one final final. end of the year stock market higher or lower? >> around where we are now but with a lot more dispersion. >> okay. great to see you hopefully see you soon i think you'll make it to the hamptons one of these days join us on monday. have a great weekend "squawk on the street" begins now. ♪ welcome to "squawk on the street." i'm carl quintanilla with sara eisen, mike santolli at the new york stock exchange. stocks look to finish on an up note nike near a record on a return to north american growth and europe is up on optimism over a migration deal. got ten year 2.85. road map will begin with putting

the first tap of 18 in the books. nasdaq outperforming the rest of stocks azt stocks as tech continues to lead nike topping salesest mates. sales are surging at 9 percent. >> and the trump trade the president telling aids he wants the u.s. to withdraw from the world trade organization. >> we'll get to the markets this morning. s&p and nasdaq on track to finish higher for the month and q2 as it comes to a close. the dow is the one to watch. it's down about 200 points for the month. all though it is up slightly for the quarter. new this morning, axios reporting that the president has repeatedly told white house officials he wants to withdraw from the world trade organization but secretary mnuchin pulling cold water on the reporting saying the story is wrong. that it's an exaggeration. even axios said some aids don't believe the president would put policy into action despite the

fact they say he said this. >> it's a wow headline it's a stunning headline and i think the bottom line is you need congress to do such a drastic action to remove yourself from the wto. just for some historical reference, i mean, this is the multigovernmental organization that gets together and decides the rules on trade it was formed by the u.s. and other countries. and if you want reform, president trump wants more protection, for instance, from intellectual property and for governments intervening in businesses, you can do that. >> yeah. >> without withdrawing from the wto. it would be a signal to our trading allies, our security partners that we're not in the game. >> it's interesting. obviously, though, for as much as a wow headline, it's consistent with everything else he said about his approach he doesn't like multilateral he told, you know, he told macron he thinks it should be bilateral

and transactional. needs an active congress it's not a formal policy push but still, i guess, probably tells you the depth of his hostility to being bound by anything that came before in terms of a structure rules or agreements. >> axios goes into percentage of wto cases the u.s. wins. nearly 90% versus china who wins less than 70% of cases the argument that, in fact, perhaps it doesn't treat the u.s. as harshly as the president believes we'll watch it mnuchin did say we're not in a trade war. called it intimate conversation. larry kudlow, as well. he hopes the fed understands that more jobs does not necessarily lead to inflation. he said the deficit is going down i don't know what he's talking about there.

we're set to rally at the open after mnuchin pulled cold water on the report. the action over the quarter, the tumultuous action in stocks, especially for the dow which represents the big multinational companies underperforming the rest of the market it tells you that story. >> it's been a huge split between winners and losers many of the losers have been exposed to the possibility of trade measures but, really, point to point, if you look at the s&p 500, where we are now up a little bit less than 2 hrnt on track for basically a mid single digit annual total return, if you includes dividends. coming into this year, a lot of people were in the zone of saying 5 to 10%. but the way we got here has been jarring. and it's been very hard to stay on top you are up so much in january. then down and you had to be in the right areas. >> we went back and looked, the

last time the dow and s&p diverged over a full half of a year, first half of '09. it's been nine years. >> it requires that you're somewhere near the flat line, probably, for that to happen usually. the one is a little above. one is is a little below it tells you a lot you have 30% of the s&p effectively technology and that's been performing great and the dow is way down by a little more than the old industry. >> i would say if you want to look at the winners and losers theme over the quarter and the trade back and forth, look at the dow versus the russell 2,000. >> it's been a stark move. i have to say, it has felt very recently like people were kind of forcing it and hiding there because a lot of the rest of the world looked a little bit dicey.

i would be interested to see what happens from here you see today with the bounce of the market a little bit of release of pressure on various fronts the bank has a decent report on the stress test and they're probably going to rebound a little bit here. emerging markets picked up all these things that were kind of hounding the broad market have been relieved at least in the short term. >> we'll be looking for volume, perhaps. on the final day of the quarter. by the way, as far as dow leaders for the year today, speaking of which visa up 16, microsoft up 15, to mike's point. and number three, nike up 15. >> nike is one of the stories of the morning, for sure. take a look at shares of nike

this morning skyrocketing to new heights after the company came out with earnings last night. nike posted the first sales increase in north america in a year that was critical. it gave investors something to cheer in the form of a new year four-year $15 million stock buy back program they wanted to hear that the growth in north america is going to be sustainable. here is what the ceo said on the call. >> much of what you said in terms of q4 in terms of the momentum that has been building, we'll see it continue throughout the fiscal year. and then i put an exclamation point on the product being a

driving force, beyond executing some of the basics that are across the board. >> so he chalks it up to the products and bullish on the prospects for the u.s. which is 40% or more. this was nike's first big report since the corporate culture scandal this last spring lead to the exit of 11 key executives. they addressed it in the march call but clearly trevor edwards who is usually on the call was not this time. and mark parker and his ceo took most of the questions. they didn't address it at all, guys they didn't address trade, either some investors were a little bit curious about going into this call i think coming out of the call, you've got to be curious, as well 35% growth in china. this is the growth market for this company it's about 12% of overall revenues is it sustainable in an environment where the u.s. and china are going back and forth

and escalading tensions? so far, any consumer products that nike does, footwear and apparel hasn't been caught up in the tariff thing but one can imagine if things get worse, it might. as far as manufacturing, that's a concern, as well nike does manufacture across asia and across the world. so it's on the consumer side that would be a worry. and no comment, no questions about it because it hasn't been effective. >> yeah. i think it's curious you got two big companies who had this sort of north america china narrative. starbucks and nike and the shares have gone in different directions >> that's true i wonder if it's a matter of, first of all, nike's home market looks like it's turning for the better starbucks it's very much remains to be seen. >> absolutely. >> i wonder how long nike has been there as an emblem of middle class aspiration in china. it's not brand new i think starbucks is much more -- >> and sort of quick service beverages. such a splintered market it's hard to come up with a shoe

company. they have. but not mom and pop shoe companies. >> nike is benefitting from the digital growth in places like china. talking up t-mall and the other outlets. nike digital revenue worth 34% mark parker made a point of talking about the growth he sees there. he was asked about the new partnership with amazon. nike is directly selling on amazon now. >> amazon i would say that our partnership is progressing well. we remain focussed on elevating the consumer experience on the platform we're learning a lot and applying you mention the t-mall. we did call that partnership out in our prepared remarks. it has been an exceptional partner for us i think the main focus on elevating the brand profile and experience on the flplatform that will continue to be the focus as we explore next steps with amazon. >> so clearly parker and the

company gave investors a lot to cheer about. they also gave the bulls who are buying the stock as headlines were coming out negative one after negative one on the corporate culture and on important executives leaving they were still buying they weren't worried about the business and nike was out and they were talking about a debench promoting internally i think those investors were vindicated by the quarter, which shows that nike didn't miss a beat the only question from here, mike, is the evaluation. >> the evaluation has been rebuilt. it's almost near the highs for the past decade. 25 times this current fiscal year earnings. and i think that the market is a little bit ahead of the analysts the analysts are a little bit reserved in aggregate. and half recommending the stock. >> they're raising targets. >> exactly the consensus price target up 10%. >> dow jones said 16 of 35 analysts hiked their targets consensus was 72 a month ago now

it's 79. >> i think there's a little bit of hesitantsi the stock has moved. >> under armour has been a comeback story, as well. adidas going the other way they're experiencing a little hack attack, as other retailers have. >> nike will add some to the dow this morning along with the banks. when we come back, deutsche failing the latest round of stress tests another look at the premarket as the month, the quarter, and the half comes to a close. and the first thing they asked was 'are you ok?' they always thank you for your service, which is nice because as a spouse you serve too. k on the we're the hayles and we're usaa members for life. welcome to holiday inn! thank you! ♪ ♪

