♪ >> live from new york where business never sleeps this is "squawk box." >> good morning. welcome to "squawk box" on cnbc. we're live from the nasdaq market site in times square. i'm becky quick along with joe kernen and mike santoli. you will see a mixed picture this morning the dow is down by 14 points you can thank ibm for that the s&p 500 up by just over 4 points the nasdaq up by 17. ibm has a negative effect of over 50 points on the dow. without that the dow would be in positive territory again this comes after disappointing results last night for earnings. we'll talk more about that in a moment overnight in asia, stocks were higher china's gdp growing sharply, and the nikkei was up 1.4%

the hang seng up 0.74% look at what's happening in european markets a mixed picture there. the dax is weaker. down by just 0.10% the cac is up by that much the ftse is up by 0.70%. check out treasury yields. this will be an interesting one to watch yesterday the two-year ten-year spread tightened up to the closest level they've seen since september of 2007. right now the ten-year is yielding 2.832%. >> more on all the markets that we follow so closely in a moment first we're getting new details into what may have caused that southwest airlines engine to blow mid flight killing one person according to a preliminary investigation done by the ntsb, the plane's engine fan broke off. there were signs of metal fatigue where the fan blade would have normally been

attached southwest airlines is stepping up plane inspections after the incident ceo gary kelly had this to say last night >> i believe in the people of southwest airlines they do a magnificent job. and i know i speak for all of them, it's a somber day. so we will need to make sure that we support the ntsb on this investigation. >> we will get more details on this story from phil lebeau in a few minutes. if you look closely, you've seen the engines. they used to be props that would push the air these have these really tight fans >> for the intake. >> all you have to do is hear it, how quickly that's going you wonder why -- it's horrific that it happened, but it's such a precision machine, you wonder how it doesn't happen more often. there's so much power.

>> engine failures happen fairly commonly, but not -- >> but it's contained. hard to imagine you can contain something with such torque they showed a similar shot of an engine in the last couple years, something similar happened to it i think it was the same type of engine too >> there are questions about southwest because they do a lot of short flights, so you're putting these engines through more rounds of these things. you're right, it's amazing these machines do what they do >> i remember the colgan air tragedy, that was 2009 tens of millions of passengers

>> details on this are what captivated the attention the idea of the window being blown out. >> we all know that happens. when you completely depressurize if you think about it, there has not been something this horrific happening in the age of everyone having a video to see people using facebook, you see the -- i have never been on a plane where the oxygen masks come down. that would be frightening. that's what happens. you remember the payne stewart -- you can lose consciousness quickly. >> when there's no oxygen. >> right we will talk more about this story in a moment. the nation is remembering former first lady barbara bush she passed away in her texas home last night at the age of 92 jay gray looks back at her remarkable life. >> reporter: she was the matriarch of an american political dynasty.

barbara brush was the wife of the 41st president and mother of the 43rd another son served as governor of florida and made his own run for the white house. her quick whit and no nonsense demeanor made bush a popular first lady >> at last i get a chance to prove i'm more than just a pretty face. >> reporter: she was force for a number of causes including literacy, aids and childrens issues >> did you like that story >> reporter: driven in part by the loss of a daughter to leukemia with her husband, bush raised more than $1 billion for charity after leaving the white house. >> my wife, barbara, the silver fox. >> reporter: former president george h.w. bush publicly referred to his wife barb as the reason for his success she was fiercely protective of and loyal to her family. >> at the end of your life you will never regret not having passed one more test, winning one more verdict or not closing one more deal.

you will regret time not spent with a husband, a child, a friend, or a parent. >> reporter: she often joked that she had been lucky to marry so well. while friends and fans say it's the country that was lucky to have such a gracious and caring woman as first lady and in her later years, affectionately known as america's grandmother >> a remarkable woman, remarkable life. one that we are all spending time celebrating today >> yep >> sipping a little bourbon. >> yesterday >> yes >> in other political news, president trump is meeting with japanese prime minister shinzo abe in mar-a-lago. asian markets were strong. >> the nikkei up by 1.4% we're learning about a secret meeting between kim jong-un and cia director mike pompeo, in an

effort to pave the way for that meeting with president trump maybe eamon javers -- which month is it going to be now? next month or june >> they're saying may or june, joe. we don't know for sure the president says we'll see if it happens he's not entirely confident this meeting between himself, the president of the united states, and the leader of north korea, kim jong-un, will actually happen they're looking at five locations now for where that meeting could take place the speculation and the best guess here is they'll have to do it at the dmz. you talked about that mike pop pay yo me pompeo meeting there were reports that pompeo had direct talks with kim jong-un, that would be a remarkable turnaround in the relationship between the united states and north korea even though the white house is not commenting officially, it may have been what the president

was referring to yesterday when he said this >> we've also started talking to north korea directly we have had direct talks at very high levels, extremely high levels with north korea. and i believe there's a lot of good will. a lot of good things are happening. we'll see what happens as i always say, we'll see what happens. ultimately it's the end result that counts, not the fact that we're thinking about having a meeting or having a meeting. >> so the president there saying that the united states is having directs talks with the north koreans at extremely high levels that could include the cia director, mike pompeo himself. that is issue number one for shinzo abe and president trump at mar-a-lago. the other subject is trade remember that the president ordered his national economic

adviser and other officials to renegotiate tpp, transpacific partnership. they're putting the damper that anything will really happen. larry kudlow came out yesterday saying it's more of a thought than official policy sort of pushing that to the side the other possibility is there's discussion now for some exception of the japanese up the 232 tariff regime that the united states put in place last month. there is some discussion that the japanese may want an exemption for that a big day of diplomacy in florida today. >> you look better you look like you got some color in your cheeks you're in florida. >> the weather is fabulous down here >> it's dark we have palm trees >> you look put together

you just look marvelous. >> you look marvelous, too >> your sad is goi.a.d. is goin, isn't it it's 38 degrees. >> i don't want to rub it. >> i'm trying pastel, spring ties and see if someone notices, maybe the seasons will change. >> i got this going. ♪ seasons change so did i all right. eamon, we'll move on now i'd like to see you with some better light to see how much color you got. were you out yesterday in the sun? >> i did go for a jog in the sun last night >> see you got some color >> sun setting over the water, intercoastal waterway. a couple of large yachts, maybe one of yours down here it's a fabulous thing. >> it's nice at the southern white house, isn't it? admit it >> yeah. the one thing i'm worried about is there are gators in this pond

behind me. i can't see them if they sneak up behind me, i won't be able to see what's going on if i disappear out of the shot real fast, you'll know what happened >> you're too close to the camera, take three steps back. >> exactly >> i think they're afraid of you, too >> i still wouldn't turn my back on them. >> no. no. >> you guys know cameraman ashley stringer, he's here i think he has my back he will warn me if gators sneak up >> you better be nice to ashley. >> right >> we'll check in and see if you're still there in a little bit. trade turmoil. the u.s. commerce department said it has made a preliminary determination that aluminum sheet imports from china are being subsidized it said margins ranged from 3 1% to 113% of the value of those imported aluminum sheets commerce is also starting investigations into whether steel wheels from china are dumped into the united states and whether producers in china

revive unfair subsidies. shares of ibm are sliding after margins missed the mark last quarter, also disappointment with the profit outlook for the year we'll talk with an analyst at the bottom of the hour they had a second straight gain of revenue gain after years of loss >> it's not revenue we want anymore. >> and higher quality earnings >> where will you see these big margins from the new -- >> i thought it was -- now it's back to 150. >> went from 150 to 160 in a few weeks. >> tesla aims to produce 6,000 model 3 cars per week by the end of june, that's according to an internal e-mail sent by elon musk not that they'll able to do

that musk says tesla will halt production at two main factories for several days to upgrade equipment. is that possible >> that would be a big improvement. >> up 2% after the drop the stock has had suggests the market will wait to see if they hit those numbers. apparently they've done it with prior models, they did a production halt and increased production rates. earning providing some support to the market the last two days can the pulls hold on? let's ask the chief u.s. equity strategist from deutsche bank, and david stubbs from jpmorgan private bank earnings have been coming in strong ibm maybe an outlier expectations were high, too how do you sort this out >> i think it's hugely underappreciated since we focus on the market all the time how important earnings and earnings

seasons have been for the rise in equity markets we've seen depending on how you count it, anywhere from 60% to 70% to 80% of the rise in most of this recovery has been about the move up in earnings we still live in an investor taking very much seeing is believing type of approach coming into this earnings season, everybody expected strong earnings. the consensus at 18%, 18.5%. our expectation was for significant beats. there's a number of reasons for that i would say basically so far i would say not only so far so good, but so far very good i would say two additional things to watch. number one, key issue is really

the extent to which the huge rise in earnings that we are seeing is really coming from the cut in the corporate tax rate. this will differ by sector and company. >> meaning it's a one-time thing that can't be repeated >> exactly also because you want to know what is the underlying sort of state and strength of earnings i would say coming into this earnings season, very much in the early days, the earnings are coming from underlying cyclical drivers. the cut in the corporate tax rate is adding, but a small par

part >> david, earnings have been strong the economy has been good, yesterday we saw the spread between the two-year and ten-year get to the tightest levels since september of 2007 what is that telling us and should we be concerned >> i think we should be concerned if it gets close to flat if not negative we think it will continue to flatten from here throughout -- >> but why >> why again, can you really trust some of the long end of the bond curves after what the europeans and bank of japan continue to do probably a premium in there. plus the market priced there a fed hiking without really watching the data too much things usually go wrong, there will certainly be a loss of macro momentum at some point maybe the fed does take a few hikes off the table as it has done several times yes, it's kind of the -- it's an

anomaly in terms of the previous two consolidations since 2009. around 2012 it was the european manki in banking crisis there were genuine concerns you could point to about the sustainability of the global cycle. now there's not a huge amount of warning signs outside of that yield curve. >> are the lows in or not? >> for the equity market, i would argue absolutely one of our goals for this year is regular pull backs. i think because of getting spoiled for 15 months without a 3% pullback, we all forgot what normal is. the 10% pullback we got is unusual, especially when growth is fine. >> do you think the lows are in? >> i think so. a lot of indications that people have de-risked

the bull bond spread -- >> read market watch every day >> the fund manager survey as well >> compared to where sentiment was in january, you see people de-risk. >> it's article after article. >> you need to see a couple more things one, activity indicators which will come off the boil, stabilizing in expansion territory. two, inflation remained and contained. fed being balanced probably hiking three times this year but still messaging -- >> do you know wilfred frost >> i do. yes. we did a ton of tv back in europe you stole him from us. >> you guys -- right you guys -- >> he's a great guy. >> he's on later today >> tell him to call me we'll get drinks later >> interviewing lloyd flank fine, he will go is there

anyone -- they'll come back to us we'll have to ask a few questions so lloyd doesn't have to strain through the entire -- you could be there we could say -- i don't know what you just said any way. i'm kidding. it's good. >> great to see you. yes, we will pass it on to wilf. thank you for joining us >> i thought you were wilf for a second. coming up, goldman sachs chairman and ceo lloyd blankfein will join us for a cnbc interview. first we're learning more about the death of a woman on a 'll llest airlines flight. wete you what we know and how the airline is responding. that's next. welcome to holiday inn! thank you! ♪ ♪

