live from new york where business never sleeps, this is "squawk box. good morning, everybody. welcome to "squawk box" here on cnbc live from the nasdaq market site in times square i'm becky quick along with andrew ross sorkin and wilfred frost. joe is out today also joining us for the hour is michelle girard from natwest markets. let's talk about the u.s. markets. looks like there's rough sledding this morning. dow futures down by 182 points s&p off by 19. nasdaq down by 58. this is coming as we saw some weakness that started overnight in asia and spread through to europe a lot of people are saying this is because of the trade issues we knew about the heightened tariffs yesterday. you didn't see much of an impact yesterday. the dow was down by 80 points. s&p off by a couple points we have seen things ratchet up

overnight. china making comments like it's fully prepared for the u.s. threat to escalate the trade war. the mecommerce ministry there saying that china would have to retaliate. >> a big effect in the after-hours trade. >> you know where i learned about it >> where >> on a show called "closing bell." >> there you go. exactly at 4:30. >> i was watching. >> good to hear. >> just wanted to plug it. >> i'm grateful. >> let's look at what happened overnight in asia. you'll see that really a lot of the damage began there you'll see what was happening for the nikkei and for some of the chinese markets, that there was some extreme weakness. biggest moves coming for both the hang seng and shanghai composite. hang seng down by 2.2% shanghai off by 2% nikkei also feeling pain with the markets in japan down by 1%.

in europe where the markets are already open, you are seeing trading now, again down across the board. the biggest decliner being the dax, had was down by 1. 5% ftse bigger declines in italy and spain. the ten-year is yielding 2.98% we touched above 3% yesterday. sonos pricing its public offering at $15 a share, that's below the expected range of $17 to $19 we will hear from the ceo at 8:30 a.m >> i'm a fan of the product, i don't know about the ipo >> it's a 14-year-old company. >> right >> yet it still makes a loss

it used to make a profit i think last year was 2013 it's odd to be able to ipo making a loss 14 years after you started. but we'll discuss that >> we'll discuss that and why. i think i know the explanation tesla rolling out results posting a wider than expected loss in the second quarter but beating on the top line. the big story, elon musk's profitability pledge on the conference call, and you can see the stock now, it's up about 8%. this is the most shorted of all the stocks out there phil lebeau has more >> if you are bullish on tesla, this call and the second quarter, just about everything you could hope for from this company given the downplayed expectations that were out there. here are the three things that moved this stock after hours last night the cash burn came in lower than expected

about 7$739 million the liquidity better than expected they ended the quarter with about 2$2.2 billion of cash on hand musk's outlook for the third and fourth quarter profitable, not only that, here he is on the conference call talking about how the company in his opinion will be profitable going forward. >> provided the economy is roughly where it is today or reasonably good, there's not a big push, i feel comfortable achieving a gaap income positive and cash positive every quarter here on. the other story was the demeanor of elon musk. remember, after the first quarter he was prickly, he was rude, he was throwing it back in the face of analysts, not the case last night. in fact he apologize ed d toaly

off. >> i would like to apologize for being impolite on the last call. it was not right i hope you accept my apologies >> as you look at shares of tesla, they got a nice pop after the earnings came out last night. they are expected to move higher today. they do not plan to raise capital. they were asked a number of times, elon musk said we done need to. they also said there is no s.e.c. wells notice that is precluding them from raising capital if they need to. they still expect to sell potentially close to 1 million vehicles by the year 2020. let's be honest, they have not started up that plant in shanghai, they likely will not have it built by 2020. so the odds of them getting close tomi1 million vehicles is not likely

elon said if we get over 500,000, that would be more realistic. >> i saw a couple of comments that suggested elon musk sounded tired, exhausted even. >> he was subdued. he was definitely subdued. >> not to a worrying level >> no. given the number of times i've interviewed him in different settings and environments, it's not like i would call a doctor up and say what's going on with this guy he was subdued for elon musk let's be honest -- >> that's what they were looking for, right >> the audio on these calls is never really good. so that compounded the impression, if you will, that oh, elon musk was tired. i think, you know, subdued would be the proper way of saying what he sounded like. >> just more on this note. oppenheimer came out and upgraded tesla in the last couple of minutes.

upgrading them to outperform looking for a price target of $385 they said they were cautious on the model 3 ramp. okay phil, thank you for that we want to bring in james albertein. you listened to the call you have seen the numbers. do you believe this company will be profitable by the end of this year >> good morning. thanks for having me i do i absolutely think the model 3 ramp ahead of schedule i know they guided to 5,000 per week by the end of qush2. they hit their bogey there we do believe the model 3 and the vertical integration they've been investing all this cash into the last few years makes for higher yields for a lot of the small nook and cranny parts and lower costs on those parts

even at 35,000, $40,000 we think this vehicle is profitable but they're far clear of that. the average selling price we think will be 50,000 as we look ahead to q3 and q4. >> do you think there's a moment they need to go raise additional capital? >> we've been saying the answer is yes we believe it would make sense for them to raise capital on the heels of the momentum they've generated here if they are profitable and the model 3 ramp is going very well on its way to 10,000 units per week, why not raise capital forever tfor the model y, the china giga factory. they continue to believe they can self-fund their growth from here we do speculate that they likely will, but they're resisting the answer to that question. >> how much do you think the withering criticism from short-sellers, disbelievers and

others has been on this company? it's almost a daily -- hourly thing, go on twitter and also you're seeing elon musk himself responding on twitter. as an investor, how concerned are you that he has engaged in all of this >> i would say it makes me uncomfortable. if you don't like what you hear from tesla, wait an hour is sort of the joke. we sit with other guests you have on the msnbc side that talk about trump's tweeting we have a similar issue here with elon. we think he should quite frankly stay out of anything that is non-business related even most of the business-related communications, we think, some tend to go too far. that being said, to this point tesla doesn't spend anything in advertising. they have one of the most formidable brands in the auto industry globally. so tweeting has been helping him, i think, helping the firm

over time. but certainly he's taken that to an extreme we're uncomfortable with some of the non-business related tweets he's engaged in. >> going back to the capital raise. you sound supportive of that idea to what extent would that be hard for musk and tesla to sell to the market and those short sellers? would it not come across as a weak thing to be doing what's your latest thoughts on the cash position? >> first, we're tracking at 2.5 billion capex for the year when we started the year the view was it would be flat to 3. billion. we're a billion lower on a capex run rate as far as we know, we're tracking well on the model 3 production ramp. when you put those two things together, we see cash flow positive and potentially

positive results in 3q and 4q if they can prove out the profitabilities of the model 3, they are in good shape to go back to the market and ask for funds to use towards the model y, the crossover utility version of the 3, and to build in china. >> i wanted to ask you about that the build into china, is there any reason to be concerned as we look ahead to the effects of if these tariffs go into effect that the impact on china and the slowdown potentially that might be seen, is that something we should be thinking about as a risk >> i think for all auto manufacturers it's absolutely a risk it will be several years before they can build up enough volume to support the market demand in china. also the offset -- china is building basically from scratch, it will center around evs. i can't think of a company that's more well positioned over

the long-term. the question came up yesterday, can an electric ferrari be considered a ferrari i think traditional manufacturers have bigger concerns down the road with respectr respect to licensing, permitting in markets like china, the uk and eu from that perspective there's an offset here we need to consider. >> jamie, we have to wrap up what do you think the value of tesla is what do you think the intrinsic value of this company is >> no company has this kind of growth investors are supportive of that growth that's why the valuation discussion means very little at this stage we think if you fast forward to a more steady state production rate, that gets to you about $12 a share. they trade at $385 per share

today on that discounted value, 14 times, 15 times ebita still significantly higher than most auto companies, but they'll have substantial growth opportunities ahead at that point. >> appreciate it >> thank you earnings just out from dow dupont they were at 24.24 a billion versus the estimate of 23.597. the stock is up about a percent or so in the premarket >> the cfo there making some comments, talking about how broad-based consumer strength continues to drive economic expansion and the underlying business growth. if you're looking for broad clues about what it may signal for the economy, they see consumer strength. barclays second quarter

pretax profits soaring after avoiding heavy restruck surestrn legal kocosts. jes staley sfopoke it our colleagues in london >> we're really clear of all the major impediments. there's no major litigation issue hanging over us. there's no more cost to achieve. no more noncore. there's no more restructuring costs. this is one of the first clean quarters for barclays. >> barkleys also hiking its dividend the shares are falling this morning, down by 1.4%. analysts say the improvement was more about fewer fines and charges than higher income >> also a bit of a surprise extra tax charge, but overall i think people are encouraged both on the uk side and international side, this is a clean quarter. the question is can he continue for a full year like that. >> let's look at square.

second quarter profit topping estimates. revenues from lending doubled, but the company issued third quarter guidance that was weaker than expected. that stock down 1.2% t-mobile added more wireless customers in the second quarter than wall street expected. the ceo says he's confident regulators will approve the deal to merge with sprint without conditions that stock up by 1%. starbucks teaming up with alibaba to expand its delivery service in china starbucks ceo kevin johnson confirmed the deal in an interview with our own jim cramer jim pressed johnson on the deal and asked how it fits into the company's growth man plans in china. >> let's say you're a shareholder of starbucks you have seen the starbucks trajectory in china go from high single digits to mid, to low, to minus 2. can we listen to this

announcement and presume you can get back on a trajectory of positive same-store sale numbers in china >> i'll remind you in china last quarter we posted a 17% top line growth most of the growth of transactions in china is coming from the new store growth. yes, we did have a negative 2% same-store sales comp last quarter. but, you know, if i look at what we're doing with alibaba and the digital flywheel, this is like rocket fuel for the digital flywheel in china. this will be an accelerator for our business no doubt >> you can hear more from jim's interview with kevin johnson later today on "squawk on the street." >> this will be interesting. it's the same-store sales number that has so bedevilled them. this will be something that you can't count on same-store sales. this will be a different way to track and see how it happens we are also trying to see if there's signals of chinese nationalism, trying to find out if american brands are on the decline. hard to say that

