well and certainly the oil prices will put bigger rig counts in focus come that friday move that does it for this hour of "squawk on the street. let's send it back down to the new york stock exchange for the start of "squawk alley." back over to you guys. >> dom, thank you very much. good morning, it is 8:00 a.m. at alphabet headquarters in mountain view, california. "squawk alley" is live ♪ good tuesday morning welcome to "squawk alley." jon fortt at the new york stock exchange dow is up 103. s&p 500 hits another record high the dow was up more than 150 points before pulling back

nasdaq though flat to lower as shares of alphabet weigh on that index. the google parent warning that ad growth on mobile and youtube is going to cost more going forward. nasdaq is coming off a record high though. so any gain today would be yet another record high. jon, it does paint a picture of the challenges even for giants in tech as they try to monetize consumers looking increasingly on their phones. >> 23% constant growth is amazing, first of all, for alphabet, google it's been two years since they made that shift to the alphabet model. so there's that. but also in this quarter there's this sense of margin erosion that tends to happen from established tech players and the thing that is fascinating to me about this is the whole point of android, i thought, was supposed to be to control traffic acquisition costs. it's a portal directly into google similar to the way that the search bars and gmail and all the things were on the desktop it's not working out that way.

the question is as we move forward into the home speakers and artificial intelligence or whatever is next is google going to be able to own enough of the stack of the ecosystem to control the costs or is it going to have to pay a toll to somebody else whether it's content creators or to gather the audience >> we know what happens to companies leveraged that way some cases writing big checks to alphabet. >> or may be just the way it has to happen. >> sure. that's where the growth is going to be. you have to participate as you can. again, i'll point out, the stock is giving up ten days of upside. it's not as if it's kind of being abandoned by the herd. >> for more on alphabet and the sector, joining us from one market out west, twitter ceo former twitter ceo dick costolo. good to have you back. >> yeah, thanks for having me. >> dick is the ceo of fitness start-up core. what do you make of our conversation here this morning, dick it's being colored in a way by some rotation into more industrial names but is there a reason to worry

about costs and margins at some of the tech giants >> i think the cost that's traffic acquisition koflt that's google is experiencing on mobile are something to keep an eye on. look, for the most part it was another strong quarter from them they seem to be making great end roads into their cloud work as well i have every expectation that both google and facebook will continue to be the advertising juggernaut that they have been in the past couple years >> how would you be balancing, especially on earnings calls, how much to tout other bets? we asked an analyst why not be a little more self congratulatory on wamo, for instance? he said because it's early is it really early >> well, it's funny. and some sense they've been working on self-driving cars longer than anyone else has and in another sense it is early days i think what google is trying to do is just be careful about not

getting the cart too much before the horse. the stock as you know is already in advance of earnings last night was already up significantly on the year. i don't think there's too much of a need for them to be touting technology that's they might not make real revenue on for the next couple of years, particularly while the core advertising business is still so strong these are very high margin businesses the kofl the costs are up incrementally i see no need to get further over their skis. >> you're a former google guy. i'm interested in your perspective a little deeper on the traffic acquisition costs. it seems to me like part of google's approach is to try to control those type of costs as we move into the next era, part of what makinghardware, you know, distributing android has been about now that they got to pay content creators for that content to help gather an audience, should we expect these higher kofcostso

be built in because of the environment that we're in? >> i think your thoughts there are insightful and correct on mobile, particularly where people may not be going directly to search -- google search bar but getting there via some other route, whatever that route may be, you can expect google's tac to increase and the margins to be compressed. i just don't think that's going to happen dramatically in the immediate term it's probably more of a longer term midterm concern of theirs i guarantee you as you rightly pointed out, it's probably something they're keeping a close eye on and would like to control more of the stack. i don't think it will have an immediate impact on their bottom line >> dick, just bigger picture though, i wonder if the investors are going to start looking at companies like google in particular but also other ones and say all these things that they're working on for down the road, these kind of real