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uh huh, sure. still yes! xfinity delivers gig speed to more homes than anyone. now you can get it, too. welcome to the party. welcome back to "squawk box. we're learning more about the engine failure that resulted in the death of a woman on a southwest airlines flight yesterday. phil lebeau joins us now with the latest weird, phil. it was that scary landing on a southwest jet in the last week, too, that was southwest. supplanted by this horrific story. >> that was completely weather related. >> but terrifying. same kind of terrifying testimonials from people >> nobody wants to be on a flight that has to go through a landing like that. in the case of yesterday, they're focusing on what's happening with the engine on this southwest flight. here's the latest in the

investigation. ntsb investigators were looking at the engine within minutes of it landing yesterday in philadelphia, an emergency landing, looking at it last night as well. the initial analysis is that metal fatigue in one of the fan blades in the engine is suspected as the cause southwest has decided to accelerate its engine inspection program. they made that decision late last night this brings up the question, is there a problem, a systemic engine issue where the cfm 56 engines that are really the workhorse of the southwest fleet. here's ceo gary kelly talking about that yesterday >> there are only a handful of incidents like this that have happened so once again, we don't know the cause of this incident and it's premature to even link it to other engine failures that have occurred. so it's just premature to say what course of action we might take

>> again, southwest has decided it will accelerate its engine inspection program the victim in this case -- by the way, this is the first on-board fatality accident for southwest airlines the victim, 4 3-year-old jennifer riordan was pulled towards the window once the cabin was depressurized. southwest believes the inspection program should be done within the next 30 days as they bring these planes in and are checked as quickly as possible the engine is made by gm -- or ge, along with its french counterpart saffrin. the cfm 56 is one of the workhorses of not only the southwest fleet, but you see a lot of them in the airline business more than 13,400 are in service. they'll inspect these over the next 30 days on a much more rapid pace >> who else uses that engine is it across the board with the

industry >> very popular with the 737 so i have to go back and check airline by airline but you know how this works, southwest is doing an accelerated inspection now but ge, if it believe there's is a systemic issue here, it will issue some type of a service bulletin or if it's more severe, an airworthiness directive they wofrnn't wait around on th if another airline has one of these, yeah, whatever southwest finds, yeah. they'll be looking at them as well >> joining us is seth kaplan from airline weekly. there's inspections, seth what is the difference between a -- this plane was inspected supposedly recently. what is the difference between a normal inspection and a deep dive on an engine? how do you spot fatigue in a metal part can you use some type of -- i don't -- do you know how you

would know how you would do that if there's some type of machine that would detect that >> no. no, i don't. we know this plane was inspected sunday that was probably what's called light check. just routine checks. i think they said maybe 10,000 cycles ago, flights ago, is the last time this went in for a major overhaul i don't know what they're planning obviously with the information about what happened specifically here, they'll look at that as phil said, no doubt other airlines with all the thousands of these in service and around the world, they'll be doing the same thing what specifically they'll be doing, i don't know. >> i remember years ago there was some type of engine event, and all of the plane -- the controls, the struts and everything, they were wires. there's more than -- there's two engines. it can run on one engine, right? unless it damages another part

of the plane or goes through a window, you can -- that's not the -- it won't bring a plane down >> i think you're talking -- there was that united airlines dc 10 that landed with great difficulty in sioux city, iowa, that crash landing >> yeah. >> there have been other incidents. in that case, some people died other incidents over the years where -- you're right, you can lose an engine and have a rather routine landing. other times where the fuselage has been pierced, but nobody has been killed. southwest had an incident a couple years ago where the image was rather dramatic of what happened to the engine looked a lot like this, but in that case everybody was okay so usually it's the confluence of several things going wrong. i have a feeling we'll hear here, without knowing exactly

what happened, that something went wrong, and then other redundancies failed, too. it's usually not enough for one thing going wrong to cause something like we saw yesterday. >> phil, the record is like mind boggling, the number of people, number of passenger miles. even -- you remember that colgan air, didn't the guy -- i think he accelerated in a dive he did the opposite of what you're supposed to do when you stall. there was a storm, i think >> i was going to say, if you remember, ultimately when they looked into that accident, they said the experience of the pilot was not as much as we believe they probably had. there's some questions about whether there was pilot fatigue involved that's the last time we had a u.s. airline-related fatality here in the united states. a u.s. airline fatality back in february of 2009

this has been a stunning nine-year period of safety in the skies over the u.s and, you know, bedwe discussed i in the past. i would bring this up with people and they would say the industry is just having a lucky stretch it's not luck. there's a lot of inspections that are done to make sure planes do not have an incident like this. that's why you'll see them swarm this as quickly as they are. they can pinpoint fairly quickly if there are other engines that may have metal fatigue in some of the fan blades. >> yeah. as sad and horrific as the puppy story was, you know, this will -- maybe -- if you're actually -- if that's the worst that happens in nine years, now we realize -- remember when it used to be, it was pretty frequent >> yeah. like every year or two there would be a plane -- >> horrific.

>> as recently as the '90s, every year or two there would be a plane crash in the country 100 people would die we thought the industry was really, really safe then i don't think anybody thought it would get to this point. >> nine years. >> yeah. insurance actuaries have a challenge of trying to rate aviation insurance because there's -- it's a good problem to have, there's so little data about crashes, they just don't happen anymore nine years since any commercial crash, in terms of a crash involving a main line airline, one of the majors, as you mentioned, colgan flying for continental. 2005, southwest there was a fatality on the ground in chicago. before that, 2001, a couple months after 9/11, that american airlines taking off from jfk >> still happens in other parts of the world, but it shows that safety does matter and inspections do matter. but it's still rare.

all right, phil. i don't know have had you on a lot talking about different airline issues, right? let's hope this is it for a while. >> hopefully >> for the next nine years seth, appreciate your time today. >> you got it. when we come back, ibm shares getting slammed after the company posted an earnings beat, but the shift to higher margin businesses not going as fast as some shareholders had hoped. we will talk to an analyst about this the stock is off by just over 4.5%. also as we head to break, look at yesterday's s&p 500 winners and losers - i love my grandma. - anncr: as you grow older, your brain naturally begins to change which may cause trouble with recall. - learning from him is great... when i can keep up!

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when everything's connected, it's simple. easy. awesome. welcome back you're watching "squawk box" live from the nasdaq market site in times square. good morning welcome back to "squawk box," u.s. equity futures this morning have been mixed. we were watching earlier as the dow was down slightly. this is because of ibm, they're putting pressure downward on the dow. we'll talk about their earnings from last night in a moment. you can see the dow may be down by 6 1/2, the s&p is up by 5 points the nasdaq up by 17 this after a second big day of gains for the markets yesterday. riot blockchain says it received a subpoena from the

s.e.c. on april 9th requesting certain information from the company. the company says that it intends to fully cooperate with the s.e.c. request cnbc reached out to the company for comment. riot blockchain was the subject of a cnbc story earlier this year the stock fell roughly 18% on the day that the story aired the s.e.c. declined to comment ibm shares are under pressure the company reported better-than-expected profits and the second straight quarter of revenue growth, but future guidance hit the stock hard. joining us is the ubs managing director and i.t. hardware analyst. we'll get into specifics, steven, but the big picture about ibm. i'm trying to figure out whether -- digital equipment is gone so many tech stalwarts of the past don't necessarily compete in the new environment like google

is ibm eventually going to be a major player or will it always be a niche player? >> still a major player. the history is incumbents get displaced by new companies >> she's running as fast as she can, ginni rometty and making progress, but i read that the revenue increases the last two quarters, you back out currency, they were not revenue increases. some declines, you back out currency, they were not as bad we are micro analyzing all these things really they're dealing with trying to move out of that old business into the cloud or whatever it is, and there's lots of other cloud players that are pretty good at what they do. will she be successful eventually too much of an uphill climb? >> i think it's an uphill climb. that's why we're neutral on the stock. a number of years ago she took money away from stock repurchase and put it into investments in

the business you are seeing that revenue is flat, constant currency. so revenue stabilized. >> what happened to profits? some of the profit the company did earn will not be happening in future years either some of the old products -- the old products, do they have higher margins than the new products >> that's the question the legacy products may be more profitable their pitch is the new strategic comparative businesses love higher margins, but still investing in those the last few quarters the problem has not been revenue but margins. that continues to be the case, particularly when you have large charges. last night they claimed under the hood there's margin improvement. it's hard to have confidence in the future i'm not convinced the newer business also have higher margins. >> you want more transparency? that's what they should be doing now? it's a show-me state sort of situation? >> it is to their credit, they take biin

include them in earnings we would like a better sense of how much they're investing in the business my sense is investments have flattened off. we could see margin improvement going forward. again, as you point out, with all these new companies in the industry, it's hard to transform. ibm is still here. >> the market right now, paying 11 times forward earnings for ibm. roughly speaking earn pg ings supposed to be flar the next couple of years the market needs to see progress somewhere within ibm is there a business the market would like more i always assumed there was an acce acce acce accenture-like business in there. is there something to do with shuffling the portfolio or something like that. >> everybody is seeing can you throw legacy assets overboard? they have not been able to do that they remix by firing 70,000 people and hiring 70,000 with

different skill sets clearly watson has been highlighted. now it's blockchain, but those are too small to matter. the free cash flow multiple is more like 13 or 14 times, which when a cisco or apple is at 11, 12 times looks more expensive. with 4% yield we think there's down side but limited upside >> it's a 1$150 bril 15$150 bil it's real. it still has the ibm -- that's a powerful brand-new augusta, they advertise, ibm is still there. i don't know that the underlying business reflects the future or the present for that company i wish it did. ge is similar. the oldest dow component that's bruised, battered it's a new world facebook is worth a half

trillion dollars facebook ibm has mainframes what happens up in new york, everybody pays attention it's sad >> i'm sure it's a frustrating thing, as the world runs on ibm mainframes, they're not going away, but can they be the ai leader for enterprise. >> can they. >> probably the lead pole position today, but they have not yet capitalized on it. >> all right hope springs eternal >> we'll talk next month at the annual meeting >> steven, thank you when we come back, nightmare in the skies a woman died on a southwest airlines flight after the plane's engines exploded we'll talk to a former ntsb chairman. and starbucks is closing 8,000 store force a d 8,000 store force a d for a dayl bias training. more on those stories.

