now. ♪ live from new york where business never sleeps, this is "squawk box." good morning, everybody. welcome to "squawk box" on cnbc. we are live from the nasdaq market site in times square. i'm becky quick along with andrew ross sorkin and mike santoli. joe is off this week our guest host this hour is ed lee of the "new york times." he's here because we have a lot to talk about in technology. yesterday we set things up at the end of the session for an incredibly strong day. we are looking at the nasdaq setting a new high the s&p closed at its highest level since january and the dow closing at the highest level since february, then we heard from facebook. facebook shares getting slammed and the rest of the f.a.n.g. stocks following that's why the nasdaq is down by 108 points you can see the dow was up by 64 points check out what happened with the

f.a.n.g. stocks. facebook down by 17% believe it or not that's an improvement. that stock was down by 24% overnight. talking about at one point 1$151 billion in market capitalization being wiped off that stock mike and i were talking about this earlier, it closed yesterday at 620 billion >> 625 around. based on what we know how many shares they have out there 217 was the price. looking to open around 180 a dramatic move in terms of market cap, but it only gets you back a couple months in terms of where the stock was. you had this huge pile in to facebook on this idea that maybe the business model is not affected by this scrutiny and regulatory pressure. now you're unwinding that everything is okay trade because they in a transparent way said less profitable, less user intensity, numbers are down >> we don't see those going up in the third or fourth quarter

>> we will talk what this means for the markets, but first let's dig deeper >> here's what we got. shares are plummeting after the company reported that revenue miss as becky said a weaker than expected subscriber growth number then numbers fell further on a dramatic conference call with a handful of analysts saying did you really say that? julia boorstin was on that call, also has been working the phones julia has a look at what happened >> that's right. i was on that call at one point facebook gave up its gains for the year plummeting nearly 24% during that earnings call at its low, the company losing about 1$145 billion of market cap. it came down to this wrarning th warning that the company's slowing revenue growth will come >> our total revenue growth rate

decelerated 7 percentage points in q2 compared to q1 growth rates will continue to decelerate in the second half of 2018, and we expect that to happen in q3 and q4. also weighing on the stock, the warning that total expense growth will exceed revenue growth and also saying over the next several years operating margins will trend towards the mid 30s on a percentage basis, that's down from 44% in q2 mark zuckerberg explaining how protecting users data will impact growth and margins. >> we will continue to invest heavily in security and privacy, we have a responsibility to keep people safe. but as i've said on past calls, we're investing so much in security that it will significantly impact our profitability. we're starting to see that this quarter. but in addition to this, we also

have a responsibility to keep building services that bring people closer to together in new ways as well >> on the call there was talk about disappointing user numbers. europe showing its first ever declines attributed to the impact of european data privacy regulations. facebook's dailying ative u inas dropping because of the combination of gdpr and other factors. but looking forward they say gdpr and facebook prioritizing privacy will have an impact on revenue growth going forward >> the one question that i i had has been lingering over all of this is the cambridge analytica scandal and whether that had an impact the company seemed to suggest in the u.s. that that part hasn't but in many ways it has because of what they have to do around the investment side in terms of

privacy. in terms of user growth in the u.s., what's your take on that >> i think it's interesting that daily active users in the u.s. was flat so there's concern about that daily active user in north america because it is flat if they had really been able to buck any of these concerns about cambridge analytica, maybe it would have grown i think we're seeing the investment in security and safety, that's impacting profitability, but we're not seeing growth in daily use in north america. it's worth asking whether they would have been able to grow if they had not had all those negative headlines >> julia, stick around we want to bring in nancy tangler, and ed lee is also here julia, i want to go to you to understand this piece of it. will we look back at this moment

as some kind of seismic change in the industry? you look at what happened with -- did i say julia? i meant nancy. yes. sorry about that, nancy. will we look at this as a seismic change in the tech industry not only is facebook falling this morning but basically taking everybody with it >> good morning. we were talking about slowdowns and for google a couple of quarters ago so, you know, it was just a few years ago when i as a value investor got into facebook because of concerns about growth i do think that the call was a bit of a blip. i don't think management was compelling and they didn't seem to be on their game, you're absolutely right people were saying did you just say -- but when you look at facebook as the maturing asset, you know, as an

investor i say i think i knew that what surprichlt that what surprised me more was the run up after april, late march early april, we were selling into that strength we still own it, we own a good chunk, but we old about a quarter of our holdings because we were concerned about cambridge analytica and gdpr and slow down in usage the story is instagram, whatsapp and how to monetize. that's part of why revenues are slowing because it's not happening quick enough >> are youbuying more today? >> i'd like to see it settle when constituencies change it becomes dead money for a while i think the growth investors will be really ticked off. we saw that in after hours i think they'll step to the sidelines. we probably will add, because we have room to it's in our buy range. but it needs to recalibrate. even with slowing growth it's

trading at a multiple in the low 20s, mid 20s it's not netflix i think this is a bit overdone i think management needs to make the case >> ed, i want to understand about the infection that seems to be taking place across all of f.a.n.g. as a function of this, and whether there's -- >> it's bringing everyone down >> whether the contagion matters. >> i would argue less than 2% off of amazon, is not much of a trade. >> and when google reported earlier, they had an upside surprise, which was nice >> netflix subscribers did show weakness >> so i think they each have their own story. we like to think of the f.a.n.g. story as one story, as a growth thing yes, maybe but we're getting into nuance. for a company growing at 42% revenue and tanking like that, that's the context >> to that point, is this a moment where you're not going to

see the f.a.n.g. stocks still be a trade? cramer called f.a.n.g. so far in advance, they did trade as a group. >> i think we need to start looking at them individually the google facebook difference there, that tells us a lot in terms of how -- google at 25%, but investors liked it when they saw the results. i think they still -- facebook owns 3 of the top five apps in the app store. it's not like people are running away from the service. the nianuance of how do they monetize this? facebook said we're running out of ad inventory -- >> we should go to julia, they also moved into products like stories which makes it more difficult for them to monetize they built products that are harder to monetize julia, i know you had a point. >> to the point about stories

there was talk about cheryl ashl sandberg about how they were moving into ads for stories she said they're in a transition period where they figure out how to generate money from those ads in stories that's good point. i also want to put this into perspective of the warnings facebook has been giving for quarters and quarters. last year mark zuckerberg warned they would be investing in security and that would impact profitability. he warned again last quarter they also have been warning that they would not be able to continue the rate of growth of ads in the news feed in that they were hitting the upper limits, and that would impact profitability. the thing is they continue to beat expectation despite those warnings, they continue to beat expectations. >> they have always been priced for perfection

>> it reminds me of walmart, when walmart said they would spend more on initiatives to raise the base pay, it wasn't until wall street saw the numbers that they said wait a second >> to julia's point they always beat those expectations. it always seemed as if the caution was not merited, that enabled investors to say they can't even help but growing as fast as they were. it was an effortless model the network created all the attention, engagement and digital ad growth. so i think there's a piece we have to keep in mind this management team has no great incentive to come out this quarter and say we blew the doors off, our business model is perfect. we got it figured out. >> you think this is a way to lower the temperature and then maybe -- maybe have a better shot going forward >> they should get into a wider range of expectations in terms of we could lose money or make money. i don't think that's where facebook is headed but the more you offer the

market in terms of here's what we expect, that's where they expect things. the stock price for facebook is actually really important to its employees. they look at their stock price all day long ever they want to see where their stock price is >> let's get nancy back in this conversation to ed's point, as an investor, did you feel they miscommunicated with you do you think analysts did not understand this? how do you look at this? >> as i said earlier, i was surprised the stock ran up as much as it did after cambridge analytica. we wrote a piece called face plant. i was disappointed with the way management handled that issue. they have been warning about rising costs what set investors on edge is when they talked about desell

r desell rag d deceleration in growth and the ad margins i agree with what mike said. i do think that this is a lower the bar kind of call it will be dead money for a couple quarters maybe and then you will see reacceleration. it's an opportunity for long-term investors if you want to be in this game >> we'll leave that part of the conversation there we'll talk more about facebook this morning thank you. the other big story this morning is the trade picture the united states and the european union agreeing to resolve tariff disputes. kayla tausche joins us with more on this. for anybody hoping for a resolution, this may have been the best they could hope for >> they are putting their trade differences on hold for a time the two announcing yesterday a new phase in the eu/u.s. relationship to continue

negotiating towards freer trade. >> this is why we agreed today first of all to work together towards zero tariffs, zero nondoctno non-tariff barriers and zero su subsidies on non-auto goods the u.s. won't roll back steel and aluminum tariffs it placed on june 1st jean-claude juncker talked about that in a speech after the white house announcement

>> the idea that imports of steel or aluminum from your closest ally could threaten the national security of this country, this goes against all logic and against all history. we agree the president must reassess this measure in due time >> it was enough to win over president trump two tweeted a photo of him and juncker hugging saying the u.s. and the eu truly love each other. they did not announce another date for talks, just that advisers would be closely working on this. u.s. advisers will host mexico today to see if similar progress can be made. >> how much of this is a move to sure up relationships with some partners if we're getting deeper into the entire situation with china? this comes right after the $12 billion set aside for farmers,

and soybeans was a big item they were talking about, additional imports to the eu from the united states. >> not just to sure up relations with europe as multi trade fronts are being fought, but also an effort to sure up relationships with republican lawmakers who by in large agree there is a trade fight that should be going on with china. whether tariffs are the right way to fight that, there is disagreement, but they agree europe should not be targeted in this economic battle that the white house has waged. so this might also be one way to potentially garner some support from capitol hill as they try to fight china, and try to avert any efforts from capitol hill to tie the president's hands on moving forward with tariffs which he sees as the best negotiating strategy >> kayla, thank you very much.

don't miss treasury secretary steven mnuchin joining us live at 8:00 a.m. eastern time. we'll talk to him much more about all of these haven't trade developments stay tuned for that. we have some stocks to watch. qualcomm terminating it's $44 billion bid for nxp this morning after failing to win regulatory approval from china and announcing a $30 billion stock buyback program. >> we are talking about the tit-for-tat tariff thing, china can respond in other ways, they don't have to approve these sorts of deals >> we can do the same thing with cfius. >> yes >> we said basically the same thing. qualcomm, when you think about who has been impacted most by trump as a corporate entity,

qualcomm may be the winner >> in the worst way. that's the thing between trade fights, between how antitrust agencies in government are acting, there's a lot of inconsistency >> at&t also >> exactly how do i navigate anything >> not knowing the rules of the road, not understanding -- >> lack of consistency, lack of precedent is a thing that if i'm going to buy something or acquire something, if i'm the target, i don't know how to -- >> you don't want capricious decisions. let's tell you about some other stocks to watch. ford cutting its earnings forecast for the year. they blame slumping sales, struggling business in europe, and trade tariffs in china

that stock is down this morning. paypal shares down 3%. second quarter profit beat forecast shares are down sharply today as the third quarter guidance fell short of what the street was expecting. amd's second quarter results topping forecast a surge in demand for pcs boosting sales of its processor as well as graphic chips used in computers and data centers that stock is up by 6% coming up, f.a.n.g. stocks getting hit this morning we've been talking about it. will this put the broader market rally at risk? we have two strategists to talk about that next. you're watching "squawk box" on cnbc who would have thought, who would have guessed? an energy company helping cars emit less.

