tv Squawk on the Street CNBC August 1, 2018 9:00am-11:00am EDT
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for that strong number. >> awe. >> it shows you the more time passes with the stronger economy. you have a buffer pressure on rates. it's not at all happening. >> i'm shocked we haven't seen more definitive move above 3%. >> and alleviates the goal. >> thank you for hanging out, mike. >> becky is back that's great make sure you join us tomorrow "squawk on the street" begins now. ♪ >> that's a tough way to start out. good wednesday morning welcome to squa"squawk on the street." welcome to august! we start the month with dow futures slightly red but they have improved as adp employment beats expectations fed decision at 2:00 eastern
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time everyone watching apple's earnings tesla tonight. europe is weaker, and 10 year hits 3%. first time since june. our road map begins with the world's most valuable company. apple delivering a strong beat and sales outlook. shares are up premarket within striking distance of a trillion dollar market cap. tim cook is warning a significant risk of unintended consequences while the trump administration considers another 25% tariff and fed watch as the 10 year hits three investors looking for clues about what is next in the rate hike cycle but first up, apple is poised to open at a record high today. posting the best june quarter ever seeing solid demand for high-priced iphones while service revenue reaches an all time high. tim cook talked about the iphone 10 last night. >> it was the most popular iphone of the quarter, once
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again, with a customer satisfaction score of 98%, according to research. based on the latest data from ibc, iphone grew faster than the global smartphone market gaining share in many markets, including the u.s., china, canada, germany, australia, russia, mexico, and the middle east and africa. >> as for loyalty, tim cook told jim you can see from the asp that the flagship products are doing extremely well but right now our view is most economies in the world are doing well. maybe better in the aggregate than i've seen in a long time. we're bullish on the future. asp is up 20%. even though shipments up less than 1%. >> what is incredible think back to the face recognition 10 came out. $1,000 for a phone are you kidding me it turned out as tim explained
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to me and to josh, well, and also in the call, people pay for it so we'll offer at that price it's supply and demand the only thing they're making a mistake on the supply and demand on the air buds. they can't make them fast enough. >> people love the product. >> still the weird teardrops what is that >> i think it's morgan stanley said the watch is up 40. you include beats up 60. >> in the call they said up 60, i believe. >> we believe consumers consider those things incremental to their product or phone. >> yesterday was really a twilight of the idols and very much new faang the apple a proctor reports in the morning 1% organic growth. it has a 19 multiple there are many metrics apple uses this has a 17 multiple
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how is that possible the ultimate consumer product with a brand loyalty that is insane i don't know i used to use old spice the body soap and i switched to the fella. >> oh. club man. >> yeah. i check things off i've gotten -- >> you do? you go for that? >> it's everywhere. >> take the blades. >> i have a full closet full because i don't know how to stop it >> you don't check the box. >> i'll pay it i'll pay it. >> i stockpile away. i got the travel i got the shampoo. >> you're forgetting when it comes to this business, as well we have a $40 billion run rate services what kind of multiple do we put on that? we talk about it every quarter it grows every more every quarter. >> you have a business doing $50 billion. let's say $50 billion in 2019. >> right. >> you another business going to
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do similar math. one business is slowing from 40% to 20% growth. the other is accelerating. >> yeah. facebook. >> how about $500 billion? >> $500? ten times multiple on the revenues >> no i'm saying that's what facebook is right now. >> yeah. >> by the way, one of the cheapest shots i absolutely loved in the call and tim won't say it but, you know, they talk about we don't sell -- we don't sell your name to people it was such -- he's gotten better and better on the call. he's got a sense of humor now. and they got rid of the analysts that aren't that much fun. it was a fun call. is there anything that gives you concern? what could you pick at >> well, how about if we go to 25% on $200 billion worth of chinese goods and tariffs retaliatory? >> look, this is -- i would say
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it's an achilles heel for both when you have unemployment the way it's going up in china, we, of course, think, you know, you have a professional criticizing the president of the country he's not been assassinated you've got a groundswell of people out of work in china. and you shut down apple. you're shutting down one of the top employers. so be careful, china. >> cook did say they're evaluating potential tariffs and potential impact on the company. he talked about the consumer, too. listen. >> our view on tariffs is that they show up as a tax on the consumer and wind up resulting in lower economic growth and sometimes can bring about significant risk of unintended consequences. >> all that said, china up 19 in the quarter. >> yeah. china was very, very pertinent and i remember there was a time
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we expected -- when carl icann -- and that turned out to be he made a lot of money. i don't want to be too critical. >> >> that was a cheap shot. >> i have a lot coming my way. >> let's say that samsung, which is number one, let's say they decided, you know, we're going to -- >> waway is number three. >> let's give it for free because we want the ecosystem. that's the only way >>well, i'll give you another one which is years out which is when you get to real 5g so much of the computing power will be on the edge of the network that the device itself will no longer need to have a lot of expensive stuff in it. that's years away but it's something we'll probably start talking about at some point.