stay tuned, you're watching cnbc. coming up at 8:30 a.m. eastern, goldman sachs chairman and ceo lloyd blankfein will join us live for an extended interview. it's just one day after the company posted an earnings beat, boosted by a surge in revenue from equity trading in a volatile market. it's an interview you can lyon see on "squawk box," right here on cnbc. let's begin. yes or no? do you want the same tools and seamless experience across web and tablet? do you want $4.95 commissions for stocks, $0.50 options contracts? $1.50 futures contracts? what about a dedicated service team of trading specialists? did you say yes? good, then it's time for power e*trade. the platform, price and service that gives you the edge you need. looks like we have a couple seconds left. let's do some card twirling

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president trump just confirming the report that we talked about earlier tweeting mike pompeo met with kim jong-un in north korea last week the meeting went very smoothly good relationship was formed details of the summit are being worked out now and denukizaticlearization willa great thing for the world but also for north korea time for the executive edge. if you missed yesterday's tax filing deadline, don't worry the irs is giving taxpayers an additional day to file returns for 2017 after some computer problems prevented some people there filing or paying their taxes before the deadline last night. the irs says its processing systems are back online after a

computer glitch intervurupted electronic payment and filing sites. when we come back, what it's like to be astronaut mike massimino. national agree graphic built a virtual reality projection helmet that lets you feel like you're in space. we'll give it a try next "squawk box" will be right back. at&t provides edge-to-edge intelligence, covering virtually every part of your manufacturing business. & so this won't happen. because you've made sure this sensor and this machine are integrated.

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♪ welcome back, everybody. to celebrate its new show "one strange rock" national geographic built a virtual reality experience it's a space projection helmet intending to show the perspective from space mike has it on right now he's about to go under shall we put it down

he's going to be watching all of this while we do it. we're joined now by someone who's logged many hours in space. mike masamino. thanks for being here. >> my pleasure >> let's talk a little bit about this helmet. this is pretty crazy looking, but this is a brand new way to see virtual reality. how does it work >> yeah. the show "one strange rock" is the story of earth and from an astronaut's perspective. >> we talked to them about it here on the show >> we talked about what it's like to view the planet. you're not looking through a window, you're kind of immersed in that scene so you can look around and see the earth or the stars and see all around you in this regard. kind of like being out in the back yard looking at the sky so this is what that helmet replicates it gives an opportunity to see these scenes in these immersive experience >> it's almost like an imax

theater on your head >> that's a good way to put it i guess, yeah. >> mike santoli, you're seeing anything in there yet? >> nothing yet, no >> looking at the wall >> good to check he's still breathing. that's good. >> tell us a little bit about your experience in space you've been up twice >> yeah. i got to fly two times to the hubble space telescope i was a repairman. i got to wear the real version of that thing. not just for projecting but a space suit that allowed us to work outside the spacecraft and do repairs i was a repairman in space, more or less. had a chance to observe what it was like and had a chance to tell it with some of my friends through the "one strange rock" show >> how does it kpa icompare? not just the show but with this helmet, to what it's really like >> we're getting better at being able to replicate what it's

like because of the technology and filming of what we see has gotten better. years ago, it was tough to get good night shots the camera technology wasn't there. but more recently we get really good views of the planet at night and what it looks like at night, the stars and so on from the astronaut's perspective. you can see pictures and people can tell you about it. but once you see it, it is amazing. that's what i like it's an extraordinary experience being in space i think devices like mike has on his head right now help people understand that. but there's nothing like being there. >> is it working, mike >> yeah. i'm seeing sort of the horizon of the moon. saw sort of the sun and the moon moving together. sun rising over -- yeah, it's pretty amazing >> you want to wear this helmet

now, don't you i'm in >> like, andrew loves to wear that but then he gets all the writes in and says he looks like gazoo. >> this is a bit of a different look >> you know, the latest sci-fi movies, we've slimmed them down. >> they're that size that's your environment in there. you want a big screen to be able to see and also you want some breathing air around you and some fresh air -- actually, the real one has a vent over the top of it to bring fresh air and keep the carbon dioxide moving away from you. >> what am i seeing with the sun here is that sort of actual, like, what a space walk would look like with the sun being that intense? >> the sun in space looks like a star and it's against a black sky. you seeing it against a black sky?

>> really, the sun looks like a star >> i'm here. >> you're probably seeing it against a black sky. which is cool. you know you're going to see that when you see it for the first time against a black sky, it looks like a star. >> does our atmosphere just diffuse it. >> that's the thing, joe and that's what the hubble space telescope has because it's in that atmosphere. you think of our atmosphere as thin, but it's pretty dense. think you're under water in a pool and you're looking at the sky through the water and out of the pool it's clearer. that's what the atmosphere does to our ability to see the sun. >> don't open that thing this is what i'm talking about, mike this is why i don't wear a -- on tv i won't -- >> what are we looking at? >> that's john kerry he lost the presidency because of that picture right there. he came out -- >> you forgot the dukakis. >> yeah. he did too

but if anything makes me look like that, it's just best to avoid it will you say, mike, open the pod bay doors. >> yes op i was seeing flowers and other things maybe different national geographic stuff. >> there's a different way to experience the film more or less >> i think he was oxygen deprivati deprivation. will you say that? >> open the pod bay doors. >> it sounds just like it. say it again >> mike, we talk about space travel being something we're all going to be experiencing but i was shocked to see this is 12 million bucks for one of these suits? >> it is for the helmet i didn't realize that. >> for the real suit >> oh, for the real suit but this thing, what do they got inside of it no, yeah the real suits, in fact, really what is so expensive about the tits we wear when we space walk ishe life support system

we can't replace them any longer

trouble in the sky southwest airlines stepping up plane inspections after a blown engine on a flight from new york to dallas kills one person the latest on this developing story and reaction from former ntsb chairman jim hall that's straight ahead. tesla's new production target elon musk's bold announcement may have investors scratching their heads after the company repeatedly missed goals. we'll look at the plan and the stock. plus starbucks in damage control mode announcing it will close 8,000 stores for racial bias training after two black men were arrested prompting protests and outrage

details straight ahead as the second hour of "squawk box" begins right now. live from the beating heart of business, new york, this is "squawk box. >> good morning, everybody welcome back to "squawk box" here on cnbc we are live from the nasdaq market site in times square. i'm becky quick along with joe kernen andrew is off today. mike santoli is here u.s. equity futures at this hour, actually the dow futures have turned around too everybody in the green now with the s&p up by about eight points the dow futures up by 18 and the nasdaq up 23 it comes after two big days of gains for the markets this week. in our headlines this morning, morgan stanley earnings coming in at $1.45 a share that was above expectations. the firm saying its strong performance across all of its

business segments. you can see right now that stock is up by 2.75% amazon and best buy are teaming up they announced a partnership that will see best buy selling smart televisions that are powered by amazon's fire technology and if you didn't file your income tax return by midnight last night, you're not too late. this is because of a crash of the irs payment website yesterday. as a result, the deadline has been extended another 24 hours until midnight tonight also, new details into what may have caused a southwest airlines engine to blow up mid-flight killing one person. according to a preliminary investigation done by the ntsb, the plane's engine fan blade broke off. there were signs of metal fatigue where the fan blade normally would have been attached southwest airlines is stepping up plane inspections after yesterday's deadly incident. southwest ceo gary kelly had this to say last night

>> i believe in the people of southwest airlines they do a magnificent job. and i know i speak for all of them, it's a very somber day so we will need to make sure that we support the ntsb on this investigation. >> we'll get more details on this story from phil lebeau in a few minutes. we'll also be speaking to chairman jim hall. >> couple stocks to watch include ibm, the shares sliding after margins missed the mark. margins were the problem this time last quarter investors were also disappointed with the outlook for the rest of the year stock down about 5%. that's hurting the dow and csx first quarter numbers easily beat forecasts. the rail company doubled profits in the first quarter as a result shares are up 5%. the dow rallying more than 200 points in yesterday's sessions as earnings season kicks into high gear

joining us for that is jaim paulson and todd salamoni. i listen to you paulson. not just the -- to point out when you're wrong. but over the years you've been pretty good. better than most can i say that how's that for -- >> i'll take that. >> last time you were on, you said the lows weren't in, i think. and that we probably would test them how about now? are the lows in? for the correction >> my guess, joe, is we're either going to just continue in this range the rest of the year as earnings climb, or we're going to set new lows yet. i guess i lean a little bit towards that view. but it's just a guess. i think earnings are going to be

spectacular. i really do. they're going to come in great boosted both by tax cuts and synchronized global growth but i also think the markets discounted a lot of that already. and good earnings are going to lead to other changes. rising rates and inflation that are going to come back and be a hurdle yet for this stock market and could send it to new lows before the year's out. >> so that big gain we saw since the election, like a third even where we are now the stock market appreciated by a third. and that was due to everything that we're talking about now due to better earnings, tax reform, deregulation >> i think there's some truth. >> yeah. >> i think there's some truth in that joe >> okay. >> and between january of 2016 and january of 2018, the market was up 45% roughly and earnings are up 14%. so, you know, the market is a

discounting animal it saw this coming and i think it paid itself last year for earnings that we're going to get this year. >> you don't think we'll be in this range you don't think the s&p trades at a new high? >> you know, it certainly could. it could my guess is it won't i think we have to work through, get to a better valuation that can handle higher interest rates and higher inflation and i think we'll probably get there and the bull continue. but i think it's going to take longer >> all right, todd will this market hit a new high first or will the reds win it could be some time in the next six months, i think, the reds could win their fifth game. >> that's a tough one. maybe not win their sixth game by then.

