about 35 and i want to wish everyone a happy independence day one problem, we were talking about problems, that we don't have is not living in the greatest country in the world. we don't have that problem >> we're all fortunate >> because we are. and wave got to remember that. and tomorrow we will you going to fireworks some good ones on the east river. >> we've got a whole plan. >> the plan's in place >> we do happy independence day, everybody. >> "squawk on the street" is next ♪ good morning and welcome to "squawk on the street. i'm david faber along withsanto. we are live from the new york stock exchange carl and jim both have the day off this day before independence day. the stock market closes at 1:00 p.m. eastern ahead of the holiday. let's give you a look at futures

for what will be a shortened sessions you can see we are looking at an up open, a half hour from now. european opens have been open for quite some time. let's take a look at how they're faring, all positive across the board. actually, a fairly strong showing there for germany's dax. the u.s. bond market, closes 2:00 p.m. eastern. and that brings us to the ten-year note yield, 2.875, and crude oil continuing higher, approaching 75 bucks a barrel. trade war anxieties continue to be on the rise. u.s./china trade tariffses set to kick in this week as president trump continues to fix the worst trade deals ever made. >> and stock futures pointing to a rally at the open. amazon, apple, netflix, other tech stocks poised to give the market a boost again >> and facebook fallout? the federal probe of the social network now reportedly involves the fbi, the ftc and the s.e.c well, stocks are aiming for a fourth consecutive session of gains one day after the tech sector led a rebound in that

final hour of trading yesterday. the dow had fallen as much as 194 points on worries about trade tensions, of course, tariffs, july 6th is when those will -- some new ones will go into effect regarding china and then, of course, retaliatory from china earlier this morning, president trump tweeted, quote, the economy is doing perhaps better than ever before, and that's prior to fixing some of the worst and most unfair trade deals ever made by any country in any event, they are coming along very well. most countries agree that they must be changed, but nobody ever asked. always interesting, sara, when he talks about the economy doing perhaps better than ever before. what he's talking about -- >> what metric he's using there? >> yes >> and that's without his trade negotiation deals going through, as he referenced if you're keeping score at home, the s&p is up 2% for the year and chinese stocks are down 15% for the year and i think that tells the story. the u.s., a relative safe haven or winner, perhaps, from what we've gotten so far. we'll see if that can hold up. we'll get a jobs report on

friday after the holiday later this afternoon and wednesday and everyone is going to be looking at those manufacturing jobs will they continue to be robust? this is the first jobs report we've seen a few weeks into the steel and aluminum tariffs we'll see whether it's really starting to create uncertainty maybe we'll see more of a reaction as the tariffs go through with china, because that, of course, is the biggy. but so far, the u.s. is holding up relatively well and our trading partners in the rest of the world is feeling it worse. >> there's no doubt about that right now, it's all an 't anticipatory there's not been a real-world effect, especially with prices of steel and aluminum with prices going up that had to be absorbed or trade flows getting interrupted. but i do think that this particular tweet does hit a wrong nerve potentially with investors who i think have been afraid that the president views a very strong u.s. economy as essentially cover for waging this trade battle. and actually, it's also cover

for the fed to do what it wants to do. so i think that's why the market is a little bit on the defensive. the rebound yesterday made some sense on two fronts. one is, i think that you could probably right now assume that there's a trading algorithm that says, wherever the market sells off in the morning on trade fears, buy it. because it's always fleeting and it always kind of bouncing >> whether it's the trump put -- >> or the fact that this is not going to be the big swing facto for the market, even though it's negative, it's not going to end this trend the second thing is, july 3rd of any day of the year the the one most likely to be up for the stock market, of all dates of the year >> really? >> it's a small margin of error -- >> why pre-holiday tendencies are generally positive >> nobody knows. they forget it's not closing at 4:00 and are still buying? >> and i think only the optimists come to work on july 3rd. >> that's why we're all here >> you don't always trade on july 3rd, of course, but it seems like we're in this range and got to a level where we bounced a few times and that was

the story. >> one point of relief, potentially, for investors who were worried that china was going to use the currency card as a weapon in this trade war, we got some unusual commentary from the top chinese central banker, who says china will keep the yuan exchange rate basically stable at a reasonable and balanced level pretty much quieting those that are saying that it is de-valuing the yuan, to get a trading edge, to punish the u.s. and the trade war and create global havoc. that those indications are that it's not doing that. that it's actually trying to stop the yuan from falling too much, because people are so concerned about the chinese economy, with trade, with de-leveraging, and therefore, the yuan sliding and it is still sliding to lowing of the year could be contained, at least it's not being actively managed by china lower >> not overly managed by china so you're not playing the card, but the card remains in the pocket >> they're not using it as a fighting weapon, i guess, is the takeaway there

let's take a closer look at how the trade tensions are impacting the markets on this shortened holiday trading day. we are pointing to a much higher start. joining us now is mona mahajin and keith parker head of u.s. equity strategy at ubs so mona, how do you view the trade tensions is it as, as mike said, a by-the-dip mentality on trade headlines? >> generally speaking, when we look at the economic impact we talk about, so far what we have in place is $34 billion of tariffs from both sides effective july 6th when you look at that compared to the -- as a percent of imports or a percent of gdp, really very de minimis less than 18% of imports and less than 1% of gdp impact it's that tail risk that's worryiworr worrying investors and that tail risk includes president trump raising tariffs to $100 billion plus, china retaliating potentially beyond tariffs and we talked about yuan devaluation as a potential tool. i think what's kind of creating some of the relief today is that

the fact that the chinese may not be using some of these tools beyond tariffs as retaliatory measures and if you do look at the chinese market, as you mentioned earlier, down 17, 18% year-to-date, it really does show that they have not very much incentive to escalate this trade war. so for now, yes, we actually view that -- especially in the technology-type sectors, energy sectors, any kind of pullback could be a long-term potential buying opportunity >> keith, do you agree and if so, which sectors do you buy on concerns about trade? >> yeah, i think the general take for us is very similar, that the impact on growth relatively small potential for escalation makes this a bit more of a bumpy, risky ride but our base line remains that a trade war is unlikely. if you look at second order impacts, i think that's what we're focused on we've seen steel prices spike. we've seen soybean and food prices down 15% quite a bit.

and i think the other is knock-on effects of, is this priced in already. and we've seen the s&p p.e.d. rate quite a laot, and in terms of sectors, we've seen industrials massively underperform, relative performance versus the s&p back down to five-year lows so we could see a bounce back if tensions cool. and on the flip side, you see retailers that are exposed should tariffs be implemented on consumer goods that sector has massively outperformed, so we could see a relative convergence in those two. >> keith, just as a hypothetical, and maybe it's fun to play the counterfactual, let's say that the administration did not decide that this was the year to start getting aggressive on some of these trade fronts and renegotiate trade deals. what do you think the market

narrative would be right now has it really cost the market a lot? or is there a way to say, well, at least we're not talking about a market that's overheating and the fed is behind the curve and inflation is flying out of control. >> yeah, i think if we go back and we say, what was the narrative in the first quarter, i would say it's slowing growth, rising rates i would say the narrative started to shift in march, april, may, and even mid-june, which is, growth is pretty good hear in the u.s., rates stable and our view is that a multiple should be closer to 18 times forward versus 16 times. i think to the point of trade, it's a healthy headwind to some exuberant sentiment, where we don't have that risk of market getting ahead of itself and overheating. i would say the setup now is that higher rates and some of these trade risks are priced, higher growth is not >> mona, we just saw wti pass $75 for the first time since november of 2014 you know, previously, you might

