noah blackstein, anyone else lorne michaels "squawk box" begins right now. ♪ nothing is wrong just as long as you know some day i will ♪ >> live from new york, where business never sleeps this is "squawk box. >> good morning, everybody welcome to "squawk box" on cnbc. we are live from the nasdaq market site in times square. i'm becky quick with joe kernen, andrew is out today. our guest host is peter bookfarb, a cnbc contributor thank you for coming in. good to see you. >> thank you. >> let's get a look at the u.s. equity futures, you're seeing red arrows yesterday, the dow closed up by 100 points and it was this smallest gainer of the three major averages when you look at percentage terms the dow and s&p 500 up by

almost .4% the nasdaq up by a little more, i think up by more than half a percentage point right now on track for gains for the week with the red arrows we see this morning dow indicated down by 47 points. overnight in asia, you're going to see the nikkei was actually slightly higher, up by .4% but red arrows in the hang seng and shanghai composite, off by .6% shanghai composite down by 1%. europe, where there is trading taking place now, you'll see there are red arrows across the board. biggest decliner is the dax, down by .6%. united states, treasury market in focus, yields for the ten year are now sitting at 2.06%. so below the 2.1% we have been hoveri ining around for the las couple of days >> iran refuting u.s. claims it was responsible for the attacks on the two oil tankers in the

middle east. overnight, iran's foreign minister accused the u.s. of jumping to make allegations without a shred of factual or circumstantial evidence. the u.s. military released footage which showed iran's revolutionary guard removing an unexploded mine from the side of one of the tankers we'll have much more on the story later this hour. we have seen this enough in different situations where perpetrators, if they have an opportunity to say this is a false flag, they do it and people immediately believe and there is no way of knowing did you see how quickly -- remember when chemical weapons were used, they say the rebels are using it to pin the blame on us and you never know and it is always plausible i don't know whether this is any other bad actor ready to go over in that area of the strait of hormuz the most knee jerk and most

plausible reaction after the sanctions is that it is iran they can immediately stir up enough uncertainty by saying, no, no, no, someone else is doing this to make the united states not like us is there someone else ready to go >> he made the point that there is no one else >> that's what i mean. >> a plot that sophisticated yesterday, saying, yeah, why would they do it, makes no sense. >> if it you look at it, it was a japanese tanker struck while abe was there -- >> i wish i trusted all government after the last couple of years, i wish i could believe that the state or fbi or any of these places, now i don't -- >> this could have been ten people in a room planning an attack getting on boats having some weapons and who knows what was rogue, what was -- >> this video of them removing

unexploded mine, i think raises lots and lots of questions and lots of fingers are pointed back at iran. >> anything that we say, oh no, iran wouldn't do that? is there anything that we would say no, iran wouldn't do that? no that's all they do cause trouble, all over the world. they fund terrorists they're still a great satan for the united states, they want to obliterate israel, still talk about that is there any reason not to think it is them >> no. but the question is what do we do about it? >> if it keeps happening, there is something we're going to do. >> right that's the scenario, i guess you don't want to get into. >> in the past, they were talking about it on worldwide exchange, they had u.s. ships that have had to -- u.s. naval ships that had to escort tankers through, that happened during the iran/iraq wars in the '90s. >> you could see more of that again. yesterday, speaking with the ceo, 18% of the world's oil supply comes from the region and

has to go through the straits of hormuz in the meantime, red flags in china, the country's industrial output for may rose just 5%. that was well below forecast that was the weakest industrial growth in 17 years fixed asset investment also grew less than expected one bright spot, may retail sales in china rebounded from april's 16 year low. analysts cautioned the stronger numbers may be a result of higher inflation rather than turn around in consumer confidence the shanghai composite down by 1% shenzhen down by 1.8%. banks reopened in hong kong after they were forced to close this week during violent protests that took place there demonstrators clashed with police on wednesday over proposed extradition bill with mainland china activists say they're planning another mass rally on sunday stocks to watch, broad koco shares falling, lower, its

revenue guidance for the full year didn't really wake me up in the middle of the night that this happened this bothered cramer a lot like 3:00 a.m., already very worried about -- >> i think that's when he gets up. >> maybe when he gets up, but this was on his radar screen saying this could be -- worries on the broader market, the chip stocks the company plame eblamed the u.s./china trade war as reasons for cutting the revenue outlook. chipmakers down across the board. micron ceo said huawei ban creates uncertainty and turbulence for the chip industry european chipmakers also feeling the pain ecigarettemaker juul says new research shows it is less toxic than secondhand smoke from cigarettes small scale study paid for by

juul according to study, they found 99% less formaldehyde. this is one of many studies that juul commissioned as it prepares to apply for proval from the fda in 2022. i'm not sure anybody is surprised there is less formaldehyde than from regular secondhand cigarette smoke the difference is it safe for you? it is better for you, i'm sure, that be smoking a traditional cigarette, but it does come -- still nicotine ingested -- >> i don't know. when we had someone here that likes to do this, i just said, well, why? i get the delivery of nicotine where i want it to go without all the carcinogens. i go, but, yeah, why do you want to deliver nicotine into your t system anyway? i like the feeling of nicotine. >> anything you're injecting into your lungs, that's not the

best delivery system for something. you can chew the nicotine gum. >> it is a stimulant. >> it is yeah i was looking at other facts on it, ecigarettes and other vaping devices aren't risk free, they can cause damage to the brain, the heart, the lungs >> we're not born craving nicotine >> i can say the same thing coffee >> i understand. >> injecting anything into your lungs is not a good idea. >> we're not born jonesing for caffeine either. >> and white wine. >> i have a nice margarita once in a while or some chardonnay. only a couple. squawk sports, want to talk about this do we congratulate all canadians? neil young mike myers, way to go.