they may not >> they might not win five for the year >> they did get that first win -- they got that one in milwaukee. >> i know. 14-3 or something. they should have spread those runs out with all the games where they got one run >> yeah. they needed a couple last night, didn't they? i think the market hits a new high and the reason i say that is just from a contrarian standpoint, i look at s&p component short interest we add up all the short interest on s&p components. we hit yet another two-year high and we're coming off that level. and the bank of america/merrill lynch survey came out. lowest equity allocation joe, you just mentioned. you were talking about the elections. that was 18 months ago here we are back at the lowest equity allocations you've got a two year high in short interest not a lot -- we did have that

correction but not a lot of people were feeling pain except for the shorts and then you got the possibility of fund managers coming back in the market as it stabilizes. you got the short covering potential. we had key levels. it was important for the levels that did hold. i think it was important for them to hold so, yeah, i think from a liquidity standpoint whether it's fund managers getting back into the game, short covering potential. i think we can take out new highs. i don't know how far above those highs we go, but i do think it's a possibility. >> todd, the default position for the market just about every morning, i notice, it just seems to be that the futures are up most of the time you never know when there's going to be a tweet or raid somebody's offices or a new tariff you never know when that's going

to happen. but the default -- it just seems like there's still money flowing down hill going into equities. as far as technicals go, doesn't that seem to be the case i wish we could go back and look every morning. got to be three out of four mornings where it just seems it's the opposite of when you're in one of those sickening bear markets where every day you're down it just seems different. >> right and it's like you said, though you could have a new tweet, new tari tariff, geopolitical event that takes the futures lower. and that was one concern of mine going into earnings season as we were going through and carving out the lows this last time, there were a lot of talking heads coming out saying we've got earnings right around the corner and they're going to be spectacular and that's -- and the focus is going to become earnings that will get the market out of its so-called funk

i'm not convinced of that. i think we're still vulnerable to headlines i think if you're a trader, you have to approach in that way if you're a long-term investor, i think you just have to sit tight for now. but as a trader, i think you have got to be ready for those headlines. because like you said, you never know >> okay. well, you have been worrying more, paulsen. couple years ago -- you've been anxious. >> yep >> inflation, you were worrying about that anyway, we got to end. but quick ten seconds, jim, to end things go ahead >> i was just going to say i think one thing that's interesting is the thing that's giving bulls confidence is the same thing that's giving the markets indigestion. and that's main street is better the global economy is better and that's making people feel comfortable about the water safer stocks but it's also what's creating the challenges for rising rates and inflation. >> yeah, yeah. don't be afraid of success

that's just negative thinking right there. you know things are going good, they're going too good that's -- leave that thought behind, jim. go talk to someone anyway, thanks paulsen, todd coming up, a southwest flight forced to make an emergency landing after an engine failure what the airline is saying about the deadly incident. and later, starbucks announcing it's going to close 8,000 stores for some training. some racial bias training. we'll speak to an analyst about the company's decision and what investors should take away from that plan. stay tuned you're watching "squawk box" on cnbc so you're looking for male customers, ages 25-54,

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and these kids, and these guys, him, ah. oh hello. that lady, these houses! yes, yes and yes. and don't forget about them. uh huh, sure. still yes! xfinity delivers gig speed to more homes than anyone. now you can get it, too. welcome to the party. continuing to learn more about the engine failure that resulted in the death of a woman on a southwest airlines flight yesterday, phil lebeau rejoins us now with more >> hey, joe. according to the ntsb, this is a case where the engine after investigators had a chance to look at it showed signs of metal fatigue. specifically they were looking at one of the fan blades inside the engine that exploded according to the investigators, there were signs of metal fatigue at the point where that fan blade attaches with the rest of the engine and as a result it

separated and is missing now, debris from the shattered engine shattered the window when it came out of the engine. the victim was sitting in row 17 43-year-old jennifer riordan, mother of two. here is the chairman of the ntsb talking about what the initial investigation has told them about the engine >> there's evidence of metal fatigue where the blade separated. we located that immediately and sent photos to our materials lab in washington and so that's what the preliminary exam has found >> and there will be more investigation being done today not only on that piece, but on the rest of the engine as well here's whether things stand. the ntsb expects metal fatigue accelerating its engine inspection program they expect to have those done within the next 30 days. the on-board fatality for

southwest airlines, the first one this airline has ever had. it has never had an on-board fatality linked to an accident prior to this. as you look at shares of southwest as well as shares of ge ge along with its french counterpart saffron makes this engine there are more than 14,300 of these engines in service and you can bet that we will hear probably more from not only southwest but as well ge today as they continue to focus on what exactly went wrong with this engine and is this metal fatigue part of a systemic issue that needs to be at least investigated and looked at in all of these other engines out in service >> phil, stay right there. we're going to be joined right now by a former ntsb chairman jim hall jim, i want to thank you for your time this morning we had heard that this engine had recently been investigated, been recently checked out. is this the type of thing that

would not show up in a routine inspection, something like metal fatigue? >> well, the investigation will get into great detail on that subject. but it's too early to tell on that >> it's probably also too early to tell if this is a broader issue for the engine but what would you say at this point? >> well, we continue to have these uncontained engine failures they're not frequent, but this one most recently i believe raises concerns that we need to look probably a little more deeper on being sure the oversight of the whole process from manufacture to inspection during operation is reviewed and improved >> i'd heard some speculation earlier this morning that southwest uses engines like this on planes that are doing short flights. a lot of activity, a lot of

cycles that it's put through because it goes through so many of these flights at a time is that the type of thing that puts additional strain on an engine >> well, southwest is known for its rapid turnarounds and keeping its aircraft in the air. so that results, of course, in a heavy use of the engine. my main concern is there's adequate time for oversight and inspection of these aircraft because of the use, extensive use of the aircraft. >> what would you expect to see in the investigation from here we've heard this very early news about what they saw immediately, but what are the next steps? >> well, this tragedy has got some very good things we need to look at. it appears that the conduct and operation of the crew, the

flight attendants as well as the passengers were important in brings this aircraft to the ground safely. so there was no further loss of life but the oversight of the emergency inside the aircraft i think is going to be an opportunity for the board as part of this investigation to look at how effectively everything from the exterior of the aircraft to the whole system, emergency evacuation a evaluated. >> we've talked this morning about how it's been over nine years since we've seen a fatal accident in the united states. and that is an incredibly long time the skies do seem much safer than they did decades ago. what's your thought about safety in the air right now >> i think that's very safe and that's a result of hard work

and i think the events going on right now to address this specific tragedy should give reassurance to the american flying public that safety and aviation is embedded in its culture throughout aviation. so it's very safe, but it's safe because the process that's underway right now has been effective over the years in eliminating accidents through the investigation process. >> jim, want to thank you for your time today. again, jim hall is the former chairman of the ntsb >> phil, are you till there? >> i'm here. what's snup. >> just looking at fan blades. i'm wondering how many there were there's fewer in the newer models some only have 18 and they're

curved they used to be titanium i don't know how you measure fatigue. >> they can do more in inspections. >> some are composite now and there are fewer they use and they're quieter and lighter. >> right there've been a lot of advancements in terms of the fan blades and the technology inside of an aircraft engine. what we should point out here is people say it was inspected only a couple of days ago that was not a full overhaul inspection a couple days ago last night gary kelly saying they did a service inspection a couple of days ago and i'm fairly certain they don't do a full complete check >> how long does that take >> it depends. they said in this case there are 40,000 cycles on this aircraft and then engines

and 10,000 since the last complete overhaul. >> what's the cycle? is that just a takeoff >> takeoff and landing yeah so it doesn't mean they're not checking the engines there are. but there's a difference between let's get in there and really look at the fan blades in terms of are we sure that there's no fatigue that is showing versus we're going to do an update and basically an engine check on a particular engine. >> okay. >> all right i mean, they know exactly how many hours are on these things >> oh, yes absolutely absolutely and look, they are looking for signs of metal fatigue not only at southwest but all the airlines are doing this. the crews, they will report if there's something that feels unusual in a particular flight and that immediately gets checked. >> okay. >> phil, thank you >> you bet when we come back this morning after halting production again, elon musk and tesla making a bold bet on production capacity can they meet that new target

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now the answer to today's aflac trivia question. where was the first stock exchange founded the answer antwerp, belgium when we come back, the teacher walkout movement that's been sparking debate in multiple states over school funding we will talk pension problems and the protests with the head of the american federation of teachers in the meantime, take a look at the u.s. equity futures dow up by about 38 s&p up by 10, the nasdaq by 30 "squawk box" will be right back. coming up at 8:30 a.m. eastern, goldman sachs chairman and ceo lloyd blankfein will join us live for an extended interview. it's just one day after the company posted an earnings beat boosted by a surge in revenue from equity trading in a volatile market. it's an interview you can only

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good morning welcome back to "squawk" here on cnbc among the stories front and center this morning, mortgage applications rising last week. the mortgage bankers association says that they were up by 4. 9% with both new purchase applications and refinancing activity increasing for the week the average 30-year mortgage rate was unchanged at 4.66%. morgan stanley shares are trading higher in the premarket. beating estimates. revenue also topping forecasts james gorman was strong across all regions. that stock up about 2.5% toys r us has rejected a bid for some of its u.s. and canadian locations

according to a reuters report. that bid came from isaac lohrian. he says he hasn't been officially notified of the rejection but calls the offer fair and hopes an agreement can ultimately be reached to save the bankrupt retailer. me too a former first lady barbara bush passed away yesterday at the age of 92. nbc's jay gray takes a look back on her remarkable life >> reporter: she was the may tr matriarch of the bush family her quick wit and no nonsense demeanor made bush a popular first lady >> at least i get a chance to prove i'm more than just a pretty face. she was a force for a number of causes including literacy, aids,

and children's issues. >> did you like that story >> reporter: driven in part by the loss to a daughter with leukemia with her husband they raised a billion dollars for charity after leaving the white house. >> my wife barbara, the silver fox. >> reporter: former president george h.w. bush publicry referred to his wife bar as the reason for his success she was protective of and loyal to her family. >> at the end of your life, you will never regret not having passed one more test, winning one more verdict, or not closing one more deal. you will regret time not spent with a husband, a child, a friend, or a parent. >> reporter: she often joked that she'd been lucky to marry so well. while friends and fans say it's the country that was lucky to have such a gracious and caring woman as first lady and in her later years affectionately known as america's grandmother jay gray, nbc news

