good morning it's 8:00 a.m. at amazon headquarters in seattle. it's 11:00 a.m. on wall street and "squawk alley" is live ♪ can't touch this ♪ can't touch this ♪ break it down ♪ oh oh oh ♪ ♪ oh oh oh oh oh oh ♪ ♪ stop hammer time ♪ >> good thursday morning welcome to "squawk alley." i'm carl quintanilla, with

morgan brennan and jon fortt amazon one of the top stories, cracking 100 million prime members worldwide. deirdre bosa has more on that. >> adding that more new members joined in 2017 than any previous year and more than 5 billion items were shipped with the program last year. now to put that in perspective, take a look at paying subscribers of other popular services like netflix and spotify. this isn't apples to apples by any means. prime is at the top and, by far, the most expensive membership on this list at $100 annually the prime ecosystem is bigger than just the membership fee multiple surveys have found that members spend more than nonprime shoppers and according to morgan stanley buy more than five times that helps offset the growing list of

prime perks that has grown far beyond two-day free shipping, includes things like access to amazon's growing library of digital content and whole foods benefits the number does not break out for u.s. versus international. so, this doesn't address the question of saturation here in the united states. some have speculated and suggested that amazon needs to get beyond its affluent base while we do know that they brought in $2.3 billion from subscription services last quarter, it's a number that has grown at a rate of 50% last year we still don't know if they're offsetting the huge amount of investment that bezos is pouring into expanding businesses, in regions like india first quarter earnings reported next week. who knows, maybe we'll get another surprise and more details around prime back over to you. >> deirdre, thank you very much. to put that in perspective today, the number of prime members exceeds the memberships at costco and population of

germany. joining us to talk about it, ceo of business insider. aside from the fact that we're getting the number, which is a big deal. >> that was a big surprise it's very nice i'm an amazon shareholder for a long time and was pleasantly surprised. these numbers are staggering, netflix at 125 million, we're at 100 million here u.s./international breakdown, you can talk about that. the lower it is in the u.s., the better then there's that much more room to grow. >> investors and competitors, i think, though, need to focus on the ball here. amazon is building prime on top of prime music unlimited, subscription service that you pay on top of prime, similar to spotify, kindle unlimited, amazon channels, prime fresh, stem club there's all kinds of niche experiences amazon is building even beyond prime to get people to pay on top of that. and that seems to be where the ball is headed, while others are necessarily, you know, maybe

just catching up to what amazon has done and creating this model. >> the least affluent households in the country, in general raising another $10, $20 seems feasible lot of power there. >> when we get a number like 100 million, given the fact that that number has been growing so much, do we get to a point where almost like you've seen with iphones and smart phones, we get to prime saturation? >> definitely within the united states at this price point you're going to hit saturation amazon is starting to experiment with lower monthly pricing and lower pricing depending on income of households you can see the penetration grow 100 million on a global basis, amazon is in so many other countries. lot of opportunity there a lot of netflix's growth is coming from there. maybe these companies go tote 200, 300, 400, 500 million customers. it's staggering to think about.

>> look what amazon is doing to pushing prime members into twitch prime and what that did for fortnight. that shows you what power they have. >> books online, all the controversy, can they make it as a retailer so many of what they're talking about today has nothing to do with that business it's the core business but it's that sense of innovation every day. it is day one comes through loudly and clearly it's so hard to do where you see a lot of other companies doing it, but the shareholder letter made that very clear. >> time 100 issue, jeff bezos is being honored and jamie dimon writes a blub about him. for most of us, transforming the industry would be an accomplishment but jeff's relentless attention to consumers is not defined by any boundaries it's long been said he scales

better than any other executive , maybe than we've ever seen does this not open up a path for those who argue to say they're too big? look how big they are. >> you can say that. they're staggeringly large taking jeff himself, he's relentless about this continued innovate, get better all the time big section of the shareholder letter on high standards, including areas he didn't know about. he has learned how to have higher standards there that is relentless when he talks about day one, that's the philosophy at the company. if we don't keep doing this ourselves and innovate, we're going to get steam rolled like the other companies are getting steam rolled is it too big? every business they're in, they have a small percentage of the business overall sure, the company itself is extraordinarily powerful as a percentage of overall retail it's tiny. >> except for ebooks. >> they have a huge amount of power, no question. >> morgan stanley says they'll take number one share in apparel

