downgoing on the surprise index is the united states went negative for the first time this week. >> thank you. >> like next week? >> you'll be here? >> i don't know. >> will you be here? >> i'll be here a little bit. >> you'll move a little bit toward me and just to keep -- >> that's my role, right >> anyway. >> depending on who is here and who isn't. happy vacation and congratulations. >> make sure you join them on monday "squawk on the street" is next ♪ good friday. scott walker is here david and jim have the morning off. futures weaken as the president

tells joe he's ready to go on tariffs for all chinese imports but tweets what he calls chinese currency manipulation. dollar is down on that europe mostly red. ten year back to 2.85. there's a lot to process today our road map will begin with the president sitting down with joe. bold comments about the economy, the market, trade, russia, and now tweeting about currencies. we'll bring you the latest. >> ge out with better than expected earnings. we'll dig in on the quarter and what is ahead for the company. >> shares of microsoft set to open on a new high we take a look at what is driving the growth and what tce is saying this morning. >> stocks on track to open mostly lower investors reacting to what the president told joe on cnbc he's ready to slap tariffs on $500 billion and a few moments ago tweets.

as we watch what happened. a discussion would be trade war. it's now a discussion about a currency. >> the president is realizing you cannot win a trade war if your currency is the strongest in the world because that hurts your exports and hurts multinational. and it hurts growth. and the fact that he's realizing it might be right but it's extraordinary and breaks a lot of taboos including our strong dollar policy. 1995 shore up confidence in the u.s. i will say that when the president jawbones and intervenes in the market like this, it has worked before the last time he complained about the u.s. dollar being too

strong, remember, back in april of 2017. the dollar fell 11% after that then it started rebounding on the back of the trade war. everyone thinks the u.s. is a relative winner in the trade war. that ultimately hurts us now he's complaining again and the dollar is weaker we'll see if it lasts. >> noticing on twitter some saying it's the paradoxes of the tariffs. that you drive down the currencies of other nations that you're targeting and this is now becoming front and center this morning. it's extraordinary he's weighing in the way he is it's not entirely unprecedented. >> no. >> remember back to 1992, as i was reading this morning, you know, bush xli in the summer of '92, before the election was saying green span should lower rates. it's not nprecedented. it hasn't been the norm for the last 30 years. >> that's the intervening in fed policy so there are two things which are both kind of crazy to people who follow this stuff. which is intervening in the currency market and in the fed in the form of critical -- >> intervening wherever he

wants. you better get used to it. it's not going away. we should have learned the lesso lesson already. >> sure. what are the implications. >> one, we're done with this bit by bit movement on tariffs right. that the president is serious about being ready to go on all chinese imports. and then, two, the idea this may bleed past the midterms. kudlow elaborating on what he said at delivering alpha telling axios the president will not let go it even past the midterms all has been amplified by the interview the president gave to cnbc here is a chunk on the economy, the fed, and more. take a listen. >> currently things are -- the economy is pretty hot. hopefully not too hot. a lot of cash is coming back in through the billions and trillions of dollars, as you know now it's coming back hundreds of

billions of dollars. and, also, companies are coming back to our country. we have record numbers of companies coming back in they're pouring back in. they're going to michigan and ohio and pennsylvania and so many different states. and people can't believe what is happening. >> wage gains. do you worry that is it time for the fed to be doing what its doing? to get a policy question should raising rate and the trajectory -- >> i have a good man in the fed. i don't necessarily agree with it i'm not saying i agree with it and i don't necessarily -- i don't. i'm not thrilled because, you know, we go up and every time you go up, they want to raise rates again. and i don't really -- i'm not happy about it but at the same time i'm letting them do what they feel is best but i don't like all of this work that goes into doing what we're doing. you look at the euro you look at what is going on

with the eu. and they're not doing what we're doing. and we already have somewhat of a disadvantage i'm turning that into an advantage. last year, and for years, we've, losing $150 billion with the eu nations with the european union. and they're making money easy and their currency is falling and china, their currency is dropping like a rock and our currency is going up and i have to tell you, it puts us at a disadvantage. now i'm just saying the same thing that i would have said as a private citizens somebody would say maybe you shouldn't say that as a president. i couldn't careless what they say. my views haven't changed i don't like all of this work that we're putting into the economy. and then i see rates going up. i see china look at what is happening with the currency. it's dropping like a rock. >> partly because of the trade -- >> i think i'm helping i'm doing something, if you want

to know the truth, we're going level out the playing field. >> fresh tweet from the president on soybeans. farmers has been on a downward trend for 15 years the price of soybeans have fallen 50% since five years before the election. the problem is other countries canada charges 275% on dairy farmers will win we'll bring in jerry burnstein happy friday good to see you. >> good to see you. >> we have creeping rhetoric into fed, independence, and currencies what happens next? are we going to start labelling officially the manipulators or not? >> probably not. just because we resisted that even though there have been periods of manipulation. by the way, in recent years, the chinese have stopped manipulating their currency. however, if you plug the yaun

relative to the dollar and draw a line where the tariffs start trump has a point. they did start tanks that's a sure fire way to offset the cost the tariffs he has a point to get to the conversation, which i thought was a great conversation that the three of you were having. i'm not going to, you know, reach for the scrapers because the president said comments about the dollar and the fed however, i think the way you teed up your question is exactly right. if this becomes a repetitive drum beat, particularly regarding the fed, then it does raise independence questions and as some earlier guests said on the show today the fed is one of the last standing institutions in this town that is working well. that's because of their political independence if the drum beat were to keep up, i would be unhappy. >> he can't have it both ways. he said the economy is the best its ever been. that would suggest the federal reserve should be raising interest rates to keep it from overheating. that would be pouring into the dollar. >> right. >> we're the relative safe

haven. the relative fast grower. >> and let me add to that. he actually exacerbated that situation by stimulating with fiscal policy an economy that was closing in on full employment. >> right the money flows into the u.s., sara i'm not sure there are any political implications of this, but the economy is working in his favor. >> the economy is working very well in his favor. politically right now consumer confidence is as high as its been for recent presidents that typically helps an incumbent party, but, you know, these comments on the fed and now he seems to have, you know, repeated them again over twitter just recently. he's going to put the fed in a position where it has to raise rates or its independence will be questioned. and so, you know, it's trump gets these things in his, you know, draw and he can't let them go i suspect this isn't the last we've hear from him on the topic. >> do we think, sara, that the