>> one of a kind we -- it seems like we've had some first ladies that really are one of a kind. >> fought for literacy opened up aids awareness by going to visit with children who had been abandoned with aids >> and we know jeb he's been a frequent guest we send our condolences. and president bush as well both president bushs but we probably know the second one better i knew george p. a great up and coming guy in texas, in fact we send out our condolences. >> it feels like you've known her for 40 years it's been a long time since she was with the public eye. all right. in the meantime, back in business news this morning, elon musk has set an aggressive new target for production of the model 3. the electric car maker closing its plant and stopping work at the factory for several days to perform upgrades they say will allow it to produce faster

musk now says the goal is to produce 6,000 models, three per week 6,000 of the model 3s by the end of june. that would be bigger than the previous target of 5,000 a week. but is this new goal too am be ishs joining us now is tim higgins. tim, this is a situation where elon musk is coming out swinging is that the right strategy >> yeah. he's missed this goal of trying to make 5,000 in a single week several times. remember, at one point he was talking about doing 200,000 model 3s last year and so at this point he's topped out at about 2,000 a week. the market is curious, is he going to be able to reach this goal by the end of the second quarter? a lot of surprise this week when he company announced he was going to take the plant down for

a week to upgrade. now he's telling the troops there we don't need to get to 5,000. let's get to 6,000 >> he is somebody who it's been hard to bet against. and the stock has suffered very recently where do you think the market direction is headed? >> well, it's not just about reaching the goal of 5,000 or 6,000 in a single week what analysts and investors are wanting to see is continued ability to produce cars beyond just a single week to do it quarter after quarter after quarter. because that's what he needs to do to start generating cash to start paying for the business and start paying for the expansion of the business. it's not just the model 3 he wants to bring out he wants to bring out a compact suv called the model y next. >> tim, obviously one of the big questions related to all that is whether the company's going to have to raise more capital sooner rather than later elon musk says no.

some analysts say the math tells them he might have to do that. it's been a big element of kind of the short case on the stock so how do we sort out exactly whether they will, in fact, need to raise more capital? >>. >> is it a question of need or want the idea of the tesla story is massive expansion, huge growth that's being funded by additional capital coming into the company. so he likes to say he doesn't need it, then the company also talks about growth ambition and gets investors excited about the idea of bringing out the model y next and the idea of more automated driving. he might say he doesn't need it, but are they going to want it? >> when it comes to the most recent crash, in fact they've been cut out of the investigation. what happened? >> yeah. a real -- top safety investors

in a publicly traded company here the ntsb as we know has some strict rules on how it does investigations it likes to bring all the parties in and the agreement is, hey, the ntsb controls the flow of information. it doesn't want miscommunication or the wrong impression about a crash to get out and tesla, however, is very aggressive in defending itself on three occasions going out saying what happened and details of the crash most recently essentially blaming the driver and saying autopilot is safe. this really got under the skin of the ntsb. >> also the center for investigative reporting recently saying that tesla's been holding some accidents off the books to try and make their statistics look better. how do you dig through all of this, sort this out? this is something i get lots of e-mail and tweets about all the time how do you kind of sort out what is and what isn't and try to determine where the truth lies >> well, you know, the challenge in making cars is it's hard and

messy and complicated. here in silicon valley where the factory is, there's not this long history there's a long history of building cars there, but not the the silicon valley ethos and we're seeing this kind of struggle of a start-up company deal with making cars. tesla would say that their rates are about average. they're trying to be better than the industry but we've seen some struggles there. and that's also affecting the company because this has opened the door for organized labor to try to make an attempt to organize the factory we've seen the uaw push hard on fremont. >> tim, thanks for your time good to see you. >> thank you when we come back, the teacher walkout movement sparking debate in multiple states we will talk pension problems and the protest with the american federation of teachers. in the meantime, the futures this morning continuing to push higher dow futures which had been down earlier this morning because of weakness in ibm now looking up

about 44 points. s&p furetus up close to 11, nasdaq by 30 "squawk box" will be right back. they're not investing in commodities or fixed income. what people are really putting their money into is what they hope to get out of life. but helping them get there requires a real refusal to settle for average. because when you approach investing with a tireless desire to beat the status quo, something wonderful can happen. those people might just get what they wanted out of life. or maybe even more.

teachers are on strike in west virginia, oklahoma, kentucky, and arizona. it's cast a harsh light on school funding in the u.s. activism from our country's educators is putting pressure on states to bolster education spending joining us now with more is randi weingarten from the american federation of teachers. she won't let me call her madam president. i have to call her randi >> please. >> and you can call me -- well, we'll see. >> only my kids called me miss weingarten when i taught high school >> and we already started talking when you sat down. my question initially was we want to do something some people think it's about choice and there's a big controversy now with president trump and who's heading the department and my question was and i had people writing in that high school graduate rates at public high schools peaked in the '70s.

you know, we've done more and more and more but haven't improved that. so the people that are talking about choice, i think they're well intentioned aren't they? >> i would say -- >> we keep trying to do the same thing over and over again, just adding more money to it? >> i would say a lot of the people who talk about choice are very well intentioned. there are some that are not. i don't think what betty devos did in michigan was well intended she was the architect of the choice programs in michigan and you saw the michigan schools largely fell but i think this is -- let me correct a couple of facts. i am a school teacher, what can i tell you but the graduation rates have actually gone up school test scores have actually gone up. but the problem in the last few years, the problem is that in the last 20 years, we have

actually divested -- we've actually pulled the investment out of schools what yao sou're seeing is that deprivation got so great what does it mean? when you actually invest in schools, ap courses, music, and art, when you actually reach kids when you invest in well being, schools do really well. and that's what we're seeing all across the country and the other problem is when you end up just pitting charters and vouchers against regular public schools as we have done in the last 20 years, this is what you've seen voucher programs have done really well. >> but zero tolerance for -- and the rhetoric's gotten ugly >> it's gotten horrible. >> that school choice is a dog

whistle for segregation or a first cousin of segregation. that i had never heard. >> that actually -- so -- >> all the way back to brown versus board of education. but we're not in an environment of that. >> essentially what has happened is that charters and vouchers are more segregated than other public schools but my point is if you're looking at performance for kids, and frankly, i actually run a charter school in new york city that has about 100%, 95% to 100% graduation rate. so the issue is not having other options for kids within a public system the issue is what has happened with charters and vouchers in the main is they have pulled money out from other public schools. >> is that the defunding you're talking about? >> and they haven't done very well no that's one of the pieces the other piece is that 29 states actually spend less money for kids in public schools right

now than in the recession. you had lots of tax cuts to the oil and gas industry at the same time it went at the expense of kids. so the public schools had 30% lower funding. and so that's why you see broken chairs, broken desks, books that are 50 years old and put together in duct tape. in west virginia, you had had the same thing tax cuts to wealthy individuals at the expense of schools. and that's the expense of teachers and the increases in health care costs have meant that teachers in west virginia make less -- >> i can understand in some of these states the situations. in new jersey it's a little different. our property taxes have continued to climb most of that goes to fund the school systems >> and what has happened also in new jersey as a result is that people move and stay in new jersey because schools for their kids and also at the same time what

we've asked schools to do -- >> we also have really wealthy people leaving and going to florida because they can't afford the taxes anymore or they don't want to pay the state taxes. >> what's happened is people -- what we're seeing around the country in terms of both, like, new york state, for example, just did an increase of a billion dollars in terms of state schooling. what we're seeing is that they have curbed property tax increases and helped state funding. how do we fund schools in a way that's fairer opposed to property taxes >> i see so many in my town have to leave because they can't afford to stay once they retire. >> but the point becomes this. dop we want to have an educated citizenry? and if we do -- >> absolutely. i've got four kids in public schools. >> so if we do, we need to figure out what is the baseline

investment because what has happened in the states that have divested, that haven't funded, you have teachers making $38,000, $39,000. the median is about $58,000. if your average student debt cost is $17,000 and you're paying more and more for health care as everyone is, how do you actually afford to be a teacher in the united states of america? and what we're also seeing in terms of teachers salaries is that similarly skilled professionals made the same in the '80s and now similarly skilled professionals are making about 20% more at one point or another, is teaching really an important -- is education important for kids? if so, are we going to recruit, retain -- >> and there's a teacher shortage in a lot of places. >> and given that women basically have lots of different options now. you know, in the '60s and '70s we taught or we nursed

not nursing our kids but being nurses and now what's happened is we have lots of different options so are we going to make it a priority or not? >> randi, thank you. randi. >> thank you >> call me joe >> thank you, joe. >> you did not refer to me as mr. poohba that i asked at the beginning. >> if i did that, you know what twitter would have done. >> exactly on your way out will you call me that >> you know, probably not. >> all right. >> i need to know you a little bit more coming up, stocks to watch ahead of the opening bell. coming up at 8:30 a.m., goldman sachs ceo and chairman lloyd blankfein. we're looking forward to that. then tonight on cnbc, the premiere of "the staten island hustle." the show follows a group of animated businessmen from staten island who have yet to come up with an idea or product too f

farfetched for them. those guys -- wow. it's a good looking crew be sure to catch the premiere tonight. "squawk box" on cnbc will be right back it's single-origin kenyan coffee from the nyeri highlands, 6,000 feet above sea level. but how do you really know that the beans journeyed to the port of mombasa and across the pacific? that you can trust they're 100% authentic? ibm blockchain. a smart way to track every step, ensuring this coffee did indeed come from 6,000 feet above sea level. and not a foot lower. ♪ ♪

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you know what's not awesome? evgig-speed internet.. when only certain people can get it. let's fix that. let's give this guy gig- really? and these kids, and these guys, him, ah. oh hello. that lady, these houses! yes, yes and yes. and don't forget about them. uh huh, sure. still yes! xfinity delivers gig speed to more homes than anyone. now you can get it, too. welcome to the party. starbucks announcing an afternoon closure for 8,000 states on may 29th the company dedicating that to racial bias training for its nearly 175,000 employees that move, of course, prompted

by the unwarranted arrest of two black men in philadelphia that you've certainly heard of. joining us from chicago, arji harvey from morning star good move? training is good, obviously, but sometimes it just looks like pr. i don't know it looks like something kind of that you do to say we're going to do something and here it is >> yeah. i think it's the appropriate measure. are you going to make everybody happy in the situation most likely not. it's a serious situation i think it's going to be something that will impact short-term results that being said, i think they're doing a move that a lot of other retail companies wouldn't take in this situation. on top of that, too, the speed and the magnitude themselves i think really show how serious the company's taking it. again, it's something that will.