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what will it mean to margins or competition to device itself given so much of the functionality because of the lack of latentcy be a part of the network. >> one of the things we talked about with tim they don't develop their own apps they say we can do better than yahoo! finance it's going to be out it's no longer going to be the default. it's crazy good. so you're going to make it so this is no longer the fall out it's going to be apple's finance. they can do that through a lot of different things. >> we've seen it we've seen lots of other things, for sure as for trillion dollar market cap, we're going with 203.45 despite what you might have heard anywhere else. >> 203.45. >> that's based on an updated to the moment count of shares exactly. they keep buying it back
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even if you look at the end of the quarter what they had in the income statement wi, it may be fewer shares. >> howard has a list of top buybacks in the quarter. apple has one, two, three, four, and five on the list. >> if you look what they said about buy back to me and josh, they're in there every day they mentioned volume restrictions in other words, they would buy everything if they were allowed but the fcc doesn't let them when it's down, they stand there. they have an intelligent buy back it's not a robo buy back it's amazing that conference call and the stuff they told me, you left it and think, jeez, i remember when somebody else was saying the best is over but you're looking at the service stream and wondering how can it not get a higher multiple than clorox which reports soon. >> and a truly global surprise in every way
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that may hurt them on the trade front but it's a truly global enterprise and, i mean, it's sold really well everywhere else. >> when you get up in the morning and it's dark, the facial, you know, i gave it to my kid i like the 8, david. i don't have to look at it i plug in the numbers and see the phillies won and beat the red sox! it was 3-1 impressive just to point it out. >> yeah. i appreciate that. thank you. >> that took 10 minutes to get to. >> the love for this device is insane. >> we're going to watch apple, obviously. the story of the day we head into the first trading of august today with the dow and s&p coming off their best month since january. adp hit today 219,000 in july. that beats expectations that the fed will conclude the two-day meeting today with an interest decision at 2:00 eastern time. adp estimate was 185 we got june revised higher, jim.
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now the 10 year as you were talking about. >> i think to find the additional workers, you have to pay more people continue to tell me offline, yes, we are hiring parolees why? because they paid their dues they're available. there's no -- there used to be a lot more immigrants coming into the country. and, you know, these people count. for heaven's sake, if someone smoked pot in some state and then legalized how can they not get a job it's wrong i think that's how you pay up. so therefore, if you pay up, then you have to pay up in interest i think that matters. >> it's not just here, of course, the doj what has been going on in japan the last few nights in terms of them trying to control the yield curve and expanding it and the move up i mean, it's still incon -- contestable interest rates.
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>> i saw 4 -- what is -- 4.84. >> yeah. and i got it because we have an adjustable. and i said are we going to pay this this is going stratospheric. honestly everyone said there's no margin because the 10 year is where it is and the 30 year is where it is what the heck? how did they do that they did it because i was stupid enough not to pay it down. that's how they did it. >> when did it adjust? >> it just adjusted. i got the paper yesterday. so did the rest of america. >> refie is down 29%. >> yeah. >> okay. downsize dollar tree, david, is not about -- >> got it. kids, you can't plant dollar trees. [ laughter ]
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>> no. >> oh, okay. >> no, johnny apple seed. >> just making sure. >> we'll get our own ism number at the top of the hour china's private sector pmi was lowest in eight months new export orderers steepest drop in 25 months. >> what is navarro is saying we're crushing them. let's go for the jugular right now. let's not let them go -- it's like belichick you know, he's like belichick. he is. navarro. they'll be up by three and we've got them where we want them. let's put on a few more. >> that explains shanghai down 2%. >> he likes spying on adversaries, as well does he have cameras in the opposing locker room whatever it takes. >> oh malcolm x. >> there you go. malcolm x. >> any means necessary.
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>> that was russian? wasn't the name of the book? >> you're the russian expert here tell me. [overlapping speakers] >> i think i remember. >> so i just think there's just a lot of good today. >> you're worried about august/september being seasonally the weakest two months of the year. >> i know. but i do think, like, there's an early guest on this morning from brian's show and he's talking about some of these things are just beginning if you remember, like the banks when you see them get revalued up in the last ten days, and they'll keep going higher. the drug stocks have been reevaluated. pfizer the number is not that special. it went up big there's areas of the market that are reevaluated on a daily basis. the airlines last week. >> housing. >> yes and that makes me feel like, you know, don't be seasonal about
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this there's just a lot of people who don't want to sell here. a lot of people who indexed and they would never sell and buyers come in and market and you'll hit the stocks up and they'll have like 100,000 shares after the last hour. >> when it comes to russian history, i was wrong you were right what is to be done >> the quick 110 page book on how to take over. >> yeah. >> guys, we're going to get auto sales all day and kick things off with ford. we'll get to phil lebeau. >> these are great not numbers but not a huge surprise here ford reporting a decline of 3.1% sales. the estimate from edmonds.com is
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a decline of 1.5%. when you look at the fleet sales, the less attractive, the less rich sales you want, if you're an automaker, they were up 25.7% in july some of that is because of the relative to the customers. whether it's government, whether it's real rental whatever it might be that's not great in terms of a surge. overall it's the same story we've seen before. car sales down 27.7% 27.7%! nobody is buying sedans anymore. good thing they have trucks. up 10.2% back to you. >> we'll get back to you in a little bit. >> i'm devastated. devastating. >> yeah. the sedan is like functionally instinct in terms of production. >> i was thinking about yesterday and the fabulous piece phil was doing about the mustang. >> yeah. >> i went to lombard street and ran it the excitement is hot.