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stock futures pointing to a strong open. despite the dow trading below the key technical level. the 200-day moving average and the s&p and the nasdaq on track for their worst week since march. what can investors expect for the second half of the year? we bring in lori and eric davidson chief investment officerat wells fargo bank lori, what did we learn from the turbulent action, specifically around trade over the past week and month as it relates to what investors should do next. >> i think we want the uncertainty around trade to go away, as one client i spoke to

recently we need the noise to die down i don't think it's happening any time soon. >> are the fundamentals changing as the tariffs ramp up >> certainly they are. we're the world's second largest export let's not forget that. one thing that investors are missing. there's a downside there's a potential upside if we make it through, we could actually come out on the other side better in a less tariff sort of world in a more free trade world than we're in now. i think investors are missing that possibility. >> there's the other argument we're in a pattern that has happened for nearly ten times where the feds are tightening cycle. >> i think that's one of the big things that is going on. you can see in terms of how multiples acted themselves it's been consistent

the last three times we've had a sustained cycle. you've seen big contraction. >> where does it lead your target >> we're still at 28.90 for the year we have boosted our earnings estimate a little bit. the number we've got now says about half the contraction you typically see in one of the hiking cycles will happen this year i think there's room to debate that 50 percent. bottom line, i think earnings will be good but markets not quite as good. >> it seems as we see earnings in a few weeks, maybe last quarter is somewhat instructive. it's supporting the market in certain areas it got sectors moving in general, it was neutralized by the multiple compression. i wonder if we're going to be able to tell if there's going to be a corporate capital spending ramp because that seems to be one of the open questions now we got the repatriation. we got the tax cuts. we know about the buy backs. is there anything that is going to be a growth accelerant? >> sure. corporate capital spending is so closely tied to confidence as lori mentioned, as we do with the issues of trade, it

continues to weigh on confidence from our perspective, investor sentiment survey it's high but not exuberant. investors are a tremendous worry. from a standpoint is a good thing. it is contributed to the compressed multiples that's a positive environment for investors. >> the aaii survey of sentiment came out yesterday pessimism p pessimism above 40%. is that pessimistic enough that signals buy time >> not buy time but don't be too early. >> in a week or two, we'll have earnings to chew on. >> yeah. >> there's a big debate whether or not they'll be digested the way they were in q1.

like we priced it in a lot of people are looking for expansion. >> specifically technology and thinking about, eric despite the twists and turns over the quarter, the nasdaq headed for the eighth positive quarter in a row technology is doing great. it plays into the labor shortage issue we face as a country, as well technology had a great run. >> you're saying stick with it >> yeah. don't go crazy but certainly don't underweigh technology. there could be room to run. >> if i can jump in. we disagree and what we wrote about this morning we've been under technology we think it's crowded and expensive. we're heading into the reporting season you'll lose the earning support. it's one of the most internationally exposed sectors. you've seen chatter about that over the past few weeks. i would absolutely be taking profits on the sector while you can. >> certainly more guidance

points to that we'll see. >> thank you. >> thank you final trading day of the first half of 2018 take a final look at futures we'll get the opening bell in just about 11 minutes.

tesla today celebrating eight years as a public company. stock is up over 1900% since making its public debut and, of

course, as we approach the end of this month, it is crunch time as far as production goes. i don't know if the spotlight is ever more intense on musk than it is now. >> no. i mean, i remember two or three years ago, the story was 2020. that was the year it was supposed to hit full scale now you're close enough to that that you have to be well on your way. this is the quarter where you'll be able to demonstrate on the lower price car, if you can do it it's amazing the stock's run has been about the last five years. the first three years it was alternative energy it's amazing because the street is willingness to believe based on the stock. >> it's hard to follow this story and this stock and the twitter account and the unicorn drawings but something that a lot of people are talking about is the bonds of tesla tesla has almost $2 billion of high yield bonds maturing in august of 2025 with the upswing in equities, people expected to see relief there. it's gone the other way.

so bonds and stocks of tesla telling maybe a little bit of a different story. the bond market a little bit s pessimistic. >> it's about cash flow. you can be enthusiastic. but it is a question of how much capital you have to raise. what the cash burden will be to get to the point where they're trying to get to the production. it. >> it sort of brings to mind yields today highest since december of '16. is that commence rate with the environment or something else going on >> it's the environment. treasury yields are a good deal higher than they were then the spread is not all accounting for that but, yeah, i mean, emerging markets usually are kind of correlated with riskier u.s. paper. i don't think it's at critical levels but it's critical to watch. so we probably seen the best levels for high yields. >> we're seeing tighter monetary conditions we're seeing fed raising rates

the dollar is strengthening. it goes together it's not flashing any signs of panic. >> not severe stress but definitely around the edges it's weakening. weakening. >> opening

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you're watching "squawk on the street." live from the financial capital of the world the opening bell in just about two minutes on this final day of the quarter and the half [ cheers and applause as for the markets today, we're talking about some of the degree to which trades didn't go with consensus for the beginning of the year talk about the banks talked about industrials and oil, as well brent today is close to 80 where it hasn't been since may 22nd. but a 10% move in the con flex over the course of the week. >> and the energy stocks are the star of the quarter.

we haven't seen that in a few years with the sustained move above $70. >> yeah. the consensus coming into this year it will be range bound. we'll be stock 65 at the most on the upside it pushed higher from there. but what is interesting is the performance of energy stocks has not moved the needle on the overall value rotation the idea coming into this year was growth stocks had to run and rotate to cheaper value stocks energy and banks are in there. it's still been a big cap growth lead market. >> biggest quarterly gain for energy since 2011. i think the other big one to watch is the financials. such poor performance over the last few weeks, the results of the stress test are out. generally healthy picture in the banking system is a lot more cash pay outs in terms of dividends and buy outs morgan stanley opens up deutsche

bank [ opening bell ] the busiest week of ipo for the year and the busiest month in five years. >> yeah. >> as far as the financials, which i'm looking at the in the

opening trade they're higher it looks like wells fargo is performing the best. i guess that was a big surprise in terms of the size of the payouts and the fact, as well, adds willfred frost said they weren't punished for bad behavior from the fed. >> exactly if you had to take it together outside of morgan stanley and goldman sachs, the size of the payouts were probably slightly he higher than expected. i don't know it turns the whole group to become a leader again if you look back at a 12-month basis. the banks are lagging the s&p. it's not just about the last few months they had the run. >> what do you make of the argument that now c car is out that capital return expectations are still meeting some disappointment relative to prior expectations.