>> could they have done anything differently? do rejust ascribe it to human nature, something that still happens? racism that's underlying in the country to some extent >> i think that's part of it i mean, i think that at the oend end of the day, there's situations you can't completely control. you can't control the individual actions of store managers or crew members that said, i think the company looking back would have like to have different operating procedures in place. different response management techniques there so i think that'll be part of the training there i think we'll learn a lot more as the may 29th date comes around but i do think every restaurant retail chain is probably looking at their play book in the situation and making sure they have the right protocol in place. >> i don't think -- you remember

denny's. >> yeah. >> i don't think of starbucks in the same -- not to take a shot at denny's by starbucks has presented itself -- howard shultz, i mean for it to happen to star dbuckst shows even the best places can't avoid it or the irony of the place that presents itself as so above everything >> i agree with that too for a company that built its brand on social consciousness, this shows it can happen to anybody. >> get on your laptop, we don't care if you buy anything or not. this is totally out of what the, you know, the environment that you think about at a starbucks you know, it's never happened to me because it probably wouldn't happen to me which is the whole issue of what

we're talking about here >> yeah. exactly. again, i do think this is a going to change the way a lot of restaurants and retailers go about the protocol for situations like this how do you treat customer situations you know, any race how do you go about that and make sure you prevent situations like this from happening again and again. it has made customers upset. it is going to weigh on near term results not only closing the stores but also the training that goes along with it. the company is willing to trade off that short-term hit for maintaining the long-term integrity of the brand >> r.j., thanks. when we come back, a check of stocks on the move ahead of the open this morning. plus stock ideas you may want to add to your portfolio. and later, goldman sachs chairman and ceo lloyd blankfein. we'll have lots to talk about with him right now take a look at the futures. dow up 43.

s&p up 11. the naaqsd by 29 "squawk" will be right back. most etfs only track a benchmark. flexshares etfs are built around the way investors think. with objectives like building capital for the future, managing portfolio risk and liquidity and generating income. that's real etf innovation. flexshares. built by investors, for investors. before investing consider the fund's investment objectives, risks, charges and expenses. go to flexshares.com for a prospectus containing this information. read it carefully.

a developing story one person dead after an engine failed on a southwest flight

>> safety is our absolute top priority >> new details on the investigation coming up. goldman sachs ceo lloyd blankfein on the record. that cnbc exclusive interview minutes away new this morning, president trump confirms that a secret meeting between cia director mike pompeo and kim jong-un did take place we show you what the president just tweeted as the final hour of "squawk box" begins right now. live from the most powerful city in the world, new york, this is "squawk box. >> good morning. welcome back to "squawk box" here on cnbc live from the nasdaq market site in a chilly times square i'm joe kernen along with becky quick and mike santoli andrew is off this week. the futures right now indicated up again this morning. you can see that the fair value

was up a lot yesterday closed up. so we're up 93 now which gives an implied open of about 45 even though ibm is lower. had been taking about 50 points off the move in the dow. i don't know if it's improved at all, but we'll talk about that a little later another dow component, we've got the ceo. and breaking news, goldman sachs ceo lloyd blankfein will join us from chicago that's an exclusive conversation coming up in less than 30 minutes. and for you wilfred frost fans, he'll be on too. interviewing him i'm trying to get as many people to watch lloyd blankfein and wilfred frost will both be on. >> good tease. meantime, here's what's happening this hour. a preliminary investigation by the ntsb shows a engine fan blade broke off and that may have caused the southwest

airlines engine to blow up mid-flight one person died. there were signs of metal fatigue where it would have been attached they are stepping up plane inspections after the deadly incident we heard from ceo gary kelly last night at a news conference. >> there are only a handful of incidents like this that have happened so once again we don't know the cause of this incident and it's premature to link to it other engine failures that have occurred so it's just premature to say what course of action we might take >> president trump in the meantime confirming that his cia director did make a secret trip to north korea in a tweet, the president said mike pompeo met with kim jong-un in north korea last week meeting went smoothly and a good relationship was formed. details of summit are being worked out now denuclearization will be a great

thing for the world but also for north korea. pompeo was recently nominated to be the new secretary of state. also german chancellor angela merkel will be visiting the white house next week. in a statement, the white house says that the two leaders will be talking through a range of geopolitical and economic issues merkel and president trump have had a rocky relationship since his election let's get you caught up on this morning's quarterly reports. morgan stanley reporting $1.45 a share quarterly profits. that was above estimates the cor o there said the results were strong across all businesses in all regions. and that stock has been up all day. right now morgan stanley shares up 2.6%. the company beating on both the bottom and the top line. another company, that would be textron came in with earnings of 72 cents a share versus the 48

cents that had been anticipated. the maker of cessna aircraft brands also announcing the sale of its tools and equipment businesses to emerson electric for $810 million a decliner in premarket trading is ibm expected better profits. and revenue grew however, margins missed the mark investors also disappointed we the company's profit outlook for the entire year. pompeo is probably safe, right? but -- >> i would guess >> do i have to? >> madeline albright went in 2000 with her father >> father. and she came back with some choice descriptions of what -- yeah anyway, let's get back to the broader markets. i don't know i was just thinking about that i don't want to go joining us now for what's working in the markets, george

mar maris. i've been asking everybody if the lows are in on the correction it's a simple question you think we get new highs on the s&p? or do we hit some new intermediate term lows >> you know, i can't tell you if we're done with the volatility right? and if we see new lows going forward. i think we'll end up in a higher place. >> it's been a long correction now in terms of time not just in how deep we went >> right and here's why i think you can have a constructive view the fundamentals in the economy right now are better than they've been in probably a decade you've got tremendous household appreciation you've got the biggest balance sheet component of every home in the united states. you've got increases in employment you've got increases in wage so the household sector is great. the corporate sector is showing

the earnings rate. you haven't seen the benefits of tax reform cycle through the economy yet. it's going to have a effect throughout the corporate sectors. the fundamental benefits couldn't be better and you're also coming off a period of the worst ten years of economic growth that this country's had including the ten years of the depression. so we're not coming off of a strong economic cycle. we're coming off of a weak cycle. >> some people and we just had a gentleman on who said that the 45% move since in the last two years, whatever it is, that that reflects -- that's why it moved 45%. all the things you just described. and now the things you're describing are actually the things that could -- you know, will switch and become head winds because of higher wages hurting profit margins we want higher wages but they hurt profit margins, there might be wage price inflation, higher interest rates so all the things, they're

great, and the market reflects that but now the other side of some of those things are what we'll see from here on out we've already gotten paid for the good stuff >> i couldn't agree more if you're to go back to years ago, that person probably didn't think markets were going to go up 45% was not reflected in the markets thinking 12 months ago or even 24 months ago people didn't know tax reform was coming through. you didn't have a global synchronized activity. >> george, i'll tell you one thing. it's highlighted yesterday the cbo numbers that democrats are use iing to talk about the plan being a bad thing, they're assuming we make it two and three quarters this year then by 2020 and 2021 we're back to 1.5 >> it also does not have a recession in there that's why the 10-year numbers

always look lousy because you have a backsliding are we not going to have a recession in the next ten years? >> hopefully we don't. >> that to me is the question. i don't think anyone would disagree about the good fundamentals of the economy right now. it's a matter of how late are we in this cycle? how much is left in terms of profitable growth that can benefit the financial markets? >> i will tell you we're really early in the economic cycle. if you're coming off the ten worst years and we had 1.26% real economic growth over the last ten years the ten years of the depression were 1.37. we're coming off of a weak economic cycle capex sales have never been this low. there's a lot of growth capital that can be spent. that will accelerate the economy for the next several years are we going to have a recession o efr the next ten years i would bet on that. do you think it's going to look like 2008? absolutely not that is with understand in a generation, once in a lifetime

hopefully event. i wouldn't bet on the world ending in the next ten years i think we go back to normal inventory build type of cycles and we move on >> if you do the s&p return, if you go back to 666, it's like, wow. we're getting 20% a year you go back to 1999 -- >> the 10-year total return to the s&p is 9.2 right now it's been average. >> go back to 1999 and what's it been we were at 10,000 in 1999. so 1999 we were at 10,000. by 2016 we're at 17,500. >> 6.5%. >> even a 20-year return i want more than that. this is america, damn it anyway so what about the two things holding back gdp the new normal that's the aging of the population and not having a workforce and no productivity. we're supposed to be happy with 2% in america

>> i think that's clearly subpar the aging of the population is not accounting for the fact that millennials are entering the workforce at a dramatic pace you've got an offset of the economy. cheaper factories of production are coming in obviously when boomers retire but you're also talking about, you know, a substantial -- you're talking about a substantial increase in labor force. so you're going to have that demographic push going forward and then also from a productivity perspective, i think the measurements are just a little bit off >> give us your favorite stocks. our producer wants to hear it. >> citigroup is in fantastic shape. a beneficiary in the structural reform i think internationally alibaba is the best over the next ten years. china commerce continues to grow, the chinese consumer is going to continue to spend it is the place for e-commerce in china and e-commerce is taking dramatic share from the physical selling in china as well so you're benefitting from two

dramatic trends. and you're taking the lead share and expanding all over the world and got phenomenal businesses across the board if you're also looking at the u.s., i think pulte homes is tremendously underrated. pulte in particular is trading at nine times this year's earnings earnings are going to accelerate the home building sector in the u.s. is clearly supply constrained. there's just not enough homes for the people out there that creates tremendous pressure on pricing that will fall to the bottom line. pulte given the fact it's a broad seller both regionally and across segments to active, benefit from all the trends across the board i think there's this market skepticism we're toward the end of a cycle i think that's just wrong. >> yeah. janus is a good name for -- right? >> fantastic name. can't own enough of it >> all right

thank you. yesterday we heard this and i guess we got an inkling of it earlier this week. but the nation is remembering former first lady barbara bush she passed away in her texas home last night. she was 92 here's nbc's jay gray with a look back at barbara bush's life >> reporter: she was the matriarch of an american political dynasty. barbara pierce bush was the wife of the 41st president and mother of the 43rd. another son served as governor of florida and made his own run for the white house. her quick wit and no-nonsense demeanor made her a popular first lady >> at last i get the chance to prove i'm more than just a pretty face. >> reporter: she was a force for a number of causes including literacy, aids, and children's issues. >> did you like that story >> reporter: griffin in padrive

the loss of a daughter to leukemia >> my wife barbara the silver fox. >> reporter: former president george h.w. bush publicly referred to his wife bar as the reason for his success she was fiercely protective of and loyal to her family. >> at the end of your life, you will never regret not having passed one more test, winning one more verdict, or not closing one more deal. you will regret time not spent with a husband, a child, a friend, or a parent. >> reporter: she often joked that she'd been lucky to marry so well. while friends and fans say it's the country that was lucky to have such a gracious and caring woman as first lady. and in her later years, affectionately known as america's grandmother. >> and as we said earlier, our thoughts and our best wishes to the entire bush family today

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morgan stanley out with results beating the street in its latest quarter dom chu is just getting off the phone with the firm cfo and he joins us with the headlines. >> so the morgan stanley cfo is getting ready for that earnings conference call. that starts in about 15 minutes here james gorman the ceo and the entire team trying to prepare for this particular report i did get some color commentary from pruzan. they reflect their top spot in m&a. some of it has delayed but they're seeing healthy markets they're seeing equities trading that helped the growth in years. th they're paying close attention but something they're watching it it relates to the backdrop for the markets.