this year in the united states. >> it's extraordinary what they've been able to do. that's a very fragmented market. >> they certainly have a lot of data, with their hands in all these different businesses. >> they're in a great position there's an anti-trust argument you're squeezing out everybody else there are thousands of retailers that are doing fine. >> starbucks, the other story we're watching two black men arrested at that philadelphia starbucks last week broke their silence today to tell their side of the story. >> so when they do approach you, what do they say and how do you react? >> well, initially, as soon as they approach us, they just said we have to leave there was no question of, you know, was there a problem here between you guys and the manager, what happened >> when you were arrested, did they tell you what you were being arrested for >> no. not at the time. we wasn't read any rights, nothing. just double lock handcuffs behind our back and escorted out

and put into a squad car. >> the two men said they want to make sure an incident like this doesn't happen again starbucks plans to close, as you know, it's 8,000-owned company stores in the united states for one afternoon in may to teach employees about racial bias. they told robin roberts they knew that the manager had called the cops when the cops literally walked in the door. >> a disastrous scenario starbucks is acting appropriately comprehensively on this they're making a big -- they're doing a lot with it. put it that way. so that's good one of the values here is social media, helping bring these events to the world and hopefully making the world better as a result. >> given the fact that they've had such a swift reaction, starbucks, to this incident, do you think it will do damage to the brand? >> i think it already has. but i think the way they're reacting is a very positive step they're taking it extremely seriously. the other thing that came out

immediately is that starbucks is a politicized brand right now. right away, you already have some antagonism as a result of that. >> i think it's going to help the brand. in moments of crisis, you get to see what a company is really about, who they're really listening to, what their gut reaction really is first of all, kudos to the two gentlemen and the way they've handled this interesting that they said we're not asking people to boycott starbucks. at the same time they're pushing for change in starbucks. to me the technology story is twofold. the smart phone, first of all, that everybody, almost, has now got in their pockets somebody was able to videotape this situation black people across america know that this stuff happens but it's kind of been this open secret. now everybody can see it then social media spreading the story like wildfire so quickly kind of providing that witness effect it's really pretty powerful. starbucks knew that mobile technology was powerful. they've been using it in their stores now it's in their stores in a

different way and it's in everybody's store. put the entire corporate world on notice. >> it's interesting. they've seen business leaders, ceos specifically tested this week and all kinds of situations starbucks, southwest, nike we talked about a few moments ago it's a big job it entails more than just handling the balance sheet. >> it's changing ceos and companies are being asked to take stands on issues that companies used to run away from, say they have nothing to do with, being forced to a lot of decision to make around that. >> it speaks to the fact that you're seeing this trend on wall street in the investing community towards investing and putting more towards corporate social responsibility in the companies that are stepping up on that. >> that's right. right to wages, becoming much more understood, the amount you pay your folks actually generates revenue for everybody else your wages, somebody else's revenue, we need to pay our people more. that's one of the issues of the economy right now, that

companies are not paying enough money generated to the people who generate it. randall stevenson slated to testify in the anti-trust battle over the company's merger with time warner. hampton pierearson is in washino with the latest. >> reporter: we're awaiting randall stevenson taking the witness stand, the at&t legal team wrapping up the testimony by calling in its closer, biggest defender of the $85 billion merger right from the start over the last 18 months, believe it or not. now far and away the most crucial part of his testimony today will be how he manages to handle what should be a withering cross examination from the government lawyers go iing forward. right now we're wrapping up testimony. on the witness stand as we

speak, john stankey, who basically if the merger goes through will run the media division of the company. he is the successor in waiting to time warner's ceo jeff bukkus, who made a vigorous defense of the merger, saying that the two companies need to come together to combat the changing landscape, especially driven by the internet of how the video can't and distribution business is changing bottom line in all of this we're nearing the end of what has been a five-week trial the government will have the last word next week with rebuttal witnesses no date yet set as far as when we can look for closing arguments. back to you. >> all right thank you, hampton the entire corporate world watching this one with its implications on m & a. former treasury secretary jack lew will stit down with our sara eisen in an exclusive

interview and we'll hear what he has to say about the trump economy. as we head to break, lack of volatility has returned. dow could post its second straight day of not moving triple digits and the vicks has settled in under 17. more "squawk alley" coming up.

