likes of walmart and boeing we'll try to keep a whip count going on the motion to proceed on the senate revised health care bill. plenty of russian news circulating. we covered more on some of our

sister networks. and the macro dating is disappointing yet again. core cpi decelerating for a fifth straight month we've been talking about what that means >> obviously the treasury market is building some of that in. the ten-year down 2 to 2.29. in the june fed meeting the impression was left by janet yellen we're on pace and want to do this thing. other central bankers came along. you reverse that but this is not some sort of tremendous rally in treasuries that we're in for a snafty slowdown. who knows how people are going to extrapolate this one number >> the stock looks to be down as much as 3% in the early going. the guidance a bit less than some people anticipated. and they did beat, but in of it was due to a release of reserves for litigation as well, which is

worth pointing out >> citigroup looking to be down a little less than that. decent results but not enough at this price >> there's the opening bell and the s&p at the bottom of your screen at the big board, it is baker hughes, a ge company ringing the bell this morning. celebrating their merger and listing here at the nyse we'll talk with the ceo in a few moments. over at the nasdaq between walmart and boeing, that's going to help avoid some more drastic losses as i imagine financials may drag on the dow although the broad s&p, holding up after the weak data and the bond yields came down, the futures firmed up. so clearly equity investors are kind of okay with this sort of low and slow story for the open. >> jpmorgan and goldman are the l

laggers. goldman ups to buy ross stores got an upgrade to outperform so that's been a bit of a string of upgrades on retail. >> that's another example of kind of in the ulta vein where ross was one of the outperformers for years. it faltered recently in terms of the stock and they're saying buy the dip. >> we are, meanwhile, watching some comments from randall stevenson to our own joe kernin. there was an article on bloomberg about the possibility of him moving to an executive chairmanship stephenson says the article was full of speculation and he will not be changing his title. >> that's kind of interesting. the bloomberg story you referenced is fairly detailed in terms of outlining what will occur after the close of the transaction to acquire time warner namely saying stevenson will become executive chairman. but still overseeing the company

and then stankey and donovan will be moving up. stankey will be running the content parts. time warner being the key one there while donovan will be running directv and the wireless business what i had heard, and again this is bloomberg reporting and now we've got joe kernin telling us and stephenson says my title is not going to change. what i heard is largely accurate reporting from bloomberg perhaps they didn't get the titles right but maybe there still will be a reorg with those people running those divisions maybe that won't necessarily be their titles as in him becoming executive chairman and them becoming two co-ceos of the new at&t one thing i'll come back to, it may close before the end of the

year, by mid-september roughly 60 days or so or even less than that from now. one other thing that i would mention that was in the bloomberg story that's not necessarily accurate is the idea the current ceo of time warner will be staying on that was originally the plan but from what i hear, that is no longer the case. a number of people confirming, in fact, his intention to more or less, and this would be confirmed by the reporting from bloomberg about the new structure that will take over once the deal is closed that he'll be moving on more quicklyy >> when the time warner/at&t deal was struck and people started to assess what the evaluation was, there was -- some people were suggesting that maybe time warner left a little money on the table it wasn't max valuation. given what's happen to the big media stocks, time warner versus disney, it seems as if they locked in a decent number.

>> seems they did a good job the performance of some of their cable networks and ability to sustain audience in the face of cord cut it will be interesting. what they're paying for some of the rights for their programming, tnt, you know, at&t, doesn't always do the best job of buying assets very low but they do a good job integrating them and presenting a good face to the world >> sure. >> very big home for time warner as well. >> you see the emmy noms 111 for hbo. 91 for netflix which had zero five years ago and the book value of netflix's net content assets which combined $11 billion is more than amc, discovery, viacom. i think combined >> netflix keeps adding heavily to that every year just with the new production >> the numbers still stagger me.

we talk -- i mention them almost every day. 6 billion amortized spending on content. $8.5 billion spending on content from netflix puts everybody else away not even close amazon is second and they're about $3 billion behind. >> amazon a laggard on the emmy side we talk so much about it for the streamers, that's kind of all you have in terms of bragging rights. not about ratings. it's not about affiliate fees or however else you want to compete if you are a cable network or broadcast. >> speaking of media snap is turning into a real battleground if you recall on tuesday, morgan stanley cut it, downgraded it. then upgrade today it's cowan going back the other way to market perform. price target from 21 to 17 a friend of mine helps compile a list 11 buys. 18 holds and five sells on snap. >> five sells is pretty conspicuous. for almost any company right

now. especially one that's newly out of the gate. it shows you the overlay of skepticism analysts are trying to game out the expirational lock up is that going to create a large amount of supply coming out. you could argue that both ways the stock has suffered from its post-ipo highs with facebook, right around the time of the initial lockup right after that that the stock did bottom so it's not always like an easy, you know, trade to just follow behind >> cramer's tipsfor management emphasis on short video. testimonials from large ad buyers and a vow that we've seen in some other examples that have a lock-up expiration no shares will be sold >> it's not going to be a stampede >> the other downgrade this week was all about the ad product just not really happening fast enough so who knows if we're going to see any tangible results into the next earnings report >> watching yields closely treasury, ten-year yield now at a two-week low

brings you back to where we've been in a window that we bounced around in but we've had calls from bill gross talking to six and then dunlap talking about the importance of 2.3-ish. >> of course it was a global move in yields higher in the last couple of weeks but even while that was going on, it really was happening in the absence of evidence of the economy is accelerating or inflation accelerating it really was about central bank rhetoric and expectations of how it's going to play out if the data dragged in the other direction, that's what we might be seeing. maybe it's retracing that yield lip. 2.6. even though it's in the grand scheme not a long ways off it seems like a big lift >> oil is not having too bad a week we exceeded the 50-day earlier this morning and almost 50 cents people are starting to wonder if we can set a higher high. get above, say, the 47 level

from a few weeks ago >> get us out of the sense we're knocking around the same range for a while. >> talk to baker hughes and their count at 1:00. >> which is a key for this market oftentimes in terms of figuring out energy. financials, of course, continue to be the worst performer right now. bank of america actually which hasn't reported is down 2% jpmorgan paring back some of those. perhaps the most important single theme jpmorgan 2.13% not expected to be going up, which is what people were hoping for. >> presumably that's the so-called read through on bank of america which really is kind of the single biggest pool of deposits with everything else that's going to benefit from yield expansion if you get it. the bond-like stocks, the interest rate plays are the leaders of the market right here real estate utilities, consumer staples. that's been that seesaw. it's kind of tilted back the other way.

