mcluckin it's just better set to go public today here at the nasdaq we'll have all the etails on pricing. and a first on cnbc interview with the company's cfo it's friday, may 17th. the guy that plays that stupid song is right here friday i'm in love "squawk box" begins right now. ♪ good morning we're getting luckin this morning. welcome to "squawk box" here on cnbc i'm andrew ross sorkin along with joe kernen. becky is out today take a look at u.s. equity futures at this hour they are in the red in large part because they're under pressure from what's happening in china overnight we'll show you that in a second. dow off 86 points. s&p 500 off about 10 points. nasdaq looking to open down

about 28 points. overnight in asia as i mentioned, stocks plunged. shanghai composite fell 2.5% we'll talk about why that's happening in a moment. european equities at this hour are also under a bit of stress across the board you're looking at red arrows finally let's take a quick look at treasury yields at this hour. the 10-year note is looking at 2.386. joe, explain what is going on in china, sir i'm looking at, i don't know how old this is. but i get some good stuff off this controversial website we don't need to talk about it but trade optimism fizzling as china says no plans for the talks. >> what's this website >> zero hedge. some good stuff comes on there >> occasionally. >> you're back stay over there. >> you stay over there you trying to give me a high

five >> you know what i do when you try to give me a high five >> from high school. >> can you do that when we ring in the bell at new york stock exchange i don't know it's instinctive china has yet to say how it may retaliate to the latest escalation in trade tensions with the u.s people's daily used a front page commentary piece to evoke the patriotic spirit of past wars saying this trade war, the trade war would never bring china to its knees. that comes after president trump signed on executive order effectively banning huawei from doing business with u.s. companies. we'll see how that ripples through silicon valley there's concerns huawei's chip unit says it has long been preparing some backup plans in case of this -- what they're calling an extreme scenario where it's banned from buying u.s. technology says it's been able to ensure a steady supply of most products

but sunny optical and taiwan semi are slumping overnight. those are some pretty significant losses as you can see there. corporate news boeing says it's one step closer to getting its grounded 737 max planes back into the sky the company said it has completed the update for the software linked to those two fatal crashes of the 737 max boeing released a statement saying in part, we're committed to providing the faa and global regulators all the information they need. we're making clear and steady progress we're confident the 737 max will be one of the safest planes ever to fly boeing is working with the faa to schedule a certification flight for the 737 max says it has completed 300 hours of testing they have the update d software for the pilots >> you think this plane is going to be in the air in the year

2019 >> what is it -- i do. yeah. >> i don't know. they may be ready, but i wonder how quickly washington will move >> i'm foreseeing the day we aren't talking about it anymore and we may or may not know we're even getting on one, i think >> i hope. >> we were -- you know, ignorance is bliss we may have been on them a lot already and have no idea until these two things happened. and in the yats, it was never really an incident >> you read that story earlier this week. you hear the tape recording of the american air pilots talking to the folks at boeing i just imagine this is going to continue in a series of investigations >> you've been more interested in, i think, the faa's -- >> side of it. yeah and that's the other piece of it that's going to be looked at >> because we know that companies are going to try to keep their planes -- they've got other concerns the faa supposedly should have

the opposite concerns. >> i put it right on the faa meanwhile, talk about companies where regulators are looking at them. tesla ceo elon musk has told employees he's increasing his own scrutiny of the company's expenses >> that'll help. >> in an effort to cut costs earlier this month the company closed a $2.7 billion offering of stock notes giving it a cash infusion as it ramped up production but an email to employees, musk said the proceeds give tesla just month -- ten months to break even so musk said everything will be reviewed literally every payment that leaves tesla's bank account. tesla has already cut back jobs by 9%. that happened last june. and 7% in january. but you're looking at the stock now with $227 a share. >> the questions about this latest crash with autopilot that

looks so similar almost identical to a similar crash about two years ago that he said was going to be preventable given the technology they put into that. again, we're talking about questions on boeing. i think there's going to be additional questions on tesla. in addition, investors getting a chance to cash in on the chinese consumer luckin coffee, starbucks's biggest competition in china the top end of the expected range, $17 values the chain at $4.2 billion. making it the biggest u.s. offering by a chinese firm this yeeb luckin which was founded only two years ago. this is one of those unbelievable entrepreneurial stories. has about 2400 stores across china already. it is backed by blackrock and singapore sovereign wealth fund. it'll begin trading today under the nasdaqic ticker lk and because you can see every ipo -- before every ipo, you

know where they want to come they want to come to "squawk box. the company's cfo is going 2to b joining us we'll have all the questions about this offering right here on the -- >> i thought we'd have to work on the pronouncer. i did not think it would reinout shackel. now you got to get it. they say shackel >> i think it's shake-el >> they don't know how to pronounce this you need an a-y then >> there was a video interview i went to last night to get the pronunciation. which it'll end up being the opposite >> oh, it is shackel

they got it right. >> nonetheless, we'll be talking to him because this is a huge p ipo. >> you can't put it all on capitals >> you know who's going to be watching this? if you're an investor in starbucks, this is what you care about. >> how much is a cup of this coffee coffee should not cost $5 a cup. we're all paying it like we're lemmings like, okay, howard here's $5. what are the margins on that >> third place, man. it's going to the third place. it's the experience. you're hanging out together at this third place >> after the way you cut him loose when he could mess up the democratic -- >> are you kidding me? i've always liked howard schultz. >> but your dream comes true he's going to unare for president. and then -- >> i try not to be political but i -- i think the world of howard schultz >> you dropped him like a hot potato because he might hurt

somebody else's chances. some wacko like bernie sanders >> i was not trying to take a side >> you like to be apolitical >> i do. >> you and everybody at "the new york times"? >> i represent myself. and i'm not representing something else. >> here we go again. what time is it? it's only 6:08 we were doing so well earlier. weren't we >> we were doing so well >> let's go back let me get back to this amazon stuff? >> we can get tom friedman in here >> tom told me -- he was classic. he told me he was a centrist >> he is a centrist. >> oh! the same way i'm a centrist. >> the same way i feel i'm a centrist tom was here, i told him i read your stuff when i'm reading your stuff, i feel like it's what -- when you're reading rush limbaugh and hahn i dnnit hannity, that's how i feel reading your stuff but i think in this bubble we're in here in manhattan then you go to that place where you guys work -- >> no, no, no.

>> they look at you sometimes as scant, don't they? >> yeah, sure. >> that says something. >> oh, no, no. yes. it depends where you sit and where you stand. >> in the universe you might be moving or stationary you only know from what's going around past you. >> that's correct. >> okay. >> i agree with that >> so i am -- >> oh, you think you're --ly es. >> count by the yard >> the kilometer leading a $56 a million funding round for deliveroo. i like that. a british food delivery start-up deliveroo said it would expand its delivery reach to offer its service to new customers the company currently operates in 14 markets including the market maybe you'll get another chance

here >> here is my big chance for the sorkin family. pras of the cryptocurrency back bel below. dropping as much as 10% before moderating just a bit. that drop coming just days after a sharp rise taking an algorrhythmic trading. >> it's hard to measure. >> you didn't buy at 35. i don't care if it is down >> it's hard for me. coming up, we've got a great story for you. the travel unicorn getting richer suitcase start-up away is using a new round of funding it's valued at $1.4 billion. it's a lot more than that actually company's cofounder is going to join us after the break.

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welcome back to "squawk box. we are here now with the newest unicorn in the private sector. away is a travel brand that started with a suitcase. it is now a $1.4 billion company. steph cora is here she's the ceo of away. i should also mention comcast ventures invested in away during its b and c rounds we've had you on the show before long before you were unicorn >> that's true. >> did you ever think this was -- i mane, can we be honest? >> i think we thought it would take longer to get here than it did. >> hold on when you first started the company, you thought selling suitcases originally was -- i knew you wanted it to be more than that. >> they did choose suitcases to do you must have thought it was -- >> when we were first starting, we thought about the opportunity in the travel space.

but we couldn't have imagined we'd be here at this point >> what are you going to do now? the patrwhole plan is to take ts beyond suitcases >> we said luggage is the beginning of our business. it's about travel. as we look at the next few years, we're going to expand our product line into not just the things that carry your things when you travel, but the perfect version of everything that you need to bring with you when you're going on new experiences, new travels. we're also expanding our retail footprint. we have seven stores today in the u.s. and overseas. we're going to open 50 more in the next three years and we're expanding internationally. so our brands are global, our products going all over the world. >> i want to talk about the different products but retail first. do you look at it like a warby parker and say to yourself you want a brick and mortar presence that's important to the whole project? >> so for us, it's not so much looking at another company's strategy as it is, like, look at our own customer experience and data and what we're learning

from our customers and the seven stores we have today essentially are all profitable the month they hope the customers that shop in store have a deeper sense of brand lo love, repeat purchase. we can bring our community together in these physical locations. so every business metric goes up >> can you keep the margin though because the trick i always thought -- not all the online direct to consumer businesses was not having to deal with the real estate costs. >> it's funny you say that because -- so we think of our business as being direct to consumer whether it's online or offline. and actually because our stores do so well, we pay less in retail rent than we do on shipping our orders to the customer on our online business. that we're more profitable than online >> so is it -- if you had to choose fashion or function with what you do, does fashion follow

function you know who died? i.m. pei form follows function is the most important thing that you don't just make -- you know, all these columns and things you do it so it works. if i have shirts, do you have something for me so it won't get wrinkled >> absolutely. i think we think about it less as fashion and more as design and function so how can we think about what materials to make things out of, what's your travel experience and what would really make it more seamless for you. then how can we design products around those unique needs. but keep a minimal aesthetic so from a trend perspective, it's not so fashionable >> you need premium prices >> and because of our business model direct to consumer, we're able to offer high quality product at a competitive price because there's no retailer mark rg it up >> you're going to start doing appar apparel. >> we are. >> men, women, both? >> both. >> what should we be wearing

when on an airplane? >> i always wonder sometimes they say you want to wear like a blazer and look like you're -- so you can get the upgrade. then the other side of that -- >> that helps with the upgrade >> or you want to be wearing sweat pants because it's more comfortable. >> so what we hear from customers and you can tell me if this is true for you or not. you want to be comfortable but want to look presentable if you're on a red eye, you want to sleep but get off the flight and go tragt to a meeting if you need to. >> he wears lululemon pants that look like real pants >> that's smart. >> function. they look okay but no one's going to -- i'm not going to make any best dressed lists. but that's okay. i get cold sometimes you never know on the plane. the. >> absolutely. you need layers. you need something that works if it's hot, if it's cold we're also bringing in a new product how to stay healthy and well when you travel airplanes have a lot of germs. >> i love this

>> there's jet lag >> i was just on a plane yesterday and a guy literally wiped down he sat down the seat and then broke out the purrell stuff. >> supposedly it's that tray table is worse than like a jo johnny on the spot outhouse. >> what do you do when you get on a plane >> i'm wiping everything down. yeah for sure >> what if your immune system sees all that? i'm immune to everything i don't -- you know, the germs need to get a foothold so you figured this out that when quality of life gets higher and higher, i'm not sure the rest of the world is here yet. but when you have time and some disposal income, you travel. you can only have so many possessions. and then it's all about travel after that >> yeah. >> it's such a powerful thing. >> and i think high disposal income isn't even a requirement anymore. people are prioritizing new

experiences. >> people are still trying to get water a lot of places. >> that's true being able to tack on a weekend trip even if it's local, just that investment in new experiences is an important part of people's lives. we think that's a good thing like, getting outside your comfort zone, meeting new people the more we can encourage that, the better >> congratulations it's thrilling to see. this is a great entrepreneurial story. i love these stories i do and i love watching the success. >> no envy >> no. i don't. i don't. i own the bag. i'm very happy >> the other day we had someone on -- >> i was envious of that >> me too. as i do this coming up, we're going to tell you why pinterest is plunging after its first report as a public company. stocks to watch is next. plus "squawk" booze news new data on the world's drunkest countries and just how often people are getting sloshed we'll be right back. incomparable design makes it beautiful.