>> and relative to longer term how much more you're going get i think there's reason to worry about that the fed had the strict test and they want to test the bank's balance sheets for a truly worst case scenario. that will continue in future years, presumably. they're going to err on the side of less capital return than less. >> wide spread critical deficiencies journal has a piece they could be kicked out of the euro stocks 50 which would be humiliation, i guess, is not too strong a word. >> material weakness in capital planning so clearly a black eye for them. we'll hear from the ceo. will fred talked to him this morning. it's are interesting that goldman sachs and morgan stanley weren't allowed to increase for the time being for the changes to the tax law didn't get the black eye of failing the stress test like deutsche bank did.

>> we're watching shares of constellation. the biggest loser on the s&p down 5%. they miss at 220 versus 243. revenue is ahead, interestingly. operating margins down more than 200 basis points on shipping costs, on currency, and had a discussion about margins being the key to the earnings quarter. we'll see if it becomes a trend. >> it's been a pretty good performer. i think investors arehave a run about materials cost and margins. didn't necessarily change the long-term story but i think it was interesting the street is not giving constellation the benefit of the doubt and beer sales continue to be speck already. it was the beer margins that were disappointing and the wine and spirits sales came in light for constellation. checking shares today of

walgreens after, boy, that blood bath for some of those companies in the pharmacy yesterday from cvs to rite aid. walgreens is a little bit higher the analysts in the sector freaked out a little bit jeffreys downgraded walgreens from a hold to a buy on, quote, the belief that amazon's purchase largely overhang. one analyst compared it to a scene of ga"game of thrones." >> it became a buy it was a scary few weeks or months i think, again, you had a little bit of a tail wind for retail. just general spending patterns were better in their favor if you look at the losers on the s&p, they're down more than 1% after big losses yesterday

that might be considered a little more right at the center of what the amazon threat is a lot of things working this morning. oil, banks, footwear, and home builders, as well. hanging on to a nice 2% gain for the week. >> it's a beat up group. we talk about how it's a tight market and pricing trends look good the builders themselves hit a squeeze now. not able to get enough supply out. a little bit of relief. >> nike is adding 50 points to the dow. it's by far the outperformer set to break a record high of course, on the earnings beat the return to growth in north america, the double digit growth in china raising of sales guidance, higher margins those are all things that investors liked in the report

and the $15 billion buy back if there was anything to complain about in the nike report, jordan sales were a little bit weaker. the company talked it up saying there's a big opportunity in terms of women's and converse was lower, as well that's a small chunk. >> the market weighed in on the lebron versus jordan. >> young people, i guess. >> yeah. >> they like lebron better. >> where he's going to go. there's a mystery of lebron and nike said wherever it is, we'll be fine. >> one thing getting talked about today is bitcoin below 6,000. 5791 was the low prints of the day. down 70% from the december high. down four straight after, obviously, a torrid 2017. but, i mean, there's been all kinds of explanations and justifications. >> the believers will tell you that the retail level had to shake out. and this is what we're seeing happening after this massive run to 18,000 at the end of last

year everybody and their mother got in the air is coming out. >> the dollar had a terrific quarter. almost 6 percent that's something you're hearing companies increasingly talk about. nike said we're raising our sales guidance but cautious overall because we see the trends like the dollar strengthening. >> and the agreement in europe. >> yeah. so they had another five hour meeting last night and european leaders, i guess, the story is cobbled together some sort of deal the whole question on what to do with eu migration and populists like italy protesting, basically. the merkel position on migration. they've agreed to set up centers

and reach some sort of comprise and that was very bullish for the sentiment. >> i think yield curves saying they'll come to the u.s. sometime in july to discuss trade. >> he has to discuss the purpose of the eu. the president told his supporters at a rally the other night was to take advantage of the united states. which is actually nowhere in the master treaty. >> as you tweeted. >> yeah. i mean, it's just -- this has been the trump view. and while he does have points about europe putting up trade barriers and tariffs, he's really going after them i think politically in a way that i'm sure the european leaders are sensitive about and want to come over here and deal with. they have to get out front of potential taxes of imported cars into the u.s. that can hurt places like germany. >> indeed. heavily rely on auto exports finally, the reuters poll of

investors today. 89% say msce, the all country global index think it'll end the year higher. they cut the overall equity holdings to 47.8 which is the lowest since july of last summer. >> interesting, yeah i think there's a varying -- it's a little bit of a mixed sentiment picture, in general. and, you know, the merrill lynch also has their kind of weakly flowchart. huge outflows from equity funds and merrill clients themselves have their biggest holdings in treasury builds in ten years they hit the bid and said cash is paying me something here. >> i was going to quickly point out the soda stocks. we got a development from california, which actually passed a new law to slow the expansion of soda taxes. basically stop them in localities and municipalities

across the state something we've been seeing popping up some were surprised with california but this was a big fight from the beverageindustry importantly, it doesn't stop the ones that have gone through in places like berkeley it prevents other smaller governments and municipalities from passing these kind of soda taxes. an overall victory but still pressure on the companies to help work with the states to try to reduce sugar, improve health, and also, i guess, clean up their budgets which was some of the point. there were job losses as a

result. >> right the dow has gone green nike adding about 50 points. we'll get to seema. >> last trading day of the quarter. we'll see heavy volume at the close as the first half of the year wraps up. the dow higher by 200. we're positive for the month and nasdaq, though, that's been the big outperformer on pace to close higher for an eighth straight investors struggle with three risks. how to quantify the risk of a trade war. second, the threat of a longer dollar now up 5.8 the last is a flattening yield curve as investors buy up treasuries that's a source of concerns for the financials you'll see the banks are higher today on positive, relatively positive stress test results the xlf snapping a 13-day losing streak will technology be able to come out as the best performing sector this quarter as energy

continues to rebound take a look at the nasdaq up 7%. tech seen as more insulated from this trade dispute, though should point out overseas markets have been caught in the cross hairs. the shanghai composite posted the worst quarters since the first quarter of 2016 when we had the devaluation fears rise south korea down 5%. overall traders saying asset managers pitching to go international have to rethink whether the strategy of going global works back home, busiest week for the ipo market and the average return this year from an ipo price 32%. that might explain why the ipo market has been picking up steam. we're talking about bitcoin.

below 6,000. >> thank you very much when we return, duetch is failing part two of the fed stress test the bank's new ceo is going to weigh in take another look at the major averages here. dow up 219 dow up 219 positive for the month but to us, it's the pace of tomorrow. with ingenuity, technologies, and markets expertise we create the possible. an you set it. nasdaq. rewrite tomorrow. "squawk on the street" is back in a minute.