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welcome back the late news on the trade deal gave the markets a boost late in the session. the dow managing to spike higher before the closing bell adding about 172 points but then we heard from facebook and those quarterly results could put a damper on things right now the nasdaq down by 115 points dow is holding on to its gains,

up by almost 40. s&p down by 6. but a lot of questions about what this means for f.a.n.g. and the broader technology sector as a whole. joining us is rj gallow from federated, and on set is ed keon from qma ed, what do you think? fang stocks in for a rough ride? is this a problem with facebook? >> i think that overall technology sector will be strong clearly this is a warning shot across the bow that things will not be as perfect as investors thought. >> mike made a lot of good points about how this is pushing the stock back, did you say a few weeks? >> back to about may so we lost about 2 1/2 months of gains. it's interesting how we seemed like this no-risk trade, it was a combination of momentum and the best businesses anybody could find and the best stocks

in the index today we get a truce on the old economy tariff fears, and it seems like it could create this rotation >> i think some investors are starting to think growth was the new safety so this is a knowledge that things don't always go according to plan. >> where have you been when it comes to f.a.n.g. stocks >> i can't talk about individual stocks, overall we don't make big bets at the sector level it's not the approach that q & a takes. we tend to be more tilted towards value as well as a combination of growth and quality. >> i know you can't talk about facebook specifically, let me try in a different way, nancy made an interesting comment, this idea that there would be a rotation in terms of the type of investor thinking about facebook this growth investor being frustrated and a value investor

stepping in or being a large majority in the group. does that make sense >> value as a style has been out of favor for a couple of years f.a.n.g. stocks have done well you may see a shift in the ownership of who owns the stocks if they do fall pack to a price where they look attractive based on more traditional metrics. >> can you look at a stock like this and even get to those numbers? >> not all the f.a.n.g. stocks are created equal, but people will be looking at them differently today. >> is this a time for a shift in leadership will you see people looking at that and saying we want to look at these names that have been crushed amid trade concerns? >> a lot of names have gotten crushed the last few days.

you learn a lot during earnings season i think overall the earnings picture has been terrific, but there are some warning signs that things are not perfect. >> but it sounds as if you're saying hold off, this is not time for a major shift these are early signals. >> it's one day from one report. if you look at the overall picture, it's still positive for the tech stocks overall and for the market >> but just in terms of trade, do you think it's too soon to say trade concerns are out the window >> absolutely. there's a difference between risk and uncertainty risk means you know the range of possibilities. with uncertainty, you don't know what range of possibilities are or the odds of different outcomes >> the story with the bond market this week has been what's happened to treasury prices. it's been unbelievable watching when we think the bank of japan may roll back stimulus, watching them roll back the prices. how does that play out in the

municipal bond market? >> as treasury yields have risen, so have munies. they continue to have a firmer tone, outperforming in the recent backup in rates led by treasuries u.s. treasuries, if it were just focused on domestic factors would be probably higher in yield. the ecb, low rates, they have held u.s. rates down for a while. a whiff of a change from the bank of japan caused rates to move higher. >> you are looking at municipal bonds as a place you want to be? do you think the rates will continue to rise there are you betting treasury yields will push above 3% and keep moving up? >> i pointed this out other times i've been on the show. we expect the ten-year treasury to end this year a good bit above 3% call it 3.25 to give us a direction and a magnitude.

muny bo muny bonds are out to incrementally outperform the supply has plummeted sharply relative to half-year points in prior years in reaction to the tax bill and the demand is still strong supply and demand matter everywhere we think that will hold true, but it will be muted returns, not roads to riches. >> thank you both for your time. when we come back, former dallas fed president richard fisher is making his way to the "squawk" set we will talk trade with him, the ecb decision and much more. and then steve mnuchin will join us at 8:00. as we head to break, a look at yesterday's s&p 500 winners and losers

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♪ welcome back you're watching "squawk box" live from the nasdaq market site in times square. good morning among the stories that are front and center today facebook shares are getting crushed, though they are off the lows of last night's session among the reasons for the drop, weaker than expected revenue,

global dalie i daily active useg in below estimates, and users in the united states and canada flat you will see now facebook shares are down by $41. that's a decline of almost 19%, but again last night the stock was down as much as 24%. >> it was a panic move during that conference call, which is dramatic we'll have to see it settle out here a lot of people piled into the stock thinking it was clear skies. >> it's an unfair game, but should we play it? where does facebook end the day? >> i'm more comfortable saying other tech stocks won't be down much in sympathy with it than -- >> that's a fair -- >> if i had to take an over/under, i would take the over >> it's probably oversold.

the question is how much >> it's the biggest intraday drop ever. it tells you a lot about how they communicate with the street >> you think it's a communications story or -- >> i think largely it's a communication story. >> i think maybe it was communication -- >> priced for perfection, i agree. >> because historically they always beat. >> the outside surprise on fb was a huge investment, then they miss >> and the other stocks that complete, the other f.a.n.g. stocks, most of them are more expensive cosmetically it was like facebook is not that expensive. 90% of the analysts recommending it >> the larger picture on facebook as a product people use

in the u.s. and europe, we're getting to the phase where if you want facebook, you already have it. i don't know how much more they're growing. >> that's a bigger conversation. peak saturation. let's talk about southwest airlines that company coming in at 1.26 on an adjusted basis, 4 cents better than the street was expecting. revenue was slightly shy of expectations, 5$5.7 billion airline notes fuel costs rose but other expenses saw a modest rise the southwest ceo will join us in a few minutes president trump and european union president jean-claude juncker reaching an agreement to lower tariffs and avoid a trade war. >> we agreed to join forces to protect american and european companies from better -- never

better than we've been doing, we've never done this well, but we'll do a lot better after we do this deal and other deals that we're currently working on. likewise the european union is going to do better, stronger, bigger >> joining us now is richard fisher, former dallas fed president who negotiated protocols for china's introduction into the wto. he is a senior adviser to ba barclays, cnbc contributor >> did you see me in that picture? i had dark hair like you this is what happens >> the situation seems to be mildly defused in terms of what we heard yesterday

did anything really happen >> look, it takes a while to negotiate these things the statement is important in and of itself, particularly given the fears that everybody had. i've been spending time with secretary ross he actually is quite articulate in their logic of what they'd like to do in the case of europe, their lo logic is we set up special protections for europe, as we know europe is reconstructed, it's time to bring their tariff structure down to equal ours if they do move to the point of no tariffs, no tariff barriers, i'm a free trader, this would be fantastic. >> do you think that's possible? >> i think it's possible to move in that direction and make progress juncker enjoyed the session so much, he kissed the president afterwa afterwards >> he is known for that. >> he's european >> over the past several weeks if not months there has been a

critique, dare i say, of the president's strategy of being as aggressive as he has would you look at what happened yesterday and say there is some bite to the bark and that the barking strategy works? >> i would say there's potential bite to the bark i took a college course, music theory barely passed it the one thing i remember about that professor talking about richard wagner, it's not as bad as it sounds maybe the president is not as bad as he sounds this is not what we hope for, maybe don't like how he sounds, but if he makes progress, more power to him >> where do you think this goes? if you're an investor this morning, do you think the markets were oversold? >> no. i don't think it had much impact on the markets

i think like i always should with this president, take a wait and see attitude if this moves in this direction, it's a positive. >> if you were a german carmaker today, what would you be thinking a german carmaker who not only -- >> who diddled with the exhaust system -- >> we could talk about volkswagen >> that also manufacturers in the united states and sells overseas >> i would be happier now but take a wait and see attitude you put your teams together, then they have to negotiate. it takes a long, long time what we do with china, it took a long time for the action to be set and then for the follow-through to take place the wto took years then we finally agreed on an agreement. here's the point, the sign is in the right direction, let's hope it keeps moving in the right direction.

>> there any doubt six months ago we could have engaged with the eu on getting towards zero on industrial exports and imports and maybe talk about some reforms to wto without the drama? a lot of people who have been at this game for a long time say this is what we've been working on for a long time >> i played that game for a very long time. for four years under president clinton. it's incremental, incremental. to dislodge it, again, we're all sort of offended by the rhetoric, but it appears to maybe perhaps, please god, have had an influence if it works, all power to them it's a crude tool, but it moves them off the dime. that's something we should applaud now. >> if you were back on the fed and there was a meeting this morning, let's just pretend there was a meeting this morning, you would be thinking what relative to what you're thinking -- >> i think jay powell has been

good on this it's not on their book it does affect the basic formeic formula. right now it has no impact because nothing is being done. the talk has the potential to move in the right direction. it has yet has had no affect on it it's been one day on output. >> very quickly what would you be concerned about in terms of the president's jawboning on the fed? >> i think i already made comments on that i would ignore it completely since bob rubin was at the treasury, the clinton administration, you won't diddle with the fed we know what lbj did to martin next to the fomc room is a portrait gallery, there's portraits of former fed chairs if you were to take a big black x and put it over somebody t would be over arthur burns

he was politically motivated no fed chairman wants that legacy i would ignore it completely >> thanks. >> thank you when we come back, mark suck lo zuckerberg losing billions of dollars in the matter of a few minutes. and tlen at 8:00 a.m., our newsmaker of the morning, steve mnuchin talks trade. you're watching "squawk box" on cnbc i think we should do that meeting tomorrow. well wait. what did you think about her? it's definitely a new idea, but there's no business track record. well, have you seen her work? no. is it good? good? at cognizant, we're helping today's leading banks make better lending decisions with new sources of data- so, multiply that by her followers, speaking engagements, work experience... credit history. that more accurately assess a business' chances of success. this is a good investment.