alex trebek. >> rooting for the raptors said all of canada is rooting for the raptors. >> anybody who is canadian, the toronto raptors bringing home the first title in nba franchise history. warriors kept it close, even though kevin durant until the end, sad story overall, single point behind with ten seconds left steph curry missed a three-point attempt. final nail on the coffin raptors won 114-110. the first nba title since joining the league in 1995 we'll be playing music by canadian artists in this hour in honor of the win if we don't have any neil young, don't even -- >> shania twain. >> what about -- >> celine dion. >> celine. >> alanis morissette >> justin bieber. >> that's not an excuse to play -- >> celine. >> alanis morissette, the

anniversary, carl was tweeted about "jagged little pill". >> i think all neil young and don't go anywhere past that. a big week for ippos what is one more on the schedule for today? we'll get you ready for chewy. "star wars" theme d ipo right after the break. here is a look at -- just passed, here is a look at the biggest premarket winners in the dow. [leaf blower] you should be mad at leaf blowers. [beep] you should be mad your neighbor always wants to hang out.

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pricing at $22 a share at $22, the offering is expected to raise just over $1 billion, giving the whole company evaluation of $8.8 billion that stock lists on the nyse today under the ticker chwy. next guest took his equity rating down to market weight in late march but says he would consider raising it based on trade progress in the meantime, he sees pockets of opportunities for investors john lynch, chief investment strategist at lpl financial. guest host peter bookfarb, cnbc contributor. the question, john, i guess people could have essentially gone to cash in january of 2018, you decided in march at this point, on a scale of 1 to 10, how fully invested are

you? at a 5, 2, 6 >> good morning, joe good morning, petter, hope you both are well. we went to market weight on our balanced accounts late march after the fed meeting. call it 60% equity. a little concerned in late march, you may remember, that it was kind of buy the rumor, sell the news going na the fed meeting. market sold off. that thursday we're up 1.5, 2%, i don't like a market giddy over free money we decided to pull back a little bit. may have been a month too early given the strength we saw in april. yet again the may performance justified our actions. >> i know how you operate. you need to be in the stock market obviously 5% is reflective of your concern about the trade war. not like you sold everything

at this point, have you seen evidence in the numbers that this is -- that the tariffs are having a major effect or just a psychological effect still we're not necessarily seeing it in inflation numbers yet maybe seeing it in the jobs numbers. i don't know those are backward looking and could be something else other than trade have you seen the effect of the tariffs yet? >> it is not inflationary yet as we have all seen in the data i do think we should look at business investment. we have a couple of -- a tug of war go on. saw the first half of 2018, businesses took advantage of tax cuts, reduced regulation, we had a big boom in capital investment, which paid a dividend in the year of year productivity growth in the first quarter of this year yet second half of last year, businesses pulled back on capital investment so to the degree that we saw a

boom if you will, in productivity, i think investors will be disappointed in the second and third quarter of this year there is some degree of sentiment, some degree of hesitation to keep spending at the rate businesses spend at the beginning of 2018. >> for centuries, china -- i don't know how we can possibly be expected as over here in the investment business to know what the prospects are for some type of deal and then you have mercurial president and two of them, but ours maybe more mercurial than president xi. how can you base investment decisions on the likelihood of us getting a deal? do you know anything more than a guess of whether this actually happens. it looks like as president trump said, it is testy now. things have not gone well for the past six weeks in -- >> that's been terribly unfortunate for everyone but what we try to focus on is

the fundamentals, you have to focus on the hand you're dealt we look at first quarter profits that came in 400 basis points, better than expected when we see unemployment claims trending near 50 year lows, when we still see the incentives for business investment, think about government having regulation, taxes, spending, tailwinds, antitrust and technology or tariffs becoming overwhelming to the other benefits, now we're transitioning back to the fed. i'm not necessarily comfortable with the market that is just going to be giddy about liquidity. i think if you focus on historically average profit growth, 2% yield, diverse fiifi portfolio, we think we can help. >> what is considered very aggressive, what is considered very conservative? >> we have five different

investment objectives. aggressive portfolio would be 80%. >> and conservative would be how low? >> i'm sorry >> how conservative -- how low would that be if you were very bearish? >> on the most conservative investment objective 40 or 45% some equity exposure for long-term investing. >> have you taken a crash course in chinese-american relations? >> i have. and i was there a couple of years ago. >> you were there? i'm afraid to go. >> i was there and it is very important that we get along. >> afraid to go to hong kong, they'll extradite. >> crimes against humanity. >> someone had to resign from a position, made some reference to livestock or something did you see that it turned into a huge -- china can't complain

when we -- when was that, we had annan and tom friedman on and it was our interview and next day chinese government responded to the comments that bannon i think -- or pompeo i think too on the show. so they know, they hear us, they may not -- >> they shut us off. >> might not broadcast us. >> three times >> your hotel room would be bugged. >> you think >> can't take your phone >> bedbugs or worse? what's worse i would rather have the microphone than the bedbugs. >> that's true, yeah not going to get anything. >> john, no association with merrill lynch, i guess you wish >> that's right. >> john lynch, and pete r, my view of the world for the next