have had a conversation about pressure on the consumer, but when you think about higher gasoline prices, coupled with conceivably higher prices for certain goods, as a result of tariffs, any concern there >> you know win, i think genera, whatwear seeing right now in terms of the consumer it remains robust and the u.s. is a relatively closed economy so only 11% of gdp comes from exports, for example so we are focused on that consumer demand. and right now, you know, we look at consumer confidence metrics, still near all-time highs. we are watching, you know, as we get into the summer driving season, gasoline prices are, you know, creeping higher. but i think the offset to that and typically, historically, there's been a relationship, 0.1% of gdp comes off in the year following a 10% rise in gas prices but really right now, because there's such a strong production base in the u.s. from oil producers, that gdp decline is actually offset by that. so we're not worried from an overall economic stance. we are watching the consumer, but thus far, we think they can absorb this rise in gasoline

prices and we really look towards that $4 level in gas prices before we become really concerned on the consumer so generally speaking, we actually think there may be an opportunity, energy prices, or energy stock prices have lagged actual wti increases, so there may be an opportunity there, actually >> so buy energy stocks? >> to buy energy here. we think it's an interesting opportunity. we've seen a sell-off recently, especially in those permian names, because of the infrastructure challenges they're facing but actually -- >> but getting the -- >> getting the gas, exactly. but that will ultimately resolve itself so if you're a longer-term buyer, that's an opportunity here >> keith, i want to circle back to your idea that you think the overall market should trade close to an 18 times forward p\ multiple that's where we were in january. it's pretty much the high for the cycle. if the market were going to be pricing in more growth in that way, wouldn't rates be higher? wouldn't you have some kind of an offset? or do you think we're in a mode now where the market is willing to tolerate that kind of high

valuation? >> i think the math for us is historically the p\e for the s& has been about 15 times, but the historical interest rate has been 6%. and so if the fed is telling us over the long run we can expect a roughly 3% rate, the ten-year settling around 3%, but earnings growth, you're talking about 23% earnings growth this year by our estimates, next year, close to 9% above average levels. so that would point to a well-above-average p\e, all els equal, so something closer to 18 than 16 times currently. >> got it, guys. thank you, keith and mona. nice to see you both >> thank you still to come on the show, auto sales report cards are out from ford and gm today we'll hit that also ahead, former heinz ceo bill johnson and former walmart u.s. president, bill simon hear their perspectives on trade and tariffs, what's at stake for american business, and the american consumer. take another look at futures

here we are expected to open higher triple digits on the dow, up 121. s&p futures up 8 after yesterday's little rally yesterday. more "squawk on the street" live from post nine at the nyse when we come right ckba r. that's great. but the market was up nearly twice as much. that's a tough pill to swallow. exactly. so i started trading. but with everything out there, how do you know what to buy? well, i think my friend victor has just the thing for you. check this out, td ameritrade makes it easier to find the investments that might be right for you. like our etf comparison tool it lets you see how etfs measure up to one another. analyst ratings and past performance... nice. td ameritrade also offers access to coaches and a full education curriculum to help you improve your skills. that is cool. and if you still have any questions you can always chat with us on facebook or call our experienced service team, 24/7. yep. just because you're doing it yourself doesn't mean you're on your own. that's great. you're still up. alright. you're still up. if i knew you were gonna run the table i wouldn't have invited you over.

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ford is out with its auto sales figure for june and phil lebeau has the got them. he's in chicago. phil >> david, not a bad month of june for ford. sales increasing 1.2%. that was a little bit better than the estimate from edmunds, which called for an increase of 0.8% it's the same story for a couple of months. it continued in june in terms of demand for crossovers and pickup trucks and really everybody staying away from cars cars down 14%. we'll see this from all the automakers, by the way suv sales up 8.9%. and truck sales up 3.2%. and perhaps the most important statistic out of these numbers and really all the automakers, what's happening with transaction prices what people are paying in dealerships, in the month of june for ford, it was up $540 year over year to an average of $35,500. guys, back to you. >> phil, remind me, who do we get monthlies from these days?

we don't anymore from gm or that hasn't yet happened? >> that's correct. we get them from everybody except gm. gm will give us quarterly -- well, gm and tesla we'll get quarterly sales from gm probably in the next hour or so >> so, phil, ahead of the -- we don't know whether president trump is going to go through with his tariffs on imported autos, which all the major automakers here have warned against. are there moves these companies can make in anticipation of that policy potentially becoming a reality? sourcing parts from different places, moving production, or that just takes too long and we don't know yet >> takes too long and it's too unpredictable. another way -- let me put it this way, i talked with one executive and brought up that scenario and the executive came back and said, which way would you -- where would you move your production to? because if you make a move and then you have moved your supply chains, you've made all these changes to go from one location to another, from one country to another, and then the tariffs don't go through well, now you've increased your costs and added on to your costs

by moving it to another area you just can't do it it's too -- it's too intertwined, too complex, way too costly >> any sense of who gets hurt the worse if that happens? >> well, it depends on which tariffs go through look, the tariffs that are supposed to go in effect on friday, the 25% on vehicles from china and then the retaliatory 25% from china on those that are sent over there, that's going to hurt the german automakers that are exporting from here. that's bmw, that's mercedes. >> daimler >> a few vehicles from china coming in here like the buick and vision, but that's really small volume relative to everything the bigger concern is if we see tariffs implemented on vehicles from germany or from europe, because that's higher, higher volume than china. >> right and all those parts, would be very expensive for the u.s. automakers >> yeah, the parts is everywhere the parts is everywhere. everybody is going to get hit with that. >> phil, thank you >> you bet >> we'll see what happens on

that front a few key deadlines. the public comments end this week and then -- >> i thought you could just put a tent up and have new production it's not that easy come on, in the parking lot. >> maybe for elon musk >> when we come back, facebook is under new pressure. the social network's investigation into handling of edata see data seems to be widening. remember, a shortened session this day before the holiday tomorrow the employee of the year, anna. [music playing] (vo) progress is in the pursuit. audi will cover your first month's lease payment on select models during summer of audi sales event.

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facebook is falling here in the pre-market the social network reportedly facing a broadening investigation sbiinto its sharig of data with cambridge analytica. according to the "washington post," now representatives from the fbi, the s.e.c., and ftc are all joining the department of justice in its inquiries about the two companies and the sharing of personal information of 71 million americans. and also according to this article, guys, s.e.c. specifically is going look into the public comments from facebook around this issue we heard from mark zuckerberg, for instance, apologizing and explaining it to congress. that's just one of the executives what did they know when did they know it? what did they do with that information? and how did they communicate around it, i guess, are the key questions. >> and what went into the decision three years ago when they discovered this, not to disclose it publicly to investors and to the public. yeah, that's the part of it that i think feels a little bit new

in this report you know, the comeback in facebook stock, i think, probably stunned a lot of people just how dramatic it was it was up from 152 -- that was the low in late march, and i believe it bottomed the day that zuckerberg agreed to testify in congress and it went up to 202. it was up by a third in value in less than three months into june and that's back up just a little bit here below 200 but it seems as if a lot of people were basing that dip buy on the premise that maybe it's an all-clear for now we'll see if it develops >> it is an alphabet soup of regulators that are now going after -- and you never want to see that as a shareholder. i guess the question is, what's the worst-case scenario for facebook is it that they face a bunch of feign -- fines >> that would seem to be the case and look, they've also had to increase their employee count to deal with these things but margins don't seem to be particularly impacted and the growth of the company and its ability to keep its subscribers -- or, they're not

subscribers, users, of course -- has not been impacted. >> and unless and until you get to a point where it seems like advertising mark share sort of moves a little bit and softens up, to instagram or something, it's hard to know this is going to resonate that much with investors. >> not to mention, that anti-trust argument you started to hear around facebook, amazon, or google, that amex decision by the supreme court a couple of weeks ago was important in terms of how it came down in two-sided markets. >> there's also no indication that that's what they're looking into >> no, not at all. but i just bring it up as another risk that has, at this point, abated a bit as a result of that decision >> s&p tech sector accounting for 102% of year-to-date gains for the s&p 500. crazy. >> all right we've got an opening bell about 5 1/2 minutes away don't go anywhere. 'rba rhtft ts.wee ckig aerhi alerts -- wouldn't you like one from the market