>> the starbucks story, it's one of the few companies that seems to have almost a special license, if you will, inside china. i have always -- >> like inthe -- it's near the great wall, near some places you would not anticipate >> but also the -- truly only american branded company, at least the first one, that actually did business in china without a partner. they spent so much money and energy working with employees. the relationship that starbucks has with the government in china is at a different level, i would suggest, than most other companies. cbs hiring a pair of heavy hitters to investigate sexual misconduct ail vagllegations of moonves. the company's board says mary jo

white and nancy kestenbaum will lead that investigation. mary jo white is the former chair of the s.e.c cbs says mr. moonves will have no role in the probe cbs will release its latest quarterly results after the bell and much discussion about the fact that mr. moonves is expected to be on the call >> yes a lot of people will be on that call hearing what he has to say about this, the redstone family, viacom >> we had an analyst on -- we had an analyst on yesterday who said he was more focused on the numbers, guidance, not all this media speculation. >> are you kidding >> yeah. i think this could be him coming out with a loud and clear defense to say he plans to be here no matter what. >> the numbers are like a side show it's the past quarter. >> i can't believe this analyst represents all analysts views. we'll listen to that call.

when we come back, the latest tv show reboot. we'll tell you about a furry friend from the '80s who may be making a comeback. i bet i know who it is. and if you're traveling to austria, we'll tell you why you might want to skip the train and rent a car "squawk box" will be right back. wednesday august 8th,

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. welcome back you're watching "squawk box" live from the nasdaq market site in times square. welcome back to "squawk box. among the stories front and center, president trump instructing his top trade representative to look into slapping a 25% tariff on 2$200 billion worth of chinese imports, that's up from a proposed 10% tariff. that is pushing shares lower this morning also look at shares of tesla. they are popping on the other end following a conness frferenl from elon musk musk saying they will be profitable every quarter going

forward. they also produced 5,000 model 3 sedans per week. more on that conference call at the top of the hour. the tesla shorts are feeling it >> an update on the race to the $1 trillion market cap apple needs to hit a share price just above $207.04 to hit the milestone. the surge in apple's stock price yesterday gave them a considerable lead over amazon and alphabet in the market cap race a silly race, but we all like it. >> we've been waiting for so many years >> just watching a company where you have the "t" rather than the "b." >> it's an arbitrary target, but it is interesting. a look at u.s. equity futures. shares looking like they'll open lower, in large part because of some of the rhetoric and commentary we heard from the administration yesterday dow off by 186 points.

naz back losdaq looking to open points lower we should tell you about this, cigna just out with quarterly numbers. earnings of $3.83 a share. that was above estimates of $3.33. cigna raising its full-year earnings outlook they were helped by membership and premium increases. cigna was also in the news yesterday when carl icahn took a stake in cigna we are counting down to the big jobs report. joining us now to talk about that and more is the market strategist and head of america's asset allocation at ubs. and our guest host today, michelle gerard from natwest markets. jason, putting it back to what we're seeing this morning, more of a selloff even though a lot

of this about the stepped up tariffs was telegraphed yesterday. what do you think is happening >> i think we've seen the markets discount escalating trade concerns, especially after last week after we got positive news from the eu looks like there could be progress on nafta. i think people put it to the back burner. getting this announcement going from 10% to 25% reminds people that this is still not resolved. all the focus is on china now. i view this as they're trying to get the chinese to offer concessi concessions. you go from 10% to 25%, you don't just hurt the chinese, you hurt the economy so it seems to me they're saying, please, we don't want to do this, but we'll have to if you don't come to the table. if we look at this idea of ending trade battling and skirmishes we've seen with canada, with mexico, with the eu, focusing on china.

that's something that people have said they would rather see happen >> get everyone on board, take off things like auto tariffs, which would have probably been more harmful or the u.s. economy. the issue of xhichina, it's a long-term story. it's not going away. it's boater to have a united front of dealing with china. >> how much of an impact does this have on the economy right now? >> i don't think we're seeing broad based evidence of it in the numbers. we're watching all the sentiment gauges, all of the company and ceo comments that up certainty is causing them to take more of a measured approach, particularly when it comes to capex spending we're seeing strong demand momentum heading into the third quarter looks good to date i think people are hopeful that a lot of this will

end up being more bark than bite, and that this will not -- even looking further ahead, looking at the eu last week, that we end up potentially in the longer run in a better place, which is what i think the president and the administration are hoping for >> if you see 25% tariffs on this additional 200 billion, you would expect that to pop up in prices at walmart and target >> absolutely. more for me than the 25% versus the 10% is the breadth of it with the first round of tariffs against china, they went out of their way, of course, to exclude products that would impact the consumer when you start broadening out and you talk about 200 billion, you have to have a number of consumer products. whether it's 0 10% or 25%, the consumer will feel it. i think the bigger impact is on inflation rather than growth

that's something we see even looking at fixed income markets. >> jason, the other big thing of note was the bond market the fed meeting was a flaun event. we did cross 3% on the ten-year. is that an important level you think we can break out from and move higher or will we stay in that range >> going back to february and march, the ten-year has been between 2.7 and 3.1% it's likely to stay in that range. a lot of the move seems technically related. >> how come this is not for real, moving above 3% and staying there. the economy looks strong and we've gotten great numbers, why wouldn't we stay above 3%? >> the range is drifting higher, and that's likely to continue. we may go up to 3.2, if you get other central banks showing they'll dial back. it's been foreign bond yields more than anything else holding the ten-year down. >> if the bank of japan comes through -- >> that's the big one. when we talk about the move in

ten-year yields, i don't think we can underestimate the impacted of the boj making a switch or beginning to look like they're turning. that is a very significant factor that we're seeing and having a lot of discussions about. >> does the bank of england hike today have much effect over here >> no does it spark anything from the eurozone? >> i don't think so. i think the focus -- we had the fed yesterday, boe today, both of those are clearly defined the boe is moving slowly broadly expected in the last week the shift in the boj posture is really garnering attention. going back and looking at the performance of u.s. treasuries is closely linked to the performance of -- >> this is important some people thought that signal was maybe overplayed that we were looking too much into it?

>> no, we think it's a significant move you look at it, they tried the forwa forward guidance being introduced to mitigate the impact in our view this is the beginning of a shift, a scaling back, and there will be ultimately as we look ahead on the margin, this will not be a positive for u.s. treasuries you had said the low global rates have been a big factor helping to anchor u.s. treasury yields >> there's also a point where we've gone from q eshg, ae, and end of this year, you have qt globally so we're at a clear inflection point with central bank policy when i think about the cycle evolving, it's about monetary policy getting tighter and the fed leading the way. >> and the question becomes is there a point where interest rates look more attractive than stocks for so long you weren't going to be getting anything. >> right now that's not the

case guidance has gone up so concern about is this hitting profit -- >> so valuations have been -- >> valuations are good equities should do well. that rotation shouldn't take place yet. there will be a point where if you get to 3.5 on the ten-year, the economy looks like it will slow, then think about the rotation >> let's talk about the number tomorrow the jobs michelle, what do you think that number will be >> we're at 185. every month i seem to be lower than i should be in terms of the underlying tlends lo trends loo. we had a great adp number yesterday. the whisper number going in i suspect will have a 2 handle >> jason, the market still wants to see good news it's not a situation where we want it too hot. >> you want to keep it warm, not too hot. i think the focus will be more on the hourly wages than the number we will get 200 in the ballpark. it's really more about the

inflation story. >> jason, thank you. >> sure. more coming up on "squawk box. we will get you ready for today's big ipo at the nasdaq. wireless speaker company sonos and don't miss our interview with the company's ceo, that will happen at 8:00 a.m. eastern time we'll look closer at casino stocks, some of the biggest movers this morning. stay edtuned. t right our bond is fraying. how do we get back to "us"? the y fills the gaps. and bridges our divides. donate to your local y today. because where there's a y, there's an us.

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welcome back sonos about to make its public debut. we'll have the ceo in a bit at 8:00 leslie picker has more on the sonos pricing. good morning >> slightly less demand than they were expecting with this deal sonos pricing its initial public offering $2 below the range it had been marketing to investors. that puts the size at slightly more than 2$200 million at $15 per share the debut valuation is 1$1.5 billion, abou half the value the "wall street journal" said in late april it was targeting.

early investors like kkr sold on the deal which can signal to investors that a company has reached its peak while revenue continues to climb the company has not posted a full year's worth of profitability since about 2014 on the minds of many investors going into today's debut, competition. on the low end it faces competition from google and amazon on the high end it faces bose. sonos is breaking more into streaming but that space is also crowded with spotify, pandora, apple. in the face of such competition, sales and marketing expenses have been higher for sonos when it comes to technology ipos, investors just want to see future growth. they want to see a pathway to future growth. it's been a positive environment so far with technology ipos. one bad deal, though, can spoil prospects for those in the

pipeline >> i'm interested on how to think about this company it has competition, low versus high, but it also doesn't quite have the identity. it has hardware competitors like bose, and technology companies which are ahead of it on the ai speck shtrum like amazon and go. >> that makes it hard to value an ipo when it has that identity crisis people don't know what to compare it to. do they compare it to a gopro or a high-growth internet company that's the question investors have to grapple with that's why you see a situation like this, pricing $2 below the range. >> in terms of growth, there's going to be the hardware growth, is there a true services component that you think gets layered on here? >> that's the big question

that's the big question investors have to grapple with a lot of invests talk about the act two. you want to debut at a time when there's act two. is that streaming, is that services component going to be the act two? >> it's like the apple story, because apple is a hardware company but finally turned itself into a services company in many ways it hopes to one day get rated as a subscription services business >> spotify and pandora making losses still it's a 14-year-old company making losses still. >> yes but for a long time they were profitable i was thinking more of it like roku people think of it as a hardware company, but it's not. it's a services company. we'll find out the answer. we'll talk to the ceo, patrick spence will join us at 8:00 a.m. eastern time to answer all of these questions.

