"squawk box." good morning welcome to "squawk box." i'm becky quick along with andrew ross sorkin and scott wapner joe is off today let's look at the u.s. equity futures. right now it looks like there are green arrows across the board. dow indicated up by 38 points. nasdaq up by 45. that's significant when you think about what happened yesterday. s&p 500 indicated up by 12.5 yesterday the nasdaq was down it was almost all because of facebook we'll talk more about that later. we did see the largest single day decline in a stock ever, a loss of 1$119 billion after the aftermath of those disappointing earnings numbers let's look at treasury yields. the ten-year yielding 2.971%

very close to 3% two-year at 2.677% today we get the second quarter gdp. that is due at 8:30 eastern time this is a big deal because we're talking about a big potential reading. in fact, those polled by dow jones are looking for the economy to have grown at a rate of 4.4%. estimates are all over the place. a lot of people are weighing in on this. the president saying anything with a 4 handle in front of it is a good reinading. this is the reading that we'll be watching for. amazon, the big earnings story of the day the company missed on the top line but crushed profit expectations for its second quarter. cloud computing and advertising standouts this morning joining us now is eric sheridan

from ubs also r.j. hatave is with us. usually you're -- you're with me here it's usually the opposite way around how are we supposed to think about that >> there was an expectation going in that north america e-commerce would be in line. it wasn't much of a surprise we're now at a scale that growing 20% plus at these sort of numbers, you're not going to get huge 10%, 20%, 30% beats on the top line from amazon anymore. when you see profits beat by 50%, 100%, they guide 100% above the street in q3 that's a rare outcome for amazon and frankly we're seeing a pace and kcadence to margins almost every quarter now. >> so, on the profit side, this was a company we thought would

keep reinvesting profits, always going to keep losing money, and they would have moments where they showed us if they wanted to have profits, they would have profits, but then go back to losing money again >> the narrative that this company can't make it is more or less dead at this point. you have four pillers of sustainable profit growth for this company you have engagement with new subscription services, even whole foods, third party sales, they continue to grow that business aws. but this advertising segment is the one where all of a sudden you are seeing the company beat on the top line of the earnings guidance that could be disruptive for players like google. >> in terms of how you value the stock now, how did you change your math last night >> we look at it two different ways we look at it on the reported numbers and as a sum of the parts. what would you pay for aws what would pay for the advertising business we moved our price target up to

21.50. but we didn't need to move our multiples at all our operating income moved up in a range. what are yo >> what are your multiples out >> two years out, paying 33, 34 times ebita. you're paying 4.7 times multiple to growth. >> is there a point where you switch to an eps number versus ebita? >> for the first time in five years we're getting pe questions around amazon. that was almost unheard of five, six years ago that you would be getting forward pe to growth questions on amazon. >> rj, how do you value this company? >> same general direction. nobody is disputing the growth in the company over the next five years, low to mid 20 type grower

instead of thinking 6%, 7% normalized margins five years out, that will go up because of the aws, advertising now you're thinking about 8%, 9% margins. when you extend that over a lock period of time, you can justify something in the 2100, $2200 range. that's where we will see price targets come out today >> i hate to be the squunk at t skunk at the garden party, when you see some of the tweets that the president put out, is there anything that you price into in terms of what could come there regulation >> we have been writing more about regulation in the last six, eight months than in the prior six years. there's no doubt with the size and scope of these companies that regulation is the biggest risk factor. tough to handicap the president's tweets not something i will be getting an edge on when you look at amazon and

apply traditional antitrust tests, are they hurting consumer pricing, which is the test for antitrust in the united states, they don't warrant scrutiny irrespective of those tweets >> i have a different question as a shareholder, i'm curious whether you heard this at all, is anyone upset that jeff bezos owns the "washington post" as an outside hobby, usually a ceo owns something on the side everyone thinks that's fine. has owning the post unto itself raised the risk profile for the amazon shareholders? >> i can say honestly that has not come up in a single conversation in the last six months >> i agree with that if amazon traded the other direction, you might have heard those concerns why would you be upset if you

look at a stock chart, that tells you all you need to know about negative concerns about shareholders >> i've heard sort of these little rumblings about the implications of owning the post. as a journalist i'm happy he owns the post, it's a great thing, but it raised the temperature for amazon i want to thank both of you guys >> thank you the other stocks to watch this morning, bp is buying most of bhp billiton's u.s. shale and oil gas assets for 10$10.5 billion. it is the biggest acquisition in 20 years and expands its footprint in america's oil-rich onshore basins intel shares are lower despite the company reporting better than expected second quarter results. the biggest gains came from the data center business but sales fell shy of estimates. intel also did not say anything about naming a new ceo

chipotle shares are rallying today. second quarter results beating forecasts with the first full period under new ceo brian niccol same-store sales beating estimates as diners spent more food costs came down avocado prices apparently are lower. starbucks second quarter earnings and revenue matching analysts forecasts global same-store sales rose 1% as customers spent more per visit, but sales in china fell 2% amid fierce competition and stricter rules on delivery the ceo, kevin johnson, will be on "squawk on the street" today at 9:30 a.m. eastern time. let's get you caught up on the broader markets. we've been watching the futures, so far green arrows across the board. s&p 500 up by 10 dow up by 28 nasdaq up by 31. a lot will be riding on the

numbers we hear today. joining us to talk about that is drew mattis from metlife investment management and eric knudson. we will be getting this gdp number today this is a backwards looking number estimates are all over the map there's a lot riding on how the economy is doing what happens with this number today? let's get the over/under eric, what do you think it will be how will the market react? >> it will be in a good number we're not in the business of forecasting a point in time number this will be a good quarter. no doubt about it. whether it's 4.4, 4.7, 4.8 the key point is this year we will be in the 2.8 gdp growth area for the united states that's a good place. the key question is what happens from there we believe this business cycle

is extending this is evidence of this this is not so much a peak, yes, it's a number that's high for specific reasons this quarter, but we're in this 2.5%, 3% growth level this year and well into 2019. >> that is the question. what is this an indication of? is the economy continuing at this pace? what could throw it off? >> i agree if you throw a tax cut into where we were in the economic cycle, all of a sudden the cycle is extending out further than anyone thought i think most people are coming around to the idea that a recession is not likely until the second half of 2020. if you're planning your portfolio, you're thinking the downturn, you want to position ahead of that downturn and how far out you want to position ahead of the downturn is up to people individually. the growth number today, it will be good. i think we have to remember there are a whole bunch of revisions coming out with this

number you will get those revisions, and that will affect first quarter which was weak if they fix that, that will pull growth from second quarter into the first quarter. >> so you're saying even if it's lower than anticipated, you have to look at the first quarter, too. >> take the average. >> did amazon save the market yesterday? save the current state of the market if amazon would have disappointed -- >> i think there's a lot of nar tef narratives where people get worried, but to the extent that people were worried that the narrative was shifting, it caused people to rethink their rethink. >> tech has been the standout leader the glamour names are the ones where -- >> f.a.n.g >> if amazon would have disappointed -- >> i don't think so. the dow was up yesterday other segments of the market

were up reasonably yesterday we had a two standard deviation differentiation between value and growth large swaths of the market have not been appreciated despite these strong economic underpinnings. if people start lookingational , they will start rotating away from the f.a.n.g there's a real economy away from the f.a.n.g. stocks which is benefiting from the broad growth environment. >> i hate to be the one looking for potential reasons for worry, because i think all in all the economy is going great earnings are going well. if you hear some rumblings, yesterday we had gary kelly on from southwest air he said that higher fuel prices, up 50% year over year had eaten up all the gains they saw from the tax cut that they realized then you hear things like

chipotle or starbucks warning about what they're seeing in china sales. mcdonald's saying the same thing. the rise of nationalism may be keeping people away from their stores in china. is that a concern for some of these big multinationals >> there's always contrary messages, what is going on with the housing market, why isn't there more robust growth in the housing market >> you mean more supply. >> right auto companies had downbeat information. i think the key message is that we are focusing on as we manage our portfolios is that as we go into the late stage of the business cycle you will see more volatility the fact that vix is at 12 is a head scratcher, given that interest rates are up 50 basis points, given that inflation expectations are up 50 basis points and going up from here, you would normally expect a vix in the 15 to 20. >> what do yyou tell investors t

do what should they be doing? >> begin positioning to take advantage of that. within u.s. equities, position a bit more for yield, for example. capture more yield take advantage of volatility to buy earlier cycle parts of the global economy on weakness and then on the fixed income side, because i get to allocate across the spectrum, we're moving into -- finding great opportunities in short duration credit we can build a portfolio with a two to three-year duration with 4%, 5% yield, using short duration, adding in high yields, hard currency debt where in the two to three-year portion of the curve we get a yield of 6.8%, which is better than the longer duration part of the curve there's interesting opportunities to capture income and reinvest that.

