live from new york where business never sleeps, this is "squawk box" ♪ jack be nimble jack be quick >> good morning, welcome back to "squawk box. we are live from the nasdaq market square. i'm becky quick. check out the u.s. equity futures this morning even after the big gains we saw yesterday, you are seeing that momentum continue this morning yesterday we saw the markets up across the board the dow was up 512 points which is a gain of 2%, and it was the least big winner of the three major averages the s&p was up by 2.1% and the nasdaq up by 200 points, a gain of 2.6% dow futures up by about 165 points there were the gains from yesterday up by 2% for the dow industrials. check out also what's been happening in the treasury market because across the board yields really are what we've been watching for quite a while the ten-year yielding 2.13%, but

it was the comments from jay powell yesterday, fed chairman jay powell that really sparked things in the market the idea that if we see some sort of a decline economically, the fed is willing to skrufrp ii -- jump in. that is a little different than what we hear from charlie evans on air yesterday, it made it sound like he was hoping the policymakers were going to adjust things if they thought policies were changing things. jay powell kind of clearing the way. that's why the markets took off yesterday. all of those gains played out in as asia overnight nikkei up by 1%, hang seng up by half a percentage point. in the early trading you're seeing this morning in europe, green arrows across the board there as well. gains of about a half a percent for the three major averages stocks in spain also up by about 6/10 of a percent. top tech executives are going to be asked to testify before congress. the head of the house judiciary subcommittee leading that probe

into whether companies misused their power. apple's ceo tim cook denying his company is a monopoly. listen to what he had to say. >> i think that with size i think scrutiny is fair i think we should be scrutinized. i don't think anybody right-hand lane is going to come to the conclusion that apple's a monopoly our share is much more modest. we don't have a dominant position in any market. >> so you're saying you're not a monopoly. >> we are not a monopoly >> and cook disagreeing with calls from some politicians that the company be broken up meantime, cook says he isn't too worried about china tariffs on iphones and doesn't think that beijing will target the company. of course at issue on the monopoly front is not so much that the phone is a monopoly so much as the app store. a number of lawsuits taking place. we're going to talk about that, the two app developers are suing apple over that app store. the developers argue that the tech giant has a monopoly over

app distribution as a result of it, they're saying it restricts pricing and took an unfair commission on sales of iphones this has to do with the 30% commission they take on apps and what's known as in-app purchases. of course spotify has also taken them to court as well over the ability to pay in-app for the service. you following? >> yeah, i do. it's a tricky sort of -- it's their marketplace. are you going to go after amazon and walmart and say you're not allowed to set prices in your marketplace? >> that's the question is it a marketplace or like walking into walmart and best buy saying what can you put on your shelves and charge for it >> that's what i mean, it's an interesting, it's the electronic version of your own store. what are you going to be telling people i should be able to have my store there or product there without going through your store. >> i guess if you want to write all new rules for what a monopoly is, you could somehow argue this just in terms of whether i feel harmed by someone that's big enough and controlling the market enough to where i feel like i'm taken advantage of, i

do not feel that way with apple. i like everything i have with apple. i could go somewhere else if i wanted to. i don't think we need to make sure that competitors that aren't as go ahead have an equal footing juice just because they do things as well as apple you think mine is too smul that sounds weird. you think my phone is too small, right andrew i have no problem with this thing. what is this something. it's not a 10. >> iphone 5 probably. >> it's probably a 6 >> my life is -- i grew up and live most of my life without anything like this >> with a rotary phone, so you're happy. >> i thought a flip phone changed my life. you know, i think this is like really -- >> to me the larger point is if you want to use an app that has -- that's totally an open feature, go buy yourself an android phone. >> why can't you do that >> you can >> that's what i mean. >> it's not like iphone controls some portion -- when they went after windows for this

situation, windows controlled a massive part of the business. >> part of the business. >> android's a bigger market than the apple. >> the trump doj is not listening to elizabeth warren's bombast, is it >> we will see. >> it's listening to complaints from competitors. >> this is how it always happens. and by the way. >> let's have the discussion say what you will about microsoft, but that's how the microsoft issue began. it began because net scape decided they felt it was unfair that their browser wasn't going to be prominent in the same way microsoft explorer was we won't do history right now. one more story, apple asking developers to place a new sign on app this is an issue interestingly they want to put a sign on with apple log in button above those from google and facebook this is important because users often pick the default or top option on their app, and if apps want to offer options to log in

with facebook and google, apple is saying they're going to require them to offer that button >> that's an interesting move fwirch what the justi given what the justice -- >> however, what apple's doing, currently when you sign over with google or facebook, you're handing over this information to the website or whomever you're using. apple is creating a fake e-mail. >> which is why i like apple's app stick, they do a lot for privacy protections. these are complaints from competitors that are coming in, not complaints from consumers on this >> and competitors that have typically been less -- less protective about your privacy. >> having said that, all of these privacy issues happened on the iphone, it all goes both ways. in trade news, this had something to do with yesterday's move as well talks between the u.s. and mexico be held at the white house today. they're expected to kick off around 3:00 or 4:00 p.m., and the president was asked about

that yesterday saying you know, yeah, they're talking to us. i have a feeling we're putting the tariffs on, and people behind the scenes say he likes to negotiate when the tariffs are already on because he feels like then they know he's not bluffing about it, and he can extract more concessions. >> he doesn't have republican support for this. >> he said they won't do that. they don't have a veto proof override anyway. >> potentially. >> they don't have enough people to do it. >> if you get 20 senators. then you have people like langford from oklahoma who said look, we're trying to use tariffs to solve everything but hiv and climate change >> yesterday this was part of i think the rally, we don't want to overstate a 2% gain, but the one thing it made me think of, when you're -- when you're in a bull market and you have like a selloff, the sharper and deeper it is, the more you think that

validates the bull market because it scares people and shakes out the weak, moves from weak to strong hands it just makes me wonder if you're in kind of down trend, if you have a really sharp snapback, whether that does the same thing to lull the bulls into a false sense of security we've got 150 points today, 160. only at six straight weeks of down action. >> i think a lot's going to depend on what happens over the next few days with these potential tariffs against medical ca mexico. >> i think it's interesting that we still think the fed can have an influence i thought that their ability to, you know, put a salve on the equity markets was waning. >> although there's been so much money that's been sloshing around, the idea of that tightening up has concerned people about that bringing an end to the business cycle. >> lyiike what the pause did there was a guy on last night that we talked about yesterday morning, on "fast money.

>> promote it. >> 5:00 p.m. eastern time. >> 5:00 p.m. set your dvrs the guy we talked about yesterday morning from morgan stanley with his colleague, we had andrew slimmens on yesterday talking about mike wilson who's one of the more bearish guys around he's talking recession, that the chances for this year are higher than normal. >> isn't a recession two quarters of contraction? there's only so many quarters left this year. >> 12 months i guess is the way he phrased it. in the next 12 months, he's not just saying calendar 2019. that still seems, i kept asking what -- it was weird because he brought a chart of consumer stocks to show how close they were to a really tough place, and then by the time 5:00 p.m. rolled around, the retailers yesterday were soaring, so i was like are you sure you want to -- >> that's what i mean. that was a good idea this morning. >> the trump administration's decision on what president trump does with these tariffs is going

to have a big impact, and we're going to know the answer to that by monday. >> yeah, we will what happened to my other story? what happened to my other story? i got it right here. i still have it. i'm going to read it off my tell prompter in u.s. china trade news the trump administration has denied a general motors request for tariff relief. the automakers wanted an exemption to a 25% tariff on its chinese made buick envision. that's a buick there are only a few vehicles built in china and sold in the united states. >> that was smooth >> that was good that worked, i know. now the prompter -- okay, it's back. >> president trump is still in the united kingdom today he's going to be participating in an event to commemorate the 75th anniversary of d-day. hadley gamble joins us with the latest what can you tell us >> reporter: as you say this is day three of president trump's state visit to the united kingdom the as you can see behind me there's a lot of packing up to do he's got a thousand people in his entourage headed to meet the

president later today when he lands in ireland right now he's in portsmouth they're commemorating 160,000 allied forces part of the normandy invasion. tomorrow president trump along with other leaders from europe, particularly the presidents of france as well as the vice chancellor or chairman of the german party will also meet in nor n norman normandy they'll be talking about the d-day invasion, commemorating that event of course we've seen lot of protests here in the u.k. over the last three days, folks coming out en masse yesterday thousands of people taking to the streets to protest the president's visit. it seems as if president trump is quite pleased with himself tweeting an hour or so ago that quote, he could not have been treated more warmly by the united kingdom or the royal family our relationship he says has never been better and i see a very big trade deal down the road this trip has been an incredible success, end quote for the president at least

seemingly this visit has been quite a success. he was scant on those details about a possible trade agreement with the u.k. post brexit but he was going long on the opportunities. >> number one, there were a lot of pro-trump protests as well. the numbers that were forecast of tens of thousands, of hundreds of thousands turned into thousands in fact, it wasn't nearly to the extent that people thought you might point that out >> reporter: absolutely, i thought it was really interesting as well yesterday that he seemed to get into a tit for tat with protesters essentially saying there were no protesters he was seeing in london the protesters claiming 75,000 people were out in the streets according to our reporters there weren't that many according to the numbers. >> that's what i took away from it, and you know, you got to -- physician heal thy uniself who's the prime minister over there? i don't think they know. if you wanted to protest the leadership in london, there's about five different people in the running. so they got their own issues

over there before they start gloating too much about our problems over here i thought, you know, hadlehadleh reception by the people that mattered, the queen, you know, the duchess and prince charles and everything else, i just thought that it was pretty nice, pretty impressive. the toasts were nice everything, the pomp, the circumstance, so the people that mattered weren't talking about the baby blimp floating around >> hadley, thank you. >> you're not wrong, i thought it was really interesting as well thanks, guys >> good to see you. when we come back, dow futures pointing to a higher open following yesterday's major wall street rally. we're going to talk about the big drivers next and again, check this out dow futures indicated up another 177 points this morning, even after the rally from yesterday the nasdaq indicated up by 73 points, the s&p up another 20. and as we head to a break. here's a look at the biggest premarket winners and losers in the dow this morning

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we're still several hours away from the open but it was quite a bit of a wild ride and a good one yesterday. dow opened 179 points higher nasdaq looking to open higher as well that's 75 points up and the s&p 500 would open 21 points higher. fed chairman jay powell giving the markets a much needed boost yesterday speaking in chicago. he signaled an openness to cutting rates if needed. here's what he had to say. >> we do not know how or when these issues will be resolved. we are closely monitoring the implications of these developments for the u.s. economic outlook and as always we will act as appropriate to sustain the expansion with a strong labor market and inflation near our symmetric 2% objective. >> joining us is the asset allocation strategist. and jay hahn, president and chief investment officer of winthrop capital management. we were discussing what led to

yesterday's rally. what was happening what's your explanation before we get into what's going to happen next? >> another episode of as the fed turns here just to be clear, this wasn't joe namath guaranteeing a rate cut. to his cred when things are getting volatile we have your back we want to be clear on a couple of thingsme first things have to get worse, even worse of them missing their inflation target, which is 2% or even worse the administration imposing tariffs on the 300 billion which would cause a really bad down trade. we're almost saying you know what, this is an environment where you don't want the fed to cut. you want the fed to stay at neutral. if they were to cut it would have to get worse. the reason for yesterday a lot of the market got short. things don't move by 500 points. >> isn't this so perverse, though because people are expecting things to get worse and then they're going to be saved?

