i'm seema mody, it's 5:00 a.m. here is your five at 5:00. netflix shares getting slammed after the company's subscriber growth disappoints prime day problems amazon suffering glitches at the start of its major sale day. microsoft and walmart announcing a new partnership on cloud technology more on that president trump returning from his overseas trip and now facing criticism for his comments about russian election meddling and going, going, and gone national solutioner pri eersolu

bryce harper winning the major league derby it's tuesday, july 17, 2018, "worldwide exchange" begins right now. welcome to "worldwide exchange." i'm dominic chu. a quick check on the market. it's stable. the dow jones would open up by 5 points as these futures gains hold, if they do this morning. the s&p basically flat the nasdaq off by 57 much of that driven by what's going on with netflix. we'll have more on those broader markets in a moment. that's our top corporate story shares of netflix in freefall after subscriber growth fell short of forecasts the shares are off by 12% in extended hours trading on the conference call netflix says it overforecasted the quarterly changes and the pace of new customers noting it

underestimated subscribers in 7 of the past 10 quarters. >> so think of us as continuing every year to figure out how we make certain adjustments to keep the operating margins growing, subscriber base growing. that's been the basic way we've been operating so it's more of the same and in terms of the dart board several years out on when we double, the answer is not soon enough we're always pushing hard to figure out how can we get more growth but we're awfully pleased with what we got. >> that's netflix in their own words. let's continue that conversation with richard broughton as we talk about subscriber growth numbers it's not like we are losing subscribers, it's just they're growing at a slower pace than before how much of this will be something that weighed on this

stock longer term or is this something netflix can shake off if it executes properly in the current quarter. >> absolutely. you're quite right a lot of the reaction from the financial markets on this has been due to the fact that historically they expected netflix to overperform it never underperformed to this degree we'll see what happens in the subsequent quarters. but i would expect, providing growth can return to expectations, that netflix can shake this off >> the outlook for the current quarter was also more conservative than what wall street expected. 135.51 million members is what they are saying. is this a sign that netflix's decision to raise prices backfired? >> no. i think generally we've seen subscriber acceptance of price rises. netflix has been able to continue driving its average

revenue per customer upwards without seeing too much of a down side. if we look at paid additions, that paints a more positive picture in the u.s., paid additions were equivalent to last year and internationally on the rise i think the price rises have been broadly accepted by the subscriber base. >> richard, we talked about these average revenue per user numbers. netflix may be looking to up that number. there's some reports they may be looking to add some ultra high definition 4k offerings. you charge them more per user for that how much is driving the growth and that next level of visual stunningness for users out there? >> uhd is a challenging thing. i wouldn't expect that to have the same impact as hd did on the paid tv market years back.

that's because the improvement in visual quality is not so much of a step up they need a large tv and to be sitting quite close to be able to notice the difference for netflix that's about driving a small proportion of high-end customers. i don't expect that to be the next cash cow. >> what do you think of the competition? reed hastings pointed out the consolidation of traditional media players like at&t, fox, what do you think this means for netflix? >> we are seeing two forms on consolidation, one on the domestic home turf where suppliers are aiming at launching their own direct to consumer services. that raises competition for new subscribers, and then it potentially raises the price or cuts off the price of content.

so forcing netflix to add more to originals and again they're being attacked on two fronts. >> netflix is the story of the day when it comes to the u.s. stock market having a huge effect on the nasdaq richard, thank you very much >> thank you in other corporate news, amazon suffering a glitch during its annual prime day sale. kate rogers has more on that >> good morning. amazon did suffer from technical issues when prime day kicked off at 3:00 p.m. yesterday with glitches appearing on amazon.com and on the app this is what many users saw when they tried to log on photos of the dogs of amazon's error messages, cute but not what customers were looking for. nearly two hours into the day, amazon did release a statement

saying some customers are having difficulty shopping and we're working to resolve the issue quickly. in the first hour of prime day in the u.s., customers ordered more items compared to the first hour last year there are hundreds of thousands of deals to come and more than 34 hours to shop prime day four more countries are participating this year compared to last year there will be deals at whole food stores and at amazon.com. you do have to be a prime member to get deals for the first time in april, amazon revealed there are 100 prime members globally there are 60 million in the u.s., the membership renewal rate is 85%, even with $220 the0 price hike