three hours. >> when we return, 600 companies send a letter to president trump about the tariffs. the ceo of one major company taking a different route we'll explain next

time for the executive edge. more than 600 u.s. companies sending a letter to president trump urging him to resolve trade tensions with china. walmart, target, macy's and

costco among the companies that actually signed the letter they say they're concerned about tit for tat tariffs and say that tariffs are not an effective tool to change china's unfair trade practices. apple ceo tim cook did not sign the letter president trump met with cook yesterday to discuss trade and other hot button issues. that meeting was disclosed by ivanka trump during an event with governors about skills development. no additional details were made public massachusetts senator and democratic presidential candidate elizabeth warren introducing new legislation to tackle the student debt crisis warren's planning to introduce bail that would eliminate up to $50,000 in student loan debt for 42 million americans that would wipe out most of the country's outstanding student loan debt. the plan would be funded with a tax on exceeding 50

million dollars. >> annually occurring wealth taxes. something. >> by the way, yesterday said only 27% of american voters were opposed to this idea >> people that paid for school and worked hard, do they get 50 grand back >> brian sullivan brought up a good point, what about the guy who just paid off his last tuition loan payment >> the kids who work through college? >> what does that do -- we have been talking about how colleges need to rein in costs and find ways to bring it down. if you have loans being forgiven, will that address it what if she doesn't raise as much money as she thinks. >> you nitpickers, you know, you -- everybody is feeling really good about this enyand y got to throw this into it. coming up, the battle over sony we'll show you the latest move by activist dan lobe get ready for chewy's first trade. what you need to know about the

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♪ i was like baby, baby, baby oh, like, baby, baby, baby ♪ welcome back you're watching "squawk box" live from the nasdaq market site in times square. >> all right >> good morning, again, everybody. >> wish golden state would have won. >> i think you're ready for friday i'm in love >> we have no joni mitchell? >> purged from -- >> as much justin bieber as you want >> neil young. >> i'm taking tom cruise he hangs on the side of an

airplane, you know, going -- does all the stunts. >> in the fight? bieber took it back. he said never mind he doesn't know him. didn't meet him. >> he's got an album coming out. total publicity stupt. >> yhe said now he doesn't want to fight him u.s. equity futures on this friday morning, you'll see red arrows s&p down by about 11.5 nasdaq off by 64 points. this all comes after gains for the markets yesterday. dow up by 100 points nasdaq up slightly more on a percentage basis for the week, we had been looking to still look at a bit of a gain. that was before we had seen another step down in the futures. look to see where that stands. dan lobe is once again taking aim at sony. third point calling on the company to spin off the chip business and sell off stakes in sony financial and other units to focus on entertainment. in a letter to investors, sony

shares rising 3% in japan, five or six years after the last time third point went after this. shares of blue apron under pressure today board approved 1 for 15 reverse stock split effective after the market closed today. they announced the split last month with the goal of raising the price of the common stock in trying to improve liquidity, shares now are down another 7.5% at 60 cents. >> chewy.com, latest company getting in on the ipo rush leslie picker joins with more on the pricing. >> youy prichewy pricing at $22e at the $22 price tag, chewy raises $123 million to invest in its business while parent company pet smart generates $902 million from the

ipo. pet smart acquired chewy just two years ago and chewy is debuting at nearly triple the valuation it received back in 2017 it is not chewy's $270 million in net losses that investors are focused on, the fact that consumers spend a lot of money on their pets and chewy has been a big beneficiary of that, despite hefty competition from amazon and others. set to begin trading later this morning. we'll see where it stakz cks up among the high flying ipos of the year fiverr up 90%. crowd strike was another, up 16% on top of wednesday's 71% gains. we have seen 13 ipos jump more than 50% on the first days of trading this year. >> yesterday i asked chewy.com, what is the difference between

that and pets.com. they said now people are buying things on the internet there is more competition on the internet too you look at amazon and walmart and all the offerings they have. the revenue has been growing what does the company say in terms of a moat that would keep it from being cannibalized by somebody else? >> key part of the risk factors is competition amazon starting in may 2018 started to make a big push into the pet space. anytime amazon gets into your space, that's a big concern for any type of competitor they can be more competitive when it comes to pricing they have been getting more into private label brands, so far only 5% of their revenue meaning chewy is the one creating the products under their own brand names. they're hoping to grow that more, so it could create more of a moat if people become more stst sticky with the brands they're creating >> is it because it is a great market or because they're

worried about the door slamming shut at some point >> i think it is the latter. there is a window of opportunity that is maybe uber and lyft began to open up might as well take advantage if you're the private equity funds or pet smarts needed to lower debt by doing this, they have been sitting with these stakes for ten plus years. to add to becky's question, has chewy laid out any estimates on when they become profitable in. >> they haven't publicly they may have said so in the road show. they have not said when they can become profitable. but if you look at their income statements, it is clear that the net losses are usurped by advertising and marketing expenses it is easy to pull back on it. i think you bring up a good point in something investors should be focused on the bulk of the proceeds from the ipo is going to pet smart, used to pay off debt not going to the business, only 100 million of the billion dollar offering is going to

chewy.com, specifically to invest in a business and grow the business, which is more common what you see with the unicorns, where they use the proceeds to become more competitive. this one is going to their parent company pet smart, even had they upsize the deal the extra 5 million shares were sold by pet smart. >> thanks, leslie. >> when we come back, the paris air show kicks off on monday will it help boeing jump start the modest aircraft order so far this year? we have a report covering that next we're also keeping an eye on chip stocks this morning after broadcom lowered the full year guidance and blamed it on a lot of different things happening with china now the shares are down pretty sharply in the premarket trading. other chips also following it. you see broadcom down by 8.7%. qualcomm and many others down by 3% "squawk box" will be right back.