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we're discussing speaker setup. casino stocks on the move this morning following quarterly results. >> watch for movement with the casino stocks today. wynn resort stock took a dive. and at wynn macau operating revenue, all down 18%, much lower than expectations. ceo matt maddox blames the world cup, which took activity away from gambling but he also pointed his finger at his competition. las vegas sands last week reported earnings that surpassed

expectations mainly on the strengths of the renewed efforts of the c.i.p. performance. >> the best years for wynn are yet to come. looking at july, we are actually experiencing much better trends in july with our year over year and monthly subsequentlial growth up over 20%, significantly outperforming the market. >> they saw some upward movement in the stock when they said that. caesar's is another casino company that got hammered by investors. closed off almost 15% yesterday. he's highlighting a lack of scheduled events that draw visitors to las vegas in july and august. maddox mirrored those comments for wynn and you're really going to want to watch mgm shares.

they ended down 9% yesterday. and mgm reports earnings before the bell this morning and i'll be listening to hear whether that softness in july and august that his competitors are reporting in las vegas on the strip. >> thank you very much for that. big movers in that sector over the last couple of days. time now for a quick discussion with michelle gerard who's been our guest host for the first hour. we've talked about the u.s. picture and some of the other central banks. what about the growth picture in europe, did they turn the last week ticked up again >> there was a little bit a moderation early in the year and that that concerned everybody that we were seeing some of the strength of the global economy in '17 fading but they data was better. we looked at the cooling in the first quarter as a bit of a -- and we've improved. i think the global picture looks pretty healthy. certainly the u.s. i think is

continuing to outperform, but i think in general you've got central banks that are going to look at the overall picture and continue to think that the level of accommodation that's being provided is probably not appropriate and i don't think that story has changed at all. >> a lot of people cite the stronger dollar, on some level it's a surprise that it's a lot more strong when you consider all these factors and the difference in pace of central bank hiking. >> that's absolutely true. the move up we've seen in the dollar is a fraction of what we had seen -- in 2014 and '15, that then did have some impact -- back on the u.s. economy. i have to say -- the improvement in the dollar is as you said, against the fundamentals is not anything that is worrisome. i don't think it changes the outlook. people ask if it will change the outlook for the fed. clearly outperforming still the

broader economy, the ism numbers we saw yesterday would be consistent with gdp growth of 4%. i don't see that any of that headwind is a factor here that we need to be worried about. >> if the bank of japan does what it's been signaling then that's a bigger factor in the currency market. >> obviously right now there's a real attempt by the boj not to keep the currency stable and not to have the yen strengthening and the dollar weakening. that's something that the boj -- the attempt of trying to massage the message of -- with forward guidance to offset the scaling back of purchases. >> just very quickly on the trade topic that we discussed earlier, does that not take effect until after the midterms? >> in terms of -- >> negative impact on gdp. >> it all depends on what we end up seeing. in the end what is actually

instituted will decide what the economic impact will be. we're just watching all the rhetoric on trade and if it ends up being part of this bigger negotiation, a leverage tool, then perhaps the negative impact on the economy ends up being far less than we fear. >> okay. michelle, thank you very much. when we come back, elon musk's apologetic conference call and his quarterly reports straight ahead. check out tesla shares this morning up by over 8%, a gain of 2466. sonos pricing below its expected range. we'll talk to the ceo patrick spence at 8:00 a.m. eastern time. ♪ a hotel can make or break a trip. and at expedia, we don't think you should be rushed into booking one. that's why we created expedia's add-on advantage.

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. markets influx, futures pointing to a lower open as trade rhetoric from president trump ramps up. what elon musk is saying about the road to profitability coming up? >> starbucks teams up with alibaba to enhance your coffee experience as the second hour of "squawk box" starts right now. announcer: live from the beating heart of business, new york. this is "squawk box." good morning, everybody. welcome back to "squawk box" here on cnbc live from the nasdaq market site in time

square. i'm becky quick. we've been watching the u.s. equity futures at this hour. check it out of the dow futures down by 186 points. s&p futures off by 20. this is coming in part in response to what we saw in asia markets earlier today and that is again a response to what we heard from the administration yesterday about these ramped up tariffs, 25% tariffs on $200 billion from goods from china of the dow futures now indicated down by 185 points. also here's what's in headlines this morning. we're watching shares of automaker tesla. they are higher in the premarket trading after tesla said it would be profitability on a gap basis during the second half of the year. they reported a larger than expected loss for the second quarter but revenues topped what wall street was expecting. we do have a bank of england decision and it's a hike by 25

basis points as expected. the second hike in a decade, the last hike is reversal the post-brexit cut so it's the first independent nonrelated to brexit hike raising it by 25 basis points to .75. let's have a look at equity markets. the ftse not really moving too much. european markets have been down throughout the day. this was expected. steve liesman is here. the pound has recovered some ground. it was down around 0.4%. it's now back to flat for the day which is a bit of a surprise to see, .4 of a move given this hike was expected. steve, your take >> i'm reading the headlines from the statement right now and it says if the economy continues to develop broadly in line with projections ongoing tightening of monetary finding will be appropriate and any such tightening will be gradual in

pace. there's a bunch of estimates here with regard to inflation. expected growth in q218 0.4. >> 1.6 by u.s. standards. >> it was a unanimous decision to hike rates. >> 90 -- >> we're getting more of a jump in the pound than expected had been a possibility of at least 1% but the fact that it's unanimous does show how expected this particular decision was, but the pound -- >> i wonder if carney's picking up on the thing that michelle said which i think is so interesting. this is the time to be tightening before the fed goes further because you don't want to be tightening into a cycle where everybody else is doing the same thing. you get a jump maybe on the boe,

the fed has had the luxury of tightening into continued easing of the ecb. >> does that signal that this is a move and they'll back off? >> i don't know how unique that commentary was but certainly they signaled further tightening ahead. almost the same language the fed used yesterday and maybe we should talk about what happened yesterday. >> we probably should. some big economic developments. >> two things happening that are big, you got the fed on the one side and the trade stuff on the other and the ink was barely dry on the fed statement yesterday when that new tariff news came out on threatening new tariffs on china going from 10% to 25% on $200 billion of goods. the fed upgraded from solid to strong and pointed the markets to a september rate hike and one likely in december. here are the probabilities we have right now. september trading at an 88%

probability, 58% in december, 59% for that next quarter point or the first quarter point in 2019 in june. what the fed did not mention was any concern about global trade tensions and the potential negative effects for the u.s. economy but those are actually off just a bit in the wake of the announcement of the new tariff threats. goldman sachs said this, we continue that additional tariffs on imports from china are likely to be imposed. when the first threats were made, a lot of the folks like goldman said we don't think this is going to happen. it's difficult to game out the economic impact of these tariffs. some warn they could reduce growth well in excess of the actual amount of trade effective, what we do have is we have our estimates from our survey. 59% say they decrease growth and 54% say they decrease jobs. there are the numbers existing tariffs, a very small .1 of a point. then it starts to ramp up on the

threatened tariffs which were at the 10% level when we asked the question. now they're at the 25% level. now they're 0.4. the question you want to ask is 0.4 off of what? we don't know yet. >> if they are not spending capex like we amaze anticipated -- >> that's important because one of the x factors of the trump expedite has been this turn around in animal spirit. nobody has a feel for that. kings wrote about it, there's no formula that says, you know, x input plus y tax cut equals z -- we've seen it. it's out there. the confidence numbers are high and now we're starting to see in some of the survey data we look at, for example, the ism manufacturing yesterday, even some of the consumer confidence data, some of the tariff stuff is starting to creep in and it becomes a question of -- i mean, the trump administration has decided to play very high stakes

poker with the whole world and maybe they get him to back down. you could have, by the way, a positive gdp effect from this if you notice what happened in the second quarter -- >> better find out now -- >> we call the magic bean, the soy bean influenced gdp in the second quarter. it could happen again in other ways as people get stuff in before the tariffs. >> on trade, this is the statement from the bank of england. they seem weaker than in may. nothing ground breaking in that. the headline was 7-2 -- 9-0 as expected. >> if you ask the central banker -- he or she would prefer not to have to deal with the uncertainty of this because they're dealing with the uncertainty of unwinding from crisis era monetary policy which they've never done before.

>> stay where you are. i want you to be part of this conversation as well. let's talk more about the markets and how they'll play out relative to all this trade war talk. >> tom lee: you heard what steve had to say. the markets headed in the wrong direction this morning. how worried are you about potential trade war? >> i know investors don't like trade tensions. they don't like uncertainty, but i think steve made a good point. we don't necessarily have to view this as being a net negative. i think on the one hand it's a real attempt to fix some of the imbalances that have been taken decades to take place and second, i think the economy is quite strong. we would use any of these pullbacks to -- >> you're buying. >> yes. >> because you think that

actually in the end nothing happens and this is all noise or because you think actually the outcome is going to be much better in terms of the actual negotiation will improve for the united states? >> i think it's a little of both. on the one hand, i'd say -- let's say there is a probability -- there could be some effects, some effects on gdp. it's actually positive for us to try to fix some of these trade imbalances. on balance it's a net positive. >> net positive. what about you >> we've got a somewhat more tactical position here. the equity market as you know has had a terrific run here over the last four months, we actually took about 3% out of our equity overweight at the end of the second quarter and we're actually bracing for about a 5% to 8% correction over the third quarter in part because of the instability over trade and

tariffs. >> this is the last week or so you did this >> the end of june. we didn't get that quite right in july, but august and september are different months. we're right with tom in terms of the fact that we think -- when we take the longer term view, a lot of what we're seeing is merely a negotiating tactic but its ugly. we don't know if it's going to work. we don't know what the near term dislocations are and we felt we could see choppiness over the course of the third quarter. >> tom, i very much disagree with your point of view on this. i'll tell you why. i think there's a broad effort to fix a system that is not broken. i think what's happened is, there are parts that are unfair in our trade agreements with china, there are parts that are unfair in our trade agreements with europe, mexico and canada. those are by far the smaller part of the entire trade relationship. >> steve, whether it's broken or not depends on where you sit. if you're one of the ones in the

unfair situations, then you think it's very broken. >> if you are -- >> i understand from the 30,000 -- >> if you're one of those people, the government and other programs should have dealt with that while the broader benefits of tariffs were able to take effect. what we have now is a focus on steel and aluminum to the detriment of the much broader steel and aluminum we have a massive trade relationship with china in which we import cheap stuff, put value added on it and make more money from that. the idea that the world trade system is broken i think is a fiction created by the president. let me give you an example of that. >> okay. >> okay? we lose 90% of the cases brought against us in the wto, right guess what we win 90% of the cases that we bring. why? because the plaintiffs in almost

all cases in the wto tend to win because they're considered and measured efforts and there's no bias against the united states in the world trade organization. it's a system that is worked incredibly well for the united states. it's why we created it and it's why most administrations and most parties were behind a bipartisan effort to support -- >> the rules themselves, even if we're playing by the rules, the rules at times are unfair in that situation. >> that's 100% correct, becky, but the question is whether or not those rules that are wrong in the wto are worthwhile undermining the entire world trade system to which, by the way, tens of millions and maybe hundreds of millions have been brought out of poverty into the broader global economy in ways that have outstripped by far any government -- >> we messed up our implementation. >> there are things that are wrong and everybody agrees things are wrong.