>> drew? >> i think this is an opportunity to re-evaluate your portfolio and think about where the areas are that you're not comfortable being in the next year or two, and the kind of move to the higher quality stuff. >> what would you not be comfortable being in >> there's been a lot of talk about the expansion of the bbb space. not all bbbs are created equal you wanted to think about am i in the bbb that's really a bbb and staying a bbb, or am i in a bbb that might drift lower >> you can help to mitigate some of those risks there will be a wave of bbb downgrades at some point if that's two, three years out, you're in the shorter portion of the curve, you can benefit from some opportunities there. coming up, a lot more ahead on "squawk." burritos and baristas. an earnings break down of two

well known chains, and find out which stock investors should have on their menu now. at 6:30, our newsmaker of the hour, bp's cfo will join us. it's all yours. wow! record time. at cognizant, we're helping today's leading life sciences companies go beyond developing prescriptions to offering subscriptions with personalized, real-time advice for life-long, healthy living. honey? you almost done? nope. get ready, because we're helping leading companies see it-

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. welcome back to "squawk box. a bit of trade news for you. the senate voting to cut tariffs on hundreds of chinese goods amid heightened trade tension the. the senate passing a bill that would cut or eliminate tariffs on toasters, chemicals and roughly 1,660 other items outside of the u.s roite reuters reporting that half of those items are made in china. big news in the world of bitcoin. the s.e.c. turning down a proposal by the winklevoss twins

to create an etf the price of bitcoin dipped below $7,900 following that news the s.e.c. believes the etf would not be protected from fraud. cameron winklevoss says he and his brother are committed to bringing a regulated bitcoin etf to market and building the future of money. there are three other proposals pending before the s.e.c >> there is still a chance for one of these other etfs to get there, but within the bitcoin community this was a huge blow they have been trying to do this forever. >> they have a lot of cred in the community. >> people have been trying to parse the rejection to understand why and whether there will be an opportunity in the future for something like this, or whether the s.e.c. -- and

depending on if you're an optimist or pessimist on cryptocurrency, you can come out with different understandings of this reading that's why the price of bitcoin dropped today. >> okay. are you a bitcoin believer >> eh, honestly, i could take it or leave it. i don't know i'm not into it. >> okay. >> are you >> i've actually started to think that maybe -- maybe there's something going on here. >> i'm sure there's something going on, but, you know -- >> can you call which way? >> no. it's such a speculative thing. >> absolutely. >> there was 5$500 million on th line this week in corporate news, two well

known chains posting quarterly results. starbucks beating the top and bottom line but trimming the full-year outlook. and chipotle beating forecasts on strong store sales. food costs fell, notably for avocados joining us is will slavaugh. let's go to starbucks. seems like a ho-hum quarter. what's your read >> i think that's right. maybe a little disappointing but in line with the announcement we heard about a nont ago they let us know the u.s. would be a 1% comp they said china flat to negative china down 2 there is a bit of probably nationalism playing into that. there is also a delivery issue where delivery is becoming more pervasive. they're not quite there yet.

there's cannibalization. so there's a couple of issues popping up there that we different expect the u.s. hohum is a good way to describe it. >> all of the growth is riding on the business in china, is it not? >> that's where they shifted the growth story is from the u.s., which is the vast majority of the business now to saying china, give it five years, seven years, it can rival the u.s. now seeing that negative comp makes you wonder about the health of the base some of that is cannibalization on purpose to try to fortress the market, if you will, in front of competitors nonetheless, you don't like to see a negative comp in a growth story. that raises concerns about how competitive that market is as local players get aggressive with price starbucks is not really a value player >> you think they should spin off the china business like yum did some years ago

>> at some point that will make sense. at this point, i think they need the starbucks infrastructure to grow that effectively. i think it's probably early to talk about that. china yum became sort of the tail that wagged the dog i think we're not quite there for starbucks. it may take five years, but over time we'll have that conversation more and more >> you're equal weight on the stock. what changes that rating >> we need to see a credible reason why the u.s. will accelerate we have seen decelerating comps in the u.s. going from high single digits to the low single digits for a while i need to see why traffic will go from down two to up one, up two. things like that they've thrown a lot at the wall in terms of new beverages, new food items i need to see every-day platforms driving real traffic despite mobile growing 14%, it's been consistently mid double

digits, they have not driven that through to same-store sales growth we'll see if they can put up u.s. acceleration. keep in mind the u.s. drives the profits here y >> you don't sound optimistic that will happen the business is so mature in the u.s. that's a heavy lift >> it is mature, and a month ago they announced they would close 150 stores in the u.s. so more stores than thought were underperforming. we did some work talking about new product introductions. in the past years they launched about 30 new beverages so a lot being thrown at the wall to see what sticks. they changed that strategy recently to see if more platforms as opposed to rapidly-pulsed limited time offers can drive more same-store sales. i think it's early to say. i will say this, valuation at

the low end of the five-year range. if things get better in the u.s., we could be more constructive on the stock. we have not seen that yet to get more excited >> seems like switching to chipotle that the death of that company was greatly exaggerated. brian nikecconiccol, the new ces to be one heck of an operator. >> i think that's true i do want to put a bit in perspective, the stock had an enormous run since his announcement we're seen one quarter i do agree with what you're saying, everything he's saying to me is taking advantage of opportunities they had for a while. when you think about chipotle having a small percentage of its business being digital, catering, order ahead, that is a huge opportunity they're focusing on that now so chipotle is picking up. keep in mind we're coming off

what used to be a 2$2.5 million average volume unit business it's easier to accelerate, however focusing on the right things and this sounds wishy-washy, but culture of accountability has returned to chipotle to where we're seeing lower turnover. the right rhetoric from management so i think the story is picking up we had a big valuation move and we're requiring a lot from earnings to catch up >> you need to think about your rating on that they have blown past your price target of 4.t25 it's at 4.70 >> that's one we're reassessing. do you want to pay 50 times earnings and assume margin and expansion continues? we're focused on an accelerating low-end consumer so that burger king, qsr the ticker, wendy's is

another interesting one. but chipotle, keeping that change in mind at some point >> will, thanks. >> thank you very much a programming note, starbucks ceo kevin johnson will be on "squawk on the street" today at 9:30 a.m. eastern it's an exclusive. do not miss it. when we come back, bp made its biggest acquisition in two decades spending more than $10 billion for u.s. shale assets. the cfo will join us live next sflo as we head to break, a look at yesterday's 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, everybody. among the stories that are front and center, amazon earnings blowing past wall street's expectations as profit topped it billion for the first time ever. check out shares of amazon up by 4.2% that stock now trading at $1884.20 look at shares of expedia. they're getting a nice bump after the travel company's earnings and revenue beat expectations gross bookings rose by 13% that stock is now up by more than 9%. don't miss the company's ceo, that's coming up on "squawk on

the street" at 10:00 eastern. and the big economic stat of the morning, first read on second quarter gdp due at 8:30 a.m. eastern time. the forecasters are looking for the economy to have grown at a rate of 4.4% the estimates are all over the map. tricky on trying to figure this out and figure out the revisions for the first quarter that were weaker than expected you can guess that number will be revised higher. if you check out the u.s. equity futures, you will see they're up across the board dow futures up by 45 points after gaining 112 points yesterday. the nasdaq indicated up by 37 after being down 1%. the s&p 500 is up by 10 points we have a big deal out this morning. news in the energy sector. bp paying 10$10.5 billion for mt of bhp billiton's onshore oil and natural gas assets in the u.s. joining us to talk about the

deal is brian gilvary. good morning to you. thanks for joining us. >> good morning. >> con grogratulations on the dl this is your largest acquisition in nearly 20 years, your first in the u.s. since the deep water horizon situation, that has been resolved but continues to still linger walk us through the strategy of that transaction then i have about a million questions about it. >> it's a major transaction. the biggest transaction that we've done in 20 years it transforms our business our investors asked a lot over the recent years as to where we will go were the lower 48. it gives us premium positions inside of eagleford and hanesville and a sweet spot inside the permian basin so this transforms our lower 48 and importantly, because we talked about this before, it's

good for shareholders, on an earnings basis, cash flow basis, and as we close this deal and we plan to close the deal the end of october, we'll hit the front end of the oil price curve >> take us inside the room when it comes to oil prices and how you map them out you say it works at low oil prices at what low oil prices does this transaction work >> this works down to 2.25 gas prices and $40 a barrel realized prices inside the lower 48 >> and was any of this, in terms of your thinking -- we've seen oil prices move higher did that impact your decision at all? >> no. actually this is our number one target for the last two, three

years. as we brought in lower 48, we brought in a new team four years ago. it's a world class team. we looked at how we can enhance that business going forward. it's not been driven by where we see the oil prices today we plan on the assumption of 55, $60 a barrel going forward as long-term prices so we'll get upside potential from these assets. >> in terms of building out an upstream business, how important is this piece? was there any other business you were looking at during this period >> if you look at permian, it's the one place where we were unrepresented. didn't have a position there the united states lower 48 is probablyone of the most prolific basins we've seen i think it was important that we get in there in terms of a with a team that were proven in the last four years, they have significantly improved operations this is one of the most

attractive assets out there. >> the within i ask threason i if there were assets you thought you wanted to buy, but given the deep horizon situationed issed we're not in position to do that now. is there anything to be said about that >> no, we have repositioned the company. we understand what deep water horizon looks like in terms of liabilities going forward. we have gone through a major oil price correction we talked about that before on this program prices have gone from 110 down to $28 a barrel. restabilized around 50 everybody had to get capital efficient. everyone had to drive down costs. we have the company back to a more level playing field going forward. the timing was just right for this asset sometimes assets come um p at te right time, and this was the right time for us, and this will

enhance future cash flows. we put our target up by $1 bil1 billion on the back of this. >> i'm reading a story where the sub headline says bp falls as analysts consider it is better for bhp. >> i think the market will need to fully absorb this there is significant upside value in this deal there's a mid stream business that comes with this we have had an eninvestv investl this morning where we went through this there is significant upside in value. as i said before, you asked about other assets, it's tough to find deals in the lower 48 that were good for shareholders.