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again, it's a shortened trading session, 1:00 p.m. eastern is where we'll stop for stocks. mike, the banks, interesting piece in the "wall street journal" this morning saying that goldman and morgan stanley received something they may not have in years past namely, an opportunity to maintain capital distributions that were higher than they might otherwise have been, given where they came in on the stress test. >> yeah, last week's stress test, the line was that in the very stiffest of those tests, morgan stanley and goldman sachs would have potentially failed, been seen not to have enough capital. and the regulators came back to them and said, we're not going to make you kind of deal with the consequences of normally of that and curtail your distribution they seemed to make a deal they left it open. now, the regulators say in part, it was becausethe capital levels fell lower because of the tax bill and when the tax law passed, it created this write off it was really a cosmetic accounting thing

and to me, that was the surprising part, that there were actually high-stakes involved in this non-cash charge that all of these banks -- >> and this is the worst-case scenario we should mention >> it's basically a rerun of the '08 financial crisis they said, how would you do that so i wondered how the market would take that? would it be, well, it looks like it's a lighter touch for the regulators, which is positive for banks. or is it that morgan stanley and goldman sachs will not have as much capital to distribute or maybe running closer to the line but it seems that the market is taking it okay right now >> mike, as we've mentioned many times, the banks have clearly not been a very well-performing sector the jpmorgan, the best of the big banks, and it's down 1.57% for the year >> they did get a little bit of a lift yesterday wells fargo and jpmorgan, it's been very choppy it seems there's always something else to worry about, even if it's just emerging market currencies. so regional banks have been pretty strong.

>> it's the yield curve. that's the chief worry >> yeah, for the economy, yeah >> thanks. >> well, you hear the applause building here at the nyc as we ring the opening bell in two, one -- there it is take a look at the realtime exchange here at the big board,prime minister of ireland watching his country with a non-permanent seat on the u.n. security council. and raising funds for the new statue of liberty museum lifelong new yorker, never been there. >> really? >> the statue of liberty >> been to ellis liisland, to te statue of liberty. >> go to red hawk and get a good view brooklyn >> i've seen that. and jim cramer's two weddings, the same place long story >> most of the groups are opening positively here within the s&p 500. real strength in the energy names, in materials. you're seeing higher oil prices, consumer staples are doing okay

around some deal chatter there so whether it's a seasonal pattern on lower volumes here or just a better tone to the u.s. markets, which we really saw come about throughout yesterday's session, which shows, by the way, mike, that volatility can be two-sided when it comes to these markets. >> yeah, the market has been kind of jumpy, but within this range. if you look at the s&p 500, 2,700 plus or minus 50 points of that is where we spent all of the year since late january, and it's been darting around in that range, but hasn't spent a lot of time outside of it and really the groups have had lots of varied performance underunderneath unde underneath it. yesterday was the big tech stocks that was lifting things into the positive column >> big winner right now is campbell's soup. it's up 3.5% on more deal chatter there if but i also want to mention, this is a company that's getting a 1-2 punch from the tariffs. the new ones from canada, which

is now taxing things like soup and ketchup and sauces and other food items impacts of campbell soup, they'll have to pay up they put out a statement yesterday saying between the aluminum taxes, which is already hurting their number one cost in terms of the cans and the canadian sales, they are expecting a significant impact when it comes to their canadian sales. 3% of overall sales from campbell's but it's a big deal, because most of that is actually made in the united states. and then shipped over the border >> right they didn't give any per-share impact or anything along those lines. >> no, and i followed up and asked, are you going to pass it on to the consumers and raise prices and their line so far is, we're figuring out ways to absorb the cost and deal with it. >> right now, sara, it's the focus on this board of directors and what decisions they're going to make. remember, they're going to tell us by the end of august in terms of a strategic plan at the company. they recently replaced its ceo, searching for a new permanent candidate for that position,

what they're going to do and they're under some pressure here, we know that any number of potentially large shareholders are certainly pushing this board to sell or certainly open itself up nar proce - for that process whether they'll be successful, we'll see. we've said so many time, the dora dorantz family itself owns more than -- there are others that own more, percentage wise. there may be some division between the actual family. bennett dorantz is 72 years old. and the company charter's, orwy line says that 72 years old is the retirement age and it's interesting to see if someone would put pressure on him to step off. he's been on that board for quite some time and is the

largest single shareholder so a lot in there, and that seems to be weighing more fai e favorably, than these concerns about trade weighing on the stock. >> i'm wondering, it's an interesting question to ask if the pressure from the trade friction, does it catalyze a decision more in the direction of potentially selling, or is it -- most companies say, oh, 3% of sales might be impacted no big deal. campbe campbell's doesn't have the top line growth to spare >> absolutely. >> so it actually kind of pinches a little bit >> it's salt in the wound for this company, which has missed key shifts on consumer tastes and failed to integrate acquisitions dealing with this schneider's lance acquisition, which they paid a lot of money for, and trying to integrate that, all with a leadership gap. a lot of changes in consumer staples. and there's a report in the "wall street journal" today that colgate is going to buy the home subscription service -- have you heard of this company? hubble like a tooth paste subscription.

what's the dollar shave clubs have done -- >> does it come with my razor blades >> so when i buy tooth paste, i don't have to go into the store at cvs and get the guy to unlock the case for me. you haven't had to deal with that, but i have >> i buy razors. speaking of, baby formula, also, kept behind the counter. that's stolen. it's so expensive. >> it's like money on the street >> lick goquid gold. >> they're doing it more and more to favor their own in-store brands i've noticed they've done it on some johnson & johnson products, advil in certain places or others it's an effective way to get people not to buy something. >> i think the question for these consumer companies, as they pursue certain places of growth, the ecommerce boom has hurt them very much. i buy my tooth paste on amazon i don't go to the store.

and these companies have spent years fighting for shelf space and even colgate is facing slower growth. they do own tom's, which is the more natural so maybe people will do subscriptions. maybe better late than never we'll see. >> i want to come back to one of our big stories from yesterday mainly, dell technologies' decision to buy in its tracking stock or offer $109 per share of its stock in vmware. trading well below the 109 price. 41% of that will come in cash. the remainder will be in new dell shares. and that is how they're going to go public. some chatter over the last day, will shareholders vote against this deal? will you get a large institution? that gets into the shares and does something to try to stir things up or get a higher price? unclear whether that's happened. probably unlikely. one key point to make sheehere,

under the provisions of the tracking stock, if you were to vote it down, dell could still go public, perhaps through a relatively small ipo, and they have the right to buy in the tracker year one at a 20% premium. year two at a 15% premium. year 3 at only 10% premium, with their shares so, they've got that in their favor, given the 29% premium they're offering for this. it would seem in the future, it might be less if you don't like this price michael dell, yesterday, seemed to struggle a bit when we asked him, why you doing this? one key reason may simply be that that spread between what that tracker is worth and where they're offering, though, is large enough for dell to benefit itself by capturing some of it, given that he's going to own 50% of dell, kind of a nice payday >> there's another argument if they wanted to be public, if you did an ipo and then you wanted to buy back the other piece of it, you're kind of paying a toll in both directions

you take a little bit of a discount to sell the ipo, perhaps. and it seemed like a little clunkier way to do it. plus, if they want to make acquisitions down the road, you want to have a public currency but wouldn't it be an interesting twist if, again, some investor came in there and accused dell of trying to steal the public company, right? how many years did they fight it out with the lbl >> and carl icahn is still sitting there in the wings and he's suspicious. but it doesn't mean that anything's actually going to occur here again, early days, probably, this is not subject to regulatory review, but it will take some time to get through the s.e.c., so you are talking about a september/october time frame in terms of the close of the actual transaction itself. >> some of the big winners in today's session are energy companies. you've got a 1%-plus move for the price of oil that's wti here and brent. more supply concerns, libya, putting some production offline. sort of offsetting what is higher supply from the likes of saudi arabia, opec, and other