welcome back to "squawk on the street." we have some breaking news one of my favorite numbers, actually, june read on chicago purchasing manager expecting number 60. 64.1 subsequently following 62.7 and 64.1 is the second best number of the year. the first best was in january at 65.7 and that was the best going all week into the spring of 2011 that far back. so a solid number. as for the market today, i look up at10s and i see 285 we're up one on the day. we're down five on the week. so just bit under 290 last week. look at one week of tens and you can see we've had a downward

drift hanging in pretty good. we look at settlement dates and equities and realize in a end of the quarter. let's look at a september 1st of bunds. why? because the february 1st of tens shows we're holding pretty well. the bunds 30 basis points. we've knocked at the door many times. you want to watch the spread relationship with our tens of bunds go lower one week of the dollar index shows it suffered overnight but up a smidge on the week. high yield based on barclays the spread underperformed a bit but well behaved given the year. sara, back to you. >> yeah. and the happiness continues today, rick. the dow is up 212. deutsche bank's u.s. arm fails the second part of the stress test wi willfred sat down with the ceo. >> they're down the record time

all this week. the market capitalzation is down i asked whether deutsche bank could truly compete again with the u.s. investment banks. >> >> we should see the structure difference of the u.s. banking market the european one, and the german one. there are different conditions and also some reasons for the different developments secondly, there's a lot in our hands. it's all about sustainable profitability. you mentioned s&p reform they did not criticize the stability of the bank. they said this bank needs to get sustainable profit if we can show that, quarter by quarter, then we get the cost under control and i'm confident we get the cost under control. that we have the franchise it will go up quarter by quarter and i think we have reevaluation

it all depends on sustainable profitability. we have taken the right steps and i'm confident we can keep up. >> on a different topic, i asked him whether president trump's trade policies would be damaging for the german economy. >> i think overall, that trade and the tariff is something which at the end of the day limits growth globally i'm a firm believer in free trade and not to impose tariffs. i think, and i hope, we get better agreements and the politicians can align their views. because globally i think we're seeing increased tariffs that will limit growth and reduce growth. >> deutsche bank shares up today. performing fine over the last 848 -- 48 hours. >> the got ahead of it they've been worried about doourk ba-- deutsche bank for awhile. >> he has a huge task. that's highlighted by the 42%

down year to date share prices he's trying to shrink his way to higher returns revenue since 2015 is down $7 billion or 19% the capital is down 10%. the return on equities is one or two forward is on the retail bank and the interest rate environment in europe probably not going to get worse but it's not getting better at the pace that people hoped. and the other thing we also talk about in more of the interview coming up on "closing bell" is morale and the ability to keep the best staff and some interesting comments from him to come on that big task ahead the favor of the qualitative part of the stress was priced in >> that focus on the retail bank, obviously, in the whole market what does it mean for the u.s. presence of deutsche bank longer term >> he remains committed to that because it's an important source of revenue the question is whether the investment bank, which is the main source of the revenue falling over the last couple of years can keep on, you know,

flat which is his aim, when you're kind of no longer the sort of star they once were in that space and he says he's very much still committed to the u.s. part of the investment bank but they are cutting head count and we'll have to see what happens because of the fed, doesn't make a difference still committed to the -- >> as goldman and morgan stanley have now dipped into the red after a nice open. >> wells fargo enjoying today, though >> and citigroup was up a lot, too. look forward to hearing more later. see you then >> see you then. as we go to break, just a few hours left we're auctioning off a chance to come down toy in nyse, watch the show live and meet the "squawk on the street" team. and you'll support the lulu and leo fund run by kevin and his wife marina. they support creativity as a tool to empower kids go to charity buzz.com look for "squawk on the street." check our twitter page the bidding dsen in just a couple hours at noon

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as you know, yesterday amazon announced plans to buy

online pharmacy pillpack and that combined with their new forray into last mile delivery wiped out $17.5 billion from eight companies during the session. fedex and u.p.s. lost nearly $3 billion in market value. walgreens lost and cardinal, amerisource bergen and mckeson. on squawk they talked to someone from learing capital who asked if that was an overreaction and she said, no it made sense. >> she said no with regard to the drug distributors, the walgreens and things like that that was a remarkable statement. if you kind of extrapolate what that means for longer term revenues and profit growth for these companies, it's a severe blow >> crazy that amazon only had to spend a billion dollars to do this i guess the worry, mike, is even though pillpack is small, it's how fast amazon can scale it and so there's a worry about market share always a worry about margins

when amazon enters a space that could act as an overhang to the sector as we talked about, a cap on multiples. >> it also feeds into existing anxiety about those businesses pricing, who is getting all the middle man cuts along the way with pharma distribution and all the rest of it it wasn't as if this was completely out of the blue and these were businesses everyone was confident in beforehand. they were already kind of cheap stocks because long-term concerns there were. >> walmart who we also reported could have spent a billion dollars but lost $3 billion in market cap yesterday because it lost out >> you consider what a small slice of the overall business this is, at least for now, when you consider what a monster aws has become the huge growth potential of ams, their marketing services and the degree which advertising becomes an enormous revenue engine >> sure. but it's a confirmation they want a foothold in this area that long term, the whole market is going to grow, right?

a lot of baby boomers are going to need a lot of pills >> this is true. >> and so will we. >> and so do we. former apple ceo john skulllskul sculley is going to join us. today is the anniversary of the first iphone hitting the shelves ke tke7. miald to john about that, too. dow up 22.

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♪ good friday morning. welcome to "squawk on the street." i'm carl quintanilla with sara eisen and mike santoli markets are going to close the quarter on an up note for now. dow up 223 led by nike but also good action in banks, industrials and oil. >> our road map for the hour begins with the markets on this final trading day of the first half of the year look at laggards and leaders and what to expect for the rest of 2018 >> nike beats the street off the back of stronger growth in the north american market for the first time in years. we'll look at the company's surge as it leads the dow this

morning. and finally, financials surging and snapping a 13-day losing streak. why banks are feeling less stressed in today's session. >> first up, more economic data to chew on rick santelli for breaking consumer sentiment rick >> yes, june mid-month read gets tossed and our june final read the university of michigan sentiment read is 98.2 now our midmonth read was 99.3 so it looks like a bit of a disappointment, and it is. but in the record books, it's actually higher because our final read for the month of may was 98 even. so 98, now 98.2 is a bit lower than many had anticipated. and if we look at the inflation projections, there's actually something interesting. on the one year inflation projection, it hit 3%. the midmonth read was 2.9. the five to ten-year inflation, 2.6 which remains constant to our midmonth read at 2.6

treasury yields are very slightly higher on the day a bit low or the week. but the trade seems to be all about the mid-280s and maybe a bit higher as kweeequities got r sea legs back. >> well put, rick. thank you, rick santelli it's the final day of the quarter and the first half of the year major averages look to end the year higher as financials finally snap that 13-day losing streak joining us this morning, oppenheimer strategist brian levitz and jpmorgan asset management alex dryden happy friday getting your sea legs back is how santelli put it. is that how you see it >> for investors focus at the moment as we bring to close the first half of the year is looking ahead. what do we think the next six months entail. the focus for investors in the second half is getting the direction of the dollar correct. that's going to be the big call. it's been hurting on the international front. we think in the next few months

we'll see peak u.s. economic growth the dollar starts to roll over now is a great opportunity to be looking to get into some of the international equities so beaten up in the first half of this year >> not underweighting u.s. >> not underweighting u.s. it's more a story of selectivity. neutral tech we see some opportunities in financials we see some opportunities potentially in energy that does very well in the late cycle stages of an economic expansion. >> brian, the set-up where we've had this decline over the last couple weeks in the u.s. market. treasury yield comes back in market goes back to the lower end of its trading range it feels like march. the end of the first quarter and then relief into april as we got focused on corporate fundamentals make any sense to think that may be a playbook? >> we're deal with a little policy uncertainty which causes volatility in markets. policy uncertainty with regards

