i got that right oh, we are back on anyway, we got to get out of here this is too much let's stop talking about me and talk about me some more. no make sure you join us tomorrow "squawk on the street" starring jim cramer and carl quintanilla and david faber is coming up next ♪ >> good tuesday morning everybody, i am carl quintanilla with jim cramer and david faber at the stock exchange. got china trade talks obviously in focus we got a downgraded boeing, too. lyft earnings tonight. euro on growth forecast can cut once again and the ten year yield back below 2.48. stocks set to open sharp lily lr

in the second day. anadarko says hey, chevron, we got a better deal right now from occidental deeming that bid superior. >> facebook buys billion dollar bargain. senators criticizing these potential settlements with the ftc. stocks are set to open lower with trade once again. u.s. china trade talks will continue later this weekend in washington every tension between the two sides are escalating robert lighthizer says, "over the course of the last week or so, we see erosion and commitments by china i would say retreating from specific commitments that had already been made. some governors said we are giving away too much >> well, look, my people i

talked to say two numbers. 3.2 and 3.6. that's when things changed >> another in other words, the chinese played tougher they over played their hand is what may people say. and so i am not saying spring them on, i am saying 12:01 on friday will be different from 12:00. >> it is interesting lighthizer and mnuchin where we have noted stand sort of different views of how things were going with united yesterday and saying there was walk back on a certain provisions and making it clear that the tariffs will go up potentially friday >> right >> there seems to be many who believe however that eventually you will get to and if not even as soon as perhaps thought of a deal, jim. >> it would be a little

shocking anything can shock you so to speak. it would be viewed as a lost of faith if they came in and made a deal >> schumer with the tweet "the president is on china. he's more of a hawk than the president right now. this is the one thing that both party agrees on. are you kidding me you had a full year to move out of china if you did not move out of china now, it is your own -- >> this is like last chopper kind of gone kind of thing >> yes >> if you have a factory in china and you have not changed your supply chain, too late. >> i love that image i really do, carl. last out on the roof on the roof of the embassy >> yeah. >> it is that. to the granularity point of all

right who's hurting? they have a lot of work. caterpillar. they did not move out fast enough apple, who knows what their gain is look at the dow. >> you think tariffs are happening on friday. >> i think they kind of want to. >> what are the chances these stocks extend until next year? >> yes, it is a journey. i keep on hearing the word journey. i was there when journey got in ducted in the rock and roll hall of fame. to journey life is a journey. >> no, i am not kidding. they're saying listen we got to do this. the chinese, they have been talking about fentanyl again >> i thought that was one of the few areas where we had some -- >> i love the dow analysis it left out 3m >> the problem is all of this still unknowable

>> that's good info. >> i came up with good info. even if you talk to the principal, you still would not understand >> mnuchin a lot of people were san bagged mnuchin speak to the press and off the record he sends his view. how can that be? no one talks, right? >> go with the broader theme which is strong economy here gives backbone to u.s. negotiators. >> china apparently felt like it has some backbone results of all those nations showing up for the belten road. >> it got great deal of influence around the world >> yes, the problem with belten road is what pence is trying to stop >> the pence's speech. >> imagine venezuela folds and don't pay back china >> it is a country, it is not a company. >> it is failing unfortunately,

particularly for those venezuelans who are suffering. >> 4,000 barrels >> how about some of the fan fiction theory being written the president is not trying to back tchina into a corner but also the fed into a corner >> i think they feel that they can win. they think tariffs are zero some they're not trying to get china. they're not looking for china to win and then the win, they want to win they recognize -- this is going to cost a million jobs we can't find anybody to work in this country i mean 3.6 is amazing. >> you want to play with house money in a way >>. >> we have some cushions

>> yes, we do. >> the you saw some of these the tariffs going up as the president said higher than india and russia and turkey you are kidding me higher than turkey >> you start higher and you think of them. >> there are those who believe that he's going to move onto europe >> how about the tomato war? you know you can't get a ripe tony rom tomato tomato unless you go to mexico >> i don't think they are. i think at 3.6 and 3.2 growth. i don't think it is going to matter that much we have an excellent story on cnbc.com that agrees with me >> there are other ways for the chinese and there are so many different things that does not do directly with trade what about north korea we were hoping the chinese will

help curtail that. you can go through a number of different things that geo political nature are not necessarily positive >> how about the south china sea? >> roast garden. y rose garden you know what i mean >> this is what i am talking about. the defense department the last thing that mattis said on the way out that he felt this is a big threat to the country i am saying there is more to it. the president does not regard it is negotiatable at this point. just put him on. >> a, b, c. >> apple, boeing and cat

>> he's looking at the dow and he's saying what verizon? not an issue healthcare >> are we really doing that? it is perfect, it is just dprgr? >> the dow is down more than the president wants? >> i guess >> is it allowed to go down anymore? >> it is camelot >> what's his threshold? where is he? >> the chart is fine on the chart. >> he is >> he wants the best to start since 1887, right? >> yes, i love that image. i fun co last night, that was 100% china it is little dolls -- >> all right, from the broader market to our big fight in the

oil patch. >> that's done, david. four days. >> sorry >> let me update our viewers >> that was bad. >> our viewers know, yesterday we told you and it was about 7:00 p.m. anadarko say said yes, occidental, your bid for our company, 59 bucks. 78% of the consideration in cash is superior to that of chevron which was a $65 deal and chevron stock had gone down lowering the overall value. what is chevron doing. the decision by chevron to allow occidental to be deemed superior typically in this situation or the many that i have covered, always a desire of the part of the company that has the deal to keep the deal and the superior destination. so oftentimes what you will see is a race when for example

anadarko came to chevron and we'll deem it superior, they're going to say okay, we are going to come up with higher break fee and we'll announce the new deal. didn't happen. in speaking to people close to chevron, it is not clear they have made a decision to withdraw we just and they don't seem to frankly made a decision at all it depends on who you talk to but jim saying it is over it is not a necessary lyanily an accu. >> you are saying i have been bad. >> no, i am not, as we indicated since day one, there are plenty of things mitigating against them going forward showing discipline year one ceo or any number of different reasons including the fact that vickie hollub seems anxious to own this and some using the word desperate everyone if you come back at 76,

will occidental go up to raise even more. you got to think about all of that if you are mike wirth it is an asset conceivably that chevron wants to own frankly they have yet make a decision from what i can gather or the conversations i have been able to have with people familiar with their thinking >> look. jesus, assets off of colorado? >> the points you have been making though, if chevron does move on, what else they are looking for? by the way, they know they're not, well, will they come back 72 or 73 based on what i am hearing they're thinking, we got to come back at least meet or exceed or not come back at all >> let me give you my take, all

right? mike wirth was on "mad money" and they're talking about thousands of wealth and it is the greatest i kind of make some calls. i got like, you are way ahead of us there is not that much there i am like what do you mean i am stoked, i got the 10,000 wells thing going. i am like hey, you got bigger balance sheet. jim, you know you like anadarko too much i don't even trust colorado. colorado, you go in there and they do enough gummies, they'll go to gases. they have a gummy factory. did you see the governor we got to move on, david, the king of dugu of gummies is someg >> here is journey