president or that jay powell is not going to raise rates or raise rates based on what the president says jay powell will do what jay powell wants to do and what he thinks is the right thing to do, no >> yes that's right and that's what we certainly believe or most economists believe. very strong credentials and dependence but, you know, the president has a tendency to not let thing goes look at the pressure he's put on his attorney general over the russia investigations. he's got it under his skin he wants these agencies to work for him. independence, you know, in trump world doesn't seem to matter the way it has for other presidents. he looked at the federal government as his to control and he's got a fed chairman who is forecasted what he's going to do two more hikes by the end of the year

he doesn't like it. >> now we have kudlow elaborating a little bit saying the chinese and the u.s. haven't had discussions in weeks that they've offered no options on ip theft or tech transfers. there have been some holding out hope we were going to get a face-saving comprise ahead of the midterms does the market need to get used to the idea it may likely not happen >> i actually think the market was already getting used to that, and, look, larry has been saying a lot of things i agreed with i liked his segment at alpha that we broadcast here i liked his comments on the yield curve, the low probability of recession when he talks about trade he makes me and everybody else nervous. it's clear there's no underlying strategy to get out of the mess. there's only a strategy for es clas and the theory of the case is we can outlast the chinese and the end everybody shakes hands that's implausible

that's not a plan. that's a fantasy markets are nervous and are going to get more nervous. let's talk about the soybeans. trump is wrong about that. if you plot soybean prices, compare u.s. and brazilian soybean prices, you see the u.s. tanking with the tariffs and the brazilian prices going up. >> yeah. and he's right about that. i'm from iowa and we've seen the pressure that this trade war and the escalation that the trade war appears to be having on the midwest. and you asked me politically earlier about this and the fact is that if you look at this midterm election, many of these most contested senate states are right in the heart of the midwest farm bell. and i think that issue, particularly as it escalades will become a real problem for some of these republican candidates trying to walk a fine line between defending trump and appeasing the trump base, their base and trying to explain this trade war, which is undoubtedly

hurrying mid western farmers. >> are you insinuating you like the old strategy better than this the old strategy didn't work for many decades i mean, gordon change w was on network suggesting what else are you going to do? you have to get the chinese to move one way or the other. >> first of all, i'm not sure what you mean "wasn't working. >> they've been taking advantage of us for decades. what have we done about it president trump is trying to do something about it it may not feel great but something has to be done to bring the chinese do t-- to the table. >> that's a fair point it doesn't mean this is the right thing to do. for example, to me the key is the exchange rates for years we've refused to intervene in currency markets in ways that would push back on

chinese currency manipulation. there's a easy way to do it. we sterilize their currency interventions by doing our own if they buy the dollars, we buy yaun it's a simple solution it's one that has been endorsed by economists. i think that would be abetter solution. >> that makes no sense for us to intervene in the currency market to prove a point. >> it's not to prove a point it's to offset current si manipulation and you don't necessarily have, you know, the chinese are allowed to buy as many dollars as they want, we're not allowed to buy yaun because of the capital controls i think that -- i'm not the only one who thinks this, by the way. the idea if they're going to intervene in currency markets, we can sterilize the intervention with our own currency purchases i don't think that's radical and i think it's a lot better solution than what is going on now. i'm answering the question you asked me. >> they did weaken the yaun by the most in two years. a lot of people see it as a fact

it's a judgment on the chinese economy that will get hurt a lot worse than the u.s. as a result of the trade war. >> we'll have a lot of time to talk about fed independence over the next few weeks. >> thank you not every day the president tweets on currencies a lot to talk about. when we return, we have to talk about earnings movers this morning. ge and microsoft a lot on track to open at a record high. take another look at futures overall. stocks did take a hit on the back of joe kernen's interview where president trump said he's ready to go for all $500 billion worth of exports from china in terms of tariffs rur squa"squawk on the see w trt"he weetn. see that's funny, i thought you traded options. i'm not really a wall street guy. what's the hesitation? eh, it just feels too complicated, you know? well sure, at first, but jj can help you with that. jj, will you break it down for this gentleman? hey, ian. you know, at td ameritrade, we can walk you through your options trades step by step until you're comfortable. i could be up for that.

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plus, come in today and ask about xfinity mobile. a new kind of wireless network designed to save you money. visit your local xfinity store today. ge reporting better than expected quarterly results helped by strengthen aviation and health care businesses but ge continuing to experience weakness in the power division of course, guys, this comes weeks after the company announced its restructuring. ge is set to open higher still down more than 20% for the year. >> cash flow from industrial operations looking at $6 billion rather than 60 to 7. but orders up 29

power continues to be an anchor around the ankles. power orders down 26 ge capital losses widen. the turn around here once again reflection it's going to take some time. >> which is why most of the market parents, guys, i speak with aren't sold necessarily that this is a time, still, or yet to get into shares of ge they could get a momentary pop like they did out of earnings or could have a stretch where they do fairly well but over the long-term, the jury is still out as to where the stock is going. >> not convinced >> yeah. ge cutting costs in the industrial business by a billion dollars. of course, the call going on it will be interesting to hear any comment on trade something we asked john flannery about and he would say he's not too worried about it and that he thinks ultimately cooler heads will prevail. honeywell reporting pretty good earnings rising guidance today. >> microsoft is the other big

story. it will open at a record high again. dow component issues up guidance better than expected results helped by growth in the cloud business they talked about that last night. take a listen. >> we delivered more than $110 billion in revenue with double digit top line and bottom line growth and our -- surpassed more than $23 billion in revenue for a year with gross margin expanding to 57% the strength of our results reflects accelerating innovation and the trust customers are placing in us to power their digital transformation. >> our friend tom hearden said it's a classic 2018 story. you got all the macro worries, all the trade worries this morning. presidential tweets about tariffs and currency and microsoft is opening up 3%. >> you mentioned tweets. cramer last night -- right, the stock drops after the results

and, i mean, cramer was on fire on twitter sort of going after those who said are you going sell it now you're going to sell microsoft now? you hear the call and the stock goes up. it's a cloud juggernaut. >> yeah. >> the stock has done tremendously well and the faang stocks get the bright lights on the marquee. but this stock has done so well. the cloud story that nadella is writing continues to have a long -- >> azure growth been impressive 89%. numbers like that. and to your point about faang, it's sort of being valued like faang. trading at a slight discount now. analysts, a lot of them raising their target it looks on the average now is $119 85%. >> yeah. they didn't give earnings for a full year but said q1 revenue will be above consensus. when we come back, former treasury secretary larry summers will react to the president's

comments to cnbc, and, of course, his kpeents this morning on currencies. all three major averages hovering near break even for the week shooting for their third weekly gain "squawk on the street" back in a minute