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time for the executive edge. we've been talking facebook all morning. shares plunging after the company's latest results disappointed investors lost a lot of money, but nobody lost more than co mark zuckerberg. he lost more than $17 billion wiped off of his net worth that happened in a couple hours. we've been discussing where facebook's shares will end the day today. betting line around here is maybe a bit better, not worse than where they are today. we'll see about that mr. zuckerberg taking the brunt

of that. >> i would be interested to talk to jim cramer later this morning to get his take on what he thinks we'll do that in the 8:00 hour. coming up, taking flight southwest airlines pulling into the "squawk" gate to deliver its latest quarterly results we'll hear from gary kelly next. at&t provides edge-to-edge intelligence, covering virtually every part of your manufacturing business. & so this won't happen. because you've made sure this sensor and this machine are integrated. & she can talk to him, & yes... atta, boy. some people assign genders to machines. and you can be sure you won't have any problems. except for the daily theft of your danish. not cool! at&t provides edge to edge intelligence. it can do so much for your business, the list goes on and on. that's the power of &.

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welcome back. a number of stocks on the move this morning besides facebook and that includes mattel. shares of the toy maker down sharply this morning. earnings and revenue following short. among the other reasons, toys r us's liquidation. mattel plans to cut 22% of its global nonmanufacturing workforce and also sell some factories in mexico, so people will be keeping an eye on that stock, down 8% this morning. airbus shares rise to go a record high. the company posting better than expected results as costs fell on the newest jet. and anheuser-busch also

topping expectations. the brewing giant getting a big boost from sales related to the world cup. also southwest airlines results out this morning. the company came in with earnings on an adjusted base of 1.26 a share. that's better than the 1.22 the street was anticipating. joining us now is gary kelly, ceo. thanks for being here today. >> great to be here. >> let's talk about the numbers. you're very upfront in your opening statement what happened with some of these numbers, better than expected. revenue was about in line with expectations. >> right. >> you do say that you were dealing with a couple of headwinds this time of around. one was the higher fuel cost and the other was, of course, the aftereffect of what happened with that flight 1380 with the accident there. let's talk about both of those issues starting with the accident. you say that it did lead to some higher cost that had been anticipated and probably largely expected by the street. you expect that that will start to drop off in the next couple

of quarters, though. >> the main impact on the quarter was on revenues and again, we came in right in line with what we told everybody so right in line with expectations and i just want to compliment all of our people. we started off the quarter with a real challenge and they rose to the challenge and did a remarkable job getting us to this recovered state, if you will, but we benefited from the tax reform in the quarter and that was pretty much offset by increased fuel prices. so the cost performance, otherwise, was really very good in the second quarter. we did shift some costs timing wise to the third quarter, but very solid performance given all the challenges. it was a record earnings per share and, you know, the main thing is what happens next and i know you'll want to talk about that, but again, i want to

compliment our folks because it was a challenging quarter and given that, they did a really great job. >> let's talk about the investigation. where does it stand right now? is there anything you can tell us about that accident >> really, there's no new news. the ntsb is continuing their work. they have set a date for a hearing and it's focused on the fan blade and the manufacturers, the airframe manufacturer and just understand exactly exactly why that fan blade failed and why it failed in the way it did creating the damage it did. we're continuing to support that investigation and haven't learned anything different through the course over the last several months. >> okay. let's talk about the higher fuel cost. you said -- it actually surprises me that the higher fuel cost basically offset any gains you got from tax reform. so where do you see fuel costs headed and i know southwest is always hedged. what are you set up for?

what prices are you expecting in the next quarter or two? >> we've got great protection beginning at about $75 a barrel and in 2019 we have a really solid hedge in place. roughly 55%, 60% coverage. it levels around $5. we got a modest gain in this quarter. if you look at all of our hedging positions out through 2021, it's close to half a billion dollars worth of benefit with the hedge. i'm a little surprised that prices have moved up so much this year. they're up 50% compared to a year ago and, you know, it appears that that will continue into 2019, at least. beyond that, you know, there's a lot of predictions. some predicting that prices will ease back down some, saying they'll stay strong. in the end we don't know. we try to be as prepared as we can for increases and we got

that kind of protection in place. >> let's -- >> go ahead. i have a fun question for you. did you get a chance to see this article in the "the wall street journal" this week with doug parker and ed bastian sitting in the cheap seats? >> no, i didn't see that. >> there's a fabulous article where they interview both of them literally sitting in coach in the middle seat to talk about the leg room and how customers should feel about it and my only anxiety after reading the article was that ultimately everyone's going to move to even less space and i want to know, when do you think we'll be tight enough >> well, i hope everybody gets tighter and tighter because that just makes southwest better and better. i'm very proud of the product that we offer. there is no second class on southwest airlines and we're very proud of that. we have very comfortable seats and i hope they jam more and more seats on their airplanes.

that would be fantastic. >> you want jam -- has that helped your business as a result of what they've been doing >> well, you know, we've had -- this is our 47th year and we've enjoyed a strong brand for decades and we're obviously famous for low fares but we're just as famous for offering great service and that includes a comfortable, onboard experience. the short answer is yes. as time has gone by, the other guys nickel and dime. they make the onboard experience less comfortable and absolutely that shines more of a light brighter on southwest. >> okay. gary it's always good to see you. we will talk to you soon. thanks so much. >> okay. thanks for having us on. >> next time we'll do the interview ourselves from the middle seat. when we return, more on the big corporate story of the morning, yep, it is facebook posting its biggest drop ever. we'll talk about that when we return. stephen mnuchin at 8:00 a.m.

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facebook's wipeout. why investors are giving the social network a thumbs down >> we expect our revenue growth rate to decline by high single digit percentages in both q3 and q4. >> on the back of the company's report, nasdaq futures pointing to a sharp decline ahead of the wall street open. get ready, it is the busy yest day of earnings season. we've got the numbers and what they can tell us about the media sector coming right up. plus president trump strikes a trade deal with the european union. a live report from the white

house as we countdown to our news making interview with steven mnuchin. the second hour of "squawk box" begins right now. ♪ announcer: live from the beating heart of business, new york. this is "squawk box." good morning. we're live at the nasdaq market site in times square. take a look at u.s. equity markets this morning ahead of the open right now. dow looks like it would open -- it would open off. the nasdaq down about 113 points in large part because of facebook. we will talk about that in just a minute those earnings surprising on the downside in a very big way. the s&p 500 also looking to open down about 7%.

we do have -- >> seven points. >> quarterly results coming in for universal's parents. revenue looks like it came in just slightly short of forecast in what the company is calling some difficult comparison when it comes to the film unit. a year earlier they had the fate of the furious" that was out. they had home entertainment releases. this quarter there was only one major film release and that was jurassic world. ebitda was up. that's better than the street expected. $4.3 billion is the cash flow. up 7%. obviously a couple key numbers. the street is always watching for these. high speed internet and business services -- >> this is coming in way higher than expected.

>> 260,000 broadband customers which craig moffett's sitting here, 260,000 broadband customers. how does that compare to what the street was looking for >> estimates had already come up and were positive 191 so anything over 200 was going to be considered a good number. this is a terrific number. in some ways it's a bittersweet, because here you have the cable business doing really well and yet comcast is doing its level best to try to be something other than a cable company and its driving anyone bananas. >> video customer loss 140,000, that was i believe -- >> that's about in line what people thought. >> it's more than two q 17. >> exactly. remember the second quarter's always a seasonally weak quarter

for video, so it's not a surprise that it's a negative number. remember, the most important thing about cable companies as we've been saying it for years, cable companies aren't media companies, they're infrastructure providers -- >> you like them in the broadband business more than you like them in the cable business. >> the cable business is the broadband business. they're the same thing -- right, but selling video is -- think of selling video as a pass through business that it's not really what they do. fundamentally what they do is they provide wires for people and the wire is still really healthy and so -- >> you think about the business in a very different way than, perhaps, by the way, people inside comcast are thinking about it given nbc universal and given the idea and other media executives or even at&t is thinking about it and they want to be in the media business. >> they are in the media business. time warner is a media company. directv is a distribution

company and unfortunately, one without wires and so its structurally disadvantaged. comcast is two things, right it's a collection of media assets at nbc and its a collection of wires in the ground and the wires in the ground piece has nothing to do with going off and chasing fox and chasing sky and that sort of thing. sky and the m & a ambitions they've got are all focused on what do you do for nbc. you own this thing and now you've got to feed the beast. that's the tension that investors are struggling with. >> you don't look at the sky business at all from the distribution end >> not even a little bit. not even a little bit. what they're looking at with sky is very narrowly it helps gets some distribution for nbc content and that's a nice thing, but much more importantly it could potentially be the basis for a global ott brand to distribute, what content they make over at nbc. >> although changing the mix so

that it's more international mix is something that a lot of -- >> no question. remember, we've seen this with other companies in the past. the synergies of a physical distribution company going global are zilch. these are local businesses. its wires in the ground. there's no synergies about having a wire in the ground in the u.s. or europe. >> that's a pretty strong purchase for the company. i don't think anybody that would argue that didn't help comcast tremendously. >> it's been a terrific acquisition but in the same way that as an investor you bought a stock that was cheap and it went up, they haven't made it more valuable necessarily other than running it. >> the running of. >> no question. >> doesn't comcast have to be aware that the concentration of eyeball hours now on mobile devices where its not necessarily especially under 5g going to be those wires in the ground bringing you the content,

they have to prepare for that? >> yes and no. you have to prepare as a distribution company and you have to think about where the physical consumption is going to be, but one of the ironies here is what's happening with wireless networks? the raddi on cell sites are getting smaller. >> you're always going to need the wire in the ground. >> the wire in the ground -- the old addage in wires its 95% wires. >> just to put a fine point on the way you think about this so the audience understands, i believe and tell me if i'm run, you did not think at&t should buy time warner, you think the idea of the distribution and -- just philosophically doesn't need to be together. comcast/nbc universal, i think a large part of it worked because