world impacts that are not just this virtual network, that's the harder stuff where the returns are less predictable and you keep saying this is down the road and the current business is great. that is totally true the market gets. that but i wonder if we're stheeg across the board with a lot of the incumbent tech giants >> i think that's perfectly fair and then the question you have to ask yourself is how many of these things are science experiments? and not going to really pay off? and which of these things are going to deliver margin? certainly in the case of wamo, that seems to be an area that could deliver significant results and to the bottom line in the not too distant future. so i think that what google, i would guess what they're trying to do is just not put the cart before the horse too much on that front until they're a lot more certain about when you're going to -- next obvious

question that i mention is okay, when i think they'll wouldn't to be a lot more sure about when that is before they start talking about it. >> might explain some of the caution on the commentary last night. dick, we're going to pivot to the president taking to twitter yet again targeting jeff bezos and "the washington post." >> carl, the president once again attacking "the washington post" as the amazon "washington post" in a series of tweets saying the up into is just a front for the retailer's efforts to lobby against the internet sales tax. there are three tweets he put out in the past 12 hours first he questioned reports in the "washington post" that administration has suspended payments to syrian rebels. then he called "the washington post" fake news. and then he said that the paper is "a lobbyist weapon against amazon's no tax monopoly." we should point outthat amazon does not own "the washington

post." it is oenwned personally by jef bezos. amazon began collecting sales tax in every state in the country except the states that don't have sales tax this is an issue that divided online retailers from the bricks and mortar counterparts for years. there is legislation on capitol hill from wisconsin representative that would prevent states from trying to get online retailers to collect sales tax in places where they do not have a physical presence. earlier this morning the retail industry leaders association said that this bill would be "a step backwards for the industry." i have to have full disclowe here is. i used to work at the "washington post." they declined to comment back to you. >> thanks for the disclosure dick costolo, i want to talk about the president's influence on twitter itself as a platform. but more importantly, how is someone like bezos supposed to spont to this or amazon supposed to respond >> well, i think if you're jeff

bezos, probably the worst way to attack him is refer to the stock in which most of his we will sj concentrated as a no tax monopoly so i think jeff probably -- i think on a serious note, the president obviously used the word monopoly intentionally there. amazon just acquired whole foods. so i think it would be troubling to the business community to start to be concerned that your business might be artificially constrained based on any political perspectives or general political views. >> dick, i wonder how much concern this type of tweet from the president raises in tech and in silicon valley anymore? there's a number of inflamatory words in there including monopoly which i think many people, most people on the street would grant amazon isn't even close to yet. other charges levied against amazon about tax that's don't

seem to have any basis in fact are people just shrugging these off at this point or is it still raising problems >> you know, it's one of these -- it's strange. it's a combination of both on the one hand the hackles are up about the word monopoly and wore dwlag general political views could be used against you in some way to artificially constrain your business. and on the other hand, it's sort of, you know, every day there is more and more of this on a variety of different subjects. so at some point you just say, you know, it's the next day of more of these sort of inflamatory remarks. so i would say generally speaking people out here are probably understating this but concerned about the kind of discourse that we're hearing about technology and business in these seemingly off handed remarks. >> meanwhile, in the moment, even if you're amazon and

wanting to kind of set it aside and write it off as more inflamatory rhetoric, you might have to, you know, go out there and say, point out that maybe we actually do collect sales taxes. i mean you actually have to respond in terms of countering specific charges, i guess. and so while that's not necessarily some major threat to the business, it definitely seems to be something that keeps this whole threat in front of mind. >> yeah. as i say, the terms that jumped out at me from that series of tweets were no tax monopoly. anyone who buys anything what amazon sees, the sales tax collected in the transaction and as you already mentioned, the use of the word monopoly here, particularly in the case of amazon and particularly on the heels of their acquisition of whole foods is disconcerting in the extreme. >> really quickly, dick, we talked before about the president's influence on twitter and you understand the engineering behind his tweets and how they drive traffic and

engagement we're going to get twitter earnings on thursday should people expect decent number because the president has been so active >> well, i think the last thing it would be appropriate for me to do is comment on that i've said one thing i will say is that i think it's -- i think it's good that the president uses the platform for one very specific reason. you have a very clear history of precisely what's been said and it's -- helpful for people to be able to go back in time, look at what's been said and compare that to be what is being said now i think that's generally good for america. >> finally, dick, speaking of twitter, some comments from elan musk whom we talked about the last time you were on the show over comments made by facebook's mark zuckerberg. he said, "people who are naysayers and try to drum up the doomsday scenarios, i don't understand it. i actually think it's pretty irresponsible.