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my reputation depends on it. flexshares etfs are designed and managed around investor objectives. so you can advise with confidence. before investing, consider the fund's investment objectives, risks, charges and expenses. go to flexshares.com for a prospectus containing this information. read it carefully. earnings just in from deere and company. reporting a profit of $3.52 a share. that's 10 cents below consensus estimates. revenue did come in ahead of analyst forecasts. persistent uncertainty in its agricultural markets are weighing on the near term

outlook. but the overall economic conditions remain positive okay we've got some stocks to watch right now. take a look at pinterest that stock is plunging after a loss that was much greater or much worse, i must say, than has been expected. pinterest says cost jumped 32% mostly related to any new employees. which was above analyst forecasts. for reference pinterest went public on april 18th and closed the first day at 24 h$24.40 it is now at $26.27. also nvidia is trading higher the company forecasting second quarter revenue above estimates as it expects sales of its graphic chips to benefit from a recovery in the gaming market. wonder whether bitcoin has anything to do with this as well separately given that a lot of miners use nvidia chips for the

coins. separately, baidu posting its first quarterly loss since it went public in 2005. the search company also warning that revenue could fall this quarter this due to the fallout from the slowdown in the chinese economy. baidu also announced a $1 billion stock buyback program. what's the drunkest country in the world according to a new survey, it is the united kingdom the global drug survey analyzed the behavior of more than 120,000 people in 36 countries people in the uk reported being drunk 51 times in the last year. that's well above the average of 33 times u.s. respondented also reported being drunk nearly once a week that's followed by canada and australia. among the least inebriated countries chile and germany and colombia they had overindulged just 33

times. i look totally aware don't i look fine there? >> very much so. >> just the first couple of sips i like beer. i admit it you know what i'm talking about right? >> mr. kavanaugh. >> yeah. >> justice kavanaugh i should say. >> yes nice nice >> the honorable >> you're not being -- >> i'm not saying this in jest look i agreed with his rule -- no, i didn't resulted in a special treat for an unsuspected couple. the diners ordered a $300 bottle of wine. but due to a server mistake, they were served a $6,000 bottle the manager noticed the mixup after they left and tweeted a photo of the two bottles coming up, some stocks on the move after china dropping overnight. we're going to explain what's going on here and really try to

answer the question will it jeopardize the bounceback in the u.s. for monday's selloff? we'll talk to a -- we'll talk strategy next. then as we head to a break, look at yesterday's s&p 500 winners and losers trust. transparency. expertise. these are the building blocks enduring relationships are built on. as investment management professionals, let's measure up. cfa institute.

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♪ welcome back you're watching "squawk box" live from the nasdaq market site in times square. good morning welcome to "squawk box" right here on cnbc take a look at u.s. equity futures at this hour under a bit of pressure after a selloff in china we'll talk a little bit more about that in just a moment. but take a quick look at the dow. it looks like it would open down

about 93 points. nasdaq off about 31 points s&p 500 looking to open off about 12 points. global stocks on the move after this selloff in china overnight. we want toget to london with a quick rundown. good morning >> good morning to you, andrew it may surprise you, but there is a lot of red on the board right behind me for european you can see all of the majors are in the red a lot of these are up north of 1.5 percentage point but the mood in asia overnight turned it south. we had breaking news in the uk in the last half an hour the ftse 100 just shifted. but it's down on news that trust party talks twaen the labor party and conservative party has officially been broken off now.ñ has dropped a good two points this week. it's not all been about trade

and tariffs. we focused much on brexit and the european elections coming up i've got a bunch of delivery food services. and the catalyst for this is amazon none other. so amazon had announced today they are leading a $575 million funding into the british start-up deliveroo this is their second round of funding. they would have raised $1.5 billion since their launch a few years ago. interesting that amazon are getting into this space. they tried it in the uk in 2016. the start-up -- the venture only lasted for a couple of years they ended in 2018 and it looks as though this is their first way back in. getting some exposure to deliveroo. other names that are public are trading down on the news delivery hero down 3.5%. but the bigger theme here is of

auto is a sector we're watching closely. auto names in the red as well. i'll throw it back to you. >> all right thank you. here to talk more about the volatile week in the market. i'm glad you're here, phil poor ed, man ed, you're losing your nerve losing your nerve. i read your comments you're shaky your knees are weak. >> more cautious >> just to summarize, and then you can go in. the two things you have your eyes on are the potential trade war and the strength of the economy. trade wars, things got ramped up you you're not convinced we get a near term resolution as far as the economy goes, we've got some great numbers and gdpand unemployment, we have some that will make you wonder

so you think it's time to go, what equal weight instead of overweight >> we're around equal weight maybe slightly overweight. the way i think about the trade. we have no idea what's going to happen with the trade war. i don't think anybody else does either just a couple weeks ago, we thought and most people did that there was going to be a deal and we're down a few percent since then but if talks completely collapse and we go into a full-blown trade war, you know, i think that the market could fall by 10% or more. so given that the upside to get back to where we were a down some i think the prudent thing to do is pull in risk a little bit here >> you, i'm sure, have some empathy for ed's position at this point, phil but i think you think things will -- you're more optimistic things get resolved. >> we think both are motivated to get this deal done. we concede that the volatility in the market right now is being driven by the uncertainty over

china. but we think this g20 meeting in osaka at the end of june is we've got six weeks here to try to get something done. the united states needs a deal more than we doe in terms of how slow their economic growth was last year. the slowest growth in 28 years the shanghai index down last year 32% or so they want to be able to remove these tariffs and get free and open trade and get their economy and markets going again. so i think to some degree, you've got negotiating stances, an elaborate kabuki dance, if you will but we think when the dust settles, we'll get this deal done >> the way it's covered, too, is pretty good. you know, on tuesday, the trillion has a lot of zeros. it's very for an on-air graphic it's a compelling thing. i maean, trump tariff losses we've come back a trillion

basically since monday i haven't seen that this morning. i don't know if we're going to bring that up. i don't know if we're going to use the same metric. but certainly at this point for being what are we 2% off the all-time highs, we certainly are aware of potential potholes. are we not i mean, who's not aware of what you're saying right here and why doesn't that make you think you should maybe -- >> that's right. it's not as though we have some great insight into what's going to happen to the negotiators it's a question of balancing risk and reward. if you go back to where you were where it was wildly expected to get a deal, you're going to go back to the price you had a couple weeks ago up 2%. but what we don't know is what's the odds that negotiations fail? now, i have no idea what those odds are but they've got to be greater than they were a couple weeks ago. it's just a quantitative balances of a risk and return. i think we may be wrong and

maybe things will go to new highs soon but i think the possibility is greater now that things could go wrong. >> so you think it's a greater possibility that we don't go to new highs in the next three months than maybe we retrench to where? we had -- the guy at ubs is 2550 now. i think he's speaking to all of ubs now where i'm going to tell my people i need to sell everything you know we don't own things. >> yeah, we're not bears all right? we still think the best economic news we've had in a long time is the productivity growth is finally starting to get some traction and if that turns out to be the big story of the next several years as some people believe, then that creates a great bullish backdrop but in the short run given this new uncertainty, i think the prudent thing to do is take a little chip off the table and play it cautious >> isaw that interview you did the other day with francois at

ubs. the two things they're ignoring here, is interest rates are relatively benign. back to that 18.5 neighborhood we do not expect this is going to result in a recession slower growth, maybe corporate earnings growth of only 5% or 6% this year. we're looking at $170. but if we get that 18 multiple with 170 $170 in earnings then r talking about a 3100 estimate for the s&p at the end of the year not 2350 or whatever their forecast was so if you focus on the underlying fundamentals, and have a reasonably constructive view of where we are in this china/u.s. negotiation, you've got to conclude that this is an air pocket it's health y i. it's a correction. but eventually we'll get this ship righted and work higher by the end of the year. >> okay. one of -- you're not totally --

i can't say one will be right and one will be wrong. you're not saying things that are really that different, ed. but we will see. and we'll have to check back on. i will remember what you said, though, ed and if you're wrong -- >> i expect a peg. yes. >> and same with that guy francois i wrote that down. 2550 all right. thanks >> thanks. coming up, a lot more on "squawk. a high profile ipo today luckin coffee looking for dominance in china we're going to talk to the cfo about its plans. stayun u' watching "squawk box" right here on cnbc this is the couple who wanted to get away

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i have a new development in bayer's legal battle the company is planning a silver bullet defense against thousands of u.s. lawsuits it will argue those suits should be tossed because the u.s. environmental protection agency said the herbicide is not a public health risk on april 30th, the epa reaffirmed prior guidance that the weed killer is not a carcinogen and not a risk to public health when used in accordance with the label.

if successful, this defense would halt claims across the board because the federal edict would supersede state laws the company has lost three straight cases and it faces lawsuits by more than 13,000 other plaintiffs nationwide. the company shares have been hammered since the first roundup cancer verdict last august wiping nearly $45 billion in market cap off and leaving bayer worth less than the price it paid for monsanto. okay shares of cray trading hewlett-packard is in talks to buy the supercomputer maker. a deal could be announced as soon as this week. that stock up over 16% right now. coming up, a chinese company luckin -- mcluckin coffee debuts later today. can they threaten starbucks? >> and they are. >> they're threatening already here's a quick check of what's happening in the european markets right now.

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♪ it's raining men, hallelujah ♪ it's raining men, amen our sound guys, you know right? >> rain is a strong -- oh! it's raining i thought they meant the three of us. >> well, that, too. >> this is a light drizzle >> okay, we've got a big ipo going on today to talk about dhinies coffee company luckin

preparing to go public today it's only 2 years old and is a starbucks competitor, pricing shares at $17, giving an estimated raise of $4.2 billion. it will list on the nasdaq under ticker lt -- i should say valuing the company at $4.2 billion. joining us is luckin ceo reinout schakel. >> it's a long "a." >> very nice to see you this morning. >> thank you. >> this is a huge day for a company that's only 2 years old. >> that's right. >> let's talk about it so people understand just the background how did this happen? >> right well, first of all, thanks for having me here today it's exciting to be here i think the founders of our business are used to using technology in disrupting industries and that's exactly what they've been doing with luckin coffee. the background is technology i think the founders are sort of coffee drinkers themselves and looked at the transaction structure of coffee and thought

we could do better than this, and they came up with luckin coffee. >> let's talk about sort of the economic story here, because you are growing incredibly fast, 2,000 stores in china already. >> that's right. >> we should say, starbucks has 3,500 stores. >> that's right. >> however, we should also note, you're losing money doing it so, the question is, as we would ask uber, though your company may have a different path, what's the path to profitability? >> let me dissect this question a little bit i think when you think about luckin coffee, what are we we are i guess a new retail model that's trying to disrupt the traditional model. and i guess the way we do that is, first of all, when you go to our stores, you have to use the app. so we have effectively connection to our customers and can drive retention through our -- >> you have to buy through the app. there is no option to walk up to a retailer. >> you essentially can pay with cash, but it still goes through the app, the transaction everyone is cashierless, meaning we have all the connection with the customers' end data.

that's point one number two is we're using technology, which is important, making operations efficient, lower wagest and quality control. and when you think about our store footprint, it's very small stores rental, decoration, we save a lot of money, we're very close to our customers and those three together is sort of the new retail model and that's fundamentally changed the cost structure in china. where we are today, we have fundamentally changed the cost structure, which then allows us to bring high-quality products for actually a much more affordable price and still be profitable i think when you think of what we've achieved, 2,000 stores, we have done what most people do in 15 or 20 years, and of course, you have to make an investment in your systems, in your staff and in your branding, but i think the unit economics today are actually pretty clear. >> so, a cup of coffee costs half the price as a starbucks cup. >> yeah. so, our target price is to sell it around 16, 17, which is the right price to drive the mass-market consumption.

