than 12% it's thursday, may 23rd, 2019. "squawk box" begins right now. ♪ >> announcer: live from new york where business never sleeps, this is "squawk box. >> all right, good morning, everybody, welcome to "squawk box" on the cnbc i'm becky quick along with andrew ross sorkin things are under some pressure this comes after the markets were down yesterday. the dow was down by more than 100 points, s&p futures down by 28 the nasdaq off by 100. all of these are continuing themes that we've watched the marketings roll around over the last few weeks again concerns over china.

things seem to have learned that it will be a long event. the zhang shy off more than 1 and a third% the nikkei is down by .6 of a% all as they continue to see the reverb racing of hauwei lack of a deal with the u.s. saying you can't do business with that. that is playing out if several other countries uk firms also saying they will not be doing business with hauwei, they use underlying u.s. technology in europe, red arrows across the board. the dax is off 1.8%. the footsie off by 1.3%. if you look at the treasury markets this morning in the united states, you will see that the ten-year here is yielding 2.3506%. we have fallen well below the holding ground wee seen if recent weeks. right now, china's commerce

minister is blasting the united states in a speech overnight has escalated the trade frictions and increased a global recession. tell global minister saying the u.s. needs to correct it's wrong actions if trade talks are to continue meantime, the company at the veteran of this trade fight says it's ready to go out on its own. a top executive at hauwei telling cnbc they could have their own operating system up and running by the end of the year we have been hearing about the past couple days >> that would only happen if hauwei were banned from using google and microsoft's hardware. i assume we are talking about their software earlier the u.s. black listed u.s. companies from using hauwei after national security concerns earlier this week, washington gave hauwei a 90-day reprieve for existing customers google reversed working with

hauwei and that's the way hauwei operates we'll continue to be updated take a look at shares of hauwei suppliers. they tumbled overnight you are looking at some of them down including sunny optical off more than 7% right now >> we talked about this quite a bit recently, tesla, the shares are on a six session losing streak the stocks lost roughly a fifth of its value since announcing a capital raids on may 2nd, which started out pretty well. it seems like it was well received we are 185 just this week tesla has been the subject of a price target cut. a negative research note from citigroup and morgan stanley and consumer reports warned yesterday a recent update to tesla's auto pilot driver software didn't work well and could be unsafe. morgan stanley analyst adam jonas held a private call with clients yesterday, which cnbc

heard in a recording remember, that was a gentleman, that was his target at greenpeace, $10. a worst case scenario. he expressed skepticism that a buyer like apple or amazon would step in to bail them out it says that tesla seems like a distressed credit and that's what people have been conjectureing. but more and more people have been conjectureing that's the end game it gets so cheap is that there is some brand value that apple would recognize at much lower prices that would be - >> that's like a crazy hail mary, though your thought is eventually somebody stems in to buy >> i tell you the renewed speculation i order overnight by a number of investors, it was speculated years ago that tesla was merged with spacex, if you remember -

>> just when they brought from the solar -- >> when they brought in solar city and spacex is considered more of the viable company you put them together. >> there is no reason to do that unless are you elon musk and you want to combine and find some way of -- because all the stuff that they said where there was this synergy, none of that has proven to actually be the case when they combine those. >> people are trying to grasp at where this story could go. >> what itself the total market for the flame thrower? that's not going to do it. >> flame thrower is a part of the boring company it's in a third group and i don't believe that once. >> so that's not going to save them >> you saw elon musk's twitter feed last night. >> back at it. >> he said they're getting ready to work on a new tunnel i believe in vegas so that's their new project. >> in vegas? >> i believe that's what he was talking about. >> we heard about that before,

potential for vegas actually i remember hearing that from some of the we had someone on the show talking about vegas being a place, they need to maneuver around more easily. the question is that scale able to do that it's a disney setup to do it in vegas. >> the acquisition as you call it a hail mary is not going to happy people because it will be such a sophisticate take under i gis would call it a hail mary in that the company and the name would continue but not -- >> if you are somebody of value, who brought in like he did, 18 dollars. if are you in a a long time, there is value here, there is shaw here. >> you think the base is much higher and there is no hail mary left and it will be a take -- what would apple, wait until they got the same price on tesla

as on dietz, what was that 4 billion? >> by the way i would have argued to you google could do this if they were looking to manufacture, if they wanted to manufacture electric cars. >> who would do it knowing it was a lawsuit, it was a manity acquisition because it's not going to add too, you will never see accretus >> if you think he's fought the technology. >> it will be acrretus in 2029 >> it's interesting from this morgan stanley call yesterday. he is somebody that andrew pointed out was a bull for a very long time he said in the fourth quarter of last year it was a completely different story. they had momentum going in their favor and demand and it was a momentum play and looking at the stock, you could make sense of it he has changed his mind, demand dropped off so pro siv russly. his point is when this was a

momentum company and you were looking at gaining sales and earnings through all of it, you could justify the stocks situation. you could justify the debt they had taken on as a result because the sales had come down. >> has ron baron written anything talked to anybody? is it possible that that just uber optimism was totally misplaced? >> i don't know. i think it used a separate what he has done and what he's created from the debt and the share price and everything happening. >> people say you shouldn't buy the stock because you are in love with elon musk. you know what i mean >> i'm saying. >> you both loved him. >> they're betting against you on music >> you loved it. he's smart, he goes down mars and will cure global warming >> he had a land rocket after he shoots something up? >> that's my point luckily you can't buy stocks

>> what becky is saying appropriately is you can separate the genius of a man. >> oh, i hope so. >> from the stock price. >> from the future of the company. >> you better. >> i don't know. >> and this is a, like a case study in that. maybe. maybe. we don't know where we're writing it off it's been here before. >> it's been here before we'll see. >> the nice ones - >> it's like pulling a rabbit out of a hat from the nice ones are nice, i don't know what it costs to produce the -- >> cars. >> i'm ready for a political bit of an update of the body style that's good. >> that was in the call yesterday, too, saying that may help things. not nearly as much as they need sales promised by a refurbishment by the end of this year >> i'm trying to figure tout tunnel >> i think they'll get around that >> they approved the slot machine, the board of los vegas convention and vis doors authority approved a contract on wednesday. the vote was 13-1.

los vegas's mayor was the dissenting voice on this >> i can't remember who it was. >> they will build a pair of tunnels that will connect with what's known as the east edge effectively of the convention center to the western edge of a few building >> this remind me more of the monorail at disney world >> everyone needs a monorail >> they will dig it if two months elon musk pledged to have it done by the tend of 2019 there will be a lot of people watching to see if they do complete it and this test case works. >> you remember the famous simpsons the monorail came to town. >> it was like the wells fargo >> it was like a takeover deal everybody was on board there was no reason to have one. but everybody wanted one. >> well, it's a monorail, one rail chairs of l brands, the company that owns victoria

secret they raised the lower guidance, comp store sales came in flat which actually beat what wall street were expecting. they were looking for a 1.3% if decline. the biggest sales were in bath and body works l. brand up by almost 13%. coming up, by the task proposal that keeps coming back. we will talk about a few call to tax wall street to pay for some ambitious if you spending proposals and later, don't miss the "squawk" news maker of the morning. secretary of state mike pompeo will join us to talk china, huh way iran and a lot more that interview is coming up at 8:00 a.m. shamplt he's been kind. as we head to the break, here's the biggest markets and winners, specifically the dow in this calls

democrats now set their sights on wall street as they hunt for ways to raise revenue for ambitious if you spending proposals. we are joined with more. i want to hear about this elan, fill me in. >> reporter: taxing wall street as you know is not a good idea it is gaining new momentum as democratic contenders look for

ways for sweeping standards. bernie sanders, kirsten gilldebrand, elizabeth warren and pete buttigieg they introduced legislation to impose a .5% onstop stock trades and a 1% tax on bond trades and.005 tax on livetives to bring down student debt. >> the middle class brought down wall street in 2008. now it is wall street's turn to help rebuild the american middle class. >> one of the co-sponsors of sanders' bill is one of his democratic rivals kirsten gilldebrand. she wants to call the family bill of right's, universal pre-k, expand child and dependent care and there is no proposal from elizabeth warren, she has been calling for a financial tax since 2015

pete buttigieg said on cnbc and fox news earlier this week he believes wall street needs to be taxed as well guys, woo ill this idea may seem farfetched in the 2016 campaign. it does seem to be more main stream heading into 2020 >> all right ylan that's what elections are for i once heard someone say and there will have to be some elections before we move forward on this. >> have they described exactly how they want to tax wall street build mechanisms here? >> radio. >> reporter: right, the proposal from bernie sanders is basically a fee on different types of trade. one proposal from kirsten gilldebrand is actually a little less aggressive and would be a .1% across the board on transactions, the size of the fee varies by the candidate. the idea they feel this could raise anywhere between about 777 billion to potentially $2

trillion everybody is looking for that big money back in order to play for those social programs. >> ylan, the question is will people actually pay it, potentially raise it there is all kind of questions of how you avoid, legally avoid a lot of these taxes if they came up? >> reporter: also one of the things elizabeth warren pointed out is she wants to design a tax in such a way that would prevent this from being a burden on mom and pop retailers. how do you make this the high frequency paid they have been criticizing versus the resale investors. it's unsure how it would affect investor behavior. >> unintended consequences, right? >> nobody is talking about tackling entitlements, the spending that we can't afford already or the trillion dollar deficits or the 22, 23 trillion we already have, it's all about

we need more money and we're going to add all these new things, andrew >> i take the idea of having a certain tax to pay for a certain thing, especially when they're unrelated items? i think money is fungible. you have to decide how much you need and how much services you want to provide and if you want to do pre-k, think of the idea of how you get there >> although, i'd be in favor of the higher gas tax, it would be locked up for infrastructure >> you know i'm not against a tax that's for a particular use. i think it's a strange thing to go from one that's unrelated to this >> nothing is ever really locked up with a locked box remember that? >> i do. al gore. >> do you think a transaction tax can be there are people saying a transaction tax would be beneficial in terms of what it might do to the investor public and the motivations. >> whether they change behavior in a positive way, irirpt

respective of the.you raise. >> right i guess the question is will there be retail investors that caught up, will there be ways to try to do at this time right way? thanks, ylan. coming up much more on "squawk box," including an activist battle brewing over, are you ready for this le legoland a tough week for retail stocks we will bring you those numbers and instant market reaction the moment we get those numbers. "squawk" returns in a moment ♪ why do you hurt me ♪ it would help me to know ♪ do i stand in your way ♪ or am i the best thing have you had ♪

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♪ oh she's a brickhouse ♪ she's just letting it all han out ♪ >> hey, the parent company of legoland at the london eye, it's so, i'd like to know, give me a consonant i'm pronouncing it, like lingerie. hedgefund value act is pursuing the deal to take merlin private claiming it can fetch 30% more than it's current valuation. merlin is the second visitor attraction company behind disney

but has struggled in the last year with rising labor costs and under performance. i thought this was the legoland owner, they thrived as a company but say they may have gone public too quickly in 2013 i guess if you take your time, we decided you can't take your time that's what happened to uber. als, take a look at sharls of leno lenovo they are fallingio ever night. they reported a profit revenue rose 10% matching wall street expectations. shares were up roughly 2% after that report but then fell as a part of this broader sell-off that's been happening across the board later in the session, now down by 2.6%. >> by the way, some of the pressure that's going to continue with qualcomm and really big companies after that qualcomm ruling from the judge yesterday, there is a downgrade today from mazz lo -- mazzulo

after judge coe's ftc ruling, they say it's a royalty of the percent of the chip average selling price at $50 versus being a part of the handset average selling price of $350. which could be significant qualcomm shares this morning which as you know have been under extreme pressure since this ruling came out tuesday night. down another 3.7 ', this morning. 66.70 is the last trade on this. the analyst at mazzulo said they handed out the index by about 540 basis points year-to-date even with the pullback we've seen today additional downgrades coming in. you will probably hear more as other analysts start to weigh in on this too. when we come back, look out below, a global market sell-off under way. we will talk trade and the

commercial market catalyst ahead. dow futures down by 242 points it comes after a decline of 100 yesterday for the do you the nasdaq is off by 102 also a programing note we will be talking china trade the conflict with iran and much more with our fuse maker of the morning secretary of state mike pompeo he will join us at 8:00 a.m. eastern time right now, though, as we head to break. take a look at the s&p 500 winners and losers [ music playing ♪ there is a hole in my heart that will be filled only by you ♪ ♪ and it's only my heart can't be feeling the things that i do ♪ let's build a better world for investing.