allies at the same time, president trump publicly pressuring saudi arabia to increase production even more as, guys, we look at high gas prices ahead of the fourth of july independence day weekend, which may or may not have the kind of sticker shock that we've seen in the past, given what people are talking about, the higher production in the u.s., which helps that kind of economy >> it seems a little bit short of kind of a consumer panic right now. i mean -- >> shock >> -- obviously, we have been significantly higher in recent years, with more money in people's pockets but we're probably nudging up towards that range, $80 a barrel, let's say, translating into substantially above $3 at the pump i think, you know, it's going to get noticed a little bit of course, very well documented impact on psychology, which is that consumers register increasing gasoline prices much more readily and complain about it more than they appreciate when they go down. >> fooiinally, guys, haven't ta a look at our barometer in terms

of where things stand with china in the one stock we look at often, which is nxp. 127.50, qualcomm still to acquire it in terms of hearing anything on likelihood in getting that authority they need, crickets. nobody seems to know when it's going to come. everybody watches very closely the progress that zte is making in terms of coming back to life and how quickly that will take place. you know, originally, july 25th seemed like it was a ways away and there was not going to be that much concern that this thing would get through. now it's 22 days and counting. and i think you're going to have sk more and more questions about, will they extend their merger agreement. they can collect the breakup fee if the deal is not closed by the 25th of july and you can see, that's why it's trading almost 20 bucks below the actual price that qualcomm has a deal for all right, let's get to seema mody she's on the floor and has more on what's moving this morning.

>> reporter: we're looking at a relatively positive global market setup, despite everything that's happening on the trade front. look at european stocks, getting a boost on signs of a migration deal coming together in a bid to save her government, german chancellor angela merkel agreeing to tighten asylum policies you can see chinese stocks outperformed overnight as well and back home, major averages on track for a four-day winning streak this morning, we'll get data on auto sales, factory orders, and wednesday, markets close for july 4th on thursday, we get the fmoc meeting minutes. friday, that highly anticipated u.s. jobs report now, the other big focus for markets is trade canada's trade tariffs went into effect on sunday now china's round of tariffs go into effect on friday. and china is showing no signs of backing down some have investors are more concerned about whether president trump will respond with additional tariffs on china. now, speaking of chinese trade, deutsche bank downgrading the

airlines, american, delta, and united airlines on these trade disputes those stocks trading lower today. take a look at one victim of the simmering trade tensions, soybean prices, plummeting to their lowest levels in a decade, as looming chinese tariffs threaten to stifle demand from the united states' largest customer a couple of other stocks on the move today roku, oppenheimer upgrading roku, increasing confidence on the channel's ability to garner viewership on other platforms. that stock up 4% and a big upgrade of square by susquehanna analysts, increasing its price target from 53 to 74 they're citing good fundamental trends and that acquisition of weebly but those shares are both up 80%. a good year for jack dorsey. >> thank you, seema mody i did want to check in, of course it's been quiet on the fox front. remember that?

disney and comcast fighting it out for fox, the current bid from disney, $38 cash and stock has, of course, they have a merger agreement in place. the question is, when will comcast come back? it's been quiet so far one thing, though, that seems certain regardless of whether comcast comes back and offers more than its $35 all-cash bid right now is you're going to see a large transaction take place for the sale of these regional sports networks. remember, disney in an effort to move along the aenti-trust reviw as fast as possible came in and didn't even make an argument saying, here, we're willing to sell all 23, and when the doj saw that, it appears they were happy to take it and enabled that deal to really be fastracked for that approval that was so surprising to be received only six months and 13 days after the deal, itself, was announced. but that was key portion of it we're going to have a large deal, though, down the road. not too long, perhaps, in terms of disney selling those rsns or if comcast does come back, it

would appear likely that it is going obligated to potentially sell the rsns. so they do $1.8 billion in ebitda put your own multiple on it. now, either party is paying a very high multiple for them, overall, as part of the deal and likely will have to sell them at a lower multiple, so therefore taking a bit of a hit. the question, though, is how big will the hit be? and what will you be able to get? there are low-growth, slow-growth businesses, but they do generate a lot of cash flow there might be some interest from private equity. there might also be some interest from the likes of an at&t or a charter, maybe even liberty f1, formula one. who knows? we'll see. but in the disney camp, they'll be able to run an auction that will return a fairly instant price. from multiple parties bidding on different parts of them, given the regional nature of them. there may be certain companies for which it makes sense in a particular region, but not

necessarily nationally but certainly wanted to point that out and it does figure prominently here, because of course the proceeds from that will impact the amount of leverage taken on, certainly if you're a comcast and considering having to divest the rsns as part of the potential bid you may make here and how high you're going to go. you want to be in a position to know you're going to get a decent number there. comcast might be in a position to at least offer carriage agreements to some of the potential buyers that could be something that would be a positive there. but didn't want to lose sight of that an enormous deal coming oon teip of an enormous deal. >> it's an offset to the cash outlay, to the leverage, as you say. you say $1.8 billion of ebitda multiples run where? >> they could -- >> -- toward $20 billion >> what they're saying, personal, you've got overall a gross multiple of 16 times being paid by disney for the overall fox assets so a big multiple there. and then when you have to take that down, as a result of not getting that multiple on the

open market when you sell them let's go from equities to fixed income join rick santelli at the cme group in chicago good morning, rick >> good morning, david wish everybody out there a happy independence day of course, tomorrow is the big holiday. if you look up at the boards, we see 255 in a two-year. that's unchanged you see a one-week chart and it definitely has more of an upward bias, especially yesterday towards the end of the session. one week of tens, not quite the same, and we're sitting at 285, down two basis points. because when they ran up yesterday, they hit 287. so quick math, 30 basis points on tens minus twos still hovering and limping along at 30 lowest, flattest curve since 2007 but bunds could be one of the big reasons as the to why this is going on. if you look at a one week of bunds, you notice yesterday we traded 28 basis points we're hovering at 30 and 30 isn't a great level because 30, if you look over the months and months we continually

bounce off of it, but the deterioration, much of it due to both mario draghi question marks, bigger question marks about growth and reform. and that really is the crux of the matter when it comes to sovereign long end now, foreign exchange, we all know what's going on with china and trade. well, today, the dollar takes a step back. look at a june 1st, one month of the dollar versus yuan it's been on a terror. and today it's easing back a little bit if you look at the same time increment for the euro versus the dollar, it really isn't going anywhere fast. the same can be virtually said about the dollar index the asterisks, while it's holding both currencies at these levels, it certainly looks a lot better on the dollar index chart. mike, back to you. >> okay, rick. thank you very much. now let's get a look at oil prices jackie deangelis is at the commodity desk for that. good morning, jackie >> good morning, crude prices

breaking 25 for the first time since 2016 iranian's president saying that trade pressures will be threatened also watching libya today, declaring a force majeure on some of its imports. and that outage in canada, it's also still in play add to that strong demand forecast for this week of the fourth of july, you can see that prices are evaluated also recall the news about the saudis we're talking about 2 million barrels a d s s a spare capacity they can step into the market to balance it if they want. the president thinks that oil prices are too high. the saudis may not at these levels guys, back to you. >> that is true. jackie, thank you. coming up, trade tariffs and the consumer we'll discuss it all with the former heinz ceo bill johnson and the former walmart u.s. president bill simon dow up 123 "squawk on the street" will be right back here in the early

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overall market is higher but the fang stocks not doing too hot this morning look at facebook, an expanded