>> for bhp it was a difficult purchase when they bought the same assets you are now purchasing they bought it in 2011 for $20 billion, invested about 20 billion and then oil prices collapsed. is this a different, better asset that can now withstand a decline in oil and gas prices? >> i think in recent years bhp have done a good job with operations of these assets we know having farmed into some of the assets in eagle ford four or five years ago we were able to double the rates just from what we've learned over the last three to four years. even if you look at bp before and after we brought the new team in that came from sand ridge, they transformed our existing lower 48 business this is a world class management team putting them to work on these assets, we can see significant value upside

we can see lots of other upsides. we have a big integrated supply and trade business from a bp perspective, the same way we sell assets, often the purchases can add more value to the assets than we can i think bhp has done a good job, but i think we can enhance value by bringing those into the bpal is bp system >> when you say double the rates, you mean double the system >> when you look at eagle ford, we were able to double the production rates that came out of those wells, deploying the same technology we have been doing. >> before we let you go, i want to thank you for talking about this particular deal, but in one other headline in the news this morning in your space, about

saudi aramco the "wall street journal" reporting that saudi aramco is being pushed by mbs to take on additional debt given that the ipo for that company is not going forward, at least is stalled for now, taking on debt to buy assets from the government what kind of pressure do you think aramco is under and will that have an implication on the price of oil and how the saudis are thinking about that? >> i wouldn't know about the specifics of that. i would say we're in a much more stable period now. supply and demand match up we're seeing strong demand it's not like two, three years ago where we had a massive oversupply on the oil side stock levels are running at five-year averages, the u.s. is slightly below that. what you're starting to see is headlines will start to drive short-term changes in the front end of the curve

if you look at the back end of the curve on oil prices, they're staying stable what you'll see is now we're in a more normal supply and demand picture. things like the sort of news you're talking about now will impact prices in the short-term. people talk about world trade being an issue that tends to weigh on prices. talk about iran and oil coming off the market, that increases prices i think we're back into a more typical trading period around oil. >> brian, congratulations on the transaction. look forward to watching the integration. talk to you soon >> thank you very much coming up, tariffs hit home. what u.s. companies are saying about passing higher prices on to consumers

it is time for today's executive edge earnings season in full swing. investors have been listening to many companies comment on the impact of tariffs. eric chemi has been keeping track of that trade talk and has the highlights good morning 40% of the s&p 500 companies

that have reported so far in july, they mentioned the tariffs or the trade war based on these current tariffs and bigger amounts being threatened down the road one theme that is sticking out, a lot of these companies don't seem to be that worried about the tariffs and price hikes going with it because they're simply planning on passing the costs on to the customers. this includes household names like whirlpool, 3m, hasbro, stanley and many other companies. the parent company of napa auto parts referenced an inflationary impact and expects to passalon increases to the customers granger, very similar, expecting supply inflation, but they're also confident in the company's ability to pass on price increases. stanley black & decker, the focus is transferring cost increases on to the customers and users. they also said this move is

something the company believes is an appropriate response in the short and medium term. we'll have to see how more companies handle this the rest of the year if this comes to light. >> one thing i would point out, these are the cfos who are talking to investors and saying the things that maybe investors want to hear, which is don't worry, our profits continue get hurt in the short-term my guess is these companies are more worried than they're letting on whirlpool came in with earnings below expectations because of problems they were facing in europe pa if you're dealing with customers already paying more overseas because of the strength of the dollar, and potentially looking at the profits getting cut in those places, my guess is this is a bigger conversation takes place behind closed doors. >> you got that from general motors this week >> right >> they -- tariffs are having an

impact on steel and aluminum but the company was so reticent to come out publicly and outwardly criticize -- >> you don't want to get targeted by the administration for saying these things, you're also hoping this goes away quicker -- or faster rather than later. >> sure. >> eric, are you sleeping? first time i've seen you since the new baby oy. >> thank you i'm working on it. i'm trying this is a good time to chat with you guys because i'm up any way. >> you look well-rested. congratulations. >> makeup department helps with that >> we know all about that. earnings in from merck let's look at this profit number $1.06 a share, comes in 3 cents above what the street was expecting revenue topping forecasts. the company narrowing and raising its full-year earnings forecast range now you're talking about the stock trading up by 45 cents to $64.46s. coming up, oil prices

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in energy news this morning,

bp buying most of bhp's natural gas assets in the united states for $10.5 million. here's bp's cfo on "squawk box" just a short time ago. >> as we close this deal and we plan to close the deal at the end of october, we'll hit the end of the price curve so it's a good deal for the company today. >> all right joining us now is managing director of global head of commodities at rbc capital markets. good morning >> good morning. >> mr. gilviry who we just had from bp said oil was entering a, quote, stable period where supply and demand finally match up does that make sense to you? >> i mean, i think we're in a period right now that's constructive for oil prices. particularly into the last quarter of the year when we're going to see so many iranian barrels come off this market i think in terms of the supply picture, it's set to tighten while demand is holding up

though there are fears about the trade wars >> it's a busy morning for that. becky has a company that just came out >> twitter just out with earnings looks like adjusted is 17 cents a share. let's get to julia boorstin who dug through the numbers. >> twitter's earnings in line with expectations. revenue coming in at $711 million. that's actually beating expectations of $696.2 million but monthly active users coming in at $335 million, that's down $1 million and $3.5 million less than analysts projected that could be one factor driving twitter shares down now. the company says it lost 3 million users from its decision to prioritize health of the platform the company also warning that next quarter monthly active users could decline in the mid-single digit millions from this quarter number.

so a more significant quarter to quarter decline.

potentially be affected. what happens when the first set of sanctions kick back on iran you know, later on in the next week or so so i think these are a lot of issues that will determine how this price goes. >> we're going to run out of time come on back because i want to talk to you about the aramco story the ten-second version of it what do you think of that? >> i think this is a sign that, you know, that vision 2030 has hit some speed bumps this was a key priority for the saudi government the ipo of aramco. now we don't know if it's going to take place at all so they're coming up with plan "b." >> what does that mean for their ability to push on prices? >> they're looking to put more barrels on market to be supportiveof donald trump. will it be enough as they take more iranian barrels off

>> okay. thank you. >> thanks. when we come back, mouhamma el-erian of allianz. stay tuned you're watching "squawk box. ♪ each day, brings new possibilities. that's why you need a partner dedicated to helping your company reach its goals. u.s. bank -- the power of possible.

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the number that has wall street buzzing we count you down to today's big gdp number, the markets with el-erian of allianz. will amazon hit the trillion dollar mark? we'll talk about the quarter and get an outlook and a shakeup in the real estate industry. how one company is looking to disrupt the home buying experience starting with your front lawn as the second hour of "squawk box" begins right now.

live from the beating heart of business, new york, this is "squawk box. >> good morning. welcome back to "squawk box" right here on cnbc we're live at the nasdaq market site in times square i'm andrew ross sorkin along with becky quick and scott wapner in for joe this morning our guest host mohamed el-erian of allianz we're excited to have him help us through the day take a look at futures right now. dow jones looks like it would open 45 points higher. nasdaq up 35 points after what was a down, down day given the facebook situation yesterday i'm sure we'll get to that again in a moment. and the s&p about ten points higher >> earnings a big driver today we have breaking news right now on that front. twitter releasing its quarterly results. and julia boorstin has the

numbers. >> scott, twitter's earnings per share coming in line with expectations at 17 cents revenue, $711 million. that's about $15 million more than analysts expected but the stock is tumbling on user numbers and also guidance that's lower than expected twitter's monthly user numbers, 335 million. now, that's down 1 million from the prior quarter and also disappointed analyst projections by 3.5 million twitter attributed the lost to the decision to, quote, prioritize the health of the platform remember, it deleted millions of fake accounts over the past several months also citing gdpr the company warning that declines in its user base will continue seeing users decline in the mid-single digits. but the ceo telling us it's worth cleaning up the platform >> we're not focused on the

impact that they can in the long-term benefits we're getting great response from advertisers when we talk to them about our health work so it's not something we're concerned about. it's something that's a source of pride for us. >> now, when i asked him about whether we should be concerned about the decline in monthly active users, he pointed to daily active users saying they're the best measure decreased 11% from a 10% increase in q1 but the stock is being dragged down on guidance which is far weaker than expected q3 earnings projected for the company to be between 250 and 235 million. that's down from the 270 million of the consensus now, following twitter's 3% drop yesterday on facebook's disappointing results, here's

what segal said when i asked if twitter faced similar issues with facebook. >> we're feeling really good about the work we're doing at twitter. not just this quarter but over the last couple of years to continue to improve the service, improve the dialogue with advertisers, and to deliver better for them. >> we'll hear more in twitter's earnings call at 8:00 a.m. eastern. seems like that guidance is going to be a real point of concern. >> we will keep our eyes on that stock. it feels like between twitter this week, facebook this week, it was a lot of anxiety out there. we'll be talking in a moment, julia. but a couple of other headlines to tell you about. one stock working right now. amazon their shares rising in premarket trading. doubled estimates with $5.04 per share. we're going to have more on their quarter in a minute. also john schnatter is suing