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>> we're going to get a look at that video a little bit later on today, as well when we return, trade tensions in the forefront the president said to be considering a 25% tariff on chinese goods. that did take a little wind out of the premarket as you can see, we worked our way back after ad p beat expectations take a look at the premarket now. looks to open up roughly flat. "squawk on the street" back in a moment alerts -- wouldn't you like one from the market when it might be time to buy or sell? with fidelity's real-time analytics, you'll get clear, actionable alerts about potential investment opportunities in real time. fidelity. open an account today. fidelity. ♪ ♪
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. it's hump day! as we like to say on "squawk on the street." about seven minutes to go before an opening bell. you know we haven't talked a lot about sprint since they announced the deal to get together with t-mobile and it's about whether they'll get the anti-trust approval. but the numbers are up. >> yeah. i think the stock would be higher, if it weren't for the c conversation sprint reports inflection in wireless service revenue typically an analyst say it. but here is the company calling it i'm bringing income of $815 million. net income of $176 million good growth. i've got to tell you, i mean, it's better than i thought it could be. >> is it >> yeah. and we had a conference call but total postpaid to ads up $23,000. >> if they were an independent company and going to remain one have the scale or the resources
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to truly compete. >> true. >> especially given how much debt they have. >> not even an issue. >> absolutely. so the deal is erg for them. >> yes interesting our colleague wrote a column yesterday about viewing in the different light saying, you know, maybe it will introduce more competition not less. >> we talked about that, too and it's fanciful to me. it's less. >> you think so? >> yeah. when you have to add these guys have that's the way you take over someone is cut your price. >> and you don't think a better finance competitor in the form of this combination versus verizon and at&t would not bring it to them when it comes to 5g >> i think these companies have the ability to expand to 5g. i think they can expand faster and better but i want 5g to be cheap. the way to do that the more the merrier for the consumer i'm never changing my view on
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the opening bell is sponsored by u.s. bank. the power of possible. we've talked for a long time about a race to a trillion dollar market cap. apple has a good shot at being first todays a its getting close to the price we're watching which is 203.45. interestingly the rates have been pretty tight among a few companies. >> yeah. i'm glad you put it like that. a lot of times i hear about these situations and i hear the race to be even more overvalued. the race to be able to say how badly this market will crater when people come to their senses then i look at the service revenue stream that is so big for apple, and i look at how the double digit growth in all sorts of countries i see it trades at much the low
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market multiple. and i say what is to be afraid of get to the key point what is an appropriate multiple for apple. whatever you say is going to trade below that, i would say. what is given the 31% growth rate in the services revenue denying $8 billion. >> okay. i have the answer to that. go over the proctor gamble call and we'll get the analysts and transfer one of them to consumer products tech division because without that, you'll never get a price earnings call. the analysts they are -- shannon ross i know i think that -- she's one of the people who gets to ask something. i do think that you can get a higher multiple if there were more people like she was you know, she's friendly and close. [ applause ] i think without that you won't get that market.
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>> watch apple and see how it moves the dow today [ opening bell ] there was a moment in the conference call that was devastating. they talked about how companies are letting people choose which pc they want we all know that we don't get to choose sales force allowed people to choose immediately thousands of people
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convert to apple but when you have one of these, like when you have an apple watch, this breeds selling of this which breeds selling of this because of the ecosystem i use these together all the time it's like i look at this and that's my wife, i'll call her back. >> not supposed to say that part out loud. >> that's true that's the inner musings as opposed to david when he says "let me take this call." >> i don't have the watch. >> you don't have the watch? >> no. as you know. i don't have the watch. >> i didn't know the preseason started. >> oh, my god. we're going there again? >> no. they went for two and they didn't get it! okay, never mind. >> it was only three years ago we were in the world series! >> what can i tell you >> apple is your best dow component followed by some financials, jim.
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jpm, goldman is in there, american express, and visa i guess looking at the curve today or at least -- >> these things -- you know, jamie dimon in the unbelievable interview david didn't play made it clear there's so many services if they can figure out how to tell a better story and make it into a service story that has the business of lending, we would be paying 17 times earnings just like we do for apple, david. >> all right sounds fine to me. that's all i got for you. >> okay. thank you for that. >> do we want to talk about the weakness we see in the nasdaq overall and whether apple will help or facebook turn around today, jim they found a bottom. [overlapping speakers] >> netflix is down again. >> facebookis buyers we haven't mentioned this story about google about alphabet and moving into china and breaking censorship. >> the intercept has a piece
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they were looking to launch a sensor search engine in china. right. >> it's down as if that is going to happen. and i remember, look, one of the reasons why alphabet had a higher multiple it's not a china story. if you throw in china that could mean a lot i think there's a bit of a zerosome at work with apple. microsoft is the enemy of apple. >> facebook, by the way, did unearth and remove a number of significant number of pages that may be related to russian efforts to influence our upcoming elections. >> by the way, elections were -- >> and, also, facebook launching some new tools that will allow you to monitor how long you've been on. send you reminders when you've hit a daily limit. turn off more notifications so you're not tempted to pick up your phone. >> they have to deal with the
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fact they're known as basically an outlaw now. outlaw organization, outlawed culture. every time you hear something they offer, you realize they were doing that to me? i have felt if you post something, you're pretty much, you know, evebuyer beware not everybody else, obviously. that's what happened last quarter. these are not gross margin enhancers. unlike apple, by the way, parts are coming down. flash memory will come down. you can have expanding gross margins. >> as a result of those prices coming down. >> yeah. there's been so much competition. >> yeah. >> and the digital quarter there's the flash memory which was the dominant memory in there. very important but this is going to come down so as the price goes up, and the actual parts go down. >> we got more even better. >> what? >> 41.3 million units shipped.
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>> yeah. >> that was up 1%, as we said. >> and yet shipments up 1 but iphone up 20. >> yeah. >> as you said charge $1,000 and make up for it. >> that's why i love josh. he pored down on that idea i think it's important people are willing to pay more and, you know, i talk about all these the watch is 65% growth. obviously they're underpricing the watch and underpricing the air buds those guys, i know they watch the show, you should be raising it air buds shouldn't be hard to find make more money. that's not what they think. >> we have a number of upgrades today. papa johns, drop box, auto zone not moving the names very much in any of those cases. >> it's interesting you mention these. auto zone we thought things would be more competitive. they're not. mainly we thought that amazon was going to come in and amazon, this is the new -- it's not a
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death star it's just maybe a star and then dropbox was a terrific piece by jeffreys talking about the stock has come full circle i think it will report a good quarter. the amazon what amazon is doing and what they're not doing they have so many opportunities. they don't have time to cross the auto parts companies. >> they're too busy in other areas. >> too busy. i'm not going to mess with some less developed country when they can go for the enchilada. >> right go where the money is. >> right. >> the banks, speaking of money. the banks up rather sharply this morning, as you might expect with a 10-year yield at 3% but they are responding, jim, as they often do, to the prospect for a better look, i guess, yield curve and as a result, of course, net interest margin. >> i did feel we were going to get away from that i thought we were going to value these in something other than the 10 year. when the companies reported the
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10 year was 2.9. going to 2.7 now we've got the opposite so people bid them up. i think it's a silly way to play it's a an algorithm, frankly. >> wells fargo up. >> i'm not diminishing that. make a lot more money with deflection i wish we wouldn't just say today it's worth x but if it goes down y. these companies are making a fortune. that was evident on the conference calls. >> we'll get tesla tonight estimated adjusted eps loss of 290. mike jackson saying he expects, obviously, some more red ink we'll watch production targets and then overnight elon responded to a story that david was going to let his lease expire and wrote tragic we'll send him a box of short shorts to comfort him through this difficult time. >> i saw that. >> that was kind of funny. >> it was. particularly because they're doing badly today.