is that what's happening the strongest tool the fed has, its ability to communicate when you look back to december when they were still talking about a potential tightening and any lowering of rates was not on the table. today they're having to change their communication. >> the fed futures are 97% that there's going to be a cut. you don't think there's going to be -- you say that's wrong. >> it would have to get worse for it to come through. >> how do you know it wouldn't have it get better in terms of inflation, or worth in terms of inflation. it hasn't been a growth story at this point, we've been at 2% with gdp at 3% at this point it's been inflation based right? >> yes, it's been inflation base in terms of their full employment and price stability we're a little bit below 2% will they were talking about that a lot yesterday that they're below. >> right so if things were to get worse on the inflation front, that wouldn't be good for stocks. i mean, look at where all these central banks doing, they're

struggling to get inflation at target, and fed funds isn't the magical elixir. >> shouldn't wage gains and the tight labor market and fwgod forbid some of these tariffs, shouldn't we be able to -- normally you'd be worried about it in this case you might hit 2% from the underside. >> i think tariffs would be more of a growth hit than inflation. >> what about wage gains and the labor market. >> wage gains are at cycle highs. i just think the fed -- there's a little bit of an overreaction right now and what the futures markets is indicating 97% seems more of a crisis mode for the fed than them having to do -- >> nobody understands. >> you're betting the opposite direction it sounds like >> we think that the economy, the fundamentals are weakening we think the fed's going to cut in the fourth quarter. we see 50 basis points. >> let me ask you separately, we were talking about tech earlier. how much of this tech wreck,

which is bouncing a little bit in terms of how you're thinking about tech and regulation and how you think that's going to openly affect all of these >> yeah, so i think people got lured into the faang stocks as being a fight to equality trade, almost treating them like treasuries if you want to own stocks and be safe, be in faang stocks tech has a lot bof beta to it. a lot of risks to it also the regular to tory issuesa we would be a little cautious on tech here and couple that with yield. >> if tech's not leading the market place, what's going to be >> anything that produces a yield, bucecky it's a 210 give me a break. you've got it get yields somewhere. >> i think if china gets fixed, not if it gets fixed, when it gets fixed, tech's going to rally. >> irrespective of whatever regulatory overhang you think there may be in terms of what the ftc or justice department

may or may not do. >> because success in the tech sector is being able to compete in china. >> when apple warned about china sales, faang stocks got obliterated until we did the december 1st time out on trade and tech started to come back. >> how are you playing this mexico situation in would you wanted to own the automobiles right now? >> no. no >> would you want to if there weren't any tariffs with mexico? >> no, we talked about that last time part of the thesis we're looking at also are these layoffs, mass layoffs we saw with ford last month. today it's volkswagen. they're coming. >> i think it shouldn't be understated, the ten-year note at 210, financial conditions have eased incredibly this careeyear stocks are up double-digits. people are forgetting how easy financial conditions are, and that ten-year note means more to the average american than the federal funds rate ever will because it controls the housing

market. >> if you're retired and living on a fixed income you might buy gm it's at 4.25%. >> we thank both of you guys >> thank you >> coming up, the companies that carlos ghosn once ran now want money back from him. his wife is speaking out to cnbc you'll hear those comments up next ♪ trouble on the way, i see bad times today ♪ ♪ don't go around tonight, there's a bad moon on the rise ♪

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the news board is starting a process to rekor 12 million in expenses that are part of carlos ghosn's alleged misconduct sara eisen sat down with carol ghosn wife of the embattled nissan chairman. she claims that her husband multiple arrests in japan were tied to a conspiracy by nissan's board to avoid a potential merge with french automaker renault. >> we know it's a conspiracy nissan did not want this merger. a few people within nissan decided to get rid of my husband that that was the easiest way not to do the merger i mean, it didn't have to be --

there was maybe a more civilized way of doing it. >> and now that you see the proposed fiat renault merger what do you think? >> now it's clear how nissan doesn't want to be involved and they want nothing to do with it. i mean, i think with time we will see more clarity on this story and people now realize that this was a conspiracy against my husband >> we have much more of that interview with mrs. gshon including her plea with president trump to get involved. a lot more on squawk this morning, bernie sanders going after walmart's leaders. we're going to tell you why. first as we take a look at yesterday's s&p 500's win skpnes and losers ♪

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. >> announcer: welcome back, you're watching "squawk box" live from the nasdaq marketplace in times square. >> wow, a song that wasn't -- wasn't pre-1980. good morning, u.s. equity futures a the thfuture at this hour are indicated up 170 points, the nasdaq up about 69, and the s&p indicated up 20. kind of -- i don't know if it's surprising but you get 500 points and you always wonder is there a little bit of a -- you know, usually you see 50 points of weakness the next month af50. the nasdaq, what is it when it goes up 200. >> it was up 2.65% yesterday. >> snap back, but again, another

so that's 200 and like 68 points in two days, if it were to hold. let's tell you about stocks to watch sales force raising its profit outlook for the year revenue jumping 24%. the company has previously pointed to strong demand in cloud computing and artificial intelligence. skywork is cutting revenue guidance for its third quarter due to loss from sales of huawei it supplied wireless products to huawei those sales accounted for about 2% of total revenue. that stock down a little over 1% right now. shares of game stop are plunging first quarter profit and revenue fell, same store sales dropping more than 10%. shoppers are buying fewer video games and consoles in store. we've been talking about game stop as long as i've been on this show want oftentimes talk

about it in the context of block buster and when and if people will download these games. >> they do a large extent of them could they provide something, like a best buy sort of service proponent. >> while we were talking about it, historically it was like in the 20s and 30s though. >> yes now it's $5.70 i mean, talk is cheap but it kind of looks like we may be witnessing something there, don't you think? it's not going to be best buy, i don't think. best buy somehow figured it out. service, things like that. i ask you things and you bow me off about tech i don't know how to fix that, and you said you were going to look into it. >> i was trying. why don't we ask our squawk viewer audience a tech question. if your twitter account on ios for the phone comes up and all of a sudden every user who follows you has a little thing next to it saying follow them. >> follow them back. >> with an explanation of who

they are, and it's all in the -- >> which obviously joe loves getting. >> send it to joe, let him know how to fix it. >> if you get 40 new followers. >> they'll probably block you. just send it to them >> how can i get rid of that >> @joesquawk. >> that and my social security number, my address is -- we're trying to figure out how to help him, and i don't know the answer >> all right >> jack dorsey if you're watching. >> @jack democratic presidential hopeful bernie sanders going to be pressuring walmart to raise pay for its workers. sanders plans to attend walmart's annual shareholder meeting today and push for a $15 per hour minimum wage. walmart currently has a minimum wage of $11 an hour which is lower than some of its rivals like amazon, target and costco for its part the retailer says it's hoping sanders uses the meeting as a constructive opportunity rather than a campaign stop.

and remember, walmart has raised starting wages by 50% over the last four years. they went from $7.25 to $11 an hour the company also points out that with the benefits it gives to workers along with that, it pays an average of $17.50 an hour and that again, these are starting wages. i can't believe doug mcmillen is getting so much grief for this he is the one who led all of these other companies, target, amazon, all the rest of them kind of following what doug mcmillen did first four years ago he came on our show, said they were going to be raising wages and he was punished severely by wall street he has done a lot to move up starting wages there, and it's surprising to me. >> andrew just give me an honest answer. >> i'll try. >> honest answer and i know hope springs eternal, and this america dreams can come true chances bernie sanders is ever president of the united states just give me the what do you

think the realistic chance -- >> don't punt here do not -- >> the reason i can't give you a good nswer. >> is it greater than 50 is it greater than ten greater than zero? >> i think it's definitely greater than ten, might be greater than 50. >> not the nomination, the presidency. >> we all sat here and didn't believe president trump would become president. >> what do you mean we sorkin? >> i'm not sure you thought president trump would become president. >> you saw the rallies right one thing that's fascinating about bernie sanders, whether you agree with him or not, apparently he has these massive rallies and there's ground swell support among constituencies. >> i don't know the answer. >> i think it it's zero. >> that may be, and i'm not promoting one candidate or the other. >> the way that you get the establishment candidates. >> look at hillary, that was totally unfair the way bernie was -- they prevented that, and

i think it's happening again. >> do you? >> don't you do you know anything about how this -- are the super delegates -- >> no, they play a much smaller role this time around, which might hurt bernie this time around you have so many more candidates. >> when you get the talking points in the morning from the white house -- >> i really think if we're going to talk about who gets talking points in the mainstream media does it really seem like they're sending out a lot that are getting the word out in the mainstream media for trump >> we're going to go to commercial we have a lot more to talk about this morning the big story, most of the major banks moving higher yesterday and etfs posted its best day of 2019, the biggest drivers. we're going to explain right after the break. later, tech regulation talk, it is heating up on the hill in a very big way, and we're going to tell you what it could mean for faang stocks stay tuned, you're watching "squawk box" right here on cnbc.

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if . welcome back to "squawk box" want the dow jones futures this morning are up 166 points after gaining the average 500 points, above 500 yesterday. the nasdaq gained almost 200

points yesterday and is up another 66 this morning. the s&p is back firmly above some of those support levels where we were worried, and 2803 this morning indicated up another 19 points. making headlines, pet products, the website chewy.com is about to go public aiming for a valuation of about $7 billion, about twice as much as its parent company petsmart paid for it just two years ago. i remember gabelli long ago was talking about pets, and i don't know whether it's gotten more insane what people do, but i think it might have. don't you think? >> based on your behavior, yeah. >> i got three dogs and i buy them -- i can't go in that store without spending, you can't believe what you spend when you just get dog food for big dogs and then you get treats and chew toys and you walk out of there, you're like thank god my kids are grown. people are nuts about -- you're a city dweller.

>> what do you have a gold fish? what do you have you got anything, a hamster, a gerbil >> you got something >> no, but -- >> that's not human. >> we had a fish the last four years named sponge bob who just passed away. >> oh, no. >> it was very sad in the sorkin family it happened two weeks ago. we had a funeral in our bathroom for sponge bob. >> is that where it met its fate in your bathroom >> we've had a goldfish that's been alive for about nine years now. >> porcelain princess. >> this was -- was it a goldfish, a 4-year-old goldfish? >> it wasn't a goldfish. it looked like a goldfish. it was larger. i don't know the name of the fish >> do you think it loved you back >> unclear i was worried that sponge bob was lonely. >> was it a boy fish >> how do you tell that? >> i think -- i don't know >> let's talk about what's going

on in the world. >> i mean, i can tell others let's talk financials and what's working for investors. joining us now marty mosby he's been on the show before director of bank and equity strategist at vining sparks. you talk about -- you follow an important group, marty for people that are trying to figure out overall market sentiment, and i guess we shouldn't be surprised at that given, you know, how important central banks are around the world, but why -- what's the recent action of the financials and what do you attribute it to? >> well, one thing i appreciate the lead-in here that was very interesting going into banks, so as we're off to the races here, the banks have really three things working for them one is they underperformed last year they're a value part of the market, they're actually a value trade here probably one or two multiples below where they should be just because of the fear of reception kind of crept into these

valuations it's sta thi starting to kind o lifted on the other side what you have is capital we're getting capital announcements. we'll get big capital announcements this year, this month, and that will get through the c car and central regional banks will be able to be out of c car, gives you a 10% return from these investments that are a value place. lastly credit stable, we don't see really the recession or the pressure on credit as long as we have that, this is a good runway ask a good kind of entry point for these banks relative to the rest of the market. >> so things look okay macro wise, i mean, in terms of loan growth and credit quality and everything else, we're not always hearing that. i thought loan growth was kind of weak or something it is, it's about where you think it should be or a little better >> it is actually, loan growth has been pretty steady. it's not been stellar throughout this whole recovery and expansion, so we've had slow loan growth. we've always had seemed like

some kind of uncertain they we're facing that has held the businesses back from pushing ahead. what's that done is put a fwgovr on the growth so this will be a much longer expansion than what we've seen in the past we just haven't been able to really catch that momentum and really kind of get into the lose the discipline, get over extended we hadn't seen much of that so far this cycle. >> i mean, for bankers that have been waiting for you know, a steep year-to-date curve and you know their classic business to come back, it's just never coming back to that extent, but if the fed goes lower on the short end does it steepen a little so they to a little bit better >> right now what we think is that the fed is just kind of in a pause mode in the past when they've over extended they've actually pushed the fed funds rate above inflation and real growth. they're above nominal growth when you start to see that real kind of pressure right now they're just right with inflation if you look at it just pausing

right here, the yield curve is inverted but that's really because of other anomalies in the market we think this will all kind of settle down. we'll see the yield curve kind of flatten out yes, we're just going to be here for a while. this isn't a bad environment we still are, again, 100 basis points heyigher than what we we at the trough. there's loans and securities that can still reprice to these higher levels in the back half of the year. >> your two favorites are what, citigroup and bank of america? >> actually, no. >> no? >> we would rotate into the super regional banks we like citizens financial group, and we like if you look at kind of another kind of sleeper would be regions financial. it got hit last year it has the risk from the last recession that they've de-risked, and they've also limited their asset sensitivity. the reposition banks significantly, and we think those two are really good values at this point right now. >> what about goldman?

do you think goldman's strategy is solomon's new strategy is going to pay off >> out of the money center banks, we do think goldman represents one of the best values, but it's a long-term kind of turned around trade. if you look at the large cap banks, you've got three turn around longer term investments you've got goldman you've got wells fargo and you've got state street, all of which are high quality institutions that over time should do well for investors, but not in the short run just longer term >> all right okay, great, all right, marty. appreciate it. i know we're going to see you in like -- what month is it we'll see you at the end of this quarterback quarter, back in here. >> second week of july. >> we'll send a car for you. >> thanks. >> there will be earnings. there will be blood. anyway, thanks when we return, technology under fire tim cook says apple is not a monopoly, but is it time for

investors to fear possible regulation for big tech stocks that's next right here on "squawk box.