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dollar being too strong and rates being too high. >> right. >> the president is telling our joe kernen he doesn't agree with fed policy and he's ready to impose tariffs on all $500 billion worth of exports from china into the u.s and the dow futures are only down 69 points >> it's ridiculous, isn't it the whole conversation it's a lot of noise the fact he was -- he made the comments about the fed and interest rates okay enough already you said what you said that's it. he's got no control over the fed. if the fed changes course, they're going to have justify why they changed course with the data the macro analytics and fundament fundamentals it doesn't mean the fed is going to change it. >> he's moving the dollar lower. >> is he >> yeah. for sure. >> okay. >> are you convinced if powell paused for whatever reason it

would be separately from the president's tweets i think people will assume it's happening. i think it ignites a fire in powell not to do it. he's going to raise rates in september. just to prove a point that he's independent. just to prove it. >> is all the trade stuff noise? >> yes, i think. the rhetoric heats up and it causes angst and anxiety. >> the market thinks it's noise. and the market always thinks its noise after they settle it they get the reaction and the market sits back because it's more noise which is why, you know, futures are down 8 and now look they're going back to almost flat down two on the svp at the moment. >> yeah. the half-life of that concern is getting shorter and shorter. >> exactly right and pretty soon, you know, i wouldn't be surprised to see the market open right here a little bit weaker and turn green. >> all of this noise.

>> right next week is going to be about tech they're going to blow the roof off the house. >> absolutely. google, facebook, amazon [ opening bell it's discovery network ringing the bell celebration of shark week 2018 what an amazing franchise they built over there a congratulations to them. so what is to worry about then vix at 13 today. we're dealing with the hot noise that is passing by quickly. >> i think it's the earning that people should be focussed on not even worried about but to

focussed on. the other stuff is is noise. but in the end, it does not price stocks. >> i don't know. don't tell that to the soybean farmers. >> technology is out of the gate the biggest winner and that is large part microsoft microsoft up 3.25% now i guess the question are what the outlooks liking like what are the comments on trade and the strong dollar? >> and i think that's exactly right. that's what people are going to be listening to as they continue to hear what these earnings will produce. what the ceos are saying about those topics are they going to be impacted? not impacted how are they doing it? i think that's going to be the key to where investors drive the markets. which is why i think it's going to be -- if there's any weakness at all, it will be short and i think the market will start to move higher in the end, i think there is going to be that cease-fire, you know, come to the table and talk about it. >> action in the financials has to be positive lately. finally waking up.

>> no it has to be financials had a tough day yesterday. but, look over the last week they're up 6.5%. off 1% yesterday is no reason for anyone -- >> that's kind of a point. >> they are waking back up and that kind of action trader action that the long-term asset manager is taking advantage of we're being patient. you're right you're going to want to see financials in the lead with technology. >> the president's comments on interest rates could affect, you know, financial trades. >> yeah. does anyone think jay powell is changing course? >> it's not about whether he's changing course. it's about the perception. if he raises two more times, the perception might be he's raising rates to show how independent the fed is. >> that's true. >> it's not appropriate. >> the market already expects it to go up two more times. we've been conditioned all year for four rate hikes. two more are expected. if he changes from two and discuss any less it's about trump having the pressure. if he does more, he'll have to

justify why the economics, why the analysis is forcing the fed to change that course. >> by the way, bullard was out this morning saying hold steady, you can invert the curve if the fed goes on the path it seems to be headed on. >> we said it before, he was talking late '18. >> yeah. a lot of people are talking about invert the yield curve jay powell has to be cautious of that. >> the stock market. i don't know if you heard the president's comments about playing with the bank money. >> yeah. house money. >> house money he's talking about the run up in the market. >> 31% the there. >> the election. the question is does it last and give him the leverage to continue this trade war? >> i honestly don't think it gives him the leverage he thinks it does. he's playing with house money, right. >> why not he's got the political capital out of the markets wise. >> he does but i don't necessarily think it gives him the full right to be

as confrontational and controversial as he's being. i think there's a different way to handle it. >> right it's not his money. >> it's not his money. but he thinks its his money. >> right. >> which is why he's playing -- >> he makes a fair point. >> thank you nice tan, by the way looks good. >> of course, you're saying that in february to him, also we're going to keep our eye, obviously, on some of the banks. microsoft is leading the dow right now. sun trust is having trouble getting out of the gate. one point made about the banks and the conference calls this quarter is that there haven't been that many fires to put out or talk about. a large part of the calls we're talking abo talking about vintech. we'll watch what happens with them net interest income was up despite the curve. >> right on the fed. >> right jpm is in the green

slightly some of the others are in the red. but it's the longer term trend that matters the most. >> talk about losers how about sketchers today. ugly results last night ugly stock performance. this morning clearly a disappoint not just on the quarterly results. on the guidance, also. some of the analysts talking about how they did not like comments on the call saying we're going to prioritize growth our top line growth over profitability. and there's the stock losing a third of its value clearly there's a fashion problem here. >> it's a market expense, too. you can't watch tv these days, especially on golf coverage and things like that sketchers commercials are everywhere it's a marketing spend that they're doing. maybe making some of the analysts uneasy. a number of target cuts across the street i didn't see a bunch of downgrades of ratings on the stock. it was a target takedown. >> i don't know. i'm looking at one -- >> it's not like across the

board. targets are coming down but you're not seeing cuts to sell or the take downs of actually ratings. >> so china sales, actually, were up 44%. we'll watch the china commentary on these. >> yeah. sneakers are a huge play in china. in fact, there's a table running around of top companies and their revenue in china apple is number one at almost $50 billion. nike is on the list at $5 billion in chinese revenue. >> this is a fear. president trump, as he indicated to kernen this morning in his interview, yesterday in his interview is prepared to put tariffs on all $500 billion of chinese exports, you assume china would put tariffs on all $150 billion of our exports to china. and that starts to include a lot of consumer goods. a lot of, you know, most of the closing in sneakers in this country is made in asia and

