good thursday morning, welcome to squawk on the street. i'm with jim cramer at the new york stock exchange. chuck robbins is going to join us on the companies earnings market slightly red. ten year yield just 224 despite jobless claims near a six month low. our road map begins with a gap between the president and ceo. those executives speak out

walmart is down on earnings and we'll dig through that report and talk about the amazon effect and shares on alibaba spiking on earnings first up though, the watch is on to see what effect this could have on the trump agenda a few of the quotes jamie dimon i strongly agree with the president's statements must speak against ideas that divide us. >> i'm ashamed of our president's behavior what does this all mean for the agenda and the degree to which business was going to help push it >> no republican that i've seen has called ut trump by name the way some of these ceos have an there's a desire to get something done in tax reform but repeal and replace that budget are going to be ahead of that and i think that they themselves

will be more attracted because of this. if you look at the calendar it's probably not possible but it wouldn't have mattered either way because i don't think the ceos are able to influence congress and congress has its own agenda. >> the thinking was tax reform specifically was going to get a big push during the vesz areces with the help of the round table or others. >> i just think you're either in favor of the tax reform or you're not and the ceos want tax reform and their views are known. they have made their statements and i think that they, it's really just the listics and the time frame and the time frame has gotten better bad. >> all right so it's a mechanism. it's not whether things happen or they don't know, that didn't change but the timing may have changed. >> yes we have to do tax reform

everybody accepts it we're going to talk to probably one of the ceos most impacted by tax reform in a few minutes. you may believe that tax reform is going to happen with rep repatriation the ceos outlined what they want they don't need to be outlining it over and over again. >> obviously a huge story yesterday as companies try to workout this political calculus. walmart is the other big story moving lower despite better than expected second quarter results. the dow components with a 12th straight quarterly increase in comps. they did raise the low end of the full year guidance but the current quarter guidance is below the midpoint and margin versus gotten some attention. >> yes, mar jins got some attention but they're shifting so rapidly so e-commerce, you have to put walmart on the plane

of amazon. there could be some gross margin pleasu pressure if this stock were at 78 it would go to 80 but it's at 80 so it goes to 78. sometimes that period happens. walmart is the beacon throughout this period. coach just imploding and dick's the stock didn't do anything so it didn't go down with the group so when we finally see the number we get a little bit of a profit taking but this is not l brands which also reported this is against expectations. >> that's interesting.

strongest grocery comp in five years. >> that's what i'm worried about. >> worried about >> groceries are under pressure throughout the country and they had a little inflation but you're going to talk about eggs and milk and eggs and milk and what i like and they're going to be tough. fastest grocery comp before the walmart acquisition is absorbed and they start drivi

driving. >> i don't think that walmart would want any of its suppliers. >> you mentioned it before. >> when microsoft that partnered with scisco has a great data center alphabet they call every one of these supply yes, sir and say let's get on the phone with red hat and move it over i think amazon has an achilles heel. >> your point is walmart has some leverage that maybe underappreciated. >> walmart has more leverage than in many cases the government. >> notice doug mcmillan when he comes out against or for anything now southwest airlindo i like as our people without paying a membership fee they are going after amazon like no one i have ever seen and

mcmillan is a quite soft spoken fella but have to tell you if i were amazon i would say, these guys aren't rolling over and playing dead and i'm going to call all of my customers for amazon web services and say, you know, let's talk maybe let's talk means i'll charge less. >> that's interesting, by the way, a number of stores, locations at walmart now doing online. >> they have to keep that because they're so close to every consumer remember they have a brick and mortar model that they can convert and that's gross margin pressure they convert to be able to be the depot then what you have is amazon buying a 400 store chain which is not that close to everybody and high prices maybe they can slash that versus walmart being a place where you can take things back it is easy to ship things back from amazon and sometimes i wonder howl people get it down

and then ship it right back. >> that's a rental organization with that scott paper towel blue tuxedo i wore but i'm watching this and thinking okay walmart and mcmillan is underestimated why? because he does not carry himself as if he is a goliath. he comes out as a david. >> sort of the antielon. >> totally that's a good one. >> he actually recognized it but mcmillan actually thinks i'm a person. >> yes, when we come back there's a lot to talk about with chuck robbins including earnings and of course how american business is dealing with the white house right now. take a look at the premarket as we look at some weakness on the back of cisco and walmart. a lot more after a break time's up, insufficient we're on prenatal care.es.

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interview with chuck robbins how are you doing? >> thank you for having me. >> good to have you, sir you are clearly executing on your strategy. gross margins are great. you're obviously getting to where you have to go but a lot of people would say listen i need something that gets there faster what do we tell people other than the 3.75% yield and the possibility of repatriation. it's a terrific change in business model. >> there's two key things out of this that i think are important. number one when i became ceo two years ago i said we're going to increase the pace of innovation particularly in our core technologies and what you saw in june was this beginning of a cycle of innovation that we're going to bring forward when we launch this new era of networking that was incredibly well received by the analysts and our customers, our partners, our employees, there's an excitement about that and you'll

see that continue over the next few years and this was the beginning of that and the second piece is in this business model transition that we talked about as we shift more of our business to software and subscription we got some great metrics this quarter. our deferred revenue grew 50% and now sitting at $5 billion and two quarters ago you and i sat in san francisco and i said jim that's sitting at $4 billion so we have gone from 4 billion to 5 billion in two quarters and we also had the first quarter where $1 billion of our product revenue came from recurring offers which is growing 40% year over year and during this transition we also had record eps, we had record cash flow so we're executing really well and we're also working on bringing these two together where this new networking platform that we bil built we're going to integrate that which is something we have