welcome back, everybody. tech is coming under fire in washington so should investors be worried ryan white is global head of internet and software at mones, crespi, hart, and tim lesko is with granite investment partners and the rest of the market seems to be thinking what you all are talking about right now, that there's no worries if it comes to this. brian, you say you've been telling people you've been watching this for a long time, you're not surprised, but it's

not a huge threat. >> i don't think it's a huge threat i do look at this group, and i think there is a reason for increased regulation i do think there is the possibility for breakup. and when i look at the companies most at risk, it's facebook and google, which if they were ever broken up, their stock prices in my view would be much, much higher. >> that's what i mean, you think even if they're broken up, valuation goes up from here. i don't understand that. >> yeah, it's very difficult to dig into some of these businesses where numbers aren't given out, whether it's youtube or waymo over at google or, you know, some of the businesses, whatsapp or instagram over at facebook, and how they're monetizing that. so, i think when people would see those separately, they'd give a better valuation, for sure. >> what if they're not broken up what if they're just told they can't continue the way they operate and they have to change behavior that's helped them gain a competitive edge to this point? >> well, they definitely have to change, and they're starting you've seen with facebook and google, some of their privacy

initiatives. but you look at the valuations, google 18 times ex-cash and facebook 15 times. i think they're very depressed facebook -- just in my group, because i have the luxury of covering internet with software -- the operating margins with facebook are higher than any company i cover. >> you have told people if stocks come under pressure here, you would use that as a time to actually add to your positions why aren't you worried about regulation >> well, i think the other guest hit on some of the key points to it we're seeing the regulation go on in europe we're about to anniversary that regulation, get a sense for what that does to ad rates. and so far, it really hasn't changed ad rates so far in europe so what this is all about is data and advertising and if advertising keeps going up and the secular tailwinds of people moving to online advertising and advertising on social media continue to grow, they're just going to see maybe a little bit of maybe tamped down earnings over the next few years can but they're still in the sweet spot. >> you say this is just campaign

talk, but we're not talking about elected officials or even hopeful elected officials at this point we're talking about actually the doj and the ftc. doesn't that concern you on any level? >> it always concerns me i think that if we're talking about breakups of companies, i would rather see a company break up a company i'd rather see a good operator come in and break up a company the government stepping in and trying to figure out what these pieces-parts are and try to break them up in any reasonable way does not give me a warm and fuzzy feeling. however, there's still a tremendous secular tailwind behind these companies and they are ready for the regulation they've been told about it now for 18 months, and you've got to think these companies are managing their business for the future, not the past >> brian, what are some of the moves that you think these companies are taking right now to try and avoid regulation, to try to get in line >> well, i think you've seen google already make some big moves in terms of you've got to opt in for them -- you know, you go to their website and there's

different areas where you can say, look, i don't want to be tracked or i don't -- >> moving towards privacy, but what about things like the advertising market or even the third-party advertising market do you think they'll ever have to split that off? >> like the ad server business yeah, it's possible. it's possible, yeah, because they have 70% of the market, they have 80%-90% of search, so it's very possible you've seen facebook make a lot of changes interms of how they're going to encrypt and kind of combine their different platforms. so, i think they're moving in the right direction. my view is this. i mean, you've got a company, facebook, 2.7 billion users around the world you know, google with 80%-90% of the market, and they have too much power on data and that influences democracy. >> brian, thanks for coming in and tim, good to see you, too. thank you. >> thank you. >> all right, hawkeye, thank you. coming up, future trading higher, they are, right after a 500-point gain yesterday the day's drivers when "squawk x"om rhtack. johnson & johnson is a baby company.

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the fed follow-through stocks rebounding after jay powell's promise sparks a market surge. we'll discuss his message to the markets and where stocks could be headed. u.s. and mexican officials ready to talk trade. the latest on the trade front and what it means for your money is coming up. and big governments, big crackdown on big tech is heating up congress now calling on america's top sec ceos to testify, as the second hour of "squawk box" begins right now.

♪ >> announcer: live from the beating heart of business, new york, this is "squawk box. ♪ good morning, everybody. welcome back to "squawk box" here on cnbc i'm becky quick along with joe kernen and andrew ross sorkin. u.s. equity futures are up once again. dow futures up by about 180 points, and this comes after a gain of over 500 points for the dow yesterday. yesterday, the dow was up by 2%, the s&p was up by 2.1%, but the nasdaq was the big winner. it was up almost 200 points to a gain of 2.6% and this morning the nasdaq is indicated up another 72 points s&p futures higher by almost 21 points. okay, let's tell you what's going on this hour, making headlines right now. a key economic report just out in about an hour from now. adp's going to be releasing its report on private-sector employment at 8:15 eastern time. according to the consensus

forecast, the u.s. economy added 173,000 new private-sector jobs last month. also, renault's board will meet again today to consider fiat chrysler's bid to buy its rival automaker. the board had met yesterday but determined it needed a little bit more time to study the offer. it's expected a vote will be taken following today's gathering. the expectation is a deal will be reached. the white house has denied a tariff exemption relates by general motors gm had asked for an exemption to a 25% tariff on its buick envision suv, which is made in china. gm argued that the request would generate funds to invest in its u.s. manufacturing facilities. fed chairman jay powell signaling the central bank is ready to help the economy, if needed that sparked a big rally on wall street steve liesman joins us from the chicago fed conference, where chairman powell spoke yesterday. and steve, were you surprised by jay powell's comments? did it sound to you like something that was pretty monumental >> no. i mean, it was important what he said, but i kind of expected it.

and it's important to listen to what he said i mean, not just powell, but also richard declaredan, a cnbc interview, signaling that the fed is ready to come to the rescue of the economy if the event the tariff war causes a downturn powell did not say rate cuts, but listen to what he did say. >> we do not know how or when these issues will be resolved. we are closely monitoring the implications of these developments for the u.s. economic outlook, and as always, we will act as appropriate to sustain the expansion with a strong labor market and inflation near our symmetric 2% objective. >> right so, the market heard "act as appropriate" as rate cuts. later in a cnbc interview, fed vice chair richard clarida said the fed would take more rate cuts into account as it cut policy, wasn't so concerned about inflation on the front end, but more about how tariffs could weaken the economy >> i think we will confront that

when we get to it, but i think the way that i think about it, steve, as one member of the committee, is i think textbook macro would indicate that you would tend to look through the price-level effect of higher tariffs, because it's not really telling you anything about long-run inflation, and i think that that would be my first instinct, which would be to look through that on the price level. >> okay, and now -- >> and then obviously slower growth means you want to do what you can to maintain growth at its potential. >> do what you can so, let's see what the market probabilities are here june, market was actually flirting with june for a little bit, but that's back down to 18%. we'll talk about june in a second july, 63% for a rate cut, september, 93%, october, 96%, and two rate cuts at least are built into the structure of the fed rate funds market. the fed meets june 18th and 19th before that, new tariffs on mexico, june 10th, could be put in place after that, president xi and president trump meet in japan.

so, the fed, essentially, is between the rock of new tariffs on mexico and the hard place of our trade dispute with china becky? >> can i just -- steve, i'm looking for it i just had some of my followers said that they were surprised that clarida said he didn't see any effect yet of the tariffs, either on inflation, or -- did he say he didn't think we'd publicized that enough yesterday and that it was noteworthy that he said he hadn't seen that. >> oh, okay -- >> did he say that >> tell your viewers i ran that -- yeah, tell your viewers i ran that sound bite three times. >> well, i didn't see it, either, but nobody sees -- >> i know you don't in the afternoon when you're at home in your bath robe in the afternoon. go ahead. >> i don't want to know about your fantasies, but if we -- >> no, it's yours. >> oh, god if all viewers could just stay all day long, our viewers would

go up like 1,000-fold. the longer we keep them -- >> i said that three times that he saw a small effect so far -- >> i think you just said it again. >> four times now or five -- >> -- these mexican tariffs. all right. it is interesting he sees these mexican tariffs -- and other fed officials i've spoken to -- as another order of magnitude >> right. >> they are as big as -- and by the way, it's also worth pointing out, joe, that second round of tariffs on chinese goods hasn't really hit the economy to the extent that it will but i think what they're saying is, so far, what is essentially seen as a $70 billion tax or tariff on the u.s. economy has not really shown up very much in the macro data you can see it in the import prices in that they have fallen by 1%. and so, prices have -- the tariffs are 5% to 7% on the initial round, so that means that u.s. consumers and businesses are absorbing them. >> steve, good work yesterday. lots of great stuff.

>> nice of you to say. thanks very much. >> no, we appreciate it. the stuff we had on our show and throughout the day, really great. >> saved the market, i think >> so, i was glad to sit down with clarida i'll tell you this, because you guys have asked me, how is the fed going to think about this, and i have not really had an opportunity to, at least on camera, ask the fed officials. and clarida told me what i thought they would think about it, which is to look past the inflationary impact because it's a one-time rise in the price level, and address growth. and i'll tell you what the big question is, and that's why i focused on june -- does the fed do so preemptively, or does it wait to see the effects of the tariffs on the economy and address that and then layer on top of that people like charlie evans, who i spoke with, they may want to be cutting anyway so, this may be a sort of proximate cause or excuse that they have out there. >> that's like a win-win for traders that mainline cheap money. if they don't worry about the inflationary aspects of tariffs -- >> right, right. >> -- and they only worry about the growth aspects, that just

means easier money maybe that's why we're at 98% or whatever it is for the fed funds. >> i'm slightly more nervous, joe, that -- i'm slightly more nervous that tariffs have a broader impact on prices there's no testified of this, obviously, because we haven't done something like this in a long time. but let's say that these are used as excuses to raise prices more broadly, and then we might have -- >> charlie would say we need that charlie in your interview would saying we need to err -- >> charlie might say we need that that is correct. >> i was listening to your interview. >> thank you that's wonderful but -- >> mostly. >> you were here, right, right but charlie would also say that he doesn't give a wit about that if it doesn't change people's inflationary expectations. so, that's the thing they're focused on, which is -- you know, you can raise prices all you want if people don't come to expect price rises, they don't act in an inflationary way and you don't have a problem there there's a lot of talk, by the way, about why the fed is missing its inflation target and what it needs to do about it, and this is a process the fed is going through over the course of

the next year, which is a sort of deep think about how it makes policy, how it hits its target and what it does next time we hit the zero lower bound, which is they have to lower rates to zero in a recession. >> all right, steve, thanks. joining us now, dan suzuki, portfolio strategist at richard bernstein advisors, and nadine terman, founder, ceo and cio of stolestein capital -- solstein capital and a member of the 100 women in finance we just went over a lot, dan just comments on what you heard from steve >> yeah, regarding the fed >> regarding the fed. >> i personally think it's a little too early to be aggressively pricing in a lot of hikes from here. i don't think that's what the message from the fed was but even if -- >> a lot of what cuts or hikes? >> cuts. >> okay, you said hikes. okay. >> sorry yeah, i don't think it's -- it's little too early to be pricing in a lot of cuts from the fed. but even if you do start to get cuts, i do think that the market's react is probably a

little bit overdone. you know, name one environment where, you know, where the backdrop necessitated cuts and that was a good time to be invested in stocks it generally doesn't happen. i think the guest you had in the prior hour was talking about the same thing it's like, if we're in the environment you actually want to be sort of, you know, focused on high-quality companies and stable growth, because things are getting worse. >> wait a second, you think the market's reaction yesterday was overdone too much. >> yeah, i don't think you should be too excited. that's the difference between short-term trading the markets versus longer term yes, the day you hear any glimpse of a cut from the fed or easing monetary policy, the markets are going to have a nice bump, but if you look over the next couple months, in that environment that necessaitates that type of verbiage from the fed -- >> because the economy's weaker. >> we agree. we think it could persist for a few days or a few weeks, but in some ways, you're getting an opportunity to fade the consensus, right because if everyone's believing that things are good, that there is more, call it cowbell, letting the stock market go up, right? then hopefully, volatility goes