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>> announcer: live from the beating heart of new york, this is "squawk box." good morning, if you are just waking up, brace yourself,

because we're in the midst of a bit of a sell-off globally u.s. equity futures this hour are down about 2%, down 235 points the s&p indicated down about 28. nasdaq down let's i mean that is as close to 100 without being 100. i guess not really overnight in asia, it hasn't been pretty. that's where it really started i think, although as you can see, the hang seng bearing the brunt of that selling. then over in europe, they got some of their own situations happening, near term and you can see it's all red there as well. >> okay. growing trade tensions between china and the u.s. can further dampen market sentiment today. at least that's the worry. joining us is steve chipperone and jay jacobs head of strategy

and research at global x fund. good morning to both of you. you look at what's happening overnight. does this make sense it does make sense to you? >> well, the market trends digest all of this trade information which is looking increasingly bleak it started with 10% tariff itself, 25% after theives, not just tariffs, cutting off of u.s. and business ties >> it's not just that, it's rippling through japan and the uk and other places too. that's kind of what may be settling in on this. >> you think this is not a temporary situation, this is not a 90-day situation, a deal will not get struck all of a sudden what was baked in the 68 completely gone you think? >> i think this is pretty aggressive escalation. it maix it harder to walk back you see both sides did he going their heels n. the more this goes on, they have to reorient their sales process. it's hard to unwind what they're

doing if this goes on longer >> who are you doing as a result >> what you do is you don't change your overall outlook on the market what's happened in the u.s. is the threat of tariffs. >> he said the world is coming to an end. >> i don't think it's coming to an end i think the threat of tariffs couldn't get over the finish line now from the u.s. perspective, you will see the pain bring the chinese back to the negotiating table. it will take a while it introduces volitive we don't think it gets you back anywhere near the december 24th lows you had the fed on the right things in december you had economic earnings deteriorating. you don't have any of those things today. >> the feds won't come help you. >> they won't hike once a quarter between now and the end of days, which is where they were last fall i think within the equity markets, what this pushes you to, though, dividend growers and payers, for example. they're a little more defensive. they will benefit from those lower rates. maybe a little away from the global cyclicals

we think you have solid funds in the u.s. that are slightly accelerates and that will maybe move higher. >> it's noise to you >> it's not noise. >> some people say, look, the rational thing is that a deal will get done. you have to give it more time than we have planned on. you are thinking that rational actors may not be rational. >> i think this is escalating. that presents more risks there are more areas of the market we think will be less affected in technology, you see the social media companies, they will be more insulated by it if you look at tech hardware, there is a lot of risks right now. >> things outside, what's not exposed in your mind >> i would say healthcare stocks are pretty low exposed a lot of domestic energy stocks benefiting from oil output are exposed to this. there are more specific industries, looking at the broad indexes. >> within healthcare, there are political risks there, too democrats and republicans don't seem to agree on much of anything, except that drug prices are too high.

that's an issue that really resonates as you are headed into a political season would you be wary of any of those stocks within the healthcare sector? >> their certainly a lot of political risks. if you look at healthcare, it's the one sector that had the strongest earnings growth and the worst performance growth here there are areas in the biotech space, specifically those in genome mix we think they're exciting. there is new growth in technology less affected >> yes, there is no political will to do anything. even on an area that has agreement like drug prices. >> infrastructure is a long shot how do you pay for it? >> the president said we're not doing anything even though there was agreement, that's much less likely to happen a month ago >> becky said this is now hitting everywhere >> i think the u.s. is still very much the best house on the block here you have better growth

fundamental also the fed on the right side of thing. you go out in asia, particularly when you look at china, they have a lot more to lose and europe has always issues around brexit plus they export a ton of goods to asia. the united states is still a relatively closed economy. i think it holds up the best here on a relative basis >> would you go outside of the u.s. your bearer share? >> there are some attractive opportunities. if you look at europe, you see stronger earnings growth than in the u.s. and the earnings are cheaper. some select opportunities, like in europe, if you look at broad continental europe, you are seeing the valuations are 10% cheaper than the united states >> is there a specific industry or stock you buy >> we would go broad frankly for europe rather than really specific into one industry there. >> we will leave it there. thank you, good to see you. when we return, the fallout at facebook, the kane taking the epps to change the inventives for selling political ads.

we got the details right after this. later, we have a big interview with the secretary of state mike pompeo. you look at the latest on the situations in iran, china, hauwei, venezuela, much more, including the trade talks. stay tuned you are watching "squawk box" right here on cnbc

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all right. welcome back, everybody. u.s. equity futures at this hour are under extreme pressure at least extreme based on what we normally see. the dow is down after three of the last four sessions were down for the major averages the dow yesterday was down by 100 points s&p, nasdaq off by 6 people are trying to figure out what is happening with the china trade talks, hauwei. how that may be rippling across the globe. you are seeing red arose and lower closes in asia, too. facebook has stopped paying commission to its employees who sell political ads the company's portal for the ads will now be mostly self served the tech giant has been making changes after coming under fire amid allegations that its social

media platform was used for attempted election manipulation and i mean i would hate to try to monitor every single thing that's happening i'll tell you that much it's impossible, is it not >> there are ways to do it a little dra conian might be hurting their business models. >> if you have malice, you go out and do something absolutely horrific would you tell me facebook would not allow you to - >> there could be a delay on it. >> how do you do it? i'm saying that i don't know how you can guarantee that a horrific things aren't going to appear on your - >> it will alloy you to spring this on people >> you say how they will do it >> it's in the eye of the beholder, too, what is horrific to me. >> there are some things we would all agree on, christ's

church. >> i would delay all video by 30 to 60 seconds. >> and then you'd hear about it quickly enough >> or longer. >> you can do a two minute delay. i think you can do it so you couldn't broadcast live to everybody, broadcast live to no more than 50 or 100 people unless you were a verified user who was with a blue check market they decided, now, by the way, some authorized blue check person might do something terrible but i think you'd limit the group of people so you could keep it contained. part of the problem is, if you can get it you know to only 50 people and contain it, that's one thing. if it go etc. to a million people, even if you try to take it down, then it's popular, it gets everywhere. >> there are things they can do that might hurt their revenue potential down the road, too yes, there are ways you can do it t does the entire world need a broadcast network? >> this is a question.

by the way, there is a flipside. i made some of the arguments we talked about and have done viewer e-mail, viewers say, look what happens, what it's done for democracy in these sorts of places in the world. look at the arab spring, what has happened without face book people said that was a great benefit. >> you are balancing things like christ's church. >> 100%. everybody is trying to balance these issues meantime, i want to tell you about crude, they said that u.s. inventories rose last week hitting their highest levels since july of 2017 production in the u.s. also rose last week to 12.2 million barrels per day. it's a record high reached in late april the barrel wti 61.46. if are you wondering how bod bad it's get:ic this out

a viral song it's the song, it was written by a retired chinese official and posted on the messaging app we chat. it's about the trade war between u.s. and china, it has lyrics to call beat the enemy out of its wits it says trade war, trade war, not afraid of the outrageous challenge. coming up, is apple poised to keep dropping goldman sachs is publishing a report this week pegging the china exposure at 29%. what should you do with that we'll discuss that next as we head to break. here's a quick check of what's happening in european markets right now. through the at&t network, edge-to-edge intelligence

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welcome back the traitest up for discussion is the impact on apple joining us is the managing director at btig while you haven't changed your numbers but you are watching this very closely and have big concerns about what this could mean because china is such an important market >> i think everyone is watching. it closes day-by-day we all hope it ends quickly. things seem to worsen. there is definitely near term impacts meaning that a lot of

things tim cook talked about last quarter which is the sentiment was positive as they exited the quarter clearly turned negative. if you sell, let's say, he's lucky this is a low volume quarter. so let's say china is going to buy 6 million phones if that gets cut back by 2 million. there is a billion five of revenue. if this extends into the december quarter will china will buy 10, 11, 12 million phones. if it worsens where china doesn't allow iphones to get purchased. the impact to earnings becomes much more significant. >> the impact is there is anti-u.s. sentiment in china and they don't want u.s. products. is that the system >> i will let tim cook talk to jim cramer about this. he used this as a positive last quarter as far as exiting the quarter, entering this quarter relationships were improving now you are seeing pressure

reports. >> trade war, trade war. the song >> i've seen this over the past 20 years when quayle com was having battles, how they can move on, one way or consumer sendment and the operators in how they sell the phones. >> how long-term of an impact have you seen in the past. if this was something that apple managed to weather quickly, how have you seen that in the past qualcomm, a situation that would last for weeks, months, potentially years? >> apple is pretty important to china also they're employing a million plus people a lot of jobs created there. when you talk about these doomsday scenarios somehow prevent apple from making phones, that seems a little farfetched at this point. >> because they're cutting off their nose despite their face in that situation. >> they make good products i'm not sure it will be long term we're early enough in the year before the next cycle comes in the phones, if we can repair the

relationship, i don't think apple is irreparably harmed. things worsen and apple looks to take manufacturing out of china, i have had companies that ripped their manufacturing out of china, moved to vietnam. that's not easily coming back. once you choose to leave, that's it, right? so china has to look at that as part of how this trade war goes. >> if you were tim cook, would you think about your supply chain? >> you have to. >> how >> you have to be looking for and talking to your partner in terms of other locations around the world where you can move manufacturing. people talked about this taking two to three years isn't this what tim cook's specialty is this was part of the reason he got this job in the first place is how do you handle the supply chain. if this is his expertise, he should be planning now how to think about moving some of that. >> have you looked into, a, the cost, timing and where he might do that? >> it's really expensive if you're going to move it quickly. right? people talk about two to three

years because you're trying to do it cost effectively the companies sha have done it in the most recent quarter, it has been a negative impact on the results. all of a sudden your manufacturing stops and you can't supply the demand that's out there with your existing chains. >> so, you haven't changed your numbers yet, when you say that your meanings numbers or price target, too? >> revenue, earnings obviously there's greater risk multiples are a function of growth and risk. the stock has come up. we traded up to parody with the market and now back to a two turn discount on the market. the market has obviously come in so it's a day by day thing things are happening pretty quickly, but unfortunately in the last couple days it seems like things have gotten worse. >> when you're looking at sort of broad indications of what to do with this, do you follow the headlines? do you follow every tweet? do you follow every interview with a chinese ambassador like we saw over the weekend?