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stocks rallying last two days to start the second half of the year dom chu joins us now. >> we talk about seasonality often but when we see the start to the year that we've seen, the question becomes can it sustain for rest of the year the volatility may still be here but generally speaking the second half of the year is a positive one for many parts of the market so our data partners took a look since 1990, major performance indicators and look at these numbers. since 1990, in the second half of the year, the russell 2000 up 3%, a positive trade, 64% of the time s&p 500 up 3.5% on average, a better positive trade ratio there. the dow is up 4% and then the nasdaq perhaps could continue its streak higher if these trends hold true for history. it's a positive trade 75% of the

time as for the sectors that tend to do better in the second half, check these out, health care and consumer staples both north of 5%, positive trades of majority of the time. the ones that lag the most are materials and energy you can see here it's still positive and again, still up but not as much as some of the other ones are one more wrinkle to throw in there, the idea this is a mid-term election year if you go back further to 1982, generally speaking in the third quarter, the markets are lower and s&p off by 2%. it's positive 56% of the time. but it rallies back typically in the fourth quarter on average nearly a 9% gain and it's a positive trade 90% of the time as we talk about the many cross currents, this going to be stuff to watch for as traders get an idea for the context in the second half of the year. back over to you. >> thank you, dom. well, coming up, former hines ceo bill johnson and former walmart ceo bill simon the two bills talking trade and

tariffs. keep it here

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good morning, welcome back to "squawk on the street." i'm sara icen and mike santoli live holiday shortened trading day. we've lost some of the early gains, stocks are still higher looking at the dow and s&p dow is up 85 and it's also lower in the sc&p along with financials, rick? >> our main read on factory orders up four tenths of 1%. most were looking for unchange and another piece of good news, last look was down .8, revision makes it down.4. rather have a positive number but half as negative as it was transportation really improves, up .7 and double from.4 to .9 of

the the final read on durable goods, we take the old half reads out and replace it we had minus two tens now it stands at minus .04 on durable goods, unchanged when you strip out transportation, what i was looking at, capital goods orders and nondefense aircraft. that was a minus sign now a plus sign up .02 minus .04 unchanged when you strip out transportation it's better than our last look it isn't spectacular we're a little lower in yields on the long end, dollar index giving back a good chunk of ground from yesterday. back to you. >> rick santelli, thank you. our road map for the hour begins with a brewing trade war that remains front and center for investors. what it means for the future of american business and consumers you'll hear from the former ceos of heinz and walmarwalmart.

a report that the u.s. government is looking at the social giant's privacy practices, we'll give you will the details. sales slowdown, real estate in manhattan hitting a low, is now the time to buy? >> we start with trade global tejs tensions on the ris new u.s. tariffs are set to take effect this friday after mexico implemented $14 billion on tariffs on u.s. goods. president trump tweeting this morning, quote, the economy is doing perhaps better than ever before and that's prior to fixing some of the worst and most unfair trade deals ever made by any country. in any event, they are coming along very well. most countries agree that they must be changed but nobody ever asked. this comes after comments yesterday criticizing the world trade organization, w.t.o and treatment of the united states listen >> w.t.o treated the united states very badly. and i hope they change their ways, they have been treating us very badly for many, many years

and that's why we were at a big disadvantage with the w.t.o. and we're not planning anything now but if they don't -- we will be doing something. >> aus stral i can't central bank citing uncertainty. and then there's this from a business like campbell's soup and statement to cnbc campbell's estimates the economic impact of tariffs to be significant. joining us now, two people with very close ties to the storied bill johnson, ceo of heinz, currently an operating partner and bill simon, former walmart u.s. president and ceo, senior adviser to kkr bill and bill, nice to see you both bill johnson, i'll start with you. >> okay. >> good to see you >> i talked about the impact on consumer companies which are already feeling it as a result of the canadian tariffs on imported u.s. soups and

ketchups, your former business and other key food products. how bad will this get for some of these companies >> if it continues and spreads across europe and asia it can get pretty bad it affects three parts of the business, it affects cost and affects price and most importantly in some cases it affects sourcing cpg gets a little bit of a break because of localized sourcing but in terms of raw material sourcing like aluminum, things like campbell mentioned, that becomes a big head wind and affects prices made in one country more than necessarily another. it becomes a big issue over time if it continues. i don't believe long term that it's in anybody's best interest to let it go on. >> speaking of u.s. business, feeling the heat as a result of the tariffs, the president continues to tweet about harley-davidson seconds ago. here's a new one for you bill simon, he writes, now that harly is moving part of the

administration out of the u.s., working with other motorcycle companies who want to move into the u.s. harley customers are not happy with the move. sales down 7% in 2017. the u.s. president trump says is where the action is. what do you do if you're running a company like harley-davidson right now? >> that's a great question this president is taken drastic and dramatic action but i think everything he does is drastic and dramatic but it is a fact and it's really undeniable that we have a trade imbalance and a significant one that's been building because of the trade policies over the last 20 or 30 years and dramatic and drastic action tariffs in a trade war that we appear to be headed towards. you know, the president is trying to take to address them i agree with bill johnson. i hope it doesn't last long and i hope it's a way to get people to realize that he's serious and come back to the table and renegotiate these eals. >> i mean, bill simon, that

comment has been -- we heard from many people like you, a lot of ceos, michael dell was saying something similar, unclear whether it's going to happen what would be the impact on a walmart customer you know the shelves better than anybody and having done a couple of documentaries, a lot of the products are from china. what would be the impact on your typical walmart consumer if these things -- this keeps running down a road where we do end up in a significant trade war? >> well, you know, just to be clear, two thirds of the things that walmart sells are grown or made in the u.s. and third are imported but a third is significant when you're a $300 billion plus u.s. business it would have an impact in the short run on walmart consumers and it would be fairly substantial. however, you know, the december mason of the middle class led by u.s. manufacturing loss over the years had a big impact and walmart has been trying to address that with the commitment to buy u.s. products and $250

billion over two years it's a program well received and progressing towards its goal in the short run dramatic cost impact and probably better for middle class families. >> bill johnson, you know, we look at these trade barriers and restrictions and idea is somehow if it causes other countries to reduce their tariffs or increase to the markets that's a good thing. ultimately we're talking large companies u.s. based companies or elsewhere move production to the united states, it seems that's a decision that a ceo would only undertake if they had multiple years of certainty about how these things were going to be arraigned. i guess right now, one of the risk rewards of responding at all to some of these potential barriers >> i think that's a very good point. and an excellent question. you know, i think sourcing decisions in terms of final production do take a long period of time and there's a lot more

factors that go into it. you have labor cost and the strength of the dollar versus the strength or weakness of a local currency there are a lot of other issues. i think what happens now is most companies will ride this out as long as they can if this looks like it's going to be sustained, it will affect sourcing decisions i must say one of the things i would have done slightly differently than i think some of the things being done now, if i was going to move sourcing, i don't think i would have broadcasted it i would have done it very quietly, recognizing it eventually it leaks out. i would have done it quietly so as to not stick a finger in anyone's eye that's to the benefit of shareholders and employees over time but these decisions are not made overnight and they are long implications for these decisions because once you move sourcing, you're pretty well committed to that country or that location for a period of time and so if it reverses itself, you have a cost problem and ultimately a pricing problem you need to do these very carefully. again, i think people let this ride out for a while and see how it plays itself out.