never seen before and we have seen early success with that as well. >> i agree 31% recurring revenue. that's really monumental but then you go to the next page which is totally transparent and you see product categories, switching down 9%. mgm rally down 9%. data center down 4 kt. service provider video down 10%. wireless up 5 and security up 3 so all of those things are some what masked by the different categories don't you have to reorganize the way you report chuck because you're reporting in a way that doesn't show frankly the changes that you're making. >> you're exactly right and we actually expected when we gave guidance last quarter some of the results we saw today obviously and the switching portfolio in particular. we knew we would be making the launch in mid june

we knew we'd pause and take a look at the newa architecture bu i think this quarter we began by showing more of the me tricks around our software business as a data point our software business today if you look at the size of it first of all, our software business and you look at where that would stack us up against software companies you would be surprised 51% of our overall software business, think about how it used to be an integrated software system. 51% this quarter came from subscriptions which is a huge shift so we are going to next quarter begin to change how we cat fworize and how we report our technologies

what a week we had where ceos are having to deal with political questions in ways they're not used to. you have some experience on this so far you haven't been on these particular councils. what is being said among your peers? what advice do you give to your peers that are more directly affected did they do the right thing and how does the relationship change now? >> well, first of all, everyone one of these ceos has to make a personal decision based on their company, their own conscience and what they believe and i think that's what all of them have done and i communicated with several of them as they have gone through this process but what happened this weekend it's incomprehensible that we're even having this conversation in 2016 as americans and as cisco we

absolutely abhor racism, white supremacy. none of it is acceptable period. we need to drive job growth. we need to drive gdp growth. if you see the latest numbers you see areas around the world beginning to accelerate ahead of us which shouldn't be happening given where we are we need tax reform and those things that we have to focus on and just because of what has transpired over the last weeks we can't abdecate the need to get those things done and finally i think in my opinion this country needs to focus on the things that unite us and have united us from the beginning and made this country great and stop focussing every day on the things that we disagree on. that's just my opinion about how we need to move forward. >> i share your opinion and you know that. chuck, are you capable, meaning

the business committee, not just you, of being a force now working with the president and i say that because you have $70.5 billion in cash. chuck i want to buy your stock if you can repatriate that money but does that make it so that it's less like lie thly that th happen >> you said it earlier there's lots of ways to work with washington to get the right outcome for the american people and the business community which i think are very aline on this topic and working with congress that actually has to craft a bill and working with the house and senate and trying to get that done. there's lots of ways for tous t still work with washington and i don't think regardless of the decisions that ceos made over the last few days i don't think anyone plans on abandoning the partnership that we need to have with the united states government on key issues related to policy that impact not only

our companies but also the wellbeing of the country going forward. >> now you have a huge federal business and i love the federal business you talk about how it could get better you talk about that. have you ever concerned about being outspoken about what happened in washington could that hurt the shareholders >> i'm not speak negatively about the administration i'm just speaking about what needs to be done and our customers in the federal space we have wonderful partnership with them. we build great solutions to help them achieve their mission every day and we're going to continue to do that as we talk about our federal business in q-3 with a continuing resolution not being clear that it created challenges for us we saw later in our quarter in q-4 after the budges became clearer we saw some improvement and now we have to get through the next 90 days and the next

budget timetable but we're very confident in our ability to bring value to the customers and they feel the same way. >> you used words like the u.s. government, washington, you haven't addressed the president by name. does the relationship with the president change >> well, i think that, carl, look what happened over the weekend brought to a head an issue that the country needed uniting words. we needed words that were going to bring the country together around what happened this weekend. and i don't think we got those words. >> from him you mean >> that's what we need to focus on is how do we bring the country together now we focus too much on the things that divide us and it's not going to serve us well on any

point as we move forward. >> chuck, i feel i'm doing disservice to the accomplishments that you're taking i think people don't understand. i want to point out how much of the transition do you think you're ahead versus say a year ago and would you ever think that you could be valued at say only 10 times 2020 earning ifs the transition occurs because of the deferred revenue we really see a different kind of number. >> you know jim if you look at our business, first of all if you go back a year ago and you look at how much progress we made we made a significant amount of transition in our collaboration business moving to cloud and our security business moving to software and subscription and even in our wireless business moving to cloud based management and now we're beginning that journey into our core technologies we launched enterprise license agreements and software in the enterprise about 2.5 years ago and we have 20,000 customers

that bought those at this point. i think if you tried to value the company and you broke it down into components of how you would look at it i think that overtime goitit's going to taker of itself and i'm really pleased with how the company embraced this transition is how the company embraced this shift to software and how much our customers and partners want us to move in this direction which makes it easier. >> i want to thank you for coming on. chuck is the ceo of scisco and thank you for answering questions. i think we all recognize it's part of the dialogue that has to be discussed. >> thank you guys. >> we'll get cramers mad dash as we countdown to the opening bell take another look at the premarket. some red on your screen this morning. opening bell in about 7 minutes. with at&t you can get your entertainment right here. right now, when you get the incredible iphone 7 from at&t you can get unlimited data

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time for cramer and mad dash. >> amazon doesn't really care about the bottom line. last year delivering alpha, interviewed the executive team and they told me that we can really grow at a level that no one has ever seen. carl today they do $1.17 revenue plus 58%, 466 million people we forget that that chinese

market we only have $317 million in our country so this was a remarkable quarter. someone asked me on twitter why didn't you run this through your charitable trust and i answered because i was wrong. >> you're always straight about it, jim. >> well. >> it does bring to mind some of the interviews that steve bannon has given in the last 24 hours one of which he says the economic war to china to him is everything that unless the country does something china will wind up dominant in five years or so. >> it's a tough issue because have been, well before the president i always felt china played unfair. i saw our steel industry decimated. i understand also if you do tariffs that signifies the wrong thing and there's a faction in the white house that says tariffs aren't economic and then there's someone like my idol that used to run a very good steel company that says we can't put these people out of business it's case by case but the steel industry does need help from