>> tom -- >> should you blow it up >> i don't think so. >> one way to measure how the world feels about this is to notice that u.s. markets are outperforming sector by sector and equity markets so i do think markets are starting to generally feel that this is a net positive for the united states -- >> but to steve's point -- >> tom's point is right on that but that just says we can win this. i'm agreeing with him. >> if we took like a 30 year view and think about the period from 1980 to now which is when we saw globalization, i do think there's a rethink that the speed of this was actually to the detriment of the u.s. there was displacement of workers. they never got reemployed. m.i.t. did a really great study on this. it came at a time when interest rates were falling. if interest rates are now rising plus we feel like we've reached, you know, the limits of

globalization, maybe trade -- renegotiating trade is the right strategy for the next few decades. i'm not forecasting this, it's a different environment from where it was in 1980. >> this is a longer conversation. we will have it. you will come back. we have to talk about bitcoin. phil, it's great to see you. thanks guys. tesla ceo musk is pledging profits. president trump turns up the heat on china as the trade war takes a new turn. the latest from the white house is straight ahead. stay tuned. you're watching "squk x.awbo" 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. to help this researcher discover new treatments. that's why she's working with watson. it's a smart way to find new hope, which really can't wait.

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simple. easy. awesome. stay connected while you move with the best wifi experience and two-hour appointment windows. click, call or visit a store today. good morning, welcome back to "squawk box." tesla reporting quarterly results after corroborationing a key milestone to produce 5,000 model 3 sedans per week. phil lebeau joins us now with more. >> i think some people were surprised to see a more contrite elon musk on the earnings call last night when he was talking with analysts and it was the very first question from tony who last quarter had been cut off by elon musk, while this time it was a far different reaction from mr. musk. here's what he had to say. >> i'd like to apologize for --

it's no excuse for bad manners. i was violating my own rule. i've been working -- my apologies -- >> aside from that apology and another one to another analyst, let's focus on what really came out of this call last night and the key questions for investors, tesla, according to musk will be profitable in the third quarter, in the fourth quarter. he also expects the company to be cash flow positive going forward. they also were very adamant about the need to not raise capital. elon said it would be wise, perhaps, in the future at some point but right now they believe that they're better served by drawing off the $2.2 billion in cash plus the other money they'll bring in and with regard to future production. remember a few years ago, iman

musk said, i think we can build a million vehicles in the year 2020. he was asked about that projection last night. here's what he had to say. >> it's not a million, it's going to be pretty close. i'd say -- it's probably at least 750 or something like that in 2020. we'll aim for a million in 2020, but some where between half a million and a million seems pretty likely. >> that's only what 15 months away. here's tesla sales through 2017 and for some point of reference in the first half of this year, tesla delivered just over 70,000 vehicles. so they're a long ways from 500,000, let alone a million vehicles. guys, back to you. >> phil, stay with us. we'll talk more about this right now. joining us is tim higgins and tim, this clearly buys some room for elon musk and tesla. how much room and what's the next test from wall street

>> i think investors were just watching that call and waiting to see how he was going to respond and when he's apologizing and when he's talking about profit quarter after quarter, you can just see that after-hour trading just spike and we've seen that this morning. people were relieved that he just put on a boring conference call. >> they want to see boring, they want to see, i guess, some predictability in all of this. what's the next test or does this buy him so much room that unless he disrupts it -- >> he's shown the ability to do 5,000 model 3s in a single week. he has to do it week after week after week and make that 55,000 target this quarter and then continue to do that in the fourth quarter and just execute on the plan. >> we are seeing, phil, the wall street community reacting in

kind to this. they're raising their price targets on some of these issues. this is something that people are going to look back and say this was a turning point or -- >> becky, i think some will look at this as an inflection point. this is a case where elon finally put to rest any notion that this company might go bankrupt, might run out of money. look, there are a lot of hurdles in the future. you were talking with tim about, you know, how much room does this buy them? theoretically it probably buys them three months, four months of a little bit of breathing room, but let's say they don't hit 6,000 vehicles per week by the end of august. it will take five minutes for twitter to light up with people saying, here we go. they cannot execute. they cannot perform as they have promised, and when you have china having to come online relatively quickly, they haven't even broken ground there. they haven't even signed --

aside from a memorandum of understanding, there are a lot of details that need to be worked out with that. tim has written about the fact that they're hoping to announce some kind of a factory in europe, perhaps by the end of this year. there are a lot of growth out there potentially and there are also a lot of stumbling blocks out there in terms of can you hit this marker, how quickly can you hit this marker? >> you're definitely seeing some of the shorts get shaken out a little bit but my guess is some of the biggest names aren't going away any time soon, right? >> right. the second quarter might be remembered as the period where the shorts will say, hey, this is when the cracks in the facade started to really come clear and the downfall began or the second quarter might be that period in time in the tesla big story in the big history when elon musk kind of grows and he was able to overcome all the hurdles and push the company and make the next big bet. >> which one do you think it is?

>> time will tell, right we'll see next year how many model 3s they're able to crank out. >> they were producing about 5,000 a week. do you believe that number the reason i asked the question is because if you look at the shorts who are running around twitter and online they think that, you know, the books are being cooked somehow >> i don't have any proof to say that they didn't make 5,000 a week at the end of last quarter. if you look around parking lots around california, there's been lots of photos of -- lots and lots of model 3s. they're clearly cranking things out of that factory. >> how much pressure do you think the shorts have put on -- we talked about elon musk responding on twitter constantly, seeing him at 3:00 in the morning either making comments even as recently as a day ago about david einhorn, how much pressure you think that's

putting on the company itself? >> enormous pressure. there's not a lot of ceos who are tweeting as much as elon musk. now there's been this back and forth, it just adds more fire each volley that occurs. it becomes a distraction at times for some of the employees. >> okay. >> tim, thank you for joining us. coming up, when we return, a lot more to come. amazon deals another blow to software maker oracle. we'll explain why and later the fed expected to raise interest rates in september, so is now the time to buy bank stocks. we'll dive into the sector and tell you what's working for your portfolio. announcer: time now for the trivia question. who was the first african-american woman to make it on to the forbes billionaire's list

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welcome back to "squawk box." good morning and welcome. we're live at the nasdaq market site. among the stories that are front and center at this hour. dow component dupont reported its quarterly numbers this morning. earnings of 1.37 per share. revenue topping wall street forecasts. the company also saying it's seeing nearly $900 million in cost savings since the merger last year. yum brands out with its earning. 82 cents per share. eight cents above estimates. fewer customers ate at pizza hut locations. and amazon has formed a group with another retail and delivery company to lobby the u.s. postal service. this is going to get under the skin of president trump, by the

way. to say that its purpose is to urge the postal service to keep its delivery service reliable and affordable. president trump has criticized the postal service for not charging amazon enough for shipping its package. a task force set up by the president to recommend postal service reforms due to bring its report in public. >> the question this comes down to, a lot of times if an administration targets a company as a monopoly, consumers are happy to see it happen. the question is will that be the case with amazon -- >> are they getting some special deal i don't think they're getting a special deal. all the evidence suggests there's no special deal. should the postal service be charging more for all of this? possibly but that's a different story. >> maybe across the board. >> he's been clever to link it to the postal service rather than hitting amazon straight up. consumers welcome amazon -- markets moving on some big trade news that we heard late yesterday about 4:30.

kayla tausche joins us with more on that. >> markets have been moving all week but yesterday's was the president trump is considering raising the stakes in the trade war with china he's asked top trade official robert lighthizer to place a 25 tariff on chinese goods. the change will extend the date for considering such tariffs by about a week to september 5th, so that's the earlieriest that these tariffs could go into place if the white house moves forward. officials decline today connect the move to china's suspected devaluation of the yuan. the change comes as officials say new and stronger tools are needed to incentivize china to negotiate which they have not been. no formal current talks are planned. communication remains open and president trump is willing to meet with president xi. there's another change in the administration's approach to trade, that is various

references to being joined in this fight against china by like-minded partners. that strategy, according to people briefed by the white house, is to reach deals with allies first then get their help in what could be a protracted trade dispute with china. last week's handshake agreement with europe is one of those steps. talks with mexico today may yield another. those happen at 2:00 p.m. in washington. both sides have been bullish on some sort of deal on nafta happening soon whether a bilateral deal, a partial deal, a deal just on auto and content requirements, so we'll see what they come up with, becky, but mexico has said they expect a deal to coalesce in the next few days. back to you. >> thank you very much. obviously pretty quick movement if that happens. for more on the trump trade agenda and the nafta talks with mexico, we are joined by michael komunez. right now he's the ceo of

monarch global strategies. michael, what do you think about this latest move because it is riling the markets this morning? >> good morning. good to be back with you. it's not terribly surprising. we've come to expect this type of action from the administration. it's concerning because the chinese as you indicated previously are not showing any signs of stepping down. at the end of the day, tariffs are a very crude instrument to deal with a very complicated problem. they are basically a aggressive tax that hurt consumers and exporters like farmers. i don't expect the chinese to back down on this. >> let's talk about another thing that kayla mentioned and something people have been talking about since last week. there does seem to be this move to sure up things with some of our traditional partners, the eu, with canada, with mexico and maybe try and get them on our side before we face a protracted showdown with china. that's something that a lot of trade experts have been saying