and to that, musk tweets, i talked to mark about this. his understanding of the subject is limited this is getting spicy, dick. do you take a side on this >> well, first of all, i'll play diplomat and say i think what elan musk meant to say is that mark's view of this is optimistic i do tend to take the more pessimistic view that it will be hard to keep general ai in a box by which i mean if you hypothesize that we could create intelligence greater than ours, it's pretty easy to jum frp there to think that that intelligence would be able to figure its way out of any sort of logical box you tried to put it in. mark tends to be much more of an optimist on the future of technology i think that's what you're seeing here. >> dick, i'm surprised that this is controversial at all. seems to be a question of degree is there any big impactful

technology that hasn't had a down side? i mean, you know, whether it's nuclear, whether it's the internet and then we get hacking. i mean we're talking so much about hacking a couple decades ago. it certainly become a threat to the very, you know, connected financial system and information system that this is built up so why is ai any different >> yeah, i mean, to be -- to take a complex subject and simplify it, i think that's basically what you're hearing from folks like elan musk. why is this going to be any different? particularly when you're starting with the hypothesis that you're able to create a general ai that is greater than human intelligence why aren't they able to figure their way out of any logical box in which you tried to constrain it that's where the pessimism or deep concern is coming from. of course, if you take that to its logical conclusion, you only get one chance to keep it in the box. if it escapes from that box, then what do you do?

>> question for our time dick, it's always good to see you. thank you for the time today dick costolo. >> thanks for having me. appreciate it. we have a rally on our hands. the s&p 500 hits a new record high today let's send it down to bob pisani on the floor >> hello record highs, 2 to 1 advancing to declining stocks. let's call it earnings take a look at the big movers. c caterpillar, construction is great help mcdonald's had good global same-store sales and traffic gm generally good north american numbers. united technology down a bit here they beat but the beat wasn't much and when you got stocks moving this far, prices this high, you need a significant beat to really most stock forward or they start taking profits. you see that with united tech. heaven help if you you missed. look at what happened to 3m. there was a small miss there that stock is down notably today. you can see seagate missed by a wide margin, 30%

you can see the stock really getting hammered here, down 15%. we know enough we have a quarter of the s&p 500 reporting. more beating on the top and bottom lines and beating by a greater percentage that's why the market is doing so well. the prices are high. you really need to have a good beat or really good guidance to really move a stock forward. caterpillar is one example of that today if you miss in any way, you get heavily penalized. there is one other group here for doing well as the stock market is hitting new highs, we're hitting asset managers hit new highs. the t. row prices and legg mason. they get paid more when assets are up thank you very much. when we come back, goldman sachs analyst heath terry is with us. we'll talk his best bets for tech for the rest of 2017. caterpillar getting a bum top day. we're monitoring the conference call and we'll have the latest on that later, she was onest youngest employees to ever work at google, 19 years old.

she now has a new ai start-up. all that and more when quauk alley continues.

it is a big week for internet stocks. alphabet out with earnings facebook, twitter and amazon all reporting later in the week. so far this year, the internet sector seeing a 30% gain, significantly outperforming broader markets. joining us now at post 9 to

discuss, goldman sachs internet analyst heath perry. i know you don't cover alphabet directly, but traffic acquisition costs, a lot of talk after the earnings report and call a lot of pieces of that. part is paying other people to bring them traffic part of is paying for content. does it surprise you that we're seeing these costs rise? looking like they're willing to pay more for professional content? >> look across the entire space. everyone is trying to drive more traffic to their site. content particularly professional or sort of semiprofessional content is a big way to do that you look at what snap chat is trying to do in terms of driving content providers. and twitter going down the road are the live strategy. so just the sheer competition for relatively limited users and content creators out there it's going to continue to drive the costs higher i think you have to expect that. >> is original content the new