vietnam. but a lot is still made in china. >> that's one of the reasons you heard from trade war, however you want to characterize it, could get worse before better. steve bannon delivering alpha said something to the affect of we could take the whole thing down regarding china and how tough we want to be on trade policy to get the changes that the president wants. >> you talk about $500 billion in tariff. we feel like we have the lempk. >> -- leverage. >> we have the leverage with the economy and the amount of exports and imports. we don't have the political leverage president trump wants to get in the conservative on the midterm election win, and that's the play, according to axios for president xi he doesn't have to have a midterm election will it manifest ahead of the election that's the question and that's the china play they've also got the currency card. >> it should be a basket 77

stocks that big china plays. intel is the second worst performer. cat, deal, micron. and if they didn't have trade to worry about, they certainly are for it with concerns to worry about. saying the sustained 10% increase in dollar euro, in particular, is 3 to 4% of eps. s&p and eps. >> this is the more immediate pain point for companies they're feeling it faster than they're starting to feel the tariffs. clearly president trump is realizing that it cuts into our growth and that it hurts his efforts and the bank money i would note besides technology, energy is the other sector that is in the green on the back of higher oil prices. mostly commodities have been hit as a result of the strong dollar and some of the tariff concerns. >> exactly. >> but energy continues to do well it's flat now. it's earlier

higher 68.06 down a quarter of a percent. brent remains high per. >> okay. we'll get to seema mody here good morning. >> good morning. you're right trade, of course, still the big headline right now dow is down about 50 points now. some concerning comments from german chancellor angela merkel in the last hour she's warning that the brewing transatlantic trade war between the united states and the eu is now, quote, very serious of course, when it comes to china, the big topic once again on the currency front. the yaun weakening to the most in two years and then it erased most of the losses overnight on a report that a big chinese bank injected liquidity into the chinese market shanghai composite closing out by around 2% as u.s. china trade tensions escalate, president xi visiting south africa to cement china's

role there in the united states another solid batch of earnings keeping the market on track to close higher for the week. microsoft beat by a nickel and gave strong third quarter guidance there's intuitive surgical honeywell raising the full year guidance and then stanley black & decker had another strong quarter saying it was able to weather the negative impact of rising commodi commodity costs and a stronger dollar that stock up nearly 3%. ge showing that wall street maybe the profit decline isn't as bad as feared ge beat on the both top and bottom line. you were mentioning sketchers, take a look at the price actions this morning disappointing quarterly results and forecast a weak outlook for the third quarter. the stock down 26% it comes amid rising competition from nike and adidas in the shoe

wear category. check out the sectors for the week financials and industrials the two best performing sectors while energy is lagging, despite the resurgence we're seeing in oil prices we'll see if the story holds sara, back to you. >> thank you bonds and the dollar getting hit off the back of the president's comments let's go to the bond pit rick santelli, good morning. >> reporter: good morning. you know, the president's talk with joe kernen whether it was yesterday's parts that we were able to see or today, they had an affect on the markets without a doubt. but the effects don't seem huge. and we'll reserve comment on the dollar in a minute one week of two year note yields we can see that the last couple of days it drifted down a bit. in in the context of the week, not a lot of movement. as a matter of fact, if you look at one week of 10s, everything along the curve yesterday virtually moved down two basis

points with regard to comments by the president regarding the fed and his opinion on the process and the policy of implementation but look at the way in the ten year is actually starting to turn back up and do remember today most likely will be the 22nd sessions that we've closed in the 280 you talk about a market that is compressed and doesn't seem to be flustered by whether it's strong data, mediocre or tweets or policy or comments by the president, at least thus far, it seems mostly focussed on if inflation is supposed to be delivered, it doesn't seem that the messenger is near knocking on the front door yet among other issues if we look at what is going on with respect to the chinese currency, which was talked about a lot. look at a one week chart of the dollar versus yaun clearly see outside of today it's been steadily moving higher basically a highest level in the year when you look at the charts

starting july of last year and it's so interesting when you think about july of last year how many things come and that should be everything is kind of correlated, whether it's the prices or the virtually dollar index at the best levels the chinese currency at the worst levels and it all somewhat fits if we look at what is going on with respect to our dollar, this is very interesting. because a two day of our dollar shows two slides there both those really, i think, were based on president trump's comments but in the context of a week, we're down like less than .10 of a cent thus far. we've lost the 95 handle which gave us a lot of horsepower wednesday and thursday that's an important area traders are concentrating on at 10:40 eastern i'm going to have senator toomey. we'll talk about the comments made by the president with our own joe kernen sara, back to you. >> a lot to get to today, rick thanks coming up former treasury

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what i'm happy about is a lot of cash is coming back in through the billions and trillions of dollars, as you know there were overseas companies were locked in and can't get it back we have record numbers of companies coming back in they're going to michigan and going to ohio and pennsylvania and so many different states, and people can't believe what is happening. >> president expressing optimism about the economy and his remarks to joe kernen. does larry summers agree with the president? he'll join us in the next hour he's been very critical. who knows. we'll find out what he says coming up in the next hour. >> i think, also, the key question, guys, is going to be, yes, we know the president is unconventional we know typical presidents do not talk about currencies and accuse europe, for instance, of

manipulation, which they are not. but is it an irritant to the market is there something deeper to worry about here any implications for u.s. investment coming in the safe haven bond market or, you know, we have to get used to a new style? >> we saw the market reaction. not much of an irritant. the dow is at the highs even though it's down 29 points clearly not unsettling that much other than to conventionalists. >> he successfully weakened the dollar which has been a huge headache for big business and the stocks. >> it's been the overriding complaint in terms of negative stories on conference calls so far. more mentions than trade more mention than wage costs more mentions than north korea or anything else it's been 4x. >> he's a businessman. he gets it he gets the strong dollar. it's hurting i think it'll be interesting to

hare from larry kudlow previously used to call himself king dollar man. that was his big thing. >> or the treasury secretary. >> i wonder if his thinking has evolved on that. >> by the way, on the rate comment from the president, we mentioned some of that commentary we were getting from james i didn't recalliearlier tg saying the trump comments won't affect fomc rate decisions. >> they would say that. >> of course but james bullard thinks that the independence of the fed will be retained after this you have to believe that powell -- you think powell is going to be impacted by what the president? >> absolutely know he's a total pro the question is, is it going to be in the back of their minds? is the market think they're impacted it's just the beginning. are we going to hear about it from the midterms? remember when he tweeted about the jobs number an hour before the jobs number and people said what happens the next time he doesn't tweet about the jobs

number does that mean it's a bad number >> it was a blow out number. >> right. >> ta lot of new things they hav to absorb. up next a start up is looking to challenge starbucks in china we'll take you live to beijing g on that story when "squawk on the street" returns with the dow down only 32 points.