>> one dynamic people have been talking about. next week will be busy between goldman, morgan stanley, netflix, ibm, cfx. the earnings parade really begains starting monday. we haven't seen earnings estimates come down as we normally do in quarters. people also wonder about the relative lack of preannouncements >> yeah, those things are connected. >> dollar weakness >> the immediate read is that that tends to be a positive sign it's not as if because estimates have not been cut as much that expectations are too high. usually the companies are give ing estimates. you probably have your standard margin of beat if you get that. it's still probably going to be okay the big question to me is, whether the market is already kind of there. we don't know. i've said this before. the bullish case was, the first quarter of 2016 was the trough in earnings. that was going to be the bottom

in year-over-year earnings therefore, you could buy stocks. first quarter this year was your peak in year-over-year earnings growth does that mean you sell them now? i don't think necessarily you have, to but that's the fix that we're in >> dow is up 3 and goldman and jpm save shaving 40 points just by themselves. let's get to bob fasani. >> industrial production a bit better retail sales weaker. cpi weaker and you can see the effect this is having on the sectors. it's an interest rate story with the ten-year dropping below that critical level so you see companies that are really interest rate sensitive the reits doing a little better than expected. utilities doing better than expected consumer staples also a little better than expected techs continuing to hold up. banks a little weaker. not necessarily on the earnings but they tend to sell off on

earnings days. if you look at the etf movers, the interest rate story playing out because you tend to see emerging markets like brazil and south africa and the emerging market etf, eem, do better on days when rates are down because they tend to perform better on lower global interest rate particularly lower u.s. interest rates. so there you see how these soft economic data and soft inflation data is playing out in the stock market as for the earnings today, a lot has been said about jpmorgan the quick read on this, these are good numbers earnings up 10%. despite a decline in trading revenues net interest income up 8%. a little weaker than expected. core loan growth up 8% that's a good number and the old number you used to look at was return on equity that's just the amount of income return as a percentage of shareholder equity that's 12% it was 10% last year that is one of the traditionally most important metrics how much am i really getting back and that number hasn't been

improving. why is the stock trading to the down side right now? they tend to underperform, particularly jpmorgan which is the market leader. we asked our friends at kensho for verive kag iification of th. one month before, the kbe, the bank etf everybody trades, tends to be up about 1%. does fairly well overall the day of, it's down. there's the spider, the kbe. it's typically flat to slightly down and one month after, it's up flat up to flat. very, very little. so basically you get the performance going into the earnings report and then it tends to be very, very flat going into it for the next few weeks. this is not an unusual pattern we're seeing even on the day of here so we're going to move on very quickly from the bank earnings i want to point out we're talking about 7, 8%, 9% earnings gain for this quarter. what's important is that there's only a few sectors that really

matter particularly energy is going to be far and away the most important contributor to earnings, followed by technology and financials the other eight sectors, only 17% of the earnings stocks we care about what the energy, tech and bank stocks are going to be doing. we'll see if the energy stocks hold up. the estimatesfor energy companies have been coming down practically every week they're still way up over last year but way down compairtd to the beginning of the quarter we're hearing a lot about volatility, how it's hurt some of the trading revenues for some of the banks here's something interesting the company that has the most interest in volatility, just hit an historic high i.c.e., interkocontinental exchange they hit a high. you think they make all their money on transaction fees on the new york stock exchange. and they do. their transaction fees are 40%

of their revenues. but most of it is in commodities and financials and some other things like options. u.s. equities aren't a big part of the business anymore. market data. they sell data all around the world. they bought a big company just a short while ago, a couple years ago, actually, that had a big impact on their earnings and the listing fees, how much they charge to list down here, only about 9% of their revenues. you can have companies that you think depend very much on volatility that, in fact, are doing very well because they are really diversified new high there on ice. carl, back to you. >> speaking of that data, let's get to the bond pits rick santelli is at the cme group in chicago morning again, rick. >> good morning, carl. everybody likes james bond movies a great bond movie was "moon raker. a great bond trade is ecb moonwalker they are definitely walking it back a little bit. the notion and it's not just

because it might be "the wall street journal" or other publications, though they may be correct, talking about all the expectations of jackson hole and mario draghi we know in order to move rates, move any market, the markets need to be vulnerable. we've seen plenty of hot and cold data that does nothing. very responsive to the upside. hints that europe would put the glasses on but if seems as though a lot of the headlines early today were walking that back pre-jackson hole so the markets were vulnerable look at a two-day of tens will do some parings here a two-day of boons tens in the we hours of the morning for our time zone were actually up in yield on the day. boons, they started to give it up they never really saw the light of day in terms of positive yields but look at one week chart of tens and boons and consider this they are leading on the way up

two weeks ago. logd the way down now. is there any proof well, they're down basically one base point, almost unchanged on the week tens, down ten on the week let's look at some year to date charts and let's consider that relationship tens minus boons you notice how it's coming in? we're getting close to 170 what that basically means is there's a change of guard here a little bit we drag the boon around for a long time on the relative value trade. the boons are in the lead despite the fact their yields are so much lower purpose foreign exchange if what i'm saying is true, the euro should be king, and it is year to date whether you look at the euro versus the dollar or euro versus the yen or the pound. not on the best levels meaning the euro versus those currencies those aren't bad positions you came in long on christmas eve. carl, back to you. >> all right, rick, thank you. rick santelli. oil back to 46.61.