to the federal reserve and trade policy the economy looks reasonably strong a lot of stimulus coming in. but i agree, the u.s. economy is going to moderate. real yields are coming down in the united states. so i think as the u.s. slows because of a stronger dollar, as some of the sugar rush from the stimulus starts to fade, you'll actually start to see some of that policy uncertainty go away. the fed has to be more cautious. the administration will take -- will walk back some of this overly aggressive trade rhetoric so i think it comes down to corporate earnings and policy and from that perspective, the cycle continues. >> i think the fed is a big question mark at this point. alex, we haven't talked about it very much, but the personal consumption expenditures price intex, the pce which the fed looks at to determine inflation is now at a six-year high in may. jumping to 2.3%. is the fed going to be able to slow down its rate hikes with

inflation posting these kinds of gains? >> it's going to be a challenge for the fed to slow down and the other thing is the full benefit from the tax bill that was passed last year is still filtering through the system we've not -- we've only seen about $200 billion of the $2.7 trillion that we think is locked up overseas come back to the u.s. we have yet to see the cap ex pick up that we're expecting all of this when it filters through the system pours more fuel on the fire of the u.s. economy. that causes the fed to go two more times this year and maybe three to four times next year as well >> so i disagree with that i actually think that a lot of that money, a lot of that stimulus is going to find its way overseas we saw that in 2003 with the george w. bush tax cut where we saw the current account surpluses of the emerging markets go up significantly. we did not see significant inflation in the united states, except in the housing market what ends up happening is a lot of this stimulus we go out and

consume, businesses consume, consumers consume. we consume from the emerging markets. big increases in their current account surpluses. that money gets invested back in the united states in u.s. treasuries, stabilizes the dollar not a lot of inflation fed can back off good time for emerging markets reasonably good time for the united states. >> what you didn't mention is we've got an escalating trade spat with some of our closest trading partners and we're in a world of america first where the president is applauding investing it back here at home >> well, let's -- we've got to put it in perspective. if we think about the total tariffs that we're talking about right now, they are dwarfed by the size of the stimulus that's inthe united states right now. so you're right. if we go down the path of an overly aggressive trade policy at a time where we're running large fiscal deficits, that's not a good position for the united states to be in in fact, the u.s. has more to lose in that than our trading partners but if cooler heads prevail and

we recognize that we're going to be running pretty large fiscal deficits and that needs to be funded and we don't see the u.s. household savings rate going up to fund that, we're going to be more moderate on our trade approach i suspect that's where we'll ultimately get to. but you're right that is the big risk and if we see the dollar get too strong as a result of that risk, then we're likely to see this cycle end prematurely. >> if you were going to deploy u.s. equity exposure somewhere else, what would you sell first in the u.s.? >> i think what i would be looking at again, getting out of many of the rate sensitive sectors, most have already rotated out of that. maybe materials. at the start of the year, i was quite bullish on the outlook >> because of what sara said >> exactly i thought the commodity space was looking attract pitch but we've not seen that trade transpire. if i was looking to deploy capital, i'd probably cut my materials exposure

>> more so than tech because it's expensive or -- >> i need to see the drivers of the material and commodity names really come to the foreground. that's just not happened in the first six months of the year i can now look at something like emerging markets the sentiment is washed out. the valuations are back to the levels they were in december of 2016 the earnings are looking solid that's probably where i would be looking for better up side than in the material space. >> finally, brian, just give us a sense of what to do with all the headline risk. we get a headline this morning from axios that the president wants to pull out of the wto, despite his -- the best advice from his advisers. what do you do with that >> we're always going to be dealing with headline risk if we just think about this whole elongated cycle, we've talked about greece leaving the eurozone we've talked about shutting down the u.s. government. we've talked about fiscal cliffs so i understand the trade issues look very front and center right now. if we go too far with it, then we'll have to become more defensive and more cautious in

our portfolios for now, i think it's a lot of posturing ahead of the midterm elections and you may see more of it ahead of the 2020 elections. that's what trump views his base put him in power to do but i believe ult ultimately for a country running large fiscal deficits, it's not great policy and i suspect we will move away from some of this larger, more aggressive frightening rhetoric. >> well, if first half is any indication, second half is going to be interesting to ride. thank you very much. nike continues to soar it's adding about 54 points to the dow right now. the oregon-based retailer reporting earnings very strong last night $15 billion share buyback program. stock trading at all-time highs. it's actually now up 30% for the year joining susbarclays retail

analyst and john kiernan the setup going into these nike result was pretty strong already trading at multiyear valuations and now we've got an 11% jump in the stock. was the quarter that good? is it justified? >> yeah, sure. hi, sara thanks for having me the quarter was that good. if we go back to a point in time, nike was a lot cheaper ahead of its investor day late 2017 when matt and i got to go out to beaverton to see the coming innovation, talk to management and hang out with kobe bryant. stock was only 20 times earnings at that point. it's gone through a period of expansion. the stock is not that cheap. close to 28 times forward earnings we see better value in its competitor adidas only trading 20 times fiscal earnings but nike's strength out of china drove up strength to our model and everyone else's model. >> we'll get to adeidas in a moment what your doing on your ranking on nike? how much up side is there on

this stock which is already surging to the top of the dow? >> we raised our price targ toets $85. we had raised our price target to $80 from $75 before the quarter going into the quarter because our channel checks were strong clearly those channel checks were valid as there was significant up side in the quarter. when you think about nike, let's come down to what it really is this is a company growing. a discretionary company that is growing revenue double digits. you don't have that many discretionary companies growing revenue double digits in the world, much less a company the size of nike $130 billion market cap company or approximately around there growing at that kind of rate you think about valuation, you have to think about that in the context, that multiple, that 30-time multiple in the context of what this company is, how aware this type of growth is and the fact we're only at the beginning of this. we're just now starting to accelerate what you're seeing in growth could get substant yelly better. >> what about china? 35% revenue growth in china.

clearly that's a big part of the beat and the story is that at risk if the trade tensions escalate? how exposed is nike to china from a consumer and manufacturing point of view? >> so it's a good question, sara it remains -- >> nobody asked it on the earnings call. you should have asked management last night >> there's no answer to be honest we don't know what is going to happen with either tariffs we don't know how china is going to respond to tariffs. we have no understanding of that it was just a year and a half ago we were talking about border adjustment taxes and what happened to that completely went away so i think for the time being, until we get some clarity around the subject, you have to focus on what nike is and what the growth is. and the one thing i can say that's unique to nike versus other american companies that are going into china that are selling products in china is that nike has very unique product. if you want to get the new pad turbo coming out, and i highly recommend you get it in rose gold, your favorite color when it codoes come out, you'll pay o

that shoe because you can't get that from adidas and from anyone else i lived in brazil and brazil has some of the highest tariffs in the world. shoes and -- nike shoes in brazil that cost $120 here cost 500 u.s. dollars there and yet people still buy those shoes because you can't find that product anywhere else. >> i love that he knew rose gold was my favorite color. a-plus >> well, just like greenspan told you the other day, it's a consumer driven market that's despite the tariffs run through it the consumer decides in the end. john, on share, i'm looking at shares of nike year to date up 30 as sara said but under armour up 60. what's happening in the mix there? >> under armour declined by about two-thirds over the past year and a half as they went through restructuring in their brand and lost some of the heat they had before. we're market perform on under armour as well nike is leading the market right now with their triple double