also happy with the performance of the wealth management franchise and the pretaxed profits there. higher levels of activity comes from whether people pulls back from geopolitical risks and headlines out of washington. we're not there yet, he says, but something they're paying close attention to back to you. >> he's not the only one watching dom, thank you very much in our headlines this morning, in a tweet last night, president trump saying he didn't think the transpacific partnership was good for the united states. he said while they want us back in the tpp, i don't like the deal for the united states bilateral deals are far more efficient, profitable, and better for our workers look how bad wto is to the u.s for the record south korea is not a member of the tpp but the president may have been referring to critics in the

government of rejoining. this coming days after considering rejoining the tpp >> all along people were saying how skeptical. or is the next tweet, maybe, okay you never know >> back and forth. our next guest is also keeping an eye on the trade debate especially as it relates to tariffs and china. joining us now is chip berg. chip, it's great to see you. >> hi, becky good morning >> good morning. trade issues to this point have not impact ee eed levi's. >> we're a big believer in free trade. we've benefitted the u.s. consumer has benefitted from free trade. but we've got lots of options if something does happen with china. >> how much of your product is made in china? >> product that we import here

to the u.s. is single digits as a percentage of our total u.s. business and we have a big global supply chain and lots of flexibility within that supply chain we have preferred strategic partners in china, but they also have a global footprint. so we'll be able to shift and adjust if we need to if something does happen. in the first $50 billion tranche, apparel dodged the bullet but it's going to be hard to get there without footwear and apparel not winding up on the list >> if you look at the debate, in a sense footwear and apparel, clothing was an earlier version of where you got these global supply chains. but we also no longer manufacture very much here >> but we wouldn't be manufacturing here even if there were tariffs it's just -- it is a low skill, low cost labor kind of business.

i mean, we make apparel. unfortunately we make apparel pretty much the way it was made 150 years ago. so the apparel industry has just chased lower costs around the world as it's happened we're innovating in that respect, though. we announced about a month ago the development of really intense laser capability which will allow us to shorten our supply chain and put manufacturing closer to the markets where we do business. >> we're looking at it right now. i don't think of innovation generally when it comes to jeans. but what is this thing doing >> so we do make jeans everybody makes apparel pretty much the way it was made 150 years ago. and this is i call it the fourth industrial revolution finally meets the apparel industry so it is the digitization of how we design and manufacture a pair of jeans >> make it look beat up and distre distressed >> today to make it look beat up and distressed it takes about 20

minutes by hand in the factory >> they're kind of artists in how they do it. >> it's really a craft but we can now match that with lasers the industry's used lasers for more than a decade, but i like to talk about it as a blunt instrument we've filed for patents to turn that blunt instrument into surgical steel we can now design and manufacture with a laser that laser takes 90 seconds versus 20 minutes by hand. and we can match a handmade pair of jeans to the point the consumer and even experts can't tell the difference. >> we were in washington yesterday talking to a lot of government officials about the new tax laws and their point is that it could lure manufacturing back to the united states in a big way that it should because it changes the tax structure. is that a pipe dream with your industry or is that something that could snap. >> i -- the way apparel's being

made today, it is a pipe dream because it is low skill, low labor. they're not the kind of jobs we really want in this country. and as mike said, the reason the apparel industry left was basically because of economics and the consumer ultimately has benefitted from that the cost after apparel has stayed relatively flat over 30 years. some of the innovation like what this laser represents, we might be able to bring kind of late stage manufacturing back here. but the fundamental -- the core cutting, sewing, putting together a pair of jeans is still going to be off shore. the scale of the apparel industry in the u.s., it would take a decade to scale up here in the u.s and they're not the kind of jobs we should be trying to create here in the u.s. >> is there a denim cycle in your favor right now we keep hearing about that >> there's a levi's cycle in our favor. we're the market leader here in the u.s. and we're really driving our business the turnaround has happened, i guess, five years of consistent

profitable growth. but the growth rate has accelerated through the second half of last year. double digit quarter in the fourth quarter and 22% growth, reported growth in the first quarter of this fiscal year. and we're both growing the category as well as taking shares so it is a levi's cycle, a levi's moment. the brand is hot. >> do you use the laser on that jacket that looks like it just came off the rack >> and it's beautiful too. >> you can distress it for me? >> i could in fact, we sell distressed ones right across the street. right over there at the levi's store. >> we usually see you in davos, but good to see you here >> thank you ve> coming up, lloyd blankfein li from chicago at 8:30 eastern. stick around

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♪ good morning and welcome back to "squawk box" here on cnbc we are live from the nasdaq market site in times square. i'm becky quick along with joe kernen and mike santoli. let's look at stocks to watch this morning vmware shares are trading higher in the premarket sources tell cnbc that carl

icahn has taken what's called a medium sized stake in the cloud competing company. although his intentions at this point are unclear. you can see that stock's up by about 4% intuitive surgical reporting $2.44 a share. that was above the consensus estimates of $2.07 the beat came on increasing sales at the company's da vinci robotic device then there was ebay that got a double upgrade this morning from morgan stanley. weighted to overweight from underweight. also because of rising ad revenue. and that stock right now up by about 5.5% let's get to wilfred frost he's live in chicago with a very special guest. you know, you can come -- tell lloyd he can come on in new york too. doesn't have to just be in chicago, wilf. but we're glad to see him. >> well, we're here for a

special reason which we'll be getting to in just a moment. but first i want to say good morning, and thank you lloyd for joining us >> good morning. great to be here zbl >> i have to ask quickly, has this been scheduled in order to clash with gorman's morgan stanley earnings call which is beginning right now. >> is he having a call >> yes. >> we should merge those feeds >> we could do that, but i think this is going to be more blockbuster, lloyd so let's get to the topic of why we're here we're here for the u.s./china business summit which you're co-hosting with investment corporation. the last sort of round of this type of meeting was in china november last year where very positive you announced a $5 billion fund to invest in u.s. manufacturing. since then, the tone of relations between china and the u.s. has deteriorated quite significantly. is that recoverable? >> not only is it recoverable,

it has to recover. we're the two biggest economies in the world there is no -- there's no path forward if we disagree with each other over the long-term we need to work things out i understand what's trying to be accomplished here. we're trying to even it out. there are different perspectives at work here i'll just say i went over in that november, i was part of that trade mission that secretary of commerce ross led it led to a number of signed agreements including a co-investment between our clients and cic to invest in u.s. industries that is u.s. manufacturing companies with a view to increasing the manufacturing to have them specifically export more into china with our chinese partners helping them get access to the chinese markets. >> is it possible that the plug could be pulled on that initiative given the raised tensions we've had in the past couple of months

>> i wouldn't say at this point anything's impossible, but the commerce secretary was a keynote speaker at the event we had last night that was co-hosted by our partners in which we had dozens and dozens of u.s. ceos and chinese ceos working and engaging with each other and of course what we're doing here can only tighten that deficit because here it's chinese investments in american companies, american jobs to manufacture american goods to ship to china and sell into china. so this is good good all around. >> so you're sounding pretty relaxed if i may say about the issue. clearly trade tensions have weighed on markets significantly. but it sounds like you don't think they're that severe. do you think the attempts to renegotiate these terms of trade with china >> i quite understand at the end of the day everybody evolves and changes. china was a developing market

that has developed in part they needed to -- they had an economy based on export at all costs. when i say at all costs, i mean even subordinating interests are respect to the environment you know, when you have to grow at 10% because you have to accommodate -- and avoid social and political unrest you manufacture, produce, export and to some extent that is good for china. and by the way, good for the world they achieve that kind of stability. but at the same time some markets around the world including markets in the united states got hollowed out a bit. and some political stability that was won for china resulted you might say in some political instability and economic instability in the united states and i think from the u.s. point of view it's time to say let's re-examine where we stand. and so i think the kind of

pressure that's being put to bear is fine i think it's going to work out not because i'm so pollyannpollh but things that have to happen, happen and you have to have the right balance. >> let's touch on your earnings yesterday, lloyd which was a beat on every line overall eps, a big beat. there was a lot of focus on trading last year. back this quarter. can that last the rest of the year or is it a one quarter bounceback, if it were >> if you asked it the opposite way, this surely would last forever. i'd also discount that we don't know. we're in the -- i say this -- we're more in the contingency business but the conditions that prevail were not top quartile positions. yes, they're high ll lly replic.

but conditions where interest rates are zero, yield curves are flat, there's no risk premium. which therefore put a damper on volatility and the opportunities to perform, that's not a natural state. we have not reversed all of that, but we're walking that back so the first indications of a withdrawal from what is an unnatural state. the market becomes a bit more volatility people get compensated for the risk they're taking. our clients are doing better consequently we're doing better with them. so i wouldn't say we're popping champagne corks. but we can certainly see what happens when normal -- when we start to walk back towards a

normal financial market. >> the share price traded down particularly on the news there'd be no buyback this quarter did investors misunderstand that is that a positive because you've got other uses of capital for growth >> look. you never know on the day that earnings come out, there's some -- the market rallied into the earnings. there are adjustments that get to be made investors, most institutional investors go and call for meetings then they discuss. it's very hard to figure out from one day in fact, almost every time there's an earnings announcement, our stock drops. also people know that employees can sell for the first time once earnings are released. there's a lot of reasons for stocks to go down including the fact that we announce that for this one quarter, we're suspending buybacks. and we're suspending for reasons that are quite good. one of the criticisms and unavoidable fact of the last few years is that the opportunity set was fairly low in our

industry and so the right thing to do, but we were still earning a pretty good return and earning money. so we were giving money back to our shareholders so they could invest in places we see opportunities to invest in our own businesses now. and so guess what we are so for this quarter we're playing a bit of a catch-up. we had an accounting effect from the change b in tax law that reduced our capital. so for this one quarter, rather than eke out a return of capital and spread it over a few quarters, we decide we take that medicine this quarter and invest in our businesses. >> i want to touch on succession planning >> where are you going >> very well said. nowhe nowhere, i hope. but you have to ask the bosses about that you and i were chatting with david. you and the board made him sole president and ceo recently does that mean he is definitively the next ceo of goldman sachs?