>> he does not like them >> they don't get along. >> i love this song. >> when we come back >> it reminds me of "the sopranos." >> facebook is under fire. tougher penalties on the social netwo network. we'll get behind to what's behind the boeing downgrade and the including turning growth in half back in a minute people know aflac. aflac! but not when to use it. do i use aflac when the kids get slime in the plumbing? no. that's home owner's insurance. slime in my motorcycle. no. that's motorcycle insurance. slime everywhere? ughhh nooo, there's no insurance for that. do they help when i have bills health insurance doesn't cover? yeah! that's it! aflac! gross guys. get help with expenses health insurance doesn't cover.

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click, call or visit a store today. ♪ u.s. senators are pressing the ftc for toucher punishment for facebook regarding his privacy practice a letter to the ftc, blumenthal and senator hawley says a $5 billion fine. they say other facebook executives should be held accountable for privacy missteps >> there is nothing in the constitution about privacies

there is nothing that protects you. there is no amendment. the first amendment does not protect it nothing. i think this is terrific but how do you enforce something that's not in the constitution? it is not. one of the things that's amazing, i felt the constitution protect the mafia, when reagan puts speakers everywhere and bugged every single one. there was a movement that tried to say, there is as stitch of all the supreme court decisions allow the mafias trying to stop those? no >> he does that voluntarily anyway >> put speakers in their house what do you think alexa is or google, all these things are they're all listening. >> immediately you start to get those ads. all the time they're listening >> that's the truth. >> i say good luck, guys there is not a law in your

favor. >> what do you make of the new argument we had a couple of times this week on fang names and not in china for whom suddenly is a blessing >> yeah, that's my wrap. they didn't let us in so that's where you go >> what do you mean? >> i think alphabet is uniquely. alphabet stock has been punished beyond >> i had significant deceleration >> terrible quarter. >> the eagles game >> yeah, they are starting to own the de-sale, i think they're going to do something about it >> i think they'll tell a better story. >> you do? >> why yes, i do. >> i wanted to know -- >> you wish they knew what they were doing >> you wish -- >> i think i got through them with that wish the wish kind of stung

i think you are going to se see -- i think it is going to be glass notes and pace-- you got something on your neck >> i got an inch >> i can't itch? >> usually you are texting yes, please get that medicine. >> for the dog >> how did you know? >> i watch your tweets -- your texts. >> are you bugging me and my house? >> you are worse than alexa. >> i have erika. >> imagine it was cramer, cramer play spotify >> would that be the greatest thing. >> cramer -- >> we have to go >> we'll get cramer's mad dash and count down to the opening bell and here is a look to the premarket as we look to add losses for monday. back in a moment this is loma linda, a place with one of the highest life expectancies

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all right, before we get started on opening bell here time for "mad dash," where are we headed? >> we live in a surreal world whether it is the abc or caterpillar. david, tesla, barclays has a sale on it the bank are receding. that means the stocks are going to go higher we live in a world where all you

have to do is the bank are receding >> they raised it over $2.5 million >> if they are solving, they should go higher everyone n if have a sale on it. how do we deal with this >> i don't know. >> it should not be -- okay, offering under cut hyper barrel case i am most struck by is that when you do an equity deal, when you do a bond deal and you get that done so quickly that it is faster than vicki hollub can do than anadarko. he's paying 2% on the convert? she's supposed to be sms-- >> we know the answer. there is a lot of demand for that stock >> that's what i am talking about. he saw it on robo taxi

>> you got to love him. >> i like david blaine and i like elon musk david blaine is so dr. oz, i put a card in there. it was the king of spades. he knew it david blaine, david. >> yes >> and elon musk if he had to be remove and a member of the board, david blaine will take his place >> 300 in a heartbeat. >> okay, that's all about magicians today. we got a lot more stocks to watch and story ies to cover he on "squawk on the street" and the opening bell in five minutes. could you hand me those files?

yeah, of course. what is going on guys? oh hey, servicenow frees us up to do the work we want to do. so we're digging out from all the work we don't want to do. ugh, getting rid of so much paperwork. oh, doug. i didn't know you still worked here. i called for help but no one came. [ laughing ] classic doug. okay, carry on. yup. can you call my wife? thanks. servicenow. works for you.

you are watching "squawk on the street," live from the capitol of the world opening bell is 90 seconds from

now. you guys covered some tesla. this boeing downgrade is a survey of fliers ay ers and thed would you be flying with the max 737 once it is back for service? >> if you do it online, i guess you don't get that info. >> it is rare to ask what kind of plane you are getting on but i assume that'll happen more often. >> i remember i asked once well, that's 30 years old. is there a problem yeah, 30 well, i was kind of didn't want to fly >> it is 30 good years there is a lot of negative >> emerson's day, it cuts the

number the barclays downgrade goes to equal way. 39% say they would fly and 44% say they won't there is the opening bell and s&p 500 at the cnbc realtime exchange at the board today 1800 flowers and the pulitzer prize. . >> i think you got to think right now. not just a greeting card >> we'll have brunch.