strategy of 2x innovation. they are clearly ahead of the competition in the digital space. clearly ahead in the supply chain space and their innovation is very impressive they're bringing the nike air platform, the retro stuff, the new stuff, the vapor max, all of it has been very successful. add on the cushioning platform, nike epic react which stole a lot of market share from adidas. it's been a powerful mix of product for nike we think their product cycle heading into back-to-school and holidays is far ahead of competitors. the stock reflects that at roughly high 20s times p/e multiple you'd rather look at a cheaper out of favor name like adidas. it has a better product cycle coming >> even though they have lost share this quarter to nike in terms of those products. matt, final question what's going on with the jordan brand. that was a weak spot in terms of overall sales numbers. >> jordan brand, look, it was a

weak spot in 20 -- or fiscal 2018 but the company mentioned that's over. it's now an inflection point and positioned for growth. they had some problems with jordan in fiscal '18 recent channel checks and data points from the jordan models is you're seeing 30% plus growth year over year in select jordan models week by week. so the proof is in the pudding we're seeing those numbers come through at point of sale so we are very bullish on where jordan can go going forward. not just in footwear but also in apparel. >> nike shares now up 12.6%. thank you guys for joining us. matthew mcclinton and john kiernan. when we come back -- $17.5 billion. why the collective market cap of eight companies dropped by that much yesterday after amazon's acquisition of pillpack. we'll talk to former apple ceo, john sculley with what it anmes

john sculley with what it anmes for the pharmacy space well, victor, do you have something for him? >>check this out. td ameritrade aggregates thousands of earnings estimates into a single data point. that way you can keep your eyes on the big picture. do that's alright. i got a box of 'em. thousands of opinions. one estimate. the earnings tool from td ameritrade. stay with us at cognizant, we're helping today's leading media companies create more immersive ways to experience entertainment with new digital systems and technologies. because we're helping leading companies see it- and see it through-with digital.

watching the action in pharmacy stocks today. a day after amazon announces it's buying pillpack walgreens coming off its first day since '15. and the deal helps wipe off $11 billion in market valley between

walgreens, cvs and rite aid just themselves former apple ceo john sculley joins us john, good to have you back. >> thank you, carl nice to be here. >> we've been asking folks this morning if that market cap wipe out was irrational or not. what do you think? >> well, i think it's a very clear message that major sectors of the health care industry are unprepared for the era of platforms, cloud-based platforms which is clearly something amazon understands really well so long term, it has huge implications, and that may be part of the reason for the reaction short term, there's not going to be much impact, i think. and that probably was an overreaction and the reason for that, even though pillpack is an excellent company. i know the co-founder and ceo. it's a great team. they give amazon a fast start in terms of those 49 state licenses

they have which is a long complex process to get but it's a long way from what they have with pillpack to get to a fully integrated system that ties into the pbms and has actual analytics that go across the entire care continuum. it's just the first step of something that's going to take four or five years for amazon to really play out. >> really? >> i was going to ask about what time or what defines short-term and long term. knowing what we know about amazon's ability to scale, you think this takes years >> i think it probably does. and it has -- that's not a criticism of amazon. amazon is anextraordinary company. i think jeff bezos is the best ceo in the world right now so i have great respect for his ability to completely reimagine from the ground up an industry but i do know because i've been in health care for 11 years now is how complex a regulated industry with thousands of rules and precedents and differences in state by state. so it's not that amazon doesn't

have incredible talent it's that they have to integrate with a cloud-based ed pbm at so time we're the only ones out there that do that now probably others in the future. maybe amazon will want to build one of their own but the reality is that will take time for anyone who wants to build a new one. >> you really think the industry was caught off guard by this we have seen megamergers with an increased sense of urgency and the narrative has been in anticipation of amazon entering the space. aetna, express scripts cigna and others >> you're right. those mergers make a lot of sense to me because what they're going to do is they're combining pbms, pharmacy based managers with health plans. pbms are pretty antiquated, and i think the savings that they'll get through consolidation will be significant for each of those

dea deals, but that doesn't solve the problem of how those companies get to a cloud-based platform business and that's what amazon understands so well. and so, yes, it will take them a few years to get there because somewhere along the line they have to get beyond supply chaining which they know beyond consumer facing businesses which they know. they have to be able to integrate into a pbm network and at the moment, we're the only cloud based platform out there. and whether they're going to build it themselves or what they'll do, we'll have to wait and see. but that's a very complex challenge ahead for a terrific company. >> john is the complexity that you keep coming back to at all some kind of an insulation for the incumbents out there that got so punished in their share prices yesterday i ask because pillpack's core business, it would seem to be the easy step. very good customers for the walgreens and cvss of the world who take pills on a regular basis. obviously a profitable segment

but if it can't expand too far beyond that immediately, are the existing players okay for a while? >>. >> they may be okay for a while but they're very exposed longer term cloud based platforms have taken over industry after industry amazon is the world's expert at that and i think they have to have more clarity in terms of how they're going to deal with the challenges, particularly with pbms where there is no transparency, where there's high criticism about the spreads and rebates. they are looked at as an inefficient part of the middle man of the health care system. how does that become more efficient? how do you bring the pharmacy business into line with where home delivery of prescription drugs can turn into a major business which, obviously, amazon is very excited about and there's not much evidence that the big pharmacies are well prepared for that.

>> sounds like one solution for amazon would be to buy rx advance but i'm guessing the fact that you're on our air means you haven't had discussions or they haven't been serious. >> well, we don't talk about what discussions we have with other people we have a terrific relationship with centine we're rap we're rapidly scaling. we're targeting $20 billion of contracted revenue so in the pbm space you have to have scale that's what we're focused on now. >> john, always good to get your take on everything tech but especially now health care today and pharmacy we'll see you soon thanks >> thank you, carl as we head to break, take a look at some of the leaders so far this year in the dow visa, microsoft and nike now leading the way. all up more than 15% since the start of the year. and next we'll take a closer look at financials as the sector snaps a 13-day losing streak

following yesterday's successful stress test and return of capital. the dow up more than 200 points. you always pay

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time for etf spotlight rick santoli looking at financials with the sector snapping a 13-day losing streak after yesterday's stress test from the fed now leading the s&p. >> looking at the banks in particular different subsets of the banking sector look over the last 12 months you'll see all the segments of banking have been slight underperformers. the s&p 500. the kbwb the broad large bank sector. the s&p is up about 12%, 13% over the last year the regional banks obviously the stronger one that's the purest play on the domestic u.s. economy. on the yield curve, things like that on short-term rates going up i put the eufn, the european financial sector in there as a comparison n indication of why the group has been weighed down. the large money centered banks in the u.s they get thrown into the same bucket deutsche bank was dinged by the stress test here it's a similar story

underperformance a lot of people thought financials n tech would have been the thing to own coming into the year as well as industrials have not panned out. the kbwb, the large bank etf is down slightly still year to date but sort of reassuring to see the regional banks up 5% year to date they, obviously, say much more about what's happening in the u.s. economy and that's been a good outperformer. wells fargo today a hybrid of money center and regional bank is a good per former >> the sweet spot of those two regional also has been a bigger beneficiary of the deregulation. >> without a doubt >> deregulation, even the idea m&a may come back. >> what explains the weakness in morgan stanley and goldman today? >> keep more capital inside. not let you distribute it out and people had expectations that dividends and buybacks would go up more than they did. >> we'll see how they fare this afternoon. hanging close to the flat line mexico set to elect a new