all those things file into this? >> twitter is obviously an important medium given how our president uses it in terms of trade war, we absolutely follow that and, yeah, every kind of utterance is important to get a sentiment mow the reaction will be to happenle in the market they're clearly an obvious market that has not yet been targeted here. >> what would you tell people to do today you haven't changed your numbers on this. >> the stock has pulled back >> it's 179. >> 2 million phones come out of china in the quarter, the range of guidance is 2 to $3 million so, right now we just have the company performing at the bottom end of a guidance range, right it's not dramatic. but if it -- if china makes a more aggressive move that's targeted specifically at apple, that's when i think you have to -- like right now again, given the importance of apple to china itself and the risks that they would run in driving apple

and their employment out of there, i think there's still some amount of cushion in that and i don't think we should let emotion take over in terms of thinking of fear obviously keep an eye on it. but ultimately, you know, i'm not sure that this is something to panic act at the moment. >> what about sprint, t mobile >> sprint, t-mobile? that's a bizarre story frankly we have never seen a situation where the fcc and the doj or at least in my memory have not come out in unison on a transaction for pi to go ahead of the doj -- >> the chairman of the fcc, chairman pi to come out ahead of making terms of a decision on this deal is just unprecedented. we're not sure what the politics are that are going on behind the scenes chairman pi already has an issue with ntia, with wilbur ross where ross has interest in satellite use of spectrum and

pi's been signing some of that millimeter waive and issues with lagato. >> you think this is political internally my reporting suggests and david and others have reported on the staff at the doj being against this transaction, but my other reporting would suggest that dell rahim is still trying to, a, be open it to and i think in a perfect world would be trying to find a way to actually approve this transaction and try to look for ways to get there, right >> which is politics so it's hard not to -- >> a, by the way -- >> they're all in the same party, by the way. >> you have an administration that wants this deal to happen by the way, we talk about a national strategy for 5g, if that was really your goal, you would actually want this deal to happen >> i agree with that it will accelerate 5g, ight? because t mobile getting access to that spectrum is great. but on the flip side you're in a way giving a bail-out to a very

well-funded company in softbank. softbank owns this company they have 10s of billions of dollars and could do what t mobile did years ago and invest in that network and invest in their asset and build 5g all we're saying to the doj is they have to analyze it not based on politics but based on will it increase pricing in the market yes, there's a political agenda to get us first to 5g that will certainly help but if politics are overruling the analysis at the doj, that's just the nature of the world that we live in terms of regulatory approvals we saw with at&t and time warner, i was at a conference yesterday where at&t executive is we operate in a world where there's a lot of uncertainties in the regulatory environment and how we make our strategic decisions. >> walter, good to see you thanks for coming up in. coming up, we're awaiting results of big buy reaction and if you have a stake in tesla, watch out, folks

the stock on track to fall for a seventh session in a row we're going to talk more about the head winds for the electric car company and where it's headed straight ahead. plus, we're going to sit down with secretary of state mike pompeo to discuss the state of the world, iran, china, huawei, russia, venezuela and s much more. we're back in just a moment. it's time for our memorial day sale on the sleep

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♪ sea of red futures falling as trade concerns continue could the merger of t-mobile and sprint mean higher prices for consumers? doj recommending it could be blocked. we'll look what it means for the investors at industry. >> critics, teases business ideas and causes controversy, but since elon musk's deal with the s.e.c. over tweeting, the stock has been hit hard, raising the question, is twitter hurting tesla? we'll discuss as the second hour of "squawk box" begins right now. ♪ ♪ communication breakdown, it's always the same ♪ >> announcer: live, from the beating heart of business, new york

this is "squawk box. good morning welcome back to "squawk box" right here on cnbc i'm andrew ross sorkin along with becky quick and joe southernen the dow off 227 points nasdaq off 90 points s&p 500 off 25 1/2 points all of this as we have red arrows across the board in asia and europe overnight, but i'm going to leave it to becky right now to tell us what else is making headlines. let's do best buy earnings first before we get to the other headlines. >> they're one of those companies that maybe got it together in terms of digital as a result, the estimate was 86 cents and the company was able to post 1.02 also seeing second quarter 95 to a 1, which the estimate is 96. so that's right in line. 9.14 billion in revenue versus 9.135 for consensus and actually

they give an estimate for next quarter, too it looks like for the second quarter, 9.5, to 9.6 this is more or less in line the stock at this point is indicated up a little, up about 2% on these numbers. although i'm seeing the bid in the ask move around a little >> we'll continue to watch that. you know, this is again a situation where you have a ceo who came in and who had real vision on how to fix this. he is not leaving. he'll be taking on the newly created role of executive chairman of the board. he's bringing in cory berry who is somebody who also has been say paising very close attention to this, who has watched this. i think he will continue with the sort of vision that really turned this company entirely. >> cleaned it up. >> they got all kinds of things and made significant progress implementing best buy 2020 strategy

it's not like the china 2025 strategy but it is something that makes sure they are getting additional service out to people and that's helped them out. >> they're spying on us in that terms? not that chinese strategy. >> different than 2025, not world domination but maybe domination in the electronics industry here is what else is making headlines at the hour. the faa is meeting with regulators from 30 countries to talk about the potential return of boeing 737 max jet to service. they will talk about boeing's software fix for the jet as well as new pilot training that's been proposed by the jet maker acting faa chief says he cannot predict when the jet, which has been involved in two recent fatal crashes will be back in the air. boeing shares down by half a percent, $351 a share. takeover talks we told you about yesterday have been concluded successfully avon products has agreed to sell itself to the brazilian cosmetics maker in a stock swap deal worth about $2 billion.

avon shares rose 9% yesterday when word of the talk first surfaced it's up once again this morning now that the deal has been finalized that's an additional gain of another 15%. but remember, avon shares even with all those gains are only trading $4.03. and hormel shares are lower in the premarket trading. they beat forecasts by one cent but revenue was below estimate answered the company cut its full-year forecast saying the outbreak of african swine fever is impacting its global hogs in pork markets stock is off about 2 1/2%. >> faz we need another reason to cut back on spam, you know what is swine what >> african swine flu i think there's also a swine flu that hit asia pacific. >> i don't want to say anything bad about spam it gets a bad rap. >> big in hawaii. >> huge in hawaii. huge federal reserve telling -- >> it is. >> it is, i know spamming the globe. >> with its patience

senior economics reporter steve liesman is here to -- >> can you read that, which i wrote. >> re-roll. >> be patient. i don't know that people got -- >> we were talking. >> thank you. >> federal reserve telling investors yesterday it will be patient with its patience. >> brilliant >> that's clever >> ill lit ration. >> sorry sorry us being us. minutes of the feds meeting showed agreement around the table for the fed to be patient, quote, for some time we hadn't heard that language before some saw this as a near-term hawkish in part they have been betting on a rate cut so heavily. the fed was sliding back to a hiking bias. i think that was more hawkish than it really was but pantheon said it's hard to read the minutes as anything other than the statement as the fed's intent to do nothing for some time yet but all is not lost for the doves. the minutes showed many agreeing with fed chairman powell, the downdraft inflation is

transitory they also showed increasing concern with the fed not hitting the 2% inflation goal several officials said they were concerned that if inflation didn't move back up, quote, in coming quarters it could undermine the fed's credibility that was not followed up by the way by a policy prescription but it might suggest they're going to cut rates in response down the road second, these minutes came before the latest round of tariffs. the fed could decide later this year we'll see how but to address tariffs with policy. >> i love this the idea that some thought this was a hawkish sentiment. we'll be patient for a really long time. we're not doing anything what >> remember, fair enough, becky. >> temper tantrum. >> the market has been heavily on the side of betting on rate cut. >> they thought they were going to come out and say six months we're going to lower rates >> right. >> i think what they did they came out and said when we said patient we really mean patient, right? >> the market has been very, very heavily betting we tried to lean against that a little bit thinking we had monday from jacksonville saying, look, i think the market -- guy

from the fed says that it might be worth listening. >> you should listen. all right. let's get to our guest, despite the fed's patience, our next guest says she does not see any threat from inflation at this time and, in fact, got kind of a two-prong view here that makes patience makes sense, i think. joining us barbara reinhart, mike santoli joining us as well. there's a high hurdle for one to see better growth which would cause maybe, i don't know, maybe a hike or to go down due to economic weakness with no inflation. so, staying on hold is exactly where the fed should be, is that basically it >> yeah. it's an accommodative term from last year for sure and there's a high hurdle for the fed to cut interest rates at this point, yes, why the market has been pricing in somewhat of a fed cut at this point about 40 bases points, if you put probability assignments against it, it's really not all that

material and in our view, the signs of inflation just don't seem to be there. if you take a look at the nfib survey, they do not site that inflation is a big issue for small businesses and while the core trimmed mean inflation from the dallas fed is -- is still sticky at 1.96%, you know, we don't see much to really punch it over that at this point additionally, the fed told you they would like to see inflation run a little above their target to try to hit their target in the long-term. so, we just don't see that inflation will be their issue. employment is the other side, too. the fed has a dual mandate and we do see that nonpharm payrolls has been very strong but we do not see them continue this 200,000 jobs a month being added to the economy say in 12 month's time. >> i'm looking at -- there's something called a ben franklin close, you put benefits and on the other side you put

negatives. it's almost tied for you here. if i were to do it, i think i'm left just standing pat with my equity exposure. >> yes. >> the world is still slowing, but, but there's signs of stabilization. so china was previously a worry, now it's showing some signs of support. >> right. >> earnings revisions globally have stopped falling. >> yep. >> credit conditions remain favorable. short-term sentiments on equities is positive. >> yes, it is. >> but then you didn't -- couldn't just leave it there you had to -- but these are sources of downside risk about four or five things that you point out could be a problem so where does that leave us? >> well, you have to be blanksed when you're an investor, you have to look at both sides of the equation and being skeptical is important thing we see there are signs of stabilization. we don't see them green shoots yet, that would be too strong. we think the fiscal ease that's in the pipeline also in europe there's about a .4 percentage

point ease in fiscal policy this year that will be a positive fiscal impulse, those things matter for the rest of the world. so we see that we're in a stabilization period >> got about four, five things, sources of downside risk can you talk about those it's china, china, china >> it's all china. sure the next round of tariffs is significant. the next round tags consumers in a significant way. that means that you would likely see continued exports from china continue to fall pretty dramatically it's really hard to see that the u.s. would have much of an opportunity to have exports fall much more far from here for china, but hitting the consumer is part of the economy that tariffs have not really touched thus far and the consumer is a very big important part of the u.s. economy and the global economy >> coming in here, santoli, what was one thing you wanted to -- that you were thinking about, obsessing over >> all that stuff reflects what i think is a pretty stuck market