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forever ♪ paris air show about to take off. phil lebeau will be headed there. first, he joins us with a preview. what can you tell us >> this is a show that will have a different tenor in tone than past shows because there is three things that people will be looking at and one of those will dominate the conversation. we're talking about the boeing 737 max. this will be what a lot of people are focused on at the show biggest story in aviation over the last six months. you got airbus at the show, expected to laufnch the a-321. think about a larger, greater range, narrow body airplane. that will get attention. there will be fewer orders announced. this is the estimate coming from abi group in terms of the number of orders. the fewest are expected since 2016and basically about half o what we saw last year at the farnborough air show these guys used to trade almost

exactly in tandem. back to march where the grounding of the 737 max happened, ever since then, airbus moved in a different direction than boeing. those shares now up 16% over the last year compared to boeing those shares are down 4% compared to last year. also the aircraft leasing companies, they will be in focus over there they usually place the largest orders early on in the show. we'll see some of those. we're not going to see the number or the volume in terms of orders that we have seen in past years. guys back to you. >> phil, thank you very much joining us now to talk about what the air show means for boeing is ron epstein, research analyst at bank of america ron, you're getting ready to go it paris yourself. >> i am. yeah, we'll be going over there saturday night we got scheduled 34 meetings >> the number of expected orders counsel pretty significantly as phil pointed out, why is that? is that boeing alone or more that is happening? >> two factors the wide body market pretty slow

for a couple of years, 777, 350, a-330, the 737 it is hard to imagine that anybody is going to be ordering 737s in an environment where aircraft is grounded. >> in terms of stock performance of boeing and airbus, you think it is warranted to see that kind of a big differential between the two? >> sure. the 737 issue has kind of slowly ballooned out. when it first happened, this will be cleared up in a matter of weeks then a month or two, then aircraft grounded for four months and still don't have resolution american airlines just pushed out their entry into the service. we're modeling in our financial models, six to nine month window six months -- >> don't expect it before december >> it could go as far as december the question is two fold

what did the international regulators do? >> they followed the faa -- >> did they follow the faa and the issues on the table for yasa are two fold. one, they said they want to review the entire flight control system of the airplane two, are they going to need another sensor right now, the design is based on -- one sensors, now two sensors, now yasa maybe we need a third sensor that's what airbus uses on their aircraft, three sensors. >> how big of a problem is that? >> it is plumbing. it is hardware it is doable but that would take some time. and it gets complicated. you have part of the fleet that would have it and wouldn't have it and retro fitted on the fleet. >> you cover utx and raytheon. >> yes. >> what happened what happened the last couple of days what is going on behind the scenes >> initially there was an

investor shock nobody saw that one coming and i think on the united technology side, it was, wow, this made a story somewhat complicated because of the spins. even more complicated because you got to spin and a merge. that community started to understand the benefits from it. on the raytheon side, hadn't talked about doing any major m&a and changes raytheon from all defense play to a -- >> why the stocks both sell off in the last couple of days >> yeah. >> he likes competition. >> yeah. >> so to be clear, right, so will it go through my guess is it probably will very little overlap. you think about it from a competition point of view, it is hard to see how it changes the competitive environment other than giving the combined entity a strong balance. >> ackman and lobe don't like it does that matter >> i think one of them mentioned

that raytheon was somehow inferior asset in my view, that's ridiculous. if you compare raytheon to carrier, for carrier, it is an air conditioning company. >> owned united technologies, doesn't own raytheon. >> yeah. >> he likes it but just talking -- >> yeah. >> you think that rickie fowler fades immediately after the first round or think he can do it this time or do you think brooks koepka is too good or is tiger -- tiger is only a couple of strokes back. justin rose, one of the nicest -- you have a pick? >> tiger momentum. >> you're talking tiger? >> i'm talking tiger. >> not brooks. he's unbelievable. he's a brute all right. all right, ron ron likes tiger. i love tiger coming up, we have -- not all of

this game -- >> 2000 game. >> masters we'll see. we have new video, yes, i said that to get him. if he's watching, he'll say, really, i don't have my a-game, you watch. new video from this week's big story, the alleged attack of two tankers in the gulf of oman. u.s. navy releasing video it says, shows iran is to blame we have more next. as we head to break, a quick check of what's happening in the european markets get a message to him thrgh vid.ou ♪ i know how difficult it can be to find the right father's day gift. but you can't go wrong at dick's sporting goods. we have gifts for every dad. if he's into boats, bikes, or camping there's plenty to choose from, including yeti. and if he likes golf he'll love the latest drivers from callaway and taylormade. plus we've got a great new selection of footwear to fit any runner and every athlete. so make it a day he'll remember with the perfect father's day gift from dick's sporting goods. if you can't get to a store, shop us online

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iran is refuting u.s. claims that it was responsible for the attacks on two oil tankers in the middle east.