they got it at a great value. >> that's right. exactly. >> great operators. >> that's right. but the question of do you make this asset more valuable by virtue of the fact that it is in the same business as the destinati distribution business? you can argue that -- it has kept them from being able to do that. at&t has agreed to similar types of rules, but the evidence of, are there real strategic synergies, the answer at least for now is at best that the jury's still out. >> can i just ask one question that level of scepticism is something that has dogged comcast shares for months at this point. >> oh, yeah. >> my quguess is a lot of people that felt that way sold the stock. >> you can still see the way the stock behaves every day. the stock went up when they withdrew the fox bid and what

people are playing for is, if disney outbids them for sky, people know the stock would rebound nicely and they would almost have to announce a share repurchase and the stock would go up quite a bit. >> you think it goes down if they win sky -- >> i think -- it goes down a little because the market is still not sure that they're going to win sky. there's -- i think the odds are that they win sky and the market is pricing it that way but it's not a done deal. >> is there another business -- if you didn't want sky, is there another business you think that you'd much prefer them to use their cash for >> so i guess there's a couple things to say on that. yeah, well, when you say buying back shares, that's -- look, buying back shares when you're trading at seven and you're out chasing something like sky at 14, i'd rather buy comcast at seven times than a business that is structurally weaker at twice

that price, right? that's what investors want them to do. this idea that no, you're thinking short-term and that's just trying to goose the stock price and that sort of thing, that's fundamentally not the way constitutional investors think about it. institutional investors think the cable business is generating a lot of cash. it's in a pretty good spot to generate cash. but the idea that says the management team will decide that we'll take that cash and invest it in another business on your behalf and not give you the flexibility of investing it where you want is a frustrating proposition. >> i will say i'm a comcast employee, obviously. we are bias when we look at this but i'm also a comcast shareholder. i have total faith in brian and running and brian and steve and if that's what they say to do, i'm okay with that too, but i hear your point. >> i understand. there are a lot of shareholders who are, but this idea that creating what is essentially a

conglomerate, it's a media conglomerate, it's got a media business and it's got a distribution business and now perhaps it will also have a european distribution business, conglomerates trade at a discount for a reason, sure. in the meantime, we'll come back to you in just a moment. the other big story of the morning, the one that just about everybody is talking about is facebook. shares of facebook they have plunged, at least in the premarket or aftermarket after missing -- metrics just falling short of expectations across the board. another big warning from the social networking spooking investors too. that stock down 20%. we want to get to julia boorstin who is in los angeles this morning to break down what took place on that dramatic conference call last night with investors. >> reporter: andrew, facebook report slowest ever user growth and revenue growth slowed more

than expected. take a listen to this warning that sent the stock plummeting. >> our total revenue growth rate decelerated approximately 7 percentage points in q2 compared to q1. our total revenue growth rates will continue to decelerate in the second half of 2018 and we expect our revenue growth rates to decline by high single digit percentages from prior quarters subsequentially in q3 and q4. >> reporter: given consumers more choices on privacy to effectively opt out of the most targeting. also weighing on the stock, a warning that total expense growth will exceed revenue growth and operating margins will decline meaningfully. mark zuckerberg explaining how protecting users will impact

margins. >> we will continue to invest heavily in security and privacy. we have a responsibility to keep people safe. but as i've said on past calls, we're investing so much in security that it will significantly impact our profitability. we're starting to see that this quarter. >> reporter: zuckerberg announced that 2.5 million people use at least one facebook apps. europe daily active users declined for the first time ever dropping by 3 million from the first to the second quarter. back over to you. >> before we do that, thank you julia. i just wanted to get your take real quick on facebook and whether you think this is oversold, undersold? >> it's michael's company to cover. it is an extraordinary thing for somebody who covers telephone companies where at&t is growing at negative 3% to see a company

where 30% growth is a giant miss and projecting 30% growth in the second half is terribly disappointing is an extraordinary thing. i think michael's argument is that probably the guidance -- >> michael >> michael nathanson. his argument is they're being a bit conservative and the phrase he used, there's -- we're sorry and look we're paying for it in all kinds of way. >> lowering the temperature, lowering the bar now and maybe to the extent that they have outperformed even their own expectations in previous quarters we go back to that cycle in the future. >> i think that's the suspicion. that's not to say that there's nothing going on here. >> there's no incentive for them to come out and say everything's great, we're set up perfectly heading into the midterm elections. >> that's right and making the arguments that privacy is so much stricter it's going to hurt us is a lot better than saying

thank god we have no privacy restrictions and its great. right? so there's probably a mix of real headwinds and also some sensible swin to try to turn down the heat a bit. >> good to see you. >> you too. also let's talk about under armor. the athletic apparel maker losing 8 cents a share. revenue did beat wall street forecast and joining us right now is sam poser, he's senior research analyst. the stock looks like it is up about 5.9%, sam. what is the reason for that? is it better than expected revenue line or something else >> it looks like to me it's up because the inventory's were down probably -- down less than people anticipated, however, because they didn't adjust the full year revenue number, it's still looking like it's over 21

weeks forward supply. >> we're also looking at guidance for the full year where they are talking about now seeing an adjusted earnings per share of 14 to 19 cents. how does that matchup with what you were anticipating? >> that's exactly what they had before. the one thing they did do, however, they changed -- they added another the old restructuring charges were 110 to 130 and they just raised it to 190 to 210, so there's an additional, you know, midpoint -- there's an additional $80 million or $95 million in the midpoint which is about 16 cents on our numbers that they -- that they added in restructuring. so if it was apples to apples before, the numbers would be negative for the year but we have to find out what those restructuring are and we're concerned that they might be cutting a key assets which will hurt them from a growth perspective in the future. >> that's what i was going to ask you. what do you think about this

company? where are you in terms of believing the restructuring at this point and the turn around >> i think they got a lot of work to do. they're moving a lot of goods through down market channels. we put out a note the other day, we saw a sports bra that was, you know, 16.99 at tj maxx, the identical item was -- was 20.99 at koerlz and a few items left at dick's were regular price at 35 bucks and they were regular price on the under armor website. it's very hard to do that plus they were very aggressive on amazon prime day which, again, it's hard to start selling full price, you know, premium product when you're promoting a lot of stuff. i think -- it's going to take some time. the street seems to be expecting a major turn around in '19. if it happens, it's going to be

a lot later than that and i'm still expecting that full year guidance is going to have to come down on the third quarter call. >> thanks for your time today. >> pleasure. when we have return, zero tariffs that's what president trump says the united states and the european union or working towards. we got a live report from washington next. coming up at 8:00 a.m., we'll talk with steve mnuchin. alerts -- wouldn't you like one from the market when it might be time to buy or sell? with fidelity's real-time analytics, you'll get clear, actionable alerts about potential investment opportunities in real time. fidelity. open an account today.

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and two-hour appointment windows. click, call or visit a store today. welcome back. the eu and u.s. putting their trade differences on hold at least for now. kayla tausche joins us with some of the details from yesterday's festivities of sorts. >> meeting, much anticipated meeting that produced a pledge and that pledge came not just after the meeting but after two weeks of talks, andrew, behind the scenes and yesterday there were two plus hours of bilateral meetings between the eu and the united states. they produced a joint statement that said they'd start a new dialogue to lower tariffs on industrial goods, reduce

barriers in trade of areas like medical products and soy beans and potentially import more u.s. natural gas. the statement also said the two sides want to resolve the steel and aluminum tariffs in retaliation for them but it doesn't say when. european commission president jean-claude juncker tweeting a photo with the caption, i came for a deal, we made a deal and president trump touted the agreement as a win-win. >> we agreed to join forces to protect american and european companies from better and really better than ever -- we've never done like we're doing i can say from the standpoint of the united states, we've never done this well, but we're going to do a lot better after we do this deal and other deals that we're currently working on. >> reporter: one of those other deals is in focus today, that's nafta. mexico's foreign minister tweeting this photo of himself

headed to washington for talks that begin again today. mexico said there are two-thirds of the way to a deal and mexico and canada met yesterday and said, they're commit today a deal with all three countries, something that the president has not necessarily said he is the biggest fan of, but we'll see how today's talks with mexico go. >> kayla tausche, thank you. we should -- programming note because we'll be speaking to the stephen mnuchin about trade. that interview is at 8:00 a.m. eastern time. when we come back, take a look at this chart. can you guess which chart it is? here are a few hints for you. this is a big hint. it's a workplace software company. it's previously been the target for an activist investor and the shares are up more than 30% this year it's trading at a 52 week high. tweet your guesses to us at

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♪ good morning, welcome back to "squawk box." we're live at the nasdaq market site in times square. corporate earnings front and center this morning. we've been talking about facebook all morning. altria reporting a penny above forecasts. bristol-myers squib coming in 13 cents above estimates. the drug makers revenue also beating estimates and it raised its full year forecast on strong sales on cancer and blood thing drugs. and home builder reported a

profit of 1.18 per shares. dr horten posted a double digit increase. spotify reporting a much larger than expected loss. we should point out that the figures you're seeing on the screen right now are euros rather than dollars. the revenue did match street forecast but growth was slowed by new european data privacy rules. the same rules that may have challenged facebook to some degree and you're looking at spotify now down about 4.5% this morning. shares of bio gen are on the move after the company reported key drug trial results. meg, good morning. >> analysts were calling this the summer catalyst for the bio sector. there had been a major run-up in

both country stock prices leading into the data after the announcement that the study results were positive earlier this month and when they came in, the results turned out to be mixed. investor reaction last night was negative. first, the trial showed that the highest dose of the drug slowed the declines associated with alzheimer's such as memory loss and trouble thinking clearly by 30% compared with placebo it corresponded with a significant clearance of amy lloyd build up. lordosis didn't appear to work and one -- there are also questions about the fact that the highest dose group had significantly fewer patients with a genetic mutation than the other groups. raising questions about whether the effect observed was exaggerated. many analysts largely suggested the stock reaction last night and this morning was too harsh and it plans to move forward with discussions with regulators about next steps for testing the drug, guys. >> stay right here. let's talk more about this, meg.