for months they would like to see happen. do you agree with that sort of strategy >> completely. i've been one of those folks on the outside calling for the administration to get its ducks in a row to lay the ground work. china needs to be confronted. its industrial practices are very problematic. they effect the entire global economy not just the united states and we should not go this alone. we ought to be enlisting the aid and assistance of our allies. we've been doing just the opposite until very recently basically. the nafta discussions as you mentioned resume today and my understanding from talking to some very well placed folks in the mexican government is that there seems to be new flexibility, new signs of some momentum coming out of washington and out of the administration and that's certainly positive. >> that's probably news worthy to hear something like that, that we could be getting a situation where we really do see a deal that comes together rather quickly after all of

these months of kind of standstill negotiations. >> i think we have to put it in context, right first of all, the canadians are not at the table and any notion that this is a bilateral agreement is not well founded. the mexicans have made it clear they won't accept that and the canadians won't as well. all the difficult decisions have been put off. they haven't gotten to the core of thepoison pill provision that the u.s. business community is up in arms about and could threaten to kill the deal, but, but, the good news is that the administration for the first time seems to be showing flexibility around some of the mexican proposals related to rules of origin and other things. so, look, the thought is if the u.s. and mexico can work out the framework, get to closure on some of the outstanding chapters and begin to drill down on some of these difficult issues the canadians can be brought in and if -- if the political will can be mustered they might be able

to reach a deal in time for the pea et tow administration to sign off on it before it leaves office. >> you mentioned tariffs are rather a blunt and crude instrument in your opinion. you also said that no one disputes that something does need to be done on trade with china. does that not suggest, though, that if the bush administration, the obama administration had failed to achieve something on trade, trade with china, that something more blunt was necessary? >> well, i've heard that critique. the truth of the matter is, i at least and many others believe that engagement is the best mechanism and china certainly -- we brought china into the wto. it has a record of flouting those rules but it also has a record of being held accountable in the wto. it has lost several trade disputes when there's multi-lateral action against it. in addition, i think, the administration and the members of congress that are working on the cfius reform should get credit where credit's due.

it will address some of the concerning practices regarding chinese foreign investment in the united states, but i think that this is a complex situation. we in the united states don't like to deal with complexity, we want simple answers but certainly just a unilateral approach that slaps tariffs or taxes that get immediately passed down to consumers and that hurt our core expert groups like farmers just doesn't make any sense. >> the argument that a little bit of pain right now will lead to a better future. i guess you don't -- you don't necessarily think the risk is worth the reward >> we'll see. that is an argument that is their argument. we'll see what history shows. i would say that the concerns i have with the trump strategy -- the trump administration strategy are two fold. first of all, there doesn't seem to be a strategy. i think this idea of just slapping tariffs -- especially flouting the national security

provisions of section 232 of the trade expansion act is really problematic and sets a terrible precedent and could undermine the world trade system if that pattern is followed. more importantly, i have a concern that we're missing the big picture. the fact of the matter is, you know, we're playing small ball trying to hide behind tariffs and complaining about foreign trade practices instead of confronting the reality that we have a formidable competitor and adversary in china that has embarked on this very ambitious made in china 2025 strategy. this is a sputnik moment. this is a time when the united states has to rise to the competition and compete its way out of a problem instead of trying to protect its way out of a problem. that's a fundamental diagnosis that the trump administration doesn't seem to see. they don't understand that we have got to get our act together, make substantial investments in american education and infrastructure and workforce readiness, prepare for

the so-called industrial revolution 4.0 that's coming and simply launching trade wars isn't going to get us there. >> thank you for your time today. still to come on "squawk box," we focus in on financials with the fed on hold for now but a rate hike expected in september. should you be adding names to your sector portfolio? if so, which ones we'll tell you after the break and check out futures as we head to the break. down pretty sharply 164 points on the dow following a 2% cle sngi.

now, amazon is dealing yet another blow to oracle. the ecommerce giant plans to be completely off the software by the first quarter of 2020. that shift is another sign of amazon's rapid ascent in enterprise computing by expansion at amazon web services, which, by the way, reported a 49% revenue growth for the second quarter. if you'd like to see more on

that story and other corporate headlines you can check out cnbc.com. let's talk banks and find out if you should be adding positions to your portfolio. joining us is marty smith. looking at your top picks is you still have a big preference for the smaller regional banks over the bigger banks, is that right? >> these would be the super regional banks because they're in the middle. they're the ones getting the most benefit from the deregulation so banks between $50 billion and $250 billion that were in the really onerous regulatory environment and now just with the passing of the recent bills have now been released to come out and start helping the economy and begin to grow their balance sheets faster than they have over the last decade. >> without that tailwind that those super regionals have, would you be less positive on the sector as a whole, are you

less positive on them now? >> we're less positive but when we look at it, we're finishing this recovery that started ten years ago. the first thing we had was credit. then we had to wait a long time to finally get interest rates and we're just finishing that phase and now we're starting the phase like deploying capital and seeing the deregulation. this is a normal pattern. it would typically take three to five years and we're ten years in to it before we're actually finishing. we think through 2019 that the banks are favorable because they are getting those three catalysts all coming to fruition now. >> due the banks that have bigger buybacks or dividends look a lot more attractive than those that don't >> what they give you is that minimum support. a bank like regents financial is able to payback 160% of their earnings next year, able to produce a 10% cash flow for their investors, so, yes, that is definitely one of the

positive things we're seeing especially in those super regional banks we talked about. >> of the bigger banks, marty, what's your top pick >> right now we really look at, you know, a goldman or even a morgan stanley because of the investment banking side and being able to benefit from that which we saw positive results in the second quarter. and then valuation for goldman really has pulled back this year, so we would see that that is a valuation opportunity as well. >> what's the top thing on the agenda of david solman when he takes the reins in september? >> as they're able to roll out markets, goldman sachs was pulled into the regulatory environment for the first time in the financial crisis. they were regulated as a bank for the last ten years. they're going to stay there which they have had to come to grips with. they might as well make the most of it by expanding their product

offering and that's what we're seeing. being able to do that while balancing and keeping the capital markets and investment banking going is going to be the big task at hand. >> okay. marty, thank you so much for joining us this morning. when we return, starbucks is stepping up its coffee game. ceo kevin johnson speaking to jim cramer last night. we have his comments right after the break. stick around. running a small business is demanding. and that's why small business owners need more. like internet that's up to the challenge. the gig-speed network from comcast business gives you more. with speeds up to 20 times faster than the average. that means powering more devices, more video conferencing, and more downloads in seconds, not minutes. get fast internet and add phone and tv for only $34.90 more per month. comcast is building america's largest gig-speed network to give small businesses more.

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welcome back. some breaking deal news. cisco systems says that it intends to buy duo security. this is a venture capital cybersecurity company. cisco is paying $2.4 billion in cash and that makes it cisco's biggest acquisition since the 7 bds buy of apt dynamics last year. that purchase of source fire back in 2013, you can see cisco shares down by 1%. also want to tell you about alibaba confirming a deal with starbucks. our own jim cramer talking to kevin johnson last night. >> it's a pleasure to be here today with daniel john, the ceo of alibaba group to announce

what we believe is a transformative strategic partnership of around modern retail. now we have the world's -- a world class tech company in alibaba combined with the world class retailer in starbucks coming together around a common vision of new retail. >> you can see more of jim's interview with kevin johnson coming up on "squawk on the street." take a quick look at starbucks's share this morning. ahead of trading, they're up about 1%. in other corporate news, cbs hiring a pair of heavy hitters to investigate sexual misconduct allegations against its long time ceo les moonves. mary jo wright and nancy kestenbaum will be leading that investigation. mary jo is the former scc chair. moonves will have no role in this probe. cbs will release its latest quarterly results after the bell and mr. moonves is expected to

be on that call. stocks to watch this morning. shares of teva pharmaceuticals getting hit hard. investors appear to be focusing on nearly 50% drop in north american sales of its flagship multiple sclerosis drug. other stocks moving lower home furnishing retailer wayfair expected a bigger than estimated quarterly loss. take a look at fitbit. shares are moving higher this morning. posting a smaller than expected quarterly loss, revenue topped estimates on higher sales for its newest smart watch models. is anybody wearing a fitbit any more >> no. >> you were? >> i have one. >> you're a classic watch guy and i've moved to the apple watch, so there you have it. >> which does all the things fitbit would have done and more. >> everything and more with the exception -- i used to love the jawbone which was sleep because

the battery needs to really charge overnight. >> you have to plug that in or because it's too big and annoying. >> i take it off and put tonight charger. >> just sleep with your arm on the charger. >> i could do that as well, yeah. >> maybe not. >> i used to love it for the sleep. >> is the apple watch a step too far -- you get an email or text -- you can't even put the phone away. >> no, i actually think it's changed everything. i do -- i'm not saying it's life changing but i think compared to regular watch the little extra things it helps me with -- >> you could go out with the boys without your phone. >> that's not even it. >> the phone's in your pocket though. >> you don't have to bring the phone with you. if you have the little red dot it means it's cellular so you can run with it. just go to the gym. it has all sorts of extra things that are helpful. i'll probably -- all along the margins but helpful. >> you were the one that got me on to the air pods. >> those are the best. >> what?

>> these >> these things. >> you look funny. >> another pronunciation issue. >> they look ridiculous. >> right. >> and they're great for music. >> they are great for music. >> conversations, phone calls. even when you're not out and about. just very easy -- they do look ridiculous. if you travel a lot you have to remember to take your old headphones. >> if tim cook is watching this morning, i want some kind of -- some kind of hookup so that if the phone is ever too far from the -- somehow this sends you an alert saying like -- >> during a phone call you mean? >> during life. >> he wants a find my ipod. >> if it's in the same place, i -- any time it gets too far i want it to say you're not near -- >> hey, dummy, you forgot your

ipods. >> a big pair of bose -- i look absurd in. >> they could attach it with a cord dave said. >> it is helpful when you're trying to keep working and you're doing phone calls -- >> you know who else will be commenting on audio this morning. >> yes, i do indeed. the ceo of sonos is going to be here. >> what was i saying >> sonos. >> it's the british pronunciation. >> let's check in on the broader markets which are trading lowers. futures are trading low. the s&ps down 20 points, nasdaq down 59. european trade for you there, we've got about a percent and a half lower for the german dax, the ftse down 1%. that follows the second rate hike in a decade for the bank of england from 0.5% to 0.575%.

it was a unanimous decision. asia markets down and treasury note for you that's -- oil down 1% for wti. ten year across above 3%. hovering just below that level 2.98. and the dollar board for you, dollar strength this morning. it's a little bit lower against the yen but markedly higher against the euro and the pound. the pound had rallied back to flat on the day when we saw that bank of england decision but the pound is down two-thirds of 1%. gold down 0.4%. when we come back, smart speakers for the home. sonos gets ready for the debut on nasdaq today. the company priced its ipo at $15 a share below the expected range. we'll hear from the ceo patrick spence in the next hour.