china but you know what, korea, south korea and europe don't play fair. i wish we have a lot of trade partners that don't play fair. >> let's get to the opening bell and the s&p at the bottom of the screen it's community options providing housing support to developmentally disabled individuals. at the nasdaq it's discovery communications and the science channel celebrating the solar eclipse. my daughter is in the path and i'd love to go visit her but have to work. >> and if you buy classes might not get here in time. >> my daughter is in oregon and

it is going to be a game changer for system peoples lives it's going to remind us how small we are. >> you have to remember that. >> down about 67%. you mentioned it earlier today. >> there's guys sticking by it but i rarely laugh at research but jeffreys came out with data again. ten reasons why you should tell l brands and really list them talking about pricing, victoria secret not that good but most important, 1100 victoria's secrets and bath and body works and they're in the mall the answer is they haven't they could still pay the dividend i believe but i'd love to hear what they

could pay the dividend and buy back stock and the fact is that mall based retailing is no go. >> that's a turn from a couple of years ago when they were the poster child for consistency because of the power of brands like vs. >> yes, victoria secret was something that overrode everything margins are in trouble there pink has been a total stand out. he would tell you that pink is doing very, very well but at the same time, sometimes you are what your record says you are and this one is is going lower. >> retail is going to be a laggerd this morning along with the xle that someone pointed to on the chart setting some new lows that break out that we had in the latter part of june-july is fading. >> big time. big time and i think that

matters. there's certain sectors in this market that are in plain old bare markets and when i look at the energy i saw chevron rolling over yesterday the leader of the big caps. >> i think it can go to 39 or 40. >> really? >> lower than years prior. >> yes, the failure at this price was rather, it was breathtaking because opec did nothing. the future selling was really great. very few quarters define what a company is which is gross margins going up more production and costs under control so yeah, you can't buy them yet as much as i'd like to because i love deep value.

we were worried about the balance sheet. >> ten years ago today exxon was the biggest company in the world. >> the portfolio manager won't eat these. there is an overriding sense that one day this could be the next coal. no 81% of our energy is still the same it's not changing but it doesn't. i think this group has a little bit of tobacco fuel to it. cash flows can be good but it's got that overwhelming my kids

are not going to be fossil fuelling. >> without the dividend. >> at least not to the same degree. >> some of the independents were so cheap that i would buy them but the leader, if you want to sew what can happen to your stock, go to a really terrific company that a long time ago took out it's low and had to do an equity deal and on the pipeline you go to energy transfer partner which is is struggling to stay at 50 million shares the other day those are the leaders. please wait until the future is settled. don't forget, needs to go down

tomorrow >> they're talking about being gross margins better if he delivers it will be a fabulous thing. >> scisco and walmart outsized o the dow. some mention whether it can trade tomorrow the way they did after. >> home depot, it's the jackels on the analyst call and i apologize for them, the analyst

community but i would point out that i think that could happen upon further review people will want to come back to walmart i am a big believer in doug mcmillan watch all the things he says on e-commerce that dominated his thinking i am very, very confident that walmart is going to be able to be the one that can challenge amazon. >> that's a big call. >> yeah. >> that's a very big call. a couple of things we haven't mentioned. hershey got love on the sell side. >> it was very good. mond mondelez has a new ceo they went after hershey. it didn't work i wish they had gotten them. mondelez would be dramatically

higher. >> and then united rentals. >> i have to tell you, this ceo, he is a brave man in the sense that he wants to expand his company into what a lot of people feels is slow growth environment. look at his stock goes up on that acquisition which is one of the top ten, top 15 rental companies in the country but it was immediately 25 this is listen watch me when he came on mad money. we need to do acquisitions he's doing them. that stock could blow through 120 on the basis of that. >> >> dow is down 53 though. good morning, bob. >> happy thursday. 2-1 declining through advancing

stocks and walmart is not changing the detail our market leader and semi-conductors and banks. forget about it. nothing going on there bio tech which is a market leader fractionally to the upside look at the major retailers this morning. let me just note here, lb missed, cato corporation, they had a loss, they had a negative sales trend. look at that, down 15% buckle is opening up 1% here for walmart it's very simple this was a good report that's not changing the narrative it's down for two reasons. number one they raise the guidance on the low end but still leaves the boelow analyst consensus for the year this is the white line as walmart. the orange line is the s&p retail xrt so walmart is up 17%

and it reminds us what a difficult environment we're in there you see it costco tjx huge moves here. ross stores sals very weak down about 17% here we are getting revenue clips so targets will be about 6% below 2016 jcpenney about 1%. macy's about 8%. kohl's about 4%. it's very simple the 4th quarter is going to be very crucial here. people are just asking what are they going to do to innovate there's innovation j.c. penney is adding pplianc appliances target is doing this enormous modeling of the stores so they're making attempts but we

don't have a sense that they're turning things around to get growth investors want more than a bottom at this point it's not enough to say same store sales are down they want growth that's what nobody can answer now. how do you get growth with sales going online, particularly in the 4th quarter and the margins lower because of the price competition. you can't? that's what the problem is and that's why you have the xrt and everybody else sitting at 52 week lows. finally yesterday traders glued to the tr set when they were announcing business committees were being disband and the feeling is its still very much alive. congress is the main trooidrive tax reform and not the white house and everybody wants to see what's the news on passing the debt ceiling, raising the debt ceiling and the budget resolution and once those get done that will greatly increase

the likelihood of tax reform everybody down here wants to know if it doesn't happen what happens to the market, generally 5 to 10% lower if tax reform doesn't happen that's the bottom line right now. so the dow is down 65 points back to you. >> thank you let's get to the bond pitts as well and check in with rick santelli. >> good morning, carl. it's been almost three years to the day that the european two year has been under zero without any trade above zero prior to august of 2014 it was slipping in and out but as you see on this chart, zero, we're now minus 70 70 basis points and while all of that was going on of course they stacked up 17 quarters of positive growth in the dax and many stock markets around the globe have made new all time highs. you look at our two year over that same period and obviously it's an ams to oranges but still

fascinating we're up about 73 basis points from august one week of tens yesterday it felt as though the buyers had completely taken everything back we holding below 220. things start to change it changes as well foreign exchange, you know, yesterday rates moved down, the dollar moved down, but look at a one week of the euro versus the dollar it did regain the 117 handle but still looks as though maybe it's going to have give back and a lot of this could be in the context of what traders are going to position themselves for as much as it's been walked back in a variety of issues

finally the mirror image it's still a coin toss but it is fighting down here carl and jim back to you. >> all right rick thank you very much when we come back this morning, bill ackman addressing adp investors today. we'll get a refrxaction in a fe moments. >> dow down on the weakness from cisco and walmart. back after a break

i'm a big believer in you are what your record says you are. how have you done shareholder returns versus competitor paychecks and versus the s&p 500? >> that's a great question, jim.