down, protection gets cheaper, and it's something that people can take advantage of. >> do either of you think that the tariffs with mexico will go on, on monday? and if so, what's the impact to the markets? because you're talking about $1 billion in tariffs on a monthly basis. >> i don't think anybody knows or you have to be more of a psychiatrist than -- >> i would think the market's going to react pretty strongly one way or the other. >> oh, yeah, absolutely, but that's why i don't think it makes -- at least for our firm, we're not positioning for these event-driven macro type events, because i don't think we have -- most people don't have a competitive advantage in predicting what trump is going to do one way or the other i think that the comments we got from mexico were pretty, you know, got the markets a little bit excited in one direction, but who knows? i mean, if you get trump -- the president on a bad day and he's not liking what he's hearing, you know, you're going to get that 20%, which is not a deal. >> but at the same time, you're seeing effects change, right and so, as the currency weakens in mexico, the dollar strengthens, what happens there is that maybe it's pricing in for a mexico and their

exporters, but people who have to export in dollars, it makes a big difference to them so, you don't have to actually, in our view, play the event, but you could actually just stay out of the way or be careful of those companies that would get hurt, if it did happen and i think you have to think about these things, because there is a mix of, call it immigration policy as well as economic policy going on and as you said, while it might be too hard to forecast, in some ways, you'd have to think about it. >> yeah. i think that's exactly right i mean, regardless of the tariffs, i mean, if you can't predict which way the tariffs are going to go, one way or the other -- i still think the positioning's the same regardless of the tariffs -- before the tariffs start to re-escalate, the underlying fundamentals were already starting to weaken anyway. if you were thinking about profits, they were already starting to slow in pretty much every region of the world. you're getting increases signs liquidity's tightening up, so that's not an environment where you want to be backing up the truck on risk. and the tariffs only reinforce that you want to be focused on more defensive areas of the economy -- >> look, it may signal that

things are coming down from the peak, but it doesn't necessarily signal that the end is here. >> oh, absolutely. i don't think that there are signs that we're tipping into recession just yet, but as mike wilson on cnbc yesterday was noting, the risks are increasing i think even if you look at the fed's own models, the risks are increasing if you look at ism is down at -- >> it was down bigger than expected -- >> -- at a previous low level, the market version of that, the pmis, are at a nine-year low the durable goods -- >> although ism is ten points above recessionary levels. >> absolutely. so, nothing we see is pointing toward a recession, but the reality is the underlying fundamentals are getting deeper, whether you look at durable goods orders, you look at, you know, credit delinquencies all these things are actually going the wrong directions on top of that, liquidity's actually showing signs of tightening up. banks are starting to modestly tighten lending standards. and this is the first time you've had people worry about the fed being a little bit too tight, people worrying about the banks now tightening lending standards at a time when the underlying fundamentals are slowing. gdp had a nice print, but a lot

of that came from inventory build and strong business spending, which those are signs of business spending starting to slow -- >> if you're concerned about liquidity tightening up, then what the fed said yesterday does matter. >> right, but one of the points you were making before is you don't have to have a recession to have changes in the stock market, and you can have stock picking. there's more dispersion at that point if growth is slowing >> right. >> and things can still do well, right? so, it's about positioning correctly from a top-down view and not forgetting about the fundamentals, which i think is your point about having good cash flow, solid balance sheets, organic growth those types of things matter, but you can still find winners in that type of market. >> what does well when the profit cycle's slowing, you know, more defensive sectors and higher quality stocks tend to do much better. >> all right thank you, dan suzuki, nadine, thank you. okay, coming up on "squawk," a check on the housing sector. plus, senator gary peters, ranking member of the homeland security committee will discuss changes at the border, the new

nafta and the auto industry. you don't wa to ssntmi that interview. stay tuned to "squawk box. we're the slowskys.

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and this is significant because yesterday we did see big gains for the market you were talking about the dow up by 500 points, and it was the least biggest gainer of all the averages it was up by 2%. s&p was up 2.1%, the nasdaq up by 2.6%, and you are seeing, at least in this early hour, those gains being added to this morning. all right, coming up, senator gary peters on the trade war and battles at the border. and then, big tech versus big government ken auletta of "the new yorker" and ed lee of "the new york times" will be here to discuss what investors can expect with possible regulation and the battlereng bwe bwieten washington and silicon valley. "squawk box" will be right back. but not when to use it. do i use aflac when the kids get slime in the plumbing? no. that's home owner's insurance. slime in my motorcycle. no. that's motorcycle insurance. slime everywhere? ughhh nooo, there's no insurance for that. do they help when i have bills health insurance doesn't cover?

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which led to the discovery that sometimes a little down time can lift you right up. expedia. everything you need to go. the dow surges, the s&p 500 soars. time to get in on the market's big bounceback strategy ahead of the bell ♪ all right, welcome back, everybody. trade discussions between the united states and mexico will start back up today. later this morning, secretary of state mike pompeo will meet with mexico's foreign minister. joining us right now is michigan senator gary peters. he serves on the commerce committee and is the ranking member of the homeland security committee. and sir, thanks for your time today. >> great to be with you.

>> we are looking at the prospect of tariffs being slapped on goods coming from mexico, and that could be happening in less than a week's time what would that mean to your state of michigan? >> well, it would not be good. it would hit michigan particularly hard, the auto industry i'm very concerned about these tariffs and what it's going to mean to workers in my state. certainly, if these tariffs hit, you're likely to see a hit to profits, and ultimately, that means to the profit-sharing checks that are going to be going to autoworkers you know, if you look at last year, folks from general motors received over $10,000 in profit-sharing checks, ford over $7,000 in checks these tariffs, if they go through, and based on some of the analysis that i've seen, it could be a significant hit to the profitability of domestic automakers, and the end result will be less money for autoworkers and many people who are employed in my state. >> there has been talk of some republican senators saying that they would vote against this, they would try and potentially

override president trump's order for this i don't know how likely that is, but have you spoken with any of your republican counterparts in the senate about any of this >> i have. i mean, my republican counterparts are very concerned about these tariffs, the impact on their states. you know, basically, this doesn't really address the issue on the border, but what it does is it hurts workers and businesses in our respective states so, i think there will be broad opposition to the way these tariffs are being imposed on something that's not related to a trade issue. this is a separate policy issue. it certainly goes down a very slippery slope when you start imposing tariffs that are going to hurt workers in our country and not really deal with the trade issue. >> so, what happens next have you had conversations with the administration >> i have not had direct conversations. my republican colleagues have. i know there was a pretty spirited meeting with folks yesterday, trying to encourage the president not to do this,

that this does not make sense. you shouldn't put the cost of what's happening at the border on the backs of workers and of small businesses and auto suppliers in my state. >> hey, senator -- sorry -- just real quick, are all tariffs not created equal? i'm just thinking about senator schumer saying hang tough on the china tariffs. do you favor those or the administration's approach to china, or no tariffs of any kind anywhere, or is mexico different? >> well, no, i think tariffs is a tool that you use on trade issues, but they need to be focused. certainly, i believe that we have to be tough with china and make sure that trade rules are being followed, but i think the administration is doing it in such a broad, blunt instrument way that it doesn't make a lot of sense, and there's a lot of really harmful impacts on workers in michigan as a result of what we're seeing, as well as on farmers farmers have been hit in a very negative way in michigan as a result of these broad-based tariffs. you can use tariffs as a tool, but you should do it in a smart way, and i don't think we're

seeing it being used in a smart way at all. >> it does raise the question about what to do with the immigration problem at the border and i know you made a visit to the border recently yourself what did you take away from that >> right well, there's no question, we have a large number of folks that are coming across the border now, and it's different than what we've dealt with in the past in the past, they tended to be young,mexican males that came across they'd be apprehended and sent back now we're seeing large numbers of families from central america, from guatemala, honduras and el salvador we need to increase our processing abilities at the border we clearly need more immigration judges and more personnel on the border to deal with the folks that are coming across, as well as some of the humanitarian issues, and there's no question, we need to have mexico as part of that solution as well on their southern border. >> but do you think there needs to be a greater deterrent to people wanting to come to the united states? that fundamentally underneath all of this is the question. and some people will say, no, you want this to be the most beloved country in the world, you want everybody to want to

come to this country, and others don't. >> well, the issue is very complicated. it's a combination of both pull factors and push factors you're tacking about pull factors and deterrents certainly, we have laws. we should allow legal immigration, but we need to enforce the laws that we have in this country and certainly, we need secure borders. i think that's fundamental there are also push factors from central america as a result of violence, really a dysfunctional government, as well as drought that's causing economic -- really, economic challenges for people that are seeking a better life. >> but should we be providing aid? i mean -- >> i think that's part of it certainly, that's part of the issue is to keep, help people stay in their country, which they want to, but we also have to secure our borders. you have to be doing both. there is no one silver bullet to deal with this issue it's comprehensive you've got to have secure borders. you've got to process asylum claims a whole lot quicker than we're doing right now. and if folks don't qualify for asylum, they need to be repatriated back to their country. we also need to deal with some

of the fundamental issues that are happening in central america that are pushing people north. if we're not doing all of that, we won't be successful in the end. >> i mean, you want to have a great country where people want to come, but you don't want to have law that induces people to try to come here illegally that's absurd! that's absurd! >> absolutely. >> of course people want to come here, but you don't want to grease the skids that they game the system from people who are waiting. they come here, come in, 20 days, they're released into the population that's insane. no one would run a country like that. >> you're absolutely right, no we have to be a nation of laws we have to do it properly. but as you said, we have asylum laws like every major democratic country, that if people are fleeing violence and fear and persecution, that the statue of liberty really does mean something in the united states, but we are a country of laws and we have to make sure we're enforcing those laws and securing our border. >> senator peters, i want to thank you for your time today. >> great to be with you. thank you. >> thank you. coming up on "squawk box" in just a minute, five of the

largest tech companies report a combined $64 million into federal lobbying efforts last year now tech companies find themselves clashing with washington over regulation we're going to break down who gave what and the influence of big tech in d.c. as we head to a break, take a look at u.s. equity futures right now. we are in the green, dow about 151 points higher. back in a moment ♪ to give every idea the perfect soundtrack. ♪ to make each journey more elegant. at adp we're designing a better way to work, so you can achieve what you're working for. you should be mad at airports. excuse me, where is gate 87? you should be mad at non-seasoned travelers. and they took my toothpaste away. and you should be mad at people who take unnecessary risks. how dare you, he's my emotional support snake. but you're not mad, because you have e*trade, whose tech helps you understand the risk and reward potential on an options trade it's a paste. it's not liquid or a gel. and even explore what-if scenarios.

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♪ still to come here on "squawk box," the clash between big tech and lawmakers heating up, but we're going to break down the risk of regulation and the money companies are pouring into washington to try to sway policy and then, breaking news on the jobs front adp set to release private payroll data the numbers and reaction, straight ahead. then later, see if royal dutch shell gives us an oil outlook, talks middle east tensions and opec, that interview coming up shortly. "squawk" returns with all that and more in just a moment.

mortgage applications out a short time ago let's check on the housing market with diana olick. good morning. >> mortgage rates are falling past, but not far enough, apparently, to impress home buyers up against high home prices total mortgage application volume rose 1.5% last week from the previous week, according to

the mortgage bankers association's seasonally adjusted index, but gains were driven by refinances the rate on conforming loan balances fell to 4.23% for lows with a down payment. total refi volume was nearly 33% higher than the same week one year ago when interest rates were 52 basis points higher. refis are highly rate-sensitive, and the drop in rates last week added about 2 million more borrowers to the pool of those who could benefit from a refinance. that's according to black night, which is a mortgage software and analytics company. for purchases, applications to buy a home fell 2% for the week and were barely 0.5% higher than the same week one year ago it's sky high home prices which continue to sideline buyers, especially the first-time buyers, who are a growing segment of the market. back to you guys. >> diana, thank you.

when we come back, big government's big crackdown on big tech is heating up congress now calling on america's top tech ceos to testify. this comes as lawmakers and regulators are looking at changing the rules for silicon valley we'll talk about all of this after the break. in the meantime, though, check out the futures again this morning. dow futures indicated up by about 143 points s&p futures up by 15 right now, and the nasdaq up by 54.