joining us right now is michel binatsa. thank you for being here. >> my pleasure. >> let's talk about the result, the street was disappointed after really expecting big things and pushing the stock higher but alzheimer's experts have been decidedly more positive on this. what's your take on the results? what could you tell people >> this is exact. the summary was very fair that you made. people expected 15 to 20% outcome. we delivered 30. having said that, that subgroup needs to be made and there is plenty of work to be done. it's a long journey. i believe overall its positive. it's not the end of the story, it's the beginning because it opens much more avenues for investigation. we have to keep in mind that if anybody is able to delay the

onset of the disease by five years, we decrease the prevalence of alzheimer's disease by 15% by 2050. i do hope that bio ggen with its partner will be able to participate for its benefit of society. it's a crisis and we hope that we'll be able to contribute improvement in this field. >> are you convinced that removing of the amyloid is the right way to go based on the results? >> we had a better chance today than months ago. i think it reinforces the hypothesis. we have seen an erosion to close to 80% of the plaque and the correlation or the slowing down of the cognitive decline and here this is again confirmed. the studies are positive but there's still some questions to

be answered and the one is obvious and very fair, we have to follow through on that. >> how do these results effect your confidence if at all in your other alzheimer's drugs with results expected in 2020? does this change your thinking or increase or decrease your confidence about that study? >> the bio ggen team is workingn the long range plan and this data increased the probability of success. >> increased >> yes, absolutely. we have to remain very modest. we know that 99 point, 6% of all the studies failed and we have some leads and we are reinforced by this additional data point here, but will remain focused. i spoke to the team yesterday and said, we keep the head down and keep working. >> when do you expect we'll get more clarity on those subgroups,

like the patients who were in the high dose group that had that great result? >> i would -- while we speak they're working i'm sure on the bringing more clarity to the community on the -- i don't know exactly when. >> there are two groups watching this today, one is the investors and the other would be patients, thur families, their doctors, they're trying to figure out how far away we are on being able to slow the onset of alzheimer's. what can you tell them >> what i would like to say, it's a like journey. it's ten years work. we need to be very resilient. this is the mission in life. we dedicate 1% of our r & d budget in this space and we want to provide a solution for the alzheimer's patients in the future. we have six programs in development and today we are

more reinforced than months ago and on -- we did not expect much six months ago. this is a positive. >> i also want to ask you about drug prices. this is a major topic for the industry right now. we've seen a lot of your peer companies come out with pledges not to raise prices. i don't believe you guys commented on that in your conference call earlier this week, but i know that pharma just had a board meeting, did you guys have a conversation there and say it would really please the administration if we come out and say we're not going to raise prices for the rest of the year was there a conversation like that >> this is absolutely a hot topic and i'm not sure that making a pledge of doing a bit less of the same is a solution to the affordability problem, because before price, the

industry and the trade association is also taking that very seriously. we want to be part of the solution. you know that bio ggen has alwas very progressive in this matter. we engage into value based contracts in ms and we're looking at all the alternatives. we take notes about the pace of price increase and we are working with the traditional association to find market base solutions. we are confident and i'm even more confident when i speak with the authorities and they continue to place science and innovation at the center. i am fundamentally optimistic about the future of the u.s. market because it's all about innovation and this is where bio g biogen is. >> i want to thank you for your time today. we really appreciate it. >> thank you, all. let's take another look at shares ofbiogen. the stock ran up on the initial news on this. it's selling down by 8.8%, a decline of $33.

you heard what he said about the longer term. meg, thank you. when we come back, a lot more to come. we got quarterly results from conocophillip. brian sullivan is going to join us now with a look at what's coming up next. >> everybody wants to know how much are these higher oil prices that we've had going to impact the bottom and top lines of the big oil companies. conoco is out but the twin guns -- that's not me -- exxon and chevron are out tomorrow. we'll ve ygiou a preview of what you need to know when "squawk box" returns right after this. hawaii is the first state in the u.s. to have 100% renewable energy goal. we're a very small electric utility. but, if we don't make this move we're going to have changes in our environment, and have a negative impact to hawaii's economy. ♪

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and see it through-with digital. we're back to "squawk box." how much is the higher cost of oil going to help the bigger gas companies. we have one number out already and two huge numbers coming tomorrow. brian sullivan is here with both a recap and preview of what's to come, brian? >> it's like magic. conocophillip earnings are out

and they beat by a penny on the esp side. it was a buck 39. you back out special items came in at a 1.09. 1.09 versus 1.08. libya has problems. lot of libya backing out. production ex-libya near the top end of conoco's guidance. they did not give a revenue number but they are raising their capital guidance to 6 million from 5.5 billion. the stock up 29% this year was looking for a lot. right now the reaction -- i don't want to call it positive but it's not negative. conoco out no offense to them. the twin towers of oil roll out, exxon and chevron. big day. exxon due about 8:00 a.m. eastern time. here's your expectation, eps of 1.27. revenue of about 72.5 billion. three things to watch. production, they came under 4

million barrels a day. will they do it again? also, cash in operations little more than a billion dollars below the consensus last quarter and of course capital spending just under $5 billion. there we go. those are the numbers to watch of the chevron will be out around the same time. eps estimate there is 209. revenue 45.5 billion, your keys to watch again, cash flow, how much did improve guys year over year given higher oil prices also cost. the ceo still relatively new on the job saying that recent cost control is everything, capital spending for chevron, guys, was higher than exxonmobils for the past five years in part because of big new projects including one in australia. to give you guys an idea is about 2.09. higher oil prices could contribute to the bottom lines of both exon and -- exxon and

chevron. >> good use of bigly. >> want to take a quick check on markets. you can see -- the dow will open up higher but the nasdaq off about 104 points because of facebook in large part. rich greenfield just out with a report on facebook this morning. headline, facebook's death has been greatly exaggerated by facebook. whether facebook was trying to lower its own temperature and whether they will effectively to outperform in future quarters in the report he talks about how legacy media executives seeing that facebook report were probably rejoicing but he said they should not be rejoicing. in fact, they should be afraid, very afraid, facebook is actively choosing to make less money, deprioritizing near term monetization to drive engagement

to higher levels to capture even more of their 2.5 billion users time and attention. keep an eye on facebook today. ecb just out leaving rates unchanged. let's get to steve liesman. >> not making any change. keeping the refi rate where it was and continuing at its new schedule of quantitative easing on track to end it. i thought this might be an interesting time to take a look, there's some concern out there that maybe we're into this period of convergence of tightening. not so fast. 1 and 3/4 to 2%. it's reducing it's easing pull. the ecb is at zero and it will ease more slowly and wind it down ending it in 2018. the bank of japan, a lot of talk about why they may be doing, they're at minus 0.1 and they are still easing and there's talk about a tweak to that

policy that has the boj -- the jgb on the move this morning up a few basis points. take a look at the two year german yields versus the u.s. you can see that difference is increased over time, so at least the bond market is not making a bet at the moment on convergence and that's also true at the ten year horizon when you go out further. here's just the spread between the u.s. and the german ten year. as negative now as it was -- that's the short-term chart. if you look long-term, say back to 2017 it's gotten worse or widened out further. we're on the watch for that eventual convergence but it's not necessarily a story made for daily business television, becky. >> well put. we'll be listening about all of this. it matters because of what -- it's going to matter because

we'll see if he has any reaction to what we've been anticipating out of the bank of japan and just with what we've seen treasury yields do over the last week. >> i think mnuchin that you have coming up is very important for the whole european outlook. you see. >> i agree. >> you see auto stocks on the move, soy bean prices are up. >> u.s. automakers up too. >> so all of that is very significant in how the treasury secretary characterized those european negotiations is important and, by the way, droggy has made comments, if that should ease off there could be policy effects on the central bank side. >> we'll be talking with mnuchin in less than 12 minutes and steve, will see you after that, too, thank you. folks, check out share of supervalue. the supermarket greg to bebough

super val u shares soaring on this news. that's a gain of just over 12 bucks to 31.75. and president trump just -- we know he's awake because he's on twitter. this is what he had to say this morning. twitter shadow banning prominent republicans, not good. we will look into this discriminatory and illegal practice at once many complaints. there have been a lot of complaints about it i'm not sure in terms of the illegality or how it works. take a look at twitter shares. they're down by 3.9% on that news. talking about shadow banning. there was a whole conversation about whether trump himself should be banned. >> banned on trump -- on twitter? >> on twitter? >> good luck with that. >> yeah. now that's separate from the idea of whether he's allowed to block people. >> right, right. >> as the president. >> right. >> because of abusive language

and things like that or -- >> the terms of service say that you're not allowed to threaten somebody else. >> yes. >> and so -- how -- >> good luck banning the president of the united states on twitter. >> good luck. in the last half hour we've had a lot to talk about, we asked you to send us your guesses for this mystery chart. here are the hints. it is a software company, shares up more than 30% this year and now we have the answer. it is sit tr. ix we'll talk to the ceo right after the break. with fidelity's real-time analytics, you'll get clear, actionable alerts about potential investment opportunities in real time. fidelity. open an account today.