>> my mom does not watch the show so i can say i got her something from etsy which reports tomorrow night >> etsy? >> i am aware. >> silverman has done quite an amazing job. >> there are incredible opportunities to buy things that you can't find it at the mall, that's why people go to etsy, right? >> 1800-flowers. >> when he came in, they had a lot of different issues. >> did you remember in the perspective, they thought it was not that important to make money. they wanted to be kind of ethiopian world. >> yeah. >> how does that work? >> guys, yesterday i did not pay close attention to shares of sinclair broadcasting which, of course, rsn auction that we follow for so long, they emerge

vict victorious they get cash flow projections obviously they're a huge station group, they talk about concerns of leverage and buyers and leverage well, they may have some because of their broadcast networks and retransmission and the leverage that may give them the stock went up was a rocket ship for sinclair >> some upgrades it is crazy. >> take a look at that thing it just took off and see at the oe end of the chart >> what's left to buy, ftc won't let us this falls right in their lap. >> nobody else wants to pay multiples.

they're paying as a good deal. there are still questions. they are known for cutting things and local tv stations and all the chairs are warn out. they get new furniture the investors love it. >> sounds like the end o of -- well, i should not go there. >> howard stern at the end where -- do remember pink vomit? >> oh my god >> this is deep stern fans >> it was the greatest movie ever made. >> guys, beyond meat. >> it is up. 75 bernstein out performs 81 target they look at alternative beverage category. they say if the alternative

meets the category gets that far in a decade, it is a 40 billion. >> well, tyson did not distinguish himself by having one this the market right now. it is possible meat can become public i actually think that there are vegans building the stock up vegan and kind of semireligious mode they're buying beyond meat. that's true, you know? >> really? its got such a small flow. >> well, wait until the lock up. >> watch it comes the same time tyson. >> of meat replacement >> well, that's kind of what bothers me barrier of injury is not that high >> i don't know, it took them a long time to put this thing together >> they have been working on a while, too >> it is like put a man on the

moon >> buy beyond meat >> a lot of chemicals on this. >> a lot of sodium >> i tried one tasted just like me. >> overall, we are back to where we were yesterday morning. disney and mcdonald's, the only components in the dow that are green. is there a floor here at 2900 or not? >> i think you have to get to monday before we have anything we have to get uber and lyft report is tonight. i don't know if that's going to blow the number. that's something lyft >> i don't know what you are looking for there. what's the key it is not they are going to make money. i still have not found what i am looking for with lyft. >> no. >> your gorilla tactic at requesting songs >> he's going to spell it "gor." i think it is "goe."

>> yes, img am aware. >> i recommend it highly >> at this point, gjim, get through uber >> a lot of people are talking about how high our tariffs are and i know "squawk box" they were talking about it. we are the 13th lowest tariffs n in the world if you put the new tariff on, we'll still be very low. they're a lot higher including china and korea and india. >> we were the leader of the free world remember free? >> well, that's the debate, is it how much do you benefit forgiving up a little bit for having a stable world order. >> it will be considered harder to measure than just the change of goods >> right there are 100 countries even if

they put the screw up higher i think it is what i worry about. we have to get through this. we have to hope that morgan and stanley have that uber deal under control and gets some stock out there. >> i think expect to i think the cfo at uber expects to know what they are doing. we'll go over the books many times. remember alibaba a >> do you think it is going to be like that >> i don't >> they like it to be like that. it is not a great week to become public >> that's my point >> they picked the wrong week. >> to your point about if you still have your supply chain out of china, would you be worried of retailers who are furniture maker? now, you take a look at

respiration harbor, they're all china. they have no intention of moving what do you do of respiration harbor the answer is sell it. hasbro has too much from china it is up very big. it is a terrific company i would not sell on it what is the dollar tree going to do they have incredible sourcing and even with 25% they'll do well do i want to buy dollar tree at 18% this year? no, i don't. i want dollar tree to come down. those are the guys when you think of it, dollar general and dollar tree, walmart has been under control. they have leverage i am still thinking of the larger issues of the chinese economy and the flow through there. we got earnings this year from nvidia and the year started from

the warning of apple these tariffs take place and time goes by without a deal. >> that's the way you want to look at it it goes from the chip inside your cell phone to olive garden. >> olive garden. new pasta. >> never been. >> i have been once. >> have you been to capital grill? >> capital who >> yeah, i have been to that >> that's darden's, too. >> i have been to olive dgarden >> darden is not in china. they're both so well run starbucks, nobody cares. that company does not have enough capital by the way, young china, look,

pizza is coming back kfc. who do you think is harder to write? colonel sanders or general soh >> jim, we got a new raising round at a cruise. $1.5 billion from a group including gm and honda valuation now is $19 billion >> people like gm. gm has been hanging in there i like forbes, wow, 4% yield i think forbes is doing better china has been loser for them. >> by the way, speaking of starbucks and coffee in china. >> so i remember

>> i am sorry, i was listening >> kervin johnson is saying they have the money to go ahead >> luckin is saying they are better coffee and loose stone and creamery or whatever >> starbucks has been unsalable. they have delivery with alibaba. >> also, disney, it goes to 170 which puts them above jessica reef >> that was unbelieverabable tho to 170 maybe they feel like they can get in today this is a day ahead of sales we are holding up okay > >> yeah. >> what is the president doing he's okay with -- cat is -- boy,

he's doing okay. the president got no problem with boeing. >> yes still holding 200 days as it has repeatedly in april and march. >> i totally worried about 3m. they're worried about 3m, too. >> this is a beyond meat market. >> beyond meat >> 81. that's already bernstein >> that's a 9% >> that shows you, in the end, it is bad taste in burgers i mean it is not as good as like -- i don't know, like the one in jimmy d i am not kidding >> that's a stabbing >> what's the matter with apple gig? >> the initial range on that

pricing was 19 to 21 >> that's crazy. >> it is $180 stock later. >> uber is going to be a quadruple. i think it is safe to say unlikely >> beyond meat, i did a piece ahead, if it gets to 85, it is the most expensive stock in the mark >> i don't know the metric >> shake shack is nothing compares to that shake hack is really chicken >> this is 13 times 2020 >> well, that's crazy. >> this is the fastest growing stock that has come public faster growing -- >> digitalizing and fo meat.