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♪ across the pacific and amid trade tensions between china and the u.s., a chinese startup has big plans for taking on starbucks. eunice is in beijing with more on this rival to the big coffee giant. eunice >> thanks so much, sarah right now i'm at starbucks newest rival in china. the name comes from the chinese name luck and happiness. the biggest thing is the logo, it's a deer that is native to china. that's one thing that makes it so different from other rivals

because it is totally homegrown. earlier today i was speaking to one of the co-founders eric wolf, who said the company is different from starbucks because they believe chinese people are going to be doing everything with their mobile phones, so you cannot even buy coffee with cash here everything has to go through the app. they've been opening a lot of stores and many of those stores double at delivery stations because they think chinese people more and more are going to be buying food and drink online so they believe they can deliver coffee to you anywhere you are in 30 minutes or less, or you get your coffee for free in fact the old way, and read that as starbucks -- competes on price, it's drinks are about 20% to 30% cheaper than starbucks, and it's also been openly criticizing starbucks. and just a few months ago, they

actually wrote an opening letter to starbucks, criticizing starbucks' business practices the china. in fact they are going to sue starbucks here he told me, we believe starbucks behavior undermines fair competition and prevents chinese customers from having convenient access to high quality coffee at a reasonable price as for the trade war, he told me that just because they were a chinese brand they would better than fit but earlier this week, state media had interviewed customers at luckin, and they said that they preferred luckin to starbucks. >> are think other u.s. businesses that face chinese domestic competitors that could be prioritizing american companies to chinese companies that have built big businesses

there? >> there are a lot, but what's always been interesting about starbucks is it hasn't had a domestic rival so all of their competitors have been costco. so they haven't had a chinese rifle unt rival until now. >> china is the pillar of growth for starbucks. they hope that this is not a huge level of competition. the stock has gotten obliterated, you guys, carl, on this program has the ceo, whether it was schultz or kevin johnson now. the stock's down again today >> the evolution from tariffs to currency to now whether state media or boycotts from american products are a significant dynamic in this dispute. >> tariffs aren't the only tool. >> when we come back, a lot more

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good friday morning, welcome back to "squawk on the street. and eventful day it has been, session lows overnight, triple digit loss on the dow, almost back to the flat line even as we speak. s&p has gone green even after all the news we have got mten fm the president on currency and trade. >> president trump making some bold market making comments. general electric beats the street, but continues to experience weakness in the power

division, we'll look at the quarter and the road ahead >> paying off, microsoft on the cloud, pushing it's sales over $100 billion we'll look at the future of the company's growing cloud business joe sitting down with president trump, the spot speaking about everything from russia to the federal eserve's interest rate policies, but the biggest thing moving the frarmat are the business's comments on russia >> we are being taken advantage of and i don't like it and i haven't for many years china has $507 billion a year in deficits with the eu, $107 billion. with mexico, $120 billion. mexico, who would think mexico mexico is making a fortune and they have a tax, we don't have a tax, they have a tax on top of that and the tax is almost 17%

a vat tax, i could go through every country, i could talk about japan, they're very good allies but no wonder they're good, the deficits, the money they're making off the united states i would have a higher stock market right now, it's up almost 40% since the election, it could be 80% if i didn't want to do this but i want to make it right. and we're also talking about gutting expenses. >> are you seeing, signs of hope from these trading partners that are starting to -- >> i always have hope. >> but are they starting to come around >> yesterday we had steve bannon talking about china, he said some very positive things about your presidency. >> he should >> he said we're winning against china and they don't know what to do. and on kudlow, he said the guy

that may be holding things up is president xi >> i do like president xi a lot, but it was very unfair some people would say 375 billi billion. i'm not talking about million, i'm not talking about pennies, we're down 3$375 billion other estimates could say 507. we're do . >> will you get to 500 >> i want to go to 500. >> with the midterms on the horizon. >> i actually think -- if it does, it does. i'm not doing this for politics. i'm doing this to do the right thing for our country. we have been being ripped off from china for a long time and i said this should never happen and you know what his answer is? i deal with the highest echelons

of china one of them in china said there was never anybody to talk to in the united states. we would put on a trade barrier where you couldn't sell cars, you couldn't sell beef or farm products and there was nobody to talk to in the united states then he put a tariff on cars toto 20%, but you charge us nothing we would do this and nobody would talk we would start off on at a lower number and raise it, raise it and nobody would ever complain until me but for many years, and i'm not just saying obama, i'm saying bush, and i'm saying long before it, they have nobody and it's actually interesting, because i asked them the question, we're down 507, recently, we're down $507 billion in trade deficits. how did it happen?

they told me nobody ever complained, nobody even talked to us. >> for more on the president's comments, here joined by larry summers who joins on the phone, mr. secretary, thanks for your time today, good to see you. >> good to be with you >> we'll tackle fed independence in a minute, but we're looking at tariffs on trade. there's been no dialogue between the u.s. and china in the past few weeks. how is the dynamic changing regarding trade with the chinese? >> look, the president saying things that are utterly fictitio fictitious i buy a lot of stuff from my supermarket. my supermarket doesn't buy a lot of stuff from me that does not mean my supermarket is exploiting me i think it's good that the united states is a country that

capital wants to come into and if a large amount of capital come into the united states, that means we buy a lot more than we export the whole premise of looking at all these things through the so-called bilateral trade sev e deficit, there are real trade issues they mostly have to do with what chinese firms are doing to exploit american firms' intellectual property. the president even focused on that he focused on this ridiculous comparison on the bilatd central trade deficit. he's alienated all our potential allies, i think of canada, i think of europe, i think of japan who's also launched a trade war on he's put at risk our

relationship with mexico with the things he has said and has done not in service of the rights -- we have no friends to do it. and the tariffs are going to screw american businessbecause they're affecting the components we use to produce things to raise the price of steel, to raids the price of steel is the best thing you can do for honda or mercedes bends. >> they have talked about trade transfers, jvs, industrial policies but if you're worried about the taxization affects of tariffs, what other tools would you employ >> first of all, he just had a long clip of the president of the united states, there's a

long transcript of that interview, which i have read he does not talk about the more important technology issues at all. that is a signal to other governments of what they are supposed to focus on and once again, the administration is dropping the ball on the highest priority issues for our national security and our -- and our future. what are we supposed to do what we're supposed to do is do what, by the way has in effect, china had a gdp trade surplus in 2010, today it was below 2%. that is because the obama administration worked with other countries on the issue of the china surplus. approached china globally with allies, through a global system.