brian sullivan joins us now with more i've heard the false flag stuff, brian. i'm just wondering, who would we think would want to tarnish the good reputation -- the reputation iran has as a good actor in the middle east, that we've just seen so often who would want to tarnish that reputation and be responsible for it i guess they claim the united states did it, or israel, right? it's great to claim a false flag is there really any chance it was somebody else, just stirring up trouble >> well, joe, there's video. in this day in age, there's always video i didn't do that well, here's the video i mean, it's grainy, it's black apd white video from the united states navy central command, joe, but it's pretty obviously -- if they're not removing something, either a mine from the water or from the ship, the question that iran needs to answer is what is their navy boat doing? >> maybe they're removing the mine someone else put in there they're trying -- oh, no, look there's a mine >> and maybe they are, but you ask yourself, what country has

mines, okay? the houthi rebels in yemen who have been stirring up problems -- in fact, there was a -- unfortunately didn't get much attention -- a missile attack on an airport in saudi arabia -- a silvan airport yesterday. 26 people were injured a missile went into their equivalent of a small regional airport in saudi arabia. that was blamed on yemen, but yemen as far as we know doesn't have mines so, it's got to be somebody that has this capability. obviously, there's an iranian fast boat, basically their version of a navy, joe so, i guess the question for iran would be, what were you doing? and let's not forget this, that a few days ago, the iranian foreign minister told his german counterpart at a conference that a country -- meaning the u.s. -- who wages economic war, cannot expect to remain safe. so, a bit of a veiled threat there. again, we don't know iran denies it, joe. but i think your point is well taken. >> and a month ago, i don't

know, maybe it was two months -- time goes so quickly -- but we got -- there were is some hostilities between the united states and iran, and it looked like they were getting kind of serious, and then we stepped back, at least we did. they don't want anything -- now they're doing this again, theoretically. what's it heading to, brian? >> so, that's a good question. listen, a month ago, you had the attacks on four ships. they were minor attacks. you wonder if whoever did this, iran or otherwise, said okay, you didn't care a month ago, we're going to step up the attacks. they didn't sink the ships one is close to sinking, the "front altair," the bigger of the two, but the date to keep in mind is july 7th, because that is the day that iran has given to the european union a 60-day extension to try to come up with a solution to get around the sanctions. they want europe to figure out a way where they can sell their oil to europe and get around u.s. sanctions >> all right let's get to our guest stay tuned

let's find out joining us now to discuss the rising tensions with iran and the implications, kareem saj apoor with the endowment for international peace. that is what we talked about, i guess, and that's oil, not necessarily world war iii, kareem, but what's going on? >> well, i think in washington you have a trump administration which i would argue has divergent end games with regards to iran. president trump clearly doesn't want any conflict in the middle east he doesn't want regime change. he essentially wants a deal with iran, or at least a big summit with iran. trump's national security adviser, john bolton, i think, is on the totally opposite page. he's long advocated for military strikes and regime change in iran then you have secretary of state pompeo, who is in between them trying to reconcile these competing impulses, and his focus is basically, let's just focus on the means, which is economic pressure to bring iran to the negotiating table i think the iranians in response to this maximum pressure

campaign feel obliged to respond because they otherwise will project weakness and i think the parameters in which iran's supreme leader is operating is on one hand, if he doesn't do anything, if he doesn't respond at all to maximum pressure, as i said, he looks weak, he loses face. if he responds excessively, he risks losing his head. and so, that's why you see iran, whenever they're counterescalating, they do it via proxy, and they don't go oftentimes after u.s. assets in this case, they went after a japanese tanker. they want to try to maintain plausible deniability. >> i just wonder if the world would be a better place if not -- all i hear about are people losing face and every decision we make -- the trade talks -- it's all losing face here, losing face there. if people would just stop worrying about losing face, maybe we'd get somewhere i mean, we don't want this to really start spiraling because of posturing on either side, do we and don't cooler heads

eventually, they're expected to prevail, karim i mean, isn't the economy tough enough in iran right now >> they're in a terrible economic state, iran and you know, this is a country which at one point was exporting several million barrels a day. it's down to 400,000 or 500,000 barrels a day. when i talk to people in iran, they say it's never been worse they're enduring terrible economic consequences. i think you're right, that both president trump and the leadership in iran want to avoid conflict, but at the same time, i think both is waiting for the other side to concede and to de-escalate. and there's both incredible mutual mistrust between the two sides, and at the same time, in the court of international public opinion, both the trump administration and the iranian regime lack credibility. so, when the world is looking at these incidents, they don't know

what to believe, because they think that the trump administration doesn't have a great track record, but, of course, very few countries around the world have good relations with iran or believe iran. >> right all right, karim may need to talk to you again, hopefully not, but maybe next week, depending on what we see transpire, but we appreciate your analysis today, karim >> thank you. >> thanks. when we return, we get three big ideas from sarat sethi, why he sees value in the financials right now. and later, morgan stanley upgrading disney dehel hear from the analyst who ma t call. we'll be back in two minutes ♪

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pointing fingers, the u.s. blaming iran for yesterday's twin tanker attacks. new video this morning, and details are coming up. a trade war triple threat. walmart, target, and more than 600 other u.s. companies are now urging president trump to resolve trade issues with china. they claim tariffs hurt businesses and consumers a sector outlook is straight ahead. plus, can disney take down netflix? the latest on yesterday's big call from wall street and what one former disney ceo is saying about competition heating up, as the second hour of "squawk box" begins right now ♪ ♪ when it gets too much, i need to feel your touch ♪ >> announcer: live from the beating heart of business, new york, this is "squawk box.