what's it all worth here 3$3.4 billion will be spent on amazon during this event, up 2.4% from last year but the glitches are a huge deal about 40% of shoppers say they'll go on other sites like target, macy's, kohl's, nordstroms to see what deals they have going on you have to wonder the people who got error messages, got frustrated and went somewhere else >> bad news for two f.a.n.g. stocks >> i know. big driver today walmart making another big push to take on the likes of amazon the company entering into a strategic five-year partnership with microsoft the retail giant will use microsoft's technology to power wider use of the cloud and artificial intelligence. walmart saying they are looking to make shopping quicker and easier for customers walmart and microsoft shares are

lower. the futures picture overall not as negative as some parts of the market you can see if the dow were to open up now, it would open up by 15 points. pretty much flat the s&p 500 down by 4 points fairly stable there. the nasdaq, the outsized losses right now, that's due to the likes of netflix so we'll be watching that story closely. the ten-year u.s. note sitting at 2.86% joining us is larry mcdonald head of global macro strategy at acg analytics, editor of the bear traps report and a cnbc contributor. as we talk about that treasury picture there is something to be said about this flattening yield curve. is it as significant to the markets overall as people are making it out to be?

>> there is a psychology that gets built into the markets. we know behind the scenes when we talk to friends in washington that the fed is very concerned about this because of the psychological impact on investors globally looking at the u.s the 5-year treasury verse the 30-year treasury is down 20 basis points that's where it was in 1999. that's where it was in 2007. you are talking about something that's nearly inverted >> what are your thoughts on the financial sector with all that was happening on the foreign policy front, financials led the dow higher adding positive sentiment into the sector is now the time to get in? >> we've seen a massive rotation out of the financials in the last 60 days or so so this is a bit of a mean

reversion catch up overall we have noticed money, capital flowing out of financials has flowed into the staples. so late cycle you want to be long consumer staples, telecom you want to stay away with financials, especially with what's happening in europe the banking system you want to be overweight staples and moving out of financials into staples. let's talk about technology and consumer discretionary they have been leaders year to date is tech and discretionary the place to be because growth is still there, despite the fact it may have come in below expectations >> you think about the fangs, there's 145 etfs that are long

amazon close to 500 etfs that are long the f.a.n.g.s. you have to be careful here. you have seen today, close to a 20% draw down in one of the f.a.n.g.s. it's the most crowded trade. i've never seen a trade this crowded. at the end of the day, if there's a fire in the theater, there's one door in the back, and a lot of people have to get through it >> do you think this tlend contin trend continues? >> for earnings, the bar is high 20% expectations on earnings growth in the tech sector it's close to 40%. the bar is high. if you look at the s&p, the s&p has had a difficult time getting through 2800 it failed there. i think four or five times since

the february draw down so i think you want to be cautious around earnings below 2800 if you get above 2800, 2850, then i think you are in a safer zone at the end of the day, you have had back-to-back the two best quarters of earnings in the recent two quarters since 2003/2004, and now looking at 20% expectations for this quarter. so the bar is high be careful below 2800 on the s&p. that's where the bears will come in >> certainly no sense of panic but certainly a sense of caution out there in the markets thank you very much. we're just getting started here on deck, going global. a brexit breakdown trump trade talks and post putin fallout. we're diving in on the overseas headlines after the break. and early risers, one restaurant chain wants to step up their breakfast game. we'll tell you how you can score a short stack for less than a