papa john's on his ouster. he said new ceo steve richie is not the right person to lead that company of course papa john's also putting in a poison pill to try to prevent a takeover of the company from him so the back and forth and food fight, dare i say, continues and chinese officials are still willing to work with qualcomm and nxp over their now overdrawn takeover deal. qualcomm pulled out of that deal after china was not granted by the deadline nxp's ceo is going to discuss all that on "squawk on the street" at 10:30 eastern time. we asked steve mnuchin whether that was part of the china trade war. he said he had made calls to china on behalf of that transaction. >> can we go back to twitter's stock? i'm surprised to see it down

of course the number of users declining below what analysts had expected 3.5 million users gone because of these fake accounts i can't say that comes as a surprise to me i lost 5,000 followers cramer said he lost 50,000 if you've been watching this all to see them clean it up which most people would say is the right move long-term, i'm not surprised by this. >> so i think of this in terms of two things, becky one, engagement to technicals. engagement whether it's facebook or twitter, investors care about engagement and if engagement numbers go down, that a flashing yellow >> have we hit peak social media? >> i don't think we have at all. but i think we have a bump along the road and these are very crowded trades when you hit a bump, you get an overreaction and i suspect that is what we're

seeing in both cases >> probably had a bit of an overreaction on the upside i mean, the run in the stock, you guys throw up the chart. the last -- throw up a one-year chart if you could you'll see it's literally hyperbolic. >> maybe to andrew's point yesterday with facebook, priced to perfection. >> there you go. the run has been pretty remarkable for the stock >> take amazon out of it because i don't put them in the social media category how it will look back in history and say this was the week this cracked or was this the week that everything became oversold? >> or that everything maybe became a little bit more ready to build for the future. like getting iting rid of some garbage. >> hopefully we'll sit here in a

year look at the charts. >> i suspect longer term this is just a hiccup. but -- and it's just a hiccup because there are so many other things this combination of mobility, artificial intelligence can disrupt so we're still early in this process. shorter term, a lot will depend on technicals. we had went a long way we had sucked in a lot of people that's why you get these massive moves. >> by the way, we haven't officially introduced mohamed el-erian he is our guest coast for the next two hours and gabriela santos iswith us too. what do you think about this >> no, we totally agree. it's about time frames, right? if you look short-term, perhaps technology had run too far as a sector overall expectations were pretty high. hard to meet them. perhaps leaderships start shifting a little bit more towards financials, for example, where their sentiment had gotten very negative.

it felt like yield curve inversion was a fore gone conclusion long-term yields can drift a little higher here longer out. but longer term, a year on out, we think there's room for both. >> that's a great point. those are the two major themes we've been watching this week. it sounds like the boj may rein in liquidity a little bit. 10-year back at 3% almost. >> they are certainly much further along in the process but i think there are other central banks joining the process. very, very slowly certainly. but ang lot of attention over the past few months has a lot of attention and confidence has been on the u.s. right? a lot of confidence on u.s. growth, under direction of u.s. monetary policy. well, guess what things aren't that bad around the world either they're actually pretty good in terms of growth. other central banks are joining the pack as well. >> did i overstate it by saying

other central banks may be coming along i will admit signaling from the bank of japan, we're not hearing anything from the ecb. >> i think we're changing paradigms. >> we're not in the new normal anymore? >> no. >> oh. >> and global liquidity is receding slowly. the fed was first. it was a surprise to me and many that bank of japan will be second i don't think they will be, by the way. i think you'll see them do something small. i think more generally you've heard me say this for the last five months. it's no longer about massive liquidity coming in. it's about divergence in corporate performance and in technical influences and this asset price performance. this is a great time for stock picking. this is a great time for playing the yield curve. and this is a very different investment paradigm from a year ago. >> give me my new catch phrase

what is my new thing to hang on? you've created that and we've been using it for the last ten years. >> it's divergence we're going to see big divergence >> that's not as catch y i >> i know. it's not about creating something catchy it's making sure people don't fall in love with the wrong paradigm too many people fell into liquidity forever. >> sit another word for volatility >> absolutely. i mean, the big changes in paradigms are the central bank and second to return gradually of more normal volatility. and so far, the markets have navigated that well. >> gabriela, you pointed out particularly u.s. growth has been good. we're going to get that number for second quarter gdp at 8:30 right now looks like the consensus number is 4 347b9% this is a backwards looking number but what should we be looking into in these numbers to clean about what to expect >> for what it's worth, our

estimate today is 4.8% zplp wo >> wow >> we wouldn't be surprised with anything in between 3% and 5%. what's interesting is the breakdown of that number, right? if we look at domestic demands and government spending, we estimate that to be growing around 3.4%. so that extra 1.5% or so is coming from a weird change in net exports to quite a surge of exports in the u.s. that we think is probably related a little bit to the change on the corporate tax code maybe businesses are more willing to recognize goods that are not actually abroad. and as well perhaps -- >> oh, just because they were penalized before >> correct and perhaps also trying to get some goods out of the u.s. before any sort of tariffs take place. >> those are two different things >> they are two different things >> one is, okay, we're actually changing the way we recognize

things because of this tax change >> correct but two forces that perhaps may be acting on the second quarter but are largely temporary forces, right? that we can't expect this pace of growth. >> where are you for the year as a whole? >> we think 3% for the next 12 months we think we can sustain that pace and ultimately we actually do find that to be a bit of a sprint what we consider potential still closer to 2% >> so that's the key issue i think that's, you know, whether this is a sprint or this is a move to higher average growth rate. >> what do you think >> i think we're moving to higher average growth rate as long as we don't get a policy mistake, i worry about policy mistakes >> that's consistent >> i think so. >> you mean 4% or you mean -- >> no, no. around 2.5% to 3%. >> a potential long-term case. >> without a policy mistake are you talking like trade talks and

tariffs and things like that >> yeah. a big trade war would do all that but there are things coming in that i think are important we're going to see high labor participation. we're going to see more impact of productivity. and we've been holding back this economy. so, you know, i don't think this is going to be just a sprint i think we're going to end up at a somewhat faster rate median term >> that's crucial to what kind of earnings and expectations we can have in the long-term. we would agree we find reason to be optimistic. we just want to see a little bit more in the numbers before we change our view. >> gabriela, thanks for coming in >> thanks so much. >> mohamed will be with us for the rest of the show amazon's biggest quarter pushing it closer to a trillion-dollar market cap we'll get an outlook for the stock after the break. there was a profit unbelievable and later, disruption in the housing sector one company taking a new

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take a look at shares of amazon there you go did amazon just save the tech trade? because the stock certainly on a day where facebook had its worst day ever, amazon's earnings have sent that stock up $77 in pre-market trading it's a 4.25% gain. for more on those results, let's bring in a retail analyst with forester research. good morning >> good morning. >> the stock is obviously off to the races this morning what's your read on the quarter? >> well, this was a fantastic quarter for them they missed earnings by a hair, but it was barely a miss the earnings were out of this world. it went up nearly 100% and the growth was in all of the areas of profitability that we like to see. it was in areas like amazon web services they have a group called amazon marketing services which is buried in some of their

marketing numbers. that's the part of the business that competes now with google and at some degree -- to some degree with facebook as well that is a big deal because it represents a new part of amazon's business. and one that is not only profitable, but a potentially enormous growth driver for its future as well >> so the revenue number that was a touch light, earnings were a total blowout. and as andrew alluded to this earlier with another guest, this is not what you normally see you don't see the eps come in with such a blowout and then the revenues a little lighter. is it at all concerning to you that the sales number came in a little bit below expectations? >> well, the only part of the sales number that was a little soft was the international number but we have to step back and look at the big picture here amazon grew by nearly $20 billion this quarter

th that is larger in one quarter of a number than the entire revenue of most of the fortune 500 there are very few other companies that have grown on a quarter over quarter and certainly year over year basis has amazon has done. maybe apple. other than apple, this is an incredible story hopefully it's not a story of fraud. but it is at the very least a story of fantastic management. the fact that they have been able to grow in so many diverse businesses, that's really i think the iger story that's been missed a little bit in this so-called revenue miss i know there's so much focus on people buying stuff on amazon. but their services business is just knocking it out of the park and that was as positive as you

could take away from this report as anything. >> yeah. the aws business grew nearly 50% year over year the momentum is still very strong there they are a leader and a leader with a distant second in this space. that's a good thing for them i characterize amazon at this point as much a b to b business than a b to c business they definitely have the retail component. but their sources are aws, ams, and the third party seller business which is bigger than those other two. >> can we talk for a moment how -- two things. do you think the investor base is going to turn over in a different way than it currently is based on the kind of risk threshold or growth versus profit versus how you actually measure? there were certain investors that didn't want to touch this company. does this change as a function of repeated profitable quarters?

and does it also change the metrics with which investors will now use to measure this company? >> i don't think yet when you look at the overall numbers and the percent of profit, it's still pretty anemic everyone is very happy that the numbers are up, but for a business that is as large as it is which is now hundreds of billions of dollars, amazon is still reporting very, very anemic profit percents particularly when it is compared to other technology companies. they have repeatedly said that they are focused on the long-term. they are here to disrupt the world. they are here to find new businesses and change the world. so i don't see anything in those statements suggesting that they are focused on profitability so this is something that is very much, you know, kind of low

expectations them sandbagging those expectations but not really a bigger story change here. >> thank you so much we'll see you again soon. >> my pleasure all right. when we come back, we'll have more from our guest host today mohamed el-erian in the meantime, check out the futures ahead of today's highly anticipated gdp number you're now talking about the dow futures indicated up about 50 points, the highest level we've seen this morning. the nasdaq up by 33 and s&p by 10 need a change of scenery?