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>> yeah. and he's maybe the worst hedge fund manager ever. >> right. >> that's subtle i'm down 18% this year. >> i'm not defending him i'm saying the words. >> all right you're right. >> i will take that back his performance is amongst the worst ever. >> okay. [ laughter ] >> right somehow he's still got money and a good amount of it. >> but, jim, you've always been agnostic on tesla. >> yeah. >> it's hard to discount what you call the consuult aspect. >> yeah. i got to see it over the last year, i've seen david blaine three times. i don't know how he sews his lips up and pulls out the jack of diamonds, which i was thinking about i don't know how elon musk sews his lips and pulls out $2 billion. and i think he's going to find a
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way. doctor oz snipped it last time i tied it. but i've got to tell you, i think elon is better david blaine is not for elon david blaine is a magician. >> how does he lfloat? >> it's an illusion. or is it magic >> i told him it was science fiction and he agreed with me. >> how does he do it >> i don't know. special powers. >> special powers and you believe elon musk can float himself? >> yeah. >> got it. speaking of cars, we got fiat chrysler numbers up 5.9 they've got a lot to handle, obviously, from the past week with the loss of marchionne. it was not a cheap version
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i mean, ferrari. they reported at the same time ferrari reported good numbers. you have to keep ferrari in the mix. but i really -- he was fabulous. >> yeah. here is a look today pandora 15 cent losses one cent narrower than expected i think up 10% premarket. >> yeah. >> 20% now. >> yeah. and now we're coming back. >> if you're on the apple call, you think that apple music will take over the world. i guess there's room for more. by the way, i was correctly evaluated in the first quarter and the stock was sold off i think that's a mistake. >> spotify 183 still well up from where it listed direct listed. >> did we get any numbers of apple music? did we get updated numbers
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we probably did. >> the number is extraordinary for apple music. and, you know, what happened is these are all accelerated. accelerated r accelerated revenue growth. >> apple pay they say live in 24 markets, 4,900 bank partners that become something we talk more about. >> yes particularly if you listen he said we're better than paypal. they mentioned harry's don't put harry's in your conference call. say a competitor don't say harry's. i'm going to sample harry's. >> yeah. i saw there was some discussion of what they said on the call regarding the amount of money they're able to save in advertising agency fees. >> right. >> they make huge changes to their marketing strategy. >> 70% is in china. >> yeah. >> and, by the way, i mean, you can't advertise that well in
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digital. i absolutely great numbers in china proctor. there's no way. >> right proctor and gamble now is what we're talking. >> yeah. there was a thing called marlbro friday. >> i do. >> they had some price cuts to everything and that friday was mentioned on the conference call. like are you going to do one of those for gillette which we know, these razors are so expensive now you don't buy the blades that's not the model. >> pretty muted overall action dow up 24 and s&p up almost five we'll get to bob to see what is moving on the floor. >> happy wednesday it's sort of a mixed open. what is important overall is faang and tech have stabilized look at the faang names. ample apple is leading here. stability in google, facebook, amazon right now that's a good sign overall. sectors and semis modestly for the upside not a lot of movers in the apple
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supply chain but not bad banks have been sluggish recently they're showing a little bit of leadership don't like the commodity action today. commodities are down around the world. energy we have oil bringing to the downside below $68 metals and mining stocks are generally to the downside. rio tinto cited higher raw material costs they're doing a big buy back as well as increasing the dividend. it's not helping there they're the biggest steel maker in the world had a positive look we'll have u.s. steel after the bell, by the way apple suppliers that you see up to the side a little bit not dramatically jabil down 3%. the buy backs we're talking
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20.8 billion in buy backs. apple is what i call buyback monster. you see methodical they are at buying back the stock? in 20136.5billion. the point is, that is a methodical buy back program there, folks and essentially apple has reduced the shares outstanding by 25% in the last five years. what that means is all other things being equal, and i stress that, all other things being equal, apple's earnings are 25% higher because of that buyback let me move on to big well known ipo. there's apple, of course new high for apple well known names trying to price tonight. one down here at the new york stock exchange
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tpg is the primary owner here. 45 million shares 16 to 18 we'll keep an eye on that. then we have well known speaker at the nasdaq. sonos. they'll price 13.9 major shareholders is kkr. kkr owns 22% of the company here and, of course, sonos is competing with apple which has, you know, its own system that is out there. we'll see how they do. by and large, big couple of weeks. we'll go into the august slump we're hitting the final wade now before we get into the prelabor day slump that officially happens with the ipo business. right now dow up 5 point -- 8 points with a modest open. back to you. >> thank you what a day in the bond pits. we'll check in with rick s santelli. >> a big day and it isn't over
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yet. look at the 24 hour chart of 10s. we're trading currently at 3.01. if you open the chart to early may, we haven't been at the 3% level since may. maybe the most important thing is why okay, above and beyond the fact that fed meeting and we seem to rise into it, by the way, the curve is steepening today. it's a global environment. the bunds are moving higher. almost 50 basis points highest yield since june looking at guilds. just shy of 140. highest yield since june and maybe the jgb. this is a chart the last time and this is just amazing the last time we traded all the way up to 13 basis points was january. early january of 2016. at least on a closing basis. and considering we're at three basis points not that many sessions ago it's a warning why should never
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use percentage changes when you're describing small interest rates. if you look at the dollar index, it has a little bit of a bounce today. it makes sense but considering it is a fed meeting, and a lot of things would be under the microscope maybe we'll hear about tariffs or some of the issues so the moving markets from the statement, we see the dollar index the last meeting 12 to 13th of june is sideways it moves up-and-down a lot on a closing basis, it's in a tight range. back to you. >> thank you very much, rick rick santelli. obviously, we're watching apple as it marches toward a trillion dollars in value right now, i think, close to $972 billion or so as for the rest of the market, though, being offset by some of the more trade worries dow up 8 and the s&p up 4.