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to spin off its car services unit wanting to raise 1 billion to 1$1.5 billion on the deal and has tapped investors including softbank didi also getting a 5$500 millin investment from booking holdings don't miss glenn fogel on "squawk box" today at 8:00 a.m. eastern. booking is the one travel operate their has significant clout in china it also invested in seatrip, and now trying to build out its chinese portfolio with investment in didi. >> developing news out of washington this morning. the senate's top democrat is asking republicans to take a vote on backing the fbi's russia investigation after president trump ripped it apart in a joint appearance with russia's

president. tracie potts reports from capitol hill with reaction from those lawmakers. >> reporter: hours ago this small but loud protest greeted president trump as he landed back home to scathing criticism of his summit with russian president vladimir putin >> i never thought i would see an american president throw the intelligence community under the bus like that. >> reporter: that's a republican senator john mccain called it one of the most disgraceful performances by an american president in memory. >> it's outrageous. >> reporter: criticized for believing russia and doubting u.s. intelligence, even his own director on russia meddling in our election >> i have great confidence in my intelligence people. i will tell you that president putin was extremely strong and powerful in his denial today >> standing with putin he criticized the fbi's

investigation. >> the united states has been foolish. i think that the probe is a disaster for our country >> americans are scratching their head and saying if that's not the explanation that putin has something on it, what is it? what could it be >> nothing putin says. critics and supporters are asking whose side is he on tracie potts, nbc news, washington. let's continue this conversation with peter spiegel over at "the financial times." there is a surprising lack of market fallout here. that doesn't mean the wheels are not turning in washington, d.c is this something we could see significantly build up as a market risk in the coming weeks and months >> i've been struck that almost all geopolitical risk has been ignored by the market. it's not just a trump trip the summit with putin was the end of a week-long trip that in

europe was a disaster. at the end he plays kissy foot with vladimir putin. beforehand he was beating up on angela merkel, theresa may, all the allies were getting their heads kicked in by him it was a week where everything we had come tos a sometime by the western -- come to assume by the western union had gone away. there's so much noise right now, the markets can't absorb it and decided to ignore it >> i think markets are trying to quantify what weakening relationships with europe means. does it mean heightened rhetoric on the trade front, more trade tariffs imposed by the european union? what is the fallout from this extraordinary week

>> you know, from an economic perspective, the trade war issue -- remember, there is a huge dispute between the eu and the u.s. on this, which trump once again has called a trade foe. in terms of the global economy, that's more of a risk. we continue see the geopolitical risk with putin, i don't think, flair up into a hot war. so there's no conflict horizon. but geopolitics has an impact. companies become more resistant to investing in certain countries, or investing large. we have a u.s. economy powering on we've seen increases in employment, investment europe is still in a weak stake where the eurozone was a surprise out-performer last year it's been weaker this year the question is whether this geopolitical instability feeds

into economic sentiment in europe and particularly when it comes to capital investment. i would be surprised now if a lot of corporate boards are not saying this is not the time to be doubling down on european investment >> peter, before we let you go, a few moments left here. we are seeing the beginnings of trade agreements signed behind the u.s. or around the united states right now perhaps between europe and china. japan and europe is that something we could see develop further if the u.s. continues on this path with trade and tariffs under the trump administration >> this is clearly a strategic decision being taken by the eu in particular. later today we have donald husk and jean-claude juncker talking with the japanese. they have deals with south korea and other allies who thought they would be part of the tpp agreement. so the eu has decided to focus on american allies that had been

abandoned by trump to see if they can't restore some geopolitical order the eu as a bloc is one of the largest markets in the world they have some economic clout. whether they can actually supplant the u.s. or sort of do away with orsome damage trump d, that will have to be seen. could this be more of a trade project where they pull in more american allies in asia. it's worth watching. >> high stakes poker game for sure peter spiegel, thank you very much coming up. we're watching shares of netflix getting hit hard after subscriber growth disappoints analysts. and later, price harper wins the home run derby in front of his hometown fans. yeah, wow..this must be for one

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net fix -- netflix nosedives. and amazon feeling the heat after its shopping day was hit by a major glitch. how the company and its stock are responding. and there's an emoji for that apple ready to release dozens of

new icons that go well beyond that traditional smiley face it's july 17, 2018 you're watching "worldwide exchange" on cnbc. ♪ welcome back to "worldwide exchange." i'm dominic chu. >> i'm seema mody. brian sullivan is off today. let's check on the top headlines. kate rogers has those. >> good morning. right now netflix shares are plunging the company reporting subscriber growth fell well short of forecasts in the second quarter in the u.s. and internationally. netflix says it overforecasted quarterly fluctuations in the pace of new customers. amazon suffering glitches at the start of prime day, the biggest shopping day of the year the sale kicked off yesterday at 3:00 p.m. eastern. there were several errors on the