right now. >> right. >> we come in and see the market looks down, less than 1%, back to levels we were at a few days ago. that's kind of where we are. still sorting through all those things i do think that we're in a kind of a market that can see a patient fed reiterating its existing stance that surveys all the evidence as slightly hawkish because we're in a mood right now for looking for a little bit of a rescue. >> just reminds me of the taper tantrums that used to go on. the traders saying, what, we want more. >> look, this is a mild move, but still i think it's because it's difficult to know in the second half of the year what's going to enable analysts to raise earnings forecast. we're still working through a lot of this stuff sector by sector. >> and we did just talk to walter who points out that this is changing on a day by day basis. he can't figure out how to change his numbers on apple or if he should because there had been so many unknowns. >> you have a handful of sectors in that condition and the question has been can the safer ones the ones that are insulated, domestic, large cap

secular growth or yield, can they hold things together while we -- >> does anybody worry about after yesterday's i guess incident at the white house that now we're in for a debt ceiling fight? i think eamon javers, you're worried? >> i was just waiving to somebody who was waving outside. sorry. >> i thought you were raising your hand. >> aimen javers says the president said he's still going to negotiate with the democrats. i did get commentary from some of the market guys that that's back on the table. >> i thought about that for a minute and a half and thought maybe that's going to be a problem but then again the president is pretty mercurial, looks like a situation that's really hurting the economy or stocks that will weigh more heavily. >> except they can't be in the same room for three minutes. >> leave that to his deputies to figure something out. >> it's the kind of thing that gets mentioned and gets on the worry list when the market seems like it's squirrely. >> would you sell based on that in. >> i don't think people outright

sell might re-enforce their inclination to do nothing. >> if you're looking to buy stocks, look for the pmis out at the beginning of june and also probably going to look for the second quarter earnings. that's why the macro data is so important to watch at this point. >> that's my question. is there nothing -- we're just finishing up the first quarter earnings nothing between now and second quarter earnings that will motivate people? are we going to be sitting in this stuck in the mud? >> a couple things. >> it's memorial day weekend. >> that's something. >> look, you have monthly earnings revisions will be out generally come out around the 28th, 29th of the month. you'll have two more months of earnings revisions and that's on a global basis one-month revisions, three-month revisions they have been stabilizing. you have two more non-pharm payroll reports and the g20 meeting. it's a lot of waiting around and seeing at this point. >> of course the market doesn't always literally wait. it knows those things are coming and then we'll see i think the question is have people who are inclined to sell the trade war, based on what we know right now, was the 5%

shakeout pretty much sufficient? >> that seems so poultry. >> except in those areas that are hard hit you have more than half of all stocks still in a down trend right now. it's not been across the board. >> that's why looking at your sentiment indicators is so support. short-term sentiment indicators are oversold so all of the exuberance has been taken out at this point longer term indicators gone from optimistic back down to the neutral. >> barbara, you say the macro data is important, we're running 2% estimate on the second quarter gdp. i think it's two and change for the year. >> uh-huh. >> is that enough? >> yes, that's -- >> i'm saying is the market want confirmation of that or does it need more than that to get excited? >> look, you need to go down to trend. the fed is not going to be able to stand pat if the economy has a 3% plus print. trend in the u.s. is somewhere around 2%. plus or minus .2 as long as you're at trend, the fed has achieved its objective

and can stay on hold for a prolonged period of time that is not what the market had priced in just three months ago. >> i think one of the difficulties for somebody who says, look, i think the u.s. economy is in good shape we're an island of better growth and stability here how do i play it well, you have these areas you normally play a strong domestic retailer, autos, regional banks, they're captive to some other force right now and not just reflecting the fact that u.s. consumers are in good shape. >> let's go by all the retailers. >> the problem also becomes if you want to stay invested but be more defensive about it, the defensive sector consumer, telecom are extremely expensive. >> the gridlock word is back >> that might be a good thing. >> talked about in the past, was it good, is it bad i think it's funny that we're talking now about the biggest thing we're hoping for in terms of bipartisanship is actually keeping the government open. we're not even going to talk about infrastructure or drug pricing or health care. >> it's so crazy. >> people say, look, trump just

said he's not going to negotiate but he'll probably at least talk to them about keeping the government open. >> or send somebody else to do it. >> that is where we are between now and 2020 the democrats don't want to do anything either i don't think other than investigate. so it's going to be -- but is that bad or good i'm still not convinced. >> i honestly think because the parties have both gotten more extreme, gridlock is probably a good thing overall because can you imagine if either party had all three branchs or had the house, the senate and the presidency, you probably would be looking at some pretty extreme actions. >> it's really a tragedy it's a tragedy, though i like gridlock. >> we agree on infrastructure. both sides agree on infrastructure. >> the democrats will mess that up. >> but then talking to our republican pollster, everybody agrees on maternity. everybody agrees on child care why don't we do these things the public pollster? instead of talking about things that go this, do the things that

bring us together, everybody agrees on. >> unfortunately they can't do that going into a 2020 election because both sides need something to win. >> we're already in the election cycle. >> the issue becomes, look, the fed is on hold policy is accommodative versus having tightened just in december of this year. positioning is very light, right? most investors hedge funds have not bought into this market. you had 135 billion in equity redemptions. that in positions is very, very light for the equity market to continue to go up. >> thank you, everybody. barbara, great to see you, mike, steve, thank you still to come this morning, secretary of state, mike pompeo, will be joining us for a news-making interview. we'lling talk about iran, huawei, venezuela and much more. up next, though, the impact of the sprint/t-mobile deal on the wireless industry? will the doj block the merger? we'll talk about that in a few minutes. stay tuned you're watching "squawk box" on cnbc ♪ there goes our first big order.

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we've got a news alert to bring you this morning despite reports that the department of justice staff is recommending to block the t mobile sprint deal, head of the anti-trust division still not made up his mind and appears to remain open to a potential deal. he remains in conversation with the companies these people say and may be trying to find a way to support the deal despite his staff's opposition and discussions about possible remedies remain on going what kind of structural or behavioral remedies beyond what the company is committed to is part of that deal with the fcc remain unclear as part of the deal with the fcc the company is committed to not raise prices for three years. it's possible the doj could push for more years, up to five for example. could they sell their pre-paid other businesses the virgin mobile business, prepaid metro business these are some of the issues on the table. delrahim doesn't like behavioral remedies like the five or three-year pricing issue i want to show you some comments he made in 2017 speech which are

being passed around amongst some lawyers in washington in the past 24 hours. at the time back in to 17 he said allowing illegal mergers to proceed subject to certain behavioral commitments -- he doesn't like them because instead of protecting the competition that might be lost in an unlawful merger of behavioral remedy supplants competition with central planning, anti-trust law enforcement is not regulation. joining us right now to discuss all of this and where this may or may not be headed ed lee, cnbc contributor, geegee, she was counselor to former fcc chairman tom wheeler and testified before congress on this very merger i want to go to you geegee first on this issue. it is very unusual for the fcc to come out in support of a transaction without the doj doing so in kind we're now at a situation where the fcc has said as blessed it

and we have this very confusing situation inside the doj what do you make of that >> what i make of it is that fcc chairman is trying to put political pressure on making delrahim and the department of justice. this is unprecedented. the fcc and the doj when it comes to mergers always go in concert, whether they're approving or blocking a deal so this to me is all about ajet trying to bully delrahim hasn't made up his mind or is leaning against it depending on what news reports you hear. and i know delrahim quite well i don't think he'll take too kindly to that kind of bullying. >> you think this will make the situation worse not better for t-mobile sprint? >> it could backfire very well maybe pi is hoping president trump will tweet about it. look, the main point is this merger is terrible

if you look at this from a competition policy basis and anti-trust basis, this is a classic 4-3 merger, prices will go up and we can talk about the vague and unenforcement pricing commitment you talked about before for consumers, this is lousy particularly if you're a low income consumer who relies on pre-paid mobile service. >> geegee, i'll speak to ed about this as well, there's a national strategy around 5g i would argue this country does not have despite all the work that's going on to push huawei and slow them own, unclear wha we're trying to do if you did have a 5g strategy, one of the things you might try to do is create a real third player that could compete on 5g, no >> well, here is the problem the promises -- the first problem is that 5g is coming any way. all the carriers have promised we're going to get to 5g the premise here and sort of i think the cheap -- >> they all promised it, but

this could be a decade in the making the cost is astronomical we have spectrum issues. the number of micro sites that have go up around the country to get the kind of coverage that anybody wants is very, very expensive. you look at where sprint and t mobile are and right now it's hard to believe they can compete independently, no? >> well, look telecommunications history is littered with promises of kind that t mobile and sprint have made here. they're making promises to cover 5g in rural areas three years out and six years out and who is going to enforce those commitments. not this fcc if they're still around they don't do anything the large mobile carriers don't want and even in six years, let's say you're trying to see whether t-mobile has rolled out the 5g that it's promised, they're going to litigate whether they have or have not to the hilt this is lose/lose for consumers. this government is not well set

and not well resourced to go up against big companies to make sure that they fulfill their commitments. >> that's exactly -- >> these promises are unsubstantiated. they're not merger specific and they're completely unenforceable. >> the behavioral versus structural, delrahim advocated for structural versus behavioral government should not be in the business of managing other businesses it's always been his central tenant i think that's a fair criticism in terms of going for structural versus behavioral. the agency politics around this, i think fcc cut a deal, they made it public i think delrahim is saying if you want to deal with me, you need to cut a deal with me, too. >> let's talk about that what i heard yesterday and again this morning, is that these talks are continuing >> they're continuing. he wants more. he wants more structural, there's more pre-paid stuff they could sell off for one thing they could actually elevate the behavioral in terms of as you point out at the top of the

segment, three years, five years or more in terms of keeping prices low >> you're back to the behavioral issue. >> it's messy either way whatever deal they end up cutting, it's not a pure structural remedy. it's a combination of both even pi isn't for behavioral remedies all the behavioral elements the fcc cut in a way gives delrahim some cover i don't like behavioral remedies but they can enforce that going forward. >> geegee, how much should delrahim consider 5 dpls g policy, america-first 5g policy? or should it be strictly on a competitive landscape pricing issue? to me that's part of what's going on here? >> the fcc is taking it in a different direction based on this 5g policy idea? >> absolutely. pi is trying to get a cheap 5g policy win again, it may not be a win at

all because who knows if these promises are actually ever going to be kept, but for anti-trust purposes, the 5g argument has absolutely no role what makan has to look up, prices will goup, evidence in the record shows it will i'm happy to talk about the pricing commitment which is limited to three years and also is vague and full of loopholes, and he has to look at whether competition will be substantially reduced in the market and the fact of the matter is you're combining two mavericks who particularly appeal to low income consumers and combining them that will limit competition. i think this is an easy one for makan delrahim i think he's thinking about the political implications those are the thumb screws pi is putting to him right now. >> would you feel differently if there were stricter on the pricing if they got rid of some of the other brands that we talked about in terms of prepaid? would that get you there

and do you have any anxiety at all that effectively at&t, verizon, if you believe this are effectively in their own business already they're not competing with t mobile and sprint on the lower end, that's a very different issue. also means they don't have competition on the higher end either >> let me say a couple of things about the pricing. first, i must note the irony of an fcc that got rid of the net neutrality rules and the fcc's it's not just a structural remedy it's also a behavioral remedy because it requires -- boost needs the new t mobile network in order to do business. so, basically t mobile has to make its network available at fair prices to boost so it's not only a structural remedy. >> right. >> i also need to say one more thing about boost, it's only 10%

of the prepaid market. >> okay. >> so without more, the new t-mobile would still have 50% of the facilities based prepaid markts these are very, very weak and ununforcible commitments. >> we have to run. thanks what do you think the timing is here >> a few more weeks. it's going to happen soon. >> you think a deal is going to happen. >> i think a deal will happen soon. >> ed lee, okay, out on a limb here gee gee, thank you ed, appreciate it. coming up, best buy quarterly results out a short time ago we'll get reaction to the numbers. stock is up almost 3%. 8:00 a.m. eastern time, secretary of state mike pompeo will talk national security, huawei, iran and much more the news-making interview coming up in about half hour. as we head to break, look at u.s. equity fuchs little better than they were, down 200 on the dow. at dick's we've worked harder than ever to help you get your summer going. there's no better time to start planning your outdoor adventures. no matter what you're looking forward to,