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as the government gets ready to take on big tech, we are going to take a look at how much these companies spend on lobbying efforts aditi roy joins us now on some of the stats from silicon valley do you not go on daylight -- what time is it, aditi thank you for joining us. >> always a pleasure to join you guys in the morning. >> that's dedication. >> yes, it's very early in the morning. taking one for the team. well, alphabet spent more than $21 million on lobbying last year that's more than any other u.s. company. amazon was also among the top five spenders, according to the center for responsive politics and facebook also made the top 20 those three tech companies each spent in the double digits on lobbying, followed by microsoft, which doled out $9.5 million apple spent just under $7 million. what are they spending on? the top issues for alphabet, which reportedly facing a doj probe over its business practices, were regulation of

online advertising and privacy and competition issues in online advertising. alphabet's spending on lobbying last decade has gone up 500%, starting from just $4 million in 2009 now, these numbers may not seem like a lot compared to the large cash hordes of big tech companies, but they are significant in the world of political lobbying back to you guys. >> you know what, you answered my question, so now i don't have a question because my question was, why are those numbers so small compared to what these guys could i'd be spending like ten times that and really getting what i want with these politicians, you know what i mean >> they're definitely the top companies. de keep in mind, these numbers don't fold in the money that they're spending or their pacs are spending on campaigns or candidates, but also those numbers end up being in line with these. >> right. >> and they could backfire, certainly, couldn't it, aditi, if it looks like you are trying to buy politicians by really beefing things up. you probably have to be careful -- >> people are buying

politicians? >> exactly i was talking to one insider yesterday who said the same thing. you don't want to be silly in terms of how much you're spending and then, like you said, it would backfire on you. >> okay. aditi, thank you appreciate it very much. >> you bet. >> we're going to continue this conversation right now for calls on big tech regulation we welcome ken auletta, "the new yorker" and author of "frenemies." also cnbc contributor, "the new york times" ed lee is with us. i'm going to start with ken -- >> start with ken. >> well, he's a living legend -- >> as opposed to you, ed >> yeah, exactly exactly. >> sounds like a seniority thing. >> no, but ken covered and is the expert on what happened with microsoft and that's why i want it go to him first you look at what happened with the justice department and microsoft, and i want you to either try to draw parallels or distinctions, if there are distinctions today, between what is happening with the way

justice and the ftc have just split up the roles of trying to oversee and maybe investigate and maybe do more to amazon, facebook, google, and potentially apple. >> well, the biggest distinction, if you go back to the late '90s, the trial -- they brought charges in '99, the trial was in 2000 -- microsoft didn't believe in spending money on lobbying and pac contributions. they thought it was inefficient. we're not in that game we're a science-based company. and if you watched bill gates' 20 hours of depositions that he gave to david boies, who was his cross examinator, and he had basically contempt for the idea that you should question me. why are you doing this i'm a good citizen i do good things and that's a big distinction and now if you look at all these companies, including microsoft, they're pouring money into both lobbying and political contributions. >> do you think to great effect? >> more effect than they had before, but the problem is their

policies and practices are raising questions about whether they should be regulated in some way. >> i would say their attitude hasn't changed much from bill gates back in the day, in terms of their disdain they acknowledge that they accept it, and they're certainly spending money on it, but i think deep down, they just feel like why do we have to -- >> i think they realize they need to grease both sides of the aisle now, which is never the way it was before. you can't even count on the republicans now, they're back to business. >> but just on the merits of what's the case, if you will -- and there is no case at the moment, but you look at -- just look at google or look at amazon and apply antitrust law as you think it was applied to microsoft two decades ago. does it make sense today is that a parallel or not? >> the argument then -- the justice department took a clear position -- we want to break up microsoft. and the judge in the district court agreed with them and then was overruled by the federal appeals court. >> but the idea of harming

consumers, which has historically been the metric or the measure -- you had a situation in microsoft back then where you could have said, look, you're providing free microsoft explorer to people and then you had all of these competitors come out, netscape and others, said this whole thing is unfair. >> the justice department position was based on abuse of power. >> right. >> they basically were not dealing with the consumer getting a free internet explorer they were basically concluding that microsoft abused its power, and particularly went after netscape and others. >> but in hindsight, did they need to do anything to microsoft? microsoft, you know, got totally out-innovated serially in every next thing -- >> because the justice department -- >> they didn't break -- >> and also -- >> years they took top management, bill gates all the way down and -- >> we know in hindsight they didn't need to take a harder -- >> but there's a strong argument to be made that microsoft, because that case was broad, allowed the googles and the amazons and everyone else -- >> it took them -- >> microsoft would argue --

there are people inside microsoft who would argue that they lost the mobile war, if you will -- it never really entered the mobile war because they were too sidetracked trying to deal with this. >> would have taken 10, 15 years and a new ceo to get back on track, really, in terms of stock performance and everything else. microsoft did not, you know, strangle competition >> yeah, but i think the justice department -- >> you think because of the remedy -- >> well, that's the question -- >> not because of the remedy, but because you know how much time and attention that takes? if you're spending years going down to washington and spending so much time testifying and so much time -- >> microsoft didn't build this business the justice department did. >> which business? >> this great business that they were allowed -- >> no, that google and everybody else built, you're suggesting. >> yeah, yeah. >> saying it came as a function of -- that's actually an interesting question do you believe that the success of google and amazon and facebook and everybody else -- do you give any credit effectively to the justice department 20 years ago -- >> yeah, some. clearly, one of the things overlooked here is that microsoft lost its ability to

retract top talent, because they had -- you know, they were poisoned they had a scarlet letter. >> and it was harder to make acquisitions >> very harder and they were looking over their shoulder -- what's the government going to do what's the citizens going to do? but i actually believe that microsoft would have been broken up you didn't have to break them up with antitrust open source and the internet were going to break them up, and that's exactly what happened. >> irrespective -- >> that was always the argument. moving so much faster than we can catch up to, so what are we really dominating. i think becky made a good point, which is they were being dragged out to the courts, spending millions of dollars. that was the real sort of liability here -- >> takes their eye off the ball from everything they're doing. >> exactly and looking now at what's going on with facebook, apple, amazon, google, that is the liability, not necessarily that they're going to be broken up, though that's what they're hanging over their heads. >> not to mention just the competitive things you're doing. you have to second-guess every move and think am i going to get into trouble for doing what i think are normal business practices. >> do you think there's a

distinction, ken, between google being now covered, if you will, by department of justice and the ftc looking -- who has picked the better, the shorter straw? >> well, it's interesting the government has agreed to split it and not to vie as to we want to prosecute this. i think that's really smart. i don't know who has the better straw. i mean, the justice department has more resources than the ftc to investigate. >> it's good that we have both sides, because how about peter till remember, he says monopolies, if you can get one, because you're so good at what you do, then -- >> it's a great business to be a monopoly in! >> then there's the other side -- >> nobody against them -- >> but there's always competing forces you don't want to kill -- i've said this like ten times in the last two days -- you don't want to kill -- it's actually the goose that laid the golden egg i don't know that the goose itself is golden, but there is a goose that lays a golden egg, and you don't want to -- i mean, there are offsetting forces. and i understand what you're saying -- >> what are the offsetting forces >> there are some that think

that too much market power is going to stifle innovation others think that it's moving so fast that just let the free market decide who wins and who doesn't. >> so, max producers made this point to me earlier and i think it's a fair one. chris hughes wrote an op ed -- >> uh. >> i think he made a point, which is -- >> universal basic income, ed. >> all of the vc money that's flowing through silicon valley right now, anything that's social or anything that's ad-based, it's not going there they're like, because all these start-ups, anything that could take on facebook or amazon or google, they're like, no, we don't want to back that. so, it's potentially stifling -- >> the luckiest roommate selection in the history of the world. >> speaks to the issue of -- it's probably the company that gets the least attention related to this, but in the news this morning, apple and the app store. tim cook saying yesterday, look, we are not a monopoly. you know, just because we have an app store on our phone, we're not a monopoly we're a small piece of this larger ecosystem. >> but the government then says, but you're charging 30% for others to be on your app

isn't that -- >> sure, but that's like telling best buy or walmart what to carry on their shelves and how much they can charge, right? >> no. you've got the other question, which is, here you are, you're a platform, and yet, you favor your own content goes the argument and that's the same argument against google >> in the market but selling that stuff in the market that you own. that's the elizabeth warren part -- >> that's the elizabeth warren argument i would argue that when you buy the phone, you know going in what the whole operation is because it's the hardware, it's the software it's like buying a membership to a club. >> you're mentioning all the winners. chris hughes, elizabeth warren. >> it's on the vendor side whether you're a vendor on amazon or apple, do you have any choice >> the question is, does the department of justice -- this goes to the abuse of power versus trying to help the consumer. >> is bernie next? bernie's next. >> but that's the issue. the issue is abuse of power versus -- or how that relates or interrelates to helping the consumer, right, in terms of the way to think about antitrust policy. >> and if you're getting free services, the argument is the

consumer's benefiting. >> right. >> but you know, if you take the extreme position, break them up, there are other things you could do with regulation that are not as extreme and don't involve the same kind of -- >> okay, so, what would ken auletta do and what would ked le do, if anything at all >> if you went back to when facebook bought whatsapp or instagram, the government today i believe would not have approved that, because they were basically buying potential competitors and putting them out of business. >> i think these agencies didn't realize what was actually happening. i think they didn't have the literacy to sort of -- >> can i make a suggestion and i don't know -- i'm going to put whatsapp in a different category when facebook bought instagram, people thought it was insane they were paying $1 billion for what was, i think -- >> a money-losing. >> -- 19 employees and a money-losing business. i don't think anybody with a crystal ball, except for mark zuckerberg, frankly, at that time, had any real inclination, whether you were a regulator or even somebody who lived on sand hill road and was supposed to be an expert, somehow knew

magically that instagram was going to turn into -- >> he didn't, but it was one of the best bets he ever made. >> and god bless him for that! but -- >> your point is that, while he's taking the risk as a businessman, why would you -- >> my point is, i think there's a lot of -- on instagram in particular, i think -- whatsapp was a much bigger business when it was purchased, but i think there's a lot of monday morning quarterbacking on the instagram purchase because i think nobody knew back then. >> 100%. you're absolutely right. and i think if you're buying into facebook right now, you're buying into instagram's value as much as anything else. at the same time, i think part of the problem agencies are having right now is defining monopolies, defining market dominance at a time when you could buy a start-up that has losing money, 19 employees for $1 billion. >> ken, do you think the law should change? >> which law >> antitrust laws in america. >> i think you base it on consumer harm, which is the argument over the last 30 years. it has to change it's different in europe >> great. >> you have to look at whether you have monopoly power. >> let's be europe

they have a lot of innovation. they should have never broken up at&t you know, that's when this all started, with the baby bells and all that stuff no maybe that was a good one. that seemed to work out, right do you remember? >> you talk about how you want competition -- >> no, i do, but i want the market forces. if you can definitely prove that market forces are being violated, then -- a lot of times they're not. >> i think it's how you define the market that's what's hard here and i think that's what ken's getting at as well. >> ed, we've argued, you don't want at&t to be able to charge for infrastructure that it builds out because, you know, two guys in their garage might not be able to get everything free you need to recoup your investments -- >> net neutrality? >> yeah, i'm talking about all this stuff two people you brought up are chris hughes and elizabeth warren i mean, you guys are outing yourselves from working down at that place -- what is that, 30th street >> oh, stop it, joseph. >> these actions are being brought by the trump administration. >> that's what i said earlier, that you need to grease both sides of the aisle -- >> this morning -- >> i'll wake you up. >> they put something in the

water fountains, joe >> you know. >> we're zapped, somehow. >> fluoride. fluoride >> what page did that come from? >> what page, please you've got -- >> white house -- >> they send the notes in the morning -- >> cnbc doesn't. i think "the new york times" might, though. >> let me point something out, yesterday what we saw with the nasdaq, which totally shocked me, because i thought monday we would start to see more pressure on the big stocks. the nasdaq monday was up 2.6%. these stocks were leading the way. we're up again this morning by another substantial amount in the futures. i thought that this would put a little bit of a chill on investors, but analysts we've been talking to say even if they break them up, both sides are going to be worth more is that the right way to look at this longer term >> but didn't the market jump up because of what the federal reserve chairman said? >> partly. art cashin says there were things happening there before that, but i would think if other parts of the market were advancing, there would be at least some hangover on these stocks maybe i'm just looking at it naively, or maybe this is a short-term versuslong-term play i don't know. >> maybe there's skepticism

about, you know, sort of agencies' efforts here, right? how much of this is a bit of grandstanding, a bit of just setting up for the next thing. and we're getting into an election year. i think these are great political talking points, but in terms of actual action, i don't know where that's going to shake out. i think that's probably what the market's reacting to i don't know if ken has a different -- >> i've always been skeptical using the market as a barometer of anything. i mean, there's a lot of irrationality there. >> you've got the fed. all right, andy, thank you edward, thank you. when you start calling me -- actually, the managing editor told me to start calling you andy whenever you call me joseph. >> when i call you joseph? >> yeah, whenever you call me joseph, i'm calling you andy. >> couldn't you call him jose? >> josie >> who's the manager >> i don't know, i was kidding i was kidding. >> i thought you knew something i did. >> exactly is it edwin or edward? >> it's edmond, actually. >> all right, edmond >> kenny boy >> thanks, ken

>> all right. >> thanks, ken thanks, ed that's good. all right, stocks to watch this morning campbell's soup reporting quarterly profit of 56 cents per share, beating the street's expectations by 9 cents. revenue also beat what the street was forecasting, and campbell's also raising its full-year earnings outlook that stock is up by 3.3% this morning. sales force is raising its profit outlook for the year after reporting better-than-expected first-quarter results. revenue was up 24% the company had previously pointed to strong demand in cloud computing and artificial intelligence, and that sock is up by 4% this morning. also, check out skyworks they're cutting revenue guidance for the third quarter because of the loss of sales from huawei. skyworks has supplied mobile and wireless infrastructure products to huawei and its affiliates those sales had accounted for about 12% of total revenue obviously, the street knew about a lot of this, because that stock's just down by about 13 cents. also, shares of gamestop have been under pressure this morning. first-quarter profit and revenue

was down same-store sales dropping more than 10%, missing forecasts. and they said that shoppers are buying fewer video games and consoles in stores gamestop also said that it is eliminating its quarterly dividend and that stock is down by almost a third. it's down by 29% this morning. when we come back, we've got much more on the market rally. plus, adp private payroll data will be in focus for investors this morning the numbers are just minutes away "squawbo wl rhtack x"ilbeig bk. johnson & johnson is a baby company.