shareholder return was 202% during that period paychecks is 129 or 130% and i believe mr. ackman is 29% or so. >> that's interesting. i know the s&p is up 128%. so it's almost double the s&p. when you go after a company that's well-known as being the gold standard you can claim an it's true that the margins may be too low given the fact that adp as i know as a customer is a high touch company is there a way to get the margins up even more without sacrificing business >> there's always ways to look at business to improve mar jins and adp does that particularly well it's i impossible for me to imagine that you could double or triple mar jins as mr. ackman is suggesting without losing much of what makes adp, adp but it is a company that has

significantly transformed itself as it's been described by him and his associates as a feet on the street operation it's much more of a technology based company. it's something along the order of 83% or so of our customers are on a single version platform. >> now let me just, so mr. ackman buys a lot of stock and over the course of the last year what have the conversations been between mr. ackman and you that he feels he has to get people on the board? has it been contentious? has his plan been presented to you? >> i stopped being chairman of adp in 2015. >> how is the negotiation going on what plan did he put forward. >> don't hold me to the exact date jim but i think it was 2008, 7, 9 but he was a shareholder then

and came into the stock and left the stock. i'm not sure what he thought he saw then that he sees differently now. but there are activists and there are activists, it's a broadly used term. it covers a full spectrum of people there's good activists and then there's more difficult activists. if the spectrum is 0 to 10 i'd say bill is probably on the 11 or 12 side of difficult to deal with. >> difficult speaking of the style of all of this, the way this has come down to style, this is what rodriguez told us a couple of weeks ago about ackman himself take a listen. >> the real question i guess is why does he need an extension or why does he need an extension. not how long is the extension or what did he ask for or really not ask for. reminds me a little bit of a spoiled brat in school asking the teacher for an extension. >> so is there anyway ackman could have come at this differently and still got your attention? >> i think the first order of

business is why adp? it seems to most illogical given the performance over time an given it's history but anyone that's voted with their feet and their pocketbook meaningfully as mr. ackman has should be listened to. you never know what kernel of good idea might come from whatever resources they have done to generate their investment pieces. so all of those conversations ought to be had by management and boards as we have done at one of the spin outs from adp, as we have done in another spin out from adp, but it doesn't have to be contentious or go to what this is which is a pointless proxy battle that serves no one's service in particular the shareholders that will bare the expense from the get go. >> the companies are telling me that he first contacted them on august 1 which means that, it's not that long ago.

>> no. >> i would have thought it would have been a much longer tdialoge where they feel like they get frustrated and then come forward but mr. ackman is the dog ate my adp nominees but you know what, i'm a fellow like lincoln thank you for coming on. it's going to be with us for a long time. >> for quite sometime unfortunately for no good reason but i find another dog to go after. >> dow is down 57. we'll get to stock trading with jim after a short break. and if that's not enough... we should move. our home team will help you every step of the way.

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any company that makes some hardware and i want to tell you that the stock has been strong they expected that prices were going to come down in those cases micron is a buy she could have easily said, she just gave up she could have said i see prices coming down but she is way too honest to have her go out on that rim i like her very much even though it's spelt with a k. >> what's on mad tonight >> we have aaron levie he has been outspoken about the president but also how great his cash flow is which is something i want to focus on i didn't sign up for this. >> we'll tackle the mission whatever it is. >> exactly and dr. gaur, allurion, weight loss there's a universal precept. >> that could unite us.

>> there's an issue toii want t get behind. >> we'll see you tonight cramer mad money 6:00 p.m. eastern time when we return the former governor of michigan that also served as president of the business round table will get his take on esthe business relationships and what they mean for the white house in a moment. finally. hey ron! they're finally taking down that schwab billboard. oh, not so fast, carl. ♪ oh no. schwab, again? index investing for that low? that's three times less than fidelity... ...and four times less than vanguard. what's next, no minimums? ...no minimums. schwab has lowered the cost of investing again. introducing the lowest cost index funds in the industry with no minimums. i bet they're calling about the schwab news. schwab. a modern approach to wealth management.

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take a look at the markets pronounced weakness on the back of sis ccisco and walmarts earn. oil is not helping that much although claims come in at a 6 month low. >> bowing out, business leaders walking away from the president's councils rebuke trump's response to charlottesville. an inside look at that decision. >> ackman versus adp making his case in a presentation to investors. >> and the retail earnings parade continues walmart reporting a big quarter. we'll discuss what has that

stock falling. >> business leaders walking away from the president's economic advisory groups in protests over his response to charlottesville. the move prompted the president to dissolve those councils via twitter. aman joins us live near the president's new jersey home with more on the fall out good morning. >> good morning, carl. the president had a chance to reflect. he is here in his new jersey golf resort. we're just a couple of miles away monitoring developments the president had a chance to reflect on everything that happened and he made a political decision here this morning he decided to continue to make statements about the confederacy this morning in a series of tweets let me bring you what he tweeted in the past hour sad to see the history and culture of our great country being ripped apart with the removal of our beautiful statues and mon yuments a reference to confederate st h