jackie deangelis is at the xhoddy dexho commodity desk >> we're trading over the 50-day moving average the 200-day as well. there's some support here but some saying the up side is limited. a couple other reasons, a stronger dollar. pardon me, weaker dollar which is also supported and at the same time, we're seeing some short covering as we head into the weekend. we don't always move in a straight line when it comes to crowd oil prices seasonally speaking, you could bounce around and see moves like this on track for about a 5% gain for the week back to you. >> thank you very much speaking of commodities, baker hughes ringing the opening bell this morning following their merger and the new company's official listing here last week at the new york stock exchange joining us, a first on cnn interview is the new baker hughes ceo making money in any cycle.

can this be done >> that's the name of the game what we've done is created really a powerhouse in the oil and gas industry by taking two iconing names, baker hughes from an oil field services perspective, ge oil and gas. we're able to cut across the whole value chain. if you look at the up stream, midstream, down stream and actually make the comparison of the products capabilities and unify them so they want us to focus on productivity, costs per barrel >> walk us through some specific examples >> so you think about the synergies and we've stated the 1.6 billion we've got out there. and it really comes by marrying the capabilities of the two companies. you think about drilling services you look at below the mud line and then being able to take it up to the completion of the well to the production of the well. then to the moving of the molecule itself. this industry is characterized by inefficiencies and down time. what we're able to do now by marrying these capabilities of oil field services and also the

equipment and services is take out those inefficiencies because we can go through the whole value stream >> thafts $1.6 billion in synergies is one of the key reasons you did this transaction. you are talking about achieving it by 2012 1.2 billion of it from cost synergies and another $400 million from actual growth opportunities that come as a result of this combination you're still confident in that number >> yes we've had an integration team working on this already since we announced it on october 31st good line of sight and then the revenue synergies, it's about the capability of working with our customers. making them go forward with their projects by bringing down the cost per barrel. that's productivity focus. linking in the drilling and linking in and marrying with the -- >> when you announced the deal you talked about the potential performance through 2020 a prudent macro view is $60 oil

price through 2019 anything above that would be up side i would think anything below that would not necessarily be great. 60 bucks a barrel by '19 >> i think you've got to see what happens over the course of the next few months and the next years. crystal ball, i don't have one either what we're focusing on is the productivity side of this. and what we can do from a customer perspective in helping them as they go forward. if you think about maximizing their production even by monitoring their wells today, we've got a number lives that we're monitoring for middle eastern customers, as well as here in north america. and we can increase the production by leveraging the ge store of digital as well you look at that analytics being able to take that analytics and marry them with the capabilities of the equipment so that you increase the production rates >> is there a price on the down side where the story really changes, just in terms of your customer's ability to keep getting you to even help with the cost >> we see the long-term still

positive relative to the oil and gas industry you look at the macro need from an oil perspective and also gas, there are commodities that are going to be necessary and we're there to help our customers from a standpoint of that extraction but driving the productivity of that extraction and moving down the value chain. think about power generation and the gas, the power aspect. >> oil and gas spent about $800 billion overall in 2015. you're serving 20% of that market do you see that market share going up or the overall number going up or everything staying constant >> our customers have been very positive with regards to this transaction. it's a complementary transaction that brings together capabilities across two companies. and so they are looking for us to enable them as they go out to projects we're looking for those revenue synergies, looking to expand what we're dwith our customers as they go forward with projects also brown field projects. you think about projects that already existed but going out to new wells.

we can extend those and help our customers. we're also leaning on the ge store here you think about prodativity coming from digital and the 3d printing, the advanced materials. that's a huge benefit that we get that we can scale into the oil and gas industry >> how does 3d printing fit? give us an example of that >> you think about modules, what's utilized in unconventional moving away from the actual welding and casting but 3d printing brings down the actual material weight and also s th d. also the wind turbines we produce, 3d printing there >> is there any expectation that mr. flannery is going to demand a different approach or different strategy from you than has mr. immelt >> he's been heavily involved in the transactions that we've done previously he knows the oil and gas industry.committed to this

spa space, and we see it growing over time. >> you have to come back often congratulations. baker hughes, a ge company, lorenzo simonelli. disney stores plans for its parks.

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disney is offering a sneak peek of its star wars land models currently under development at theme parks in florida and california they'll transport guests to a never before seen planet one of the attractions lets guests take the controls of the

millennium falcon on a secret mission. >> wish we could go there right now. they've had a lot of success in parks. we know shanghai has turned on a path to profitability earlier that even the company expected >> a never before visited planet even in the movies or is this supposed to be some composite of locations that they have used? i need the details, obviously. >> but for both disney and for our parent company universal obviously hugely important >> been thriving >> i remember about the '08 recession, people really were questioning whether they were going to get occupancy rates back up. they're investing too much money in physical assets in the parks and that's paid off tremendously >> the nbc universal and comcast. that was a huge unexpected bonus just how extremely strong it's been of course, harry potter being a key part of that for universal >> i have a little wand i got

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♪ good friday morning. welcome back to "squawk on the street." kayla tausche is back. >> like that intro song right there. >> sarahi ooieisen is off today big day for banks and macro data we're watching the hill even though kayla is here today >> the start of earnings season. jpmorgan, wells fargo, citi all reporting. a little drama on that jpmorgan call we'll dig into the numbers >> retail sales did slump in june >> ceo psychology in the spotlight. why one popular way of operating may be on the way out. jim stewart is with us >> all right so we worked our way through cpi retail sales more data crossing the tape. let's get to rick. >> yes, light aim toward

universal michigan sentiment july preliminary which means this number will day peer when we get the final 93.1 we were expecting a number most likely at or north of 95 last look on the final june was 95.1 93.1 it gets an interesting accolade here it's the weakest number of the year and actually 93.1, let me cipher here. looks to be the weakest number since september of last year let's go through some of the internals on this. we know inflation at least based on data points we're monitoring seems to be ebing a bit. not so true when it comes to the one and five to ten-year embedded in this one it follows 2.6 it's up 0.1 from 2.5 so it's interesting and maybe the way the respondents cut off time in their answers will

change when we look at it on the final due to some data points, but it something to pay close attention to carl, back to you. >> rick santelli, thank you. let's get analysis of cpi retail sales from steve liesman what a morning >> the consumer sentiment data ticking down really what's followed by wall street are the retail sales and inflation numbers. the inventory numbers coming as expected here's the data. unchanged on cpi missing by a tick core cpi up just 0.1 and think about these numbers being higher than the gauge that the fed looks at from 0.3% to 0.5% these numbers not getting there. retail sales defying expectations and very interesting given that consumer centiment is still pretty high. let's look at some of the details. first the cpi details. prescription drugs an outlier, up 1%. new vehicle prices down.