>> and do you think you're going after a different audience than starbucks? >> when we think of the coffee market in china -- so, if you think of china, 1 1/2 cups of freshly brewed coffee versus 300 to 400 in the u.s. -- it's a heavily underpenetrated market -- what we're trying to do is bring down the per-cup cost to provide something that is affordable, also convenient and high quality and i think with that, and with that price point, we think we're going to drive mass-market consumption and we see that to some extent really i think we're after driving that mass-market consumption and also functioning more on the functional aspects. >> right now there is heavy discounting going on the real question on a unit economic basis is, a, how fast you're going to grow, and b, when does that hit profitability without the discounts? or can you discount and still get to profitability >> i think just in terms of the discounting, how we look at it is, we have ourselves, we have the listing price. if you go through the app, you see our listing price. we don't ultimately want to sell for the listing price. we're going to give you a buy two, get one free coupon, which

then gets you around to 15 or 16 remmaby, which is the right price to sell. yes, we're giving discounts, but our per-cup cost means that even if we sell at 16, we're still going to be profitable and that's how we see it in terms of the unit economics, we are approaching break-even. >> if you have 2,000 stores today, two years from now how many stores do you want to have? >> for us, we're thinking of this from a demand perspective and i think we're trying acquire customers and figure out where the demand is and supplement that with the store footprint. i think our target by the end of the year, we've communicated around 4,500 stores and i think you'll see that growing going forward. >> can you speak to just doing business in china right now? given the sort of larger conversation we've been having about china trade and everything else that's going on >> yeah, look, i don't think we see an awful lot yet in china related to our business that is impacted by the trade war, i think -- >> do you think the trade war

could slow starbucks down and therefore advantage you? >> again, i think that's something we don't see today if this is something happening around to us, those trends, that could possibly impact starbucks more than us, but that's not something we're particularly focused on. >> okay. thank you for coming in this morning. >> great. >> good luck with the offering this morning. >> thank you. two big hours of "squawk" ahead. stephen moore will join us next to discuss how the fed should react to the recent market volatility he can now speak completely freely, if he didn't before. then later, speaking of market volatility, should investors worry after this week's roller coaster ride we'll talk to lpl financial's ryan detrick about the wild week stay tuned you're watching "squawk" on cnbc it's us. millennials. hey. we all worked hard in school. but then? we got to pay back an obscene amount of student loans. so...buying a house? paying for a wedding? meanwhile our parents paid for school by waiting tables.

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a visual snapshot of your investments. key portfolio events. all in one place. because when it's decision time... you need decision tech. only from fidelity. earnings alert shares of pinterest plunging after the company disappoints in its first quarterly report since going public. who has it right we're going to ask stephen moore if the markets are getting ahead of the fed plus, higher taxes, please why a group of wealthy americans are calling on government leaders to raise their bills the second hour of "squawk box" begins right now ♪ it's friday i'm in love

♪ monday you can fall apart >> announcer: live from the beating heart of business, new york, this is "squawk box. ♪ it's friday, i'm in love good morning welcome back to "squawk box" here on cnbc i'm joe kernen along with andrew ross sorkin, way over there. hello! hello! hello. >> there's an echo. >> becky is off today. so, there's literally no one here and no one between us keep that in mind. there might be some good stuff happening. we've got one of your buddies on later. >> who's that? >> you know, he was biden's -- >> who are you thinking of who's a -- >> jared. >> oh, yeah. >> yeah, he's coming on, so he'll probably -- i wish you could stay for that, moore stephen moore's here u.s. equity futures this hour are in -- why did biden need a chief economist when he was vice president? >> everybody needs a little help >> please.

anyway, there are the futures. they're down triple digits we made by the end of thursday, yesterday, we almost made back the $1 trillion caused by trump's tariffs, but now we're down a little bit today. so, what else is making headlines? okay, we've got a number of stories making headlines this hour the u.s. blacklist of china's huawei technologies had a significant impact in overseas trading. it happened this morning shares of the telecom giant's suppliers taking a big hit as the trump administration's ban impacts the sales outlook of those companies. investors also worried about the possible impact of the huawei action on trade. you're looking at some of those stocks, including sunny optical off 10% this morning now take a look at boeing. it says its software fix for the grounded 737 max jet fleet has been completed and that it will make the jet safe to return to service. however, the company adding that the regulators are still asking for more information about that fix and how pilots interact with the updated system under various scenarios. so, while this is an optimistic note in terms of where they are,

we're going to have to wait on the government to try to understand whether that plane is going to get in the air in the year 2019. also, take a look at shares of pinterest, falling sharply this morning following its first quarterly report as a public company. pinterest saw revenue grow to $202 million that's more than wall street had expected that's the good news but that was 54% above year-ago levels the bottom line, though, negative, with the company losing $41 million during the quarter. and ceo ben silberman will be on "mad money" tonight in san francisco with jim cramer to talk about the quarter and the company's outlook. that's going to be a must-see tv interview given the pressure that's on that stock today. well, if you believe some of this stuff, the markets now seem all but certain there will be a fed rate cut this year, but are traders getting ahead of the central banks? steve liesman joins us now what's the answer? >> joe, you know, they were certain of a rate cut early next year, and now they're a bit

baiking in a rate cut later this year here are the probabilities december fed fund futures trading at a 74% probability of a rate cut, even as high as 52% as near as september, but does that match fed rhetoric. the fed governor lael brainard said we need to be especially careful to preserve as much of our conventional policy space as we can she wants to make sure that the fed has rate cuts to give in the event of a recession that's morgan stanley's view as well they wrote in a piece recently "the domestic economy is sound, inflation is contained this combination does not force a fed move on rates this year and well into next trade negotiations and fiscal debates are near-term risks to the outlook, but recession probabilities remain moderate. we now expect the fed to remain on hold until the back half of 2020, delivering hikes in september and december." i think three things have to

happen for the market to be right about coming rate cuts one, growth has to fall substantially below trend, which is 2% to the fed a serious shock to the system could also move the fed. and more interesting, a decision by the fed to become -- about combating inflation that runs persistently and substantially below the 2% target. i am not hearing support for that kind of activism from members of the fed one thing we would ask in our interview on monday with raphael bostic, coming to us live from -- i get to come to us from a good place -- florida, not like the conventional -- well, i don't want to name the cities. joining us is heritage foundation's stephen moore and i was like, wow, we have stephen moore on suddenly, it's like wow, we have stephen moore on there's good things that come -- you know what, i think when you run for president, it's the same kind of thing, even if you don't have a rat's chance. right? an ice cube's chance in hell

i mean, like, jillen brand you saw senator -- i don't even know how to say her name do we even know who she is it works for them, doesn't it? do they spell your name right with all this publicity you went through? >> that's the first thing. firstly, let me say thanks to cnbc of all the coverage during this debacle, you were the fairest -- >> that's a low bar. >> and gave me a chance to talk about what i wanted to talk about, which is the economy and the fed and prices and so on and my friend, steve liesman, who, we were talking in the green room -- steve, i just want to challenge you on one thing you said -- >> on the fed. >> -- which is, you said that growth has to moderate for the fed to lower interest rates. and this is my whole -- this was my whole campaign was about, that growth does not cause inflation and that, you know, reducing growth doesn't somehow require the fed to -- look, growth, steve, pushes out the supply side, reduces prices, and i'm hoping, actually, that you know, the fed does reduce rates.

we can call that moore's revenge, if that happens because remember, i was the one who called out -- many people did -- but my main thing was the december rate hike was unnecessary. they still have not reversed that rate hike, and they ought to >> do we know for sure about tariffs? i mean, i saw again that people said that import-export data helped the gdp it didn't hurt the gdp so, if you had a -- i can't believe we're talking about qe, but if you had a rate cut and qe, even if we had these tariffs -- that's why i think the fed needs to raise, because you know, they -- you know, i just don't see how you could actually -- >> so, here's another thing. here's where i disagree with the president. you can't reverse bad trade policy or bad fiscal policy or tax policy by changing interest rates. i mean, the fed's responsibility is to keep the dollar stable and to keep prices stable. so you know, we can have an argument about whether, you know, what the impact of this trade war's going to be, but i

just don't think that the fed is going to be able to counteract that by cutting rates. >> isn't that why traders think we'll get a cut? because the economy's going to slow because of the tariffs? >> the thing that was the shock of the system that could come from trade >> why else -- >> if you bake that out -- it's interesting the way the market reacted this week, joe there wasn't the shock and then kind of an unshock, whatever you want to call it. >> but germany is negative again. why should we be even at 2 1/2 if germany's negative? >> look, if you look at the fed's target, you know, they've been targeting 2% inflation for at least the last four months they've been below that target i just think there's a threat of deflation in the economy, not inflation. that's -- >> steve, i'll tell you when you'll be right, in my opinion, is when -- and the disagreement you have is not with me. i'm reporting what -- >> i get it -- >> you know how that works. >> i think the whole mentality of the industry --

>> the mentality of the relationship of growth, what i have specifically for what you and larry talked about, the supply additions to resources and deflationary -- so, here's how i think you can be right, which is, if you have a run of higher productivity, and that productivity looks to be linked or is linked by the fed to lower inflation, then i think you can say, you know what, we're a little tight, let's come down. but you have to keep in mind the quote i gave you from brainerd they want to hold on to their conventional monetary policy space so that they can react if they have -- >> and i hate that if i had been on the fed, i would have challenged that whole idea this was the problem i had with the rate increase in december, its mentality. here was their logic -- we have to raise rates now and cause a recession so we can cut them later to combat the very recession we caused. i mean, i just don't think that the responsibility of the fed should be to tweak interest rates one way or the other to somehow juice the economy. i just think that's wrong. we want stable prices. you put stable prices on top of

the tax cuts, the deregulation, the pro-american energy policy look, the trade stuff is bearish for the economy, no question -- >> you don't want the rates to juice the economy, but that's what they would ultimately do. >> no, no, no, no. i want -- the reason i want a rate cut is because i'm worried about falling prices, not -- i think they're below where prices should be, not because i want to juice the economy. that's the key difference here i want to keep prices stable over time. i want that dollar that you're holding in your pocket to be worth, you know, five years ago pretty much what it's worth today. that's why we have a currency, right? the purpose of a currency is to retain its value over time. >> we're having a populist discussion about what the fed would call the neutral rate, what the right rate run rate -- steve, if you've got a $20 trillion economy and you're running inflation between 1.5% and 2%, you're darn close to your goal, and i think what the

fed would have said to you is we think we have the capacity here to take that rate hike and not hurt the economy and it's sort of borne out to be true >> in december >> in december. >> the december rate increase crushed the economy! my goodness -- >> hold on, steve. let us review the bidding, as we might say in bridge. you had a rate hike in december. >> yeah. >> you had 3.2% growth in the first quarter. >> but that was -- steve, wait, wait -- >> how could the rate hike have crushed the growth if you had above-friend growth -- >> that was only after the fed reversed course and -- >> how could the economy have possibly responded >> the economy instantly responds to the changes in -- >> i don't think the economy was nearly as weak as the markets and many pundits -- >> fell 2,000points in two weeks after -- and the growth rate in the fourth quarter was very weak -- look, we had 4% economic growth in the summer of