android, the new approach that technology companies are going to need to take and control that cost >> you know, it's one i think of several categories that are tactics that you're seeing being taken here user generated content is the holy grail behind this there is relatively low cost associated with it f you create the kind of ecosystem from a technology standpoint so that users want to do their creation there, you end up solving that problem without having to go out and write a lot of big checks. >> i'm fascinated by your view that there are i had ydiosyncrac opportunities in small and big names. pandora, yelp, buys on all of them >> we do intersunset a difficult place to be a small cap company so you have to look individually at sort of where those opportunities exist for companies.

there are different answers for every single one of those as to why we think those are buys. we think there are opportunities, particularly when you see the outperformance among large cap. >> and that outperformance, i mean we talked about the whole group up 30% year to date. can you point to plenty of big picture funneled al trenfundamental trends there is a sense that investor flows are in this direction and crave something kind of growth and almost hiding to some degree in the very large cap names. is that a dynamic that has run the course and do you talk to clients and say this is the game right now? >> it's such a relative game and something that goes beyond my scope of view. you've seen it over the last just couple of months, right, when industrials started to outperform, when financials started to outperform because rates are going up, these names underperform that is a dynamic that we have to continue to deal with these are great companies that are taking up large parts of our economy. we know it from our own time and money being spent. at the endst day, give investor

a better option, particularly something that underperformed and they're going to take it. >> heath, from here going forward, how much of an influence do the mega scale cloud providers have on your outlook for internet in other words, how much are they bringing down costs for the others that want to accelerate the growth and does that factor into your calculations >> that is also a big part of the way we think about the smaller cap names and new company creation happening in the space. when i first started covering internet, you wanted to start a company the first thing you went out and did was you raised tens of millions of dollars worth of venture capital and built a data center now you turn amazon on with a credit card. and so the barrier to entry into all of the spaces is a lot lower. the cost of operating these businesses is going lower because of cloud computing obviously creates a huge opportunity for those cloud service providers, particularly amazon given their lead in that category but it also creates cost savings for everyone across the business i think it's very important that something like snap got built purely off of the back of cloud

services >> you wrote a note yesterday on blue apron, right? calling for a target of $11. talking about how when there are new categories being built, it doesn't matter if a giant is breathing over your neck, apparently >> we've seen this before. you get the consumer facing internet categories that get hyper competitive. they get overinvested in there are over 20 meal kit companies in the u.s. alone right now that have raised venture capital money in the last 18 months you and i aren't going to live in a world two years from you from now where there are 20 meal kit companies. we saw this happen to grub hub a couple years ago companies like post mates and door dash and maple and sprig all out there competing really aggressively for companies giving away food to get customers on to the platform you're seeing the same thing in the meal kit space right now we think it will get more rational the economics of something like blue apron's business get a lot better. >> what is the technological mote that likes of a blue apron or somebody else needs to build

up in order to succeed is it a special data set anticipating customer tasteors something else >> so a lot is supply chain. building the relationship with farmers, building the infrastructure to get food to people quickly if you're one of the startups, it's relatively easy to do that at small scale it's the four of us want to start a meal kit company feeding a handful of people, question do that but to do it at $1 billion in revenue, the run rate is much more difficult from an infrastructure and logistics standpoint. >> isn't that what grocery stores already have? >> sure. and for like a subset of customers and for a large subset of customers, grocery stores work now for people that want to cook that don't want to deal with the grocery store, don't want to deal with all the food waste that goes along with buying for a familiar live two or a family of three and letting that go to waste, blue apron is, again, for that subset, a pretty easy road to go down >> the bet is how big and durable that customer segment is going to be long term.