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happening now, dow futures down triple digits this morning after president trump threatens china with bigger tariffs. premium speaker company sonos set to open for trading. will the ipo big music to investors ears the ceo will join us on set. plus when life gives you lemons, make lemonade but it's going to cost you a lot more as a heat wave puts a squeeze on this year's harvest. a sour story as the final hour of "squawk box" begins right now. announcer: live from the most powerful city in the world, new york. this is "squawk box." good morning. welcome back to "squawk box" right here on cnbc. we're having too much fun this morning. live at the nasdaq market site in time square.

wilfred frost is here in for joe today of the take a look at the futures right now. we have red arrows across the board because of some rhetoric from the president on trade. the dow would open 176 points, nasdaq 60 points, s&p 500 off 18 1/2 points. you're looking at the ten year treasury yields. we're now at about 2.98. becky? the bank of england raising its key interest rates to quarter of a point to 0.75%. that decision was unanimous and policy makers suggest that they are not in a hurry to raise rates further amid brexit uncertainty. wolf point it had out just in the last hour. this is the only the second time in the last ten years that they've raised interest rates. take a look at the pound. you can see right now 130.58. >> when the decision came out rallied back to flat for the

day. now down again because of the guidance that even though it was a 9-0 vote to hike this time, not going to happen again any time soon. president trump instructing his top trade representative to look into slapping a 25% tariff on $200 billion worth of chinese imports. this is something that was signaled yesterday morning at this time but this is up from the previously proposed 10% tariff. u.s. trade representative robert lighthizer saying that the raise increase is to encourage china to change its harmful policies. china vowed to retaliate. in deal news this morning, cisco says it intends to buy duo security. a venture capital backed cybersecurity company. cisco is paying $2.2 billion in cash and that makes it cisco's biggest acquisition since its $3.7 billion buy of apt dynamics last year and $2.7 billion purchase of source fire back in 2013. the sscc are investigating

options. dow jones reports regulators are taking issue with how that company handled market turbulence in february saying it failed to accurately forecast how much cash would be needed to cover trading losses triggered by a spike in volatility. some individual stocks to watch this morning. dow dupont. shares are down 0.9%. cigna also beating the street. it was helped by high membership numbers and increased premiums. the stock is up 2%. and squares topped estimates. revenues doubled for the company issued a third quarter guidance that was weaker than expected and so shares are down 2.5% after the phenomenonal run in the last year. up 146%. big day for sonos.

pricing its ipo at $15 per share. the company had expected. sonos facing intense market competition as it gets set for its first day on the stock exchange. congratulations. >> thank you very much. you know i love the product. i use sonos. you're a sonos user, let's talk about the company itself. will, raised the issue earlier. this is a 14 year old company. people don't always appreciate that. this is not a start-up. >> no. >> how should we think about the valuation and how should we think specifically about the fact that it came in below expectations >> we definitely encountered that general tech market weakness we've seen in the last week or so and i think you hit on an important point which is what i learned across the road show is that people don't know us very well and don't really understand the story and so i was spending a lot of time helping people get to understand what sonos really is, because you see the hardware and people

naturally see the hardware but they don't understand that more than half of our team is actually software and it's the software as you guys know from the experience, the software is what really makes the magic happen and we are the most unconventional hardware company you've met because we have 93% of the products we've shipped over those 14 years are still active today. we build long lasting products and people buy more of them overtime. they add more just like you're doing now as opposed to people that are actually trying to get you to move to the next one. >> let me ask you this. the company lost net loss of $14.2 million on revenue of nearly a billion dollars. when you think about that, what will be the turning point? >> we're into phase two now. through the first phase like the last decade basically, we were taken on the home audio market and some of the traditional players in that space. really now what we're doing is riding the wave of streaming. this rise of spotify, pandora, apple music has been fantastic

for us. over the last six months we've added a million households in the fastest time yet and there's 176 million people around the world paying for streaming music now, paying $120 a year for streaming music. you can get started with sonos for $149. attaching to this -- >> speak to the competition because for so long you were the only high end player now you have apple trying to get in there, amazon is in there with alexa, maybe not at the same kind of high end but unless you're an audio file some people don't appreciate the distinction. you have google. >> all partners of ours as well. for the last decade we've put all those services, you can get all those all on sonos. you can get alexa on sonos. really sonos is the one building long lasting hardware and gives you all the services you want. all of those players have a different strategic intent. they're trying to push their services on consumers but we coopt all of those services.

people can -- it gets better overtime. >> you're open to all the new tech services because originally it was you could link all your speakers across a house which was very new ten, 12 years ago but today it's that open platform. >> we invented that and we have the patents to prove it. we have the second most powerful patent portfolio in electronics so we invented that. it is what everybody loves about the system. you can play music in one room or multiple rooms so that is a key part of the value proposition. what it really is, you can simply play any music service, get any voice service on sonos. it looks and sounds great anywhere in your house. >> we use it too and i do love it. you mentioned all these partnerships you have. is there any threat that they might pull back from that partnership if they're trying to do their own thing >> it's interesting obviously i work very closely with all those companies. they have been very eager. we have great relationships.

they put all their streaming services -- nobody thought we could put all the competitive streaming services on one platform. we have amazon alexa on the platform. we have google assistant coming later this year. i have no reason -- >> there's nothing in the filing -- >> in the filing, just been very upfront about the fact, we could turn off peoples' services, they could turn them off. we're transparent by nature so that's in there. >> there's a report -- i don't know if you remember this, given your pattern portfolio that you were able to pressure, dare i say, the googles of the worlds and others to participate in a world that they may not have before. >> having the second strongest patent portfolio does give you a stick if anybody tries to do anything that would be unfriendly. >> the profitability aspect, 14 years old, still making a lot, you said that the profitability comes by riding the wave of streaming music services. we've just seen the likes of pandora and spotify report and

they're making a loss themselves. so how does that particular trend deliver to the bottom line when -- >> very different business model. for us we built this hardware -- this is different than anybody else in consumer electronics, they use the system for a long time and they add more. 38% of our sales came from existing customers coming back and adding another sonos, so we know that people will buy -- we have a recurring revenue stream we just money ties it through hardware and we make 45% growth margins. >> people love a subscription but people love a software subscription business because they consider that to be a high margin business. hardwares always been less comfortable for certain investors because of this idea that you have to keep upgrading the hardware. >> yep, but we are so different in that way. we're the only company -- this has been an issue -- who do you care us too? there is no one. what we see is consumers coming back and buying more of that.

we monetize the experience we create by getting people to buy more over time. >> and the other question which -- i assume you'll be using it for r & d to make new product, right now we're talking becky and i are sonos users, i may buy -- i want one of the new -- try to get two of them, but the ideas is will i be constantly upgrading my system >> our numbers prove that you add more over time. 38% of people last year that came back and bought sonos already had sonos and were adding another one, not replacing it, unlike in many consumer electronic companies where they're trying to drive obsow lensance. our cost of acquisition on that is zero. people love it and add more. we have a clear model that shows people buy more over time which is great from a financial model. >> i don't want to jump in before you answer his other question, what do you do with

the money? >> the investments we are definitely -- we've been sporadic in our product launches in the past. we've launched these two products over the last 12 months. you'll see two products. we've raised 110. we'll do global expansion. >> is there a subscription business or other services layer that could come -- the reason i'm thinking that, we had the ceo of row queue here and a lot of people thought that it was a hardware business until they realized that it was a services business. you don't have the services component at least not now. >> we have the recurring revenue through hardware purchases. we do have a recurring revenue stream and we're always thinking about the products and services. you get six to eight software updates a yearly. we're thinking about what services our customers want -- >> is there a subscription model or something where you think that the company's like a spotify or pandora that are running over your service that's would ever either pay you for some type of prioritization or some kind of other marketing --

>> it's been a mutually beneficial relationship with all the other partners on the platform today. over time given how attractive the 7 million homes we're in are -- >> very quickly. what you said about the patent, potentially being able to use it as a stick. what's the patent that you own that you have -- >> we invented and have the patents to take and move music from one room to another or any audio content, being able to play it in -- >> none of them would be able to do that without your permission. >> correct. >> what would be the bigger threat if apple came out with home speaker set hardware or if bose or someone came out with very good futuristic software to -- >> we've been at this for quite a while. the legacy players like the ones you mentioned are challenged because it's really a software game now and so like i said, software's not the core what we

do. it's more a question of like what some of the big tech players do and what you always see is their strategic agenda come through. all three of those companies work closely with us to get their services on here as well. they have primary aims which are very different than building long lasting hardware that gets better over time that is open to all the services. >> 60% of insiders are selling as part of this from my understanding. >> some early investors and some our founders that are no longer in the business. >> currently, people like yourself -- >> i'm not selling. >> you're not selling? >> no, no. >> we were talking about apple the other day that said apple should be buying sonos or google should be buying sonos. during this ipo process, has anybody come to you and said we'll just take you out right now and call it a day? >> i can't speak for any of those companies, we've been unique in the sense that we have been open to all those services and we've worked with them for a long time.

they know our 7 million homes are couldn'tinting on our abili be open -- >> does that make you less of a takeover target long-term? >> you'd have to ask those companies their view on that. what i know is that it's important for consumers that they be able to get any service they want. >> we'll leave it there. we should mention you have come up with a special sound or something, sonos folks -- when the nasdaq is going to open this morning, what have you done? >> we've remastered the opening bell. since we are a sound company. we've had our people work on and remaster the bell. we're very excited. we work with nasdaq on this. today it'll be a hold new sound for the bell. >> we'll notice it >> absolutely. >> is this a one day new bell sound or a bell sound forever? >> we'll see what they want to do. >> appreciate it. thank you. >> congratulations. coming up, when we return a california heat wave is putting the squeeze on the state's lemon

harvest. >> reporter: that's right. this is what those scorching temperatures did to the lemon harvest here. can't really make lemonade from these. we'll tell you what it did to prices in a live report coming up. phones have made our lives effortless.