airline fares down and gasoline station sales down big, 2.8% now we'll look at the retail details and you can see some of the deflation in the sales numbers there. sporting goods down 0.6% department stores down 0.7% and gas station sales down 1.3%. all of this combining, guys, to lower the probability of the fed rate hike. the third rate hike coming in. down to 38%. one of the lowest probabilities we've seen this contract had traded above with -- above 50% at one time and now has steadily come down given the data that's happened, the comments by yellen and the fed governor brainard. the third rate hike. and the fed has quite a few months to go for the year if the data do turn around a chance to get that third rate hike in. there's less than a 50% probability that the fed does that third rate hike >> that's a number the market is

watching closely the banks are watching that number closely as well jpmorgan, wells fargo, citi all reporting earnings we're joined with more pretty colorful this morning >> making headlines has been jamie dimon's rant on the u.s. economic policy picture over the last decade though his main point was that growth is actually resilient >> since the great recession which is now eight years old, we've been growing at 1.5% to 2% in spite of stupidity and political gridlock because the american business sector is powerful and strong and is going to grow regardless it would be much stronger growth had we made intelligent decisions. >> but it is fair to say by the end of this paragraph, he was ready to see some change in policy >> we've become one of the most

bureaucratic, confuse, litigious societies on the planet. it's almost an embarrassment being an american citizen traveling around the world and listening to the stupid we have to deal with in this country >> the bottom line for earnings today, lowered guidance on net interest income from jpmorgan, despite a bottom line beat meaning that their shares are down for wells fargo, the decline in shares is because of softer than expected loan growth for citigroup, they're down the least because trading, while down, was better than expected and net interestincome more resilient than jpmorgan's. >> all right, thanks so much, willford frost a busy morning ahead for you let's bring in the executive director at nomura you heard him lay it out jpmorgan lowering its guidance citi hurt on trading and wells lower on loan growth what's the common thread between the three today if there is one. >> i think wolf outlined it

clearly. to clarify, citi actually had a beat within trading so their results on the trading side beat expectations but this is really a question around nii and some of the guidance which is softer than people had expected. taking a step back you have cautious guidance from the management on the net interest outcome outlook, that's going to likely bring down numbers just a touch for the back half of this year but you're looking at a group that's had a very strong run post election and year to date the bar was getting a lit lost here and given some of the more measured guidance from the management, felt it was elevated and reacting accordingly >> so do you think the expectations for this group were too high or do you think this is sort of a garden variety correction for them? >> yes, i think for the quarter,

expectations had appropriately rebased, but everyone was taking a wait and see approach on the back half as it relates to capital markets, trading and also some of the guidance on net interest income. in that regard, you saw a wait and see approach from consensus. and people hadn't cut their numbers yet. it feels like there is some negative revisions they'll have to be filtered through that's driving some of this optimism today >> we were looking at a one-year turn of citigroup up 49%, which is a stunning move for a single company over the course of the last 12 months how much more growth do you think this sector can see? let's say we get tax reform. let's say the consumer does get more confident after we saw a little blip in the last data how much more can this sector rise if we get some positive catalysts? >> i think the biggi isgest pos catalyst which jamie outlined. it was an epic rant at that. did note that the capital relief

is going to be a really big driver of share outperformance for a lot of these stocks. and you are coming off over very favorable stress test results that we saw in june. and ultimately it means higher buybacks, higher dividends and then the relief in areas like volcker could drive some increased trading activity, improve liquidity as well. there's a lot of tail winds that could drive earnings higher and ultimately bodes well for the group. those do feel increasingly priced in, but the blue skies analysis that we've donecont contemplating a lot of these benefits you've seen plus side for citi a >> what's the down side risk because the conversation on those topics you just mentioned has been very prevalent, baked into the stocks and potentially overly rosy for the last few

months what could bring this sector down >> so i would take the two most significant factors are the policy, which is uncertain at the moment in terms of the policy changes that are coming we actually had better visibility on what's likely going to be a more challenging environment to get some of these changes pushed through i should note that a lot of the changes that we and even jamie had outlined in his remarks on the call this morning, they are changes that don't require legislative action so long as you change the composition of the fed, and actually rewrite the rules, that in and of itself should be able to drive significant capital relief so it seems if we don't see any real progress there over the coming months, yes, you could begin to see some of these stocks lag the other element, which you highlighted is tax reform. and clearly some reduction in the tax rate is being baked into these stocks i'd say not fully at this point.

i think there is some skepticism that it's started to get priced in but you have some of that benefit reflected in the share prices if it's clear we'll not see any progress there either, you can see the stocks lag as well >> and leading to some frustration at jpmorgan in particular we've got to leave it there. steven chubak of nomura, thank you. the dow coming off another record close oil up again this morning, aiming for its fifth positive session in a row we're joined by russell investment chief market strategist steven wood and merrill lynch managing director here at post nine. good to see you. i see over your shoulder the vix once again below 10. is this extended goldilocks after the macro data today what's going on? >> the data we've got right now is consistent with our expectation of a -- our view is that the fed would have two rate hikes for 2017 and

assess for the fall. so i think it may be a response to the fed but the lower volatility valuations are still an issue we think these valuations are coupled with okay fundamentals in the united states modestly improving and a good time to look more global >> does this add to the transitory argument, today's data, or not >> i think it takes away from that a little bit. i think there's some structural issues at play with respect to inflation. asian demographics, a lot of global debt throughout global technology as well. so all of that is playing into this as well but we do think that the fed will eventually be vindicated. i think as the job market keeps improving and wage pressures start to build up, wage pressures have been building up in a choppy fashion, but it has been building up i will call it pressure but it's trending higher. >> over a period of years? >> over a period of years. and i think the fed will be