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welcome back. citrix out with earnings. they had a competition about what this chart representing. joining us right now is david hensha henshall. good morning. >> good morning. >> help us understand how the cloud strategy has moved things much faster than what it seems like you had indicated earlier this year. >> sure. if you take a step back and think about citrix as an organization, for the last 30 years we've been focused on connecting people on demand. we've evolved the organization.

over the last two or three years we laid out a strategy that said, we want to help our customers adopt cloud services in a hybrid fashion in a way that feets the pace that they're on a lot of our ceos we talked to, how do we improve productivity of our employee base, how do we adopt cloud mobility at the same time all within a security end flow. we've been executing on this strategy and fortunately we're well ahead of the trajectory. >> how much higher margin is the cloud margin or the classic legacy business? >> the overall margins of the company are about 30% last quarter up from 26% a year ago. if you look back over the last several years we've taken margins from the low 20s up into the low 30s and we will be able to stay in the low 30s over the course of the next several years. the margins are set up, our services are not highly compute

or storage intensive and therefore we can maintain margins that are much more typical of an enterprise software company. >> analyst communities hate or love citrix -- they've been burned, but when you think about effectively the next year and how much you've outperformed, do you think -- can you maintain the level of growth? let me actually ask in a different way because it reflects the facebook issue today. >> okay. >> which is -- i'm not saying that you've sand bagged expectations before, but how much have you purposely set a bar that you can always jump over >> i think the issue for us is when you're going through a multi year transition, the most important thing is laying out a

framework so both customers and investors understand where you're going and why you're targeting certain metrics and you can execute within that envelope over a protracted period of time. the mix of subscription is going to move around from quarter to quarter. last quarter it was 42% of our new sales were coming from subscriptions. a year ago it was 30% and as that mix changes the reported financials will change along with that. our strategy has been to lay out that overall framework so as we execute the quarter to quarter gyrations aren't going to be a surprise to our investors. >> okay. >> when we look forward, we think we're in the early innings of a multi quarter transition and we've laid out targets all the way to 2022 just against that same strategy. >> david, thank you. appreciate it. in our headlines this morning, qualcomm terminating its bid for nxp this morning after failing to win regulatory approval from china.

qualcomm announcing a $30 million stock buyback. the ceo will be on "squawk on the street" at 10:30 a.m. eastern time. when we come back, we are waiting for results from fast food giant mcdonald's. we'll bring you those numbers as soon as they cross the tape, plus an interview that you don't want to miss, treasury secretary steven mnuchin will join us at the top of the hour, we'll talk trade, tariffs and everything that's happening in just a few minutes. making cars lighter, it's a good place to start, advanced oils for those hard-working parts. fuels that go further so drivers pump less. improving efficiency is what we do best. energy lives here.

a "squawk box" news maker, treasury secretary steven mnuchin joins us live from the white house to talk trade straight ahead. facebook fumbles, shares of the social networking giant plunging. will it take the rest of the market with it we'll debate straight ahead. plus, forget about the fed, it's a news conference from ecb president mario drghi today that could move the market. we'll bring that to you live as the final hour of "squawk box" begins now. announcer: live from the most powerful city in the world, new york. this is "squawk box."

good morning and welcome back to "squawk box" right here. take a look at the futures. here's what's happening. let me show you what the nasdaq is doing first. nasdaq off about 102 points in large part because of those disappointing earnings from facebook. really not just the earnings but the expectations for where -- for what's going to happen over the next quarters. that company warning that growth is going to slow considerably. the dow looks like it will open higher and the s&p 500 off about six points right now. mcdonald's just crossing the tape with its results. take a look at. this the dow component earning 1.99 a share. 7 cents better than the street was expecting. revenue also beating estimates. that was above the consensus estimate of 3.5%. that dow component turning around. it was down i think about 20 or

30 cents just before these numbers came out. it's up by almost $2. a gain of 1.2%. 160.80 is the last trade. the do you futures are up by 63 points. let's get to our news maker of the morning. joining us right now from the white house u.s. treasury secretary steven mnuchin, mr. secretary, thank you for being with us today. some big news yesterday with the ecb. let's talk about where we stand because going back to may, you said that the trade war with china was on hold and that lasted a few weeks. is this a different situation? is this a more formalized or more concrete situation with the ecb this time of around. >> good morning. it's great to be here and i think this is. we had a long negotiating session yesterday. we concluded an outline of an agreement and now we'll turn this into a real agreement. this really started with president trump and his discussions at the g7 making it clear that he wanted with the g7 and europe free trade which was

no tariffs, no tariff barriers, no subsidies. i continued those conversations last weekend at the g20 with my counterparts. we also discussed very significant wto reform which we'll call wto 2.0. we had a long session yesterday concluding with an outline of agreement. >> great news to hear and i should correct myself. the eu -- we said ecb. but obviously this is all with the eu. what does this mean? we're still trying to get the details on things. we've heard from the eu that this is a situation where the auto tariffs, the threatened auto tariffs will be put on hold while these negotiations take place, is that the case? >> that's correct. the first issue that we'll begin to negotiating is to arrive the issue on the steel and aluminum tariffs and retaliatory tariffs. phase one will be to immediately resolve those issues so there will be no tariffs in either direction on that. president trump is said that as

long as we're negotiating the overall agreement that there will be no new tariffs in either direction. >> and in terms of resolving the steel and aluminum tariffs, is that a heavy lift at this point? do you think you have the ground work laid to be able to remove those tariffs as well? >> we have the ground work laid and i hope to resolve that very quickly. >> great news to hear. just last week we heard from larry kudlow and i know the news cycle is changing so rapidly. we hear so many things going on. he told us that when it comes to china we're at a bit of a standstill, the chinese didn't want to negotiate. is that the situation still today when it comes to china >> i'm not going to go into the specifics. we are having some conversations and i've made perfectly clearly that any time china is willing to seriously negotiate and we're talking about a commitment to reduce the bilateral trade deficit as well as to deal with technology issues we're

available any time. there continue to be some quiet conversations, but we're prepared if they're going to make serious moves to negotiate. >> is it fair to say the ball's in their court at this point >> i'm not going to comment who's court's it's in and get into that level of detail. i would just say, again, we're very focused with the eu, we're very happy about those discussions. last week i was in mexico, i had the opportunity to meet with the new president-elect and his full economic team. i think we have a very strong direction to move forward with nafta and we hope we'll conclude those negotiations. ambassador lighthizer is very focused on that. we're well on our way to resolving a lost these trade issues. the economic plan has always been tax reform, regulatory relief and trade. >> with trade, again, going back to just nafta and mexico and these conversation that's are taking place, both mexico and canada have said that they want this to remain a three country deal, is that the position of the united states?

it sounds like you're moving toward that direction for sure. >> for president trump, he's focused on the deal and making sure we resolve the issues and whether it's one deal or two deals, as long as we get the right agreement, we're indifferent. >> what are the sticking points that still exist with nafta? for a long time it had been a country of origin and in particular some of the auto parts, is that still >> i think the good news is ambassador lighthizer has worked very hard. these are very complicated issues that go over a large area and the negotiating team is very focused on the remaining points. i'm not going to go into the specifics, but a lot of the work is done and we're hopeful that we'll have an agreement in principle in the near future. >> mr. secretary, i want to get your thoughts about the idea of subsidizing farmers and whether ultimately that could lead to handouts or i imagine a lineout the door of the white house behind you for subsidies in all

sorts of industries and how you think about that >> these are not subsidies and we're not interested in subsidies. what we are interested in is, to the extent that china and other people attack our farmers specifically in an unfair way, an unfair retaliation, we will defend our farmers and i think you saw yesterday a major part of the eu agreement was agriculture. we'll immediately focus on soy beans but we'll focus on other issues. we want to make sure that our farmers have fair opportunity to compete throughout the world. >> mr. secretary, you know, this agreement now that we have with the eu it seems, is kind of an agreement to continue talking to work towards some kind of solution, maybe meet in the middle on many of these issues, is there any way to suggest that perhaps negotiations with china might come to a similar point? it doesn't necessarily seem as if anything agreed to yesterday with the eu is going to move the

needle dramatically on our trade deficit in the near term. i wonder if there's a way to extrapolate how we'll approach things with china? >> you will see move in the trade deficit over the next year with the eu. this is a trillion dollars trading block. this is an enormous opportunity. we have about $100 billion in trade deficit with them in goods and services. there's enormous opportunities. we're focused across a lot of different areas. l & g where they're building terminals, chemicals, industrials, medical devices. we agreed to try to limit regulations, the medical device industry and pharmaceuticals very big opportunity. i think you'll see a lot of progress over the next year on this. >> secretary mnuchin, i know that the tariffs that are collected are actually collected by the treasury department that go into the general budget, i guess. could you give us an idea of how much we've collected at this point and the tariffs that have been put on?

>> we're early in the stages so i'm not going to give specific number. we do collect them in the general fund. our long-term objective is not to collect tariffs. our long-term objective is to have free and fair and reciprocal trade and anywhere we can do that we are the largest trading area. we have free opportunities to trade and we just want fair and reciprocal trade in all areas and that's what we're focused on. >> mr. secretary, a political question, there are obviously a number of american companies that have been impacted by the potential for a trade war, aluminum and such. i'm thinking of a company called midcontinental which deals with nails and i was reading an article where you had the operations manager saying we're in a situation where we're fighting against our own country. it seems like a battle that we shouldn't have to fight. this is a trump supporter, by the way. there's a lot of good things he's doing but he's effecting me

now and i don't appreciate it. what do you tell people like that >> i think most people understand what president trump is doing and what we're doing is good for the economy. i think as you know we're looking forward to a very strong gdp number. we have real economic growth and we have a large group of people between commerce and usgr and treasury that looks at all these individual situations, we have a process to grant exemptions to the extent that people can't get u.s. products. we have a process to manage through the transition, so this is something we're very carefully looking at and we're sympathic that our counterparties have targeted specific areas of the economy on a very political basis, which i think is unfair, but we're not going to stand down. we're going to fight for free trade and opportunities for american workers and american companies. >> mr. secretary, what you're saying is music to the market's ears, they've been wanting to hear a message like this and the idea that you're hopeful that

progress will be made is something that's helping free traders right now in the markets. in terms of where you expect to be, let's just say at the beginning of 2019, fair to say that you think we will have agreements in place for nafta and we will have an agreement in place for the eu and maybe things will be progressing with china? >> i'm not going to comment on china, but my hope is they come to the table and that they negotiate serious issues on market access. i would say on nafta, we hope to have an agreement in principle. clearly very soon that's the first priority, the eu you're going to see pieces of this roll out. it's not just one major agreement. it will be piece that's we agree over time and i think we're making a lot of progress. i would also again just repeat, wto 2.0, that's a big deal. reforming the wto system, president trump never said he wanted to get out of it. what he said he wants to fix it. another old agreement that needs

to be updated so that its fair for us and fair for the eu and our other g20 counterparts. >> what would be an example or two of the fixes to the wto? what do you think would make it better and stronger partnership? >> i think there's a lot of issues. i don't want to go through them all today because, again, we're going to start negotiating them. it's really about reciprocal and fair trade. what we've said all along is, president trump believes in reciprocal tariffs and fair trade. we'll drop to zero if other people drop to zero. it's not just tariffs. you have to focus on in many cases the non-tariff barriers, the subsidies, the issues with state owned enterprises, those are all even more important than the tariffs per se. it has to be an entire agreement. >> to that end, mr. secretary, i wanted to get your thoughts about qualcomm terminating that proposal to buy nxp in large part because china would not