good morning, and welcome back to "squawk box" here on cn cnbc i'm joe kernen along with becky quick. andrew's out today with us today, peter boockvar, cio of bleakley advisory group and moreimportantly, a cnbc contributor, obviously, to his self-image and stature in the community. u.s. equity futures at this hour are indicated lower. we've seen 80, we've seen 40 we're now down about 66. broadcom had some weak results, so technology and chips are a little weaker today. the nasdaq is down 54, and the s&p is down 8 and change. iran is refuting u.s. claims that it was responsible for the attacks on two oil tankers in the middle east yesterday. overnight, iran's foreign minister accused the u.s. of jumping to make allegations without what they said was a shred of factual or circumstantial evidence. the u.s. military, however,

released footage yesterday that it said showed iran's revolutionary guard removing an unexploded mine from the side of one of the tankers we'll have more on this story later this hour. here's what's making headlines, other headlines at this hour. the government's set to release its may retail sales report in about 00 minutes it's expected to show that retail sales jumped 0.6% last month following a decline of 0.2% in april. in the past, this number's been kind of volatile and surprising, so it should be something that you should tune in for, if you are in the markets or just interested in, you know, the recent conjecture about the strength of the economy. pet product seller chewy is set to make its wall street debut this morning the initial public offering was priced at $22 a share, above the expected range parent company petsmart will receive almost $900 million from the sale of the shares. and facebook has reportedly won significant backing for a new cryptocurrency the "wall street journal" reports that more than a dozen companies, including visa, mastercard, and paypal, have

signed agreements with facebook for a currency that will be unveiled next week and launched next year. those companies will each invest around $10 million in a consortium that will govern the new cryptocurrency. >> so, if you thought they were worried about government oversight or attracting attention, maybe not so much. >> the way you should do it. >> right. >> keep doing what you've got to do our next guest is focusing on three major areas that may be good picks for investors joining us right now is sirat sethi, equity analyst at douglas c. lane and associates our guest host is peter boockvar with bleakley advise rye group sirat, you still like the market, even though we've come back a long way from the declines last month. >> i do. i like pockets of the market i think the market itself is now fairly valued, so you have to be specific as to where you want to go, but having said that, there's going to be a lot more volatility we know that interest rates potentially might move we know the administration is looking to put more tariffs on, given that, and we've seen the story, especially in the last six months i think if you focus on some areas that are undervalued,

especially in terms of price to earnings and potential growth, so building home products, they do well in lower interest rate environment. >> why >> because the consumer then has more access to capital, will put more money into their home, especially as housing prices have moderated now consumers now will want to put more into their home so that if they sell, they'll get a higher appreciation for that. so kitchen cabinets, flooring. these companies are trading at 14 times earnings, really strong balance sheets, and really looking to kind of the consumer to go forward, especially with a full employment. >> that means you don't think a recession is on the horizon? >> i don't think we're going to get -- if we get a slowdown, but i don't think it's a serious recession, and i do think at that point the consumer will focus more on their home and say, look, i'm going to enjoy the experience of putting more things into my house than i think there. the other areas that i think that we like are companies like disney and interactive again, interactive is tinder, match. that has secular growth going forward, really not specific to

how the economy is going to do by itself. i think disney is a special story. they're really focused now on getting into kind of the direct consumer business and also into the amusement park and the other part so they have a great mote around their business you know, it's been a few years that disney's been a dead stock, but i think management has reinvigorated the company. >> because of their new plans with the ott >> i think that's the other part of it. people forget the other part, the marvel, the amusement parks, the whole branding that they have and if you think of disney, every eight years, they don't need to recreate their company their company already has content that has been created and money put into. >> for a long time, it was espn that was really dragging things down tell us about what happened. >> there was a couple years where the stock multiple came down because espn was bleeding now espn has steadied. what they've done is segmented espn, they've segmented all their content, and kind of looked at it as, hey, listen, you can have a different menu and price point is much cheaper

than kind of some of their competitors. so, you've got a company that's positive cash flow, growing earnings in a secular growth area where, yes, the economy could slow, but you're still going to get margin improvement. >> what about iac? i mean, is that a play on experiences, on love is in the air, millennials, everybody using the internet for all these things >> absolutely, it's a combination of all those three if you look at the assets of that company, they're worth much more than the stock is if you take out match and you take tinder, which is growing, and you take out venmo, which they also have, those assets are much bigger than kind of iac's whole thing. so if you look at the market and you say, where do you want to be, look at specific stocks. at this point, if the market comes back as a whole, you've got some areas that you can buy in terms of great blue chips, but these are great companies i like right now. >> why is iac down what's the market disagree with you on this? >> well, iac's up over the last 12 months -- >> why do you think it's not fully valued as to where you think it should be

>> because if you look at iac, match is trading separately, so that's why you've got kind of a discount -- >> but the street hasn't figured this out this is still a secret >> it always gives it a discount until maybe they spin the whole thing out. and then really, tinder hasn't gotten the full value as well, and there are other pieces of iac. but if you look at it as a sum of the parts, it's worth at least 30% to 40% more than they're currently trading -- >> they're inviting an activist at some point to realize that value? >> i think at some point they'll spin it out and focus on the other assets they have that's kind of been the history of the barry diller companies going forward, but the secular growth in this company is so far above the regular market growth that i think there's an opportunity here to buy something here on the cheap, regardless of kind of what the economy -- people are still going to be dating they're still going to be looking for that experience. maybe they'll do more of it if the economy goes slower. >> what about financials we've been hearing for so long that the financials are the place to be from a lot of people. >> so, i look at it as kind of the bar bell you've got the growth secular stories and then the value