>> welcome back. take a look at lam research

shares fears of memory pricing. martin lam is the ceo of lam research good morning, martin. >> good morning. thanks for having me on. >> can you clear up for investors what your outlook is and how much you might be affected by memory pricing because it's quite an interesting dynamic to have this beat a number of analysts ticking up their targets. >> i think it's one of the realities of the world we live in today, that there is a bias to short-term headlines and i think what's getting lost in this conversation is the fundamental reality of silicon and the role that lam research plays in that road map, supporting all the services innovation in the data economy and world of artificial intelligence to your point we just delivered our best results in history. we guided revenues and

profitability in our june quarter to be higher than the march quarter. and the implied guidance for the year is solid growth year over year so, there's some very compelling headlines for the industry and an exciting opportunity for the company. >> and on shipments and worries that your guidance was a little bit weaker than expected there, is that something people should pay attention to, or how do you fit that within the overall context of demand that you see for chip equipment right now >> yeah, certainly when it comes to, you know, running the company, investing in our future, it doesn't really have a huge impact in terms of the decisions we're making our focus is on sustainable, long-term profitable growth, broadening our portfolio, making sure we're increasingly relevant to the needs of our customers, whether that's in memory or in logic of our annuity business,

that's our focus sho short-term ebbs and flows are just that. we think this is the most exciting time in the history of our industry except, perhaps, the first five years so, i think it's getting lost in translation a little but, having said all that, we have to be attentive to short-term ebbs and flows and run the company with the variability in our cost structure that makes us competitive. >> so, martin, when analysts at credit suisse said this could be the downturn that bears have been arguing for, you would say those fears are overblown? >> i think so. time will tell if you look at the fundamental kind of drivers of demand today, they're much more diversified than ever before they're much more about content than cell phone units and pc units and scale of social economic problems in the world, whether it's food and water, transportation, security health care, whatever that you want to focus on they're big in the role of data and artificial intelligence will be significant long-term

and the role that silicon has to play and the role that lam research has to play, we think, is long term and very sustainable. ups and downs along our journey but let's not get confused by the long-term headline, which we think is compelling. >> martin, you mentioned ai. i'm wondering, what is the impact of moves like facebook seem to be making to develop its own chips and ai, google has done things similar and count back to when apple first started making its own chips for phones. nontraditional players, moving into the space of designing their own chips. how does that, perhaps, shift in the way demand is created within the industry, filtered down to you? and are there any adjustments that you have made or are making to capture more value because of, perhaps, the different way >> we engage more holistically

in the ecosystem today, including with that community than ever before so, i think that's an important part of answering your question. the second is, you know, say on innovation and innovation on applications and services is critically important in the scale of these socioeconomic challenges of the world, so-called evergreen verticals. the more diversified the solution set is, i think that's good for the health of our industry. >> i want to get your take on trade, given the tougher trade stance, the tit-for-tat tariffs between u.s. and china how much of a potential headwind or threat do you see that as being? >> not seeing threats or risks playing out right now but certainly attentive to the risks

that you've described and, you know, leading indicators for us are consumer sentiment if we see disruption in consumer sentiment, ultimately that plays into the semi conductor demands, headlines and, you know, tit-for-tat, the risk profile there is that there is a fundamental adjustment to local domestic agendas on equipment supply china's agenda in semi conductors is focused on chip manufacturing for balance and payment reasons and i see that as likely to continue. we watch the space for the reasons that you just outlined. >> martin anstice, thank you, ceo of lam research. stock now 5.5% off the lows. thank you for joining us. >> thank you. after that deadly southwest flight, former ceo of northwest airlines will join us next to weigh in on what went wrong.