>> bill johnson, how much cost can consumer companies whether they are the staples that you and i follow or maybe more discretionary companies absorb costs? how high can they deal with inflation before they have to pass it onto the consumer? >> well, i think it depends on how important that business is canada fortunately for most u.s. companies is still a relatively small piece of their business and from a multinational standpoint, it will depend on what happens in europe and asia primarily. you will pass it on as soon as you can. the problem right now is while we're seeing inflationary impact in the goods in currency changes and because of tariffs, there's not much inflationary pass through that you can do in pricing. ultimately what you're going to do is confront the issue by reducing costs and taking price where you can and improving your mix and cutting back on areas where you don't really believe you're getting much benefit. it takes a constant review and

continued overview of the markets and where you're going for us, for example, we would have shifted production silently to our european factories on ketchup to our canadian factory when we had it that's one of the things kraft is facing right now. i think it's product dependent and market dependent >> bill simon, you mentioned what is a laudable goal, creating more middle class jobs by moving manufacturing back to this country but i wonder, do you think the current strategy which may include withdrawing from the w.t.o., at least we heard the president sort of making potential threats about that, or moving in a lot of different directions here is going to get that end result? i mean, we look at harley which is moving production to europe because of the response from the europeans to our own tariffs what gives you the confidence that actually ends up being the result of all of this? >> well, bill johnson said it pretty well.

it's a long-term decision and over the last say six or seven years, the economic factors have been tilting in favor of u.s. and u.s. manufacturing and return of u.s. manufacturing the factories built 20 and 30 years in asia are now reaching their maturity so we're getting ready to head into another generational change the emergence of the middle class in asia, which is great is starting to create demand for products in asia there's an opportunity for the next generation of products to be made somewhere else and the u.s. now with energy increasingly energy independent and a market ready to absorb labor and jobs would be the place that could do that and walmart several years ago we did an analysis which talked about which product categories are ready to come back now and many started to come back and which will take a lot of time. the formula is right and the timing is right. but those decisions aren't long

term as bill said and they'll take some time to be implemented. once they are in place, that plant will stay there probably for 20 to 30 years so you're committed to that decision so that process is going on today. and you know, a lot of this discussion about trade and tariffs and retaliation changes the decision or the discussion and so it would be better if all of that were to be cleared up and there would be certainty so manufacturers would know what the markets would look like and know what the tax and trade laws would look like so they could make those decisions >> bill johnson, what happens to campbell's soup next a company that doesn't have a ceo, trying to figure out whether it's for sale or not and whether the family that owns 40% wants to sell it and now has to deal with aluminum tariffs and canadian tariffs on soup import, what's the future? >> the future is decided by the family there are a lot of provisions in the charters that really give the vote back to the family.

i think david mentioned it earlier in the broadcast, about how much they control. but they really control more than their shares indicate because of the provisions in anywhere charter i think whatever the family decides is really what's going to be the inevitable result of where they go. having said that, they do have some significant issues, primary business has been down for the last several years and adding cost to it is not going to be helpful because they haven't been able to price they aren't captured in my view the consumer trends in the u.s. or frankly the rest of the world. and so i think right now they are struggling to sort of one pick a path and go down that path, strategy is always a function of circumstance and there's a change in their strategy hasn't. and secondly, the family will have to make a decision as to whether or not it would be better off in someone else's hands or whether they could work their way out of this themselves and only the family can answer that i hate to predict -- i'm still somewhat skeptical about whether the company will be sold i'm not negative on it

i'm just skeptical of with whether the family will reach that decision. >> why because historically the family always o opposed it and they have four or five members from across the family on the board having said that this time i hope in their eyes is a little different and they may see the fact that consolidation is good not only for them but for the industry i'm just relick ta licluctant tt that way given the history. >> do you think there would be a decent amount of potential interest >> i think there would be interest based on the synergy potential that the company would bring to a bigger company in terms of the cost they could get out. that's another issue the family will have to confront because they have been so wedded, whether they go down that road, i don't know from a gross standpoint they've got issues soup is a category fundamentally challenged in the shift in consumer taste in the united states and other businesses while good businesses are relatively small and relative to

the market, i think the one case with the snacks acquisition that got into a category where there's a bow heel edge in control. there are a lot of factors that go into a decision like that but i do think people could -- some company could benefit for a short period of time to the consolidation process bought i do question whether they would bring growth to the business. >> thanks. good to get your perspective bill johnson and bill simon. for more go to cnbc.com we're all over the trade story and impact on business i will note harley-davidson trading up almost 2% despite the president threatening to negotiate with their competitors about bringing business here >> all right well, the worst heat wave of the year is hitting the u.s. we can all attest here in new york city. weather channel meteorologist stephanie abrams joins us with the latest from atlanta. what can you tell us >> unfortunately it's not going to end through today and

tomorrow everywhere you see red, orange and pink on this map, this is an indication that we're going to see heat indexes of 100, 105, here in ohio, 110 degrees. that's what it's going to feel like outside let's talk temperatures. these are actual highs today remember, these are taken in the shade. if you step out into the sun, it's going to feel 10 degrees hotter than that now you throw in the humidity and bam, look at that. this is what it's going to feel like yet again, new york city, 104. d.c., 107 and then we're going to see a repeat of this as we head into tomorrow of course tomorrow is the fourth of july. so it is going to be blistering hot out there for everyone, make sure you're drinking plenty of water while you're going out and celebrating. the west coast is going to be actually quite comfortable and quite dry. look at phoenix, 107 of course, it's going to be a hot one there. here's some of our extremes we're going to see tomorrow. phoenix, 107, miss soul la the coldest spot, that's a high.

42 degrees on the fourth of july and that's going to be a little wet in galveston a and bit breezing into north dakota. >> that's a dry heat in phoenix. >> exactly >> easy. >> not to worry. not like out here where you get wet walking outside. >> humid. >> true. lots of water and ice cream. >> thank you, stephanie. >> when we return, take a look at oil prices, surging wti topping $75, first time we've seen that since 2014 a look where prices could go from here and what's driving the action, actually, wait, things have turned around we've just lost it we hit 75 and then -- we'll look at all of that plus facebook, a probe pile-on. new report has shares falling this morning we've lost some of the early gain but dow up about 70 points but the s&p 500 is being weighed a little lower by technology and financials, nasdaq just flipped positive we'll stay all over it for you

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crude crossing above $75 a barrel for first time in three years and dipping back below that level geopolitical tensions driving that volatility as well as supply concerns, joining us to talk about it all. global head of analytics and our capital marketses head of commodity strategy and cnbc contributor. good morning to you both chris, markets trying to absorb

a lot of things here obviously we got through the opec meeting and we have the president trump tweet asking saudi arabia to give more supply we get a bounce this morning and then we give it up what do you make of it all >> there's a lot of talk about opec right now but the things we're not talking about is the short term demand disruption that we're seeing, 350,000 barrels out of canada and libya somewhere around 700,000 barrels a day of lost production so all of the talk has been about iran but this has come early the disruptions and we saw a very large stock draw in the does last week, 10 million barrels, almost 9.9, that's really given a lot of support to w.t.i. and pushed into strong -- and see prices now above $75. >> we have the one-off supply disruptions chris mentions and the premise of course that the president's tweet that saudi arabia could turn on the taps and opec could make up the

difference i'm guessing the market thinks otherwise? >> there are real questions about how fast saudi can bring this on. saudi and russia reiterated plans to add an additional 1 million barrels. president trump asked for 2 million and it's a real question does saudi arabia really have the capacity in the short term to ramp up 2 million barrels of production as chris pointed out, we have pro live rating supply outages, 850,000 barrels, that could be extended throughout the year even if it clears up at the end of july, we have venezuelan production continuing to drop. this market is actually tightening at the moment we're questioning how quickly opec can bring on any additional barrels. >> even if saudi arabia does sort of cave to the pressure from president trump and his tweet and increase production from here, is that necessarily bearish for the market wouldn't that put them more at the confrontation with iran? >> there are a couple of

factors, if saudi arabia spendses all of their spare capacity, we have no shock absorber and the gee toshio politics is going to heat up over the summer. august 4th, first set of sanctions kick in. there's a real question whether iran will stay in the nuclear deal what happens if they restart the nuclear program and today they are making threats to potentially cause trouble to shipping lanes like the straits of hormuz. i think we're headed towards a hotter summer in terms of geopolitics which could put pressure on prices. >> one of the investors describe saudis as similar to what the fed is for the bond market and if you think they are out of bullets, you know what's going to happen. is there a fair comparison think fg saudi is sort of down or out of bullets they don't have the spare capacity >> that's absolutely a great description at the end of the day. maybe they've got 1.5 million barrels to put on the market and already added 66040,000. they can't put the amount of oil