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still to come, we have a preview of the number of the day. it's goteveryone from traders to president trump watching. steve leisman has a look at what is coming up good morning >> good morning, becky as you've been saying we're waiting on a big gdp number. is it history or a flash in the pan? we'll tell you what you need to know about gross domestic product on just the other side of the break this scientist doesn't believe in luck. she believes in research. it can take more than 10 years to develop a single medication. and only 1 in 10,000 ever make it to market. but what if ai could find connections faster.

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are you ready to take your then you need xfinity xfi.? a more powerful way to stay connected. it gives you super fast speeds for all your devices, provides the most wifi coverage for your home, and lets you control your network with the xfi app. it's the ultimate wifi experience. xfinity xfi, simple, easy, awesome. good morning, everybody. welcome back to "squawk box" here on cnbc we are live from the nasdaq market site in times square. among thestories front and center, we are watching shares

of dow component merck this morning. that drug maker reporting adjusted quarterly profit 3 cents better than expected merck also raising its full year outlook saying it sees strong growth in areas. then shares of twitter are taking a hit in the premarket trading. they matched estimates revenue beat expectations, but then when you looked at the monthly average user, those numbers came in below what the street was expecting not sure why it's a huge surprise we know twitter has been purging what it considers fake account but the number of losses was about 3 million accounts right now that stock is down 15.5%. also bp selling assets to

bhp billiton $6 billion buyback we are now less than an hour away from the gdp report steve leisman joins us with a preview. becky and i were joking around earlier. this is like christmas morning >> for me. >> you were like walking around the studio, pacing around. you only have an hour to go before the number drops. >> i don't hardly know what to do with myself, scott. >> bp is buying the assets not selling the assets $10.5 billion. >> yeah. >> we said selling >> oh. i didn't say that. >> no. i did. i'm correcting it. >> you're the best, becky. >> thank you >> here's the deal the 4.4% gdp number expected is one of the most political growth numbers i can remember in a long time the administration is setting this up as proof they have sought their tax cuts are working. critics are pushing back here's the bottom line

i like this number from pantheon quote, every major component of gdp growth with the exception of housing investment looks to have supported growth in the second quarter. there are also going to be some one off items. a bit for everyone in here you're going to have a q1 adjustment which will be interesting. bea has been trying to fix that problem. it may mean some of the second quarter stuff getting put back into that number you have this buying and selling. both on the export and import side and you have had a pretty big boost in government spending that could stick around for a i while, but ultimately would be a one off. let's look at some of the records. we're talking about a history here the last best quarter we had or plus 4% was back in q3 2014.

the latest strongest year was 2015, 2.9% the current annual rate running at 2.8%. that's pretty strong moving to the right, the best quarter ever q1 1950. 16.9%. >> what the heck happened? a change in how they measured things >> i think it had to do with post-war stuff going on there. also you had people coming back. there was one more there best year ever was 8.7% in 1950. >> but 16.9%, there has to be something other than -- >> i'd have to get more history on that. bottom line is this economy is growing more strongly now. it's probably not a 4% economy, but the good news for everybody out there is it's not a 2% economy anymore either what i want to show you are these fed probabilities. this tells me the market is seeing this here

92% chance in september. 66% in december. and what's new here is the 50% probability of the next hike now being in may that's been moved up from june so they were looking for that probability. now they're starting to accelerate those hikes over time i think the market is starting to believe it's a stronger economy. i don't think the market is going to buy into a 4% number, but, you know, it could be a 3% number that's a pretty good accomplishment >> that's actually mohamed has talked about that a lot too. >> let me push a little bit. do you buy the 92% probability for september hike first >> yes >> you do? >> yeah. >> so you expect next week -- >> can i flip it around quick? do you >> no. i think that's why too high. >> what keeps the fed from -- i'm pushing you back what keeps the fed from its hiking of a quarter point? and let me add to that the way the president has raised the

political stakes on the fed not hiking against a 92% probability. >> if i looked only at the u.s., i would buy the 92%. but i think there are other things happening in the world. so i think it's over 50% but not 92%. which makes a difference when you're trading the market. i think there are head winds from the rest of the world the political angle i think the fed will try to ignore and say let's assume it didn't happen rather than say let's worry about it does it move were not move, happen or not. if it is 92%, then we're going to see a lot more stress on various markets including the global fixed income market, including the fx market. that is an important estimate. >> you don't think it's already in the market? >> i don't i think if you look at what's already in the market, people are seeing okay for fixed income but it's not translating

>> i want to ask you this question what the heck is happening in japan right now? i think the -- i'll check it out again. it looks like the jgb is up again. >> correct >> the whole u.s. spike -- i want to make your point for you which is what happened in japan dramatically impacted what happened in the united states. and that was all on some perceived tweak of boj policy. so i don't quite understand what's going on. what tweak could they do here? >> what tweak they could possibly do is change the signal about what they intend to do about the yield curve. that is what caused rates to move earlier this week the bank of japan has come back with the second intervention this week saying not so fast like other central banks, the to

obtain optionality >> i want to talk about draghi draghi came out and said we are to the spring until we sign off on that. so i think there's a lot of journalists and lot of people in the market that want to tell the story of the broad reversal of monetary policy in the world i don't think that's happening quite so quickly i think the fed is going to do its thing. but i think that europe and japan are going to be slower >> i agree a thousand percent. >> i agree that's why i talk about divergence the market is trying to force the ecb and bank of japan to go faster and whether it's the bank of japan today or the ecb yesterday, when he said through the summer mean iin ining octob.

a lot of people thought as early as june or july. and he said through july well, he meant october i think that's important yes, the central banks are going to change paradigm but in case of the bank of japan and ecb, it's not going to be as fast as the market expected. >> so your take on this. this is important. this keeps the fed from doing it and my take is a little bit more it lets the fed do it. >> it doesn't keep it slows the fed >> so you're saying no december? >> no. i'm saying we'll definitely get a rate hike this year. not two, just one. could be september could be september but i wouldn't put a 92% probability on this. the fed i think cannot continuously ignore what's happening in the rest of the world. >> you don't think that people are going to say to powell or about powell and about the fed if they don't do that hike at this point, that's politics. >> they'll say it. they'll say it they certainly will say it and the fed will say that's part of navigating this new

environment. >> but will it be politics >> no, i don't think so. i think the fed will go out of its way to put politics on the side. >> but how do you get around the perception of the politics >> you can't you can't! and that's why the president shouldn't talk about it. >> that's the box he to some degree has put the fed in. >> even if mohamed is 110% that politics doesn't figure into it, people will think politics figures into it and then that affects the trajectory for rates going out. that has an impact on the curve because they'll think the fed is easier than it would have or should have been >> that could very well happen, probably will happen i think what the fed is going to try and do is put the politics

aside. i know i may be misinterpreted >> i think i'm with steve on this one but we're with mohamed for the rest of the show he'll be back in a bit a lot more to come when we return, a home selling disruption and it starts on the front lawn. diana olick has a preview. >> what else can i say it's the sign. big changes coming we'll show you next on "squawk box.

z. we're back on "squawk box. that's a look at the futures this morning s&p would open higher by about ten points the dow would open higher by 45, we'll call it -- yeah, 45. and then nasdaq on the back of those amazon earnings looks higher as well by 28.5 points. technology has had a huge impact on how we shop for, buy, and sell a home. but one part of the process hasn't changed at all until now. diana olick joins us with more on this. >> well, it's that silly old sign it's what most people see first when they're looking to move to a certain neighborhood or move within their own neighborhood. the for sale sign. now compass real estate brokerage which is a fast growing new kid on the block is disrupting the sign.

this fall you may see this round interactive sign yes, it spins and lights up. if you have the compass app an your phone, it will send a notification about the property and of course will connect you the designer said he researched this for the year and the final product is what the agents said they wanted. >> we wanted to really consider creating the ecosystem that makes compass so powerful. which is the combination of data and software and hardware. that can help really deliver something of value for our agents and their clients >> the technology in the sign can manage open houses, digital lock boxes it will be rolled out this fall. compass has over 5,000 agents in the u.s.

there has already been huge demand i asked if he said it might get stolen, he said they'll all have insurance on it. >> okay. thank you for that when we return, the ceo of focus financial on the booming financial advice he'll be our guest after the break. a lot more coming up right here on "squawk box" when we return 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 &. & this shipment will be delivered...

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rising in their nasdaq debut joining us now is their ceo. good to see you this morning >> thank you. >> this is a big day why take the company public now? >> well, we had a very, very successful last five years and the opportunity in the wealth management space is terrific so we thought we need to have a public currency, we need to have access to the capital we have as a public company and it's a great pull for the future >> how do you think things are going to change now for you the way you're going to run your business as publicly tradeed? >> our responsibility is to our shareholders but also our partners and focus is built on an excellent group of partners. and as a public company, this opportunity is even larger >> how about going public in the cycle. how do the markets look for you?