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♪ time for jim and stop trading. >> we spoke last night, josh and i, i just want to read something he said to me in answer to a question i said how much are you buying back, how much cap he said there's only so much we can do on any given day. you know our trading volume is not that large every day we try to see when there's an opportunity and when we see a disconnect but he says the company is under valued at these levels, bottom line i said you guys should sell at every dip and say that it's over guess who buys it? this man is not standing around and buying 100,000 shares a day. >> he requecan outbuy you, any any month, any year.
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he's got more buying power than any other fund in the world. >> he has more divisions that anybody else >> you told me >> stalistalin >> remember anna carana, who said don't get laid down on the stock when it's going to 160 >> jim, what's tonight >> agco, this is important because a lot of people are worried about trade and farmers. martin richenhagen he said it very well >> as we watch this potential farm aid. >> and we can't get to mention chesapeake >> by we have to have a navarro
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white house reportedly considering hiking tariffs on chinese imports to 25% china is already vowing to retaliate. >> and kroger is launching a grocery delivery service but first, we do have economic data crossing the tape, let's get to rick santelli for the numbers. >> perfect timing, sarah, construction just hitting the wires, that's a june number, and a it's big miss, minus 1.1 actually much more, we were looking for up .3. last month almost makes up for all of it on its revision. .4 on its original release mov s s all the way up to 1.3. isi, the national number, 58.1, a bit of a miss as well. 58.1 is theweakest number only since april.
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the range for the year of course includes 60.8 in february, of course that was the best in 14 years. on the employment index, after abp being pretty solid, and the number on friday comes in on 56.5 that's a half percent higher actually moderated a bit 72.6 versus 76.8 so these numbers on ism headline okay, the internals a by weak, and construction saved the day to some extent but adp thus far was the shining highlight of the day >> rick santelli, interesting and important numberings there apple of course is the big story of the day, it hits an all-time
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high, on demand and services growth market cap inchi ining ever clo to a $1 trillion valuation will power, research analyst at r.w. bear. let's start with you, the overall narrative seems to be maybe don't count on a supercycle, but prices are making up for a less than absolutely stellar demand and of course services is propping all of this up from underneath how do you see it? >> i think that's a very fair assessment that apple is tracking for the third or fourth year flattened unit volumes. but they have nice asp increases and certainly that caught us all by surprise this quarter
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>> revenue guidance for the current quarter, how do you see their pricing strategy for the next fiscal year >> the apple isp strength is up for the third fiscal year. and the guidance allied any concern on that point. look, the cherry on top of the sunday is the power of the ecosystem that really shines in the services business, apple paid transactions, apple subscriptions. all those are moving in the right direction and we think that continues to power the stock from here. >> you think the stock goes higher as well and looking at a price target from you, maybe you're going to raise that, it's up 4.5% so we have surpassed that
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strength every time there's a bearish narrative, tim cook comes back with a report that proves everybody wrong and shows that this enormous company can still grow revenues by double digits what do you think about the valuation and whether wall street gets it >> that's a good question, i guess as far as the narrative goes, one thing we do have to keep in mind is that the asp trajectory for the next few years will not be as rosie as it did through the iphone x, from what we know about the impending cycle, it doesn't seem as if they're going to push that tier higher furthermore, from what we have gained, and what we have seen with demands is that we may be on the cusp, on the upper end of elasticity here. and apple may not be able -- i
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think we should be a little bit careful about extending that asp increased trend into the future. and that would suggest that apple's revenue growth would slow a little bit as we transition into the next product cycle. >> and we should point out, this is seasonally, historically not their strongest quarter. when we head into the fall, that's when a lot of these do take place how do you model that seasonality, with tariffs, at least greater demand in china? >> we haven't seen impact from tariffs at this point, and that remains to be seen there's no question that's a risk, a wild car, and also shipments to the u.s. and what it could mean there. i guess our hope is that cooler minds prevail and we don't see
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as much of an mpact. obviously something to pay attention to it only takes a tweet or two apparently >> on the trade front, jeff, which is the biggest risk for apple's profitability and sales. is it on the consumer demand in china, the great exposure, the fact that it's still growing double digits or is it on the production, supply side, and if this tariff goes through, this is a company that makes it's phones in china. >> i'm not sure that's a question that' easily answered because there seem volatility on what the tariff structure might be i may have effectively dodged that question a little bit and maybe i will retreat to saying that both the u.s. and china have a vested interest in keeping the iphone production
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volumes high, not interfering with that trade. certainly, obviously, we all love our phones here, and in china, there are millions of people that are either directly or indirectly affected by iphone production >> will, if i told you i had an independent company services business posted $9.5 billion in revenues growing 31% year over year, what kind of multiple you would put on it? >> hey, dave, that's a good question, right? i guess you're going to look at some of the big cap higher growth, internet names, albie b -- alibaba or google. that's quickly getting to $50 billion. how i would punctuate that
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point, we think another iphone is going to hit the market in 2019 >> they'll use apple tv, i guess, potentially as the distribution mechanism for the sfre streaming product that will compete with -- >> that would be the most seemless fit, just as apple hits the home pod these days. you know, we think this is a significant opportunity from them and they have made a number of announcements that content highers. >> finally, jeff, the gross margins led some to believe that
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they're not going to have to cut prices in order to chase units at the same time, h uaw e -- you think they need to cater from the low end or can they survive this upper atmosphere? >> let me first make an observation on the prior question i think we should be careful not to value apple services business as wholly independently of their unit business, because obviously it is people who on board into the apple ecosystem through new device sales, or through upgrades of their latest devices, are the ones that fuel in part the services growth. so the two things are not wholly independent. so let's be careful about that as far as a lower end phone for apple goes, yes, i do think that's important apple's unit volumes have been flattish for a number of years
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now, despite growth in the smart phone ecosystem. our analysis of what's happening is that people who leave their feature phones, say, in india, for example, will migrate first to a google phone and then move over to iphone i think it would be great if apple were able to grab some of that growth early on and therefore grow it's ecosystem a little bit faster than it has been >> we have never really gotten to buy backs and all that. next, guys >> a >> we'the trump administration reportedly planning to announce higher tariffs on china perhaps this week, china firing back vowing retaliation