desktop site and the mobile app. and walmart entered into a five-year partnership with microsoft. the retail giant will use microsoft's technology to power wider use of the cloud and artificial intelligence. back over to you let's check on markets now futures are mixed. the nasdaq right now lower by 56 points this is a different story when you look at the dow jones, which is up 8 points the s&p 500 is lower by 5 points joining us now to talk about markets is ken kayman. good to see you today. >> good morning. >> netflix is down 11% in the pre market disappointing earnings we've seen a big outperformance in other areas have expectations gone way too high for stocks like netflix >> a lot of these stocks are priced not just to perfection but to expectations of further

perfection the f.a.n.g. trade is the most crowded trade seen in your previous guest's career, and i have to agree with that. so many people are in passive investments that are so dominated by big names, and five or six stocks represent 80% of the s&p 500 gains for the year so investors need to be cautious with these companies with 200, 200 plus pe ratios dominating portfolio portfolios >> but to be fair we've been talking about high pe stocks slowing down for a while not long ago we thought facebook would go down. the cambridge analytica scandal would take them down all these companies have gone through september sichkepticisme why should we be more worried about stocks >> wall street is a crazy place. everything is the same until

it's not it sounds like a ridiculous thing to say there will be one event that gets everyone to look at it differently, then you have the pundits saying we knew it, we called it. it was a concentrated trade. the problem is you're counting on momentum to continue. if you're trading and looking for the day's trade, i would agree. if you're looking to save for retirement and build your nest egg, you have to be careful for the phantom bell ringing and the dog whistle that no one hears today that will be apparent in the future so much of the market's performance is concentrated in stocks with ridiculous pes >> in this market environment where earnings are painting a mixed picture and valuations are a bit more of a concern, how you are advising clients to make money? >> valuations are a concern in a la handful of stocks. now you have to look at your portfolio to broaden out the portfolio. too many people have been

concentrated in securities >> so where else energy, financials >> energy is up. financials i'm cautious on here. i still like small caps because they have insulation from trade wars and they will be less vulnerable to big international stocks just having a good broad based portfolio, maybe some cyclicals, staples, names in sectors that people have built long-term portfolios on make sense to me >> can we look at the macro side of thing we have comments from jay powell, trade wars president trump perhaps saying russia did not meddle in our elections. all of these things are working around is that the kind of environment where investors should still feel like they should be invested or is this a time to rethink about putting more in cash >> it's hard to be anti-market now when the economy is thrusting on all cylinders i think there's a chance that

we'll started hearing the fed back off of the idea of another two rate hikes this year maybe they won't want to invert the yield curve. it's still a friendly market for investors, but if we get break through on the trade war stuff, any sounding of reconciliation or making a deal, we can get a melt up in the market. the reason we've been range bound is because of the trade war fears. >> all right ken, thanks for joining us >> thank you all right. your big individual stock stories now include ford the automaker agreed to a 2$299 million so-called economic loss settlement covering at least 6 million u.s. cars with a potentially faulty takata air bag. ford shares are unchanged in the

premarket. shares of international game technology are higher today. the slot machine company will provide its sports betting technology to fanduel. fanduel will offer other options gradually such as online and mobile betting those shares are up 4.5% on that bit of news. cat rogers has the top trending stories >> the nominations for the 2018 mtv video moouziusic awards are. ca cardib. led the way with ten nominations. the carters were right behind her with eight nominations the show will take place on monday, august 20th at radio city music hall. >> i love cardi b's instagram. if you feel down or bored, open that up, she's hilarious