>> i threw one of their sauces against the wall and it is stuck. what do they got in there? elmer's glue that glue. that's hanging in there. >> he can go and go and the connections. he's already on newell now and the sausages and to newell >> you won't buy that at five below, let me tell you that much >> we are holding at 29.08 let's get to bob pisani. >> happy tuesday, everyone with the vice premier coming this week for two days. tariffs are getting more real. the risk is to the downside. how much does the mark go et gop what happens if there is no trade deal and there is mortar

rif more tariffs. multiples have to come down or earnings have to come down you can make an argument for the s&p. the market can go down quicker without a trade deal than it can go up with a trade deal. that's what we talked about when we say downside risk 35% of their exports are to china, well, luxury good makers and autos and bmw and voeks wagon and the banks. in terms of here in the united states, the usual things associated with china trade are weaker it is not dramatically of course, you have semis and of course that's ground zero and sell on the china trade deal worries. it was not dramatically. they ended down about 2% retailers, we always thought

peer o pier one they're not moving down that much today kohl's and best buy and electronic it is fractionally metal and mining, they have been terrible some of the other ones and some of the transports are down a little bit today expediters, and canadian and pacific. they have been down for several weeks now. in term of market movers remember something about this whole thing. part of the problem, neither side is desperate for a deal the four things that matters is the fed pivot and china stimulus furiously putting at the bottom of the economy there the bottom line is both china and the u.s. have decent economies right now. china is worry soisome.

that may have been embolden both sides to be harder on terms of the trade negotiations finally it is a little early in may to declare obvious rotation, have you noticed the worst perfo performer was healthcare the best performer in may was healthcare the best performer was technology stock and among the worst performers so far is technology there is a little bit of rotation, i will pay more attention to that in about a week or so >> back to you >> bob pisani, thanks. >> let's check in rick santelli at the cme in chicago. >> good morning carl traders are paying close attention to the way yields have melted a little bit. especially the face of some of the strengths we see on big numbers whether it is first look of gdp or jobs report or some extent retail sales and durable

goods and productive you can see on the far left was unemployment friday and how we drifted it down with the tariffs story. you open it up to a 10 year chart, starting in april, the lowest yield close since april 10 we'll call it a month. let's look at three-day of bund, they went from positive 01 to minus 03 we have been minus before but it does accentuate. the rest of the world still is questionable and three-day of the dollar index it losts a little bit on friday. it is so firm. the dollar verse in chinese yuan you can see how it is moving up. many traders paying close attention of this. carl, david and jim, back to you. >> rick, thank you very much before we go to break, social

media is still a buzz with the photos from the met gala last night which included the likes of jared leto and billy porter who looked great check out who's there? jeff bezos >> i would have met him and get the interview. that's the biggest met in history. >> why didn't he wear a costume? >> the theme was camp. >> by the way, on a related note, amazon opened its 12th go store, this one is downtown manhattan. check it out cashier free >> really? >> yep >> just bring your cell phone. >> correct >> let's go david.

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ipo. stocks open lower and we're around levels we defended successfully 24 hours ago. dow down almost 300, s&p 2,898

time for cramer and trading. >> i thought bob passan any had incredible insight david whitman, bill mcnabb, some may remember him from vanguard, bought $1.4 million. those guys are putting their money where their mouth is today is a down day. this is something to remember when the market comes off. >> we're also not heading into the seasonally strong time of the year. >> no. this is it this is what i've been worried about. a lot of uber coming at you, talks going badly. this is not a great week rained last weekend so there's a dow stock that's not doing well, that would normally be a place you would go you couldn't plant last weekend. you need to plant because those

costco tomatoes are expensive. >> what's tonight? >> 1-800-flowers whi, upcoming mother's day and teledoc. amazing how many people use it millions use it. i haven't used it yet, but i think i'm going to. >> all right >> you go to a clinic, everybody is sick there. that's the last thing you want you want to be sick at home, not sick at a clinic >> jim, we'll see you. cramer tonight, mad money, 6:00 p.m. when we come back, david kostin what he's calling an unusual rally. not today, though, dow down 250. ♪ (vo) i know what you're thinking. electric, it's not for you.

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♪ good tuesday morning welcome back to "squawk on the street." i'm carl quintanilla with sara eisen and david faber. bears getting a chance to test the bulls. we're back to 2,900 on the s&p as trade worries are downgrading on the markets.

>> that's where the roadmap begins, stocks tumbling on renewed trade tensions u.s. says higher chinese tariffs are on the way. >> china is coming their top negotiator will be in washington for this week's trade talks. can a deal get done? the clock is ticking for chevron. we'll give you a major update and fresh details on the deal for anadarko. >> stocks are lower this morning. dow falling nearly 300 points. up about 1% across the major averages nasdaq hit harder down 1.2 concerns over u.s./china trade relations continuing the u.s. announcing the possibility of a new set of tariffs. talks were set to continue wednesday. with us is david kostin from goldman sachs. good to see you. >> nice to see you. >> trade tensions are escalating what do you do >> it's always difficult to model donald trump as an

investor i think we can go back and look at what are the fundamentals telling us, what they think about the economy or earnings, valuation or money flow, some of the frameworks that i like to use. we think about earnings, we're now roughly 80% of the way through the first quarter reporting season earnings about to come in a little better than one had expected it was a pretty low quality beat that is to say, that earnings which were expected a month ago when i was last here, ahead of the earnings season, market was expecting down negative 2%, 2% year over year growth in earnings coming in closer to positive 2%. a lot of that came from lower taxes. lower taxes than what portfolio managers were expecting. tax rates came in around 19% projections were 21% earnings themselves were reasonably positive, again from a low quality perspective. we're thinking about some of the

drivers of profit growth going forward. and we're looking at some of the communication services stocks, thinking of a combination of low labor cost sensitivity as a way of inoculating the portfolio manager against rising labor inflation which is one of the consequences, if you will, positive consequence from a social point of view, that you have unemployment rates so low you saw that number on friday. you are leading to wage inflation which will pressure margins going forward. that's one strategy. the second would be dividend growth which remains a long-term strategy which is generally paid dividends, no pun intended, for portfolio managers that's how i would tackle the market right now. >> you've long been calling for a lull in the middle of the year is this how you thought it would happen, through trade? >> no, not necessarily as i said, difficult to model some of the geopolitical developments they happen when they do take

place. >> does it accelerate your call? >> no. i think the issue is, it's uncertain. certainly it's aspanner in the works, as they say it's a concern expectation is that eventually they'll be a trade deal. if we look at, as a portfolio manager, focus on more domestic facing companies, more revenues sourced domestically as opposed to the good side of the economy. if you look at a company like at&t, 6.7% dividend yield. we look at a strategy, there's a company with dividend yield and growth also relatively low labor cost compared with a lot of other companies. some of the big cap technology companies, facebook, google, which has relatively low labor cost as a share of their sales, that's what i would focus on with portfolio managers. >> interesting strategy. to come back to trade right now, i know it's hard to model