2018 the fed got spooked by high growth they started raising interest rates, even though there was no inflation, and their growth went from 4% to 2.5% to, i forget the growth rate in the fourth quarter, but i think it was less than 2%. >> 2.2%. >> that's a big difference, between 4% and 2%. i hope, if i've had any impact, it's to get the fed to start thinking about, you know, stable prices and the growth does not cause inflation. that's why i kind of went off a little bit and i know you were saying, here is the market perception on this, but -- >> you want a single mandate, instead of we have a triple mandate. price stability, full employment and the stock market going up. >> what a beautiful picture! why did the fed have to disrupt that now look, the trade war -- i want to give steve some credit yesterday. you made a great point yesterday. you and i don't always agree, but i think you're exactly right, a tariff is a tax, right? a tariff is just a tax and shouldn't tariffs go through congress you know, congress has been -- >> it's not the president's fault. >> pardon? >> it's not the president's

fault. congress is the one that creeded its revenue power -- >> can you explain to me, if it's a tax hike, then why don't democrats love tariffs they love all tax hikes. >> that's a good point -- >> and if you think about it, you use tax hikes to hopefully effect something positive in society, whether it's expanded entitlements or paying down debt or something what we're doing with this tax hike is trying to bring china into the world order, so they love tax hikes i don't know why they don't like this one. >> i can't speak for democrats i'll speak for conservative free-market republicans like myself i don't like tariffs i hate tariffs, but in this instance -- >> we're hearing a lot of buts from everybody. >> we're in an epic struggle with china, this might be the time to do this. and i'm going to say, my bet is within four months, you are going to get a deal with china, and i really believe that these tariffs will be -- >> it's whether it's a half measure -- >> and when that happens, you're going to see the biggest boom. and why do i think that? because it's in the interests of both countries to get this

resolved -- >> and you're going to see the biggest boom because of what i don't understand -- >> the one thing that's holding back the economy is this -- >> this fear -- >> the big cloud of the trade war with the two biggest economies in the world if you solve that, i just think, you know -- what i've told the president, by the way, is look, get this thing resolved now, get the best deal you can -- >> best deal you can. >> then you get a second term and you can use your second term to hash it out -- >> won't be a great deal, though. >> pardon? >> won't be a great deal they're not going to change. >> it won't be a great deal -- >> they've got too much riding on the way it's done now. >> i talked to our trade negotiators. this is -- it is so difficult to get china pinned down on anything one day they say they'll do one thing, the next day, the next -- >> i don't disagree this is creating a cloud over things and things would boom or likely be better if we get rid of this thing or at least get over this, get to an agreement, but the larger question i have is, functionally, do you think manufacturers coming back to america is a function of this? do you think we're going to start -- to me, that's the larger -- all of this

manufacturer's just moving to vietnam. isn't that what's happened >> those are global trends that are happening irrespective of this tariff war, but i think -- look, one of the points i've made is, there's nothing that donald trump is asking of the chinese that's unreasonable, right? i mean, everything he's asking for them to do, yes, they should stop stealing our intellectual property yes, they should open up their markets. yes, they should reduce their tariffs. ultimately, i had a good discussion with my pal, larry kudlow, the other day. we want to get tariffs actually down the end result of this trade war, if it works out, could be actually lower tariffs on both sides -- >> so, four possibilities -- more tariffs on china, the same exact existing tariff regime on china, rolling back to the 10% tariffs we had before, and rolling those back, too. of those four probabilities -- >> that's a good question. >> -- what do you think is the most likely outcome a year from now? >> i think that the most likely outcome is at least we go back to 10% and maybe 0%, you know --

>> so, he rolls back that level -- >> it depends. steve, the reason i'm hesitating is it depends on what china's willing to do. >> what's interesting about that -- >> the worst outcome, by the way, the worst possible outcome for the united states of america and the future of our economy would be for trump to just cave in we cannot cave in here we have to stand firm against china. i mean, this is the epic battle of our time -- >> it might not be next year or the year after, but five, ten years from now, we'll wish we had stayed firm -- >> exactly right we are in a position of strength right now. one thing about donald trump, he understands the concept of leverage, and he understands, you know, we can't trade with china, we sneeze -- >> it would be nice if the rest of the world and the scientists and engineers develop all this stuff and then just sort of bring it into your own, you know, let your own companies have it. i mean, there have been people that have said, if china really did have to develop everything themselves, that germany would outcompete them, south korea could outcompete them, japan could outcompete we definitely could probably outcompete them, but it's not a

fair playing field. >> intellectual property theft is a gigantic problem. i don't know how you solve that problem in a trade deal, frankly. i mean, the chinese are still even -- they're still even saying that they're not stealing, you know i mean, how can you solve a problem when they won't even acknowledge it by the way, they have a problem in china the companies steal their own -- you know, within the country they have a problem with intellectual property theft. >> if the chinese had to incorporate environmental degradation that goes on in their country -- >> another great point. >> -- some economists estimate there may have been no growth in china, if you count the lives lost on degradation to the environment. >> their increase in emissions and pollution levels last year, just their increase was more than the entire amount of pollution from the entire country of canada. so you're exactly right about that. >> you're talking about particulate pollution, sulfur dioxide -- not -- >> it's the real thing. >> not greenhouse -- >> so, we're going to win and we're going to have a greener planet as a result. >> chemical waste, nuclear, all that stuff all right. we had stephen, the stephen -- so, you just walk around here

and people go, stephen moore, stephen moore. it's big now you get any table you want at any restaurant now, right? >> i'm either famous or infamous, depending on who you talk to. >> of course, you get the nice table and then all the new yorkers come up to you, stephen moore, we don't like you, right, andrew >> just one thing. i love women, i love women, i just don't like women's basketball, okay guilty as charged. >> wow there you go >> it's not that different than what these guys in the nba do. all they do is run down and hit three-pointers. >> they're dunking now. coming up, bitcoin plunging with $21 billion in market cap wiped out in the cryptocurrency industry in the last 24 hours. we'll look for reasons why, next ♪ go on, take the money and run ♪

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>> no! >> because i don't -- >> no! these guys are doing something fabulous -- >> has nothing to do with zipline. all right. company is saving lives. okay this is good using drones to deliver blood. stay tuned "squawk box" will be right back. >> announcer: time now for today's aflac trivia question. what year was budweiser introduced the answer when cnbc's "squawk box" continues 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. get to know us at aflac.com

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♪ ♪ bear, bear, bear >> announcer: now the answer to today's aflac trivia question. what year was budweiser introduced the answer, 1876 welcome back to "squawk box. zipline making the disruptor list for the second straight year julia boorstin tells us about the company's work in africa >> reporter: a second-time cnbc disruptor, zipline international, is expanding its drone delivery services in africa and will soon be coming to the u.s the company's drones have made

more than 13,000 deliveries since launching in rwanda three years ago. it supplies more than half of the country's blood supply in ghana, zipline has partnered with the bill and melinda gates foundation and others to serve more than 2,000 health facilities and bring emergency medical supplies to an estimated 12 million people. and in june, the company will begin servicing hospitals in north carolina as part of a pilot program with the faa >> i've got to tell you, i love this company now we want to bring in ceo keller renato, joining us with an announcement about the company's latest funding, which i believe is going to turn them into a unicorn, good morning, keller. >> good morning. how are you? >> great congratulations, both on the disruptor list, but tell us about this new fund-raising round. >> yeah, i mean, you know, often fund-raising is the last thing that zipline's talking about, but over the last year, we have raised about $190 million from

bailey gifford, tpg, and tom tomasac, and the company didn't need to raise money, but we're in a position where there are so many countries wanting to follow the footsteps of rwanda and ghana in terms of providing universal access to health care for their citizens that it made a lot of sense we're getting ready to expand into asia, southeast asia and the u.s. and have plans to serve more people. >> you are going to be expanding into the u.s. for first time what does that mean in terms of how quickly you are able to scale into other parts of the united states? >> that's a great question i mean, we're really lucky that the secretary of transportation, elaine chao, has basically said what's happening in certain other countries where this technology is now operating at national scale and saving thousands or tens of thousands of lives and she and her team are pushing really hard to make sure that the u.s. doesn't fall too far

behind they've created the integrative pilot program, which is making it possible for zipline to begin operating at a statewide scale in north carolina, serving a whole bunch of different hospitals and health facilities. and assuming that we can show we can do that in a way that's safe and benefits people's health and equalizes access, especially for people who live in rural areas, then we expect to be able to roll that out to every state in the u.s. pretty quickly. >> keller, as people see the success of what you've created, not just in terms of sort of the remarkable technology involved, but really what it's able to do in terms of saving lives, is there a competitor out there is there anybody else that you think is now going to be trying to do what you're doing? >> i think, you know, everybody is pretty captivated by the potential of the technology, and so, there are a whole bunch of start-ups out there that are doing different demonstrations and pilots, different use cases, trying to figure out what are the different ways that this technology can benefit people, but today zipline's the only company in the world that's operating this kind of technology at national scale

and we're doing hundreds of flights day in and day out in a way that people rely on with their lives, fully integrated with the national health care system and so, that is really what differentiates us. >> and is the plan to remain focused strictly on health care? i mean, that's one of the reasons, i imagine, that so many different countries have actually been willing to open their skies to participate in programs with you. >> it certainly is a much easier conversation with a regulator when every flight is saving a human life and to put it into perspective, 5.5 million kids die every year due to lack of access to basic medical products so, this is a problem that has to be solved by someone. even if we can be a small part of that, we're proud to do it. by the way, this is also good business health care logistics is a $70 billion market, and that's although it only serves the golden billion people on the planet well. if we were actually serving every human on the planet, it would be a much bigger market

than that. so we actually think this is a really nice intersection of something that's good for the world and good for business. >> right keller, for those who are uninitiated -- and i know you've been on the program before and explained this, but just explain how far these things can fly, how they come back to you, how this whole thing works >> the overall idea is really simple we think that your access to medicine or health care should not depend on the gps coordinates of where you live. so, the service that zipline provides is basically an instant delivery service to any person with a smartphone. so, you can press a button on a smartphone and immediately receive in 15 to 25 minutes the product that you need or that your patient needs, if you're a doctor or nurse. and the way -- the technology behind all of that, that essentially enables us to provide that service, these are small, electric airplanes. they fly themselves, sothey're fully autonomous, and they're powered by batteries so, we operate distribution centers. so for example, to serve all of

the country of rwanda, we use two distribution centers we're now building four distribution centers we just launched the first one in ghana we can serve all of north carolina with about three distribution centers, just to put it into perspective. and from those distribution centers, we are basically launching these aircraft they fly out to where they need to make a delivery at about 110 kilometers an hour and then fly back and land. so, it's really, really -- the idea is simple obviously, the execution from a technology perspective is complicated. >> what's a cost per flight? do you see it in a unit economic basis in that -- is that the metric >> yeah. so, zipline charges -- we work directly with governments. we sign contracts directly with governments or operators of hospitals, health care systems and we're typically doing deliveries in a way that is on par with how expensive it would be to do a delivery using a motorcycle, except we're about ten times as fast and way more reliable. >> fair enough keller, it's a fascinating business we congratulate you. and it's great to see you. and i hope next time you're in

new york, we get to see each other. >> it's an honor i'd love that. thanks. >> thank you see you soon. coming up, another group why another group of wealthy americans want the government to raise their taxes. they're in connecticut there's like 20 of them. we're going to talk. anyway, first, as we head to break, check out shares of deere. the heavy equipmentmaker posting weaker than expected earnings. you're watching "squawk box" on cnbc sfx: [phone ringing]

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♪ i don't care if monday's blue ♪ welcome back to "squawk box. we've get a lot more to come this morning, including "stocks to watch." baidu shares are dropping. plus, what will drive today's trading? the dow currently on pace for its first four-week losing streak in nearly three years would you like to swing? >> embrace it. i can't stop -- >> then, politics and your money. why a group of wealthy americans in connecticut are launching a major push to pay more in taxes. we'll talk about that as well. stay tuned yore wchu'ating "squawk box" on cnbc, and joe kernen singing. >> heroes they are

dear tech, let's talk.