president on sunday in what could be one of the most significant votes in that country's history. michelle caruso-cabrera has been all over that story and has the latest on what to expect, implications for nafta and more. >> on monday we expect to be talking a lot more about a man everyone calls amlo. likely to become the next president. amlo is an acronym andress manuel lopez obrador if you look at the poll numbers, he's out way ahead he's within twice before but it looks like the third time is going to be the charm. he is at least 17 points ahead he could even command the majority, his party when it comes to the congressional elections happening at the same time he's going to wipe the floor with the other two traditional parties that had been in power there for decades. the u.s. administration has been worried about him because he has been seen as an autocrat, someone very aligned with the thinking of hugo chavez, for

example. however, he has softened his leftist rhetoric in this election running much more on anti-corruption which is a real issue in mexico. and he's argued he's going to spend more money on social spend bug not run up the deficit that's calmed financial markets. there has been talk in the administration that they wanted to get a nafta deal done before amlo becomes president now there is thinking they can still get a deal done because amlo is interested in higher wages in mexico. the u.s. government has been pushing mexico to raise its wages because they'd like mexico to be less competitive less incentives for companies to move the hourly manufacturing wages you can get in mexico if you're paying them $4 an hour versus $39 in the united states $30 in canada. then add on top of that the weakness in the peso and even though if you are mexican, maybe your wage went up by 4.6% in 2015. if you are a u.s. employer, your costs for those people went down

12%. 2016, ditto. that's because productivity has been thoroughly stagnant there look at u.s. productivity versus mexico's productivity. and that is why. so we'll see on monday what the results are. but it is likely, and we will be dramatically surprised if amlo is not the next president of mexico sara, back to you. >> big change there. peso is up right now, down for the quarter. >> because he's promising not to spend too much money >> it's also -- also moving a lot on nafta headlines throughout the quarter michelle, thank you. let's get to sue herera for a news update. >> good morning, sara. here's what's happening at this hour first degree murder charges were filed against jarrod ramos who killed four "capital gazette" journalists and a staffer and wounded two others he's scheduled for a bail hearing in annapolis this morning. ramos has a well-documented history of harassing that paper's journalists. vice president pence telling leaders of the three central american countries that their

citizens illegally crossings of the southern u.s. border is a threat to national security and appealed to them to do something about it >> our nation needs your nations to do more last week president hernandez and i met in washington, d.c., where we agreed to take new steps to strengthen our security partnership. and today, we all discussed specific new steps at guatemala, honduras and el salvador can take with american support to end this crisis. >> a clean liftoff for a spacex falcon 9 rocket from cape canaveral. its second in two months it is carrying nearly 6,000 pounds of supplies and experiments to the international space station. and it is the 12th launch this year for spacex. you're up to date. that's the news update this hour mike, back dounwntown to you. >> at some point that will become routine 12 this year we're still talking about each one. >> still pretty amazing.

when we come back, rbc's head of global research is with us on the last day of the first half for alook ahead to 2025 why he says he'll still be holding the faang stocks eight years from now as we close out the month and quarter, look at some of the nasdaq leaders for the start of this year, for the first half. netflix and amazon in the top five along with both classes of twenty-first century fox and align technology we'll have much more "squawk on

the street" after this break at the marine mammal center, the environment is everything.

we want to do our very best for each and every animal, and we want to operate a sustainable facility. and pg&e has been a partner helping us to achieve that. we've helped the marine mammal center go solar, install electric vehicle charging stations, and become more energy efficient. pg&e has allowed us to be the most sustainable organization we can be. any time you help a customer, it's a really good feeling. it's especially so when it's a customer that's doing such good and important work for the environment. together, we're building a better california. welcome back to "squawk on the street." i'm sara eisen with carl quintanilla and mike santoli from post nine at the new york stock exchange we're about an hour into the trading session. a broad-based rally. dow up 239 points led by nike. a big standout after a good

earnings report. s&p 500, though, up 0.75% being led by financials for a change consumer discretionary, energy and technology also going strong we're cutting into the losses we saw for this week, though still stocks are lower for the week. after a bumpy one with a lot of headlines on trade >> and a lot of people thought it would be necessary to hold if it wasn't going to be something worse. 2700 on the s&p. as we do close the first half of the year today, we're not only looking ahead to the second half but also to the year 2025. rbc capital markets is out with a big note seven years from now, analyzing what themes will dominate the market and what are some of the good stock picks for their imagine 2025 portfolio some surprising sector weightings, rbc's head of global research mark harris joins us here at post 9 good to see you. >> thanks for having me. 69 stocks that fit these themes. various themes lots of technology lots of familiar names

some not so familiar in industrials. i wondered if you look at what the performance of the portfolio has been, and i ask that because you have to wonder how much the overall market has seen these good things coming for a lot of these companies. >> so, look, one of the first things the street complains about about the sell side is we focus on the next quarter. so absolutely, certainly you can't argue that google or amazon hasn't seen some good performance over the past couple of years everybody likes those names. we also try to do, again, 20-some odd percent of the portfolio. the bulk of it is other stocks names that may not be on your radar. it was agnostic of what happened in the past. we didn't do back testing. we looked at it and said based on now looking forward seven years, based on these themes, what will be the winning portfolio? and this was it looking around the world talking to our global analyst. it was a true bottoms up process. no living on number names or sectors. that was the idea. >> what were some of the counterintuitive conclusions do you think in terms of just the

durability of the advantages of some of these companies. chub, for example, or some of the financials that you wouldn't necessarily think would distinguish themselves >> jpmorgan or silicon valley bank or chubb for that matter. if data is the new oil, these are companies that have a massive amount of oil. you have to look at that the key is the wul the idea these companies are all willing to sacrifice near-term earnings and substantial amounts to invest in that seven-year outlook to really in essence draw down on that and have backing of the boards, the shareholders and everybody else. we think those are the types of companies that can they sit in the middle of the insurance market that unique advantages and they're showing that advantage to invest and move that forward. intuitively, zylum this is a water company. if water is a scarce asset going forward and this is the leader in that market another great example of the company you'd want in that portfolio.

the counterintuitive themes stretch across the board ai is an obvious one but what about areas like the calibrated augmented self the idea that we as consumers are going to create self-directed products there's some big companies that will be able to do that but probably a lot of smaller companies that will be able to take advantage of that as well some that are private. but these are the themes as much as the names are what we're trying -- >> on the more obvious side, looks like all the faang names in there >> you know what i think it would have been an oversight not to look and say, again, that is the new oil these are companies that are massively investing in all the themes in ai. understanding the consumer creating specialized products dealing with them. talk about the risk, but the reality is they have mass ivresources. they've shown a willingness. amazon, for years. how many times was amazon beaten out for the fact they kept drawing down earnings in their investments. how many years was that a complaint against them and look where they are today >> they got over that. >> yeah.