stories. we've been owning financials for three years. they haven't helped us they haven't hurt us too badly, either but you're getting multiple compression. look at the big banks like a jpmorgan, bank of america, even morgan stanley balance sheets are really strong dividends are going to grow double digits for the next couple years and really, at some point i think the value's going to accrete to these stocks. i don't know when -- >> i was going to say, again, why has the market not figured this out yet because it seems like a smart play intelligent people have been telling me this for several years and it hasn't caught on yet. >> because you haven't seen that, quote, secular growth we have seen the last few years, the faang stocks -- hey, what's sexy i need to be in amazon and salesforce and workday and all of these other stocks. >> the yield curve has disappeared. i mean, i look at what the ecb and the boj have done to their banks. the topix index is down from 30 years ago. from a value perspective, i agree, but i'm just worried that they're going to get stuck in the same sort of profitability situation where there is none

because of what the central bank has done to the yield curve. >> and that is a real fear, right? the fear -- at least in europe, of negative interest rates that really hurts the banks. i think here right now, our yield curve's flat, kind of inverting at this point, so you have to look at the banks to say, where else can you make money in our business? so, a jpmorgan or morgan stanley, two of the stocks we like, they have a wealth management business. they have an m&a business. that can support it. i think if you're just buying it on the yield curve, it's very hard to say, do i even get it close to a market multiple and at this point, morgan stanley's trading just a little bit above book value so, you've got cheap stocks that i think have some intrinsic value to it, so you've got a base to it it's not like you're buying them at 20 times earnings and saying, hey, i think these stocks are going to beat the market growth. right now they're put in this bucket and they're what, 13% of the s&p. >> right. >> so, they've really come down since '09. and i think there's also this overhang of a lot of people who went through '09, said i don't want to touch this sector at all. >> never again. >> i don't know what's going on there. does the real estate sector --

is credit going to hurt us at this point i think you take those and you say, if these banks keep on improving, i think if they get 6 to 8% earnings growth and a 2% to 3% growth and they're a little bit overbooked, in three years if we don't get a recession, but we get a slowdown, you'll still do better on the market than some of the 30, 40-time multiple stocks that are out there that we saw after '99, after the multiple compresses, they can trade at 10, 12 times earnings. >> you see all these ipos and you wonder sarat, thank you peter will be with us for the rest of the show. can disney win the streaming war against netflix? we'll discuss that in a few minutes. ♪ just so we don't have to play any more justin bbcer i'm going with canadian american bands as long as they have a canadian component. did you know the band -- this is the band, right? did you know that they were the backup band for bob dylan initially? >> i did not. >> also asked for a song called

"the weight" to be performed by steve liesman. do you remember when he did that >> oh, yes >> we don't have that anymore. so we're going to play -- >> wait, that got -- because of the same rules, that got flushed out of the system, too >> i think that was so valuable that if we weren't going to pay for it -- >> we couldn't afford it. >> we'll play the band version of "the weight," not the original liesman version. big tech under fire. william kovacic, former chairman of the commission joins us y'rwoerg cause the raptors won. ifoue ndinabout the music. johnson & johnson is a baby company. but we're also a company that controls hiv, fights cancer, repairs shattered bones, relieves depression, restores heart rhythms, helps you back from strokes, and keeps you healthy your whole life. from the day you're born we never stop taking care of you.

frombe go[ laughing ] gone. woo hoo. ♪ welcome to my house mmm, mmm, mmmmm. ball. ball. ball. awww, who's a good boy? it's me. me, me, me. yuck, that's gross. you got to get that under control. [ dogs howling ]

seriously? embrace the mischief. say "get pets tickets" into your x1 voice remote to see it in theaters. ♪ take a load off fannie, take load for free ♪ ♪ take a load off fannie >> i want this to be our friday music, every day ♪ put the load right on me >> obviously, we found the liesman, long-lost recording, and fact, it wasn't spoken for by anyone in terms of copyright. he's on at 7:30, and you may get a replay, if you want to tune in then welcome back to "squawk box. the futures right now are indicated down about 54 points we talked about one of the dow components, in just a moment becky's going to tell you about it can you guess which one? >> there's only 30. >> which mickey mouse stock we're talking about? >> oh, give it away!

when we come back, disney's stock climbs on a bullish view of disney. plus, hulu and espn plus is the magic back for the media giant? we're going to discuss that after the break. and later, how do consumers feel about items made in china with an all-out trade war going on the latest cnbc all-america survey posed that question, and you may be surprised by the response "squawk box" will be right back. ♪ i know how difficult it can be to find the right father's day gift. but you can't go wrong at dick's sporting goods. we have gifts for every dad. if he's into boats, bikes, or camping there's plenty to choose from, including yeti. and if he likes golf he'll love the latest drivers from callaway and taylormade. plus we've got a great new selection of footwear to fit any runner and every athlete. so make it a day he'll remember with the perfect father's day gift from dick's sporting goods. if you can't get to a store, shop us online