statues. you can't change history but you can learn from it. robert e. lee, stone wall jackson, who is next washington, jefferson? also the beauty that is being taken out of our cities towns and parks will never be able to be replaced. >> not sure why he has decided to continue to make statements given all that's happened this week but it's a political decision that the president is now doubling, tripling, quadrupling down on. however you want to describe it that's what is happening here in new jersey this morning. let's review how we got to where we are today an incredible 48 hours or just over 48 hours in corporate american history starting at about 8:00 in the morning on monday when ken frazier said he was re-signing from the president's manufacturing council. shortly after that the president attacked merck on twitter saying that frazier would have more

time to lower rip off drug prices now that he was stepping off of the council but that didn't stem the tide we saw more ceos continue to re-sign from various councils and affiliations throughout the following hours on tuesday 1:21 p.m. the president tweeted that the ceos quitting his council are grand standers and that he has many who are in line to take his place and then on tuesday at 4:00 p.m. we saw a fiery and angry press conference in trump tower where the president held a news conference an impromtu news conference sthag very fine people, ceos were re-signing an not taking their jobs seriously still though, ceos and executives continue to re-sign from the various councils and affiliations up until wednesday at about 12:50 p.m. that's when you had the conference call of the strategic and policy forum ceos from various sectors deciding they that couldn't move

forward with that council deciding to disband it we saw the public announcements of additional ceos re-signing and yesterday the president tweeted he was dissolving the strategic and policy forum at least 9 after that released statements rebuking the president of the united states in the harshest terms. one saying he was ashamd ed of h president's conduct. not clear that the presidents continuing to tweet this morning will do anything to repair his relationship with the business community. we'll have to watch for the fall out politically otherwise from this morning's barrage of tweets from the president of the united states. >> aman we'll come back to you what happened over the

weekend brought to a head an issue that the country needed, you know, uniting words. we needed words that would bring the country together around what happened this weekend and i don't think we got those words. >> for more on the president's relationship with business we're joined by former national association of manufacturers ceo and the 46th governor of michigan it's good to have you back good morning to you. >> good to be with you. >> we have the disbanding of the councils people ask questions what happens next what if gary cohn leaves the economic council do you think that's likely do you have any edge on that intelligence >> i don't i hope he stays because i think he's the star of the administration and is an important figure when figuring out how we're going to go forward with tax reform and infrastructure agenda. we need gary there and we need

b bannon to quite down and let him do his job general kelly has to tamp all of this down over there and it's tough when the guy at the top has his own mind and willing to speak through twitter. >> do you believe the president has any interest in building back the bridge between himself and these business leaders >> i hope he has an interest in getting his agenda done and as such then you try to build coalitions that's what governors do and successful political leaders do. you bring people together and he needs 218 votes in the house he needs 60 votes most of the time in the u.s. senate and you bring that together not by dividing people and class fieg them and singling them out but trying to figure out what do we agree on and there's a lot we should be proud of the business leadership in this country. they're focused on the nation. they're leaders themselves the president is talking about his election which is

increasingly in the rear-view mirror but they face an election every day in the marketplace. >> and to that point, governor, don't you think that when koimts to issue like tax, infrastructure and many issues that are already on going in discussion with members of the administration like work force development and apprenticeships and deregulation, that press conference before it got high ja jacked by the president he was putting in place an executive order to cut down the regulation process on infrastructure. aren't ceos going to come to that discussion even if they're not going to have the photo ones. >> sure it matters frankly very little you still have the business round table. you the chamber of commerce and a lot of groups that can talk on behalf of the larger business

community. i think they're just as credible ceos are just as credible. there's a lot of ways to have input and i would say they have a great opportunity. >> i think the ceo's obligation is to put forward solutions because it seems the white house is struggling. where are the plans? put them out there so we have something to start with. that's the whole reason health care collapsed nobody had a plan. they had a lot of positions but nobody had a plan and i this the business round table has a plan on tax reform that would be spectacular if it could be adopted. the business round table has plans on parts of infrastructure

but not the whole enchill la da so that's something where we can all work together. there's a lot of work to be done and business leaders are well aware that the congress is a co-equal branch. usually the executive is able to put some of their positions in to actual policy proposals this group hasn't figured that out yet but that's an opening for congress and business to work together. >> governor, is there a possibility that this shakes congress into action almost an opposite reaction to what a lot of people are talking about if they're thinking ahead what ticket am i going to run on in midterms next year and they realize we need to have some legislative achievements to offset the negatives they fear they might be associated with. >> i think that's a very good point and i think the one thing the president is probably willing to assign whatever hits his desk so in that sense he almost removed himself from the process so i would say to congress let's have at it.

the big problem in congress is that you have some hardcore groups in there and they do fall on the right and the left. some are full, flat out resistance anything that could be done or opposed because president trump might get credit if it isn't my way then we shouldn't do it. it's give and take and compromising sometimes you take what you can get. if you can get 60% and not 100 take the 60 and validate the direction you're headed in and you get the other 40 later on. >> you talk about congress being a co-equal branch. that's true but less so when it comes to trade to me he says the economic war with china is everything we have to be focused on that. if we continue to lose it we're five years away, ten years at the most of hitting an inflection point from which we

will never be able to recover. are you worried about that >> like all things there's elements to be concerned when i was at the round table there's great corporate concern about the intellectual properties of the chinese. it seems to be unabated at the moment and the policy is to figure out how to insource everything and often by acquiring the u.s. technology or intellectual property so that's a big deal there needs to be a strategy there. i think that trade generally speaking is very poimportant. that's been a big winner in my opinion. it was a huge savior of the auto industry it brought the auto industry

back so there's things that can be done there but you don't throw nafta out. i thought not going forward with the transpacific partnership that would have been a check on china and that's why bannon is completely wrong and other people are right if you're going to check china then you build stronger relationships with other tragd partners you don't put yourself solely in that chinese basket so i think bannon's style behind the scenes and the opposite of team work something that kelly had to agree with i don't think an administration having these debates in public are helpful to congress and figuring out what to do and often it can give a few people what they think is licensed to go off in a direction that doesn't get you to the finish line. >> yeah. we will see what the president said about steve bannon. so on the nafta point now that