>> she's very endearing, too >> i have to start following these people the '90s cartoon show rug rats is getting a reboot nickelodeon announcing a 26 episode revival order. the show's original creators will return to the series as executive producers. i totally watched rugrats when i was younger. >> i remember all the toys and things i wasn't a big rugrats person. i'm a little older >> it was a good show. >> i >> happy world emoji guys day. the new emoeng jis include curl hair, red hair, no hair at all >> it took that long to get a

red hair emoji >> this resonates with me because i have more salt and pepper happy 6 0th birthday to i hop. they are offering a short stack of pancakes for 60 cents today from: 7:00 a.m. to 7:00 p.m >> count me in >> i'm in. >> who's driving >> i'll drive. >> when we wake up this early, we can't talk before food. >> i have the four-door passenger sedan with the car seat in back >> we'll move that. it may be the slowest sports week of the year but it was loud and hot in washington, d.c. last night. nationals right fielder bryce harper won the major league baseball home run derby in his own home ballpark. he's struggled a bit this

season, not last night though. he hit nine home runs in a row in the final round he defeated kyle schwarber, and he won in front of his hometown crowd. tonight is the all-star game >> yes, of course. where is that? >> washington, d.c >> got it. still ahead, saying sorry. amazon feeling the heat after prime day sales went a little haywire. we have all the details when "worldwide exchange" returns on cnbc [music playing] (vo) progress is in the pursuit.

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welcome back to "worldwide exchange." the futures picture has been stable all morning the dow jones would open up by 12 points. the s&p 500 down by 4 points the nasdaq off by 55 you can say the s&p and nasdaq, declines are driven in large part with what's been happening with netflix the treasury side of things, the ten-year treasury note yield, 2.86%. the two-year just a hair shy of 2.6% many prime

day deals yesterday after 3:00 p.m. got images of dogs saying uh uh-oh, something went wrong on our end. amazon said it was working to resolve those glitches joining us is sucharita kodali prime day is one of ammazon's most important days of the year. when you experience an outage like this, how much of an impact could this have on sales >> i think it's more an impact on the customer experience and consumers who tried to get on to the site and couldn't find anything and realized they have to come back on days like this when the site goes out, the site is still capturing transactions if you went into deeper pages on the site, like the amazon echo page, that was fine and working

well if was probably 30% to 50% off what they could have captured. it looks like the site has rebounded this morning >> so, one of the things we want to talk about is the idea that amazon sells a lot of its own devices, those alexa-enabled types of devices on prime day. did consumers get as much out of prime day? we make so much of this huge day for amazon are people buying things other than just echo enabled or alexa enabled devices on prime day >> in general yes. yesterday at 3:00 probably not too much not a whole lot was available. tems of which the thousands and vast majority are not amazon

they had coleman products, under armour products. that was one of the sales that was glitchy for many hours yesterday. those are the brands that consumers love, even though the number one item will probably be an echo as it was last year. you will see an enormous day for other brans a brands as well it's expected to be 2 billion, 3 $3 billion in sales. the average day outside of q4 does a billion dollars >> who will emerge as winners from the outage? is it walmart, target and ebay >> well, yesterday the other retailers should have benefited. anybody who, you know, is looking for sales, went to google would have likely found other options. whether on ebay, walmart,

target so many retailers, including retailers lobally. so today the site is back up and running. consumers who didn't see what they wanted yesterday will come back they are curious they'll spend 15, 20 minutes on the site skoaling throu iscrolle and add things to their cart >> one last point here prime day is prime day it's a 36-hour event what's the biggest risk to your mind from an exkulecution standpoint what is the one thing that could rerail all of the amazon succ s success? >> one thing not talked about is the lack of regulation around

the third party sellers in particular what we ended up seeing is a lot of rogue sellers who don't sell high quality merchandise it can be anything from merchandise that falls apart or doesn't work when you get it often because it's coming directly from china to counterfeit products in the united states the ftc does more to regulate small sellers at garage sales than it does to regulate any third party sellers online if donald trump wants to stick it to some of these larger e-commerce sites to do something around the third party sellers to force regulation around that aspect of the sales would be a big deal that's the single biggest driver of the company's success >> certainly an ongoing discussion around regulation when it comes to amazon and third party sellers. we have to leave the

conversation there sucharita, thanks for joining us. we're approaching the top of the hour that means the team at "squawk box" is getting ready. becky quick is live in new york with a look at what's coming up. >> good morning. we'll talk about what you have been talking about what's going on with netflix and amazon prime and what that will mean for the markets we'll dig down through this. we have burton crocket who will be joining us to talk about netflix. that miss in terms of subscribers, how big a deal that is the stock down 14% overnight the nasdaq under pressure because of that and amazon prime. ed lee will join us to take about that we have some distractions. we have three dow components that will be reporting earnings. johnson & johnson, united healthcare and goldman sachs all out with earnings. we'll see if the number there's will be enough of a distraction