i actually wonder if it's the etsy issue they had the unique spot but how big is the market? >> yeah. >> who cares about those things? >> absolutely. that's one of the -- some of the math we go through is how big this market is it's obviously a much smaller subset of the $800 billion grocery market that is out there. but you think about the 30% of americans that cook more than three times every week, this is potentially a better option for them >> finally, you got some thoughts on ai we just talked to dick costolo about the debate of whether it's a force long term or not you talking to lawmakers where is your understanding? >> sure. ai right now is really a small evolution from where we've been. i think we've been raced on the hollywood view of ai i think that is leading to the conclusion that's people are coming to the reality is this, is you know, this machine learning, these steps that we're taking are much more incremental than i think is being portrayed in some of the more alarmists headlines

and commentary that's out there. it makes things more efficient it creates more productivity this is going to be a good thing. we all know we've been in sort of a productivity stall as a country for a while now. this has the potential, we think, to sofrt reaccelerate the kind of tech driven productivity boom that we saw in the late 90s just by making those things more efficient. >> yep heath terry, thank you. >> thanks for having me. >> when we come back in a moment, a tale two of earnings within the dow cat and mcdonald surging, 3m and utx dragging the dow lower we're still close to session highs. we're back in a moment

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good morning, everyone here's your cnbc news update at this hour. an american official says a u.s. navy patrol boat fired warning shots near an iranian naval ship during a tense encounter in the persian goulf. it came within 150 yards of the u.s. thunder bolt which is a patrol ship involved in an american military exercise >> jared kushner arriving at the capitol to testify before the house intelligence committee investigating russian interference in the 2016 presidential campaign. on monday, mr. kushner said he did not collude with the

russians and was unaware of anyone in the campaign who might have a massive manhunt is under way in switzerland for a man suspected of injuring five people in a chain saw attack in the office of an insurance company. swiss police releasing new pictures of 51-year-old france rusis. none of the injured has life threatening injuries the vatican says the founlt anz will be shut down because of italy's drought. it said the decision was linked to the pope's teachings on the environment. italy is in the midst of the third worst drought in some 60 years. you're up to date. that's the news update this hour back downtown to "squawk alley." mike, back to you. >> sue, thank you very much. big earnings day with a number dow components out with results before the bell. mcdonald's, caterpillar, utx, dupont and 3m amid a two day fomc meeting joining us is dianne swonk and peter chakini. thank you to both of you for

being here dianne, let's start with the macro and the big picture as the fed meets. take us inside the meeting room a little bit when you have, you know, kind of the doves out there saying, look, inflation is stubborn below 2%. what is the hurry? team normalization is loud where do you think it all shakes out? >> it shakes outto be a much more dovish statement. the fed has to 5:00 noacknowledt they think the slowdown in wages is transitory, it has occurred and it's not been as transitory as they like so until they see the whites of the eyes of inflation, they're not going to be able to raise rates again. on the flip side, even the dogs have signed up to shrink the fed's balance sheet. i don't think that is going to happen in september because of uncertainty surrounding the budget debt ceiling and what could be another showdown over a government shutdown. so that could delay them a bit in september they're committed to shrinking

the balance sheet which is a way of removing accommodation than actual rate hikes and maybe widening spreads a bit there is a lot of concern within the fed about how much financial easing has occurred since they raised rates >> absolutely. on some level with the market seems to view balance sheet normalization as to some degree of substitute for a rate hike or two. and do you think that the committee that is the way things are viewed >> i think it is the question is they don't know -- they have no answers there. we're going to unchartered waters the sort of $50 billion a month they laid out much further than we thought in the june press conference that means they've got a rod map now. this is part of yellen's legacy too, she is coming up to the end of the term. i believe she'll be replaced in early 2018 so the legacy is to start normalization and the exit strategy so we doubled our rate hikes this year from last year two instead of one so that started. but we do see the balance sheet slowly and being able to pull back or accelerate that as necessary.