and that was effective this strategy has gotten us nothing. except uncertainty, risk, alienation and a higher probability of conflict. >> larry, i want to ask you about the u.s. dollar, which is falling today on back of the president saying it's too strong, everybody else is manipulating, we're tightening, it's not fair. we don't like the strong dollar, is that problematic for the president to abandon the strong dollar policy and directly job own the currency >> yes, problematic for him to dog on the currency down -- [ no audio ] >> we lost him >> are you still there mr. secretary? >> i wanted to hear that >> both of those acts will make us poorer as a country the fed, even if it wanted to

lower interest rates, or it wanted to slow the hikes in interest rates couldn't do it because we'll look -- in front of the president other people want to sell the dollar, that's going to put upward pressure on u.s. interest rates, and it's going to put upward pressure on u.s. inflation. it's going to put pressure on a large number of things we buy from the eu, it's going to make us this poorer, the president is obsessed rightly with raising the wages and the purchasing power of workers we import less, making things more expensive we reduce the purchasing power of workers look, i-we see this around the world and it seems we hugely say it but every banana republic as the

leader, who surrounds himself with people who -- judiciary of his country, who focuses on anger a anger at immigrants, runs up a huge deficit, drives down the value of the currency and tries to overrule what the central bank does. >> mr. secretary >> this is as old as the history of banana republic and we have a scholarship written about it calling it the dollar policy cycle. it does produce results and looks good for a while, but ultimately it leads you into real trouble >> mr. secretary, are the chinese currency manipulators? >> not right now

the chinese have spent a trillion dollars in the last three years trying to hold their currency up. chinese capital falls in the stock of people from selling the currency, so the currency stays up so china's intervening in the market to make its currency be stronger, not to make its currency weaker. it's absurd to say in recent years that the chinese are currency manipulators, could you call the chinese currency manipulators five years ago, they were, but we have focused target, it was effective in getting them to stop but no, to say that a country is spending a trillion dollars propping up it's currency is

driving it downwards no u.s. official ever complained about chinese trade practices. that is a libel, impugning the patriotism of hugely dedicated people in most administrations, who worked in the treasury department, who worked throughout the government. the statement that the government was not concerned about the chinese trade practices, or the chinese surplus is just utterly dishonest and reflects very poorly on what is in fact the primary -- a primary frustration with the united states which is that there's no consistency in our policy, and when we have a president who

denies the facts of history, obscures the laws of economics, and regularly makes statements that just are not true, it is very hard for other countries towork with us, which is why if you look around the world, the president has achieved a rema remarkable thing in other parts of the world, there's now more admiration for china with their nondemocratic system than there is for the united states who has a constitution that is a consequence of the gross mismanagement of u.s. international relations over the last 18 months

>> bullard's on the tape now shaking off what he said he said i'm not willing to give up the president's style are you willing to do that >> i'm not surprised, because i'm not surprised that this president would make a gross mistake. let me be clear, it's not a gross error in terms of obstruction, it's a gross error in terms of -- it would be -- to he judges that appropriate because it will invite the suspicion of him vowing to political pressure, and the one thing that no big chair can do and deserve the respect of his allies without political pressure, so the president won't give in to political pressure and he needs to preserve his

strong achievement of independence, could ironically be directed in ternls of what the president was trying to achieve. >> i mean very quickly, larry, i mean you're raising a lot of issues that are cause for concern and alarm. banana republics and yet the dow is down a point. and the s&p 500 is down a point. it's hard to see if the markets are taking all of this in, you're saying this is so destructive. why is the stock market not saying that? >> well if you look at what you actually find, that markets are great until they're not. look at how markets were performing in june and july of

1914 we're about the home of a world look you look in the moments before world war i, pearl harbor, september 11, most of the momentum goes -- and don't respond. but the markets, we look at the increase in the markets this year, it's all being praised and those five companies are achieving the multiple global position positions and the sentiments are up, whatever it is

i think it is a great achievement in innovation. but that doesn't have anything to do with the identity of the united states or have anything to do with the president's policies and so to use the stock market as a way of taking -- is a serious mistake for anybody trying to make judgment about policy you set the stage for the great depression of the 1920s. and stock market was shooting the wrong way until it wasn't. i'm not here to put a need in

and i'm here to say that making a mistake when you drive your car recklessly, when you drive your car recklessly, you're more likely to have an accident sooner even if you're driving good at the moment and that's the way to understand the policies that are being pursued right now. >> mr. secretary, thanks for the thoughts, appreciate it, always good to check in with you, larry summers, former treasury secretary. some say trump could nominate summers because he's got hawkish views that the president has had. >> that's the other question, why wouldn't you just keep going. >> up next, microsoft's big belt on the cloud, it looks like it's paying off, shares on the move

this morning, higher, record highs of more than 2%. plus the trade war hitting soybeans, our contessa brewer is live in portland, north dakota contessa >> and here on the ground in north dakota, you've got millions of acres of food grade soybeans under cultivation, but already the retaliatory trade wars against china are slapping the soybean farmers lard, and they're getting a political slap in the face here more ahead on "squawk on the street." ♪ come on. this summer, add a new member to the family. at the mercedes-benz summer event. lease the glc300 for $429 a month at your local mercedes-benz dealer. mercedes-benz. the best or nothing.