vindicated and the data will prove itself out >> how big a role will the fed play in the economy and the market it seems more and more like earnings are still the bed rock. >> the fed always plays the largest role you have a market and the bond market and equity market disagreeing, go with the bond market, in my opinion. the information we're getting is an economic deceleration inflation is on the lower side the fed is going to be more cautious rather than more aggressive and the earnings situation in the united states is coming off the boil so it's going to be a challenge for earnings to maintain some of their support going into the end of this year >> you think banks support that thesis today >> i think so. i think so so if the first quarter if you look at the softness, earnings, the composition of u.s. earnings, a lot of that was generated ex-u.s we don't have a bearish call on the u.s. but a slightly above average is not going to be sufficient to support these valuations >> so is europe still the call where is -- where do you want to play >> we like europe a lot.

europe has come a long way this year but we like europe because european equities, as well as the margins in european equities have trailed the global averages the other thing is they are still a relatively more cheaply valued than u.s. equities. also the political risk in europe has diminishdiminished. we were a little worried about the france elections they have a pro-growth, pro-reform minded president. >> and if i can go back, ecb you have the fed discussing the nature of their tightening, and the pull down of the balance sheet. the european central bank will be creative for the time being we're looking 2018 before they make a meaningful change in their liquidity. bank of japan, european central bank going slightly different directions >> do you believe that jackson hole will be consequential for

draghe in terms of setting a table for next year? >> i think so. what is the implementation scheme for the european quantitative easing? when one looks at the u.s. versus europe, you see how much more robust deep in liquid kiwi is easier to element. >> you don't think they'll wait to see how things play out in germany later this year? >> over the elections in germany, a pretty good shape italian elections are -- >> we've heard that before, though >> absolutely. far from me to predict the political election but i think italian elections in 2018, i think europe still has legs. and i think fund flows are showing that as well >> we've gone this whole conversation and haven't mentioned politics or policy here's dimon this morning. we just played a bit of it we've become one of the most bureaucratic, confusing, litigious societies on the planet it's hard to be an american traveling around and listening

to the stupid stuff we have to deal with in this country. are we done discussing tax reform we're doing a whip count on health care. >> the good news is the market is not expecting much from washington anymore so-called rates. they're not showing any expectation for anything from washington i think we get some kind of tax reform maybe a tax cut. simple tax cut which is temporary in nature. that helps with the markets. markets juice up a little bit. earnings help. but what we really need is tax reform comprehensive tax reform which is you lower tax rates and close the loopholes. that will add to the aggregate supply of the economy, a positive scenario. and i'm not sure we're getting that >> he did seem to be saying the gridlock is not hurting us right now but the lack of gridlock could help >> it could help that's why you'd need to take a more global perspective. the policy gridlock in washington, d.c., which we might

get some relief. but then if you go back to fed policy, earnings and valuations, if one takes a more global perspective you don't have to make these tougher choices look where valuations are more of a tail wind policy monetary and political is to be added to one's portfolio. >> emerging markets doing well >> good to see you thank you very much. good discussion. when we come back, shares of walmart on the move after the bullish call from the street we'll discuss that and the slump for retail sales this morning. tax reform is in folcus as the cbo unveils the budget we'll talk to grover norquist later in the program n'11is up dot go away.

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i'm gonna just go back to doing what i was doing. find your awesome with the xfinity x1 voice remote. retail sales did fall unexpectedly in june for the second straight month. courtney reagan is watching that >> good morning. another active day for retail stocks with some mixed messaging after a strong day yesterday for the etail etf. the xrt. it's flat right now. the commerce department says the june retail sales fell 0.2%. expectations were actually looking for a slight gain there. if you break it down by category, ex gas, 3.1% for may department stores also down 0.7% and then look at the food categories food and drink services down grocery stores down 0.5% food and beverage also down just shy of 0.5%. the strong retail categories are

the ones that continue to be strong building and garden equipment up 0.5% nonstore retails, internet-based retailers and general merchandise up 0.4%. health and personal care, we talk a lot about cosmetics, makeup, up 0.3% for the month compared to the month before june retail sales isn't enough to offset the positive push from goldman sachs for walmart shares they're upgrading them from neutral to buy adding it to its conviction buy list with an $84 price target, about $8 above the current price right now. analysts saying walmart is as well positioned as any mass market provider. walmart's cope willing with the commerce spending whether amazon's growth and more specialty retailer gap alsoe inn the day. gap getting added to gp morgan's

list as a top specialty through year end old navy sales trajectory, acceleration in gap's underlying trend, but the analyst notes nothing new from gap's previous expectations going into the year the executives spoke about gap inc as a last man standing beneficiary saying there's $25 billion introubled retail market share up for grabs. >> thanks so much, courtney reagan a new take on ceo psychol y psychology we look at ayn rand. joining us with his latest column is jim stewart. jim, good to have you back >> nice to be here >> what a great provocative take >> thank you i thought it would be a really fun idea, i could create an index, the rand index of stocks of companies whose ceo embraced the thought philosophy of ayn

rand that doesn't seem to be doing that well. the latest example is travis colonic at uber who, you know, was pushed out of the chief executive role and i know he's been backing away from rand and said maybe i wasn't that much of a randian. but he had the cover of the fountain head as his avatar and many principles can be traced to rand's thinking. so the thinking is great for visionaries, entrepreneurs, people with a vision who want to charge ahead, but she's not good at assessing risk. she's not good at team building. and she really doesn't address the extremely difficult task of converting from the visionary founder to the manager of a large sprawling company with many stakeholders. >> objectivism is being replaced with what in its place comes what >> well, look. objectivism is an extreme form