grant it regulatory approval. this is another form of a tariff in some cases. what do you make of that >> i'm very disappoint that had they didn't get regulatory approval. i specifically had conversations, unfortunately, i think this is another example of where it was approved in every single other territory, we're just looking for u.s. companies to be treated fairly and i'm sure qualcomm will continue on a great path. it's a great american company, but i think its unfortunate that that didn't get approved after a long two year process. >> the next time a chinese company wants to buy an american company, is cfius going to look into it more how do you see this back and forth going? >> no, we're not going to approach this in any way on an unfair basis. every single one of these cases we review fairly. we look at for national security. we couldn't be happier that the cfius reform just passed this wasn't targeted at china or

any one country. president trump was very clear. we want a level playing field. that's our job in our treasury and that's what we'll do. >> you don't think this is a retaliation by china >> i'm not going to comment on why they made the decision. i don't know why they made the decision. i just commented i was disappointed in the decision. >> one other trade related question because you probably saw the president's tweets last week related to the eu fine on google. do you think that's a trade issue. >> i wouldn't say it's a trade issue, it's an economic issue and i can tell you, you know, we have major tax issues that we are defending, our internet companies against unfair taxes. it's a discussion every time i'm with my counterparts at the g7 and the good -- g20. >> the president also made clear that he doesn't appreciate seeing the dollar rise because he thinks other countries are manipulating either their currency or their exchange

rates. i realize you have to be careful what you say about the dollar and the policy there, but we have seen the dollar under a little pressure after the bank of japan seemed to indicate that it might be willing to soak up some of the liquidity. we have to hear more about this but obviously all of these issues play into the strength of the dollar. we've seen treasuries pick up the year and the ten year almost hitting 3% and the two year picking up substantially too. do you think these moves -- that the market is right to assess these moves by just watching central bank policy and these things going through does it make sense to you through your viewpoint >> i'm not going to comment on where the dollar is in the short-term as i've said in the past. what i will say and i've said over the last week, we are obviously closely monitoring the chinese r & b and the weakening in that market which is either intervention or an absence of them on capital flows and other

issues. we'll carefully review that as part of currency manipulation and we're looking at other currencies and we've always said the long-term strength of the dollar is important. it's a result of a very strong u.s. economy, but we will carefully mondayitor and make se people don't use currencies for unfair trade advantages. >> mr. secretary, a regulatory question, given the big headline of the morning, facebook, i want to ask you if you looked at their earnings yesterday, they blamed gdpr from the european union as at least a part of that along with trying to increase its privacy tools, do you blame europe and do you think that some of the regulatory measures that have taken place in europe should happen here with facebook >> well, i think there are legitimate privacy issues that need to be addressed but europe has gone too far. this is another area of we want

to make sure that our country's aren't unfairly attacked for regulations and data localization is something that we're fighting for. we believe that data should be treated and protected. that's very important for u.s. consumers and u.s. people and everyone else, but we want to make sure that it's done in a fair way and not attacking u.s. companies. >> thank you very much for your time today. we appreciate it and love to hear updates on trade as you can tell us more. >> great. thank you. good to be here with you. >> thank you. >> great to see you. coming up, when we return, more on the big corporate story of the morning, it's the one we just mentioned. facebook, those shares getting slammed. we will tell you what the company executives said on the veor last night that had spooked insts. stay tune. you're watching "squawk box." and serve with confidence that it's safe. this is a diamond you can follow from mine to finger,

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welcome back to "squawk box." facebook shares plunging off now as much as 24 rs during the earnings call. we're off about 20%. they did dip a little bit below that, we've been having a bet on

where things are going to close at the end of the day but in the meantime, i want to get over to julia boorstin who joins us from los angeles with more of the details from last night's dramatic call. >> reporter: well, facebook reported its slowest ever user growth and revenue growth that slowed more than expected. the big news headline out of that call is the company said that after revenue growth decelerated 7 percentage points from the first to the second quarters, cfo warn that had revenue growth rates would decline by high single digit percentages subsequential in the third and fourth quarter. privacy settings that enable consumers to opt out of valuable ad targeting. facebook also warning the next year expense growth will exceed revenue growth and over the next several years operating margin will decline meaningfully. mark zuckerberg on that call explaining how protecting users

will impact margins. >> we'll continue to invest heavily in security and privacy because we have a responsibility to keep people safe, but as i've said on past calls, we're investing so much in security that it will significantly impact our profitability. we're starting to see that this quarter. >> reporter: it was interesting that in this call the cambridge analytica scandal was never mentioned by name but zuckerberg talked about the impact of changes to protect user data as well as new european privacy regulations gdpr. >> gdpr has not had a significant revenue ima picture but we also recognize it had wasn't fully rolled out this quarter. it was very encouraging for us to say that the vast majority of people affirmed they want us to use information including from the websites they visit to make their ads more relevant. but as we look further out we recognize that there's still risk and we'll watch closely. >> reporter: gdpr was also cited

that the reason active users declined for the first time ever down 3 million from the first quarter to the second quarter. >> thank you very much. when we come back we have more of this morning's stocks to watch and breaking economic news, stay tuned. you are watching "squawk box" right here on cnbc. so, my portfolio did pretty well last year. that's great. but the market was up nearly twice as much. that's a tough pill to swallow. exactly. so i started trading. but with everything out there, how do you know what to buy? well, i think my friend victor has just the thing for you. check this out, td ameritrade makes it easier to find the investments that might be right for you. like our etf comparison tool it lets you see how etfs measure up to one another. analyst ratings and past performance... nice. td ameritrade also offers access to coaches and a full education curriculum to help you improve your skills. that is cool. and if you still have any questions you can always chat with us on facebook or call our experienced service team, 24/7.

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coming up, two economic reports to tell you about. we'll be speaking about that in just a little bit. here's what's going to be hitting the tape. spotify is just one of those and you're looking at that. we thought it was down even more than that before. >> it had been, yeah. >> and it looks like it's gotten marginally better. two economic reports about to hit the tape. we'll bring you those numbers and we're about 24 hours away from another big report. all that and more in just a moment. an energy company helping cars emit less. making cars lighter, it's a good place to start, advanced oils for those hard-working parts. fuels that go further so drivers pump less.

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♪ good morning. welcome back to "squawk box" live at the nasdaq market in times square. comcast posting better than

expected earnings. parent company of nbc universal added 260,000 broadband customers during the quarter. that's the highest in ten years. they're up 3%. also, actually -- that's actually should be higher. we want to get those numbers right now from rick. rick >> reporter: all right. let's start out with the trade balance for june, 68.3 billion. that's obviously red ink and it's a bit larger in the redding column than we suspected. if we look at wholesale inventories, it's a preliminary june read. it's not out yet. initial jobless claims moved up 9,000 from 208,000 which is a subtle revision to that really low 207 original release up to 217,000. we're continuing claims move from 1.753 to 1.745.

and of course that is a number that's also quite low. wholesale inventories are unchanged. that is a political read. now let's get to something juicy. june preliminary durable goods. this is a volatile series. these preliminary numbers get replaced with the final number and that can be much different. we're expect up 3%, we got 1%. if we look at ex-transportation it's up .4. nondefense airport, a proxy for business spending and this is a real important number, it is up .6, not too bad, a little better than expected. here's good news. our last look for the final read of last month more than doubled from .3 to .7. shipments this go around up 1%. very solid numbers subsequentially following up .2.

retail inventories for the mont of june were unchanged. we're still one basis point away from the highest yield. we're sitting at 2.96. if you were really buying into any substantial additional curve steepenning that started, you may be a bit disappointed. don't expect any surprises, not a lot of volatility there and of course we continue to monitor all that is the equity markets and anything in tech that may start to kind of permeate into the fixed income but not seeing anything at the moment. andrew, back to you. >> okay, rick, thank you. we are just 24 hours away from another economic update. joining us right now is jared bernstein. he's now the center on budget and policy priorities senior fellow.

cnbc contributor. michael strain joins us. what are you expecting >> we're expecting something with a forehandle which is a nice big number -- >> would you ever have conceived that >> you absolutely could have because the quarterly numbers are pretty volatile and we really juiced the economy with fiscal policy so the underlining trend is moderate. build in some fiscal umph under that and you've got something. we see a forehandle, maybe 4.5 is the estimate i'm hearing most commonly just for the record. tomorrow they're going to be people saying this is never happened before. it's happened before. we had a couple of quarters 2014 where we had about 4.5 two quarters in a row. the real way to understand the underlying trend is to look at the year over year number which is around 3% which is still a very nice number. >> here's the question, michael,

is it sustainable long-term? >> well, i don't think quarterly annualized gdp growth rates of 4.2 or 4.5% are sustainable, no. i think jared has it basically right. we see quarterly gdp spike from time to time, even if you look at the underlying trend this is still impressive. it is not all due to exports. there seems to be some pretty solid underlying growth here that can't be explained by, you know, one-off factors like exports or inventories or something like that. some of this is the tax cut. some of this is the increase in discretionary spending and some of this is an underlying economy that's quite healthy at this point. >> let me ask the question about the tax cuts. have all that -- have we seen all of the impact yet? >> no. the estimate would be something like adding about a half a point to gdp growth this year and next year. after that, some of the fiscal

impulse goes the other way. it starts to fade a bit and their the expectation is for gdp growth to come down a bit. this year and next year you can count on the tax cuts to add some where north of half a point to gdp growth. >> michael, we now are left with the question of what could potentially change the story a little bit we came into this year thinking, wow, the main risk in the economy might be that it's going to be too hot and you had the trade concerns, interest rates went up a little bit. what are you looking for out there whether it's change in fiscal policy, the fed, anything like that that might act as a headwind >> i think there are a number of headwinds and a lot of them are policy driven. we don't yet know how severe our tariff regime will be if it becomes too severe than i will expect to see the fed try and counter that. we don't yet know, you know, many things about economic policy. we don't know -- so far it's

been kind of confusing, businesses and financial markets don't seem to be reacting to some of this policy uncertainty and some of the, you know, policy that's actually been enacted like the tariffs for example. they don't seem to be return to go very large budget deficits year after year. at some point our investors are going to decide that those things are troubling, i'm not sure. i've been puzzled by their behavior so far. i think that there are headwinds in the future from president trump's policy, potential headwinds from the fed, potential headwinds from investors and i think time will tell how those things will play out. >> jared, speak to that but also speak to this, which is are you surprised that all the speculation around trade hasn't taken these numbers down further or do you think, by the way, that these numbers would have been higher if not for this conversation >> i actually think that the

macro economic impacts of the trade war are thus far minimal and may actually stay pretty minimal. now that doesn't mean that certain sectors -- if you're selling soy beans to china you've got a big problem right now. but if you consider the fact that we export 12% of our gdp. we import about 15%. the difference is a trade deficit. you go to europe, you go to any other developed country, those shares are much, much higher. we're just not as exposed. i think the really interesting question is, what could knock this recovery off track? and i think it could be a fed mistake, although i'd give that a low probability. i think they're playing this well. it could be an overheating, but really haven't seen much of that especially on the wage and the price side. >> an overheating that causes the fed -- basically the first two are the same thing. >> and it could be -- well, i guess my point was that the fed could raise without overheating and that would be a big mistake. >> one and two are both the same. >> one and two are both the fed.