on the market long term. they can do what we call water flooding of the reservoirs to increase production and empty their tanks. we think that's what they are doing today. they are trying to get that all along. yet the big problem is going to be in november, where we see the big impact of these sanctions on iran 1.4 million barrels a day is going to be taken out. we've got this imbalance now of about 2.4 million barrels of day of disruptions versus maybe something like 1.7 million barrels to 2 million barrels of spare capacity to come on. i think we're running out of oil to throw back -- >> the laws of depolice do apply? >> they do, taz an interesting point. everybody is working extremely hard to maximize production out of wells but what we're doing is we're more rapidly depleting the existing wells and not investing so much in new wells or production facility. very low levels of investment

decisions being made for what i call the mega projects to supply tomorrow's oil. >> sounds like a bullish picture. oil taking a pause for w.t.i we'll see where it goes through the summer thanks for your time this morning. >> as we head to break here, take a look at shares of glenn corps. under pressure after the company received a subpoena from the u.s. justice department. on pcomplying with money laundering and foreign bribery laws "squawk on the street" will be right back dow is up 90 don't go away. whoooo. looking for a hotel that fits... ...your budget? tripadvisor now searches over... ...200 sites to find you the... ...hotel you want at the lowest price. grazi, gino!

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time for e.t.f. spotlight. we're looking at consumer staples, they are moving higher this morning despite the sector still trading well within that more than 10% correction territory amid trade tensions and very well known growth challenges look at the xlp, the main sector spdr, you see it down 10% for the s&p consumer staples index although it's interesting if you

look at the right hand of the chart, in the last one month, it's up 4%, it's one of the best performing sectors in the last month. there has been this bounce they got so oversold i think a lot of bad earnings reports got filtered through and people wondered they had answers to the growth challenges and it seems like with the rights of p and g and personal products it has brought the sector up. we have a look at the sjm. strictly a food oriented look at the consumer staples that has been weaker in the last month than the broader consumer staple stocks. there's a little die verge ens between beverages and package food companies. >> seen as struggling a lot more, especially the domestic players but you have two other things working for these companies and that is interest rates stopped going up we were talking about the 3% on 10-year yield, that was a big -- they were appealing over the last few years and that stopped happening and they became

attractive again you also have the deal talk and the speculation and the chatter reaching a fever pitch and the activist like a dan lobe and that sort of thing, it's not like all of a sudden this group is growing again. >> you can pin cal conagra, may be part of the indexes you just mentioned. >> everyone decided that was a pretty high price to pay but that's good for the rest of the group, right this is the going rate for if you're a smaller player like pen that cal. >> if inflation heats up and tariffs that could be a head wind the strong dollar stands in the way of a lot of companies that do business overseas breaking news, auto sales from gm. >> what we're looking at are april and may and june and there's no comparison really for estimates from other analysts and people who have been out there saying this is what we expect they were up 4.6% for the second

quarter for general motors and when you look at the market overall, that generally is in line with what we're seeing the market overall gm not only maintaining market share but average prices up to $35,500 and to give you some sense of where the market is right now, consider these two statistics, silverado pickup sales up 15% by comparison, chevy bolt, sales down 22% and general motors said it is encouraged by global demand for the bolt and its increasing fourth quarter production of the chevy volt despite here in the u.s. they were down in the second quarter. >> i'll take it, thank you, phil lebeau >> let's send it over to sue i e herera. >> a kremlin spokesman says president putin and president trump may meet in private as

part of an upcoming summit in helsinki the two could meet without their aides before the start of the official meeting on july 16th. in switzerland, iranian president rohani appearing at the news conference with his swiss counterpart and responded to the u.s. threat by saying washington will never be able to cut iran's oil revenues and said as long as iran's interests are preserved in the nuclear deal it will respect the multinarkt pact. >> homeowners were set to evacuate, now set to scorch more than 700 acres firefighters are making progress though in containing that wildfire and the maszive lebron james banner hanging in downtown cleveland is coming down this after james signed a four-year $154 million contract with los angeles lakers and the ten story bill board has become

a city landmark. >> you never know though we'll see. >> you're up to date that's the news update you never know where he's going to go next after the lakers, back to you. >> he will be about 37 at the end of this contract although, you're right, never know, the man is incredible. >> he is. >> absolutely. >> they'll just store that banner >> even with playing three additional seasons when you add up the playoff games, sue, thank you. >> sue her ra ra, when we come back, we'll have more on today's auto sales numbers and plus president trump threatening new tariffs on automobiles as the trade war does seem to continue to escalate. former general motors vice chairman bob lutz will weigh in on all thingtaffs ris related and i'm sure a lot more. he'll be next. i'm april kennedy and i'm an arborist

with pg&e in the sierras. since the onset of the drought, more than 129 million trees have died in california. pg&e prunes and removes over a million trees every year to ensure that hazardous trees can't impact power lines. and since the onset of the drought we've doubled our efforts. i grew up in the forests out in this area and honestly it's heartbreaking to see all these trees dying. what guides me is ensuring that the public is going to be safer and that these forests can be sustained and enjoyed by the community in the future. june auto sales from top u.s. automakers coming in line

with expectations and there are concerns that could be disrupted by president trump's policies. the eu warning of a $300 billion hit in retaliatory tariffs that the u.s. imposes auto import tariffs, the likes of which the president has threatened at 20%. the trade group representing gm and ford and fiat saying a 25% import tariff would increase the imported cars by nearly $6,000 joining us now with his take, vice chair bob lutz, give me your take here 20% tariff on autos coming from eu, what'sing that go to do? >> this is president trump correcting something that's been out of whack for the last 30 or 40 years europe has four times the automotive tariff that we have they have 10%, we had 2.5. china had 25%. other countries have been

basically plunderring the american market and making it impossible to sell overseas. the 25% in the $6,000 that's all scarce stuff and i could see where gm and ford have joined in the protest against the 25% because at this point it also covers nafta and canada and mexico and all of the domestic companies have very heavy manufacturing facility, especially in mexico but also in canada but my guess is 25% is never going to happen. it's just the big stick to threaten everybody with and what the president is really after and god bless him, is to get a level playing field so that american products aren't disadvantaged. >> bob, i think one of the recent times we spoke to you, we mentioned 25% duty we have here on incoming light trucks and pickup trucks is where the

growth is and profit is for north american auto sales. you said look, i think we'll be fine our pickup truck business would do well. don't you think the europeans feel the same about their domestic car business? we're kind of looking to get access to a mature market for vehicles and it's just unclear i would wonder if you're wondering what the risk reward is, we have lower duties in europe how much chevies will you sell there? >> specialty products like chef ro lay camaros and crossovers, there's a lot of demand for that in europe, but american vehicle sales in europe are at a symbolic level by the time you add the external tariff and the 20% value added tax, a ford mustang is $60,000 in germany, whereas german cars in the u.s. because they are tax

exempt when they are exported from germany take 2.5% and 5% sales tax and mercedes bens or bmw is cheaper in the u.s. than it is in europe this is ridiculous and we've accepted it because it's been this way for a long time so we think it's the natural order of things. but the natural order of automotive trade is what in the industry we call the international car exchange where everybody has sort of the same tariffs and same tax load on the cars and everybody trades cars across international borders. that's fine. and whether this would result in a sales surge for american producers immediately, the answer is no, it probably wouldn't but over the years, especially as the u.s. becomes very, very skilled at autonomous cars, i