>> it was a terrific opportunity. i think we had a very differentiated and unique offering which is why we were well received. >> rudy, can you tell me the difference between your desired investor base and what's likely to materialize >> that's interesting. >> well, we chose our investors very carefully you know, at one point in the history of a public company, at the ipo you can choose your investor base. we were very pleased >> what were you looking for >> well, we wanted to have a perfect -- as close to perfect fit with being long-term investors who are well informed and understand our story some very unique sovereign investors who came in in the ipo already. and quite frankly, a number of hedge funds that are known for the depths of analysis in being long-term strategic holders. >> our bob pisani points out in

some notes and he's been following your company that the stock price below the range. do you think that investors in some respects have had a hard time sort of figuring out what your growth trajectory is going to be? >> we are very unique. there has never been an ipo in the wealth management space. so it's hard to comp us. having said this is one of the most successful large financial services ipos since 2014 so the reception in the market has been outstanding you know, quite frankly, the story is resonating. >> you grow through acquisition as you have been doing >> well, it is a good mix between the same store growth of about 150% very significant growth through transactions >> what do you think the wealth management business looks like ten years from now do you think there's even human beings going to be involved in the is

>> oh, absolutely. because ultimately the service we provide to our partners, to our clients is ultimately so close to, you know, how the family operates. it's so important how to invest your money this will not get replaced by computers. and quite frankly, the success of robo advisers is a testament to the strength of the personal relationships advisers have. most importantly, there is this tectonic shift away from brokers and wire houses operating under the suitability standard which is the highest standard of advice you can expect. >> i think you're alluding to active versus passive. >> whether that even works anymore. and then i also think there's just the human to human connection whether that -- >> and most people are very

surprised there hasn't been more disruption in asset management in general >> yeah. you're absolutely right. this move to index and passive and index strategies but we are wealth manager. really first and foremost planners taking a realistic look at your needs. money magt is what we do but the service we provide is so much broader and will not be replaced by computers any sitime soon. >> many people realize that having a wealth management arm is wonderful you had a choice you had a choice do an ipo or find a much bigger platform that will welcome you why not the second one >> well, what makes our industry successful is ultimately the

independence they are not part of a bank. they're not part of a broker but they are only duty is to their clients. and we thought therefore this was the right step to take >> congratulations >> thank you >> big day for you and your company. all right, folks let's take a look at some stocks to watch this morning as well. you're also going to see intel shares are lower despite the company reporting better than expected second quarter results. biggest gains came from intel's data center business but sales fell a little bit shy of what the street was expecting. intel also didn't say anything about naming a new ceo to repla replace. chipotle beating estimates same store sales topping estimates as diners spent more

on -- spent more and food costs were lower especially when you looked at avocados that's a big staple for them >> guac. got to have your guac. check out starbucks. second quarter earnings and revenue matched what the street was expecting. global saim store sales. but sales in china were down 2% amid fierce competition and stricter rules on delivery service. we heard from mcdonald's yesterday that they've had some issues in china and it may be because of a rise in nationalism there as well. the gang on "squawk on the street" gets a chance to ask ceo kevin johnson today. also, electronic arts the video game maker posting better than expect ed outcome >> i have one more question before mohamed

it's the story i find fascinating. we've been talking about saudi arabia for over a year aramco officially stalled. "wall street journal" saying not only is it stalled they are to take on additional debt to basically take that debt and use that money to buy assets from the saudi government. it feels like there's a lot of money being moved from one hand to the other what's going on here >> the journal calls it plan "b". that is for what their basic objective was. which was to diversify their wealth away from oil how do you do that you monetize part of the oil and you invest it in something else. two ways of doing that either you ipo aramco or you borrow against the assets. they pursued the first path for awhile they realized it's problematic for them now they're pursuing another

one. whether you believe that the proceeds are borrowed by aramco if they do that are invested >> here's the question you hear the saudis and now commitments to blackstone, for example. they made commitments to softbank there's all these big commitments and they don't have the cash to support them all so now they're going to have borrow effectively to finance these. does that make sense >> it's a situation where they are -- they have a lot of wealth and because of their commitments, it seems they have a bit of a cash crunch i think the mumt question is are you investing wisely that is the fundamental question >> and the question is is oil better than -- >> correct but most people would 100% say relying on oil for your wealth is not a good idea there's another level below 100%

where it's a good idea coming up, the fda approving the first new treatment for ma lair -- malaria in 60 years. dr. sue desmond-hellman will join us. "squawk" will be right back. you always pay your insurance on time.

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breaking economic news a gdp report that could make history. we're going to bring you the numbers and the market reaction straight ahead a "squawk box" exclusive exxonmobil set to report quarterly results. we will talk to a top executive from the world's largest publicly traded company. the final hour of "squawk box" begins right now. ♪ live from the most powerful city in the world, new york city, this is "squawk box. >> good morning. welcome back to "squawk box"

here on cnbc i'm andrew ross sorkin along with becky quick scott wapner is in for joe kernen this morning. our guest host, mohamed el-erian we will be hearing a lot more from him as we count down to the big second quarter gdp report. price is right rules as well also recognizing that trump thinks the number's going to be good and has indicated a four handle would be good for him >> i don't like playing this game i don't like this game >> it doesn't matter you're here. you're playing >> 4.1%. >> i think you're right. i went with 4% but only because someone already went with 4.1% >> and i went with 4.2% to box everybody in and you're the optimist. >> i still feel like that could be low i feel like this number is going to be good

want to take a quick check on the markets right now the futures flight let's show you what's going on dow looks it would open 30 points higher. nasdaq as well by 23 points and the s&p 500 higher as well about 9 points of course we had a tough day yesterday in large part because of facebook. but then the amazon results which were a big surprise in large part because the number was higher let's take a quick look at treasury yields as well. right now the 10-year note trading at 2.978%. let's get you caught up on a few earnings out this morning. merck earning an adjusted profit of $1.06 a share revenue also topping forecasts the stock is up by about 1%. then there's twitter which matched the street's forecast

when it came to the adjusted quarterly profit revenue also beat estimates but those are not the numbers that the stock market's been watching today. twitter's monthly active users came in at 335 million that stock is right now down by 15.6%. earnings just out from exxonmobil profit came in at 92 cents a share. the consensus estimates were for $1.27. revenue did top forecasts and there are far fewer estimates for revenue than earnings. stock right now down 1.1%. i'm still trying to see if there's anything in the release. but the clean number per share, the street was looking for -- i'm not sure if that was an apples to apples comparison. shares of amazon higher after quarterly profits soaring.

courtney reagan has more >> remember when we wondered when is amazon going to turn on that profitability spigot? it's here. it's on. doubled the street expectations. net income actually 12 times as large as the same quarter last year and this marked the third straight quart ee erquarter the high margin businesses drove the profit nlt despite making up a pretty small portion of the revenues. amazon web services makes up just 11% of total sales but 55% of the total operating income. advertising is just 4% of total revenue but now a multi-billion-dollar business. both north america and international revenues came up short. but tom forth says the story of the quarter is profitability

amazon's profitability picture is improving as more of the retail partners are private. speaking of its retail business, remember amazon's prime day shopping event did not fall in this quarter just reported that's going to be in the third quarter. they did say it was their best day ever but its revenue forecasts did fall below the wall street estimate >> courtney, thank you you hit it right at the top. we have always wondered if they could turn a few screws and the profit comes are we past wondering at this point? when you hit $2 billion in a quarter, is that will wr you say they're here to stay >> i think as the call was going on they were talking about the capex spending being pulled back this year because they had done so much of that last year.

so we started to see the stock price tick a little higher saying maybe they are going to take those profits and run >> i feel they'll always do what's right for the business. >> what happens when the next quarter emerges and you say we decided we're rep investing in the business >> i think that's fair i think amazon is obsessed with the customer if they say they've got a customer obsession, we're going to go a after that even if it's larger, then boom there's an investment we didn't see coming i think you could see some inconsistencies going forward of whether or not they're going to continue to invest >> so an investment we didn't see coming anything in particular >> i think the pill back while it wasn't shuj and hasn't closed yet is at least starting to give an insight on what they're planning for health care

that was interesting they wouldn't say a ton on the call other than it's a customer obsessed business just like we are and they're highly efficient. those are the businesses we're off to whole foods, we know that was a big acquisition. we're about a year in now. they did roll out those prime benefits nationwide during the quarter. they didn't say whether it grabbed more prime customers rather than whole foods was one of the fastest adoptions of prime benefits they'd seen >> i see it used all the time at whole foods. you hold up your phone you have the code on there binge. they hit it and it gives you the extra discount on top of their already on sale merchandise. >> they're really making sure that you know this is a new benefit and take advantage of it >> are you surprised the discount is not more >> maybe it soon will be

many that is the bread and butter they said the prime day event on july 16th, they signed up more prime members than they have in history. that's really the goal whatever it takes. >> thank you >> thanks. a new malaria drug is being touted as a game changer that could help millions of people. let's bring in dr. sue desmond-hellman. thank you for being with us today. it's great to see you. >> glad to be with you let's talk about this drug in particular, sue. it's called tafanequin what's different about this and why does it matter that the fda has approved this? >> well, this is great news. it's the first new drug in 60 years for the form of malaria

called vivex the drug moves us from something that took two weeks and any one of your viewers knows what it's like to take a pill for two weeks. it just doesn't happen to a single dose so tafanequin allows people to clear malaria out of their liver with one dose. >> you know, the old malaria drugs also had a lot of potential side effects like crazy dreams and other effects does this new drug have that as well >> well, actually this new drug with the single dose is in the trials was very safe it does have one thing that needs to be incorporated a very tiny number of people, but a real number of people. about 3% have an enzyme deficiency for which this drug would break down their red blood

cells and cause anemia so there's a simple blood test that needs to be done. in thinking, memory, things people talk about with malaria drugs, not much of that is in the trials >> you talk about vivex. i don't know much about malaria. how big of a problem is this in the world? high is this something that will particularly help there? >> the most common form of malaria is called falsiporum 90% of malaria deaths are in africa from that serious form. vivex tends to be a little milder here's the hard thing about vivex and it's hard when you want to get rid of malaria