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welcome back to "squawk box." tesla shares rising this morning after that earnings report and the conference call last night and phil lebeau joins us. it's up 8 3/4%. >> this is clearly a relief rally not only because of the tenure of elon musk but also because the company reported numbers that were better than expected. especially on a number of fronts. first off with cash burn. that came in lower than expected. some people were expecting to be at high at 900 million. liquidity of $2.2 billion is better than expected and the outlook is expected to be profitable in the third quarter as well as the fourth quarter and according to elon musk, all the quarters after that. >> the economy's where it is today or reasonably good and there's not a big event -- i

feel comfortable achieving a gap income positive and cash flow positive quarter every quarter from here on out. >> couple other catalyst for the stock after hours last night and likely today as well. the company has said it did not receive a wells notice from the sec which would have precluded it from doing a capital raise and in terms of a capital raise, musk says they do not need it right now especially even for the china plant. >> so it could raise money but we do need to -- yeah, it's better to -- >> did you take a look at shares of tesla a host of notes out from investors today. this was a positive report. not gangbusters. open heimer out today upgrading tesla to outperform, raising the price target to $385. we're seeing a lot of the analysts raising their price

target following this call. >> we are just seeing some flashes that are coming across from the trump administration talking about maybe proposing weaker emissions levels and not only that, revoking california's ability to set its own emissions level. maybe that's a fairly important. how would that play into what happens with tesla >> two parts to this question. in terms of what they are proposing here, under the obama administration they passed a set of guidelines that the auto industry would have to hit through 2025 and i think we might have a wall here explaining where fuel economy is supposed to be headed by then. if you look at this chart, close to, you know, 2020 by the end that have green line there, it's around 36 to 37 miles per gallon. that's the epa standard. 45 and a half miles per gallon by 2025. what the trump administration is saying after 2020 we're capping this. you don't have to go any higher, so basically much of that orange line there would be eliminated

if this guideline goes through -- >> just on that point alone, phil. i've wondered about that for a long time. we had mike jackson on yesterday talking about how he sees americans coming in and they want to buy suvs and trucks. i don't know how you get to those higher standards with the mix of cars and trucks and suvs versus smaller automobiles. >> that's part of the argument from the trump administration. they're saying this is unrealistic. it would require a huge investment from the automakers in order to come up with the technology as well as push more electric vehicles in order to hit those standards, therefore, let's cap it at the 2020 level which, by the way, by law that's all they can do. they can't roll it back. they can cap it there at 2020 or i shouldn't say they can't roll it back but they're saying let's just stop there at 2020 at about 37 miles per gallon. with regard to your second question, becky. that's the big fight here whether or not california has this waiver to set higher standards and the importance of

that, is that they're about 11 or 12 states that follow california. so the automakers are saying, wait a second, you're going to have one set of standards for much of the united states but then there's california and these others that are going to have a higher set of standards that's highly inefficient if you're an automaker. they want one national standard so that court fight is really the fireworks that everybody's going to be focused on. >> thank you. >> you bet. coming up in the next half hour, nfl preseason is kicking off and scientific gains is betting on big business with sports wagering. that company makes sports gambling technology for casinos like caesar's but the stock is down more than 11% since the supreme court sports betting decision. we'll delve into why. it's up 2.6% this morning. the ceo of scientific gains gidital divisions will join us soon. you always pay your insurance on time.

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welcome back to "squawk box." new this morning "the l.a. times" reporting that cbs members knew, they knew several months ago that the l.a.p.d. had investigated an alleged sexual assault by les moonves. the report says moonves disclosed the existence of the investigation to a committee of the board which then hired an outside law firm to investigate

the matter. the outside firm reportedly concluded that no further investigation was warranted. moonves expected to address the allegations during a conference call with analysts after the cbs earnings reported to after the closing bell. a lot of people will be focused on that phone call and what he has to say not only about the earnings but about these allegations and also about the state of play with the redstone family and the potential merger with viacom. >> there's a disclosure question on the part of the board but there's also interesting details that there's been an outside investigation already and was cleared from. >> the question was, what was this supposed sexual assault was this one that was reported on by ronan farrow, is this a different matter it's hard to say without knowing the details. >> we doesn't noel the details and clearly if the l.a.p.d. did look into this and -- >> dropped it. >> and conclude today drop it. >> that's a different scenario. >> that might have been left the board in a different place. >> this is different than the

column that was written this week by jim stuart at "the new york times" where he raised questions about whether they knew about the specific ronan farrow piece that was being investigated, whether they knew about that at the time -- >> it's almost impossible to believe at that point they didn't know that journalists were looking, whether they knew what farrow had or didn't have at that time, that's harder to say. >> it's going to be fascinating. cbs reports later today on "closing bell" "closing bell." 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.

>> reporter: welcome back to sidewa "squawk box." $218,000 on initial, that's up 1,000 from an unrevised 217 and if we look at the continuing claims picture, 1.724 million and that is darn close to unchanged. maybe just -- i take that back. there was a revision. that's down from 1.747. the numbers on the weekly continuing claims continue to auger for the notion that employment is tight. we're waiting for any type of transmission of wages into the

inflation picture at large. we did touch and settle a 3% yesterday. we backed off a little but don't despair. there's a lot more data yet to come. durable goods, back to you. >> thanks very much. steve liesman also here on set with us reaction to the data. >> good numbers. up -- honestly, you need to get north of i'm going to call it 275 to really start to worry about the monthly jobless numbers. we go into the number tomorrow with a forecast of 190,000. -- sorry 3.9% is the forecast for the unemployment rate. that would be down a tick and the numbers have been good going in. yesterday we got the adp at 219. we have the ism manufacturing was pretty strong. i want to talk briefly, wolf, about the yuan and the trouble it presents for the u.s. trade policy. if you take a look what's happened since the u.s. began to put tariffs on china, the yuan

has depreciated. it undermines the tariffs because suddenly chinese goods are relatively cheaper. they don't get rid of all of the tariff effect but what you heard lighthizer say yesterday was that we need to up these tariffs from 10 to 25 because the yuan has depreciated. it depreciated further. to wipe out the whole effect of the tariffs, you have to go down probably seven, almost eight to the dollar in order to wipe it out. there's two problems for america, because even though its displayed as somehow america is being taken advantage of by the rest of the world, the world remains a heads we win, tails you lose world, why? because when things weaken globally or even things get systematic risk, what happens to the dollar >> it strengthens. >> remember what happened when we had the financial crisis. people ran to the dollar.

there's nowhere else to go. we have to fight this rear guard action against our tariffs and the possibility of global weakness. >> there's only so far the chinese can put up with its currency moving in its direct. if it falls in an unsupported fashion that's worse for them than this little slight devaluation. >> that's right, and i think what i heard -- what i've been hearing, is, what the chinese have been acting to slow the depreciation -- they peg it in a range. it had been rising now it's back to depreciating and the thinking right now is that the chinese are not actively depreciating the yuan but stopping it from depreciating. >> and the market hasn't -- it's encouraging for the chinese for now. let's continue the discussion.

scott nations. what's your view on this its ability to retaliate and what all this means? >> the chinese have lots of tools. they have lots of weapons, probably more than we do because they're essentially a command economy. we don't have that many and let's face it, as soon as shareholders start getting hurt, really hurt and it looks like they'll be hurt a little bit this morning, then they'll start talking to their politicians. >> thus far, though, clearly that hasn't happened on the u.s. side. gdp has been strong and it likely will remain pretty strong until the midterms. that's not going to really hit the president for the next round of elections. >> farmers are already up in arms as you might expect. we export six times more soy beans to china than we do to the euro zone. trump says the euro zone is going to eat more soy beans and to tofu. they would have to eat tofu

morning, noon and night for them to use that much soy beans. it has to do with interest rates, the yield curb. i think everybody wants to be out first. >> do you think these tariffs will pressure the fed more because it can push up inflation? >> anything that injects uncertainty into the situation is going to worry the fed. that said, i think they're on autopilot till the end of the year. >> scott, i'm confused by what the right trade is here on trade. i went back and i documented that so many of the 1% or more decline we've had this year have been on trade news. at the same time it seems to come back and the market's ability to ignore the bad trade news, i think the effect is mostly in the counterfactual as in the market probably would have been higher. there have been some studies have been foregone, if that's a

word, because of all the trade stuff. how would you do this? would you buy into this weakness or just get on the sidelines >> i would be doing one of two things. i would buy weakness like you're getting a chance to do now. i would stay away -- i love john deere. it's a great company. listen, it and boeing and a few other names are going to be at ground zero of this battle. >> doesn't the market know that? every time the market gets ratcheted it up, they take the hit. >> farmers don't want the $12 billion. they want fair trade. the most entrepreneurialal people in the united states of america are american farmers and they just want -- they just want to compete. >> take a look at our results of our fed survey. we asked people who wins a trade war and the results are that america overwhelmingly will be the winner. i don't know -- it reminds me of the old love and death at the

end of a war. the idea here is that the 42 responsents to this survey think if we go tow to tow with canada and china and with the eu, america has the means to emerge has the winner. >> i think we -- listen, us going to war with canada doesn't make a whole lot of sense. >> there was a movie about it. canadian bacon. >> i'm not going to base my investment thesis on a movie. i've heard you say this morning that describe the situation with china. i don't think the situation with china is fair. they're horrible when it comes to intellectual property protection. they're horrible. this is what needs to be fix. you can say what you want to about free trade. it does great things for us if we can have them built all of our iphone, if they steal the

technology, it's horrible. >> i agree completely the technology needs to be fixed. my problem is that you've taken this issue which does not represent i don't know what percentage but not the vast majority of the percentage of trade between china of which we are massive beneficiaries and made it the center and made it end up helping u.s. growth overall. >> fair enough. that assumes that this ends up really ugly. >> it's already ugly. >> oh, no. it's not. the s&p is within a couple of -- >> in that regard i agree. >> let's take a step back. let's look at the '80s. everybody thought ronald reagan was crazy by going head to head militarily with the then soviet union and in t worked out well. why? because he had a strategy. he had a strategy and he bankrupted them. i'm not certain that's -- we can do that with china but we can hurt them. >> okay. scott, thank you very much. >> you really started a big

debate this morning. i like it. >> i like scott a lot and i know we got to go. you're the third or fourth person to compare how we react and deal with our trading partners the way we reacted with our mortal enemy the soviet union. we had missiles pointed at each other and a lot of our tactics and strategy seem to make a lot of sense because everybody could die at the end. we're talking about is a 5% or 10% portion of a trade relation of which maybe 70 or 80% vastly benefits growth and we have to go to the mat on this stuff? >> you call them partners as if they're friends and they're not friends. >> please no more from -- >> the wonderful -- >> come on back, we'll get boxing gloves and the whole thing. a california heat wave putting the squeeze on the state's lemon harvest and that's putting pressure on prices and kids who want to have lemonade stands. we'll talk about it. aditi joins us from california.