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about this is ryan detrick, senior market strategist at lpl financial and cnbc senior commentator mike santoli is on the set with us. i'm going to go quick to you for a sense of what you think is really happening obviously a lot of pressure overnight in china. >> yes. >> especially on huawei's suppliers. but how do you think that's really ripples here? >> the market over the last, i would say 48 hours, has made another attempt to get beyond the trade issue, try to get away from just fixating on every headline, and i think you have the ability to do that because nothing much happened of substance over the last two days, so the market was able to rebound. dow was up 500 points or so in a couple days, got back most of monday's losses. i think it's still attempting to kind of sequester the market into here are the stocks and sectors that are really going to be affected by what we know right now about potential trade barriers, and here are the ones that aren't. so, yesterday you got software stocks going up, faang stocks going up, google

that maybe breaks down if you have, just an excuse to take profits after a good couple of days, and just the general inability of the market to price these probabilities correctly. we just simply don't know what the process is there isn't a process ongoing right now. >> ryan, does that make sense to you? >> it does building on that -- i mean, what happened a 25% bounce then a 5% correction think about this, the s&p was up the first four months of the year you look at that in history since 1950 the final eight months, so the rest of the year, was higher 14 out of 15 times. a good start to a year normally can lead higher. here's the catch -- you have an average pullback of about 10%. at lpl research, we've been bullish along with you guys and we expect the market to go higher we're a little more cautious here we think there's times to take a swing and talking about swinging, how about our reds beating the cubs two in a row, right? but there's time to take a pitch and right now we're being a little bit more cautious here waiting for maybe potentially that summer pullback that tends to happen during a pre-election

year. >> what are you doing as a result of this thesis or view? >> right for our lpl advisers, we've gone a little more market-neutral when you talk about equities here and we're bullish cyclicals, we're bullish large caps, and we still like emerging markets here as well. i know they've gotten beat up a lot the last two weeks, but those are three areas that as we're cautiously -- or taking our time waiting -- we're going to bounce into those groups and invest in those groups on an eventual pullback. think about this -- this is the worst six months of the year sell in may and go away. average correction's about 11% we think we could potentially have some type of a correction like that later this summer as the trade stuff's swirling, all the other concerns that are there. but the bottom line to us is the economy's so strong. look at earnings season. we're wrapping it up we're talking earnings recession this time four months ago. we're seeing strong earnings. >> stephen moore said look, if you get past this trade deal, he thinks things boom. >> yeah. well, i couldn't disagree -- we would not disagree with that but that's the thing, if we can get past it.

let's be honest, two weeks ago we thought we were past it and then the curveball came. but at the same time, i love what mike -- mike did a tweet that showed what the s&p did during the cold war. you know, if you have good economy, you can have negative headlines and still have stocks go up. and we think that's the case but again, with that big rally that we saw, we're just being a little more cautious right here. we've had a 3,000 target on the s&p 500 all year we didn't cut that earlier in the year when a lot of other places were. we still think that's logical. it just may be time to kind of wait for something to pull back and get into the cyclicals and value stocks as the groups we really like here. >> yeah. i mean, we entered may in a condition where the market pretty much needed a lot of things across the board to go fairly well, to build on the gains of the first four months and i think right now we just don't know exactly what kind of growth picture it is it's been oddly encouraging with numbers we got this week i think on unemployment claims and others but still, you have the bond market screaming for a rate cut. you have the short end of the bond -- the two-year note is at 2.17% or 2.18% right now, way lower than it was in december.

so, what does it mean that the bond market is essentially insisting on an easier fed at a time when, you know, the here-and-now numbers don't look so bad so, i think that's the static in the market right now, and not really sure exactly what kind of baseline growth we had when we got this threat of trade disruptions. >> ryan, are there any stocks you look at right now that actually touch china that you say, actually, i want to own that because maybe there's a shot here that good things happen or do you think it's too risky >> no, i'm not allowed to talk about individual equities, but the emerging market theme in general, that group clearly is extremely influenced by what's going on with china. we look at emerging markets, valuations are very cheap. earnings growth we think can come in better than expected and if you get that resolution with china, which we think can still happen sometime later this summer, there's so much room for both sides one is going to blink first and we think probably china. nonetheless, you get that deal and that can help emerging markets. so again, what we're investing

in for our lpl advisors, we are tilting towards emerging markets and we think that can outperform the rest of the groups this year even though it's scary now, there's going to be some alpha there for the rest of the year. >> thank you, guys appreciate it. all right, coming up -- i don't know how great it is, but we're going to debate taxes again. should wealthy americans pay even more? the two sides of that argument next. then later this morning, don't miss facebook's coo, sheryl sandberg, live on "squawk on the street" at 10:30 eastern. stay tuned

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welcome back to "squawk box. as connecticut faces a $1 billion budget crisis, a group of wealthy state residents have sent an open letter now to the governor and legislators there, begging -- are you ready for this -- to be taxed more robert frank joins us now with that story robert >> good morning, andrew. they call themselves fair share connecticut, a group of about two dozen self-described wealthy connecticut residents who want to send a message -- tax us more, please the group seeks to raise the tax rate on households making $5 million or more to 9. 9% from the current 6.9% it would add smaller increases to those making more than 500k the plan would raise about $1 billion in new revenue, at least they say "we need to contribute more," the letter says. "together we can close the budget deficit and invest in

connecticut's future." the legislator is raising capital gains on the top earners, but governor ned lamont says high taxes have already chased away too many companies and too many high earners. fair share say it's a myth that the rich are leaving those moving out are mainly low-income earners who they say can't afford to live there anymore. they say 100% of the state's income gains since the financial crisis have gone to the top 1% and that the state's cost of government is among the ten lowest in the country. the governor's office saying, "we cannot tax our way to growth." so, he is holding firm >> all right. joining us now, jared bernstein. jared, my man! it's been a while. center on budget and policy priorities, senior fellow and cnbc contributor it's weird, isn't it, how we always argue, but i see you and i don't know, i just love you. >> you just feel good. you feel warm in your heart. >> why is that do you feel the same way or you can't reciprocate with that --

>> i can at least partially reciprocate. >> how does that work? it's not about politics -- >> we've known each other a very long time, and we have differences -- >> right. >> but we're old friends. >> you're wacky. you're nuts, some of your policies, but i like you >> right back at you >> anyway. and connecticut state representative chris davis first i have a question for robert frank now, this list, does it include florida governor ron desantis and florida senator rick scott and texas governor -- does it include any of those guys from states where there's lower taxes? >> they are wealthy connecticut residents -- >> for sure! all right. i wondered whether this was a stocking horse for guys who are -- >> benefiting from connecticut taxes -- >> did any of the 20 offer to write a check? >> they have not. >> they have not that's interesting jared, i do want to start with you, because i know what you're going to say, that there's no evidence that this causes people to move. but i mean, i know for a fact paul tudor jones moved, and he's got enough money to where if you

do the math, that comes out to millions, right? barry sternlicht, i know he's moved. that would come out to millions. who else, thomas >> thomas peder freed -- >> how much is he worth? >> about $20 billion, i believe. >> jared, my only problem is are you sure that you don't end up when you do this with a lower actual number that you collect just based on the virtue that you feel for proposing it and -- >> no, no -- >> are you sure you're not cutting off your nose to spite your face? >> that's a risk this is economics, so there's never certainty, never 100% certainty. as you said, the literature on this -- and it's a deep economic literature there's been lots of state tax increases, so you can look at this across the country -- is quite solidly finding that you don't get this kind of flight of folks when top tax rates go up and in fact, we've had millionaire tax increases in

about eight states, and in six of those eight states, growth, jobs, income have gone up. we haven't seen -- revenues have gone up -- we haven't seen the kind of exodus, but you're right to raise that as a concern, and connecticut in particular has had less positive outcomes with some recent tax increases. so you know, i think there are both sides of the argument here. what i like about where these folks who wrote the letter are coming from is they themselves are telling you, we're going to stay here. and remember, they're representative of what is characteristic about this state, which is it is a highly unequal state with a really high level of accumulated wealth of the top of the scale it's the third largest number of hedge funds in any state it's the most -- it's the highest per capita income in the country, i believe, so i take them at their word. >> i can find 20 people that want to go back to the gold -- i can find 20 people in connecticut that have ideas that are so outlandish and ridiculous, and i just don't see

why -- okay, virtue signaling and we'll promote it and we'll talk about it, and oh, my god, they're rich and they want to pay more, who would have thought? it's so tired and old. >> and jared, you're absolutely right about the level of inequality in connecticut, but that's the issue for taxes so, in most states like connecticut, new york, the top 1% pay 40% of the income taxes, but when you break that down even further, it's probably ten guys in connecticut, all of them hedge fund guys, who probably pay a disproportionate share of that so if any of them leave, as we saw with tepper in new jersey, that becomes a problem >> no question and again, connecticut is a state that when you line up states that have raised their taxes and you look at their outcomes -- you know, connecticut hasn't been at the top of that list -- >> yeah, but then you've got salt in there. so you're saying the studies show with tax increases, we haven't seen much change in the wealthy leaving the state, but it's a matter of degree, because when you add in the salt, you add in going from 6.9% to 9%, there is a level at which the wealthy say, okay, enough is

enough. >> yeah, no. so, here's the question -- i don't think anyone who's seriously looking at connecticut's fiscal situation is saying we don't need to raise any revenues at all. so, my question to you is, if you're not going to get it from those who have benefited far the most -- in fact, you said it yourself, virtually all of the growth over this recovery has gone to those folks in the top, you know, 1% -- connecticut already has a regressive tax system taxes paid by middle and low-income people in connecticut are 50% higher than those at the top. so you tell me, where are you going to get the revenue >> let's bring chris in. chris, i don't even think lamont -- i mean, even he has figured out this might not be a great idea, right? >> i think it sends a terrible signal to those who do pay the most in the state of connecticut. and to counter jared's point, our own department of revenue services commissioner just a couple years ago said that they have a team within the department that looks at the filings from the top 100 taxpayers in connecticut, and they track it and they try to keep track of whether or not

they're paying as much as they did in taxes before, because the impact of just one or two of those individuals leaving the state of connecticut can sink our budget as we move forward throughout a fiscal year and in fact, they actually send out an intervention team and try to stop individuals from leaving the state of connecticut, and they still did it anyway the state couldn't even offer what they were looking for. >> so, address my question if you're not going to get it from those at the top of the scale, where are you going to get more revenues in a state where you already have a tax system that's tilted against middle and low-income taxpayers? >> well, the question isn't about getting more revenue the question is about finding ways to cut spending and reduce spending. >> no, it's not -- >> yeah, it is, because connecticut's revenue continues to grow year after year after year after year, to the point that you made previously, yet our spending continues to grow at astronomical rates. and the ability for the individuals at the top to pay, yes, they have the ability to do it, but i'm more concerned about the individuals that are in the middle class that do not have that ability to pay day in and day out -- >> i agree with you! >> sales tax increases, tolls to the tune of $1 billion, and

situations where those individuals can't pay. and if those high-income earners leave, those are the types of cuts to the services for those kids that are necessary. so if we continue to raise those taxes -- >> hold on, hold on, we agree -- >> if you continue to raise the taxes, they'll leave the state of connecticut and leave us behind. >> we agree about not raising taxes on middle and low-income folks in connecticut what we disagree on is this notion that you can get -- where you need to go through cutting spending connecticut's debt burden, its pension obligations are just too high for that. and in fact, if you look at the debate in connecticut, it's not about whether we're going to raise taxes or not, it's about who we're going to raise taxes on taxes have to go up there to some extent. sure, spending cuts should be in the mix, but there will be revenue increases. and it is, i think we both agree that it is just deeply unfair to consider raising taxes on middle and low-income people, but we're going to have to raise them on those at the top now, if you don't like what this group of millionaires and billionaires are suggesting, there is a proposal on the table to slightly raise capital gains

rates in connecticut by 2% that's found to be particularly innocuous in terms of hurting growth or generating exodus. maybe that's kind of a compromise position here. >> no, i don't think it's a compromise at all. i mean, we're going to find these individuals that are paying a higher capital gains rates and connecticut would be the only state that taxes, puts a surcharge on long-term capital gains as well, so you'd be hitting entrepreneurs, business owners that have built up business assets, that employ people across the state of connecticut, hit them with a surcharge if they -- >> all i hear is no from you all i hear is no, nothing. we're not going to do anything and i just think that's very unrealistic. you've got to come up with something that's better than we're just going to cut spending >> let's talk about why that spending went up it went up because the fixed costs went up, because of long-term union contracts that have been put into place through negotiations in the executive branch and not the ability to do it through statute as in almost every other state in the country. >> fair point. >> we had an explosion in debt service payments over the last ten years -- >> you did. >> -- because of reckless and

irresponsible borrowing on the part of the executive branch. >> i agree, again. >> those are the things we need to be taking on and going after before we ask for a single another dollar from the residents of the state of connecticut. >> yeah, again, to me, that's just log-rolling yes! you've well described the spending pressures, and there's just no flexibility there. so you have pension obligations that you have to meet. now, you're either going to raise taxes on people who are already paying a disproportionate share relative to their incomes or you're going to have to raise taxes on those at the higher end of the scale, and i think waving our hands and just saying we're going to cut spending is not responsible fiscal leadership -- >> well, why don't we work on growing the economy so we raise the tax base so we have more people paying into it? and the only way we do that is by sending a signal to those people who employ people in the state of connecticut and raising taxes sends them the signal to get them out of town. >> that's an interesting proposal it's always good if you can

broaden the base. >> jared, how's your signature do you have a nice signature >> why are you asking? >> well, just if biden were to get in, would you be signing our currency >> i was hoping you were going to ask me about this fox call where biden's beating trump by 11 points, man what do you think? >> yeah, i remember hillary's polls, too but seriously -- >> that's fair. >> do you -- what's your signature like admittedly, by dollars will probably be worth about 50 cents on the dollar -- >> this is not an identity theft play you're making here, right you're getting me nervous. >> i'm asking you whether you'd be treasury secretary, yes or no >> i cannot comment on that at this moment. >> all right and as i said, my dollars will be worth about half as much if you guys do get in, but anyway, thank you, jared chris. i love you, jared. chris, you were awesome. your facts and everything. it's unusual for our guests. coming up when we return, a lot more on "squawk. raising the rhetoric in the trade fight. latest headlines from washington

and beijing and the global market reaction. we'll talk about it. stay tuned you're watching "squawk" on cnbc when you rent from national...