would see -- we got to do something to balance exports and imports. look at the country's trade deficit. >> okay, so you clearly favor the president's policies here. but i think the question that people have, what about the method he's going about doing it yes it's a noble goal to lower trade barriers for american cars going into europe, but at this point, when automakers and parts are so globally interconnected, confronting them by imposing tariffs and creating a tit for tat trade war that brings on all sorts of other products, when you could have just negotiated the ttp. there was a trans atlantic partnership why no go about it it that way other than the direct confrontation that could affect economic damage >> every major surgery performed on the human body has some dramatic short term side effect like and every strong medicine

has side effects like may produce headache, loss of equilibrium and nausea and vomiting, et cetera, et cetera no cure is without side effects and this happens to be the president's preferred negotiating tactic, if you read his books, you're not surprised by it. which is immediately produce the big stick and ask for something that you know you're not going to get but at some point, all he's trying to do as he did with kim jong-un and as he is in the process of doing with iran and as he does with nato, he's getting everybody's attention and making sure they understand that he is dead serious about changing an inequitable system then after all of the scare and $6,000 per car, which i'll tell you is a red herring, that would never ever happen, but after all of the scare is gone, everybody sits down and negotiates a

reasonable settlement. my guess is it's going to be either europe reduces their external automotive tariff to 2.5% or we raise ours to 10% to make it like europe. china comes down from 25% to 10%. and if everybody has 10%, that's fair >> right, bob, you mentioned one thing, autonomous vehicles i do wonder sometimes thinking about where this industry is going and the possibility of the rise of fleets of autonomous vehicles that perhaps lead to fewer people owning their vehicle. i mean, we're talking about trade here to create jobs, of course is the hope of the president here in the united states but isn't the long term trend for actual vehicle production perhaps going to be less given the rise of autonomous in? >> well, look, i think this is a subject that i give paid one hour lectures on i'd use up the whole rest of the

morning. but autonomous vehicles are definitely coming. there's going to be two kinds, which is conventional vehicles that you can use all over the country but which have an autonomous feature like new cadillac ct 6 and super cruise and other category will be the fully automatic, fully anne t autonomous robo taxis which will be what will move people around in the urban area. those are going to be owned by the big transportation fleets like uber and others and i know -- i suspect the big automotive companies are going to want to have their own autonomous fleets out there. but that's going to really fundmentsally trans for the automobile business. if you hail -- use your cell phone to hail a autonomous module, you don't really care whether that's a bmw or mercedes

bens or chevrolet or ford. that means it's kind of the end of the automobile business as we know it. >> right which sounds like a good place to end for now and perhaps begin the next time you join us. i don't know if we'll have an hour bob we're not paying you but we certainly want to hear what you have to say. >> okay. >> bob lutz. for a lot more on this trade war, go to cnbc.com. we've got a lot there to read. whether we come back, time to buy real estate having the worst second quarter since the financial crisis we'll discuss. take a look where the major averages stand at this hour. a little over an hour into trade. still positive across the board, oil gave back some of the early gains and s&p up a third of a% nasdaq lags but is in sivepoti territory after a down open. we'll be right back.

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in just three minutes, at better.com. . wlets get olet's get out toe group. hi there, rick. >> ira harris, last before independence day, happy birthday america. i guess if you're going to talk trade, everybody is talking trade in the conventional wisdom is nobody wins a trade war but some of the historical facts don't seem to jive, do they? >> no, there's a great book out now by professor dug house irwin, pages 380 to 420, clashing over commerce it came after deflationset in. >> say it again. this is key. what was -- there was the problem first that created a nervous scenario that smud holly grew out of but didn't really cause it and that's the way many

remember. >> myself included i'm from the age group which i was in university studying these things. >> why is that important here? >> because everybody is trying to place that on top of. if you were doing a chart, you would place that, here's the impact the impact is wrong. it comes back to what you and i have discussed for many moons, of course the yield curve. the yield curve has been an indicating something about the global financial system long before these tariffs had become a main stay conversation. >> let's mplay my favorite game. how many times have you head fed speakers and economists and analysts lots of street cred say how many basis points higher do you think it would be without the policy pick a number? >> 40 points. >> i here as high as 75 basis points. >> used to be 110 basis points. >> let's for the heck of it say it's 50. you had 50 basis points, that 30 tens to twos now becomes 80.

wouldn't probably bother anybody. >> no. >> how significant is that manipulation of rates made the yield curve flash red but then add in global weakness how are we supposed to interpret it >> let's go to the piece again written by governor the piece we by governor patel from reserve bank of india warning about the three pillars taking place here, the increase amount of treasury bills, the fed raising rates pushing shortened higher, and of course you have a dollar funding will problem through all of this because the united states sees more pressure -- >> competition for dollars to service debt. >> flattening the curve. we discussed this last week, if you overlay a gold chart with a two-ten curve, it is a concept that there may be deplace developing in the system that's what the world is worrying about because it walked in lock step with the flattening of the curve over the last four months. >> real quick because we have

little time left how would you proceed if you were the fed chairman with respect to trying to navigate wanting to raise rates but understanding all of the implications that have nothing to do with our economy preventing -- >> well, you know what i have a lot of respect for him, he has done a good job, but stop, stop raising the fed fund rate if you want to continue shrinking the balance sheet, fine, but you don't know the impact of both. >> that's right. if you strengthen the balance sheet you steepen the curve. thank you. >> rick santelli, thank you very much let's go over to jon fortt with a look at what is coming up on "squawk alley." >> good morning. names like airbnb, we will look at the second half outlook for ipos and startups and more coming up on "squawk alley." ♪

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welcome back to squawk on the street the real estate market on long island continuing to slide robert frank joins us with more on the story how bad is it? >> pretty bad, certainly the worse since the financial crisis it is actually the third straight quarter of lines for manhattan real estate. prices fell, sales declined and inventory was way up

the average apartment in new york city will cost you a mere 2.1 million, down from 2.2 million last year according to a new report from douglas ellerman and miller samuel the number of sales fell 17% and inventory of apartments listed for sale, that was up by 17% now, the high end is still the weakest, especially the new condo buildings. sales for new developments fell by 37% there is now a 15-month supply of those luxury units. now, the three main reasons here, you've got a growing pipeline of new condos coming on the market you got that new tax law which is making buying a home in high-tech states less attractive, and you have fading foreign buyers get this, the share of apartments purchased by foreigners has fallen by 40% since the peak in 2015 now, the overseas economies are slowing, governments are cracking down on using real estate for money laundering and off-shoring. most expensive sale of the quarter was penthouse of the new

getty building off the high line purchased by robert smith. he paid $59 million. that is a new record for downtown manhattan 10,000 square feet, two-story penthouse. it has two master suites, four bedrooms, seven baths and two kitchens guys, here is a question quiz for you guys why do you think they call it the getty building >> it used to be a gas station. >> yes! yes, it used to be. >> i remember. >> good one, david david knows his manhattan geography. yeah, it used to be the only gas station left downtown. they wiped it out and now it is a condo selling for $59 million. >> it is hard to find a gas station in lower manhattan. >> robert, we have the lack of deductibility of the state and local income taxes coming. people haven't paid their taxes yet, it is this year don't you think it is going to drive even more high-enders out of manhattan, potentially hurting the market even more >> it will we won't know exactly what the effect is until april when people start writing those

checks, but it is certainly at the high end the low end, half of all purchases in manhattan still use a mortgage, so higher mortgage rates is now hurting that sort of million to 2 million, what we call the entry level in manhattan as well. so that and the taxes, it is going to be a tough year >> all right robert, thank you. >> thank you, guys. >> sarah is sad. she's trying to sell an apartment. doesn't make her happy. >> the market doesn't look good. >> it doesn't sound good when we come back we will talk about more trouble ahead for facebook reports the government looking closer at its data and privacy practices. we will talk about thanet xt on "squawk alley. stay with us ♪ whoooo.

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good morning it is 8:00 a.m. at facebook headquarters in menlo park, california, 11:00 a.m. on wall street and "squawk alley" is live ♪ yeah, i was right all along ♪ yeah, you were along ♪