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because at carvana, your car happiness is what makes us happy. now this is training. keeping my reflexes sharp. ha, oh! you were just beaten by a rabbit. you don't even know it. [ ding ] oh, my pizza rolls. good morning and welcome back to "squawk box. we'll start off with shares chipotle down 2% it's in that underperform rating now. it was a market perform. they cut the target price to 620 bucks from 675

they're siting the effects of african swine fever killing hog populations in china and leading to higher prices for pork and other animal proteins. they chi chipotle has more relative exposure to pork than other restaurants in their coverage universe. shares of expedia moves lower. analysts at citi group downgrading to a neutral from a prior buy. the target price goes down to 130 from 145 they sited slowing growth at vacation booking site the rbo and potential softening in the market end on shares of uber which are lower by around 2% or so, roughly 9,000 shares of premarket trading volume despite getting started with coverage analysts at new street research buy rating and $50 price target. think think ubers near term will be rocky but confident quadruple bookings by the year 2025. >> dom, thank you very much. let's drill down on best buy beat on the top and bottom lines. also had better than expected

comp store sales joining us is michael lassar, the hard line and broadline retail analyst at ubs. michael, strong numbers here we have been having this conversation over the last couple days about the retailers who have a strategy for online and who have made the investments they needed to make and those who have not best buy obviously in the camp that has >> good morning, becky you're absolutely right. best buy showing the promise of its potential from all the investments its made over the last few years highlighted by a really good report on several fronts 1.3% domestic same store increase better around 1% we were forecasting also the gross margin was up 40 basis points first time in five quarters it increased. second point is they guided -- they reiterate the guidance for the first year and incorporated the 25% tariffs within the guidance which is important because 7% of their cost of goods are subject to those

tariffs. third they indicated that their second quarter same store sales is going to increase 1.5 to 2.5% that suggests that the current quarters off to a good start which we heard a lot of mixed indications about what's been happening in may, so the fact that best buy has further distanced itself from the competition speaks to your point about all of its investments paying off. >> so much of this has been done under the guidance of the leader who will be stepping aside from the ceo position, taking a position as executive chairman, i believe. very interesting to hear about cory berry, somebody who has been given very high marks you think she'll be able to continue all this innovation and this really staying on top of things >> cory is terrific and will continue this. i have full confidence in that she's quickly established herself as one of the strongest executives in retail sector. i expect a seamless transition

he did a masterful job at turning this business around he deserves a ton of credit. >> what is the 2020 plan they talked about they say they're making advancements on that what's the ultimate end goal >> the ultimate end goal is to continue to grow their market share, generate low comps, see their margins flat to growing, buy back stock, generate mid to high single digit eps growth and given that the stock right now trades at 12 times, you know, there's an argument that that's a pretty compelling proposition. the caveats are if we see the full list of tariffs go through, best buy will be uniquely subject to that because a lot of the other products that are in that last list of tariffs are consumer electronics. >> michael, you had nothing -- just really quickly. you had nothing but nice things to say about this company the leadership, what they're doing and what you think the plans for the future are, but your rating

right now is a neutral rating and price target is only $72 stock is selling 71 spnt 30 right now. are you going to reassess things or do you think the stock is rich >> we're always reassessing things, becky. the next couple quarters have uncertainty. we'll reassess how they are going to perform once we get past the next couple quarters. >> michael, thank you very much. it's great to see you. >> thank you you, too. coming up right here on "squawk box," shares life views, rebut critics teases business and causes controversy since elon musk and the s.e.c. reached deal on tweeting guidelines he was boring company on twitter. tesla stock has fallen 20% in the meantime, we'll discuss what's going on right after the break. at the top of the hour, a do not miss interview, secretary of state mike pompeo is our very special guest right here on the table at set where we will discuss geopolitical concerns, huawei and so much more.

"squawk" returns after a short break. the latest innovation from xfinity

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uncharacteristically quiet on twitter after the fcc restricted his tweets is that what's going on here i think it's related to supply/demand issue. joining us is erin gibbs dale is also with us this morning. as you think about this situation, is it as dire as what the market seems to be suggesting this past week? >> yeah, absolutely. >> it is >> i strongly believe and some of these negative calls i have been waiting for them. i think between after the first negative report we had back in february, having to pay a billion dollars out in debt in march and basically have a really big negative headline almost every single month for this year is about time people wake up and say, hey, something is really fundamentally wrong and our estimates really need to change we really need to look at what we're hoping for this company.

>> just based on sales. >> just to give you an idea the profit expectations for this company started at $7 per share. it's now down to less than $1. so a loss of $1. >> right we thought we were on an up and up. >> we thought it was -- >> sales picked up but maybe those were getting pulled forward before you saw the expiration. >> all the tweets would be profitable, be cash positive, that's not -- doesn't look like that's going to happen looks like they will be cash negative by the end of the year. >> jeff, do you think that this lack of tweeting has changed the narrative or at least prevented elon musk from trying to mitigate the damage in the stock market that maybe he was able to historically or do you think it's much more fundamental? >> i think you're right. he did use to pump the stock in many ways that, steve jobs or henry ford or edison were incredible, unrelenting self promoters and that would give a short-term fix in the past and get him into all kinds of

regulatory problems. if he was tweeting yesterday, last night, we would have him instead of attacking the s.e.c. or divers, we would have him attacking consumer reports and of course morgan stanley and others that would just take us down assaults. a lot of false information he's put out in the past that he would just be spinning more tails that would of course lead him into regulatory problems the only good news, in fact, yesterday was that he was quiet, that he didn't try to make false statements about production levels he was way dramatically overstated before about autonomous fleets of autonomous vehicles that aren't going to happen by the end of the year. that's clearly not going to be the case so, maybe it looks like the s.e.c.'s restraint are working, but it would be nice to hear somebody, robin, the chair, say something in response to be accountable to this bad news. >> well, so that is the question, though, from a

communications perspective or policy, who do you want to hear from and in what format do you want to hear from them as the stock continues to slide >> so, a lot of the valuations we got were because elon musk was so good at pr, at being able to spin the negative news and he has 26 or 27 million twitter followers. that's a big group of people to be listening to you every single day. and so losing that advertising is certainly a negative. now, does how much given how volatile his statements have been recently, it's a question of just how much value that really has. >> but that's the real question, how much real value did they have in i should note there was an article put out that suggested maybe tesla needs to advertise for the first time and elon musk did respond to that actually and said, look, we've always not advertised and tried to use that money for the product instead. >> but ultimately you did have 26 million twitter followers

that were advertising. yes, it was free, so yeah maybe they need to look at more other the avenues and other areas where they can control the message versus having that one person that can be slightly volatile. >> jeff -- >> the s.e.c. -- >> go ahead. >> i'm sorry i was going to say the s.e.c. didn't intend to mute him entirely as he was yesterday they just said he couldn't make reckless comments that weren't cleared through attorneys and the board first. so, he certainly could have addressed the issues we're talking right knew, 13 plus billion dollars of debt, talking about the collapsing sales that aren't meeting expectations, you know, that surely we're looking at at least 100,000 below forecast in terms of model production what he's going to do with china with demand off there. he could say something about the trade. but it just needs to be cleared and not irresponsible. i would also say when he did speak this last year, before he was muzzled in february, this didn't pump the stock that much. he didn't get him up to 425 a share. he was still down by almost a

third. down by 40%. >> law of diminishing returns. >> what do you make, though, of the bulls out there and they're all over my twitter feed today giving us a hard time for talking about some of the problems the company is having, say, look where amazon was 20 years ago? there were moments at which it looks imperilled or there was a problem or they were scared. look where it is today >> well, when you look back about these spectacular regularity of tesla and continually having to revise a estimates down, there are very few companies that are able to pump up analysts expectations and then disappoint them on a consistent basis. >> by the way the difference with amazon is amazon could turn the lever at any point and decide to stop expanding into other markets, stop investing and then go ahead and beat the expectations. >> we weren't having huge negative stories >> they could choose to flip a switch and change. >> tesla, their back is against the wall they're constantly having to

raise capital, issue equity that's deluting long-term shareholder values reissuing new debt they're constantly having to struggle to find medium term -- >> i wouldn't -- >> henry ford once said you can't built a reputation by what you're going to do it has to be on what you're actually doing he's been selling us dreams. jeff bezos, times in the last time he was on back in 2002 or so on cnbc is that he got caught up with some wild speculations he couldn't quite match. but since then, he's continually surprise to the high side, even though he went almost a quarter of a century with no profits which he does now, he did constantly surprise on the high side and always proforma profits. nobody ever said that jeff bezos was misleading that's just the difference he met his projections here, we can constantly see somebody coming up with wild speculative conjectures he doesn't neat sure he is a genius. so did nickolai tesla.