president trump. there are fundamentals at play here the tariff rates are set to go up from 10% to 25% on the $200 billion. that includes semiconductors, agricultural products, machinery. do you have to stay away from those stocks that get impacted by tariff costs right now? >> if you think about it, the segment between services companies and goods-oriented companies. some are more exposed and more sensitive to the impact of tariffs. some are more sensitive to potential retaliation on the part of china which may take place. yes, those are companies that will be in industries that are more exposed, risks both sides of the tariff equation and those that are more inoculated or more immune from those risks. there are always risks, but those are some of the strategies which would be more in the services area, whether it's communications -- you can look at it in any given industry, if it's more domestic, that's what i would emphasize. >> you took down the rating of

utilities. why? >> well, back in november we were looking for a more defensive posture, concerned about a rise in rates and the different environment that was taking place that was a successful strategy in the fourth quarter. matched the market over the period of time in the last three months the area of focus right now would be more simply exposed in terms of economic growth, technology and communication services would be sectorwise an area of focus. i think themes are more important and that's why dividends and the more the idea of domestic revenue would be an area of focus. as you pointed out correctly, the risk involving trade is a backdrop near term expectations is at some point that will be ultimately resolved. >> two questions does the upcoming ipo supply take oxygen out of the room in general. what is the beyond meat, what does it say about investor sentiment? the hunger for any secular

growth in this global economy? >> the u.s. economy is growing, globally it's also growing in fact, more reacceleration in terms of the activity in the united states and in china so there is growth, but modest growth that is an environment where secular growth as a thematic way of investing generally tends to do pretty well in that kind of environment. in terms of the ipos, there's a desire -- the proverbial wilshire 5000 has something like 3,500 stocks in it a consolidation for the better part of ten years, fewer securities out there there's a lot of demand and interest for new companies, interesting how things have evolved. that's a big area of focus no doubt. that's an area where from a portfolio manager point of view, most managers are lagging the market this year when you look at what has done well, some of the new ipos have

done well. that's been an area of focus, i think combination of lagging performance, you had rotation in the market that's an area that people gravitated towards. >> you didn't sound super impressed with the quality of the earnings beats we saw this season what two you see for the rest of the year >> modest growth for this year looking at something from 3% to 6% earnings growth is what i would forecast. >> is that keeping the market going. >> between $168 and $173 per share in s&p 500 earnings. an increase in 3rs to 6% what's level of gdp growth, what rates are and then margins in terms of the pressure on companies. that's the kind of growth. that's consistent with an s&p 500 that rises from, as you point, right now around 2,900 towards 3,000 at the end of the year which is a modest increase,

lower, single-digit return that's why dividend growth is an attractive environment the important point is, the economic growth, you had my colleague here on friday who talked about economic expense in our forecast, 2019, 2020, 2021 that's consistent as you look over a several-year period rates low. economy is growing, rates are low, inflation is low. that's an attractive backdrop for stocks to do modestly well over time. >> you mentioned hats yift who did a piece over the weekend about corporate debt not being too high it's been declining since the mid '90s kaplan is trying to wave a flag on at least highly lefrd companies. >> former colleague at goldman sachs, i'll point out. i would look at the interest coverage ratios. for companies, there's no

question that a immediate company has more leverage today than the last 30 years the coverage ratios are quite strong what you have here is that reduces the risk meaningfully. the stock market has already traded that to a certain degree, concern about this the companies with the strongest balance sheets are trading 12 multiple points higher than companies with weaker balance sheets markets have traded that to a significant degree i would argue what do you pay -- how much should one pay for a strong balance sheet company the answer is you're paying 24 times earnings as opposed to 12 times for a company with a weaker balance sheet i think that's largely embedded in the share prices. >> we're just watching, we've got a dow ticker up. declines accelerating, down 313 on the dow, 1.2% decline sounds like what you would tell people is buy the dip, it could still work because you see a rising market. >> think about a framework

when you're lost in the ocean, you think about the economy, think about earnings, valuation and money flow the economic environment, wages are growing, jobs are growing, consumer confidence reasonably hi if you go down the boxes, you've got consumer balance sheets -- the dow's fed president did more on corporate balance sheets. the economic story and the backdrop in the united states remains strong earnings remain positive because nominal gdp is what drives sales. margins themselves are flat to slightly lower as a result of -- there is pressures on input clause you look at valuation, valuations themselves are high, not extraordinarily, and you have buybacks which is david's favorite topic to focus on. >> it is >> see more companies invest more in their businesses look at the framework. the framework says things are doing okay in this environment and that's consistent with economy. >> i listen to you and i think you're sharing sells of goldman

sachs rising dividend growth fund that's what i think you're doing here, david. >> the framework in this environment, what's likely to do well more durable, visible, you said secular growth earlier combination of dividend growth and yield is attractive in this environment. where the upside is the low single digit number. if you have yield in growth over time, dividends generated like 40% of the return to equity inquesters over time. >> it's not impossible, though, if these trade talks are truly stuck, you're going to bring your earnings estimate down for the year and hence your target am i crazy >> earnings generally drive the price target generally in terms of the support earnings drive the valuation on the story. that would be a scenario that we'd have to contemplate depending on what takes place. the idea we just finished first quarter earnings, we still have eight, nine months left in the year to understand where the

trajectory is of economic activity 70% of the revenues of u.s. companies are domestic while tariffs are an issue, it's more concentrated in some sectors than others. lots of industries are more domestic facing. they don't have the tariffs, just less sensitivity. look at utilities, telecom face where that's a domestic facing that don't have that exposure. >> what do you tell an investor that owns industrials today? it's getting slammed, 3m and boeing having issues right now do you hold on to those stocks if you're seeing a better economy, that's a cyclical group. >> think of aerospace defense, the government spending, concerns over what's happening, you heard the president over the weekend, concerns in the middle east in terms of the oil supply, things happening in the south china sea. generally speaking, the federal budget spending on defense is increasing