the administration has officially kicked off the reopening of this negotiation and talks do you have confidence that they'll be able to deliver something, tangible changes that will help industry as you're talk about and may or may not decrease the trade deficit will this president consider it a win if it doesn't decrease our trade deficit with mexico and canada that's his prerogative and i'm not sure that that's possible in this modern day trade negotiati negotiation. >> one thing is first of all what is the actual deficit the way we score this sometimes is very confusing and doesn't give tus the whole picture i'll take mitch. there's some parts of a car that go back and forth across the border i'm not sure that we capture that effectively but i can tell you that has allowed for companies in michigan to be competitive and in some case opened up new markets for them and i also think this is an area

where business leaders go far, far out in front there's an understanding that growth is the driver how do we get that we got 6 million jobs today and many of those are good jobs. one of the reasons that there are these jobs that are open, can we bring more back to the u.s. you bet. we can be more competitive but that means fixing your infrastructure and getting your tax structure right. part of the problem is we have so many people that want to grab ahold of one piece and say that's unrelated or not interrelated to everything else and my view that's just the wrong way to look at it. >> finally governor, i know you said you want cohn to stay and any idea what the fall out would look like.

>> i think the one thing, i worry that it's going to be hard to recruit people to come into the administration if they think there's such a lack of loyalty or you could find yourself being tossed over the side if you fall out of favor with a group that you didn't even appreciate had a significant role to play this is general kelly's challenge. the president isn't going to change donald trump isn't changing. we have to deal with what we got. almost all the ceos on these councils never met donald trump before they appointed these councils i heard one station suggest they were all friends and tight allies they're not. that's the challenge for donald trump being in that private company all of his life he has been cocooned away the responsibility of a public

ceo is a very differ role and i think if cohn were to leave, he's been a bridge, globalists tendencies that bannon wants to fight. a lot of that is in his mind rolling around what the president has talked about from time to time that's growth in america and that's jo jobs that's something that cohn is very interested in very important to let the labor secretary and the education secretary get going on that agenda there's just so much work to be done and the president diverts all the time from the real focus. >> governor we appreciate your time and insight much appreciated today. >> thank you very much. >> when we come back, ackman ramping up the pressure on adp right now make his case to investors. we have the late frst on that

one company dodging industry issues has been walmart but shares are falling this morning. we'll dig through the report taking a look at stocks at this hour, most industry groups are lower. walmart is hurting the dow taking 12 points off the dow's 'lbeiginrit w.e ghno wel rht back.

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leslie has been watching the presentation and joins us now with more. >> it's been about an hour so far on this call 55 pages through the presentation outside of 168. so still have a ways to go so far the market not enthused by what they're hearing. shares of adp down over 3% his main focus has been on this employer services division that's payroll and beyond. the focus of this segment that represents 87% of their revenue. they need to stem client losses there and improve technology they said they could actually increase the operating margins by as much as 2,000 basis points increase the value per share of 221 to 225 per share by 2021 so obviously this presentation and before the presentation has

received quite a fair dose of skepticism by analysts and investors saying adp has performed quite well over the last year and in response to that skepticism about adp's condition the company has actually been masking their big issues. >> in my experience when a company reduces disclosure and it's gotten worse over the past six or seven years as a company that's not a good thing. usually means the company is trying to hide something and obviously losing clients in enterprise that would be the thing you wouldn't want people to know. >> specifically he's talk about the cash that comes through adp and holds up for about a day that's from employers before distributing it to payroll which he says overstates the operational profitability relative to its competitors. >> in terms of mr. ackman's recent issues himself in terms of performance and high profile

stock mistakes does that make it harder for him to make his case as to why he should be listened to as an 80 kviactivist investo? >> they used that defense from day one with they pointed out how their performance under the current ceo carlos rodriguez is up 202% since he took his position that's certainly something that bolstered their case it will be interesting to see what investors say when they're able to vote next month on ackman's three nominees that he he supports including himself. >> leslie thank you for that we'll let you get back to the next 100 slides or so of that presentation. >> when we come back, shares of walmart falling despite the beat for the retailer stocks at this hour, session lows here in a market is a tad nervous. down 123 we'll be right back. their experience is coveted.

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revenue up 58% from a year earlier. that brings the 12 month gains for the stock to around 70%. sticking with earnings shares of walmart the other way. lower this morning despite beating on the top and bottom lines, u.s. online sales surging 60% but the company raising the lower end of its guidance. let's bring in the senior managing director here at post nine thank you. so bob you like this stock and, in fact, just raised your target what do you think is bothering the market here? guidance or margins? >> the expectations increase going into the results and i think the comp was a really good

comp, people wanted to be a little bit better. the stock is within 5% of the 52 week high so it was more of an expectation piece and then when you look at the higher end. >> 63. >> so it sounds like nothing to change your thesis here. >> absolutely not. >> i think bob said it well. expectations were high particularly on the heels of target yesterday he put up 2.1% growth in traffic. it's been a long time since target has seen a greater increase in traffic than walmart. now the key here is when can walmart see sustained profitability improvements and generate earnings growth i don't know that we got a lot of evidence to support either side here so tsa part of the

reason why the stock is down today. >> michael we always talk about the competition online of course but they're facing a bit of competition at the lower end in terms of bricks and mortar stores is that taking a big effect on the margin or is this a question of amazon verse walmart overall? >> you're exactly right. walmart is facing competition on all sides of the business. what that's probably going to do is put downward pressure on its mar ji margins over the long run as it has to make these investments in order to win >> there is a big part of the