>> looking at the s&p 500, financials leading by far as bank stocks bounce and american express jumps 7% resqwkll" aomt. whether it's a big thing, small thing, or something unexpected, pnc will be right there when you need us. because when it comes to your finances, if you focus on today, tomorrow has a way of working itself out.

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when everything's connected. it's simple. easy. awesome. welcome back to "squawk alley. faa ordering airlines to inspect a certain time of jet engine that forced a southwest airlines flight to make an emergency landing in philadelphia. joining us now on the phone for more, former northwest airlines ceo douglas steenland, now former delta board member. good morning, doug. >> good morning. thank you for having me. >> this incident on tuesday, there had been a proposal from the faa that was out there for more in-depth inspections. why are we just seeing that take place now, especially when we

saw a similar accident back in 2016 >> well, i think first the number of times that there has been an uncontained engine failure is very, very rare second, you know, there are ongoing inspections that take place as part of, you know, checklists and every day operation of the airline and airplane that take place to look to find things i think the reality is that when an airplane -- when an engine is on wing, the ability to identify, you know, metal fatigue and the like is difficult. and, you know, it ranges from, you know, when you see before

every flight the pilot or co-pilot do the walkaround of the airplane and part of the inspection is to take their flashlight and look into the engine and see what they see, that's pretty -- you know, that's pretty minimal. you can then also use some ultrasound and other techniques to look to try to find things. but there's only so much you can do in terms of identifying not visible to the eye, very, very difficult to detect, metal fatigue on engine lights. >> it seems to me this makes the case for some of the new tech we're starting to see come into the manufacturing and industrial process, including from companies like ge, the co-manufacturer of the engine that we're discussing right now. this idea of the industrial internet of thingswares and

sen -- softwares and sensors. do you think that potentially we'll see them be able to detect things that the human eye can't? >> if you take a step back and look at the safety record of the airline industry as a whole, it is truly extraordinary and i think what that is testament to is the commitment of the manufacturers like ge and cfm, airlines and the like their commitment to safety and their commitment to put into place techniques and strategies and practices that will always raise the safety bar i think another thing that southwest incident shows is two things -- one is the very productive and recurring training that airline pilots, commercial airline pilots go through. so i'm sure that the southwest

airline pilots who were operating that airplane had been through numerous simulations of exactly that experience. >> yeah. >> and so when it happened, even though it's very, very rare, in their simulator, they had previously experienced it. and, therefore, knew exactly what to do at the same time, boeing, as well as airbus, they basically designed, you know, and built in margins of safety into the airplane itself to basically withstand this type of event so i think the real conclusion of this week was very, very unfortunate but the airplane did, in fact, land and the fact that it landed wasn't really a miracle. it was a reflection of the training and the design features -- the training of the pilots and the design features built into the airplane. >> doug, it's great to get your

thoughts on this i believe the pilot was a former fa-18 fighter pilot actually. >> and kudos to her. she did a great job. >> tammy jo schultz. >> yeah. >> i think it was a reflection, in large degree, to the training that she had and if you've ever been in an airplane simulator, you know, it doesn't -- it simulates motion it simulates the turning and effect on the airplane and so it gives you a very, very real live sense of what happens when you lose an engine and cruise. so she and her colleague knew exactly what to do. >> doug, thank you so much great to get your thoughts on this we appreciate it doug steenland. >> glad to do it thank you.