that's revenues for these companies. 99% of their revenues are coming from the federal government. you're looking for visible, durable growth in the industrial space, that's an area to be focused on focused on that for several years. yes, other areas certainly more sensitive and at risk. >> good to have you on a day like today, david. thank you. david kostin. >> let's get to rick santelli who will give us a rundown >> or march read on job openings and labor turnover was the fourth highest number ever so hopefully we're showing a long-term chart. 7.488 million. that comes back to just january when we had 7.625 million, the second highest number of all time these are really powerful. just ponder this for a while, carl we haven't had a number over 7 million till just about a year ago. last april was the first time over 7 million in july of 2015, the first time

the series was over 6 million. it's really been an incredible run on jolts, but the market hardly noticed you can argue that yields went down a basis point >> when we come back, the selloff is picking up some steam here down 331 as sara said, we'll talk about how to position portfolios roger altman is with us. we'll look at sectors getting hit by the trade tensions. as we go to break, some of the worst performing stocks onhe p. t we're back in a moment your daily dashboard from fidelity. a visual snapshot of your investments. key portfolio events. all in one place. because when it's decision time...

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when you download the xfi app today. let's take a look at the divergence between growth and value. warren buffett has long said he missed the amazon story. now buffett says berkshire hathaway has been buying shares. does that change ow investors should perceive amazon with us with his thoughts, "new york times" columnist jim stewart. he did say, of course, it wasn't his purchase it was his other guys who run a good amount of money on their own. >> that was interesting that he said, well, it's not really me but then he turned around and said, but there's still value investors and on all these different metrics, it's still a value stock.

i was kind of taken aback by that i was scratching my head what would those metrics be? i went through them statistically. i was having trouble finding any. certainly, you don't look for earnings at amazon necessarily, with a pe, a good e report last week is over 50. you can't call that a value stock. revenue, which for the tech companies is the big metric, it looks like it's about 4. if you want to see a value stock, look at walmart priced to sell metric there is like .5. it's certainly lower than one. i don't think we can call that a value. i have trouble putting amazon and value in the same sentence. >> what's going on at berkshire then they had typically shied away from some of these big technology-related stocks that obviously have higher rates of growth than some value they've lagged as a result. >> they have definitely lagged

>> i think there are two possibilities going on here. one is there is a case -- i think there is a good case for amazon i don't know if i'd make it a value case let's say you can make a value case with it we can talk about it a little more second is, this is what makes me nervous. this is a long period of underperformance by value. we've seen those before and when the value investors start throwing in the towel, it's exactly when typically value starts coming back it reminds me so much of, you know, the '90s when the value investors were down and out. just when they capitulated is when it came back. that makes me a little bit nervous. i hope they're sticking to their value philosophy that said, there's a lot i like about amazon i think they've got in a buffett way, they're building a moat he loves moats he loves barriers to entry

that's really been his hallmark when he looks for stocks i think you can make a good case there. and they've got a big addressable market still they still have plenty of room to grow in some of these fields they're moving in. >> some people say it's a sign that value investing is dead >> the minute i hear people say value investing is dead is when i think it's time to buy some value stocks i'm old enough now that i've heard this many times before that's the funny thing about value. i never hear the growth people say, oh, growth is dead. never. even when they're at their lowest levels, they're like the diehard optimists. i think growth people as a group are kind of pessimistic anyway so they're always seeing the storm clouds again, they've been battered for many years they've been out in the wilderness i think that's exactly the time when they should stick to their philosophy i am fascinated by the amazon thing. the google leveling off, this

whole idea that people are searching on amazon, i thefr thought anybody was going to dent that google network effect of having the most algorithms, the best searches and search results. suddenly a lot of people going to amazon. i've been testing that lately. the great thing for amazon is it's shoppers who surge on amazon that's the most valuable ad target. >> they already have their wallet out. >> yeah, they're going to make a purchasing decision. that is the super valuable searcher if you're looking for, you know, abstract information on, say, chinese tariff policies. a company trying to sell you a mattress is not going to jump on that key word. but if you're looking for the product, you've all experienced it you've searched for a product and you get the targeted ads that are exactly what you're looking for. there's no question that it's faster to go to amazon you get the things right away,

push a button, get the product you don't get the array. don't get the variety. if you really are going to know what you want, i still find it's better on google i can see amazon is making inroads there and i can see why. >> yeah. >> then there's the moat i think the delivery thing is fascinating. i don't get that really, that's exactly why amazon moved into that if they can really perfect the home delivery, that is a huge convenience. if you're in the network, all you do is tap on your phone, it gets paid automatically. it's seamless. the staples, you don't need to go squeeze a carton of milk. it's heavy you don't want to carry the thing either there's a lot of potential there. >> you like amazon, not as a value stock. you haven't mentioned aws which is by far the most profitable and the fastest growing -- >> that's the part i'm sure

warren buffett and i don't understand quite a well. amazon is at a reasonable price. if they can boost earnings the way they did, it's going to be pretty reasonable. >> jim, thanks as we head to break, take a look at shares of boeing, getting a downgrade today. when we return, american farmers in the crosshairsment why a farming community says they're losing hope in the wake of renewed trade tensions with china. "squawk on the street" will be right back

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. stocks selling off -- really the selloff picked up speed. all sectors in the s&p are lower. dom chu looking at the chip stoc stocks >> traders keeping a close eye on what happens with the u.s./china trade negotiations. the computer chip industry, like

you see there, one of the most sensitive parts of the market, whether it be positive or negative, this particular etf, ticker smh is down 6% lower than the record high we saw from april 24th not helping matters today, shares of kla-tencor which are among the worst performers in the s&p and the worst performer in this etf, on the heels of the earnings report after yesterday's close. the vast majority of larger cap chip stocks are higher year to date you've got universal display, also cane's design and qualcomm some of the big gainers in on a year to date basis all up 50% or more one of the biggest laggerts. chip stocks continue to be a focus because so much of the supply chain for high tech electronics flow through china chips a big part of that story

back to you. in the next hour, speaking of semis, don't miss an interview with amd ceo lisa su that's coming up on squawk alley. trade tension also hitting farmers across the united states our elon my' joins us with that story. >> the ag industry suffered a one-two punch as some of the biggest battles in washington are turning farmers into collateral damage. first is the trade war with china. a lot of hope amongst farmers that any deal would include china removing the tariffs on soybeans as well as ramping purchases back up. right now that is all up in the air. i talked to greg mimms, a farmer in georgia who has about 3,500 acres. soy beans is one of his main crops. he says his bottom line is taking a hit >> we really need to get some type of trade agreement worked