of thrfree market capitalism and promotes the individual to a very high degree now that isn't going away. it's a matter of gradation i think probably the vast majority of chief executives would to some extent subscribe to some of rand's ideas. i talk to rand people at the rand institute who think about this day in and day out. and their criticism of the people who are randians who aren't doingo well is they're not randian enough they cherry pick a few things they like but they don't take on the tough stuff or study her philosophy it's like a lot of these philosophers you can read a lot of what you want into this text. but i think her idea is, look, let's face it. there's still importance she has a big sway right now the white house is filled with people reading her books i think she's worth knowing about, taking seriously and she clearly is having a big influence. >> but it's interesting that when you talk to people who follow her theories, but you

compare them to travisic icaic l calonic, they don't want to be associated with him. >> one of the things is how as a randian do you treat other people and some people have said, rand just gives you a license to like mow them down as you pursue your own self interest the randian people say that's not true she had incredible respect for people who did their jobs well, no matter what those jobs were whether it was a secretary, someone mailing, you know, stakes into the railroad if they did their job well and were proud of their work, then she treated them really well and treated them fairly and in justice and treatment of employees is very important to her. they are saying she would never endorse or tolerate sexual harassment in the workplace. >> is there an example beyond uber that you think plays into this >> well, there are a lot of people out there to varying degrees have expressed and backed her john mackey of whole foods is

not exactly a randian but he's expressed admiration for her work you can see some of the problems of kind of maybe overindividualism that surfaced there. jack dorsey at twitter has been identified with the rand philosophy and you see twitter definitely having some growing pains. that's why as a guru, if it would be interesting to follow how they do and whether in the end they really deliver for shareholders >> will it work better in washington than in the board room >> well, let's, you know, that's just -- again, the randians say, you know, trump has embraced it. ti ti tillerson and pompeo have embraced it. they're check cherry picking a few things the hero is an architect real estate developer they say that he is just superficially doing it to the extent they seem to be embracing it, it's not getting them anywhere with congress because randians are very averse to compromise. they stick with their vision and they want to get people on board

and it's basically their way or the highway. i don't think that works very well in a representative democracy where you're negotiate with people all the time and compromise is the essence of democratic government. >> thoughts on the market, on the economy, anything as we work our way through this month and this summer? >> the emerging markets, europe doing a lot better that's been years in the making. the u.s. has been outperforming for so long. and i did feel there's been a big secular rotation to in of these neglected parts of the world. if you look at the numbers on in of those, i think yellen's testimony this week has suggested interest rate hikes will be pretty glacial, slow, you'll barely feel it. that's all positive in the markets. that said, i wrote a couple of weeks ago, we're a pretty high valuation, especially in u.s. markets.

>> you still feel that way >> i wouldn't aggressively be putting money in u.s. markets right now but i'm not bailing out either >> good to see you, jim. up next on "squawk on the street are" the cbo scoring president trump's budget what it means for your taxes and your money grover norquist founder of americans for tax reform will join us next

i'm courtney reagan. here's your cnbc news update president trump and the first lady attending bastille day celebrations with french president macron and his wife. macron invited the president to be the guest of honor at the celebration which commemorates the 100th anniversary of the u.s. entry into world war i. jimmy carter has been discharged from a hospital this morning to return to the habitat for humanity build site in winnipeg, canada the 92-year-old former president became dehydrated on thursday during the build a fight erupted between ruling and opposition lawmakers in the taiwanese parliament. check out this video it broke out when nationalist lawmakers criticized the budget

proposals for the infrastructure development program. the brawlers were seen grabbing each other and throwing water bombs. news research suggests that yoga may also protect against age-related memory loss. brazilian researchers scan the brains of 21 women who practiced yoga for at least eight years. they had greater thick innocence thickness in an area of the brain compared to women who didn't practice yoga back over to you, kayla. >> good to know. we'll go practice yoga this afternoon. thank you, court >> namaste the cbo releasing its budget on trump's budget. we get the revised senate health care bill which involves some significant tax changes. join us is grover norquist, founder of americans for tax reform i assume you're not a fan of the two affordable care act taxes

that are kept in the bill. what do you say to republicans who say we have to find a way to pay for it somehow >> the house bill and the original senate bill abolished all of those taxes and paid for what they needed to do on reform there are some politicians who wanted to spend more money, and they are being -- they got what they wanted, which damages economic growth because these are some of the most anti-growth tax increases in obamacare that will be remaining for a while. the good news runs as follows. they are going to get a health care bill. we'll block grant medicaid we'll get rid of most of the tax increases in obamacare there were a trillion dollars over a decade. now we move to tax reform. and that's where we will be able to get rid of the obamacare taxes that were particularly bad for economic growth. we have to do that as part of a pro-growth tax reform package. and the white house is focused on getting to a 15% rate for all

business income. corporations and sub chapter s corporations, pass-throughs, partnerships and so on it's going to be very pro growth but we are going to have to back up and get rid of the anti-growth taxes that are not yet eliminated in obamacare repeal >> but for the taxes that are repealed in the health care bill, grover, the senate is currently digesting and taking up what's the net effect on business do you expect a boom in tanning salons or medical advices? do you expect consumers will be buying more over-the-counter drugs with their health saving ofs accounts >> they're been doubling how much you can sbout it. it allows for you to pay for premiums this is a big reform, not just a tax cut. it's a tremendous reform it's a new way for people to save into the future, for future health needs, tax-free accumulation, health savings

accounts like i.r.a.s and 401(k) for health care. that is a big tax issue, as well as a health care reform issue. getting rid of those taxes on medical devices that a lot of companies have talked about how damaging they think that is, it's in effect a sales tax on medical devices. this tax on premiums, on health insurance, which is very expensive for both people who sell insurance and buy insurance. that's going away. and then, of course, the dead weight cost, the penalty of taxing businesses that couldn't afford to pay for health care, to punish them that's going away. and taxing individuals who chose not to buy one of obamacare's particular plans that tax is going away so -- of course, the taxes on tanning. tanning salons are largely run by self-employed people. more often than not women. this was an attack on