brilliant man, but he destroyed his own enterprise happened to ken olson of digital and see it repeat lid. unfortunately these geniuses are really career dragon slayers. >> wa do you think, erin, before we go, there's been speculation if things get worse, talk about apple and google and all these people buying it but now there's been talk about whether he would try to merge the company with spacex, his own company? >> you know, certainly if the price gets low enough, yeah, there are a lot of possibilities that could make this company attractive because it does have that ip and the technology and certainly if you had -- if you didn't have some of the cash flow issues you might be able to really start some growth. yeah i think that's going to be the biggest question is as this stock tumbles not so much for investors about, oh, are we going to buy at this price, it's what other companies are going

to buy at that price >> okay. erin, jeff, thank you, guys. appreciate it. >> thank you. >> i warned you so long ago. it wasn't the tweets, it wasn't the flame thrower, the canary in the coal mine, his brother's hat. that ridiculous hat that his brother always -- right? you know what i'm talking about, elon's musk brother? always wears it. >> the unconventional -- >> did it not tell you that a year ago that this is a problem? >> people are looking at stock charts, financials, joe is looking at the brother's hat. >> no, he always wears it so people recognize him as elon musk's brother. >> if you wear something that looks that stupid. coming up, secretary of state mike pompeo joins us live in times square. we'll discuss, huawei, national security, iran, china and much more that interview is right after the break. check out the futures at this hour down about 200 points. we'll beig bk. rhtac

right now on "squawk box," secretary of state mike pompeo, live in studio we'll ask america's chief diplomat about president trump's targeting of huawei, tensions with iran and the global oil market and much, much more. plus, futures under

pressure fears over tariffs and trades mushing markets lower this morning. putting boeing 737 max planes back in the air the right way. ralph nader will join us on what boeing needs to do next and how to hold an industry giant accountable. 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 becky quick and andrew ross sorkin the futures -- i'm glad i knew that because it was stuck. did you see that if i didn't know who was here? i read that, i would be stuck. you're here. >> thank you, anchorman. >> thank you, ron burgundy the futures are down today, down about 212 points it would be i think the sixth week we had a little bit of a

pullback in the dow. amazing that it's only 3% basically off high so it's been a muted pullback. >> maybe 4% with the losses. >> with the 1% loss today. treasury yields reflecting some of the angst that we're seeing globally down all the way at 2. -- let's call it 2.36 couple big stories that investors are going to be talking about this morning the faa meeting with regulators from about 30 countries today to discuss potential return of boeing 737 max jet to service. they're going to talk about boeings software fix for the jet as well as proposed new pilot training faa chief dan elwell can't predict when the jet will be back in the air after two fatal crashes. a live report on the story in the next hour. separately, sources now telling me that the head of the anti-trust gigs at the department of the justice hasn't made up his mind yet on the

merger between sprint and t mobile sources say the anti-trust chief making trying to find a way to support it and discussions about possible remedies continue to be on going. best buy beating estimates on the top and bottom lines for its latest quarter the electronics retailer coming in 16 cents above estimates adjusted 1.0 2k per share with the revenue topping forecasts as well comparable store sales up 1.1% beating the .9% consensus estimate joe? let's get right to this morning's "squawk" news maker. secretary of state mike pompeo, welcome you to the show and welcome to times square to our set. >> great to be in new york city today with y'all >> and normally if we have a secretary of state on, we think diplomacy and foreign policy can you believe how much of what you do now is in cnbc's domain in terms of economics and money

and oil and cyber security >> joe, that's a great point i have very few meetings with foreign counterparts we can't talking about important economic issues, trade, regulatory set of issues, all the things that drive economic growth. you all know, you can't have a good national security for your nation, whether that's united states or another country, if you don't have economic growth back home. it's imperative. >> it's a good place to be that we're not talking necessarily about missiles aimed at us, although that's still something you're worried about i was trying to figure out, do we start with iran, which unless it really deteriorates that probably is not as big an issue to the markets as what's happening with china i want to start with china and get to iran because it affects oil prices, et cetera. terms of bannon is not part of the administration anymore, bear with me for a second destroying huawei, according to mr. bannon, is ten times more important than striking an overall trade deal and i thought that might be hyperbole, andrew, until i

looked in your paper today and i'm reading about -- no, i did and i'm reading about what's happening in the area where you have the -- >> yep. >> the uighurs and these camps they have set up a huge virtual cage of spying, which supposedly here is a quote from your newspaper, they're arguing china is using technology to strengthen authoritarianism at home and abroad and that the united states is only country that can stop this is bannon overstating the issues here >> i'm going to say something that will surprise you, i think "the new york times" has that story right. there is real risk and you saw what president trump has undertaken with respect to china. for too long this is not partisan, presidents from both parties had ignored the challenges that were presented to american workers, to american technology and to american national security that china presents he is pushing back in every element. the decision that was made to list huawei had enormous

national security component to it it is tied to china and the chinese communist party. that puts american information at risk. i spent talking to our partners around the world explaining to them why putting their citizens information, their citizen's national security at risk by having that technology inside of their systems. >> mr. secretary, i don't want to diminish the potential risk, can you help us, is there evidence that we can point to specifically today to suggest that there was spy ware or other kinds of spying taking place using huawei hardware? >> yeah. that's the wrong question, andrew if you put your information, your information, in the hands of the chinese communist party, it's de facto a real risk to you. they may not use it today or tomorrow. >> i don't want to diminish the risk i'm raidsing the question because we heard from the ceo of huawei who says, look, we don't share this information we're not working with the

chinese government point to something -- >> that's just false that's just false. to say that they don't work with the chinese government is a false statement. >> there's a law that they must work. >> required to by chinese law to do that. so, it's just the huawei ceo on that at least isn't telling the american people the truth nor the world. >> we have seen already that some of the partners you mentioned about, some of other countries have already started to take up and remove huawei equipment or say that you can't use it going forward several uk companies overnight and some japanese companies as well do you expect us to see more of those companies in coming days or other countries >> we do we have been working at the state department to make sure that everyone understands the risk it's been an educational mission as much as everything else every private company gets to make its over sovereign choices for the countries and private decisions for those entities, but as we share with them the risks, as we share with them the incapacity to mitigate those

risks, which i think some thought could take place, as a technical matter, we don't think there's much mitigation opportunity, as we share that, we're seeing them come to same understanding that the united states has come to. >> do you think we wind up with two internets, one based around china and its closest partners and one that is the western world? >> i hope that's not the case. we need a single place where information can be exchanged but it has to be a systems that has western values embedded in it with rule of law property right protections, transparency, openness, it can't be a system that is base on the principles of authoritarian communist regi regime. >> how do you think of huawei ass a chess piece and does it help us or hurt us does china think okay they got us and therefore we're going to now work with them in a better way? or do you think they say to themselves you know what, they got us and we're really not going to work with their companies now? >> so, remember there's two pieces to this there's the national security

component. and then what president trump has been driving at to create a fair reciprocal balanced trade relationship between the two countries. i hope that we can keep those issues in their own place. we have an imperative to protect american national security we have a need to make sure we get these trade rules right. you all know this. i come from kansas american workers in kansas creating intellectual property, trying to grow their business, trying to take care of their families and the chinese steal that information that's not right we're trying to fix that they force companies that invest in china to create jvs with the sole intention of making sure the government has access to the information that comes across there. those are the kinds of things that president trump with secretary mnuchin and lighthizer are working on i hope they can come to an arrangement. good thing for china and the united states. >> global 5g is not going to include huawei we will not -- is that our stated policy right now? that it's not going to be

huawei >> we want the global 5g system when it's ultimately built out to have a western value set embedded in it not just american technology, technology that will come from europe, it will come from other parts of asia. this is a global form our requirement is that this technology create trusted networks and if we have trusted networks we can have a single system which will benefit the world. >> that's not just a small chess piece. that's not a pawn, a ruck, a queen? >> a bishop or a ruck for sure. >> why do you think we have not led on 5g? why is huawei been able to get as far ahead as it has and we don't have a company that's been able to build the micro cells and some of the other devices that they have created >> it's an important question because we need to make sure that's fixed going forward so it's not just a rear-view mirror why didn't we get there and how is it the case there are western alternatives to huawei there's lots of pieces to it one of which is if you're a state-directed business and take

on subsidies from the chinese government, therest no doubt you can make real hay. when you show up with not only low cost, affordable product but engage in behavior that the foreign corrupt practices act would prevent, yeah, you can get a little bit of foothold i am convinced that the west will ultimately prevail because i think the world wants systems they can trust. >> what are the prospects for us actually getting a deal that has teeth given that so much is at stake for the way the chinese operate now? they would need to be dragged kicking and screaming into an agreement? either it's a lukewarm agreement or it's going to take years and years and years? are you pessimist snick. >> joe, i don't know the answer to that. i've spoken to secretary mnuchin almost everyday as they have been part of these discussions i haven't been at the center of the actual negotiations. i have seen them make real progress i hope they can continue to make it these issues are not only important to the united states we remind people, these are good for the world and good for the people of china. if we get this right, this will

create a trading system that can continue to create prosperity for citizens all across the world. >> sec stair pompeo, can i just ask you if have been in touch with steven mnuchin, you have seen him make progress but recently has there been a more down beat sort of outlook on what happens that seems to what the market thinks >> they don't have any meetings scheduled for him to travel to china. i hope by the time the show ends they're back at it it's important for the conversation to continue it's important to get this right for both of our nations. it's tough, joe to your point. the things that changes the transition we're asking china to make to create these fair, reciprocal trading rules is a big ask but it's important for the united states and president trump is firmly committed. >> i briefly mentioned the chinese ambassador was he -- was that for a u.s. audience or is that really -- >> chinese audience? >> or was that really the policy positions? i watched him say that there's been no military buildup in the south china sea on any of the

islands. i watched him say that everybody knows huawei is just a private corporation, has nothing to do -- i watched him say that the internment camps are jobs training for the uighurs i watched him say that every thing they decided on that the united states had pulled out three or four times and taken back what they had -- i mean, it was -- >> yeah. >> maybe baghdad bob is too strong, but that was the feeling i got listening to some -- and if that's what we're hearing from the negotiators i don't see it going anywhere ever. >> yeah. the chinese are building up in the south china sea. >> that's a fact. >> the authoritarian nation taking place to the uighurs, some million people held in camps, these are not community colleges these are authoritarian reeducation institutions and we have seen what's going on in the technology space those are facts. i can't account for why the chinese ambassador said -- >> criticized you in saying

things >> i'm sure they have. >> they'll be mad i said baghdad bob. >> what's important, joe, not that -- not name calling it's important to be honest, get the facts right and ensure that our nation protects its interest and president trump has done that at every turn. >> and he, you know, again referencing some people that know him they are saying he's not going to back down, he's going to listen to chuck schumer and not going to back down on this >> president trump has made clear his expectations for how the united states will behave? >> there's not an s&p 500 level where we decide to start talking more >> these are important commercial long-term commercial economic interests of the united states and national security interests. president trump understands them. >> we could go until 9:00 talking about china. we should mention iran what is the latesthe in terms of you on record saying we have plenty of oil, we have partners that will make up for

any disruptions that we see from iran in recent days, have you seen them pull back on some of the more bellicose moves they made whether the bomb near the embassy -- and we don't know it's them for sure with the ships but certainly looks like them. >> this threat, this threat from iran remains we have had some luck in disrupting some of the tactical things that were in front of us. i think it's fair to say but make sure we're still on high alert we're still making sure we have the right resources in play. your point, i remember when we began the maximum pressure campaign there was talk probably on this show of oil going to 150. you're listeners should know when may 2nd came and we withdrew, oil is now well below that brent crude at 69 something when i walked in here this morning. it's below where it was when we designated the terrorist organization we are confident that we have done the hard work to make sure that the market is well supplied i hope that we can continue to maintain that. i think that we can. >> you have no problem saying

unequivocally this wasn't hyped by the administration for political purposes the democrats are sort of sounding that alarm. >> none. no overhype. and we briefed congress extensively tuesday of this week i think almost every member, democrats and republicans walked out of that room understanding that the threats that we were discussing and the decision that president trump made to talk a posture to deter those threats and to protect our forces were wholly justified and reasonable. >> you and bolten are on the same page? >> yes >> yes >> yes >> nothing going on there? nothing to any of those stories politico >> look how these -- these stories are crazy. every senior leader in the united states government will have a different view on something and they'll make their case where none of us are wall flowers. president trump wouldn't want a wall flower in his administration he wants people voicing their views base on the facts they see them john does that i do that. there are days when we don't agree perfectly, but john and i have a policy perspective and as we stare at the risk to the

world are in nearly complete alignment. >> the stories suggest you're in favor of negotiating and he's in favor of not egotiating, not believing. those are pretty important differentiations. >> talking about iran? >> yes. >> the president made clear at the right time negotiations are important. what john and i think is interesting what the president says is important and the president has said that he's prepared at the right time when the iranians conclude it's in their best interests to negotiate we stand ready to take the call. >> i want to ask you one question, your predecessor, rex tillerson was in washington apparently in the past two days. there was a report that he was interviewed by some congressmen and was asked about the president, president trump's values and he said that he, meaning rex tillerson, was guided by, quote, american values, such as democracy and freedom but that he could not offer the same assessment for the president. what do you make of that comment? >> it's pretty outrageous and probably explains why rex tillerson is no longer the

secretary of state >> john kerry is no longer the secretary of state. >> we have lots of folks still hanging around. >> do you feel confident you're the only one speaking for -- with iran's leaders at this point? is there a cease and desist order there? i mean, now i hear they're waiting for 2020 china is -- everybody is waiting for 2020 before we do anything >> sadly i'm not confident we don't have others out trying to speak on behalf of the united states working against president trump's policies i wish i could say i'm confident of that. i'm not. i saw secretary kerry travel to munich there's a security conference every year he was with the whole gang that put in place the jcpoa which fundamentally failed america it's what we're working to correct america today. i'm not confident we're in that place. i hope -- here is my assurance to you all, when i'm done being secretary of state, i'll get off the stage. >> you see how well this dynamic works. he'll ask the tillerson questions, i'll ask the john kerry questions. >> i love predictability.