out because the depressed prices right now are not helping us at all. >> on top of his trade troubles, he's also still waiting on federal disaster relief. his farm took a direct hit from hurricane michael all the way back in october. he's still not gotten help from uncle sam. congress is debating $3 billion in direct aid to farmers right now that is all getting tangled up in a partisan fight over how much money should go to puerto rico. >> small towns here depend on agriculture to make a live iing. not just the farmers, but businesses in town depend on that money from the farmers that goes into the economy. >> the politics are extremely messy. we're expecting to see movement this week. the house will take up the disaster relief bill of course, china's trade delegation is coming to washington what you heard from mims is the

sense of fatalism on the farm. he doesn't expect to see a resolution any time soon. >> okay, thank you down to the oil patch and the fight we've been following it's been a number of weeks. occidental petroleum got at least what it's been seeking for a bit of time now in that its bid to acquire anadarko has been deemed superior. increasing the cash component to a level at which it does no longer require a shareholder vote, a vote of its own shareholders, eliminating the potential risk holding back anadarko's board from deeming it superior now it is. now the clock is ticking for chevron to choose what to do in order to compete chevron originally had a deal to acquire anadarko for what was $65, 75% stock, remainder in cash the value of that deal has declined as chevron's stock price has declined as well

the question is will chevron continue to compete? it remains unclear oftentimes in a competitive six like this you will see the company that has the deal approached by the target when they're about to deem another bid superior saying, hey, now is the time we didn't see chevron step up and sign a new deal. that's typically been the case in these kind of things. that doesn't mean chevron has chosen yet to say no mas in speaking to people close to the situation, it's simply not a decision they have yet arrived at, but one they're certainly going to have to soon. if they do, my understanding, they will choose to compete at a level that is very close to the current bid from occidental, not a lower level. there is the prospect give vin vicky howell's aggressive deal to go higher in the bid.

chevron, still unclear what they're going to choose to do. >> isn't there a deadline? >> four days the clock is ticking. over to sue herera for a cnbc update. >> good morning. here is what's happening at this hour the treasury department refusing to release the president's tax returns to congress. this comes after a request from house democrats that treasury release six years' worth of returns. the legal battle will likely end up before the supreme court. the two reuters journalists jailed in myanmar were released from prison overnight. the two men spent more than 500 days in jail after investigating the death of row ming yeah men and boys. turkish president defending the decision to hold a new mayoral vote for istanbul. the move invalidates the election of answered gan opponent the turkish lira dropped sharply

in the last two days. the u.s. government spent the first payment to malaysia t. department of justice hopes to recover some $1.7 billion in total from the scandal-ridden state fund set up by former prime minister razak you're up to date. that's the update at this hour back downtown to you >> sue, thank you. when we come back, trade concerns weighing on markets around the globe health care materials, technology worst performing sectors. everybody is lower as the market selloff picks up speed s&p down 1.25% evercore chairman roger altman is with us why he thinks there's nothing to fear that's next. "squawk on the street" will be right back with the united explorer card,

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threats to raise tariffs on imports. over the course of the last week we've seen erosion and commitments by china i would say retreating from specific commitments that had already been made. that in our view is unacceptable despite the tensions, our next guest thinks there is nothing to worry about. evercore's founder and ceo roger altman is with us. did i get that right >> i wouldn't say nothing to worry about. i think what you're referring to is there will be an agreement, and the question is when, not if very short term i think the united states has the advantage simply because we import so much more than china does from us so in terms of weeks, there can be a tariff war and we have a short-term advantage medium term, let's say months, i don't think that's viable and i don't think it's viable because, one, the u.s. stock market likely weakens trump has shown a lot of

sensitivity for the stock market, not likely to tolerate that two, his strongest political advantage is the economy which is doing extraordinarily well, but a series of retaliatory actions from china over months rather than weeks could also undermine that i don't think his toleration or our toleration as a country for that would be great. this could go on for weeks i don't see it going on for a series of months over the very long term china has the advantage because there's so much skepticism about the enforceability of any agreement as it relates to intellectual property, technology transfer and so forth. that's what i think is going on a little bit in terms of china backing off from changing its legal -- changing the laws underlying this. >> does it matter whose tolerance or pain is higher at this point if so, whose is it >> well, as i just said, short term i think our tolerance for pain is a little higher because on any given day over the next, say, two weeks or three weeks,

the pain on china is greater because of the import imbalance. but i think it's mutually assured destruction over more than just the short term because of the possible imt pacts on the stock markets and the economy here of course, the continued impact on china my point is, there will be an agreement. it could take weeks. it won't take months. >> weeks, not months you think it could be that soon? why would you have that confidence >> well, this could go on for, let's say, six or eight weeks or even a few more weeks. is it going to go on for six or eight months no it's not going to because of what i said. >> you think because they'll react to the stock market and/or the economy will start to suffer. >> if you were in president trump's shoes, david -- imagine yourself there. >> okay. trying to. go ahead. >> you were thinking, of course, towards your re-election which like any other president he is, you say what's my strongest card my strongest card is the

economy. what's the one thing i can't trifle with? that's the economy would six to eight months of retaliatory action from china potentially undermine the economy? yes. am i going to take that risk no. >> that's if things were to deteriorate even from here the fact is they are emboldened by a 3.2% on gdp, 3.6 -- >> if you say to yourself, well, could we have a tariff war for six to 12 months, i think the strength we've just seen could weaken, and into think if you're president trump you don't take that risk. of course, i can be wrong. it's just a judgment but i do think they'll be an agreement and not smart enough to know whether it's four weeks or eight weeks or ten weeks, but i don't think it's going to extend over many months. >> we're all trying to figure out what, if there was an agreement, that would do to the economy. you talk to so many businesses,

advice thems on deals and ipos what's your sense of what's being held back because planning decisions are hard to make when you don't know if tariff rates are going up and tensions with accelerate. >> i don't know about the last 48 or 72 hours, but the answer is no in terms of activity that had been held back before this latest spike in trade tensions you see it in the data if you step way back, the idea of this strong data, this late in this expansion is unprecedented. to have 3.2% growth, 3.6% unemployment, 2.5% productivity gains, wage gains, at this stage after nine to ten years of expansion, depending on how you measure it, that's unprecedented. so we have a remarkable situation in terms of our strength and that's one of the many reasons if you're president trump you don't want to trifle with it very much because