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here's the very latest, kayla is it fair if that tax rate moves higher on the 2$200 billion worh of chinese imports. >> if you need proof that talks between the u.s. and china aren't going or progressing as well as perhaps investors might hope, all you have to do is look at this reuters report, that says that the administration is we considering raising the tariff level on that $200 billion worth of products, they would raise that to a 25% tariff from a 10% tariff it certainly has peaked the retaliatory interest of china. a spokesperson for the foreign ministry in china saying this about that move if it were to happen saying u.s. pressure and blackmail won't have an effect
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if the united states takes further further further escalatory steps -- it would certainly seem to signal that the administration is willing to escalate this in a way that would cause more collateral damage to consumers back in june when the administration first announced that it would be targeting these $200 billion in exports, peter navarro, when i asked him at a briefing how they were going to limit the affect on consumers, he said the fact that it will be a 10% tariff and not a 25% tariff is designed to blunt the affect on consumers or potential job losses so this would go beyond that estimate by the white house, and
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we'll see what they have to say about this and whether that news does come to fruition. >> because this is the list, kayla, that involves all sorts of consumer products that we buy from china, furniture and baseball gloves and food and fish and it's a long list of stuff, but it's stuff that directly will impact u.s. consumers? >> exa >> reporter: exactly, it's stuff that you find at the grocery store, the appliance store, the hardware store, things that people buy every day its seems the ustr is evaluating public comments and erieliminate any products >> thank you for the update outside the white house today. meantime, continuing to get
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auto sales from all sorts of makers today, toyota is out, let's go to fill fphil for that number >> these are not numbers to write home about, for july, toyota sales down 6%, that is 1% better than the expectation from edmonds.com. one note about toyota sales. as gas prices have moved higher in the last six months, a lot of people are saying, this is where you're going to see hybrid sales up, like the prius example prius sales up 5.2%. which is far less than what we saw a decade and a half ago. we are on fed watch today as the fomc is coming to a close. where are we headed? plus growinger ship, the
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coun largest grocer is starting a delivery service more "squawk on the street," back in a minute, don't go away. jimmy's gotten used to his whole room smelling like sweaty odors. yup, he's gone noseblind. he thinks it smells fine, but his mom smells this... luckily for all your hard-to-wash fabrics... ...there's febreze fabric refresher. febreze doesn't just mask, it eliminates odors you've... ...gone noseblind to.
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this after we await the federal reserve's rate hike decision later on today we have steve liesman and chief equity strategist jonathan golen. i guess we expect no new economic forecast. >> the fed basically wants to get out of this meeting holding intact the general market forecast that they're going to raise in september there's no hike at this meeting. the fed hike will likely be in september. and a pretty good possibility for december i'm going to be watching out the december probability and of course now the 10-year now, and the 2-year as well do they sort of make it seem like december is more baked in or less baked in june 19 is the next place where we get over the 50% probability
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of that hike so you do a quarter in september, a quarter in december, and then the next quarter comes in june, it's been sort of a june-may thing i think it's a little early yet, but to start to think about how all this affects the 2019 outlook for fed hikes. >> jonathan, two hikes this year, is that already baked in, and is there anything the fed could put in their report today that would affect the markets. >> the september is a done deal and the discussion around the fed today is what happens in june i think what you're going to hear from the fed is that the economy is really, really strong and you're starting to see upward drift on inflation, whether they become a little bit more hawkish in their tone but the underlying data is that show should -- that's probably the most important thing
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when you have seen interest rates rise over the last month or so. the stock market is continuing to do really well. >> so we can tolerate higher rates. >> i would like to look at where on the 10-year bond yield could go before you have a problem, i think 3.5% on the 10-year before you have a problem but the yield curve is something we're going to be increasingly looking at, whether it steepened or flattens. >> what do you mean by a problem? >> once you get past a certain interest rate, companies have a hard time financing, and people have to take money out of their homes. so when rates are really low, the rising rates say the economy is great but too much of a good thing isn't good yeah, but it's harder to finance your home and your business. and the next 50 basis points, which i don't think we get there
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for another six months, but it's still a positive factor for the market >> does the 3% level on the 10-year matter >> as we reported at the last meeting, there was a paper presented that said that the fed should look less at the 2-year spread there's no magic in this 2-yea spread the idea is when the outlook for fed rates are higher, the market expects better growth, when it's lower, the market expects a recession. so i don't know how much that whole idea has sunk in throughout the federal reserve board. i think the fed chairman thinks about that idea, that maybe the 2-10 spread is not the one to watch or the one to worry about inverting. i know bos trtick from bhoft --
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statement, you've got 4.1 gdp in the second quarter, forecasts hovering around 4% in the third quarter. a adp report talked about 200,000 plus jobs, that's above what the fed believes potential is i think there are so many things that lock the fed in to thinking it ought to raise rates that the 2-10 curve they be, sixth, seventh or eighth down the line. >> there's also this idea that whatever's happening in the rest of the world is impacting our bond market. there was more drama in the japanese bond market, yields there shot up. i like how the journal calls japan the spiritual home of low interest rates and this has an effect on our
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bond market. >> the reason the curve is the way it is, is that japanese yields and the german yields -- even if the fed inverts the curve, and i think steve raises a really good point. if you look at the 3-month-10-year, it's telling you that everything is healthy so on one hand everyone knows this is not giving you a doomsday outlook on the other hand, if investors have been trained to see the 2-10 and at least sef self-fulfilliself-fulling >> somewhere between a little over year and a little over three years is when things go bad. so you have some time, and when
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you watch the curve invert in '97, '98, and if you would have gotten out of the market, you would have gone up 50% in the market it's a signal, but you got too be careful about it. >> our thanks to jonathan and steve, as we count down to the fed decision let's take a look at shares of pandora, up 21%, although it takes you back just a few days ago, as it reports a beat on the top and bottom line. it now has about 6 million pandora premium subscribers. dow is up 33 as we get up session highs, back in a moment. exactly. so i started trading. but with everything out there, how do you know what to buy? well, i think my friend victor has just the thing for you. check this out, td ameritrade makes it easier to find the investments that might be right for you.