that's another important lever for them >> and peter, meanwhile, financial markets seem pretty comfortable with this ambiguous backdrop, the low rates, high liquidity dollar weak, corporate profits coming through strong wlachlt what's not to like >> i think there is uncertainty around what central banks globally are going to do in fact, you know, we've been saying sort of begrudgingly saying sanguine since the beginning of the year. really again, i've said it many times, the reason for this is that global financial conditions on net are actually much easier than they were at the start of the year with global central banks primarily the ecb and boj increasing the side of the balance sheets by a trillion and a half dollars year to date. that puts them on pace for a $2.5 trillion balance sheet expansion into the end of the year and so that is setting the tone for financial markets right now. and until we really start to see them changing tone and body language, especially wli respect

to what the ecb says it's going to do, there is quite a bit to like that said, valuations are very high at about 24 times trailing earnings on the s&p 500. 17 times forward we're looking at very, very rich valuations in fact, the company that's have been missing expectations have been punished. >> without a doubt i mean what would you be looking for, peter in, terms of a sign, aside from the ecb actually coming out and saying we're done with the qe. we're tapering in terms of market action, that's going to tell you the market sniffing out a less friendly environment >> well, you know, it's interesting. the markets have been lucky of late in that, for example, copper has rallied quite a bit oil rallied off of the low and so that has actually carried a bunch of the sectors that had underperformed year to date like energy and others. and that has actually metals an mining that actually helped the markets overall. what i'd be looking to see is,

for example, i'd like to seat rally in copper stall. i'd like to see oil stall at $50. and when that happens, i think that's going to tell us that the markets are ready to take a breather more broadly. that is the broader indices as well >> and to add to -- yeah >> go ahead. >> i was going to say to add to peter and dove tail off his remarks on dragghi, we know he's speaking at the meetings he sort of started to signal maybe they want to pull back on the balance sheet. then he pulled in on that they're running out of assets to buy. this is one of the issues. so i think we're going to see a signal that jackson hole, wyoming, meetings from draghi. i think what is important is this uncertainty issue that sort of seems to be a big disconnect in the markets is how much policy uncertainty there is both the united states and abroad i mean, m rachacron lost ten po and he has an aggressive sort of in france, a reform agenda to

get throughout summer. i think the optimism and euphoria, i was in paris and meetings and incredible intense meetings with no air-conditioning in france for a long time in the last couple weeks and they're so high on the euphoria the reality is setting in and being able to execute in a lot of these things that we need to move forward in a more fundamental way. that uncertainty is going to come home this summer. i think by september, october, you're going to see uncertainty playing a role that we would like it not to play and that is the negative for both economic activity i think we're in a good place economicly but it's taking a little off the top. >> yeah. it wasn't too long ago that we thought that european politics and fiscal policy were going to be the big risk factors this year maybe it will again. dianne and peter, thanks a lot for your time this morning an let's get immediately to seema mody who has the european

close. >> hello, gentlemen. solid data out of europe put a pause on the selloff of the equities the numbers surprised to the upside the july business climate index at a record high now with upbeat data comes a stronger currency which is being dubbed the raging bull powering through 1.17 for the first time since 2015. coming off the highs at 1.16 against the green back greece is a big story in europe. testing the appetite for the first international bond sale in three years. a symbolic moment for the troubled nation that is at the heart of the euro-zone crisis. today's sale is seen as emblematic and growing confidence in greece the five year bond price at 4.6% that, is tighter than the initial forecast still, some skeptics, analysts point out that the picture and high unemployment rate still well above 20% is a reason to be concerned here all right, shares of

angloamerican, one stock in focus, higher in speculation in the rebound in commodity prices allow the miner to resume dividend payments. that stock is up 6% today. let's talk fashion michael korrs acquiring chijimm chu as they try to expand the portfolio overseas, off set sluggish growth. jimmy choo sales are helped by a weeker pound and strong growth in asia. you can seat stock up 17% on this deal news guys >> seema, thank you very much. when we come back, a lot more on artificial intelligence. she was one of the youngest google employees environment aert 19 years old. now her company is making some waves in ai. good day for the banks, retail ismaking a move here to the upside rick santelli, what are you watching >> i'm, of course, watching anything that may move in the markets first dave the fed's two day meeting. but really, i'm looking to overseas it's still a little dim there because it is happy hour question is, when did the lights go on? after the break. she's nationally recognized