>> thank you. >> thank you >> appreciate it very much. when we return, instant reaction and analysis to our conversation with secretary of state mike pompeo. all the geopolitical tensions and what they mean for the markets and the u.s. economy right now as we head to a break, take a look at the futures this morning, the markets under pressure once again, obviously trade concerns at the front of the situation and also any implications from the ripple effect of huawei and more companies saying they will not do business with them. dow futures right now down by about 240 points s&p futures off by 26. the nasdaq down by 92. "squawk box" will be right back. sfx: [phone ringing] you still have service? call the insurance company it's them, calling us. it's going to be a week before they can get through on these roads shhh, sorry, i didn't catch that. i said ask how soon they can be here right now? what's now?

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♪ you saw what president trump has undertaken with respect to china. for too long, this is not partisan presidents from both parties had ignored the challenges that were presented to american workers, to american technology and to american national security that china presents he is pushing back in every element the decision that was made to list huawei had an enormous national security component it to the company is deeply tied not only to china

but to the chinesecommunist party, that connectivity, the existence of those connections puts american information across the wire at risk. >> i want to get some reaction from american enterprise institutes james, also a cnbc contributor and also capital alpha managing director james. good morning to both of you. >> good morning. >> you just heard what the secretary had to say specifically about huawei. i'm curious whether listening to the secretary made you more or less holeful in terms of what the huawei piece i know we had james and james. >> jimmy p. >> jump ball, james. >> i'll jump in. listen, if you thought that huawei was going to be a repeat of zte where after a few months

trump would say, this is going to cost jobs and basically a bargaining chip to get a better deal from china, the secretary of state said nothing that would make you think that. he painted huawei as a fundamental long-term national security threat. i don't see how you can just say, we're not going to ban them because you're buying some more sorgum from the united states. >> james, if that's the case, how does china deal with that both on behalf of huawei and do you think that's going to be a game changer in terms of u.s. businesses doing business in china? >> look, this is full spectrum competition. you just saw the human rights issue. you saw the national security issue. you saw the economic security issue. you saw protecting american workers. we're not talking about huawei or even a trade deal in isolation from anything else we're really running an effective communications campaign challenging chinese

behavior literally everywhere they're behaving badly it's this comprehensive push overtime i think will get results and it also shows -- >> how does it get resolved, though when >> it gets resolved overtime because the one thing the chinese don't like is being under the spotlight. communist regimes hate transparency they hate accountability they hate disclosure in an asymmetrical world, they have deployed strategies against the u.s. our is total transparency and communication. that's the one thing they can't take. >> listen, i think that's a good question what does resolved look like you have trump -- you have former advisers to trump, people within the administration who are thinking calling this a cold war, a new tech cold war, economic cold war. the cold war was about containment and eventually president reagan, his idea was that there would be no more communist-led soviet union is that what the president

thinks what does he envision as winning this war it's apparently not just a trade deficit anymore. is it fundamentally changing the chinese economic system, is it creating a freer china down the road to becoming like south korea and japan? the president ought to let us know because i don't know exactly what he views as the end game. >> but you look at the futures this morning, clearly the markets remain concerned listening to the secretary, are you more concerned ten minutes later or less concerned? >> well, listen, by concerned you mean you think that this is not going -- >> concerned this is an on going -- >> yes, for sure >> sure. look -- >> multi-year problem. >> the journey of 10,000 miles begins with the single step. dealing with any sort of unbalanced abusive situation that starts with having the conversation about it. that's what we're doing. it's progress simply to be talking about this, but everybody who follows this for a

living knows we're talking about a long-term, multi-year strategy just as the u.s. confrontation with the soviet union took years. but ultimately, the u.s. triumphed when the soviets ran out of money the chinese will be slowed down. when the iranians run out of money which is the goal of pompeo's strategy there we may see changes in iran sooner. >> what did you make of his comments about iran? >> well, i think that the u.s. has one policy which is to try to constrain behavior. we can't change them but we can take away their options. what money for the ayatollah don't you understand limit missiles, bad behavior, you have reserves but you have to shut the money down i think that's what they're doing. >> iran is interesting the president offered clarity about iran i don't want to shoot anymore with iran. he said that trying to tamp down some of more his aggressivive advisers

i heard no such clarity regarding china and what he wants other than the talk early on about trade deficits. >> james and james, thank you so very much. >> you bet. >> good to see you. still to come, breaking economic data. we have the latest read on jobless claims out in just a few minutes. and an interview with ralph nader on boeing's fixes to its 737 max jet. important lessons from important crises from the past is all ahead. stay tuned you're watching "squawk box" on cnbc [knocking]

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♪ welcome back to "squawk box. breaking news, we're looking for our latest read on initial continuing claims. once again, very low numbers 211,000 that's down 1,000 from unrevised 212,000. if we look at continuing claims, they moved up ever so slightly from 1.664 million to 1.676 million. we still have new home sales yet to come. that will be 10:00 eastern but welcome to december of 2017 because should ten-year no yields close at 236, that would be the last time we were at this level. of course, we all know we have been really paying close attention to the very mushy yield curve, the long end has

been toying with the low yield close of the year 237 for tens, 281 for 30s. they have both gone through not on a closing basis yet i find the most significant the highest priority if you're a technician but it certainly hasn't acted very well the last several sessions yesterday for a variety of reasons, maybe it was the fed, maybe it's hopes of insurance tightening that probably won't happen, but in the end, we seem to have lost it yesterday after the previous session was at 1.5 week highs we eased back a bit. becky, back to you. stick around, rick steve liesman joins us right now along with mike santoli and, steve, what do you see in the numbers? >> well, job market is strong. it was lost a little bit and everybody talking about what the fed meant about rates how up beat they were on the u.s. economy stronger than the average person on the street there. and the job market looking at claims, looking at 228, 212, sorry is that 202?

212, 211 those are good numbers those numbers tell you that the job market remains strong. it's everything else that's the problem. and i thought it would be fun, well, not fun, but in my realm of realm for economics to go back and let's listen again to what j. powell at the press conference said about all the other stuff that was swirling around, how things were getting better here is what he said >> at the start of the year, a number of cross currents presented risks to the outlook including weak global growth, particularly in china and europe, the possibility of a disruptive brexit and uncertainty around unresolved trade negotiations while concerns remain in all of these areas, it appears thatate. >> okay. so that was may 1. what's happened since then brexit has gotten worse, trade's gotten worse, iran is added to the list and global growth, i

don't know, the saying there's been some okay global data and some worse global data somebody talked about the european manufacturing this morning being bad, german manufacturing being bad. very little has gotten better while theist growth outlook remained about the same, 2% on our rapid update. >> that's why in some senses the minutes i think were take on the be a little outdated in the sense it's based on this premise, you know, these concerns of moderated. well, trade didn't moderate since may 1st. >> right. >> that's the one that stands out. i think the market is trying to assimilate what that means is this a new status quo is it a stalemate? are we going to have this slow motion disengagement from china economically where as before we thought it was just -- little bit of a rubber stamp so we could set that issue aside for a little while. >> that means what has the market reacted to that or is it still in the process of -- >> i think the market is still coming to terms with that. i think it's reacted you really do look at the hardest hit areas, the most directly affected, yes

the market is genuinely saying, semiconductors have this kind of risk in them some of the heavy industrial exporters absolutely. >> apple. >> exactly >> what does it mean for general global growth? does it mean you have to raise the probability of something very disorderly happening in chinese economy or something like that? that's where we don't know we also should remember the fourth quarter which was a market kind of tantrum and it created this sense of a feedback loop into confidence levels and into what businesses were saying and all of a sudden that's what matters. it wasn't that the numbers got worse for the u.s. economy certainly. >> mike, i'm wondering if the idea that some of these problems on that list are essentially man made i don't mean that in a sexist way, i do think they are man made and they can go away. does that attenuate how much the market reacts to it? >> what problems aren't man made, steve? >> what's not man made >> that was my question. >> when the market has -- sometimes when you have a recession it's not exactly clear

what the source of it is. >> right. >> but you can go back to each one of these things and say -- >> it's a policy choice. >> these are policy choices that are made and these are policy choices that can be unmade whether or not you can put the -- rick is there rick, i don't want -- you take it over. >> well, that was my question what's man made. i like to even get beyond that see the problem is it doesn't matter what's man made or what isn't man made the problem is that men and women have to decide what to do about it and just take brexit brexit a bad thing or a good thing? they're voting my feeling is that the fed has all of this uncertainty. i get it they're not going to be anyone to devine the outcome any better than you or i. their fears about mr. carney might be 180 degrees backwards we may discover delaying brexit was a big problem. they should have busted out. they should have turned down the ticket to the titanic and be infinitely better off.

the hemispheres relocate and all global trade recalibrates. all of this is changing the status quo that's always viewed as negative by the bureaucrats and the market doesn't necessarily agree. >> i mean, the brexit analogy has always been interesting because of when it happened, when the initial vote happened you had this kind of recovery from a global recession scare. the market was on a good role for a few months then brexit happened i think the consensus was, well, we got to wait for this to get resolved three years later nothing is truly resolved but the market did digest some implications and moved on from some other things. >> market closed higher that day. >> it had a little quick setback. >> but there's definitely an adjustment all of our surveys showed they were beginning to bake in an agreement. powell was baking in an agreement. i don't know what the culinary process is but to unbake in the

trade deal >> it got a pop from not hillary. it did it did right away there was a tax cut when hillary wasn't elected. but the other part of that, though, is you have to sort of there's this emerging idea, maybe tariffs will be around for a while. you think of the way the president negotiates, he changed the facts on the ground by putting in the second round. what gets negotiated away, the second round, back to the first round. i don't know exactly how it ends up, but you could end up in a place where you have this 10% permanent. he did get rid of mexico and china, right mexico and canada. that went away there's thinking out there get ready for the long haul on these things. >> gentlemen, thank you very much mike, steve, great to see you. rick, thank you. >> thank you coming up, boeing's road back, flight back maybe is more not mixing metaphors, right? >> you have to start off on the

runway. >> yeah. sometimes at newark it feels like you're driving where you're going. >> an update when we can see the company's 737 max planes back in service as the faa meets with regulators around the world. plus after calling out the plane maker, we'll speak with ralph nader on whether boeing's response to the recent crashes measures up. stay tuned he's probably going toay s something you'll want to hear. "squawk box" will be right back. ♪ ♪ creating the perfect night...