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a market surprise, courtesy of the fed stocks turning in their second best day of the year after listening to jay powell. a first look at hiring in may. breaking adp jobs data out in just minutes and states of pain with growing talk of a possible recession, which states are well positioned for a downturn, and which might have to jack up tax rates? 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 -- i can't help it -- becky quick and andrew ross sorkin the futures right now are indicated up 155 points, and the nasdaq now indicated up 61 1/2, and the s&p indicated up just under 17 treasury yields have backed up a little bit, but if it was a month ago and we said we'd be at 2.11%, i think -- >> what? >> -- there'd be a lot of raised eyebrows for what's happening here. >> to be at 2.11% and to see the market went up 512 points yesterday -- >> but still down -- six straight weeks. >> a decline of 8% before the 2% gain. let's talk about some of the other stories investors are likely to be discussing today. as joe said, the futures are pointing higher this morning yesterday was the second best day of the year for the dow, the s&p, and the nasdaq, all of them rising more than 2%. in fact, the nasdaq was up by 2.6% the best day of the year, by the way, was january 4th

and remember, we were coming off those december 24th lows at that period so when you see big sell-offs is when you tend to see big pick-ups, and that's the same thing we've seen this time around the spike came after fed chair jay powell signaled in a speech that the central bank was open to easing monetary policy. powell said that the fed would do what it had to do to sustain the expansion. art cashin is pointing out that, look, a lot of these things were happening even before the fed got started, but certainly, the fed added some fuel to the fire with that and potentially some commentary coming out of mexico also helping things, where they said there was an 80% chance they think things will get settled without the tariffs being put on now, today there is a warning on president trump's plan to impose escalating tariffs on mexico, unless the country stems the flow of illegal immigration to the united states. in a new cnbc op ed, seven former u.s. ambassadors to mexico say that leaders should delink the issues of trade and immigration. they say higher tariffs will hurt u.s. consumers and weaken production chains in the two

countries that support millions of jobs on both sides of the border and to make calls for increased regulation of big tech, apple's ceo says his company is in the a monopoly tim cook disagreeing with calls from some politicians that the company should be broken up. >> i think that with -- but with size, i think scrutiny is fair i think we should be scrutinized. i don't think anybody reasonable's going to come to the conclusion that apple's a monopoly our share is much more modest. we don't have a dominant position in any market. >> so, you're saying you're not a monopoly >> we are not a monopoly >> on the subject of trade, cook says he isn't too worried about china tariffs on iphones and does not think that beijing will target his company >> okay. speaking of tariffs, they get a prominent mention in the earnings report out this morning from spirits producer brown-forman, saying sales of its jack daniel's brand negatively impacted by about one percentage point during the recent quarter, tu to tariffs overall. they reported a quarterly profit

of 30 cents per share, 3 cents above estimates, although revenue fell below street forecasts and that stock up marginally now. tuesday's market rally notwithstanding, there is growing talk a recession could be on the way. many states, though, aren't well prepared for a downturn. and you know one of the ones, the worst, becky, obviously. that could mean more tax hikes robert frank joins us now with the states that are on the edge. i know -- >> if you thought s.a.l.t. was bad, wait until a recession -- >> i did >> a report from moody's found that while most states are prepared for a recession, two of them would face a budget crisis and be forced to cut costs or, of course, raise taxes even more the report looked at how much revenue would likely drop in each state in a downturn and whether they had enough reserves to fill that gap now, even a mild turn could be as damaging to some states as the 2009 crisis. that's because states have

become more reliant on the personal income tax. the income tax is more reliant on the top 1%, and the incomes of the 1% are now by far the most volatile. now, they say that pennsylvania and new york are especially vulnerable to those big income drops at the top, but the biggest factor here is pension liabilities. that's why the two states least ready for recession are, you guessed it, illinois and new jersey now, the pension liabilities for illinois would be six times the total tax revenue in a downturn. new jersey's would be more than three times all their tax revenues, which means that if you're in those states -- and probably connecticut, too -- your taxes are going to go up for certain in the next recession. new illinois governor j.b. pritzker pushing to eliminate the state's flat tax with a progressive income tax that, of course, is when the wealthy pay a higher rate. and new jersey governor bill murphy still insisting on the millionaires' tax, which the legislature, of course, is fighting. >> he's ramping up the efforts,

murphy is, in terms of trying to force that through the legislature. >> it's his line in the sand he has basically said i am not negotiating, i am not signing, unless you give me this. >> and the tax on millionaires would go to 11%, is that -- or from 8% something to -- >> 8% to -- >> 8.5% or 8.6% -- >> anything over million -- >> anything over $1 million -- >> of income. >> that's correct. >> exactly it's almost like the federal government, where, i mean, fixed costs are certain -- people say cut spending, but that's only a small part of what you can deal with, with your fixed costs. >> right and if you look at california, they have that volatile income issue times ten of any state, but thanks to jerry brown, they now have a huge rainy day fund that they can basically withstand any recession. new york, new jersey, connecticut, have not done that. so, you couple that with the pension issues, and that's why illinois, new jersey top --

>> they had one, but it's gone. >> yes they really didn't take advantage -- i mean, at this point in the economic cycle, all these states, including new jersey and illinois, should be flush with cash, should have paid down a lot of these liabilities, and they just didn't do it. >> no political will for it. >> right. >> absolutely. >> we spend a lot on just state beauty, andrew, you know if you come -- you immediately can see it -- >> as you head down the turnpike >> yeah. he's made comments in the past about that, right? you're an anti-jurici tenk, right? >> no, i like all the states in america. >> let's talk more about the states being recession-ready and the prospects for higher taxes joining us now, former indiana governor and u.s. senator evan bayh, and former u.s. senator jim demint and i complain about a lot, when we set up debates, how it always seems we get a rhino with the dem. now i've got the opposite problem, i think, ryan you're like a dinosaur in that -- you don't recognize the party you used to be part of right now, i don't think

and jim demint, you are, i think, one of the persons that could get a job at a conservative think tank afterwards with no problem whatsoever evan, have you got an idea of what to do here for new jersey or illinois? >> well, i think you touched on it, joe, and i'm happy to report that becky's home state, where i had the privilege of being governor for eight years, we had a bipartisan consensus a lot like you just mentioned in california, where we got our spending in order. we put together a rainy day fund for when volatile revenues went down and so, we were prepared -- and we fund our pensions so, these are hard political choices, but it's not rocket science. those are the things you have to do, and it helps to do it on a bipartisan basis clearly, in illinois and new jersey, there's been -- that has not existed. >> senator demint, in your view, are you just going to tell me to cut spending >> well, i'm glad at least we're talking about state debt right now. i always talk about the $22

trillion federal debt, but states combined have $3 trillion in debt, and many of them have unfunded liabilities that are so large, they can't handle there are a lot of states, like evan bayh was just talking about, for his state when he was governor, that have dealt with the pension problem. they're getting ready for the future, not just for recession but we've got a large number of states with debt and pensions, and they're not dealing with it. in fact, a lot of states are adding to their pension benefits, and you've got states like california now where the average retired state worker is making 25% more than the average worker in california it's unsustainable we've got to cut spending. we've got to balance some more what the federal government does and what the state governments do, but we can't keep sweetening these pension pots in a way to buy votes from government workers, because a lot of us forget that the largest employers in most states are the state governments, and it's a

good way to buy votes to promise future pensions. >> senator demint, one of the points you make here -- okay, this is one of your comments, and i'll let governor, senator bayh respond to it "i would hope the states would learn from the example of president trump that tax cuts and deregulation are truly what boosts economic growth taxes only hurt it." would you mention kansas or how would you respond to that, evan >> well, it is true when you raise taxes, you make your state less competitive economically, and it's also true that in some states like your home state, joe, the most successful people will vote with their feet. you know, once their combined federal, state tax rates get above 50%, they'll look for alternative places to live i don't think the dramatic tax cuts in kansas weren't transformative, but here's what you've got to do when times are good, a lot of money tends to come in and the temptation, as jim was saying, was either to spend way too much or cut taxes way too

much the answer is all things in moderation so, keep the spending increases in check, put some away in the rainy day fund, and fully fund your pension so when tough times come along, you're prepared for that politically, the temptation is to just kind of let the party roll when times are good, and then you've got real bad choices to make when times are tough. >> evan, didn't you see hicken loper and that other guy out in california at that convention and they got booed right now you're getting booed all across dem land. didn't you see that? haven't you learned from that? >> ha ha well, joe, with all due respect to my friends out in california, the people who attended that convention may not represent all of america, for sure, may not represent even the majority of the democratic party that tends to be the furthest left element so, there are moderates in my party, and the general election will be decided by moderates and so, i hope as democrats, we keep that in mind. >> get ahead >> senator bayh, i have a quick question what concerns me is, it's clear

the federal government is not ready for recession, given the amount of debt and given that we just lowered taxes the states, what's interesting about this report is any even moderate downturn is going to feel like the last crisis because these states are now so dependent on the income tax, which is dependent on that 1%. but if we have a recession, so therefore, given those conditions, what's to say that states will not just continue what they've done, which is raise taxes, rather than cut costs? >> well, some might. and for those states, it will be more difficult going forward economically for example, illinois borders my state, and there are businesses that choose to locate in indiana because the tax rates and the regulatory environment are just so different so, you can do some of that, but you go too far, and it hurts your competitiveness and the most successful people leave, which then makes the problem even worse, so -- >> everyone was expecting with the s.a.l.t. change that these states would react by cutting costs. and in fact, the opposite happened >> well, you can do some in

cutting costs. and in fact, in indiana, we did that but when you look at most state budgets, it's either pension obligations, which it's difficult to get out of those legally, correctional costs -- well, we're not going to open the prisons and just let the inmates go -- and then education. the other two things are education -- it's tough to cut teacher spending, probably shouldn't do that -- and finally, health care costs and medicaid there is some waste you can wring out of the medicaid program, but those are poor people, so you can't just throw them in the streets, so your hands are tied that's why i come back to start a rainy day fund don't just let the party roll. when times are relatively good, start a rainy day fund so you have leeway when tough times come along to either not raise taxes or make draconian spending cuts it's hard to do politically, but you need to do it from a policy standpoint it's the right thing to do. >> senator demint, there were times when you actually worked with the other side of the aisle and actually, you know, in terms of policy, you know, you proposed a lot of things --

entrepreneurship, policy but could you function in the current environment in the senate right now or washington writ large right now i mean, i'll ask evan the same question later but what do you make of it i don't think anything's going to happen, at all, until 2020. >> i haven't seen it this divided. i mean, we had more folks like evan when i was there that you could at least talk to and work with a lot of the things i proposed, we had democrat co-sponsors. so, the environment is pretty poisonous right now, and a lot of it's performing to the base and i think i believe in open government, but i think a lot of the c-span and the coverage of the hearings has turned legislators into performers. but i think behind closed doors, we used to see more comradery between republicans and democrats. and from what i understand -- and i'm still working on the hill a lot -- it certainly is not as good as it was.