story. they have been investing for a couple of years and part of the forward looking expectations is that expenses will get some leverage and i believe that for this stock to continue to work, we have to see the top line continue but we need to see the bottom line start to pick up and accelerate and i believe over the next 12 days and months we're going to see that. they have a commitment to expense leverage for the year which means some evidence in the back half of the year. i think they have been very diligent and be able to achieve that. >> since you compared it to target, target is down 20% this year walmart is up a little more than that amount. which is the better buy? >> well, walmart certainly has the momentum the larger e-commerce business one way to look atwal mart is its on pace to have $25 million of gross merchandise value by the end of this year

fix a three times multiple on that it's about a $75 billion business you take the rest of its market cap an it's basically trading in line with a target and a kroger so it's not as though the market has not acknowledged some of the very favorable trends that walmart has experienced. i think over the long run that's going to push momentum behind it and they can probably do better from a stock perspective. >> we'll leave it there. thank you very much for talking walmart today. story of the morning >> now let's get to sue herrera for cnbc news update at this hour. >> good morning, everyone. here's what's happening at this hour joint chiefs of staff chairman meeting with chinese president in beijing culminating his visit to china now those two countries signing an agreement that would pave the way toward improving military communication. >> you and president trump have

committed through our improvement in military relations and we approached it with great commitment, candor and we certainly want to deliver results. >> more than 30,000 public school students in guam returning to class this as tensions between the u.s. and north korea decline a little bit but some g aurksuam officials are worried about the effect of planned military drills involving u.s. and south korean forces. >> the number of labor day weekend travellers is expected to jump 5% that's according to an airline industry group 16.1 million people are expected to fly between august 30th and september 5th. that's the news update this hour i'll send it back downtown carl i can't believe we're talking about labor day at this point. what a fast summer. >> it was fast, sue. when we come back, ceo's parting ways with the president. we'll talk about the fall out with andrew ross sorkin.

down 105

it's fascinating to really understand how some of this came together early conversation happening between mary bara at gm and of course pepsico all seem to be some of the earliest movers. he was part of this and then there was a conversation that happened before yesterday's final meeting of the entire council where larry fink from black rock had gotten together

or gotten some of these folks on the phone as well. there does seem to have been a concerted effort going into this meeting and to put some pressure on him to call the meeth and then of course to disband it we reported yesterday jamie dimon also was active in all of this so from what we understand it was always a comply katd situation for him given that he represented jp morgan and of course 200 ceos their job is to have a seat at the table but we're told when that meeting began he got on the call and he said it is over from his perspective and then of course the great combination with all of this, he called jared kushner to say we made the decision we have to call the president jared kushner says can you put in the press release that we're doing this all in agreement? they do it almost as a stop to him and then before they're able

to even release it, he puts out his tweet. >> i'm going to jump in and add more color as well in terms of jamie dimon. he did issue a statement as early as monday but didn't re-sign at that point and i spoke to a source close to jamie half an hour ago he always felt a moral responsibility to help leaders on all sides of the political bargain and that he had already pub hickly disagreed with president trump on various issues whether that was immigrations or transgenders in the military and they didn't consider re-signing then and didn't consider re-signing from the strategy forum at the weekend. it wasn't changing his mind. it just wasn't what was on his mind according to a source and when the extra statement came on wednesday he thought things had gone a little too far and perhaps was the fact that they only met twice and that things weren't necessarily achieving as much versus as andrew was saying

that seat at the table, the business round table something that is considered more influential and that's what changed in the 48 hours between his two statements. >> it just underscores the point and andrew jump in if you agree that these councils have become some what politicized but the real work being done behind the scenes whether it was people on the councils or other ceos that this administration was talking about can still move forward as planned even though they're disbanding the council. >> that's the distinction here and that's the distinction that many of these ceos are making in their own mind which is is to say that to some degree the councils had become a bit of theater. some of them described themselves to me as feeling like they were props in the president's theater if you will to some degree you can play it both ways that perhaps the president was props in their theaters but nonetheless while i think they wanted to discuss and move forward with policy they'll

still be able to do that and they still will without the association if you will of these councils themselves. >> well they have a responsibility to do so for their shareholders. >> you can read the memo to her employ he yee-- employees ibm is committed to working with the government it's just not going to be done with the cameras. >> thank you very much for all of your work yesterday we'll talk to you soon for more on the president's relationship with the business community we're joined by wal r walter issacson. >> good morning and congratulations to andrew for the story on the new york times today. >> now we have the president making more tweets about statues. sit clear to you that he wants

those relationships to be repaired or not? >> clearly he doesn't and people say should john kelly make a difference or should people get to the collaboration and then you wake up every morning and you find out it's him. it's not the people around him this is donald trump unfiltered and to keep fighting confederate monument battles when you have tax reform, infrastructure, health care and a lot of foreign policy things just seems unhinged to me. >> now we have speculation about how long various stars of the administration stay. we just had the governor talk about gary cohn. cramer sat at this desk. gary has to stay how much is riding on his continued tenure in the white house walter >> as i said i don't think it's about gary cohn or whether or

not jared and ivanka can put out statements quitely saying they disagreed or whatever. it's about the guy that's in the oval office and he doesn't seem to be tetherred by his advisers. if he were coming out with a very coherent tax reform plan this week or doing an infrastructure plan like he was supposed to be doing then you would say well it's really important that we figure out the infrastructure in this country this is where a guy is not tetherred to knowing how to work with the senate democratic and republican that a normal president would be doing and instead he is getting up and sti deciding to fight the heroism of

confederates. >> but that said we have been discussing how the policy forum haven't really achieved that much anyway. lots of republican members of congress haven't explicitly criticized the president and so far none of them re-signed could we all think. >> i hope so but every week we said in a weeks time when we quit focussing on whatever he had tweeted about this week and this will just be looked at as a little bit of a tempest. the issue here is that the conservative movement in america and the republican party in america ever since the days of reagan and even before have had an umbrella big tent in which big business is at the table and very influential corporate america but also social conservatives and people. that coalition is being broken apart. he doesn't really have any