let's get to seema mody. seema? >> spotlight on europe's consumer companies that have benefitted from strong growth and emerging markets but disappointing results to take note of today. first, let's start with weaker than expected results from unilever, showing a strong euro is hurting its bottom line, making it challenging to raise prices in key markets like india, brazil as well as the u.s. and nestle did confirm its full year guidance after organics rose 2.8% and novartis, psoriasis and arthritis drug and french advertising giant publicis, driven by a rebound in north america. sky, you can see it down there, posting a 22% jump in operating profit this, of course, as fox is seeking uk regulatory approval

to buy that 61% stake in sky it doesn't already own. let's also talk about m & a. shire rejecting a takeover bid by takeda. allergan is in early stages of considering a bid of shire stock up 6%. focusing more on health care and pharma, germany's merck, selling consumer health business to procter & gamble, giving them exposure to key markets like latin america, asia. merck up fractionally on the news that's your european update. >> thank you very much, seema mody. amazon's reach, what 100 million prime subscribers reveals about the e-commerce giant. we'll hear from former treasury secretary jack lew "squawk alley" continues in a minute

i we worked with pg&eof to save energy because wenie. wanted to help the school. they would put these signs on the door to let the teacher know you didn't cut off the light. the teachers, they would call us the energy patrol. so they would be like, here they come, turn off your lights! those three young ladies were teaching the whole school about energy efficiency. we actually saved $50,000.

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remember the oklahoma city bombing victims. timothy mcveigh parked a van full of homemade bombs outside the building that destroyed a third of the building. members posted offensive videos, laced with racist slurs to a closed facebook group in syracuse university students protesting, demanding they be released trailer packed with expensive equipment and over $800,000 in disney tickets was snatched by thieves overnight in california the goodies were headed to the future farmers of america conference disney is reprinting the tickets. and a touching tribute to the late first lady barbara bush that is houston's city hall, which was lit up in bright blue last night and that was her favorite color. you are up-to-date that's the news update this hour back downtown to "squawk alley."

jon, i'll send it back to you. >> thank you, sue. shares of amazon are rising after jeff bezos revealed prime subscription numbers for the very first time ever there are 100 million of them across the globe joining us now for more, boomerang commerce ceo, former amazon executive and from piper jaffrey. guru, i want to start with you maybe you can put into context what's going on at this stage with amazon and prime. we're used to thinking of it as free shipping after you pay that 100 or so bucks a year and even video and some music thrown in. but now amazon is building even more prime prime subscriptions that seem to me to be on top of that deeper music, grocery, et cetera what's amazon really doing with subscriptions here >> well, amazon started these with something very simple at the end of the day, they are

a consumer first company they want to be the world's most consumer centric company and with that in mind, they have started getting into almost every facet of a consumer's life, starting with books, but then music and video and dvds and all retail categories and eventually they're starting to figure out that consumers are buying products online so they're now in music and soon to be subscription services in grocery and so on. so if you take a look at the journey that amazon is taking, they're sort of breaking down every single penny that's going out of the consumer's wallet and they want a share of that. great way to do that is subscription services. because that really gets you in a very repeatable format to buy on amazon. if you're a prime member, they're starting to create all sorts of sticky factors and great value in its services that you can use, all the way

starting from free shipping but then to prime video and now with amazon prime and pantry and fresh and even whole foods discounts that you can take advantage of that creates an extra amount of stickiness. >> and mike olson, maybe put a finer point on this. there have been a lot of guesses about how many prime subscribers amazon has overall not only globally, but also domestically and, i mean, some of the domestic numbers i've seen probably have to be taken down now. people thought that domestic numbers were as high as 90 million. so, what has this done to your numbers, your estimates? what do you think of this number for amazon overall what do you think the domestic number is at this point, mike? >> yeah. you know, when you look at the 100 million, it's a huge number, amazing milestone. it's actually consistent, however, with what we believe it to be. the market suggesting maybe it's higher than what some people had anticipated, given the stock action today if you look international versus

u.s. mix, it's a really important question basically what it shows is that the international market is so under penetrated for prime option we believe it's around 80 million u.s. households based on our teen survey, 6,000 teens able to extrapolate prime usage across the country if you think about it from that context, 80 million households equals about 80% market share of internet households in the u.s 20 million households internationally is hardly scratching the surface of overall households worldwide there's just a long ways to go for prime option internationally. a huge opportunity. >> guru, i want to get your thoughts on logistics. global logistics wasn't really touched on in a meaningful way in jeff bezos' shareholder letter when i say numbers like 5