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welcome back to "squawk box. futures right now down 223, about where they have been for most of the session. nasdaq indicated down 80 that's not as bad as it was earlier. it was down almost 100 the s&p down 23, andrew. >> okay. developing story right now the federal aviation administration meeting today with global air regulators to update them on plans for getting boeing's grounded 737 max planes back in the air. phil lebeau joins us with the details around more. phil >> reporter: thank you we're at the regional office in ft. worth this is where the head of the faa, dan elwell will be meeting with representatives from other aviation agencies around the world representing 33 countries. so what's going to happen at the meeting today, basically comes down to this -- they will essentially be laying out an update of where things stand on the 737 max and as they look at

the 737 max and decide when this plane will be back in the air, elwell in a briefing with us yesterday said their goal is to get all of the global regulators on the same page, essentially they want them to lift the groundings of the 737 all at the same time. in fact, the question then became what's the time frame for when this might happen dan elwell told us we will follow a process that is robust, rigorous and we will leave no stone unturned if it takes a year to find everything we need to give us the confidence, so be it as you take a look at shares of boeing, keep in mind that we heard from yet another chinese airline overnight that it will formally ask boeing for compensation because the 737 max is not flying, deliveries will be delayed guys, we'll hear this from every single airline, either formally or we know informally they're already talking with boeing about being compensated for not having the plane in their fleet

as planned so, this meeting starts at 9:00 central time this morning. don't forget, coming up at 10:30 eastern time, 10:40 eastern time first on cnbc interview we will be talking with dan to get an update in terms of what he's hearing back from other regulators around the world. guys, back to you. >> we'll have ralph nader on if you asked the company about ralph nader, what do you think they would say would they say he's totally irrelevant would they say he's hyperbolic, what would their response be to the charges that he levels just so -- i don't know >> right. >> doesn't look like he knows what he's saying is kind of incendiary >> well, publicly they will not say that anybody is irrelevant that's not boeing's style. we want to hear from everybody privately what they will say is, look, we understand that some people will look at the max and they are going to think that this is a plane that has not been fully vetted and fully

checked out before it gets back in the air, but we have been taking the steps and we are confident that even a third party, independent third party would look at the software fix and will approve that software fix. but you get right to the point, joe, it comes down to public perception, public confidence. and that's going to take a long time, which is why the international airlines are going to be meeting, all of them globally, the airlines themselves will be meeting today in montreal to talk about how do you restore public confidence in this plane once it is recertified? that's going to be a huge challenge. >> there's raffle nader the consumer advocate and ralph nader the grieving uncle. >> sure. >> he's absolutely relevant. i wonder if they're taking notes about whether there's litigation down the road whatever based on mr. nader. >> oh, they know there's litigation coming. they are fully ware of that.

and you can see some of the moves they made that they're preparing for that both in terms of the lawsuits from the families of the victims as well as lawsuits that might be coming potentially from shareholders who will sit there and say, look, this is something that we should have been made aware of all of this is going to play out over the next couple years, joe. >> hey, phil, thank you. we'll hear more from phil lebeau as we go through the day right now let's turn to a special guest joining us on the "squawk line" is consumer advocate, ralph nader author of "collision course" will address airline passenger safety at a summit last month and he lost a niece on the ethiopian airlines crash of boeing 737 max earlier this year. ralph, thank you for being with us today. >> good morning. thank you. >> so what do you think about what's going to happen i know you written both to the faa and to boeing. what do you think happens next in terms of the recertification of the max 737s? >> basic problem is the

instability of the plane apart from the software that was designed to fix it with all its glitches is the plane was built with larger engines vectored in ways that changed the center of gravity on the old fuselage to which they were attached and there's not enough attention paid on the design now, you can look at boeing's frantic efforts going here, going there, modifying their software, whether they're telling the faa in time not informing the pilots, not training the pilots, not saying there should be simulators, not having flight manuals with the details -- all of that is because they're trying to deal with a stall-prone plane that is unstable and so i think the house and senate committees have missed the boat so far. they're getting mired into the software and how much is going

to overpower the pilot and how much is going to empower the pilots when the basic problem is the design of the plane. and there's no way you can fix that without recalling the planes, the way they recall cars, and grounding them and having boeing sell its -- continue to sell its boeing 737 800 ng which is a stable plane the faa has been in the pockets of the boeing company for years, pressured by congress and the white house on both parties to cut budgets, to cut staff, reduce their talent pool, to oversee boeing and they've delegated to boeing the power to appoint their own inspectors in the factories. inspecting themselves. so it's not a good situation for airline passengers fortunately we have a lot of

aerospace experts speaking out in all the product defects that i have worked on over the years, i have never seen so many whistle blowers, so many authentic aerospace experts condemning the boeing practice here why did they do that instead of a clean sheet plane which they decided to do in 2011 and a few months later changed their mind and went with the max is because they were trying to catch up with the air bus 320 knee owe and that's why they suppressed their own engineers who objected on engineering aerodynamic bases this kind of heavy engine on the old fuselage. >> ralph, there is reporting to back up just about everything i think you've said on this point. but the company has not fully spoken and given its side of events there are investigations going on to get to the bottom of some of these issues with the crashes. >> that's the problem. the problem is -- >> butly ask you, though, is

when we heard from airline pilots themselves from the very beginning and on in the months since, airline pilots have had their own concerns they have been frustrated but all of the ones we have spoken to, even some of the more vocal ones in the unions have said that with additional training and information from the company, they do feel very safe flying these planes. what would you say to them >> well, some of them do some of them don't we haven't heard from the pilots in the foreign airlines who are more critical. we have heard from the head pilot in american airlines who has been very critical he has not conceded a thing. and the faa has rubber stamped boeing saying there needs to be no similar trainings when people like captain sullenberger landed that plane safely in the hudson said to me of course there has to be simulator training by the pilots before the planes are allowed to fly again. >> that's a very different idea, though, having simulator training and making sure that the -- making sure you have

simulator training before these planes go back up versus what you had said earlier about scrapping the entire design and starting ver. >> that's right. >> would you feel confident with the faa signing off on this or other nations signing off on the recertification of these nations signing off on the recertification of these planes if there is training for the pilots >> no, i wouldn't because i want to see the investigation under way in all places, overseas, congress, the ntsb, the i.g. of the department of transportation they should be awaited by the faa instead of the faa trying to push these planes up in the air in the next 90 days or so. there's an asymmetry of time here the faa wants to move fast once they get them up in the air, then all the other institutions who are investigating lose their bargaining power they can be accused of alarming unduly passengers, undermining airlines, and that's why boeing and the faa want to work to get

these planes up very, very quickly. you know, boeing had a good record for ten years or so but that does not allow boeing to have any free crashes that are preventible by standard aeronautical safety stability. it's been known for years. >> ralph, to the extent that you believe the faa is too close to the airline industry, how would you -- how would you structurally change the system >> well, you turn it into a regulator. right now it's a del gaegator boeing has huge influence in congress it's contributed to 330 members of congress. almost all the members of the house and senate on the transportation committees are taking money from boeing and the white house under both

bush, obama, trump, kept pummelling the faa to delegate more and more. senator blumenthal is preparing a bill to answer your question, to return the faa with an adequate budget, adequate engineers and staff as a regulator, as an arm's-length regulator. the airline industry itself better ask what's going to happen when consumers start boycotting this plane? when they start talking about -- you know, when they call for a reservation and say, okay, what plane is it? well, i don't want this plane. if they lose trust in the plane, that's not going to help boeing, it's not going to help the airlines fortunately, there is less than 7% of the planes that have been ordered have been produced and boeing ought to cut its losses >> ralph, have you heard back from either the faa or boeing from the letters that you sent them >> no.

see, that's another thing, they never respond, they never return calls. and what does that tell you? it tells you that whether it's fliers' rights, the prime consumer group representing airline pilots, the head of it is on the faa advisory committee, paul hudson, and they don't respond to him as well the advisory committee has almost no airline passenger representative, like bill mcgee of consumer reports, knows what he's talking about he's not in any of these situations and i just heard that senator wicker, who's the chair of the senate transportation committee, has said that he's not going to call on boeing to testify until the plane is recertified and sent up in the air i mean what kind of attitude is that you wait until it goes up and then you question boeing

now, david price, the subcommittee chair in the house from north carolina of the appropriations for the faa told me, he said, you have eight iterations of the 737 plus the max. at what point does it become a new plane which has to be certified as a plane, not just certifying the software but certifying it as a new plane now that's a pretty authoritative source he's the one who's in control of the appropriations of the faa. and they just brush him off. >> ralph, i want to thank you for joining us today this is an issue that's not going away and we hope to have you back again soon. >> and the media is doing a great job, including cnbc, investigating this situation. >> thank you, sir. let's get down to the new york stock exchange. jim cramer has been waiting patiently. just your initial take on that interview we just completed,

jim? >> ralph always represents the consumer well. i don't know whether the memory of what happened is going -- we're kind of -- we don't really have a long memory in the country. this is the time where mr. mulberg steps up and says we'll get this totally done and we'll make sure it's the safest plane in the world i think he can do that i think ralph really issued a challenge to boeing and i think that boeing is up to the challenge. i'm not going to write this company off, too long a history. >> we had secretary of state pompeo on as well, jim i don't know if fixing -- soybeans aren't going to do it, i don't think, jim the trade imbalance might not get us where we want to go the more that keeps happening, i hate to harken back on some of your comments a while back, but it was -- who was it, was it pence on a speech somewhere, jim -- >> it was the october 4th pence speech in front of the hudson

institute, basically declared china the soviet union and issued a like the letter -- >> that would have been good to listen to you on that. >> a fervent speech. i will tell you i thought that secretary pompeo did offer a way out for the chinese. i did not think he was as harsh as peter navarro, a little more toward larry kudlow. where's larry? where's larry? we need larry. we need him. >> what's the way out? jim, what was the -- >> i think the way out is just a path i think what we need is a multi-year path to see that we actually want to be able to have big trade as opposed to trying to have regime change, which will not work because we'll just get the poas guy this guy is enough of a poa guy. >> jim, tesla, though -- >> they have got to play golf, though can you get a golf match

doesn't xi like golf, right? >> i think he does >> if they're really good friends, they should be golfing together. >> i guess we've got to go we can't talk tesla. it's always a sport. >> i want to hear about tesla and sprint/t-mobile.

a morning it has been. the secretary of state sitting here on the set talking about the future of trade talks with china, which are weighing on the markets today. make sure you join us tomorrow "squawk on the street" begins right now. ♪ start spreading the news ♪ i'm leaving today ♪ i want to be a part of it ♪ good thursday morning, welcome to "squawk on the street." futures obviously weak a number of things working against the bulls today. more heated trade war rhetoric, weak pmis in germany and japan, europe markets are red 10-year yield lowest in about a year and a half and oil below 60 for the first time since march our road map begins with trade