it's kind of like playing your own version of best ball. because here, you can choose any car in the aisle, even if it's a better car class than the one you reserved. so no matter what, you're guaranteed to have a perfect drive. [laughter] (vo) go national. go like a pro. see what i did there? trade tensions weighing on stocks once again. futures pointing lower this

morning with the dow on pace for its first four-week losing streak in years. uber one week later. after an awkward debut on wall street, has the ride-hailing giant finally found its footing? and another piping-hot ipo today. luckin coffee, which wants to take down starbucks in china with a store base that's growing like wildfire. 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, and welcome back to "squawk box" here on cnbc, live from the nasdaq market site in times square. i'm joe kernen along with andrew ross sorkin. becky quick is off today we also have hormats here, who i didn't know you moved to music like that. that was -- really >> it's moving, animating.

>> you will completely go wild at times with a strong beat? >> absolutely. you need that in this environment. >> yeah, yeah. ♪ >> love it >> the futures right now -- actually, he didn't move at all. i don't. i move my little finger and then my whole body starts, and i won't lotte it happen. anyway, we're down 180 on the dow. the s&p down 20. and the nasdaq up -- i'm sorry, down about 58 points treasurys were 2.39% earlier, 2.36% this morning on the ten-year. let's tell you about some of the stories investors will be talking about this morning suppliers of chinese telecom giant huawei taking a big hit, i should say a massive hit in overseas trading this morning as the trump administration banning impact on the sales outlook of those companies having a huge impact, investors worried about the possible impact of the huawei action on trade take a look. sunny optical by the way down over 10% right now we have a number of other stocks

down in the 4% and 5% range now also separately, boeing saying its software fix for the grounded 737 max jet fleet, it's been completed, and that will make the jet safe to return to service. at least that's what the company's saying however, the company adding that regulators, of course, still asking lots of questions and they need more information about that fix and how pilots should interact with the updated system under various scenarios. so unclear, of course, when those planes will get back in the air. and then luckin coffee, which is starbucks' biggest rival in china, has priced its ipo at $17 a share. the top end of the expected range. it values the chain at about $4.2 billion, making it the biggest u.s. offering by a chinese firm this year luckin, by the way, was only founded two years ago. it's got about 2,400 stores across china already to put that into context, starbucks has 3,500 stores the ceo joined us on set and says it puts luckin well ahead of the competition

listen. >> when you think of what we've achieved, 2,000 stores, we have done what most people do in 15 or 20 years. and of course, you have to make an investment in your systems, in your staff and in your branding, but i think the unit economics today are actually pretty clear >> luckin is backed by blackrock and singapore's sovereign wealth fund it will start trading today on the nasdaq under ticker lk and we should say, since so many of the ipos, virtually every ipo these days, these guys are not making money yet so they're still losing money doing this. >> starbucks has 3,500 stores on seventh avenue, don't they do you know? have you counted >> total stores in the u.s.? that's a good question. >> no, below 98th street, if you go down to tribeca, i think -- you're over 3,000, anyway, aren't you. >> and they're mostly full >> i know, with people on laptops. >> are you hanging out there >> with man buns, right? a few stocks -- you've thought about -- you've thought about it, whether that would -- >> if i could grow a man bun

i don't know. >> about actually -- no? never. >> i don't think i could pull it off. >> everybody's got one the world -- bob, the world's passing us by. >> that's right. >> a few stocks on the move. shares of heavy equipment maker deere are falling in premarket trading. they reported quarterly profit of $3.52 a share, 10 cents below estimates. revenue did beat forecasts deere also cut its outlook uncertainty in its agricultural markets. hewlett-packard enterprise, hpe, buying supercomputer maker cray, the deal worth $35 a share, $1.3 billion in cash. hpe expects the deal to add to its bottom line in the first full year after it closes. okay, china has yet to say how it may retaliate to the latest escalation trade tensions with the u.s the virtual blacklisting of products made by telecom giant huawei we want to get to kayla tausche, who's in washington this morning with more on this developing story, and we're seeing the impact overnight on those companies' stocks. kayla? >> reporter: hey, good morning, andrew new developments in this trade

tension have gone mostly quiet, despite the fact that tensions continue to simmer behind the scenes between the two sides you did see china's foreign ministry spokesperson at a daily briefing today say, yes, china prefers to resolve disputes through direct talks, but then officials told the "wall street journal" overnight that the chinese side does not know of any u.s. plans to travel to beijing for a next round of talks. but you are seeing china take some actions, and it's playing out a little bit behind the scenes here. you saw china, its central bank intervening to prop up the chinese yuan above the $7 level, that key psychological level and then, of course, there is some news about potential purchases of jet fuel in china that could happen later this summer to blunt the effect of the trade war. these are both according to reuters. and then, china's also canceling a major purchase of u.s. pork orders this is according to data from the u.s. department of agriculture. in the last week, china canceled

an order that would have totaled about 3,700 metric tons, so another hit to u.s. agriculture as the trade dispute moves on. meantime, officials are moving on to other issues in the trade front, cutting preferential treatment for turkey, but also cutting steel tariffs there from 50% to 25%, and then other white house officials are trying to figure out how to frame this decision that we expect where the white house is going to be delaying a decision on auto tariffs. but i spoke to a senior administration official who says inside the president's mind, it's all china all the time. guys >> hmm, interesting. >> okay. >> i thought -- you know, the big, popular expression now, kay kayla, is someone's living in his brain. who's living in trump's brain? either biden or pete -- can you say buttigieg? >> mayor pete. >> do you try really hard to get both edges in or do you do the short -- i do budda-edge.

>> he did get a clear pronouncer, but he has one on his twitter profile as well, so that was out there. >> who's living in trump's brain right now, would you say elizabeth warren used to say she was living in there, too i think they're all living in there, aren't they >> i haven't spoken with anyone who has definitively said they have taken up residence in trump's brain, so i'll leave that to you. >> kayla, isn't she -- you know, she's in the beltway you have to take things seriously, no matter how ridiculous they are, and we appreciate that. thank you. >> we try. >> we've been working together a while. all right, thanks. >> we've got a guy who could be living in his brain. we'll see. for more on the simmering u.s. trade session, we welcome bob hormats. he's served as vice chair as goldman sachs, undersecretary of state and deputy u.s. trade representative are you living in his brain? >> i don't know. i don't think so >> okay. >> i haven't seen any evidence of it. >> so, this move by the administration against huawei's suppliers, the right decision, the wrong decision what do you think's happening here >> i think it's a strong signal

that trump is trying to put more and more pressure on the chinese, and a lot of the discussion that we've had with the chinese has been about technology, and this is sort of symbolic of a broader set of -- >> let me ask you a question, is this huawei story a trade fight or a national security fight >> both. it's both. there are clearly implications for the trade negotiations and these 5g issues that huawei relates to and other companies relate to. also when you talk about new technology -- >> i understand that, but do you believe that huawei -- do you believe that huawei really is a back door to the chinese government that's the -- let's start there. because either the whole thing is a terrible, terrible back door into everything, or we are way, way, way behind on 5g, and we are now using tariffs and muscling everybody else out because we actually just have -- we can't get there on our own? >> we're not way behind on 5g.

>> hold on i don't know anyone who doesn't think we're way behind on 5g do you know -- what u.s. company -- >> components of 5g. this is the huawei huawei is producer of certain components of 5g -- >> correct. >> and we don't have producers of those components. >> right so we -- let's just agree that huawei is wildly ahead of where we are >> on certain products, yes. the question of 5g -- >> let's call it hardware. >> the hardware, huawei is a world leader. >> hold on, we can only roll out 5g in the united states if we were to either use huawei hardware, as far as i can tell, which we're not going to use, or effectively, ericsson hardware. >> or nokia. >> do you know of a u.s. manufacturer whog doos this? >> no. >> isn't that a problem? >> that is a problem that is a problem. >> okay. >> for sure, that's a problem. >> that's a problem, okay. so now that we know that we are behind -- >> but there are other aspects of 5g where we're actually moving ahead i think the hardware -- >> we're hopefully going to win, still, don't you -- >> but this is the question --

how are we going to win if we don't have anybody in this country actually making this stuff and we're so wildly behind in what we're doing, i would argue is trying to muscle huawei out of the way so we don't have to deal with this -- >> remember sputnik? i guess you don't, but we were way out of the way there -- >> there are many aspects of 5g. so, let's look at it and put it in perspective >> okay. >> it is certainly true that we do not have some company that is in that range that you're talking about. huawei, nokia, ericsson. >> right. >> we have other aspects of 5g where we're actually quite good. and so, the question is, how do we build our 5g capability up? so, this is a big challenge for us but many parts of 5g we actually can do quite well. >> what parts, just so we're clear? >> well, with the whole question of transmissions, the software questions. there are a whole range of things there are companies here that make chips for 5g, not necessarily the hardware at the

center of 5g that is true. >> okay. let me ask you, where do you think we are in this trade negotiation? are we weeks away? are we months away >> you know -- >> are we never getting there? >> earlier in this month, almost everyone on the chinese and the american side agreed that there was a deadline may 10 was going to be the date. and they were making a lot of progress and there are four elements that i think are useful one is the structural issues, intellectual property, trade secrets, production, level playing field. second is the amount the chinese buy. they pretty much agreed to buy trillion, trillion-plus. they hadn't quite agreed on that the third question was how you embody it, how you integrate it into chinese law there obviously were some differences of opinion on that the president wanted to be under chinese law that's produced by the national people's congress the chinese may have had different interpretations as to how to record or embody this in their law. and the fourth was how you enforce it, verification and

enforcement. and there were some differences in the past, but those seem to not -- >> okay, but where are we placing the blame? if you read the stories and reporting that's been done this week, there's this suggestion that, somehow, we were really there -- the u.s. thought we were there, and then president xi changed the game plan at the last minute. do you believe that or do you believe that this all was misinterpreted on the u.s. side? >> it's very hard to know. it's very hard to know exactly looking in the minds of what's happening -- all i can say is most people did think there would be an agreement. something happened, whether it was a misunderstanding or decision in beijing. it's very hard to interpret because it's an opaque situation at this point for observers. but the problem is now we're in a situation where we're raising tariffs, the chinese are going to raise tariffs in response we're more dug in on both sides now. and what's important to know is, we have strong public opinion here the chinese do as well they have -- they're not a jeffersonian democracy they have public opinion, and there are certain things that i think their leaders would find

difficult from -- >> as u.s. multinational companies start to move their supply clanz -- and i believe there are really conversations now where that's happening. >> yes, that's true. some people are finding it more difficult than they think. it's not so easy to change your supply chain from one that's dependent on china for 20 years to vietnam or bangladesh or sri lanka. some are trying to do it some i've talked to have tried to do it and found out that it's hard to source elsewhere, in which case, they're forced to pay a higher tariff for their intermediate goods for their components, which makes profitability more difficult, unless they pass it on to consumers, and consumers, of course, are going to be squeezed if they have to pay that. >> we've got to go, but you tell your clients who call you up and say, bob, what's really going to happen here, you tell them, a deal's going to be made, it's going to be made when? >> i think it's going to be a lot more difficult to make a deal -- >> so it's not going to be made? >> i think it probably will be made, but i think it's going to take a lot longer and it's going to be a lot more complicated, because both sides are dug in. >> 2019? >> i would hope, but i've

predicted before in a more optimistic way, because it looked like they're moving in a more optimistic way. now i think the odds are more difficult. >> okay. bob hormats, in the brain, potentially, of the occupant of the white house -- >> i'm very disappointed that, you know, that you don't think that we can catch up i mean, if china's not able to steal all the stuff for 5g, how are they going to win? >> huawei -- >> they're going to develop it all themselves. >> because they have -- >> okay, okay. are you a huawei expert? you're a 5g expert on what they have on huawei you know, with everything that's going into 5g, you're in a position to say we can't catch up with china on this? from what? >> go read the dod report. go, go -- listen, there's so much riding on this and so many people that actually know what's going on will tell you that we are so far behind on 5g, it's outrageous >> you know aspects of it, but -- >> you know they tea off at beth page today you think i'm going to read the dod report you tell me what it says.