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welcome back to "squawk on the street," china canceling it's soybean contract with north dakota trump tweeting, farmers have been on a downward trend for 15 years. a big reason is bad, terrible trade deals with other countries. they put on massive tariffs and barriers canada charges 275% on dairy farmers will win perhaps in response to our own contessa brewer's report on "squawk box," she's live with the story. >> this is really make or break time for north dakota soybean growers, because as you can see here, the soybean plants are already flowering, they are expecting a bumper crop this year but as you mentioned, all the

food grade contracts for food grade soybeans have been cancelled by china this is the point where all these food grade contracts get locked down. [ no audio ] >> having some sound issues today, we'll try to get back to c contessa in north dakota >> the president treating this morning along with so many other issues let's talk about microsoft, those shares are on the move josh >> scott, microsoft was already up strongly after heading into this trend and this morning, you see it hitting new all-time highs, that's as quarterly earnings and revenues both beat the street forecasts

guidance already stronger than expected microsoft already proving that it's a power house in cloud growth the azure rising 6.9%. starting to catch up to the company, he says this is a likely $9 billion business that continues to grow very strongly. on the call, the ceo talked about azure's strength >> both leading companies are running on azure and i'm happy that walmart and microsoft chose azure for their associates and customers. >> investors have been climbing into cloud players, holdings include microsoft as well as amazon and sales force up more

than 20% so far this year. also more broadly, take a look at the move in the xlk, the tech etf. it's up 14% this year. tech is the best performing sector in the market cfra says the sector is now trading to a premium of its five-year average. >> josh, thank you, new high from microsoft today, stocks up nearly 3% as we speak. when we come back, shares of state street slumping on big data 'll eawespk with the incoming ceo, "squawk" on the street will be right back.

welcome back to "squawk on the street," dow's up 12 points on this friday morning stock's officially up since comcast dropped that bit for its assets earlier in the week jim stewart is here. his column focuses on other big names in media

good to see you again, welcome back first your thoughts on what went down this week regarding fox >> i think one of the interesting thingshere is that comcast is giving up on the fox ass assets so where will fox go now fox has to be put in the camp with the comcast, and brier and some of the other big names. either they got it or they forced the rival to pay a lot more, so disney is paying a lot more to get them and they're still in the fray for the sky assets i guess having written about viacom and cbs assets. i guess you can see that viacom and cbs assets are susceptible to being taken over. >> are you making a judgment on that question or not >> my own view is somebody should it's -- if they have been under performing, i mean the kind of

management turmoil there has been legendary, they have new management, they have bob ackerman there, the shareholders seem very comfortable with him there's a lot of talk, turn around a lot better, so things are improving, so i don't think anyone watching -- and one of the things i came in my call today. why putting it back with cbs is falling apart. and that's now dead. it looks like both sides in recent court filings have said we don't want to -- >> it seems like a soap opera disaster but what could have been or what was maybe thought of to be a good retie up. >> les moonves, the ceo of cbs, and red stone who gained control of the red stone empire, we're getting on great, it was like nothing but mutual praise, a

muse wa mutual admiration society. behind the scenes, this relationship started deteriorating, deteriorating, i don't call a friendly meeting where you make a joint agreement not to publicly argue or disparage each other that is not a good sign right there, which is one of the things that happened here. and again, i think it's kind of extraordinary that ms. redstone has given up on the combination. les never wanted the combination, so why are they still fighting about it? why is this going to take up millions and millions in legal fee, more recrimination as this works its way through the court. it's scheduled for court in october. >> wasn't the reporting from david vapor and others that it was a bit of a surprise thatth doj decided to appeal the at&t

time-warner and letting them merge, and perhaps gave them pause when it comes to going for another business on disney would that matter in other deals? i think it would later less here the current tradition has stood sort of traditional antitrust reasoning on its head. the viacom assets in particular, i don't think anyone who feels that comcast already owns nbc is going to own cbs but the viacom assets, there's much less concentration in the hollywood movie studios, they had no trouble with guedisney ad the 21st century fox assets. comcast unlike disney has the big distribution piece, which gives it a vertical dimension. they have targeted that, that's what they lost big on, on the at&t case. but the antitrust chief has said

i'm looking for another case like that and it's possible he would try to block it. but if comcast wants the assets, they have- >> the recent decisions we have heard on disney fox, regulation approval, sin claire >> it strikes me as interesting. looming over all of this since trump became president has been how much of this is about, who's a personal friend, who's a personal supporter he has obviously said he does not like cnn, he certainly doesn't like time-warner, they're doing everything they can to make life difficult for them and the murdock assets are sailing through. and that's interesting again, because, it's, you know, if murdock is whispering in his ear, we really wouldn't know

about it >> jim stewart of the "new york times. let's send it over to courtney reagan for cnbc news at this hour. >> at least 13 people including children have died after a duck boat carrying tourists capsized and tank on a lake during a thunderstorm in branson, missouri 14 survived the sinking, but some were injured, some critically teresa may is promoting her latest brexit plan he's urging leaders to take a broader view on how to solve the issue. >> i believe it is the basis for a new deep and strong relationship with the eu the white paper represents a significant development of our position it is a coherent package >> and the nfl is suspending its rules regarding it's new national anthem policy it will work with the players on

an agreement it will work with their policy of fining players who protest adventuring the dur. >> at least they're finally working with the players courtney thank you when we come back, ge beating the street with the company's cfo jamie miller has to say about the results later on squawk alley, former ge vice chairman bob wright ways in the dow, now firmly positive, up 29 points.

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welcome back to "squawk on the street," i'm sarah izen. one hour into trading, we started out soft and mixed on the market as far as sentiment, the dow is up 25 points, the s&p 500 is up less than .1%.

the nasdaq is the winner and technology is the best performing group including microsoft. and scott, i know you're watching the banks >> they have all gone positive whether it's citi up half a percent, if you take a look at all those of stock prices, the xlf has been able to work itself well off it's 52-week low over the last week or so. and it's actually performing pretty well. so you've got a bunch of tech experts. president trump complained about the strong dollar, and there you go, the market is listening. take a look at shares of sketchers, disappointing results today. and a weakened outlook foefr r fourth quarter awonhetrt"ilbel right back, don't go away. ♪

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disney could snap it's longest winning streak in five years, but some still believe the stock is heading for an even bigger rally we'll have that deteba, and more trading nation more "squawk on the street" coming right up.