so, i worry for our country. i worry for our state right now. the issue we've been talking about this morning, i think it's going to be more than just a couple of states in a recession. i think we're going to have a large block of states who want to get bailed out by the federal government, because we can print money up here and the states can't do that. but you know, evan's got the right solution there states now are generally getting a lot of extra tax revenue the economy is good. they need to create a rainy day fund they need to solve their long-term pension plan and there's more that can be worked out at the state level now than we can work out at the federal level. >> you don't even have any gray, bayh i mean, why don't you come back or something would you? >> he's too smart for that, joe. >> no, i'm talking to you, senator. >> oh! >> yeah, you look like you're about 30 years old why don't you come back and try to fix things in the senate? >> well, i don't know if it's fixable right now. a lot of what we need to do is

just outside, what you do every day on the air we've got to get the american people engaged in what we're doing in a more positive way frankly, america's not nearly as divided as the politicians would have us believe. >> you're right. all right, thank you, senators, governor. >> thank you for that. in the meantime, we are just seconds away from the latest adp private payroll employment report futures are higher and we want to get to steve with the numbers. steve? >> 27,000. adp saying private payrolls in may rose by 27,000 that's compared to an estimate on the street for this number of 173,000. it is a sharp -- i don't know what you want to call it -- regression, reversion to the mean from the month of april -- 271,000 was that month that was revised down by 4,000 the good sector being the primary source of the weakness, down 43,000, but the service sector not doing its normal part of being the major source of a lot of jobs, up just 71,000. and all of this compares to a

private payroll estimate for may, which is for the friday report of 180,000. we will see, of course, if that number gets revised as the day goes by. the big weakness coming in small business, which -- have that next there yes, you do. down 52,000. again, that was up strong in the month of april medium business up just 11,000, also strong in april large business, up by 68,000 that one was kind of on the weak side in april. so, all of this -- a lot of this looking like a bounceback or a bouncedown from -- and looking at by sector, education, health services up pretty strong 35,000 leisure, hospitality also good, but it's manufacturing and construction where the weakness is now, if you look at a chart and you're driving in your car, what suv a 271,000 next to a 27,000 so that's like the equivalent -- if you want to think of it, like i don't know, shallots yeel o'neil standing next to danny

devito that's how you can picture it in your mind. and is it a change in trend? i'll show you the three-year average of adp, fallen from 216,000 to 153,000, that's the three-month average you're looking at that would be the data you're looking at there andrew >> okay. steve, stick around. joining us now for more on this number, the adp number, mark zandi, chief economist at moody's analytics, the man behind the number. tell us what it means and tell us what it means for friday. >> the economy's weakening gdp growth in q-2's tracking close to 1%, job growth is slowing. this overstates the case it's not slowing -- i think steve did a pretty good job. take last month, this month, take the average, it's about 150k that's probably where it will be up, around 150k. >> but you're saying this understates the case or overstates -- >> overstates -- last month as we discussed, it overstated the strength -- >> overstated the strength, now we're -- >> and this month overstates the weakness the reality is growth is slowing and it's slowing very sharply, yes.

>> maybe this is an unrelated question, but why are your numbers overstating things each time generally speaking >> we get the adp number based on 24 million employees. >> yes. >> we have a model we take the adp employment number, use other economic data, most notably unemployment insurance claims for the bls estimate the bls estimate is swung by the unemployment insurance claims. that dropped sharply last month and went back this month that's causing the numbers to swing. but the reality, the underlying trend is slowing the economy's growth rate is slowing significantly. >> what industries are getting hit the hardest? i mean, we hear all the time about capital expenditure not being put back in, but where are you actually seeing hiring start to slow? >> well, business capex is dead in the water it hasn't grown since the trade war began this time last year. and that's starting to show up in manufacturing so, manufacturing activity's weakening. you saw that in the adp number, manufacturing employment actually declined. and if you look at the bls manufacturing numbers, they've weakened very sharply.

so, last year we were creating, you know, 25 -- i'm making this up, so it's not exactly right, 25,000 a month in manufacturing. now we're down to zero. >> construction's a big deal, too, though. >> construction, yes, that has slowed, too, but -- >> guys, guys -- >> this is overstating the case. >> steve go ahead. >> just real quick, take a look at what's happening in the ten-year and the two-year. the fixed income -- >> ten-year's back below -- >> all declining in terms of yield. you've had a little bit of come-off in the market you know, what can i tell you? i think this makes fed rate cuts more likely. >> right the markets will be going up, steve -- >> what's that >> the markets should be adding another gain no, when it came out, i wondered, what does it do? >> joe, that's a great dilemma, right, which is when you look at the prescription that you're going to be given, you wonder, is it exactly commensurate with the illness that you'll have and i don't know that the market necessarily feels that either a weakening that's

unrelated to tariffs -- you have weakening anyway, right? then you have that on top of it. if a quarter or a half a point of fed rate hikes is enough. i've always maintained, joe, for i don't know, 20 years now, the market would prefer growth to fed rate cuts induced by weakness. >> but it's so warped that you wonder, like when you hear it -- it's down what, like maybe 40 points from the highs, and who knows once it opens up -- >> this does not reflect the trade war. that's not showing up in the employment data yet. >> what's it reflective of >> it depends. in the small business sector we saw weakness a lot of that's labor shortage they can't find workers. they've been jacking up wages, but they're losing out to the big guys who can, you know, they can't compete against the big guys retailing is getting crushed the brick-and-mortar retailers are getting crushed. and i think in manufacturing, that's the one place where you're seeing trade. but the real trade effects, they're just starting to come. they haven't -- we haven't seen the effects -- >> they'll hit small business more, too, right

>> they will they will. although multinationals are going to feel that, too. i mean, because they do a lot of business overseas, obviously so, the trade war's a big deal if the president ups the ante here on monday, this is going to be a big deal. it already is a big deal >> okay. mark zandi with the adp number we will see where things land, whether it's been overstated or understated, by friday thank you. >> we should point out, the dow is now indicated to open up by about 113 points we've seen it up by as much as 170. still triple-digit gains, even after the 500-plus points that it was up yesterday, but off the highs of the morning and as steve liesman pointed out, the ten-year has fallen below 2.1% for the yield when we come back, we've got your biggest stocks to watch this morning, including a big upgrade for a major pot producer the details are ahead.

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a few stocks on the move this morning american eagle outfitters reported quarterly profit of 24 cents a share. that was 3 cents better than the street was expecting the apparel retailer also said that comp-store sales jumped by 6% during the quarter. that's almost double the consensus estimates, and that stock is up by 6.6%. then there is cannabis

producer kroneos group which got a double upgrade at bank of america merrill lynch. they boosted the stock to buy from underperform, and that call was based on optimism about the canadian company's prospects in the u.s. market. that stock is up by 8.1%. coming up, a spring slump for crude, and energy industry plans in the second half of the year ceo of oil giant shell is going to join "squawk box" straight off the company's investor day to discuss their strategy, initiatives and a big-time shareholder return plan. share return plan. ay ted you're watching "squawk box" on cnbc there's one thing you can be sure of. they're changing by the nanosecond. that's why cognizant created a unique engineering approach to design and build new digital products. learn how cognizant softvision designs experiences and engineers outcomes. ♪ cool. ♪

welcome back to "squawk box. futures right now are under triple digits, finally 96 points after the weaker-than-expected adp employment numbers, 93.87. 27,000 they were looking for 170,000. last month was a shocker when it was up 270,000, and it was reflected in the actual numbers that came out. we don't know what this means for friday with the jobs number coming out. >> but i love this if the market was up by 500 points yesterday because jay powell said the fed would cut rates if the economy needs it, we're like, fantastic! then, wait a second, the economy may need it. oh, my gosh, there's a reason for the rate cuts, and the market's got to process that. >> too much of a reason, i think. but what, it's 828, so who knows by the end of the session. that was a big gain yesterday. >> look, 2.08% for the ten-year.

>> but nobody wants -- it was recession fears that really kind of scared us the first time around, and then, you know, we had the gdp print and some good jobs numbers on a couple of fridays, first fridays of the month. now we're back to where it is. a lot of people saying that maybe in the next 12 months, but some even saying highly likely in 2020 at some point. you're smiling because you're thinking -- >> i'm not smiling. >> you're thinking about the election. >> i'm not -- >> you're thinking if he doesn't have a strong economy, he's toast! >> i'm thinking about -- >> i'm thinking about what happens to all of these states if we go into economic downturn after robert frank's report. >> i'm thinking about american workers. >> well, you haven't been that excited recently about all of the great stuff that's happening. now you're thinking about them that's good, though. that's good. let me tell you what's going on down south. democratic presidential hopeful bernie sanders is going to be pressuring retail giant walmart to raise pay for its workers sanders plans to attend walmart's annual shareholder meeting today. likely to create a little bit of

feeder there, pushing for a $15, per-hour minimum wage. walmart currently has a minimum wage of $11 per hour, lower than rivals like amazon, target, and costco for its part, the retailer says it's hoping sanders uses the meeting as a constructive opportunity, rather than a campaign stop. >> i still think this is a crazy situation. walmart has raised its minimum wage by 50% over the last four years. they were the first of the big retailers to go ahead and do that, to initiate it, and they say that with benefits they're paying over $17 an hour. >> so, what's so interesting, though, the other thing i was going to add about this is a walmart employee named kat davis with the one responsible for this -- >> because bernie can't go because he's a shareholder. >> davis is an employee, not just a shareholder, an actual employee, and she's the one who's invited him to effectively speak on her behalf as her proxy. >> i think they also want to see employees being put on the board of walmart that's part of the push they're going with which is part of bernie sanders'

other part that dovetails with this, that he would like to see employees treated -- >> which follows a german model, in fact, because in germany, they have two different boards, and some of the boards include employees -- >> you're hanging on bernie sanders -- i think he's punched so far above his weight class. he's small -- you know, vermont. what goes on in vermont, besides ben & jerry's and some skiing? so, it's a small state he's an independent up there he honeymooned in the soviet union, and here he is a viable candidate for the highest office in the land? that's doing well. and i would let -- and he certainly uses it -- >> there have been some ads recently, i mean, some articles that have looked into him being a millionaire now, too. >> i think we need to play back -- >> which is what he argues against. >> -- next time he comes on. we do. >> we definitely don't have the rights to that >> we don't have the rights -- whatever music is left anymore, we definitely don't have the rights -- >> instead of that ridiculous rolling stones song that president trump plays -- >> the speeches of accusations -- >> what do you mean speeches >> it's just, it's -- >> i don't want to trigger you,

andy. >> it's political gobbledygook look -- >> all right. >> we had views over whether president trump was going to become the president i have no idea if bernie sanders, but -- >> you have no idea whether he can become president, really >> i have no idea. >> okay. >> did you have any idea that president trump -- >> yes, i thought he might i thought had a might. >> because he called in on the phone first. coming up, an interview with the head of one of the biggest oil companies. crude saw its highs of the year about six weeks ago but has been hit hard since then. we'll hear from the ceo of shell on where he sees prices going next and his company's latest strategy and consolidation in the industry, including a deal for anadarko ayun t"sawk.