billion items shipped worldwide i think capacity crunch. as that growth continues that is really going to potentially be a challenge to continue finding more and more means of shipping in real time to keep pace with it what do you think? >> lodge irvigistics is a key et amazon is a worldwide machine and jeff bezos referred to that in his letter, and pushing the boundary of quickest availability, faster shipping they have to continuously raise the bar in terms of expectations with their shipping and logistic providers and start using the economies of scale to start insourcing that. you're going to see a lot more of prime air and prime amazon branded trucks going on the roads and things like that they're going to start, again, continuing to use the scale to start insourcing and they'll take the cost savings that they can get out of that and pass that to the customer again, raising the bar in the

industry for other retailers and brand manufacturers to compete. >> all right we'll leave it there guru and mike, thank you for joining us it's not the last time we'll be talking about amazon prime, i'm sure when we come back, we'll take you live to the imf spring meetings in d.c. where sara eisen is sitting down with former treasury secretary jack lew. dow is down 85 i'm not a bigwig. or a c-anything-o. but i've got an idea sir. get domo. it'll connect us to everything that's going on in the company. get it for jean who's always cold. for the sales team, it and the warehouse crew. give us the data we need. in one place, anywhere we need it. help us do our jobs better. with domo we can run this place together. well that's that's your job i guess. ♪

i'm scott wapner here is what's coming up at the top of the hour. rate risks at their highest level in nearly a month. what does that mean for stock if they keep climbing plus amazon seems primed to hit a market cap jon and pete revealing stocks set to move based on what they just found in the options market "half time report" is at noon eastern, in 15, carl see you then. >> busy day. thanks, scott wapner sara eisen is at the imf meeting with another special guest hi, sara. >> hi, carl. i am with a familiar face at these meetings, jack lew, former treasury secretary of the united states nice to see you. >> good to be with you. >> just stepping off your panel. t trade is dominating the conversation here, whether it's news of japan or what's going on with china what goes through your mind as

you are on the other end of the table? >> we demanded that other countries follow the rules and we argued forcefully for american interests i think it's important that the united states be seen as a leader in defending the rules and promoting adherence to the rules. right now we're seeing rhetoric that's very hot. we still don't know what the actions are. i think that it's very dangerous to get into a tit-for-tat war in trade. even if your goal is to be moderate and proportional in response, one thing can easily lead to another and it can get out of control i think it's a moment where people should take a step back and be cautious. i do think that, you know, it's important in countries like china to recognize there are things they did in the past that have caused harm here in the united states. it's equally important in the united states to recognize when they're not doing things that they did in the past

and we have to move forward, finding a way for the two largest economies in the world to find ways to work together. >> it sounds like what you're saying is that you don't agree with president trump's tactic here of threatening tariffs on $100 billion worth of chinese goods? >> the united states, asserting tariffs that are difficult to justify in terms of international law, which is how i viewed the aluminum and steel action, is not a good place for the united states to be. i think asserting national security grounds for aluminum and steel tariffs, then exempting countries like canada and european countries, leaving japan is the country we have aluminum and steel tariffs on. we don't bring in a lot of aluminum and steel from china so japan will bear the brunt of the steel tariffs. the additional $100 billion, we don't know what the percentage will be. the responses could easily do more harm in america than they do help.

aluminum and steel, i think was constructive that people started to understand it could make our auto industry less competitive that's not a good thing for u.s. workers. i don't know exactly what the shape of the $100 billion package will be. i worry that the response could do more damage than any tariffs like that do good. most importantly, you need to push china on important issues, reducing excess capacity in aluminum and steel like not closing their markets to foreign businesses that are open where the other countries are open to them not having subsidies that skew investment and create unfair advantage. you do that by engaging. not just one on one, but in multilateral settings. >> the administration would say, look, your administration, the obama administration, tried that it didn't work we'll have to talk tough and when you look at the president's style, it may be unconventional, but those fire and fury remarks, he brought north korea to the negotiating table. maybe he can do the same with china on trade. >> i hope that the outcome of

the north korea ongoing process is successful. it's very important to the united states and the world for north korea not to be a nuclear threat we don't know the outcome yet. i'm a patriot. i hope for success in this economic space, it's not fair to say that the united states didn't do well in the obama years. you know, we're now in the ninth year of a recovery, seven years which was in the obama administration we helped to rebuild the world economy, leading the world even while the economic crisis started here the united states has to be able to lead the world. the world needs it and the united states needs it i worry if our leadership of the world starts to erode. >> i was wondering where are we in that leadership of the world economically >> our economy is doing well actions we're taking in a number of areas are not in the medium and long-term helpful. look at the tax cut we passed. i think it's helping simulate international economic growth.