>> we should be putting more into our national labs and own research -- >> it's a disgrace how far behind we are! >> okay. coming up, it's been one week -- and the american dream is only alive in china, too, according to andrew. they make 10,000 a year there, average gdp. coming up, a week since facebook co-founder chris hughes -- oh, god, we just go from one thing to another -- chris hughes called for the breakup of the company he helped start. we want to know if he's moved the needle one iota today. could facebook's iron grip on social media and that world finally slip a bit plus, we're going to talk hulu and the future of streaming as disney makes a big move into digital. stay tuned you're watching "squawk box" on cn bc

welcome back to "squawk box. take a quick look at the futures. we are in the red. overnight in china, things went south as well, and that's what seems to be pushing the stocks and the futures, at least this morning, this direction. dow off about 191 points, nasdaq looking to open down about 67 points, and the s&p 500 looking to open off a little over 20, we'll call it 21 points right now. all right, in just a couple

of hours from now, on cnbc, our ownjulia boorstin's going to sit down with a chat -- >> the one and only. >> -- for a chat with facebook's coo sheryl sandberg. ahead of that news-making interview, we want to break down some of the biggest issues facing the social media giant today. julia joins us now flanked by a couple of big-time "the new york times" stars, media stars. in other words, ed lee he's here. media reporter for "the new york times" and a cnbc contributor, and some guy that does it all. i mean, you're here, you're there, you're over here. >> everywhere. >> and julia -- >> where in the world is julia on any morning >> you could spend your career following his career as a media reporter, right? trying to keep track of everything. >> watching billions. >> dealbook. i mean. >> let's hear what's going on with facebook. that's the interview today the interview today. >> it is it is. and i'd be worried if -- no, i'm

kidding. but what are you going to -- i mean, what is going to be the thrust >> look, this will be first time we've heard from her since chris hughes wrote that op ed really calling for the company to be broken up, among other things, also talking about the need for a new regulator out of washington so, it will be interesting to see what she says about that and then also, really to hear more about how they're going to be able to make money from facebook when they're giving consumers tools to clear their histories and making targeting far less valuable for advertisers. so, what are you going to do when the whole business model could potentially shift if people opt out of targeting? >> are you really a believer that everybody's actually going to opt out of targeting completely >> i don't think everyone will completely the question is will enough people opt out that it really impacts their business >> also, it's going to require people to take an action they're not going to default to wiping everyone out. it's like if you want to wipe it out, here's how you can do it. i think a lot of people won't know to think to do it. >> there's an assumption that a lot of people don't even change their privacy settings when they

can, but facebook did warn advertisers this week -- they posted a blog, for advertisers saying just so you know, the clearing history tool will go into effect, limiting your ability to target ads. so far, we've seen americans don't care too much about privacy enough to take action about it, but it is something people are talking about. >> do you think that the redesign is going to have a big impact because i started playing with it i will tell you that i really enjoyed being on facebook this week >> but from a engagement standpoint, are you spending more time on it? >> this week i started going on and all the white and it just looks different and i sort of got into it. >> you like that it's different, though, maybe. is it functionally better or just different >> most people don't like when things are different. >> that's right. you changed this thing, the button's over here, now why's the color look like -- >> to me, this was a less dramatic change than maybe what snapchat did, which did alienate a lot of users they fundamentally merged who different parts of its business. facebook's making it easier to access everything they do across the different platforms. by the way, that ties into the

whole antitrust thing. would it be impossible to break up facebook when you're integrating messenger and instagram and whatsapp would it even be possible to separate them out? >> today you could, right? >> today you could the longer -- remember, the back end is already being integrated. so with every passing month, it would become much harder. >> i know there's a lot of talk about regulation and chris hughes sort of talked about that in his op ed, break it up, regulate the data. one thing interesting to note is data portability, the idea that you can take your stuff on facebook and take it to another or competing social media platform has been sort of part of the big bugaboo for years, right? the original ftc settlement was can you move your stuff over facebook did that but mainly just your photos real portability is if i can communicate with my friends in a

social network through the back end. instead of breaking up facebook, they should look at interon reality across different social networks the way the phone systems. all of the different bells at one point in time worked out deals with each other. >> what do you think you're connecting to? >> chris hughes would say facebook is so massive, there isn't an opportunity for any other smaller social network to actually become big enough that you would need to port to them. >> it's interesting that when snapchat created a lot of filters, people were using, love the filters. they would screen shot that and then post it on facebook, right? that is an example of a lack of interoperabili interoperability if there were a way to communicate across networks, that might actually foster more competition -- >> do we think there's a real conversation that's happening in washington right now about breaking up facebook right? it's one thing for all of us to gab about it and talk about it and chris hughes to go on tv and to write an op ed and everybody wring their hands. under -- and i'm looking at joe, but under -- in a trump

administration, and assuming, joe, that trump wins another four years, do you think that there's any -- this conversation -- >> well, i think there's certainly a conversation about regulating facebook and figuring out different ways to regulate facebook we have talked a lot about privacy regulation there's going to be some pretty stringent california privacy rules going into effect next year, which puts pressure on the adoption of federal privacy rules, but i do think there's been talk about creating another kind of regulatoror, maybe under the ftc or not, that's focused on regulating tech companies i think the conversation about breaking up facebook, you would almost need new laws to really enable that to happen, because under current antitrust laws, it's not entirely clear. >> i agree, i think it's more regulation than breaking up. i think that's the more likely outcome. and if you see the way the eu has been regulating things, they've become the de facto regulators, because the tech companies are just going to build it one way and then deploy it across all of their different regions. >> ed, stay here for a second. i've heard from -- let's call him bill r he's a really smart telecom

investment banker. says "we haven't made telecom infrastructure since lucent over a decade ago that ship has sailed huawei makes equipment they will deploy 5g services and innovation better than anyone in the world. does it matter if you use a chinese manufactured phone or computer to access facebook or google no there are no u.s. manufacturers of tvs, but netflix is a blockbuster success. he is focused on the wrong issue --" actually, it says as usual, but i'm not going to say that part. >> that's me. >> then i got something from a well-known ceo that i think you got the same thing read that quickly and we don't need to say who it is, but are you reading it right now >> i am. >> let me see if that makes sense to you ed, do you -- >> what's it say >> all right, i'll read it >> i want to see. >> wildly behind the only commercial deployments in the world are in u.s. and south korea. why is china going nuts on the commerce department's entity list inclusion of huawei this week because they are ahead or behind huawei has no access to u.s.

tech do they have a 5g product, question mark. if u.s. has no access to chinese tech, do we have a product answer is yes. and we don't need to talk about, you know, this is off the record, maybe, but we both got that one, sorkin. >> yep, we did. >> so, where's all your bluster come from? you read a dod report? ed, what do you think? are we going to be able to catch up for 5g? aren't we going to be world leaders in 5g? >> i think we are definitely behind -- >> in hardware. >> yeah, in hardware, but the thing about huawei, i think the thing to understand is that their technology -- a lot of it's built on u.s. components. u.s. technologies are built -- but you need that -- that's what trade is about, right? it's not -- >> all right, we're not ending trade. >> no one entity or one nation -- >> julia, we're not breaking up facebook tell cheryl, i'm with -- >> do you think it should be regulated? >> this is also a guy who wants universal basic income he's wacko, chris hughes guy he's nutso. >> do you think it should be regulated, though? >> if you've got billions of

people saying stuff and you're going to try to sensor that, i don't know how you do it -- >> but in terms of mandating certain protections for user data and privacy >> i'm kind of with andrew on this if i get all the benefits, go wild if you do something, i'll worry -- >> did you say you're with andrew we should probably -- >> did you see bannon and tom friedman the worlth wk d iseeis, like, crazy. >> ed lee, the one and only julia boorstin

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welcome back to "squawk box" on cnbc live from the nasdaq market site in times square. among our stocks to watch this morning, pinterest shares falling sharply following its first quarterly report as a public company pinterest saw revenue grow to $202 million, more than wall street had expected, and it was 54% above year-ago levels. the loss, though, was a lot more than people thought, losing $41 million during the quarter i think that was double what people thought ceo ben silberman's going to be on "mad money" tonight with jim cramer to talk about the quarter and the company's outlook. shares of applied materials are higher this morning. the maker of semiconductor manufacturing equipment reported profit of 70 cents a share, 4

cents above, gave an upbeat guidance for the current quarter. and jpmorgan securities upgraded under armour to overweight from neutral, saying that it was impressed by their focus on innovation and a robust product pipeline. renewed trade stress has been weighing on the minds of business owners and consumers, but the jury's still out on the risks of lasting damage to the global economy joining us now to discuss, nancy lazar, co-founder and partner at cornerstone macro. and in just looking at some of your thoughts, nancy, they are a problem, but the question is -- i guess it's a question of duration and just how much of a problem it is at any time. it's a negative, but i think, i got the feeling from reading your notes that you think it gets overstated at times on how serious it can be? >> as of now, i think it is overstated but what happened over the past couple of weeks is now putting the extra 50% tariffs on the

extra goods opens the door that you get to $300 billion, 25% tariffs on the next $300 billion, and that becomes a bigger problem so, as of now, i think it is overstated the, kind of the backdrop of the u.s. and global economy is a little bit better than it was in the fourth quarter the fed was in a tightening mode in the fourth quarter. europe was clearly getting hit from an economic perspective in the fourth quarter china was also still deteriorating from an economic perspective. as you moved into the first part of the year, the fed has obviously backed off if anything, they have room to ease, and so rates are down. that's helping housing and also, you've had a pickup in china's economy, not off to the races, but it's better and as is europe >> when we hear of a 25% tariff being a tax on u.s. consumers, then we hear people that try to say it's not as serious. they say, well, some of that is going to be absorbed by manufacturers. some of it is going to hit china. some manufacturing is going to move what percentage of that actually

hits consumers here? and with inflation so muted, is it a big concern here? will it hit consumers as much as it normally would, or is it the consumer and where he lies on the economic spectrum that is a serious problem, since it usually hits the lower people? >> the consumer is actually in pretty good shape. the job market's healthy, wages have increased, income's pretty good right now but what we saw last year, first with washing machines, is companies did, indeed, increase prices pretty much all that was flowed through to the consumer. they went up almost the full 20% and had a pretty sharp drop in washing machine sales. in the latest leg on the tariffs, you did see the bulk of that flow through, but it was only a couple of tenths. and as you said, inflation is still pretty low you barely saw it in the inflation readings it's really going forward where you're at risk of starting to see that chip away but what you saw with washing machine sales is they went down sharply. and the next thing you know, prices has to come back down