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♪ welcome back to "squawk box" on cnbc. we're live at the nasdaq market site in times square a couple stories that investors are going to be talking about today. adp saying the u.s. economy created just 27,000 new

private-sector jobs last month that was substantially below the consensus forecast of 173,000. the report says that factors holding back job growth include labor shortages and layoffs at brick-and-mortar retailers also, another key economic report is about 90 minutes away right now. the institute for supply management coming out with its nonmanufacturing index that happens at 10:00 a.m. eastern time this morning. it's the measure of the u.s. services economy, expected to be down slightly. that compares to a month ago and many investors fled the stock market in may, the first losing month in 2019 for stocks. new figures showing that stock etfs saw a record $20 billion in outflows during the month. oil and gas giant shell wrapping up its investor day the company saying that it will return $125 billion to shareholders in the next five years, if oil prices stay firm let's find out how likely that is and what the ceo thinks about the recent occidental deal for anadarko he's with brian sullivan for a first on cnbc interview down at the new york stock exchange.

and brian, take it away. >> all right, becky. thank you very much. if oil prices stay firm, that's a big question mark right now. we're joined by ben van beurden, ceo of royal dutch shell ben, good to see you again. >> thanks. >> you're not an oil trader, but you've got iran sanctions, 2 million barrels exported off the market, venezuela, rolling disaster why is oil in the low 50s? >> well, you know, the oil market is a very difficult market to really penetrate there's so many moving parts to it, geopolitical parts as well what's happening with opec, what's happening with shell, what's happening with long-term projects, what's happening with demand, all of these things create a confusing picture for the market all the time. if you look at fundamentals, though, you would expect a slightly higher price than we are seeing today. >> in your base line, becky talked about billions being returned to shareholders your base line is 60. >> that's right. so, if you are in our business with the sort of volatility that you have to see -- >> you have to predict a little bit. >> well, you have to predict, but also you have to be conservative so, what we say, let's work with

$60 real terms flat all the way up to 25, and let's make our outlook on that basis. it's more likely going to be somewhat higher by that time, but at least we know we are going to be conservative with our outlook. at the same time, we run the company on a very conservative basis as well. debt levels, et cetera, et cetera and we basically sanction projects on the lowest possible break-even prices. and these are sensible things to do if you are in the commodity markets -- >> sounds a little bullish, though $60 is your conservative projection going forward. >> well, it is i think we will probably see in that period quite a bit of roller coaster effect still, and it may, you know, it may well be well below $60 or maybe down to $40, but i don't think it's going to stay there. at the same time, i also don't believe that oil will go back to $100 and stay there as well. >> anadarko being bought by occidental after being approached by chevron, but what many people may not know is that a lot of that anadarko property in the permian is a joint

venture with you guys. >> yeah. >> what happens to your acreage if and when occidental completes that deal for anadarko >> i think probably nothing much will change immediately on the ground indeed, we are in what we call an ami, so it is an area of mutual interest where we work together and you know, occi most likely then will step into the shoes of anadarko we know occi well. it's a good operator and we will have the same arrangements as we would have currently with anadarko going forward. probably a different level of sort of capital planning, different levels of collaboration, but we have to see how it plays out but fundamentally, nothing changes to the acreage. >> occidental bought anadarko in part because they're neighbors they talked about that, vicki hollub, they're neighbors. you're not just neighbors, you live in the same house why didn't you try to buy anadar anadarko >> we look at things all the time, but i make it clear that to make a deal, we had to be

very disciplined with our capital and said we will not spend more than $25 to $30 billion all the way up to 2020 and of course, this type of deal would not have fit in the capital budget so, you have to be disciplined we did our deal earlier in the cycle, and now we are still digesting that, and that's okay for me. >> you've heard of carl icahn, the billionaire investor he just sued, he thinks occidental overpaid. do you think they overpaid for anadarko >> i don't think that's for me to comment on. i do, by the way, recognize the feeling that we had, but a lot of shareholders examined it, said was it a wise move? in our case, it turned out to be a wise move, and i'm sure that occidental will go through the same scrutiny, but let me not comment on what other investors are saying. >> do you think it will set off a wave of m&a, or was that a one-off big deal >> i don't know, brian sometimes, people will expect that one of these will trigger a whole lot more i don't think really the industry works like that the industry, certainly after a

bit of a binge in the early 2000s, is very disciplined to look at what makes sense. >> a long hangover. >> still a hangover, yeah. >> let's talk about shareholders, because you're finishing up a $25 billion buyback next year. you announced yesterday $125 billion -- becky alluded to it when she came down to us -- that is going to be given back through buybacks or dividends, whatever, over the next number of years that's a lot of money. but yet, you and exxon and others are down. your stock is down over the past year you have all this good news -- increased free cash flow and all that money you're giving back -- and the market has not rewarded you. what are investors missing >> well, i think the sector is at this point in time still a little bit in the dog house. it will take some time before people sort of get their interest back into the sector and see it, indeed, as a great opportunity for growth in the future i think the story that we have, where we indeed are going to give back $125 billion, that's half the market capitalization of shell at the moment in the

period '21 to '25. at some point, fundamentals are going to reassert themselves and people will realize, if i get that type of yield on my investment, i'd better be part of the growth story that that will bring. >> but investors, to your point, using the earlier analogy, have been hung over they got burned in oil and gas and the industry has had a pretty much negative to flat net return for shareholders over the last decade. >> yaeah. >> why do you see that changing? >> i think because the industry has been changing as a result of debt i do believe that, indeed, since the, say the middle of this decade, discipline has really set in and of course, we had to but i think also you will have seen that the large players have really been very effective in sticking with that discipline. so, at some point in time, the hangover will be over. i think we're nearing the end of it and indeed, the prospects ahead of us will be more important than perhaps the hangover of the past. >> we'll find out. there's no pill for that

hangover, by the way ben van beurden, ceo of royal dutch shell here at the new york exchange, a real pleasure. thank you so much. >> thanks, brian. >> becky and joe, $125 billion, giving back half the market cap of the company over the next number of years, and we have not seen much of a reaction. time, i guess, will tell back to you. >> we'll watch we are seeing some reaction in the dow futures. we were only up 60 a little while ago. we're back up to almost 90 the fed fund futures are now implying for the june -- is it june >> june, it is >> fed fund futures now implying a 33% chance of the fed cutting interest rates at the upcoming june meeting, and that is -- >> wow that's unbelievable. >> it's up 10% in the last week, from the low 20s to now in the low 30s. >> when's the meeting? i've got it look that up are they talking in the next two weeks? >> today's like -- >> the fourth, right >> the fourth or the fifth anyway, and then charlie evans, who spoke to us yesterday, is talking, echoing a lot of the

things he told steve yesterday, but in light of the, maybe even -- you know, he probably saw that adp report. you know, adp, it's an important number, but it'd be nice to wait for friday i guess we can assume friday might be weak -- >> market never waits. you don't wait until you see the numbers. >> adp's been so wacky along the way, though, at different months, last month and -- who knows. coming up -- there we are, up about 93 points. and you know, if it's more likely they're going to cut, then i don't -- you know -- >> we were thrilled they were going to cut, but we don't want there to be a big downturn in the economy for them to cut, so the market wants it both ways. investors looking to capitalize on the market gains tuesday was the second best day in terms of points for the dow, s&p, and nasdaq. after the break, we're going to talk markets and get you ready for the trading day ahead. tedun "squawk box" is coming right back

hamilton, what is the best way for investors to hedge and mitigate losses in this market >> well, what we're seeing in this market is actually very normal every year there's some type of pullback the average is about a 14%

pullback and clients need to find a way to stay invested. getting invested and staying invested is very important. >> what about investors who want to buy on the dip and lock in gains when the market goes up? >> those market timing aspects actually degrade your performance. finding a way to stay invested throughout time is a good way to hit long-term investment goals. >> for investors who want the downside protection, should they hedge? >> when i think about hedging, it's about smoothing out the ride it's taking a portion of your existing equities and creating a smoother ride, or actually, hedging enables you to own more stocks. >> so, when you are evaluating assets, what are the key metrics that you are looking at these days >> given where fixed income is and relative to equities, you really can't afford to own fixed income you actually have to find a way to muster up the confidence and comfort of owning more stocks. >> great insights. thanks for helping us "solve it," hamilton.

all right, welcome back, everybody. futures coming off their session highs following the adp report that release saying that the economy only added 27,000 private sector jobs last month, significantly below estimates. the question is whether that is a harbinger of what's to come friday with the official jobs number from the labor department in fact, the adp number was the lowest number since 2010 yields this morning immediately came under pressure. the ten-year falling back below 2.1%, sitting right now at 2.093% the dow indicated to open up by about 94 points right now. remember, this comes after big gains yesterday with the dow up

more than 500 points joining us right now to talk about all of this is jim paulsen, chief investment strategist at the luleuthold grp and mike santelli, cnbc commentator. what do you read into the rally and the adp number today what matters >> the context for yesterday's rally matters a lot, which is the market was down a ton. dow down 1,800 points in six weeks means it's primed to kind of catch a spark, and i think that's what happened it made some use of that oversold condition the fact that yields went up was significant, right you had a relaxation of this buy bonds in a panicky way and sell stocks so, that reversal i think is positive you see a lot of the internal measures of yesterday's rally pretty much check off the box and say this was a pretty important little bounce, almost 90% of all volume and up, all that stuff however -- >> how about the reverse of the reversal with the bonds back -- >> that's the issue. so today you get these numbers from adp and the bond market kind of doesn't give you the green light for stocks

that's the way i would read it right now. and i think yesterday's comments by jay powell and the other fed officials were not that different, but the market was ready to hear what it wanted to hear because stocks were down a lot. and they're looking for that clearance. big question for me is, is a fed rate cut, if and when it comes, going to be an inoculation against something or the medicine to treat something? that's what the market's trying to can. >> jim, give us a little bit of a longer-term picture of what you think's really happening in the economy, in the markets, how you kind of mix it all up and what you think it means. >> you know, becky, i think fundamentally, the economy is not in that bad a shape. i think we're overblowing the negative impact of the trade war. i don't think it's been that impactual yet. it's have to go on for a long time to have big impact. global trade flows have been flat for more than a decade, and having them continue to be flat probably isn't that big a deal so, i think we're in decent shape. what i worry about, and what mike alludes to, is a fear

freeze here, is a financial market fear freeze, and i think the bigger issue facing the markets right now, which yesterday points out to me, is about the inversion of the yield curve and having free-market bond vigilantes pric the price of 10-year is so far below the rate other fed members signaling and reaction from the stock market is telling i think the fed needs to take out the inverted curb more than they need to address the fundamental fallout of the trade war. if they do that, under line economies are going to be okay and the stock market wis will d high the bigger fear factor could be to ceos and cfos, people making

decisions of how much money plowing back to business all of this uncertainty and fear factor could have an impact on the real economy eventually. >> it could. >> if it goes on long enough it is interesting, you look at consumer confidence report at the end of may and it is at a directive high consumer confidence in china reported in april, its high levels of recovery, the trade war had been going on since july '18 the ceo conference it is still pretty high and small business, spoi, i know they can deteriorate, if capital spending is going flat but it has not collapse if you look back at the 2015/16, major global manufacture slow down we had back then. it was much worst.

we had much deeper declines in commodity prices we had capital -- 10% or 15% where they are basically flat so far in the cycle i just think it is not nearly as bad as people think and the bigger issue is the fear of inverted curve i could be wrong >> it makes a lot of sense because the question is if the fed is also looking at those good consumer numbers and believes that the economy is doing fine, do they need to see erosion? >> they got the inflation side to consider. >> sure. >> what you said i was thinking about that, how patently nu nuts -- >> if you knew >> if i can choose to treat what i have, don't you wish we can

treat it >> it is not clinically tested 25 bases points in july. >> well, they tried. they think they are. they keep on pointing to the one or two examples that did work that way which was '95 and '98 we have as much inflation right now. >> it is not as if it collapses. >> jim, i think there is a difference between the tariffs with china and what would happen if we start to put tariffs on mexico and ratchet up 5%, what do you think >> this can have a negative impact i agree with that. i think it is a long time. i think leaving a long for a considerable period of time. you think of impact of tariffs of the inflationary transmission methodism of the united states,

it could not be a better time to have that. cpi and ppi and commodity prices have all come down we have global disinflation is a theme that's strong in the world and even the fed can't get its core pc measure up if you are going to have inflationary fallout for tariffs, it is probably the best time i am not sure that some prices will go up a lot, becky, consumers may stay in better tactic, i think. >> are you getting a lot of sleep last night you are in such a great move >> joe, the ice is out here in the lakes and temperatures and bugs are not quite out yet and minnesota twins are in the first place, i am feeling good >> it really is, it is all local. >> we are all happy. >> that's right.

>> thank you, mike we are going to another jim who also is half full. i mean it in a good way, jim let's get down to the new york stock exchange and jim cramer is joining us you may not be that optimistic of that adp number >> that may take you by surprise i don't know, when oil goes down, we are cheering for weaker numbers. we obviously want everybody in the country to get a job this may be more ammo for what jay powell needs to do i think very telling last night when i mark benioff, europe is much stronger for his words in the united states which is really saying something. >> i saw that. that's pretty interesting. so fed funds for june, 33% now

for this month for a cut, jim. >> wow >> we heard it is not going to happen but you thisty thnk it w not be a mistake to do it near term and maybe take back in december >> rate hike was ill-informed. you got to see more than one mo month of weakness. i do think a lot of our companies are vocalizing now that they'll get hurt this quarter from china and tariffs are hurting. i can't tell who's fake news the president is saying he got the gop on board or they're not on board for mexico. >> we live in interesting time, i guess you can say that almost everyday thanks jim, we'll see you in a couple of minutes on "squawk on the street." on friday, don't miss our

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quick final check on the

markets. dow is up 76 points, i say only because it comes down after the news of the adp employment report, it is lower than expected we'll see what it means through jobs number on friday. s&p 500 is looking to open 9 or 10 points higher make sure to join us tomorrow, "squawk on the street" begins right now. ♪ good wednesday morning, welcome to "squawk on the street," i am carl quintanilla with david faber and jim cramer coming up, the second biggest rally of the year. adp was a nasty downside surprise only 27,000 jobs added the president heads to ireland, two-year yield falls below