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coming up, as stocks break the record levels, we're revealing data on where insiders see the markets in the month months ahead it's not where you think one trader's new investment in a sector he says is about to see a major breakout and another investor making a quarter billion dollar bet we'll see how you can profit with him "halftime report" starts at noon eastern. we'll see new about 15 minutes >> see you then, scott

thank you. let's get to the cme group check in with rick santelli and get the santelli exchange. >> good morning, carl. you know, i know it's the first day of our two day fed meeting but i still talking about the european union the ecb, all that is the euro-zone. why? well, as i'm talking, i want you to look at a chart this is a one year chart of italian ten year rates hovering around, what, 213, 214. definitely lower than ours and contemplate that when you think of problematic banks, i don't know, what do you think of italy, portugal? yes. they pop into your head. and the main issue here is that the european central bank in many ways giving the fed latitude to move some of the accommodation. what am i talking about? okay well, look at the dax and the cac and what is going on in europe with their equities look what is going on with the euro it's a stellar performer it's big moves we're getting close to a 117

hand will. so our fed while all this is going on, the dollar is weaker, our rates are lower than they might otherwise be for a variety of reasons we won't get into, it's a time to start doing things the down side, that's the good the down side to that is we may not see the real impact because of the ecb why? well, first of all, they have minus 40 basis points deposit rate, boat loads of yielding instruments, the bank received from the ltro roughly, that's long term refinancing operation, by the way there is an on going target of 60 billion euros every month it sets a pick for anything the fed is doing in one direction it gets offset in the other direction. however, at some point this happy hour needs to end. i've underscored for many months now, whatever the time line, is it's probably too short. you know in, all the years i've

been in markets, i heard a lot of smart things and traders talk about a lot of smart outcomes that prove to be correct except for timing timing is always real time was always longer than their time. now let's go to the board. you saw that one year chart of italian tens here is a 17-year chart of italian tens as i said, they're traging around 213 low yields right around 1%. high wear the mark right around the beginning of 2012 is around 7 and a quarter. but here's what i'm getting at at some point you would think normalization needs to occur however, maybe it doesn't. maybe all the central banks are going to continue subsidies. the point is here's where we are. here's where they were before the crisis before any of this stuff happened there was a 5% instrument i don't know, logic would dictate they need to get back here how is the dax going to deal with it? i don't know but at some point i know one thing, they will have to deal with it. jon fortt, back to you

>> rick santelli, glad you're on the case thanks still to come, caterpillar soaring on earnings and an upbeat forecast. details next plus, one young former googler sterelping businesses buy new cuoms using artificial intelligence "squawk alley" is back after this at fidelity, trades are now just $4.95.

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shares of caterpillar continue to surge this morning the ceo talking to analysts on the conference call right now and our morgan brennan is analyzing that >> caterpillar is the top performer in the dow today after a big earnings beat. a hike that forecasts revenue growth after four years of declines so on that confidence call, the ceo saying a number of markets remain challenged for that construction in china and gas compression in north america were the bright spots. all four geographic regions and all three primary product segments did see higher sales. on china, the cfo saying strength continues to be driven by government backed infrastructure, residential investment with demands expected to be strong through the yest of the year in the u.s., despite all the talk about rebuilding roads, bridges, tracks, sales of that kind of equipment, however, fell with the company urging federal passage of an infrastructure bill that would "be positive for our country and our business."

in the second half, higher steel prices are expected to pressure material costs cat plans to significantly increase the number of digitally connected machines that's something cat already does have the largest connected industrial fleet in the world. as for largest connected fleet the world. and as to the investigation into the company's taxes, you will recall the offices were raided by the feds earlier this year. calls still going on, but as of a few moments ago, no update on that meantime shares are up today and they are up more than 21% on the rear they are outperforming broader markets. >> all right thank you, morgan. meanwhile node a new ai company has attracted big name investors like mark cuban. this morning it's announcing a new round of funding joining us now is founder and ceo of node. great to have you. >> thank you for having me about that. >> this sounds like one of those

holy grail scenarios where you are saying you can tell businesses who will be buy their product to the tune of like big ticket sales and customers who they haven't had before how do you do it >> yeah, so really the premise behind the company is with 90% of the information on the web being created in just the last two years. so information needs to change engagement model has been focused on search when you know what you're looking for, but the next ten years we believe will be all about proactive an personalized discovery and we're solving that by building machines that make sense of the building and products on the within and then facilitate discovery of the right opportunities at the right time in whatever application you're in so we aim to be that intelligence layer in all applications in the future that are facilitating discovery and today for sales and marketing organizations, we help them understand the world of people and companies that they should be selling into for the next five years known as their total addressable market