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slk, that's the technology sector and health care, first of all, the lesson of this chart is that there's not a zero sum game both have outperformed the s&p as a whole on a year to year basis. on the very right-hand side, you see that sharp lower in the line, that's the tech sector while health care has continued to march higher. there's been some preference of people who have been shaken out of technology. still kind of a growthy sector it's not all that cyclicly gears to what's going on in the economy as a whole 10% is johnson & johnson so i guess the partial answer to the question is if those handful of huge stocks in the nasdaq and the technology sector can't carry things for a while, what's
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the market's answer? again, health care would be one of them. i don't think it would be a unique, perfect handoff, but 14% of the s&p is health care, once the s&p takes away from technology, it's basically going to be neck and neck with financials and the technology sectors. >> stock prices versus some of the complaints about social media. >> which had held back a lot of the bigger companies in health care, but even like big pharma stocks seem to be struggling as well >> thanks, mike. let's get to sue herrera and get an update this hour. here's what's happening at this hour, we begin with 55 cases containing the remains of
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american troops from the korean war, they were transferred on to a plane bound for hawaii this at a repatriation ceremony at a hawaiian air base and vice president pence arriving in hawaii for that ceremony marking the arrival of the war remains. pence is the son of a korean war veteran. police say thieves have stolen priceless treasures from the royal regala here at home, firefighters continue to battle the mendocino fire evacuation orders have been
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issued for 4,700 people in the lake port area we are watching oil prices recouping some of the losses, this is an interesting inventory report from the eia, we actually saw an increase in inventories, 8 million barrels of crude when we were expecting a decrease of about the same this is the time of year where you would typically see draws, to see a build at this time of year, but we did hit a low close to 67. apple trying to climb above $200 as we close in on that $1 trillion market cap, "squawk on the street" continues in a minute
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welcome back to "squawk on the street." live as always from post nine of the stock exchange let's look at where we stand, higher across the board. dow is up 50 points, s&p up about 7. and nasdaq up more than .6%. s&p technology index is the best performing right now in the market a bit of a change. things stabilized yesterday, but before that a 10% slide in three sessions apple hits a high as it gets set to be the first company to have a $1 trillion market cap. >> so let's start with one big notable number in and apple's
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report the average selling price per iphone came in at a stronger than expected $64. thanks to the popularity of the 8, 10 and 10 plus. took said i think you can price things to what their value is. and the iphone has become a part of people's lives. i think there are quite a lot of customers that view the phone as an important enough part of their life to pay that $1,000 price. cook talked about the momentum in the apple app store >> apple pay went over $1 billion for at least quarter with growth accelerating for market quarter so to put that tremendous growth
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into perspective, this past month we created more total transactions than square and more online transactions such as pay-pal. >> took said there he's not fan of tariffs, saying they're passed on to the consumer. took said that trump listened to him. he said there's a whole host of things that have different views on he says to date, apple products have had no impact from the tariffs. >> as apple closes in on that trillion dollar market value, google may still be the better investment is apple 1's founding partner
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dan niles. on apple's stock price, did apple just lay the ground work to become a trillion dollar company and sustain itself that way? >> apple is a well known name. i'm sure a lot of us talking here have apple iphones. it's a very easy stock that investors want to buy. one of the issues with apple is that multiples are actually getting pretty high at this point. if you look at it on a trailing basis is, if you go back to 2015, it was closer to about 11. so a lot of this move up in the stock is valuation based and as we saw in the last few weeks, that value wagations can go down quickly. >> it's not high when you compare it to other -- as david
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mentioned services business, or other consumer businesses with proctor and gamble, trading at a higher multiple and gaining 1% organic revenues. >> that's true, but what you have to think about is what drives the services revenue? about half of it is driven by iphone units the asps are up a lot year over year, which is the highest year over year basis in several years. but eventually it's things like warranties, and apple care, app store obviously driven by the number of people using the phone. so what you did see this quarter even with services growing very nicely, you saw the 30% growth in march, and the 28% in june, i think you'll see that decelerate being forward, apple struck a e
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neo search deal back in 2014, but it's really helped apple because google has had to pay more but that's going to benefit us going forward. don't forget that the units they sell is up 14% if you look at apple itself, and the units are down pretty significantly, relatively 2015 as well. so that's something that's going to affect you as you look out in time, and services for the fact that they're growing well, still is not a huge percentage of revenue revenues it's about 25% when you combine it with others, an 18% stand alone. >> we did get a tick above $200 which some people were looking
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for. but with 1.2 devices installed isn't there a bed for services >> maybe tim cook's right and prices don't matter and we can keep pushing the prices for these phones above $700. i just find that hard to believe because the growth is really coming from international markets where people don't make as much money as they do in the u.s. or in india or china. i think this holiday season we'll find out i think it's really hard to push phones under over $1,000 when it's emerging markets that have 1/5 of the income we have here >> and just that buy back, and that almost seemingly endless