>> no. nothing is definitive. he's the fourth coo i've had but i tell you -- >> he's just next door i hope he can hear that. >> i'm kidding except that's factually true my expectation is -- look. we have a bit of a process we have terrific people. whatever else people could say about goldman from time to time, nobody doesn't think we have great people including very senior people, some of whom stick with the firm and mostly there comes a point at which your career tapers off and people go outside where they do fantastic things. david is the guy who's left and i haven't announced anything about my own timing, but i've been doing this job for quite a while. >> what's the biggest factor on timing is it you need to see more from

david or you have personally more you want to do yourself >> i haven't -- i think there's a kind of not a question of seeing more, but i think that there's a culturalization and period you get used to to talk about david who i like very much and worked with for a couple of decades, his experience and background -- his job up to the point where he was coo for a year never surveyed the entire firm. and so he ran investment banking and then became coo. there's a lot of complexity to our trading businesses or investing businesses or activities overseas. so i think it's good for him to be the kind of ceo in waiting, if you will, have the benefits of being able to survey that and have a period of time where he doesn't quite have the accountability for the consequences >> lloyd, we have a question from the studio from joe >> hey, joe. how are you? >> lloyd, you're still really

sharp. i mean, that was good. i've had -- you know, we've had three -- becky and i have had three co-anchors on "squawk" including andrew too who knows. right? but you're still -- you can tell you're still quick can i ask you a question going back to davos, lloyd >> sure. >> you were in a great mood about business conditions back then and i guess it had something to do with just business sentiment, really and maybe the upcoming tax reform, deregulation and now your earnings reminded me of the goldman in the past where, you know, the estimate would be $3 and you'd earn $6 or something. that happened a lot. can this -- and wilf referenced it is there any reason why 2019 or 2020 absolutely has to be well below 2018 i see the cbo says that. everybody has the idea that this is all front end loaded because of tax reform.

>> look. everybody's nervous. and, you know, bull markets climb a wall of worry. it's gone on -- the bull market's gone on too long. we can have duelling cliches here, but bull markets don't die of old age, et cetera, et cetera i would say that generally things don't go in the same direction for a long time because people overadjust to them, expectations change, people put them in foolish places and they get -- you know, that's how bubbles form and they burst. of course you don't see it until hindsight, et cetera there's generally an expectation there will be cycles to things i share that expectation but if you divorced yourself from a general feeling and anxiety and just looked at the facts and the numbers and what you can measure, you'd say things look awfully good and it feels like awfully good in a way in which there could be a bit of a runway here for things to remain pretty good

inflation is in check. interest rates, therefore, are lower than you'd expect at this part of the cycle. people are working commodity prices are in check. the biggest commodity price is held a bit in check by the potential supply of more oil coming online if the prize rose enough to justify investment in that sphere. countries that were half a cycle behind us are kind of catching up they'll add wealth creation into the world. there's a lot of reasons for optimism but then again you have to remind yourself you don't hear the one that gets you. only in hind sooisight are the problems obvious i think we will go forward here on a playbook that involves optimism with a kind of healthy state of anxiety that, you know, goldman sachs has been producing in its leaders for 149 years now. >> hey, lloyd, let's talk about some of the things that could throw us off though. i know you said a little bit ago

when it comes to the u.s. and china trade tensions, that you're optimistic about this but you also said that you're in the contingency planning business i wonder what contingencies you're planning for if things don't get resolved, if we end up in a broader trade war >> if we find ourselves in a broader trade war, things won't happen buyers of companies around the world include americans buying chinese, taking advantage of chinese opportunities. chinese buying assets in america. that's on the investment side. the -- we are huge markets for each other obviously we're a bigger market for them, but we have aspirations to change that and by the way, the chinese have aspirations to help us change that that's why we're developing this corporation fund and i think to the -- you know, my observation of the chinese and i can't speak for them or their leadership, but they're a

kind of a consensus driven different political system but also consensus driven. i think the leadership has been expressing that they want to open their markets, that they want to deal with some of the problems that the trump administration and business leaders generally have identified about doing business in china and they made good pronouncements i'm sure when they get back and try to develop a consensus around it, some of the business interests in china get a little bit parochial and, you know, sort of between intentions and effect they haven't been accomplished i think with the pressure the administration is putting on, it's not entirely a bad thing. we get to the right thing. again, my optimism is premised on the idea that a real aggressive mean spirited trade war is so bad and the necessity and the advantages that come from trade back and forth is so good it'd be a farfetched thing to not get there when we kind of

agree mostly on the facts. it's just a question of chinese will say this takes longer, we're a developing country we have to wait. it takes time. we say, guess what there's been a lot of time you have developed your economy is virtually the size of our economy by some measures let's get with it. this is what we're talking about. and i think if that's what it's all about, we should get to the right place. >> lloyd, you -- >> also, we need each other in a lot of other things as well. look at the security situation of the world with north korea. there are other things at stake here maybe bigger things at stake that provide another impetus for us getting together and working these issues out. >> lloyd, getting back to your business you addressed the core business in the last few months feeling a little more normal, perhaps, to you playing to goldman sachs' strength i wonder, though, in terms of the broader business mix of the firm now, we hear a lot about some of the newer initiatives like consumer lending.

i know you made an acquisition recently of a personal finance app. what's goldman sachs' edge in these areas? where do you see it going in terms of its role in the firm long-term? >> sure. i'm super excited about that space for us and i think people misinterpret this to some extent. let me say, we haven't just moved -- we haven't lost our minds moving to a consumer business that we weren't in historically the consumer business has moved to us. because, i mean, if consumer business is one thing if you're lending -- you know, if it's a wonderful life and you're jimmy stewart and you're lending to 500 people and you're looking into people's soul and character deciding whether to make a lending decision, that's one thing. but if you're lending to 50 million people, it's math. it's algorithms. when you slap down a credit card, the credit card company, the bank behind it is making a credit decision to extend credit

to you really in that split second, how are they doing that? they're doing it by algorithms, sophisticated risk management methodology. and it's distributed electronically to the case of consumer lending in our case, digitally well, we're very good at algorithmic trading. obviously a consumer experience is very important here and we had to import that it's important, but it's not the biggest part of the enterprise at this point. this has started to move into our wheel house and we're taking advantage of it now. now, why us? because on the one hand, we have these experiences in digital a lot of the wholesale platforms that drive the wholesale market were created by goldman sachs and then distributed to a broader community. we also have a balance sheet

unlike the normal disrupters of markets in silicon valley. we're a licensed bank holding company. we can take deposits and lend them out the other bank holding companies namely our competitors who've been in the consumer business for a long time are a bit of a victim because of their legacy businesses. for a long time are a victim because of their legacy businesses. they have big credit card balances and they're charging anywhere between 16 and 22% for those. they not dieing to refinance the credit card finances with consumer points with a thousand basis points with lower cost we're in a unique position here. big balance sheet bank, skill and digital distribution no legacy businesses that conflict with our creating a consumer business for 2018. >> we were in washington yesterday. we had a lot of people on from both sides of the aisle. we had a couple of democrats who said they would retake the

house. they're going to repeal the tax reform act and i don't know what they'll do with financial regulation at this point, would you prefer the gop holds on to the house and senate or would you prefer the democrats retake the house >> i live this bifobiforcandida life. >> goldman sachs, which would you prefer >> i'm for the nonexistent party that is a fraction of each one i'm for the moderates. i want stability. >> gop or democrats retaking the house. which do you want? you want the gop. >> i don't have to answer because you answer, you know, you have to question that. of course! on your side the question is simple at the end of the day, you're asking me now or predicated your

question is are democrats going to reverse a consequential piece of legislation that will have been in effect for almost two years. >> they said that. >> who wants to live that way? i want legislation to incorporate to both houses so they can sustain themselves for more than one. >> you knew i would ask. you know what you know i know you you know me. i love sort of -- just -- because -- >> i know i know you know i know [ laughter ] >> i want to jump in we're getting to know you a little bit better because you went on to twitter recently. a lot of your colleagues i've spoken to suggested because you want to sort of shrug off the image goldman sachs or wall street ceo might have. >> is that true? >> yeah. i've been ceo for 12 years i've been trying to get the image of a normal wall street ceo. >> but the tweeting is that to offset some of that and put out

there's a bit more of a light hearted side to things is that a fair explanation >> i would say it's not that calculated i discovered the instrument. i mean, i like it. and i have to say, you know, one of several things i learned. trump has done it, i'm not competing with that. but what i observed is, look, you're in the press you have your responsibilities. i have mine. the day before a story will run, i'll get a call from somebody or a press department we'll say this, that, and i'll say that's wrong. that's not right that's a wrong impression. will you please change it this way? they'll go "no." and i'll go "oh my goodness. so one of the papers who wrote something which was incorrect at the time that we were about to declare -- we're declaring that

david solomon will be the sole coo. guess what i went on twitter and i addressed something. at the same time i have 90,000 followers not 90 million followers but i go down the list and 10,000 are press people who write the story and pass it on so it's not that calculated. i like the fact it's short i think it's a challenge to say what you want to say be a little bit provocative. not too provocative. and say that in a small space. >> thank you very much for your time, lloyd. we'll let you get back to this important conference thank you. >> thank you. >> back to you in the studio. >> thank you, wolf that was great thank you, lloyd we hope to see him

thanks, lloyd. and i just had to think let's get down to the new york stock exchange jim cramer joins us now. would you prefer the republicans keep the house or the democrats retake the house >> i prefer nothing. i prefer whatever gives us higher stock prices. >> what do you think would be better for the stock market? they said they would repeal the tax reform act. >> if feel tax reform is negative for the economy therefore negative for the stock market it's pretty straightforward, joe. it's not exactly going to help the economy. we have that unbelievable interview you did with secretary mnuchin you won't get the 3% growth that goes off the table. 1 to 2% growth doesn't support it so i'm going have to view it like that after that great interview you did, i have to conclude bad.

>> all right it was a fabulous interview. it gave you a perspective of what could go right in this country and i think that's okay. better than giving you what can go wrong, don't you think? >> i'll tell you you know what i came out of yesterday, jim, with a lot of that, you know, it's not fake news that you hear, but i don't see how i can hear one thing about tax reform from one person who i don't think is dishonest or a bad person. and i hear the other thing from another person who is also not dishonest or bad and it's like you're talking about -- it's like black and white like one side sees this and -- there's not even overlap on what they say about this! it's just so weird. >> larry kudlow was my partner for many years he said lower taxes means more growth how am i going to disagree with the man the chief economic advisor to the president >> they have a guy that can explain things in there. we'll be back, jim

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so i can keep growing my business in big leaps! what's in your wallet? all right, everybody a final check on the futures this morning well, still in the green but you're looking at pretty modest advances of course, it comes after two big days of gains for the market we'll see how wednesday shapes up as we get closer to the

opening bell dow futures indicated up by about 26 points. s&p futures up close to 9. i want to thank mike for being with us today. we'll see your tomorrow. >> see you tomorrow. >> make sure you join us tomorrow, too. right now time for "squawk on the street." ♪ good wednesday morning welcome to "squawk on the street." stocks look to push further into the green for the year as we watch ibm and morgan stanley the president tweeting on tpp. a yield curve continues to impress. we'll get the beige book this afternoon. our road map begins with stocks set to extend gains. the earnings driven rally fuelled by