members of that coalition anymore. he is getting down steve bannon and david duke as his last two coalition members. >> you know that's not true. there's work being done at the treasury and gary cohn's team that are working actively with the ceos and on apprenticeship programs and infrastructure programs and they're still having the outreach and without the councils coming and doing the walk up to the white house i'm not sure how much of that changes and i'm not sure how much the market is thinking anything changes as well as far as the legislative agenda. >> you're right. i should have said in the beginning something i said three or four months ago when the councils were formed so the issue is not whether or not you have the council but whether or not your stiffing it to the ceos trying to work with

you including after they decided to disband and after they have been asked to put it in to put out a tweet that basically is untrue there's work being done on tax reform we haven't seen a concerted presidential effort to say here's what i believe on border adjustment tax here's what i believe on tax reform and let me start getting this through so it's fine that people are working pretty well under him. it's not fine that he hasn't gotten his agenda and started to sell it. >> they outlined it a few times

and the expectation was that at least on taxes we were going to get another round of granularity in september that groups like the business round table would help promote do you believe that still happens? >> i would have thought you started with a tax reform and infrastructure bill and repatriation you would have started in the beginning on that but to make your first two moves health care that you can't get through and the confederate monument doesn't seem like pushing the agenda that, you know, people who thought trump might be a good independent president were hoping he would push right away.

>> we're going to see what the coming days and weeks bring. it's already been a heck of a week thank you for your time. it's good to see you. >> i hope you're right because every week i hope that. >> walter thanks. >> it's only thursday. walter thank you much more ahead. squawk on the street will be right back a quick look at the dow. isly dow stock that's green mcdonald's cisco is the biggest loser which we'll talk about don't go away.

> >>afind out at trading nation.cnbc.com. more squawk on the street coming up

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>> thanks for taking the time to talk about the economy richard. >> given the strength of the economy data we saw this morning it looks like people are work all five days of the week this summer so happy thursday, rick. >> happy thursday. we can debate a little bit on the manufacturing data and maybe there's a little worry to be had but all things considered the data has been good atlanta gdp now 3.8. my question is is it mostly the softer data? we know that gdp looks better for the quarter, is it over yet but ultimately it's the sustainability of growth missing. will that change based on the data you just described? >> what i'm seeing is it is sustainable. our moldels are pointing up 2.8

3% gdp growth now. it's sustainable because one of the things not getting a lot of oppress is tax receipts have been accelerated all summer long and we're seeing acceleration s like some of the soft data is finally starting to translate into some of the actual data that we're seeing now. >> so tax collections are going up, i'm sure d.c. will throw a party over that, deciding how they can spend that and more all right, another topic i think that's important, all the central banking activity, yesterday's minutes, in the end do you think that, a, anything the fed may do for the rest of 2017, whether it's on rates or balance sheet, is it going to take the bunch bowl away from the party that you think we are all now in attendance at regarding the economy? >> so on an absolute basis, whether or not they cut some of their bond purchases and raise rates maybe another 25 basis

points will do nothing to the u.s. economy and probably won't even push up interest rates all that much. the question is relative relative to what the bank of japan is doing relative to what the european central bank, et cetera -- >> i'm giving you a standing ovation in chicago, richard farr, a standing ovation because in the end if the rain clouds blow in from another zip code, liquidity is liquidity so my final question with 20 seconds to go is do you see the ecb or the bank of japan any time soon? a yes or no answer, what do you say? >> mostly no. >> i got you, richard farr, a man of few words i like that, you ever think of running for office listen, thanks richard, i want you to come back when we get more data points, especially the current quarter on gdp wilfred frost, back to you.

>> thanks very much for that. when we come back, natural gas prices may be shutting down an island. we have the details on that story, don't go away, we're back in a couple. what's the secret of turning a no into a yes and when is a good time to have fun in the office i'm j.j. ramburg, i have great answers to these questions which might help you run a better business whoooo. going somewhere? here's some advice. tripadvisor now searches more... ...than 200 booking sites - to find the hotel you want and save you up to 30%. trust this bird's words. tripadvisor. if they knew just howers rich they were.ed the average american home value has increased $40,000

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natural gas prices and the cost of production have nuclear power plants in this country shutting down. our jackie de angelis is with us from three mile island in middletown, pennsylvania, with more on this story jackie >> reporter: good morning to yoyo you. cheap natural gas prices may have the power to do what one of the worst accidents in u.s. history couldn't -- shut down three mile island. with the natural gas prices sitting around $3, nuclear plants are no longer profitable. it takes more than two years to do and when you shut this thing down, there is no reopening it there is a hope the state could step in and offer assistance or even that the trump administration could make changes that keep three mile island operating but right now it's wait and see. what's at stake here from an energy standpoint? the argument is putting all the country's eggs in one basket what if natural gas prices spike?

what if it moves to $5 this plant becomes profitable once again from a community standpoint, we're talking about 650 jobs, a little bit more than that during maintenance and a town that relies on this business activity now, those who are against nuclear energy all together will say these plants are unsafe, they should be shut down but at the same time the folks we spoke to here say it's this plant that keeps the town going from 2013, five other nuclear facilities have been closed down and three mile island is one of a handful that's on the list to go, guys. >> interesting trend based on this market. jackie, thank you. ceos are revolting, former american airlines president and chairman bob cndl raalis here with us to discuss the significance don't go away. at fidelity, trades are now just $4.95.

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welcome back to "squawk on the street." stocks are lower, near the lows of the session with tech stocks weighing the most on the s&p

500. the sector is down about a percent, standing out as the worst-performing sector of the s&p, lagers include netapp, cisco, adp and micron technologies keep an eye on applied materials. that does it for this hour of "squawk on the street. let's head it down for-tto the w york stock exchange for the start of "squawk alley." >> it's 11:00 a.m. on wall street and squawk alley is live. good thursday morning,