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amount they're putting in it to stabilize the stock. >> that's probably the biggest thing with apple is that they do have an enormous buy back, obviously having high profile investors like warren buffett buying into the stock has made people more comfortable with it. you have a market where you're selling $1.5 billiing 1.5 billi year apple may be able to get back into china, that's a huge market for them and if the tariff situation gets worse, we'll see what happens with china and the iphones that are sold there so that's a risk with google, they don't have any business in china, so that's something else i think you need to think about which is is tariff situation at least with china does not seem to be any better and that's something that you have to put into your analysis of risk versus reward
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here and i think that's something to keep in mind as we go through the rest of this year. that's another piece of that that we're watching. >> cook addressed it on the conference call yesterday, saying tariffs could have unintended consequences. dan, thank you for calling in. when we come back, kroger looking to take on amazon and walmart, the largest chain in the u.s. launching a new delivery service called kroger ship apple did cross 200 and the dow is up 56
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let's get ever to the cme group. >> i would like to introduce my guest ceo and fed president. and more to the point, the most senior fellow. and william poole, let people choose their behavior and things will work out is not very fond of tariffs bill, why don't you start out telling me why you think we're going down the wrong path with trying to use tariffs to create a more fair trading landscape? >> good to be with you this tariff program is unforeseen and unintended consequences are made of us. every business that goes to china, goes volunteer tearily. the people's republic of china does not kidnap ceos and throw
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them in jail until they accept china's currents there must be an overwhelming bias towards accepting voluntary transactions in our economy. in a competitive world, a voluntary exchange, the trump tariff will scramble long standing tariff relationships? and for what purpose china will view america as an unreliable trading partner >> i understand and believe me, any time you try to change in a world packed tight with leverage, there may be some pain, may be some gain, but always differences is it really voluntary for
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corporations like ge years ago to share technology, was it voluntary or was it coerced by circumstance >> rick, you should talk to the. i will tell you that it is voluntary. that is my opinion, it is voluntary. >> now we can debate that, but the real issue here is, bill, this gentleman was elected president and this was one of his platforms. i guess what i'm getting at is do you see any light possibilities at the end of the tu tunnel could any of the unintended situations be to the up side or not? >> the purpose of this program is domestic politics that's what's going on and if you don't keep that in your front burner, on your front burner, then you're missing the point of the program
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hard to take your eyes off of apple this is closing in on 6% gain, above 200. adding 75 points to the dow. a reminder technical l above 200 before it split 7 for 1 in 2014. obviously today's price would be closer to 1400 under that old system >> as we watch the trillion dollar mark inching ever closer in terms of market value we'll keep our eyes on apple all day long we're watching shares of kroger. launching a new grocery delivery service. called kroger ship it's the grocer's fourth ecommerce attempt in less than three months
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the company loves to take on big competitors in the space amazon with acquisition of whole foods and walmart. grocer said it's developing the service inhouse. topping vitacost.com kroger acquired it back in 2014. this is part of kroger's four part strategy. stores, pick up, delivery and shipping online. i did have a chance to talk to the chief digital officer over at kroger about this effort, long time software engineer. they are obviously not standing still. only 2% of the $800 billion grocery market in this country is online. the next five years are going to be critical, because the growth is projected to be around 20% of the overall market shifting online, and it's up for grabs. it's going to be a three way fight between walmart, amenazon
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which owns whole foods and kroger who thinks it has advantage at it by going through acquisitions and by having the biggest store count, a physical grocery location >> 2% includes all mom and pop >> it shows you how small of a piece of it actually has shifted online most people go to their grocery stores those habits are rapidly changing, and the point was made kroger is growing even faster than that in terms of the digital shift online all about collecting data on customer habits, what you want and exposing them. if you're prone to buying gluten-free kroger wants to make sure every time you pull up that site you'll get gluten-free. it's only in four markets but trying to rapidly expand as the online grocery war heats up. there's no winner because we're
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so early >> they are aggressive giving everything a shot they are not sitting down. this started way before the kroger acquisition of whole foods. speaking of food i think we should mention the news on campbell soups "wall street journal report"ing hedge fund third point built a more than $300 million stake in the food company amounting to 2.5% of campbell stock dan loeb spoke to campbell's ceo. it is ongoing. they are looking at options. no matter how much of a stake he acquires not going to be as big as the doran family. >> loeb has been in there. we thought he would file early te termination. they are looking at every option but whether or not the doran
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family will consider a sale is the key question i don't have an answer and dan doesn't have an answer either. we don't know. you could imagine there would be a number of buyers that would be interested without a doubt if they were actually really putting the company up for auction. that's very much unknown at this point. they got to get a new ceo, they got a lot of other things to look at. >> and turn around the business and dealing with steel and aluminum tariffs the other question is how much success is he having at nestle >> not as much as he would like. >> coming up later today on the closing bell this will be another exciting one tesla getting set to report results after today. amc reporting a beat on the top and bottom line. movie theater operator reporting a record quarter we'll talk to the ceo adam aron. should be interesting because of their chinese ownership. do they get caught up in a trade
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war. >> knows a bunch of industries having been through. when we come back apple all morning long closing in on a trillion market market cap 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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