and we help them prioritize their execution on those markets so it drives more revenue faster >> so why did you leave google you're there at 19, so i guess you graduated from college early. how did you end up at google and why leave when artificial intelligence is high on their list of priorities, as well? >> yeah, i was at google for six years. i literally grew up there. google is an incredible company when it comes to innovation and of course ai is something that they are putting as a top priority and i think in general ai will be pervasive in everything that we do in the future. and google is definitely leading the charge both from an infrastructure perspective as well as from an application layer, too now, i think the problem that google is solving while it's extremely important in terms of

search, it's different than discovery. and that is the problem that we solve today for businesses and perhaps for consumers. >> what is a real world example. >> we might recommend that an organization should sell or market into a new market and actually explain what that revenue opportunity look like and why we're recommending it. and we'll actually suggest the right person so for instance we might suggest that you should reach out to xyz prospect and the reason why is because they were your former buyer at an existing customer and just move to a new code that node identifies hasa higher deal size potential and exactly what those signals are and at a user level, node will prescribe how that individual can relate to that person when picking up the phone and calling. >> so is it something in past lives would have been done by mckenzie or recruiters >> yeah. >> dunn & bradstreet had books of prospects >> that's what we're seeing. ai will be impacting businesses where you don't need to spend

hundreds of thousands. it can happen in seconds through platforms like ours. and that will shift our business world from focusing on analysis and human crawling to actually judgment and having the technology serve up those recommendations to us. >> one of virtues we hear of a google/facebook is that they have the raw data right there in-house what are you looking at in terms of mining? >> we use the web. so we're making sense of all the relationships that exist on the web that today are very hard to -- that actually don't exist on social platforms. these have bits and pieces of information about us, but there is not one holistic profile. and that's what we aim to build. >> do you run on google cloud? >> actually aws. came up first. >> okay. thank you, fallon. >> awkward >> when we come back, how main street is taking on the small business skills gap.

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kay rogers is in deny vr withvea look a how small companies are coping >> reporter: small business owner here in denver where the unemployment rate is at just over 2% say they do feel the impact of the skills gap as they are looking to hire and expand denise burgess is ceo of burgess services right here in the city. she does struggle to attract new talent to her business and calls this a by product of the great recession when so many people left construction jobs >> they're younger, not as trained, not as seasoned as previously and it's also a career path that is not glamorous it's not silicon valley software, not facebook it's something that you're going to work hard but you also get paid really well for so it's a hard sell, not impossible sell. >> competing with large firms in the area only complicates things because they are able to offer

things like signing bonus which is can be more attractive to new hires, something that denise didn't necessarily have the band width to do. and the national federation of independent businesses monthly read on main street optimism shows skilled labor has moved up into a top three issue for small companies behind taxes and government regulations but one thing that all main street advocates can agree on is the fact that small companies are struggling to find the right people is a good sign in general because that means that they are actually looking to hire carl, back to you. >> great story out of denver thank you. brings to mind a tweet the president made just a few moments ago about consumer confidence figures, the number of people who see jobs as plentiful versus hard to get continues just a multiyear trend. >> without a doubt that has been the strong point it's interesting, continues to find the so-called soft to seize upon >> and harder data is -- >> also by the way consumer confidence over a long period of

time does also reflect the markets. >> and meanwhile, retail, banks, industrials -- >> energy. >> commodities, energy, yeah >> everything but tech >> a mega rotation today we have earnings tonight let's get to wapner and the half all right. welcome to the halftime report our top trade this hour, running of the bull. another new record for the s&p 500 after earnings from caterpillar, mcdonald's, utx and more beat expectations, but even as stocks soar, some bracing for a serious correction the exclusive data coming up with us for the hour, ubs private wealth management and one of baron's and forbes' top 100 financial advisers just keep notching these >> the mantle is so full