it hides out in your liver so many people in brazil who get malaria, it recurs because it's hidden in their liver. they don't get another mosquito bi bite, but it comes back in we can cause a term i love, a radical cure get rid of malaria in your body so it's an important of look this milder more persistent form of malaria >> we've been watching all along with what you all at the gates foundation have been doing to try to wipe out polio. where do we stand on that front? what's the eradication story at this point >> we're continuing to make good progress best news so far is nigeria, the continent of africa so far is polio free this year good news. we're continuing to work in

afghanistan and pakistan overall continuing to make progress it's a massive effort to get to tough places with brave vaccinators who are continuing to make progress more to come, but better news this year than last year and we're hopeful for the rest of 2018. >> sue, as becky said, you've done amazing things. what's the next big thing for the gates foundation >> one of the things we're really excited about and we love technology we love new things as you know, bill's been talking and warning the world about pandemic preparedness. we need to be ready if a serious flu hits we've been working with many partners on new ways of doing vaccines that will have a more rapid ability to respond to a threat sop we just saw ebola contained

in the democratic republic of the congo. the ability of responding to threats we don't know what they are yet is something on the technology side i'm excited about. to make sure the world is more ready for the next threat. >> sue, financial question warren buffett -- how do you think about selling those shares down and in terms of the timing and when you do it >> well, happenfully thatilhappy job. for the bill and melinda gates foundation, i'm responsible for spending money >> you get the good end of that deal >> yeah. i tell lauren i don't do "p" i just do "l." but the bill and melinda gates investment side of the shop is

on top of berkshire stock and make sure they're responsible in how they sell it it's incredible. bill and melinda gates and war run buffett. even though i smile i'm in charge of spending it, it's a massive responsibility we all take seriously so warren's generosity again last week when that berkshire stock is sold, we will spend it wisely >> before we let you go, you are on the board of facebook you saw the news of the reaction of the stock price after the earnings report. what's your take on how people have reacted to that >> well, listen. i'm really confident in management at facebook it's a very good board i've been on it for several years. i feel good about how management is overseeing the times we're in at facebook and feel really confident in the board and in the management team. >> and i don't know if you saw,

there was an investor yesterday who called for the split between the chairman and ceo roles that mark has he is the single largest controlling shareholder of the company. what do you think of that idea from a governance perspective? >> from a governance perspective, i've been on the board, the audit committee the risk management had lots of discussions with mark and the board. i feel good about where we are on the board and with management >> all right thank you for your time today. we always appreciate seeing you. >> absolutely. nice to be here. thank you. when we come back, exxonmobil out with quarterly results. stock is in the red this morning. we'll have a rare interview with a member of exxon's management team next. check it out right now exxonmobil shares down by 3.3% by the way, we are awaiting the gdp report

we're going to find out at 8:30 a.m. easternim resqwkoxright after this

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exxonmobil, the world's largest publicly traded oil and

gas company is out with quarterly results this morning they came out in the last 18 minutes. profit came in at 92 cents a share. the consensus on the street was for $1.27. we should say revenue did top the forecast the stock is down by about 2.8%. neil chapman is exxon's senior vice president he oversees global investment. thank you for joining us today >> sure. happy to be here, thank you. >> this is the first time we're getting to speak with neil he joined the leadership team at exxon back at the end of last year neil, i know that was a move by darren woods, the ceo of exxon to try and open transparency kind of has been something he's doing and making sure management has a firm footing on all these issues but i'm hoping you can shed a little light on these numbers this morning revenue came in better than expected so what happened where were the expenses the street wasn't anticipating

>> yeah, sure. and obviously when you have a big gap between what the investment community sees versus what we published a few minutes ago, then it warrants some explanation. the way to explain it is if you look at our first quarter's results and during the period, brent was up $7 a barrel wti up $5 a barrel we would have anticipated that earnings would have been up something like a billion dollars. $1.1 billion just based on that revenue increase alone what the analyst would not have understood is we would have had planned maintenance in our business in the quarter. largely affecting our refining business these refineries, when they come on -- when we're operating, when they come online we had to take them down every several years or

so that takes them offline. we do a lot of maintenance and inspection we would love these to be regular all across all the years. it's just not like that. with some unplanned maintenance, that accounted for the million dollar difference. we had some foreign exchange impacts. the foreign exchange impacts, stronger dollar versus the euro and the pound. 800 in the maintenance 90% of which was scheduled then you got a billion and a half which i don't think the investment community would have seen >> let me ask you. if you were talking about may not mans that was scheduled but the community didn't see it

coming, is this maintenance that had been put off for a long time or is this maintenance you were pulling from additional years? should the street be taking its numbers down in future quarters? i'm just wondering was this stuff long time coming or stuff you pull forward >> no. and neither. this is planned maintenance. it goes in peaks and troughs we take these turnarounds at different times every several years. we just had a peak in the second quarter. we had several refineries down of course you get the double impact when the refinery's down. you lose the strong margins. and these are big maintenance activities we spend a lot of operating expense. >> my point is it seems unusual they would have known to anticipate that sort of an

issue. i know again that darren woods has been trying to make things more transparent to the street making sure you're investing money down the street. the street has been skeptical of that when they see a big surprise, $800 million of maintenance they didn't know about, how can that be communicated and what can you tell them into the next couple of years if this happens every year. >> it's $800 million in lost revenue from the plants being offline. >> okay. and because it was higher margins at that point. >> yeah, absolutely. and we want to be transparent. i will be on the earnings call with the investor community in a few minutes after this discussion here. that maybe we haven't done

historically i don't want to reconcile away the second quarter and say it was all planned maintenance. it's important to note we had a disappointing quarter in non-scheduled maintenance. most of it in the downstream business, some of it in the business that did roll over from quarter to quarter making sure we have the most reliable operations. those are behind us but some of those unplanned maintenance did roll over from the first quarter to the second quarter. we're all over it as a management team. that we were disappointed about. now, of course part of that unplanned maintenance was the earthquake in pap ua new guinea. but the unplanned maintenance is activity we're addressing very

clearly. >> neil, in addition to your insights on the company, people watching the show will be very interested in how you see oil prices and how do you think about hedging currencies going forward? >> we have a policy in this company. we don't try and predict oil prices in fact, any margins going forward and we're not going to do that. we're in a commodity business. margins go up and down prices go up and down. what's really important for the company is we focus on the fundamentals of this business. when i was in new york earlier on this year with our investor analyst meeting, we laid out the most attractive set of portfolio growth opportunities across the upstream, downstream, and chemicals that this corporation has had since the merger of exxon and mobil.

that was some 19 years ago what i pointed out at the time was these are robust around price and margin scenarios the projects are all a double digit return and $40 a bare of crude oil. we focus on the long-term. very kwiekly, those opportunities -- five big growth opportunities we're progressing. one in the permian in north america. we think we have the most attractive position there. the growth is rapid in terms of production there we have two deep water assets. offshore brazil. >> neil, we have 30 seconds left neil, i'm sorry to cut you off we have 30 second left in that time, where are we on the plan darren woods laid out back in march to spend $230 million to double profits and pump out another 1 million

barrels per day? how do we stand on that? are you on track >> we have been on track with what we laid out in new york in fact, all of the growth opportunities that we laid out in the downstream in chemicals and the upstream were absolutely on track what we have seen in the second quarter and the first half of the year, there's no structural change to our business >> thank you so very much. we have to leave it there. the big gdp number, much anticipated coming up right after this thank you. what do advisors look for in an etf? i tell clients, etfs can follow an index, but which ones target your goals? it's not about quantity. it's about quality. no trendy stuff. i want etfs backed by research. is it built for the long-term? my reputation depends on it. flexshares etfs are designed and managed around investor objectives. so you can advise with confidence. before investing, consider the fund's investment objectives, risks, charges and expenses. go to flexshares.com for a prospectus containing this information. read it carefully.