there was demand destruction so, it is really a tax it's not inflation and if the consumer does pull back on spending in those areas, those price increases probably don't stick. >> shifting gears. when you saw the 3.2% print, were you surprised and is it transitory well that word's becoming popular. is it inventory? is it import-export? is it likely to continue what's the current state of gdp in the economy >> so, we've been expecting about 2.5% to 3% gdp growth this year, which is a little bit more than expected, so -- >> you're against the grain. >> yeah, a little bit. >> above consensus. >> a little bit. but that 3.2% you highlighted, a lot of the stuff in there isn't sustainable. the inventory pickup was a lag effect, we pulled a lot of that forward. i don't think trade's going to deteriorate sharply, but it's going to be certainly not the boost that it was. the bigger issue is what happens to kind of final demand, capital spending and consumption and housing. housing is one of the few areas that's getting a boost from what's going on because mortgage rates are down almost 80 basis

points so housing, which has been a drag for the past, over a year, is likely to start to boost gdp in 2q, 3q. unfortunately, that's only about 4% of the economy. the bigger issue is what happens to consumption good news, retail sales were revised up a lot for march the bad news is you started the quarter on a soft note, so you're not getting that rebound in consumption that i thought you'd get here in the second quarter. you're going to be better than the first quarter, but it's not clear yet how much you're going to get capex to me is really, though, one of the most important supports for the economy it has been. and i'm -- i get a little worried about that with business confidence on edge. >> what's the dot chart? what's happening there why is that happening? you think we're going to get a cut this year in rates >> my colleague, roberto, at this stage doesn't think we will -- >> why is it 75% probability >> the markets -- you know better than i -- the markets obviously swing one way versus, you know, reality. and we clearly swung to an

extreme tightening mode in the fourth quarter obviously, that didn't make any sense. if the fed needs to, they have room to lower rates, as roberto would say, but at the end of the day, i'm -- as long as we don't do the $300 billion, i don't think we're going to need to cut rates. >> i mean, we are in a world where there's negative rates again, from some pretty big economies. >> yeah, yeah, yeah. >> so, why are we diverging? why should we diverge? and if there's no inflation, is there any reason not to keep the pedal to the metal >> well, to be sure, you don't want to overstimulate and create excesses and bubbles, you know, a la potentially what we did -- certainly not anything like what we did in the '70s interest rates are low, i would argue, for in the united states, long-term interest rates are low for? fundamental, important reasons one would be, as you just said, the underlying trend in inflation is low why? because we've seen an improvement in productivity in this country it's been an improving trend for a couple of years now. and at the end of the day, that's really what helps keep

inflationary pressures low very similar to the 1990s. we had a pretty cool backdrop where you had accelerating gdp growth, accelerating productivity growth and slowing inflation, which prevented the fed from really having to kill the economy until 1999-2000, kept bond yields moving lower, kept the economy relatively healthy. so, i think there is some real positive structural forces for the economy that are keeping core inflation on the lower side, which is why what's going on right now's so frustrating. >> very good nancy, thank you >> thank you very much. >> she's like a big top economist, did you know that >> i know. >> yeah, like number one in ii and -- what, isi, you're co-founder >> something like that, yeah. >> with who? >> ed hyman. >> ed hyman and nancy lazar. did you know that? >> i did not. >> you read dod reports, but you don't know about our -- >> i didn't appreciate who -- we have breaking news, though, to get to right now. news on tariffs out of washington we want to get over to kayla tausche right this moment. kayla. >> reporter: andrew, we are getting an official postponement

of auto tariffs for six months, as cnbc reported what happened earlier this week. in a proclamation that the white house just released, president trump says that he agrees with the sole finding of the commerce department's report that was submitted in february, that investigation on whether automobile imports and parts imports threatened national security the president says that he concurs with the finding that automobiles and certain parts are being imported into the united states in such quantities and under such circumstances as to threaten to impair the national security of the united states, but the president says he's directing ambassador lighthizer to conduct negotiations with the european union and japan on these auto parts and other trade issues to update him within 180 days or six months, as is allowed by law, and to figure out how to proceed from there so, you are getting an official postponement of those auto tariffs, though we should note, if at any point in those six months, the president feels negotiations aren't going well, he does have the right to make a

decision within that time frame. he doesn't have to wait until the end of that period, but certainly, this is going to be seen as a welcome and dovish sign to the markets. guys >> okay. kayla, thank you for that. appreciate it. we'll see what that does in terms of the markets today. coming up, revisiting uber's wild week. it was only last friday that the stock started trading and fell almost right out of the gate but check out this chart it's come almost all the way back since then. was uber simply a victim of bad market timing or was there something deeper going on? we will talk about that story next, when "squawk box" returns right after is th

welcome back to "squawk box. some stockmovers, more stock movers this morning. deere shares are under pressure. heavy equipment maker reported weaker-than-expected earnings. company cut its full-year forecast, saying persistent uncertainty in its agricultural markets is weighing on its outlook but that its long-term fundamentals and overall economic conditions do remain positive nvidia higher today after reporting better-than-expected first quarter. the company also forecasting second-quarter revenue above estimates as it expects sales of

its graphic chips to benefit from a recovery in the gaming market the company's ceo, by the way, is going to join jim cramer on "mad money" tonight. and there was a deal this morning. hewlett-packard enterprise is buying supercomputer maker cray. the deal's worth $35 a share, $1.3 billion in cash they expect the deal to add to its bottom line in first full year after it closes. coming up when we return, a big conversation, maybe a little bit of a debate about the comeback in uber's shares after a stumble last week in its first day of trading uber had a nice comeback this week, almost back to the beginning, although it's down with the broader markets this morning. when we return, we're going to take a look back at where uber was just seven days ago and where it is today and maybe where it's headed. stayun ted you're watching "squawk box" on cnbc ♪

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success today is a stable price, a little bit higher than the pricing, not a lot higher than the pricing, because we want the pricing, we want there to be a fair price that the company received, but we're going to be measuring success in three to five to ten years, not in one day >> that was uber ceo dara khosrowshahi during our sitdown last week right before the stock's first trade. of course, uber did not get a stable price on that friday or on monday, but the stock has

rebounded nicely since then. leslie picker joins us with more on maybe how that happened. >> hey, andrew that's right, uber's stock making up quite a bit of its losses over the course of a week, but still trading about 4% below its ipo price of $45 per share and looking like it could trade lower today as well. uber's first two trading days were in the red, but the three after that were in the green as the stock climbed higher now, the question among many in the market is how much of that was real buying and selling, and how much of that was support by the underwriters as cnbc reported this week, uber's underwriters took an unusual step when they thought the deal was in trouble that gave them even more firepower to push that stock price back toward its $45-a-share ipo price. now, a couple of catalysts to look forward to in the coming weeks. the company has yet to report its first-quarter earnings uber shared some preliminary results in its ipo prospectus, but they did not include all of the metrics that investors are looking for. additionally, in a few weeks we'll see research reports from the analysts at the firms that

advised on the deal -- morgan stanley, goldman sachs, bank of america, and more -- will be free to publish their notes on uber so those things, depending on what they say, could help propel the stock price higher or drag it back lower. guys. >> okay. stay here. we want you to be part of this conversation i also want to talk to you about what morgan stanley may or may not be doing until we totally understand what's going on i want to bring in john elton from gray croft partners good morning to you. >> good morning. >> what i'm trying to understand is we're a week later. was this a mess and now maybe it's not a mess? >> i guess -- dara just said it -- i think the jury's out for a year, three years, five years. but it's an ipo. there's some volatility attached to it. i think his expectations around having a stable price going on, given all of the interest in this is a little bit unrealistic. i have reason to be optimistic and reasons to be concerned long term but i think overall, just getting out, having a public stock and seeing where it settles is a win.

>> is this a real stock price right now or is this being supported by morgan stanley? >> i'm an efficient market theory person, and the vast majority of data suggests that i'm right on that, so i don't believe in conspiracy theories and that one individual firm can hold up an $80 billion stock >> and so, when you look out now three to five years, let me ask you a question, the past week, there is this massive debate all these questions, do you think those questions are viable real questions >> absolutely. the thing that gives me pause is earning surges came out report that sits on the driver's side uber had about 80% share where they just drive for uber and it was 10%. today it is 50% uber, 25% just lyft and 25% both. so if you have kind of a

swapping population of drivers on the supply and then you have on the demand side, you have people shot price on the app you have a definition of the commodity market where supply and demands are swappable. they are taking steps to address that uber just rolled out a reprogram. i am using it. and it is early. >> leslie, what's your sense of what's happening with the stock price here it is difficult to say morgan stanley and no under writer would disclose and say we were the ones behind the support here tch here it is clear wind volume does take down a bit. the under writer do have more support. they have a mechanism in place that allows them to push that stock price higher and their ability to do so is correlated >> how much was this also about

tb ne the news we got from the labor in terms of you knowiziunionizid the idea did came out. that came out on tuesday >> yeah, it was helpful because of big over hang for that stock has been this idea that it is driver as contractors. >> right >> and their business model is accident on th dependant on the idea they are not employees. you think you can get a bigger boost from that kind of news though if it was -- >> john? >> it is super important i think on the long-term, the autonomy question came into play and uber has a chip there. short term, labor is a huge factor in the stock.

>> is there an intersection of the market area? i am serious how are you doing an efficient market when you have no idea in terms of valuation metrics and why is it that i hope to sell it to someone else that's stupider than me at the price >> i think on that, you know the market is good at pricing stuff. >> the market is good at pricing, that's why i think it can fluctuate on any given three-month period >> if you look at it, it is a factor of future discounted future cash flows. having highly volatile price is rational the market is bifurcated of these brief stocks their core asset is an

incredible company that has world class engineers that's disrupting our market. if they figure all this stuff out, their big imported companies of the future, there is a high risk on them so they could be real disaster >> nobody knows. >> it is a volatile stock. it continues to be short term will be all over it there will be negative new story all over it. it is a great company. it got great asset and i love it as a service consumers, it changed the world. you know it is a great american su succe success story and so is lyft >> it could be a utility with subsidize, how do you know it becomes a moneymaker or everyone using it? >> the first data point on that is uber eats last year just getting started and 1.5 billion revenues and take a big chunk of that market. >> there is a taco bell hotel

opening. >> i thought uber eats and taco bell is a main profit driver did you see that >> you saw the talk co bell hot and you didn't bring it up >> i saw headline. >> why did it take so long >> can you imagine the room service menu >> it boggles the mind >> what's wrong? you want to get out? >> we got to get to jim cramer >> i want to do that >> john ellington says it. >> thank you, leslie let's get out to jim cramer in san francisco. monitoring your twitter feed, i don't know what has you going today and i want to let you know what i should be thinking about? >> the negativity on the two stocks that i have on tonight,

nvidia and pinterest is rather shocking are things really that surprising to people also, the dear comments people say are so important to the market again, shocking? the chinese are trying to make things so that deere is having a tough time the surprise factor is not surprising whatsoever. i am kind of surprised at the surprise >> we almost made it all the way back to monday now we are head down the other side i guess we'll have to wait >> joe, you and i both know there are people who are convinced that trump does not know what he's doing and that the trade war is a loser and you know it is a false narrative. you and i both know it we got to teach other people, all right? >> i believe so. i wish we could see the future, jim. that's the thing about the future it is hard to predict. anyway, thank you, jim we'll see you in just a couple

of minutes and make sure not to miss the big lineup on "mad money," jim speaks with the ceos of ptestinre and nvidia and proofpoint stay tuned, "squawk box" will be right back experience the style, craftsmanship, and technology that have made the rx the leading luxury suv of all time. lease the 2019 rx 350 for $399 a month for 36 months. experience amazing at your lexus dealer.

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