what i really am happy about is a lot of cash is coming back from the billions and trillions that were going overseas and the companies were locked and they couldn't bring it back companies are pouring back in, and they're going to michigan and they're going to ohio and pennsylvania and so many different states and people can't believe what's happening >> that was president trump with our very own joe kearnan i'm going to bring in senator pat toomey, senator, thanks for joining me >> good morning, rick. >> good morning, you heard the president there in essence on the repatriation trade and the

notion that this administration isn't really trying to build walls around what was deemed inversions, but trying to make a better landscape for funds to come back. your comments on what the president just said? >> the president is right, it was our tax code that was driving the inversions in the first place, the tax code created a huge incentive to eliminate the inversions and we eliminated that with the reforms with edid. so as expected, we no longer have incentives for the tax code to drive that, and we have companies, repatriating, bringing back home hundreds of billions of dollars that was trapped overseas so this is a very, very good story for our company. >> the fed chairman spoke and you had several good questions earlier in the week, on wages, 2.7, not very threatening, and actually a number we have seen many times over the last several

years. but you brought up a key point, maybe you can explain to the audience regard to that rising participation rate and why they may have kept waging down. >> if you're calculating just the average wage and that grows by, say, 2.7%, okay, that's not huge, but the composition of the workforce has changed. and when new people are entering the workforce, they tend to enter at the lower end of the wage spectrum, they may be getting their first job or they may be returning to the job force after a long absence those folks bring the average down, if the total average is still going up, it tells you that people who have been continuously employed, they may get a bigger rate. if you drill down into the subsets, and you look at people who have been continuously employed, their wages are going

up >> on productivity, you brought up a good point. on the tamped down productivity of late, in europe, just an article today, germany is having a problem as well as are many developing companies but tax cuttings gave us a tail wind, maybe the uncertainty is giving us a headwind can you cap those dynamics >> i don't think there's a big mystery on why the -- we saw a collapse in the growth of capital expenditure. i think it was because of a wildly excessive environment a terrible tax code, and less cap ex means wages are relati relatively stagnant. we have changed that dynamic with a wave of deregulation and pro growth tax reform. we have seen cap ex spike up

tremendously but now we have seen a new risk, and that is a risk of an escalation of a trade war and the fed's most recent minutes as you just saw, we have seen reports that there have been some cap ex decisions put on hold so it would be a real pity if this really strong economic growth that we have kind of helped to launch gets derailed because of an actual trade war >> excel plenty, you know, senator, thanks for your thoughts, this is a complicated issue. >> now let's send it over to john ford who has a look at what's coming up on squawk alley. >> the nasdaq reaching record highs. how much higher is it going to w

hois it positioned strategically giv strategically? that's coming up on squawk alley. alerts -- wouldn't you like one from the market

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a look at shares of state street, falling more than 8% the money manager announcing a deal to buy financial data firm

charles river development for $2.6 billion they're suspending $950 million of share repurchases and issuing fresh equity to finance that deal the firm out with mixed first quarter results. the state street ceo joins us. seems like there's skepticism around the deal or how you intend to pay for it by cancelling the share buy back plan what are you telling investors today? >> i think investors always want to take some time to digest a deal and decide whether or not it is within why they bought our stock, why they own our stock, so it is not unexpected you would see some kind of a stock slide. so you know, investors need to understand our rationale which we believe is quite compelling. >> talk us through that, especially on pricing.

seems like a lot of analysts were asking about on your call. >> if you think about what's going on, our core client bas base is other asset managers like sovereign wealth funds. what they're facing is a series of challenges, firstly, how do they deliver better investment performance, how do they lower their costs, how do they simplify their operation we as an asset servicer spend a lot of time with them on the back office and middle office. this helps us provide them front office solutions and also helps them integrate their front, back and middle office. so we are simplifying their own operation, lowering their costs, and most importantly giving them access to data in a way they can inject back into their own investment process, so it is a highly flexible system that utilizes either our capabilities or the capabilities of others but in a seamless way.

sounds like it is about technology, is that what you're talking about, automating the process better for your clients? >> of course much about what we do is about technology what we do, for example, we're the largest player in the so-called middle office business, and what we do is we take lots of mangled operations off the hands of the investment manager and put some technology and systems in them so we can streamline, make the reconciliations better, make reporting faster, and most importantly lower their costs, so it is very much about technology and consistent with our overall technology strategy. >> forgive me, finish your thought, sir >> if you think about what's the most important thing to an investment manager today, it is data and information, and data and information in a usable form it is not so much the quantity of data but the quality of data,

the useability of it, the speed with which it can be brought to them much of our strategy for years now has been about how do we bring that data to clients, enable them to utility their own data well and ago debate other data it is about this idea of good data, good information, helping the investment decision and lowering costs >> sir, how does the market look to you these days? >> the underlying fundamentals remain quite strong. you still have particularly in the u.s. a growing economy, a strengthening economy. so from an economic, pure economic perspective, the market looks good, and that's what the market sees. there's obviously a lot of uncertainty. the biggest one probably is

around trade, and whether the tariff actions and trade actions being taken are going to result in some kind of long permanent protracted price and trade war that will of course create damage for the economy i would describe strong fundamentals but with a lot of uncertainty, mostly fueled by trade. >> how do you feel about the president publicly criticizing the federal reserve's policy of tightening and the strong dollar >> well listen, this country has an independent federal reserve a long time, you can look at how well the u.s. did through the last market crash. the fed made the decision given the strengthening of the economy it is time to raise interest rates, i think it is good for all of us to just listen to the fed.

we should in some ways be celebrating that interest rate rise it reflects the strength of the economy. >> and finally, is the uncertainty you mentioned the reason you're seeing the slow down in the etf business no new investor cash in q 2 into the global etfs. >> secertainly saw in the secon quarter particularly amongst institutions, you saw the risk off trade. i think it was money managers and investors saying we're going to put money on the sidelines, we're going to go into low risk investments, and let's wait and see what happens because of the uncertainty we see out there >> we appreciate you joining us to talk about the deal, the president, the markets and more. >> sarah, thanks very much >> r

we'll have more on the currency moves, that's the big story off the president's comments and tweets time to get the currency experts out, we're going to talk to strategists, scott, thank you. see you on the halftime report >> thanks, guys. when we come back, the president threatening tariffs on all chinese imports. we talk to former white house economic adviser "squawk alley" starts in a couple of minutes. or to carry on a legacy? its show of strength... or its sign of intelligence? in crossing harsh terrain... or breaking new ground? this is the time to get an exceptional offer on the mercedes of your midsummer dreams at the mercedes-benz summer event, going on now. receive up to a $1,250 summer event bonus on select suvs. mercedes-benz. the best or nothing.

good morning it is 8:00 a.m. at microsoft headquarters in redmond, washington 11:00 a.m. on wall street. "squawk alley" is live ♪ ♪ ♪ good friday morning, i am carl quintanilla with morgan brennan and jon fortt. busy friday morning.