to get investors focused on that instead of f.a.n.g. stocks we'll talk more about goldman not only with earnings but what's happening in terms of the leadership there. >> william cohen is a "vanity fair" correspondent who has written the book "why wall street matters" he will dig into things happening with goldman and what the change at the top may mean and we'll talk about rusch zsa z russia with mark warner, the senator from virginia. he's also the vice chairman of the senate's intelligence committee. he will join us to talk about the implications of this what this means. and i don't know, what we may see next out of the united states and from russia we'll talk about that and much more that's coming up >> a full slate as always. thank you very much there. still ahead on "worldwide

exchange," tech tanks, financials fly high. the st abend worst bets for your money coming up after this break. olay ultra moisture body wash

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after all, a cleanser's just a cleanser unless it's olay. welcome back to "worldwide exchange." futures are relatively stable. you could say it's a wait and see type mode. a lot of data coming out earnings kicking off let's bring in peter boockvar. is the picture for economic data supportive of the markets overall? could we continue higher >> we'll have to see whalt impai -- what the impact is of the tariffs. if you can calculate it as a percentage of gdp, it's easy to say it's small a lot of it is a psychological impact does it freeze investment decisions. yesterday we saw sharp drops in spending plans for capital spending and tech spending

is that the first sign that companies are saying let me stop things and see how this plays out. we don't know the answer to that. >> president trump's meeting with vladimir putin, we are seeing push back and criticism from both sides of the aisle in the face of that, markets ended higher yesterday thanks to financials, better-than-expected earnings from bank of america. does that story continue or do we see an escalation in rhetoric around foreign policy and the decisions made by washington how can that impact market sentiment? >> i think geopolitics always has a fleeting impact on markets. maybe for a day here or there. the putin trump thing is somewhat irrelevant and more for

a different type of market companies will be looking at the second quarter, what they're saying about the third quarter, i think that's front of mind >> earnings, are you optimistic or more pessimistic given what you've seen and expect >> earnings will be fine compani companies, some will beat expectations we'll see about rising transportation costs, revenue growth should be good. to me, it's always about the guidance in light of the tariffs and the rising cost pressures businesses are facing. >> what about the impact of the stronger dollar? >> could move the needle if you look back over the past year, it's trading in this range. dollar index around 95 it shouldn't make that much of a difference i would look at it more as an execution for

execution -- excuse for an earnings miss. >> as we talk about the bigger picture, what can we expect out of jay powell? what would you be keying in on >> i think it will be a non-event. he did an interview recently will he lean to that december rate hike? we know one in december. playing it by ear in december. inflation printed at 2.9%. now he's playing a dangerous game in terms of inflation he'll lean against the symmetry thing, if he leans towards the fourth hike, that's something to take note of >> peter boockvar, thank you for joining us that does it for "worldwide exchange." >> "squawk box" is coming up next or your digestion... so why wouldn't you take something for the most important part of you... your brain. with an ingredient originally discovered in jellyfish,

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president trump's meeting with vladimir putin was either a fabulous success or a horrible failure depending on who you ask. we'll get reaction from washington johnson & johnson is set to report this hour we'll bring you a first on cnbc interview with the company's new cfo. and netflix shares are plummeting after subscriber growth came in weaker than expected we'll take you inside the numbers. it's tuesday, july 17, 2018, "squawk box" begins right now. ♪ >> live from new york where business never sleeps, this is "squawk box. >> good morning. welcome to "squawk box" on cnbc. we are live from the nasdaq market site in times square.

i'm becky quick along with joe kernen and andrew ross sorkin. let's look at the futures. after a mixed day yesterday, you will see this morning that the nasdaq is coming under severe pressure down by 53 points below fair value. thank netflix and amazon prime for some issues yesterday. s&p futures down by 4.5 points the dow indicated higher again it was bank of america that powered things for the dow yest