good morning. >> reporter: good morning. we're here in ventura county that were effected by these searing temperatures. it's caused prices to just sky rocket all of this happening during a really critical time of the harvest at the very tail end of the harvest and that's cause the prices to soar. it knocked out up to 15% of the crop to make things worse, we're also seeing supply shortages of lemons from mexico, chile and argentina, all countries that fill the gap. wholesale prices of cartons of fresh lemons were between $36 and $39. as of last friday they were between 62.50 and $64. that's more than 60% higher. industry watchers tell me it's the highest prices they've seen in a decade.

it's the consumers who may get squeezed as retailers either pass on the cost to them or simply take lemons off store shelves. if you're a lemon purist like i am, you won't notice prices falling back down until about late september or october and that's when we'll see the next regional harvest in the area. back to you guys. >> thank you very much. just crossing the wires right now, retailer brookstone has filed for chapter 11 protection and is seeking a buyer for the company. it's also begun a process to close the company's remaining 101 mall store locations. this is brookstone's second bankruptcy filing in the last four years. what about those massage chairs and all of the brookstone -- >> i don't think i've ever been to a bookstone. not like i have a chance either. when we come back this

morning, nfl preseason about to kick off and casinos are racing for a piece of the gambling action. as we head to a break, check out the big casino stocks after a rough day on wall street. wynn resorts down by 4.4%, mgm off by 3 1/3% and caesar's down by a .03%. ♪

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welcome back. we've been watching the futures this morning and they have been under pressure all morning long. we're talking about the dow futures down about 175 points. people are saying this is because of the trade concerns that have been ramped up. we knew about some of these expected potential bigger tariffs yesterday morning at this time but you did see a bigger reaction in asia overnight. those stocks down pretty significantly and then some pushback from chinese -- the chinese government as well about how they would take any threats from the trump administration. right now the dow futures down by 175 points. s&p 500 futures down by 16 and the nasdaq down by 55. new york stock exchange owner intercontental exchange reported better than expected profits. the company earning 90 cents a share. also inter-continental exchange announcing a

partnership with black rock to create a new platform for trading etfs. and earnings in this morning from cruise line operator royal caribbean, profit of $2.27 a share came in above the estimate of $2.01 a share. revenue was below the forecast and its 2018 outlook earnings range falls largely but not completely below the street's forecast. squawk news, this morning tiger woods and "fast money" will be facing off in a head to head golf match. that's according to the match will take place at the shadow creek golf course in las vegas. sources tell the net -- the contest will take place either friday or saturday and the payout for the winner has yet to be determined. previous reports have put the amount at about $10 million. it's like a boxing match in vegas or something. it's cool. and for its almost time for football. the nfl preseason begins tonight

with the bears and the ravens on nbc. the first snap comes less than three months of at supreme court paved the way for legal gambling. joining us now is matt davy. thanks for being here. >> thanks. >> what has this decision from the supreme court met, first of all? i was a little surprised that the stock hasn't performed better as a result. >> i think i like to frame it like this. the gaming association has made $150 billion in turnover available in the gray market bet by americans today. that translates to about $7 billion or $8 billion in revenue to the casinos. what the supreme court did was they gave the state option to create this marketplace. five states have legislation in place to allow sports betting. >> it happened very quickly. >> there's another 11 states coming through the pipeline with

legislation in place, but what the supreme court didn't do, they didn't flick a magic switch and open up $7 billion of revenue that is addressable today. it's going to take time for the markets to evolve. what we know is we're not creating demand. demand exists. how do we service that in a regulated license framework and that's the step that takes time. >> what have you come to what's your decision on that question that you just asked what do you think the best way of doing this is >> the market's spoken. no one controls the consumer any more and right now they're voting to spend $150 billion through gray markets and so we think the license regulator framework that enables operators like caesar's, it's the right way to bring a safe and fair environment for players. >> i guess the situation we should explain to people that you remain invisible in this. >> that's right. we do the plumbing underneath.

our technology provides all sports betting transactions -- the pirate camera management. we process around 80% of all sports betting transactions in the united kingdom which is the largest sports betting market. in the world cup we provided 177 million transactions during the world cup itself. it's a quite powerful technology but from a consumer perspective, you won't notice it or see it. it's all about caesar's and how they manage the customer journey through that process. >> who are your competitors in this arena >> it's a large number of tech businesses, mostly in europe that are build out great digital technology. within scientific gains we have the broader set of technology and we think we're the best position from a licensed perspective to service the u.s. market. >> what are the problems -- people always worry about problems in sports betting whether people will take advantage of the system, somehow people are gaming the gaming, people are using -- going into debt themselves, what are the things you do to try to avoid

that and what are the things that people should be watching out for? >> i tend to break it out into three major stakeholders. we look at the operators. you need operators with integrity. that's the gaming regulator's job. they tech works, there is integrity in the tech, that none of our developers have put a little bug in the back door >> other examples, not with you, but of that. >> that's right. think all technology has its challenges our technology has gone through more of a rigorous process than i've seen in most industries, including banking industry we have an incredibly well defind proced defined process. >> projections between now and three years. >> we've seen over the last 15 years the migration move getting behavior from land-based analog to dinl tal. it's gone up 15% to 20% year over year worldwide. the u.s. may even go more rapidly given the kind of grey market that's already here coming up when we return, we'll head down to jim cramer

who will join us live from the new york stock exchange. futures right now ahead of the open looking like we open down 165 points off on the nasdaq 53 points off on the nasdaq -- 53 points on the nasdaq. 165 points on the dow jones and s&p 500 both off about 16 points back in a moment [phone ringing] need a change of scenery? the kayak price forecast tool tells you whether to wait or book your flight now. so you can be confident you're getting the best price.

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with pg&e in the sierras. and i'm an arborist since the onset of the drought, more than 129 million trees have died in california. pg&e prunes and removes over a million trees every year to ensure that hazardous trees can't impact power lines. and since the onset of the drought we've doubled our efforts. i grew up in the forests out in this area and honestly it's heartbreaking to see all these trees dying. what guides me is ensuring that the public is going to be safer and that these forests can be sustained and enjoyed by the community in the future.

say you are a shareholder of starbuc starbucks. from china it goes from high single digits, mid, to low, to minus two. can we listen to this announcement and presume you can get back on a trajectory of positive same-store sales numbers in china >> last quarter in china we posted a 17% top line growth most of the growth of transactions in china's coming from our new store growth. now, yes, we did have a negative 2% same-store sales comp last quarter, but if what i look at we're doing here with alibaba and the digital fly wheel and enabling delivery, this is like rocket fuel for the digital fly wheel in china and this will be an accelerator for our business no doubt

>> that was starbucks ceo kevin johnson speaking with jim cramer last night jim joins us now from the new york stock exchange. hey, jim, how you doing? >> i'm good. how about you? i think you pointed out that you can't continually weaken your currency and do well that's the key thing for the yuan i think the iowayuan's playing fire in china. it is not as easy to quickly depreciate and not worry about inflation. >> 8% in the last quarter which is huge for them having previously pegged their currency 8% for them is sort of like double that for anybody else >> i bring it up because obviously kevin johnson's talking about china. china's very pertinent i think a lot of the narrative i hear is so defeatest about what is happening if you decide to break the chinese stock market, if you decide to do that, it is easily broken a lot of stocks don't trade. we really have a very, very

wrong-headed view about the power of a command economy command economies in the end fail >> what else did kevin have to say? we look forward to the full interview. >> thank you the problem with -- there was a rapidly shifting way to be able to get coffee in china starbucks was caught flat-footed. it went from being let's wait in line for starbucks to let's have it delivered they had a third party delivery cup system they are leapfrogging over all these small competitors with this alibaba deal. it will jump-start and take same-store sales to the positive it is a reason indeed to own starbucks. those who say it is much ado about nothing don't even know their own shakespeare. >> was that a turning point for tesla last night >> yes >> okay. >> yes wow. calling him david blaine yesterday. yes. >> david blaine is science fiction. so is musk it works though periodically >> okay, jim we look forward to the full discussion coming up

>> that was a good tease i'm going to be watching, jim. >> we certainly will be watching an ample interview with starbucks ceo kevin johnson coming up on "squawk on the street." "squawk box" back in a couple minutes imagine traveling hassle-free with your golf clubs. now you can, with shipsticks.com! no more lugging your clubs through the airport or risk having your clubs lost or damaged by the airlines. sending your own clubs ahead with shipsticks.com makes it fast & easy to get to your golf destination. with just a few clicks or a phone call we'll pick up and deliver your clubs on-time,

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welcome back, everybody. final check on the markets this morning. futures are indicated down as they have been all morning dow futures down by 167 points following declines in the markets in asia and now in the european markets that are trading, too s&p futures down by 16 nasdaq off by 55 wolfe, it's been great having you. join us tomorrow for the jobs report, folks. "squawk on the street" starts now ♪ i feel like a million ♪ i feel like a million baby whenever i hear that sound ♪ good thursday morning. welcome to "squawk on the street," i'm carl quintanilla. david faber. this hour kevin johnson spoke to jim cramer about the company's new partnership with alibaba in china moments away futures set for a drop as the white house confirms it has asked the u.s. trade rep to consider 25% tariffs on chinese goods.