the tariff escalation turns into a bigger problem than i articula articulated, that's possible. >> that's a decision. we just don't know. at this point i completely agree with you that you slap tariffs on, you know, a couple dozen million dollars of goods and that's not going to, you know, cause major problems but if we end up putting tariffs on, you know, hundreds of billion dollars of chinese imports, then, you know, you do start to see that. >> i think recoveries are often whacked by the unknown. >> we'll leave the conversation there. whacked by the unknown. jared and michael, thank you guys. >> thank you. when we come back, ecb president mario draghi. senator jerry meren will be among the senators quizzing him. we'll talk to him about what this is all meant for him state,

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welcome back to "squawk box" this morning. the futures is a mixed bag, focused on the s&p 500 and in particular the nasdaq this morning in large part because of what's taken place with facebook and those disappointing earnings and their forecast. nasdaq off about 102 points.

s&p 500 off five points. dow jones looking up 68 points. united states trade representatives robert lighthizer will be testifying today. senators are hoping to gain some incite into where things stand on nafta, tariffs and the president's future trade plans. joining us right now ahead of that is kansas senator jerry moran. senator, thank you for being here. >> good to be with you, thank you. let's start out by letting us know what the trade issues to this point have met for kansas and kind of your perspective where you come at these talks today? >> thank you for that question. exports matter. we earn a living in kansas by what we sell around the globe and we focus on agriculture, on farmers and ranchers and kansas is clearly an ag state. we bear the brunt in the tariff

retaliation from china and other places, so when we get in a tariff war it is kansas agriculture, our farmers, ranchers and the communities in which they live that suffer the most significant consequences. it's not just an agriculture issue. we are a state that manufacturers automobiles and significant manufacturing of areao space and airplanes. and aluminum and steel are important components as well as the supply chain. so we get retaliated on in agriculture, particularly with tariffs and in both the case of agriculture and manufacturing, we are a beneficiary of nafta and our trading relationship with mexico and canada are important. mexico is the number one purchaser of agriculture commodities from kansas. canada is number two or three depending upon the year. >> let's talk about the announcement yesterday between president trump and the eu just this idea that we're going to be sitting down and talking. we spoke with treasury secretary

mnuchin earlier this hour and he said that he has great hopes that the situation with the eu will clear up very quickly. he also expects nafta to really get some resolution he hopes in the near future too. is that enough to make you feel better about things when you know china is still a big part of the equation for you? >> i would say clearing up nafta for example, in the near future and clearing up europe, i don't know exactly what that means but if that's true, if there is something that is resolved in both those instances rapidly, immediately, that is awfully good news and its helpful in regard to our concerns with china. one of the messages that i and other members of the senate delivered to the white house was, we understand the challenges we face with china. they're stealing of our trade secrets, intellectual property, the cyberattacks. mr. president, it would be useful if we could narrow the scope and focus on china and to do that we need to have a good relation, a trading relationship

with mexico, canada, the european union. let's single out our effort worldwide. they share our concerns. let's work together. any resolution of other issues can allow us to better focus on the problems that china creates and their misbehavioral and violation of rules and the order of trade. i also would say that now is the time from an agriculture point of view, the circumstances we face in kansas is significantly challenging, its dire i would say. commodity prices are at a significant low. farm income is down significantly over the last five years and we need some reassurance particularly as farmers go to their bankers and try to borrow money going into the new season. if we knew that nafta was satisfied, if we knew that we were going to continue to have european markets, that would be useful to give us some hope and to provide some certainty for

those producers and their lenders. >> obviously the farmers and ranchers can't turn on a dime. >> we're planting crops now for when we don't know what the markets are in the future. >> what was the president's response when you delivered that message? >> in the president in that particular meeting indicated when one of the other suggestions was that we would ought to reenter the negotiations in regard to the tpp and help isolate china and one of the ways we could do that was to have trading relationships that now china has and to regain our access to markets, agriculture, beef to japan. that's an important issue and tpp was a way -- the president indicated an interest in reviewing, taking another look that nothing really came from that as far as reenergizing the efforts in tpp. the president talks about bilateral agreements and that would be another message to

lighthizer, the ambassador in front of our committee this morning. mr. ambassador, the president and the administration focuses on bilateral agreements. where are those agreements where are those negotiations we don't see or hear much about anything that's happening with one-on-one trading improvements with other countries. >> tpp, look, they've moved on the president first talked about potentially renegotiating tpp in january. the reaction from the other countries was we've moved on. it's not really open to renegotiation. are you still thinking that's an option >> the president has discounted that option, japan as i understand have tried to reach out in bilateral trading agreements with japan. japan has said you need to do that through the tpp negotiations. so i don't know the exact answer to that question, but my point is, if we're not going to be involved in tpp then we need bilateral one to one country trade agreements with those

countries and others around the globe. >> senator moran, thank you for your time today. >> thank you. we have breaking news. mario draghi speaking to reporters. >> he just made a comment on the recent meeting between the united states and the european union calling it a quote, good sign. it's a good sign that they're talking. it shows a willingness to discuss trade in a multi-lateral framework. on the european union economy, he said growth is solid and broad based but stimulus is still needed to get back to that 2% threshold. he said uncertainties are related to the trade environment notably the threat of protectionism remain prominent. a couple quick things. he held the interest rate at zero. they're going to keep rates unchanged they think through the summer of 2019. andrew >> okay. thank you for that. coming up, name this company, it's a new york city tech name and it stock jumped

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the digital network popping. joining us with more on the new partnership and that stock performance, howard lerman, yext ceo. howard, want to talk about the partnership with amazon. before we do, i'm not sure everybody totally understands what the yext business is. just explain it. >> yext lets companies control their information. intelligence services, like siri or google maps, so that just like they manage on their brand website. so if a company like mcdonald's changes when they are open or a fact on their menu, they simply enter that into the yext software and it automatically updates in 150 digital end points around the world like google or siri even in we chat -- >> you don't change customer reviews or anything. >> just basic facts.

>> i was surprised i always had the view that somehow google was crawling all of these things. then when you put -- look up a restaurant or something on -- you get the little box on google's screen, it will say all the information. that's not from them, that's from you >> every intelligence service crawls they have different ways they try to get information but the ultimate authority on when mcdonald's is open is mcdonald's they're the ones that should say when they're open for an objective fact not for a review >> i heard this at my doctor's office people were calling in all the time because it said they were open when they weren't and visa versa. >> that's the problem yext solves yext puts answers in all these different intelligence services. >> you are structuring data for companies like google. >> we structure data and we believe the ultimate authority is the business. the business structure is the data every industry has slightly different structures your doctor has physicians, they have a location, a hospital. a restaurant has menus they have their restaurant location

a hotel could be pet-friendly, have free wi-fi. it could have different attributes we push it into these new services >> tell us about the partnership with amazon. >> we could not be more excited for this partnership with amazon alexa. it is the service behind the world's leading smart speaker. so many people use alexa every day. now for yext customers they can control their information in amazon alexa if home depot or mcdonald's changes a fact about one of their stores, say they were closing on sunday, they just type that in to the yext knowledge engine now it updates in google, siri and wechat, but it also updates in amazon alexa. >> is there a service you are not on and want to be on >> not after yesterday >> so this was the missing piece of the puzzle. >> over the past ten years the services that people use has changed dramatically when we started the company our first service was city search. nobody really uses city search

anymore. the world continues to change. in ten years the services people use are going to change again. big trend today is voice search. one-third of all americans are regularly using voice search and people talk very differently than they type they ask more precise questions. it is -- >> is it changing the kind of data that you have to provide and the clients are going to have to provide? >> these services, the uis and ais change the types of knowledge that a company needs to have are getting more and more precise. and so with voice search people ask more precise longer questions. you can talk faster than you can type and so the details, details about what your hotel offers or what your restaurant has on the menu those are the types of details that these services have to offer. >> do the customers, the companies, just pay you a subscription and, two, could mcdonald's say, a fact about us is we have the best burger >> that's not objective and there is no way to structure that the web is a series of texts connected by links

the business pays us a subscription fee we rolled amazon into our base package. every customer across our geographies that we support gets it right away. >> what's the defensive moat around this business which is to say, could somebody else jump in and try to do this? >> our business has a natural network effect the more knowledge that yext creates, the easier it is for us to call and say we have all the knowledge about 1.5 million businesses, which grew more than 50% year over year so the more knowledge we have, the deeper partnerships we can form with all these services >> it is a very cool business. thank you for coming in. congratulations. show the sneakers. check these out. this is when you know you've hit it big can you see that okay very nice. >> thank you when we come back, this morning's biggest movers then on "squawk on the

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points mcdonald's among others beating estimates today and that is certainly helping the dow. that does it for us today. >> we're done. join us tomorrow "squawk on the street" begins right now. ♪ good thursday morning. welcome to "squawk on the street." i'm carl quintanilla cramer has the morning off futures relatively steady when you consider the hit the nasdaq's going to take from facebook's expected 20% decline in the open. useu trade talks are in focus, along with nxp