that's what the imf report shows. but it's also going to increase american borrowing, it's going to increase our trade deficits it's going to weaken the u.s. ability in the future to be strong you look what we're doing on trade. we strong and what we're doing on trade. we need to press for fair trade. tpp, we negotiated a goo agreement. i think this administration, if it does re-enter, we'll be lucky if they can bring it back to where it was >> where it was a few days >> yeah, it was there a few days but the signals on again, off again. united states brought much of the world together to agree to tpp. and then the world moved on without the united states. that's not good for united states >> as a result of the trade friction the results against china, what do you think american companies that operate overseas need to be most worried about is it the supply chain disruption boycotts >> i think there's a lot of precaution right now because of

all of the uncertainty it's not just because of the u.s. i think in europe, you're seeing that kind of caution because of where will brexit go in between the uk and europe? there's a lot of things where uncertainty is still slowing investment you know, i think the risk to u.s. producers is that their costs go up in areas and they become less competitive. you look at the north american supply chain it's very important for our auto industry it's very important for our agriculture sector the uncertainty over the future of nafta isn't good. i hope these issues get resolved where the policy is more moderate than the rhetoric >> we've seen the bark has been tougher than the bite. with the market, two-year yield high flattening curve. now that you're not the treasury secretary, you can comment on these things >> i think what i just describ3ed, caution in the market we're late in the business

cycle. there are a lot of geopolitical risks and economic risks and there's questions about what does that do to inflation. going back to afraid, what does that do to inflation what does the fed do in response you raise inflation, you will see the market move. i think tell has made it harder. the fed has tried to thread a very narrow needle they want to keep inflation from taking off but they don't want to stop recovery the signals that may be conflicts in terms of policy or confusion are probably going to about rate decisi accelerate decisions in retrospect that could be good or bad >> sounds like what you're saying there are chance for a potential mistake in trying to maintain this delicate balance >> i think their job has gotten harder >> as a direct result of the trump policy >> i think the cbo forecast that

came out showing the debt reaching -- the debts reaching $1 trillion. the debt reapi ireaches 100% of. >> but saying the debt rose in the obama years -- >> it didn't rise as a result of gdp. we stabilized it as a result of gdp. and the definite kcit of 10% and now we've accelerated the long-term problems i think it makes it harder >> we'll leave there thank you very much. jack lew, the former treasury secretary of the united states that sums it up here, carl those warnings about rising debt coming in about the optimism about strong economic growth >> really put a lot into perspective there today.

sarin iy arra eisen at the sprig meeting. >> mx is adding about 50 points. but a tough day for semis. for consumer staples tobacco. dow down, s&p down almost 20 global markets, of the rhythm of the world. but to us, it's the pace of tomorrow. with ingenuity, technologies, and markets expertise we create the possible. and when you do that, you don't chase the pace of tomorrow. you set it. nasdaq. rewrite tomorrow. ♪ directv now gives you more for your thing. your letting go thing. your sorry not sorry thing. your out with the old in with the new,

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welcome back you are looking at video of the president landing in key west.

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that is the president deplaning from air force one he's going to your the joint interagency task force south which monitoring drug trafficking. any headlines we'll bring them to you dow is down 113. best day for banks in a week best day tour am smdex let's get to the half. welcome to "the halftime report." i'm scott wapner our top trade this hour is rate risk and how much can the markets take with us, joe tarynenovo, josh brown and a cnbc contributor and senior economic reporter steve liesman. let's begin with the markets stocks choppy, investors keeping a close look on bond