entrepreneurship, which is going to go away >> grover, any intelligence or reaction to reports that bannon wanted to see an upper tax bracket with a forehandle. >> what do they call that? dead cat bounce which is something that doesn't bounce. it was in the newspapers that he had said this or asserted he said it. others in the white house have said that's nonsense nobody is suggesting that. the president has promised repeatedly that every american will get a reduction in their personal income taxes. nobody gets a rate increase. so if it was an idea, it was a dumb idea, and it's in the past. >> grover, in the logic you laid out earlier you made it sound like a linear process. getting the tax return and this cut in place for americans when filing next year safe to say the white house's operations thus far have not

been anything close to linear. i'm wondering how likely you think it is the white house could reach an agreement on tax reform with the house and the senate before august recess like they're currently planning >> i think you'll get the health care done, but, you loorking at this month, but you're looking at september, october, for tax reform what makes tax reform easier is that it is one dimensional taxes go up or down. whereas health care, there were regulations you had to look at there were spending bills you had to look at there were taxes you had to look at different committees different people, different -- a whole series of interest groups that had been paid off to get obamacare into being then you had to declaw them to undo obamacare, and people held on to their subsidies and special privileges very hard tax reduction, tax reform is much simpler you go to a 15% business rate

which is what obama wants to do, and i believe where the ultimate resting place will be. >> but you still have interest groups and tax reform, grover, and specifically in tax reform you'll see the states play a major role because republicans are looking at the state and local deduction. you'll get some pretty angry governors showing up in washington how does that eventually play out? >> there is an incompetent governors lobby. a bunch of governors who like to raise taxes on people in their states and mayors. and say, oh, don't worry about this it's tax deductible. so you're only paying two-thirds of my property tax increase or sales tax or income tax increase in point of fact, getting rid of the deductiblity of state and local income taxes to help people in california and illinois be able to argue with big government mayors and governors and say do not raise taxes. do not tell me that somebody else is paying for this. i am paying for it and when we reduce taxes, i get

the benefit. so it's a -- the deductibility subsidizes corrupt big city political machines and subsidizes too high taxes at the state level. if you subsidize something, you get more of it we should nobt subsidizing high taxes, high property taxes, high income taxes we should allow local elected officials and local voters to discourage that behavior >> always a provocative conversation appreciate your time, grover >> you got it. >> grover norquist from the americans far tax reform one stock we're definitely watching today is snap cowan downgrades the snapchat to market perform from outperform the company, of course, ipo'ing with a lot of fanfare. high expectations. down nearly 11% this week alone. we talked about it last hour sort of the back and forth of downgrades from morgan stanley earlier in the week and then

finding value and upgrading yesterday. >> when is their earnings going to come out? they've had one earnings report, but i imagine it's a couple weeks away >> august 10th is when they post >> i imagine heavy options activity around that as well >> high profile lock-up expectation. santelli thought it was not inconsequential. >> concerns about the company in terms of its audience reach. its effectiveness as a platform for advertisers. they're all out in sun valley. so maybe, you know, marty sorel can get together with them and try to school them on what would work or not work that being spiegel and enroncom out there. i think it wraps up. >> i believe it does wrap up later this weekend >> snap did get an emmy nomination for innovation and some of the work they did with "the voice" for our parent nbcu. so a little by little, i guess

we'll watch and see what the earnings look like on the 10th when we come back, a lot more on the big banks and the rare drama on the earnings call with, which else, jamie dimon of jpmorgan.summer, so does the lobst lobster. fishermen with record catches. we'll check in with contessa brewer ♪ no, please, please, oh! ♪ (shrieks in terror) (heavy breathing and snorting) no, no. the running of the bulldogs? surprising. what's not surprising? how much money aleia saved by switching to geico. fifteen minutes could save you fifteen percent or more.

10:45, let's get out to rick santelli and the santelli

exchange >> remember, if it's earnings season, it's rebecca corbing this is going to be the most fun spot we've ever done because there's one universal question in every country, every economy, every central bank that everybody wants to know. are the markets overvalued, and the survey says -- >> well, every quarter we survey institutional investors and reach out to somebody. almost a trillion under assets and the survey said fewer investors believe the markets are overvalued >> you said fewer. >> fewer >> last quarter we raeeached a pick at 67% of investors thinking it was overvalued it's down to 47% this is the first time that folks have not said it's overvalued in over a year. >> many market analysts would disagree but one area agrees the price of the equity markets. when we talk about valuations and they're not overly rich in your opinion, that leads to earnings >> sure. >> there's been a lot of comments about earnings.

what does this survey say. >> they are expecting strong earnings again it just continues. >> and they were right last time >> they were companies delivered strong earnings the vast majority of expecting better than. 63% are expecting sequential improvement. and this is really bolstered by very bullish neutral bullish management commentary. 80% describe management teams in terms of their tone as more optimistic to bullish. >> and that's pretty interesting considering how many ceos have bitten the dust since the last time you were here >> let's dig deeper into earnings we have a lot of guests. i heard carl say not seeing earnings expectations coming down weigh in on that in general terms. >> we're not surprised by preannouncements being low companies are not going to preannounce unless they absolutely have to because they sd still have the third quarter to make it up when we get to the third quarter, that's when we see more

preannouncements >> we talk about earnings and have to always talk about where the rotation, where the sectors, where the hope, where the despair is in global terms, give me a global perspective >> if we go around the world, eurozone, a lot of optimism. >> i look at the euro yen, euro dollar they agree with you. continue >> currencies are strengthening. that's beneficial to the u.s. dollar which is modifying. we're not seeing as much fx headwind this quarter. we don't predict but eurozone very strong real economic growth, european investors really promised around macron and france. theresa may missteps and then, of course, india still very strong, southeast asia >> now when i look at some of the emerging markets, some are getting nervous that if central banks go down a certain path it's not going to be pretty for them none of that seems to be showing up yet >> india strong. china strengthening. a lot of positive momentum coming out of china. latin america still dealing with