history says, if the economy remains that strong, president trump will be hard to beat from a re-election point of view. >> i'm wondering if the economy gets even a further boost. business investment, for instance, was not that great in the last gdp report. i wonder how much uncertainty is playing out there which could unleash some real investment if this trade deal gets done. >> let's assume we were having this conversation a week ago i don't think the answer is much being held back. a week ago, and there was i think a chart on bloomberg that showed this -- >> we don't know what you're talking about. >> i know. it's a startup this chart that showed the percentage of earnings calls in this cycle on which china was mentioned. and the answer was that small. so that tells you that at least as it relates to the tariff and trade tensions, there hasn't been much concern recently because the assumption has been we're going to have a deal i don't think that has been restraining investment

i don't see any other factor that would be restraining investment either from the point of view of uncertainty any individual business is making judgments about its outlook. >> brexit. >> well, snaes a limited factor for most companies in financial services it's a big factor for most companies, that's a limited factor. >> let me ask you this what's to keep the chinese from employing a strategy where they appear to make progress, pull back, make progress, pull back and wait out the clock until we get into the prime election season >> that's a good question because if it comes to issues like changing their laws for putting in place some regime of enforcement that really might work, that's very, very hard for them to do i don't think they want to do that at least the framework i outlined a minute ago suggests a rope-a-dope strategy would work for them because if you get into two months or three months of

four months,our tolerance goes down >> so the presidencies that, hence his tweet this week, right? >> he sees that. but on the other hand, he obviously has sold himself for a very long time as a master dealmaker. he needs a deal at some medium-term point to fulfill that he also needs it for the reasons i talked about in terms of the stock market and the economy so if you're china, you say to yourself, if this goes on for months, not weeks, the u.s. will want a deal more than they do. >> can't let you leave without another core competency of both of ours, m&a it goes to ceo confidence in part to sara's question. where are we first quarter wasn't great are things picking snup do you expect that ceo confidence will result in more deals >> conditions are good you're right first quarter data, global m&a totals in dollar terms was off,

17% year over year conditions are good. for most firms, backlogs are up, not down, and various technical indications of strength are up, and you just have very strong fundamentals despite the weakness today and yesterday, you have strong equity markets, high valuations. you have ten-year treasury this morning, 247, robust credit availability, pretty good levels of business confidence spots like brexit, but generally good when you continue to have those factors, you have strong transaction volume so the outlook at least at this moment is pretty good. >> roger, so good to have you and your specificity see you soon roger altman. lomoa t re "squawk on the street" after the break. dow is down 350. or the latest phones. $4.95. no matter what you trade, at fidelity it's just $4.95 per online u.s. equity trade.

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all 11 s&p 500 sectors in the red. hardest hit is information technology you've seen steep declines, 1.5% in materials, energies, industrials. let's get over to the cme group. >> i'd like to welcome chief mack tomorrow skrat gist at td securities, michael hanson thanks for joining me. let's jump right into it we've had terrific data points, whether it's been productivity, first quarter gdp, jobs reports. today, the fourth highest jolts number ever, just shy of 7.5 million. yet rates are definitely on the soft side. i understand tariff issues michael, explain what you see in rates. >> i think that you had a situation where rates came down

sharply because of concerns about the global economy, about recession. you're right, the data has been a bit better certainly in the u.s., perhaps a little less so abroad i think you do have these lingering concerns about downside downside risks and trade's part of that story, so i think the rate's market is still kind of concerned about what the outlook is >> all right, now let's frame this out old school. sb supply and demand. on the demand side, the u.s. is the high water mark. many investors would like to buy that nice, positive rate even adjusted with currency and low inflation. on the other side, the supply side with huge deficits and auctions of the biggest magnitude we've seen in the history of treasury. which of the issues do you think is most important? is it the demand more than it is global weakness? >> so i think it's demand for sure a combination of things on that side you're not see iing the market t

worried about large deficits that's a global story. so i think as a combination of demand fakctors and i think that is probably going to keep us capped in terms of just how high yields can go for the foreseeable future >> everybody's an armchair diplomat with what's going on with china now today aside, we don't know how it's going to end, but it certainly seems to me that all trading points outside the are quaking in their boots more than the u.s. if this gets more dicesy on trade. umt to weigh in? >> so i think there's concerns on that front, right so obviously concerns about what the implications would be if we had higher tariffs on china and what the spillover would be to the broader economy. a lot of concern about european weaknesses is through a china channel. i do think that if you were to get some sign that other forms of tariff woul get discussed, you would u get risk off

movement in the markets. >> in the last seconds we have, are this any important milestones ahead regarding the issues with china that we should pay particularly close risk off attention to, michael? >> well i would say on the trade front, you have a decision that needs to be made on those auto tariffs. section 232 on may 18th. probably less china than other trading partners, but that's an important date to keep in mind >> excellent michael, thank you david faber, back to you >> okay, thank you, rick santelli and now i will send it over to jon fortt. >> morning, david. well the united states has been on a super computing run, competing with china r for the fastest computer in the world. there's a new entry and we've got lisa sue with that latest on that and the competition that's coming up "squawk alley.

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stocks are trading near their worst levels of the day so r far with the s&p tracking for its worst day since late march industrials and technology leading the way to the downside as you can see here, but let's

look at the underperforming group, material stocks overall among the laggers, dow, dupont, new core, companies sensitive to growth relying on china but the worst performers, mosaic shares, the wall street giant beat on sales b, but lowered guidance for the rest of the year putting it on pace r for its worst day since november 2015. back to you at the stock exchange >> thank you dom. we're watching these markets and i'm assuming given we're near the lows, let's call it 1.4% on the s&p. question will be where will we be a few hours from now. >> must see tv worst day for stocks since march. all over the sell off. we are also going to talk abts the environme about the environment for business with bill mcdermott he will be our guest always got a good feel for

intersurprise spending and happening globally china as well. plus, lyft's first earnings coming after the bell, instant analysis there especially with uriber's ipo ju a few days away. >> when we come back, we're going to be all over the sell off, plus amd and crea partner ing to develop the world's fastest super computer we'll talk to both includingly sa su. [knocking]

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