people tend to get over it >> data being the new oil. your energy weighting is the lowest of all the weightings at 7? why is that? >> it is for obvious reasons. look, in traditional energy plays, and we don't have any traditional oil companies in it because it is -- they are -- oil is not the -- we have schlumberger and halliburton in that. those are the technology enablers of the industry industry they're going to allow them to produce at the lowest possible rates. it's not going away. these are going to be create companies generating great cash flow the companies to help enable them are ones we want to own in the theme of this portfolio. the idea wasn't singularly the best outformance it was really about let's think about these themes and help people think and frame around those. >> you acknowledge there's a cyclical orientation to the portfolio, right it's not necessarily just kind of buy it and forget it cash cow type businesses. >> no, absolutely not. there's some great companies that are those cash cows

the deers of the world, the halliburtons, schlumbergers. these are in the portfolio but also companies like albermol it's a lithium producer. why do you care? if you are making electric vehicles, you need a little lithium. this is the number one producer. we've got international plays that play into that. same idea for copper similar ideas but that will certainly be cyclical along the way. seven-year view, we're confident. >> i'm curious how you chose some of the global consumer names. why adidas and not a nike? why lbmh and not a u.s. luxury company? >> it's all choices. at some point we didn't want to have too much of a weighting but we want to choose representation from different regions so that our different clients could see the difference ideas lvmh is a good example this is the dominant luxury play they've been able to through all of the retail weakness, this is a company that's powered through. number one shares in each of their markets and investing in the digital consumer

trying to figure out how to get into that high end through digital means. they're using that data, consumer data of a very high end customer to understand how to service them >> names that you wanted them to make the cut but didn't? can you think of a couple and what's instructive about that? >> i would be remiss to be throwing names into the portfolio we didn't put into the portfolio. that would be bad research director stuff to do but, you know, i think if -- to answer your question as directly as i can if you take these six themes, artificial intelligence, cloud go through this list and identify these six themes and look at the what-if scenarios. this is one of the most interesting parts. if you read this report, one thing we spend time on is what-if scenarios. what if -- what if you as a consumer had all the information sort of embedded in your armor wearing equivalent of google goggles or 3d lenses that showed you everything while walking the glasses. who can play into that

to name all the names that might benefit from that? there's a lot of them. but one other theme i'd leave you with it really focus on the companies that have the willingness to cannibalize some of their own parts of the business if there's one overriding theme, that's going to be a message you have to walk away with you have to do that. >> see you in seven years. >> thank you thank you, everybody it was really a pleasure pleasure less hair at that point surely, for me >> on all of us. as we go to break, a reminder about a great cause an hour left to bid to win a chance to come to the nyse and meet our team, see the exchange. the experience being auctioned off for the lulu and leo fund run by our former colleague. guess who is bidding john legere. the ceo of t-mobile was the highest bidder if you outbid him, he may just come down and join you to bid. check our twitter feed go to charitybuzz.com. look for "squawk on the street." one hour lt.ef

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emerging markets entering into a so-called death cross an ugly technical level which may be a good thing for u.s. stocks find out more, tradingnation.cnbc.com more" squawk on the street" coming right up. alerts -- wouldn't you like one from the market

when it might be time to buy or sell? with fidelity's real-time analytics, you'll get clear, actionable alerts about potential investment opportunities in real time. welcome back to "squawk on the street." rick santelli here i'd like to welcome my last guest of the week, dr. lacey hunt thanks for joining me. >> my pleasure >> the big topic on this trading floor and a lot of the pieces that you've written is about global growth. at one point synchronized. now it seemed to be reversing. synchronized shrinkage, so to speak. my question and the discussions revolve around are bad policies and lack of reforms whether in europe, japan, china, are they just destined to roll up on our shores or can there be some

divergence in the growth metric from a global perspective? >> well, i think if you go back to the end of last year, there was a view we'd have a synchronized recovery this year. n that's just not happening. europe is slowed rather abruptly and unexpectedly so. japan has contracted china's been very weak the u.s. has had decent growth the second quarter was certainly a good quarter overall, but i think it's the peak rate of growth for the year and we'll see the u.s. growth trail off as we move into the second half and that means by very short order we're going to have a synchronized slowdown globally all the major areas will be weakening. >> you know, it's hard to argue everything you've said, but i'm going to push back >> okay. >> i know the eu summit had some agreements on immigration, which it definitely is a thorny issue. but macron is pretty strong in

france but there's problems in italy and reforms all across europe when you take japan, their central bank is taking them to mars with the amount of ownership it has with regard to the economy. the u.s. tax cuts, many say that's it. at least from the individual side, most of the benefits are go gone i disagree i think the tax cuts on small businesses, medium-sized businesses is going to be a tailwind for years to come can we see some of the issues about capital flowing here due to our better treatment of capital, partly due to the tax reforms? >> i think when you have a debt finance surge that we see, no further tax cut and increase in federal spending, the economy receives a transitory benefit that's what we saw in the second quarter. because we're so heavily

indebted, those benefits wear off quickly. that's the problem in europe they're trying to solve an indebtedness problem by taking on more debt they get these little fleeting episodes in which growth is better but then it weakens quickly. moreover in the united states remember there's a second wheel of stabilization policy, the federal reserve. the federal reserve has engineered a very dramatic contraction, reserve aggregates. a sharp slowdown in the rate of growth in both sides of the balance sheet, the liability side and the asset side, comprised of loans and assets. we have a major deceleration in bank credit and in the money supply and a flattening in the yield curve. these elements together suggest that the u.s. economic growth is going to trail off. >> lacey, we're going to have to

leave it there i know we could go on. next time you come back, i still want to dig deeper with some of the possibilities to bolster more activity on the u.s. side thank you for joining me mike santoli, back to you. >> rick santelli, thank you very

much we'll have more on "squawk on the street" after this

with more on what helicopters are rushing to be the uber of the skies and had an interesting trip out there this morning. good morning, robert. >> reporter: i did, carl it's a perfect beach day in the hamptons, which means a lot of helicopter traffic fairly quiet now later this afternoon there could be 20 to 30 helicopters taking off and landing per hour that's one every two to three minutes. that's because the whole business of ride sharing in the sky has exploded it started here about four years ago when blade came in, offering the ability to go on their app and book a single seat to the hamptons there are now six or seven companies offering that type of service to the hamptons. this summer there's a new type of perfect called blackburg. they started on the west coast

in l.a., offering service from silicon valley to tahoe. this year, they are now doing service to the hamptons, nantucket, martha's vineyard what they do is act as an expedia of the skies you can type in east hampton friday at 2:00 and find all the operators, all the helicopters and sea planes that could take you here this afternoon. the flight we took this morning was on a company called foxtrot booked through blackburg, about $100 cheaper than blade. we talked to rudd davis, the founder of blackbird he said given how many empty seats are flying around the skies, there is a huge opportunity for an app that connects those empty seats with passenger passengers. >> taking advantage of all the access capacity and connecting that with all the demand out

there, truly reducing the friction for anyone out there who wants to book a private flight. >> reporter: in ten years, the flight from manhattan to the hamptons could be as cheap as $50. and that means airports like this one are going to be swamped. guys, back to you. >> wow, a lot of people willing to pay $700 to $1,000 to avoid that friday afternoon traffic. robert frank, thank you, from east hampton. coming up on the closing bell today, new ceo of deutsche bank, the only bank that didn't pass the fed stress test shares are up 3%, a lot more llt to be outdone by wilfred i' be all over that on "closing bell," too. dow wiping out june's losses

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