a lot of issues in terms of government corruption, et cetera and then in terms of sectors, we're seeing a huge amount of positivity in technology >> see now it makes sense. the leadership role has been nasdaq, nasdaq, nasdaq >> yes >> tell me, do you think that will continue, and is there a global preference to profit from that notion? >> sure. i think that the same group will continue to see -- facebook is coming out with interesting stuff in terms of workplace. just saw it on linked in with regard to starbucks culture. that's going to be a positive element. and then bats in china alibaba, ten cent, these are strong >> think i.t think big. it's the biggies that are in control. finally, we're almost out of time the fed. is the fed showing up anywhere and this survey cut off on the 7th. there's been some changes but that's still pretty realtime >> 86% are expecting the fed to continue to increase the majority feel that it's

going to be one 25-point basis point. but it is a driver of the market, of bullishness the low interest rate environment. that will take time to work through the environment. obviously, the banks are feeling the positive effect of raising interest rates >> rebecca corbyn, always a pleasure you make it sound so easy. can't wait to see next quarter how we did this quarter. kayla, back to you >> thank you thanks so much, rick we're seeing bank earnings that have benefited from that interest rate hike but soft spots elsewhere. look at jpmorgan, citigroup, wells fargo all reporting earnings this morning. some comments from the ceo jamie dimon of jpmorgan getting quite a bit of attention especially when he expressed frustration at the government saying it's, quote, almost an embarrassment to be an american citizen traveling around the world and listening to the stupid blank we have to deal with in this country listen >> since the great recession, which is now eight years old, we've been growing at 1.5% to 2%

in spite of stupidity and political gridlock because the american business sector is powerful and strong and is going to grow regardless. i'm saying it would be much stronger growth had we made intelligent decisions. >> on that point, he told jourmistjourm i journalists, why you don't write about it every day is beyond me. this is vintage dimon, if there ever was one >> we talks about having recently traveled to france, argentina. meet with the prime minister of india and china. amazing every one of those countries understands that practical policies to promote business growth is good for the average citizens of those countries. something he doesn't believe we share, at least at the moment. >> he currently chairs the business roundtable. if there is anyone who has a front row seat and a seat at the table with the administration right now, it is him he's been pushing for tax reform, for infrastruct are

policy, workforce development but he seems pretty exasperated. >> he's been focusod dereg and tax reform to the exclusion of everything else. what i hear from people inside jpmorgan is that as well he's supportive of the trump administration's agenda when it comes to those ideas to the exclusion of other things, despite many years of course, his saying i'm barely a democ t democrat. >> his preference in working with washington has largely been head down, pencil on paper, dispassionate, just get the work done but this seems to be a departure from that, for sure. >> let's get over to jon fortt with a look at what's coming oup "squawk alley. >> no more cowering bankers. we'll be talking about ipos. blue apron, snap doesn't look good up there right now but tune in. roku may be the next to jump in. we'll assess the prospects and reomg up on "squawk alley. (baby crying)

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this year's four worst performing etfs have something in common. we'll tell what you that is and whether it's time to buy them. we'll have more ""squawk on the street"" next.

$130 million, that's the number, the record number of lobsters that were caught last year but with the extra lobster now the industry needs to find more lobster consumers. our contessa brewer is in maine with more on that storey good morning, contessa >> did you say the tails the tails, right that's what you said okay so here's the deal chinese customers are loving the lobster in part because in chinese the name means dragon. and when they're cooked they're the lucky color red. and they, in fact, even resemble somewhat the mythical creature the industry is really making a concerted effort to open new

chinese markets selling these middle class families on lobster as a clean source of quality protein and it's working exports to china are way, way up when you look at them overall, in 2010, it was less than a third of a percent now it's up to 13% of all overall exports to china and they need this new demand to take up all the extra lobsters you said 131 million lobster, a record harvest wlachlt is behind the big boom climate scientists say it's climate change >> so the waters in southern new england area have sort of warmed to the point that lobsters are less able to produce young and survive. but the warming waters has created a very beneficial situation off of maine so they're right at the optimum temperature for lobsters now in the gulf of maine. >> so the lobster industry though points to sustainability as a big factor between this lobster boom they say they started actively

managing their resource, more than a century ago before there were even laws regulating it so they threw back the big ones, threw back the small ones. they threw back the egg bearing females and that means there is a real commitment to sustaining the resource >> they're very passionate about making sure there are lobster right and do it correctly. you make sure that you have enough to sustain what is going on >> well, it's working because in the last 30 years, lobstermen have quinn it up willed the harvest. now they're making money and hoping they can keep the supply up to meet this growing international demand, guys >> very interesting story, con tes yachlt it looks like not a bad day at the office for you. contessa brewer. >> can you believe this job? >> the fact that we get to do it is pretty amazing, contessa. enjoy it we thoed a break on squawk on the street. take a look at where stocks are right now. posting modest gains

the nasdaq on pace for the best week in 2 1/2 months since the end of april the dow and s&p 500 on track to post their biggest weekly gains in seven weeks we are seeing a bit in the treasury market as well. yields on the ten year down to a point they haven't seen since june and it has been a rough ride for ipo nz 2017. roku may be jumping into the mix. so is the window reopening we will discuss as we see snap down more than 1%. blue apron down nearly 1%. "squawk on the street" will be right back

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welcome back to "squawk on the street." stocks are posting modest gains on pace to end higher for the week financials, however, are lagging in early trading to day. there is the worst performer in the s&p 500 and by a wide margin following this morning's batch of bank earnings reports according to fact set, the financial sector is expected to report the third highest earnings growth in the s&p 500 in the second quarter. that's 6%. among the biggest laggers including bank of america, wells fargo and morgan stanley shares of j.p. morgan and citigroup are also lower after reporting declines in trading sales. the decline in banks is putting the spider bank etf under pressure etf is down more than 1% and on track for its worst day in nearly three weeks now i'll send it back downtown

for the start of "squawk alley." >> thanks, leslie. it is 8:00 a.m. at amazon headquarters in seattle and "squall alley is live. ♪ good friday morning. welcome to "squawk alley," john fort here at post 9 on this interesting market day dow up is 18 points or so. shares of snap are under pressure yet again this time it's cowen downgrading the stock to market perform citing digital advertising the second downgrade this week