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welcome back to "squawk box. exciting live breaking news. we have our first look at second quarter gdp. will it be above 4%? will it be above 5%? and the survey says 4.1% 4.1% now, granted, it isn't 5%. it isn't 4. %. it isn't 4.7% but it's not bad upgraded from 2% to 2.2% now it stands if you start third quarter of last year to get four in a row, that was 3.2%. the last quarter last year was 2.9% personal consumption, whoa much better. 4% that is big time that's sequentially following

up 0.5%. and if you look at the price index, that's also hot 3% we're expecting a little over 2% and followed by 2% quarter over quarter this actually isn't as high it's 2%. our last look was 2.2% and we were expecting 2.2%. the response in the market actually is a bit of a disappointment on the knee jerk. that's only the knee jerk. how can i tell we've given up a couple of basis points on treasuries no matter how you slice it, where does it come to? the second quarter of '14 was 4.6% looks like the average here is going to be now firmed up a little bit i'll do all the permutations and get back to you on this, becky dollar index gave up a little bit of ground as well. but it's still up on the session. everybody, of course rb remembers two things from

yesterday. fast gook got a nice drop. and of course we continue to edge towards 3%. >> thank you very much steve leisman is here with more reaction to the report steve, rapid response for cnbc 4.1%. >> yes right on we it was spot on. it's been running better than the atlanta fed which is my only metric none of that is neither here nor there relative to the importance of this number it is a strong number. there's no denying that any way you bake it. the keys here i think are looking for what is fiscal policy and tax cuts and what is sort of one off items? let me go through a few of these. consumer spend iing -- was lookg for 3% consumer growth

that's something he brought back from the first quarter because there's a little bit bigger checks out there, you have more people working wages are up a bit not doing too badly. business investment 7.3 prst that comes off of an 11.5% number in the first quarter. businesses doing well. you can expect that's from the tax cut. then you have two other items here surge in exports the buying of stuff, soybeans has moved gdp which is rather incredible to me jack and the soybean stalk exactly. i don't think with should think that's going to continue i'm not -- some of it may be but government purchases as in government spending up 2.1%. that's going to to end up being a -- 3.5% is local

that's a big contact irk of the economy. one of the great surprises to the forecasters this year was that $300 billion continuing resolution that happened they were looking for the tax cuts to increase deficit spending they didn't expect the additional spending that came along with it. some of that is also going to be military spend pl and we're going to kind of back in out and come up with an guy lying debate >> mr. el-erian, or mr. erian. >> rosenberg was saying at least half the growth this quarter was coming from the soybean issue

and also this accumulation these sort of one off outcomes that make you see how the number is as you seem to be fairly optimistic that maybe not this level of growth is sustainable, but something growth. >> i don't think 4.1% is sustainable. i think we're between 2.5% to 3%. >> what number do you want the price deflator or -- >> the one that will matter close to the fed fed so the core pc for the quarter is right there >> rick, you want to jump in on this conversation? >> i do. i always like to run the four quarter averages if i start at q3 '17 and add 4.1%, a running four-quarter

average is 3.1%. so we popped over the 3% mark. i think that's interesting to throw out there. we've had some better quarters in 2014. but the difference was a lot of variants in between. month over month you want sustainable, nicejec y trajectory >> let me echo that real quickly which is did a lot of work on this the four quarter average number is the number least aus sesusce to revisions this will be revised twice more and over the next five years any single quarter is subject to huge wide revision it creates a less error prone number >> stay here for a second. i want you to jump into this conversation joining us right now michael

maddowitz and jim petakukis. good morning to both of you. michael, i'll start with you your take on the number and maybe the better question is how sustainable you think the number is >> i think it's actually a pretty goldilocks type number. if you asked me what was going to spook the fed, i would have put someone -- i'll take my chances. i would have liked to have seen a bigger number. i'm sure the administration will take the 4%. how much of this number was going to be sort of soybeans, trade stuff. how much was going to be the sugary stimulus numbers. i was hoping really to see the better investment numbers. that's where the supply side oomph, you want to see the hints

of that. >> steve >> you got 7.3%. pretty happy with that >> equipment number not great. >> some of it is likely going to be from the oil and gas industry that's another thing we want to separate out how much of the pop we're getting. look, we've talked to a lot of folks out there, they say the tax cuts only change their investment plans at the margin i'll take it at the margin >> do the white house economists believe that what they've been saying is it's not a marginal thing and we should eventually see that >> jimmy, let's be smarter than the politicians here, okay if kevin hassett is right and i'm willing to give him a little bit of rope on this which is the politicians are stupid to claim

what we're seeing now is the tax cut. it has been stupid for them all along to say that is you had this process step one is you cut corporate taxes. step two, create higher investment step three is you have a productivity boom that changes the potential and dna of the process. >> that's a two or three year process. >> it undercuts their argument because if you -- if next quarter we get a 2.4%, what? now it's not working >> i think it's stupid. i think there's a little bit of tax cut, little bit of sugar high from all sides here i take a step back and go with what mohamed said. and by the way, i'm sorry to keep yakking here on this thing. but that's a huge success. to raise the growth rate of a $20 trillion economy by half a

point, i will take that trade all day long >> mohamed you've been quiet thus far >> so would i. if i was trading this market i would want to know two things. how much of this is one off and temporary and reversible and how much is underlying the second thing i want to know is does this change probabilities of a fed hike in september? so steve back to you still at 92% which scott thinks is too low. >> doesn't do anything to throw it off, does it? >> no. it doesn't do anything to throw it off >> you thought it would? >> yeah. i have a bias. i have a framing. 3.8% to 5%, i wouldn't be surprised. this is toward the lower end of

expectations. >> what their 1 says about the view of investors are where the food is going to move many -- >> good number within the margin of error we're not going to get too excited about this if anything, slightly weaker than i expected. but there's so much going on and we're only in july see what happens when -- >> by the way, may also lead to your fed scenario. >> i think the second one is what i would stress more unlikely to get two this year. on the timing of whether it's september or december. under the powell fed, i'm not sure >> jim, do you agree with that you've been calling i thought for two hikes this year at minimum. no >> oh, i -- listen

i don't know i think three hikes, four. i think four became slightly more likely after the president's comments about the fed. hopefully the president will stop talking about the fed and maybe we'll get three. >> michael, we'll give you the final word what should the fed do >> i'm still a fan of the fed, letting it run longer. i think that's where a lot of the potential for ak -- >> all right we're going to leave the conversation there, guys thank you. okay coming up, today's top stories including earnings just in from oil giant chevron. meantime, take a look at futures on the back of that gdp number all three of the major averages would be implied higher. there you go the s&p by 8 nasdaq being affected by amazon

numbers up 33 points we're wac after this

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about energy efficiency. we actually saved $50,000. and that's just one school, two semesters, three girls. together, we're building a better california. all right. welcome back, everybody. chevron matching rival exxonmobil and posting an earnings miss today. chevron earning $1.78 a share

compared to the estimate of $2.09. revenue fell short of forecasts as well and the company is also targeting $3 billion in share repurchases a year that's based on its current outlook. again, the reason this is probably such a surprise to the street is that oil prices and gas prices rose rapidly. oil prices in particular up sharply from a year ago. people who were anticipating big profits have to dig into these numbers more but exxonmobil told us it was because they had a lot of anticipated -- unanticipated costs including about $800 million for refinery retoolings and lost profits we have some news just crossing the tape in from russia president vladimir putin he says he has invited president trump to moscow but says conditions have to be right. he adds that telephone talks are not sufficient to discuss such issues such as global conflicts. >> so in other words, no, we're

not coming to washington after trump -- >> originally there was a washington plan. then it was delayed. now they're saying moscow. >> wow >> so we'll see who accepts what >> duelling invites. twitter call under way as we speak. julia boorstin is monitoring that take a look at shares this morning getting hammered on those numbers. down 12%

welcome back to "squawk box. check out the futures after the second quarter gdp report. 4.1% dow jones looks it would open higher. nasdaq up about 40 points. s&p 500 up, we'll call it 10 points we're calling this a golding locks number i don't know if that's where we are. that's what people are talking about. maybe it leaves the fed in the decent position not to go too fast or too slow >> according to peter alexander, the president will make a previously unannounced statement on the south lawn of the white house on the economy. >> on the economy? it's not in response to putin? >> maybe that, as well surely he's going to talk about the gdp number of 4. 1%. there's another number that is important. twitter. shares are falling after reportings are line in

expectations user number, thoughs, and guidance did fall short. julia boarstein on the call. >> reporter: it wrapped up seconds ago. twitter shares plummeting on weak guidance. the company says its largely due what it calls health work. deleting fake accounts shares now down over 11% jack dorsey focussed on the comments on why it's worth investing to clean up the platform. >> we do believe that our health work and a focus on improving the health of the public conversation on twitter is a growth factor over the long-term. we want to make sure that we're building this into our dna we want to make sure that we are being -- able to measure it and held accountable to it, as well. >> reporter: dorsey also saying that the company is focussing on health and tools to highlight relevant content and events

drove better than expected advertising growth. >> the momentum on the platform is translating into success. the total revenue increasing 24% year over year in the second quarter. receiving positive feedback from customers about our efforts to enhance advertiser transparency and a -- improve the health of the public conversation. >> he talked about twitter success for the world cup saying it generated about $30 million in revenue and 39% of users engage with two or more games on the platform dorsey saying it's not a oneoff situation because they've learned so much with what worked with the world cup. >> before you go, julia. when he's talking about health are we talking about mental health >> reporter: we're talking about spam, trolls, the fact that twitter was a messy place where there are a lot of bots. over the past many months going back to last fall, twitter has gone through the process of deleting fake accounts, deleting

spam accounts. they talked extensive they're probably up to 80 million accounts deleted between last fall and now and the reason why that only translated to 3 million accounts in the quarter is because many of the accounts were deleted the second they were created or old and inactive they want to get the mess off twitter. they want it to be conversation that complies with their rules and not bots following people. >> mental health i was thinking, you know, maybe it would do better with carbs and, you know, i don't know. thanks i want to remind you, one more time. a little more clarity on what we expect to hear from the president this morning 9:30 on the south lawn of the white house. he's expected, president trump, to make a statement, we're told on the economy, the fastest quarterly growth we just got in some four years we'll hear from the president in about 35 or so minutes when we come back, we'll get

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great number best we've seen in years we saw number one all the way back to 1950 of more than 16% growth he said it was the end of quarter. after the recession from the truman era that at one time. i thought there was something whacky with that. >> thank you for being here. >> it was great to see you. >> thank you have a good weekend. have a good weekend, everybody make sure you catch the president 9:30 this morning. "squawk on the street" begins now. ♪ good morning welcome to squawk "squawk on the street." we're live from the new york stock exchange carl and jim have the morning off. sara and melissa join me, carl there you se