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the trifecta of disney plus, espn plus, and hulu, seems to me a strong sales proposition in various ways to sell it. the economics are, how do i say this, insane i don't know, insanity seems to pass and reasonableness seems to take over. >> that was former disney ceo michael eisner commenting on disney's streaming strategy. and before that interview on "closing bell," disney shares were soaring to new heights. morgan stanley raising its price

target on the entertainment giant to $160 a share from $135. the dow component is now up nearly 30% year to date. here to discuss what prompted the higher forecast is ben swinberg, analyst at morgan stanley. do you remember gibson greetings? they had people running disney that had no idea how -- roy disney was like lost, and then they brought that guy in, who turned disney into sort of what it is. then they screwed up again and put michael ovits in, lured him for $100 million and we forget because iger has brought such an incredible amount of stability and fortune to the company since then. did you know all that? >> well, i've been doing this 20 years, so i probably don't know it as well as you do, but i remember a lot of that. >> it's amazing what it's turned into, from children's films into -- i don't know even know what you call it now, an incredible media -- >> and bob obviously an abc guy

originally and then made these acquisitions of film studios -- marvel, "star wars," pixar, and that's really been the fuel for the renaissance. >> i would never say it's as good of a company as comcast, but they have done extremely well so, you're going to -- why are you going from $135 to $160? when did you have the $135 target, because people have had that target for four or five years, didn't happen until recently, finally took off with the streaming, right >> yeah, the stock basically didn't do anything for five years as you pointed out, as people were grappling with all of the espn issues that the company had. then we were waiting for the fox deal to close. there were three main points in the report yesterday -- one, we think their streaming guidance is ambitious, but credible i think maybe second and probably more important is that it's not in the stock, so if the market starts to discount success, we think there's real upside that's how we end up taking our price target up. and the third is we spent some time trying to think about the cannibalization risk of other earnings for example, if everybody loves disney plus, does cord-cutting

get worse? do people start buying less dvds, that kind of thing and the point is, there will be a transition, nothing is linear, things can be bumpy, but if you look at the other side of this, if they're successful, they end up with probably a better business than they have today in terms of monetization and owning a direct relationship with the customer, which they've never had before. >> i would -- you know, we talk -- i was joking with you before you came on about there is a rivalry, i think, to some extent, healthy, between comcast and disney the valuation has widened between the two. is it okay not -- i mean, i think having a high-speed internet component for businesses -- i'd almost trade that for some of the other pure media assets for disney. i mean, why isn't that more -- why isn't that realized in the marketplace? >> yeah, look, i think that when you look at the broadband business, it's a phenomenal business, especially in the u.s., and that really anchors the earnings of comcast -- >> doesn't that insolate you from the cord-cutting to some extent, too, which disney

doesn't have >> absolutely. that's been our cable thesis for a long time. we have an overweight rating on comcast. i think there's less mystery to that, though that's a more mature business. the market sort of knows what you're getting withcomcast. >> with mystery, you become less of a fundamental stock >> to some extent. i think if disney succeeds in this, they could build an enormous streaming business, and nbc may be able to do the same thing. i think we're waiting for details around nbc's plans there. >> and for their big hits, what percentage will be sequels that we know about and what will be new content? >> for disney? >> yeah. it's like, sequels, isn't it >> well, i think we'd call them franchises they'd probably call them franchises, too. >> think about that, though. is it 60%? >> they have 11 franchises -- >> marvel and star wars and toy story and the rest of them but i go to all of them. >> they have 11 franchises that do over $1 billion a year in retail spend. >> oh, you're just talking about the princess stuff and things that come off of it, the princess dresses and the retail spend alone, right >> yeah, yeah. >> that's just the stuff

>> there's an enormous amount of content. you're almost overwhelmed with content. this is a zero-sum game that the better disney does, somebody has to lose in the streaming, or can the whole industry continue to grow when disney rolls this out? >> look, we think there are going to be a small number of global winners in this space the economics are daunting you need to have massive scale, global scale to generate healthy margins. netflix is obviously enormous already, 13% operating we think that will go higher, but you compare that to networks of the past in the 30s and 40s and they're not going to be that big. you have to be many companies. but i think netflix and disney can absolutely both be winners, but the television industry is $500 billion globally. subscription streaming is less than 10% of that market today. so there's a massive transition. it's going to take a long time it's actually pretty far along in the u.s we know who the losers are but i do think disney, netflix, potentially nbc, depending how they lay out their strategy and

execute, all can be global winners. >> so, the hulu deal really was good for everyone, is that the way you view it? >> well, i think it gave comcast some nice options as they sort of nail down exactly what they're going to do with nbc and the content they license to hulu. >> right. >> and for disney, they get control of the asset so i think those were the two main goals for both companies. >> and the way they structured the deal, it's that each of them get the upside and each of them get the downside, depending how things go? >> no, i think disney probably takes on more risk and more up side nbc's essentially -- >> have to get some of the up side -- >> -- eventually on their way out of the asset, presumably. >> we've got -- there's like a floor, i think -- >> there is. >> what about succession i hear iger, like when they make -- you know that thing, like this, where you're like that it's not a stair master, it's something else i can do it for like a minute and a half and i almost start crying i hear iger does that for like 40 minutes in the morning. >> i think every year he gets up one hour earlier. >> what's it

it's a ladder. so, i don't know why we need to worry about succession, since what is he, like 67 or something? that's the new 47. i don't know whether i told you that, but it is. so, do we need succession? do they have their ducks in a row for that >> well, you brought up michael eisner before. that whole succession process was really -- >> but why does the iger -- what's his contract run to now >> '21. >> and could it be extended again? >> you know, the board and bob would have it make that decision obviously, it's been extended before i don't see any reason why it couldn't be extended more. >> we need to work on the corporate guidelines for that, you know what i mean if we're going to raise social security to higher -- why are people retiring? >> some boards still kick you off at 65 or 70, which is crazy. >> isner said i don't know why iger would ever retire it's a pretty good job. >> and shareholders are benefiting from it, too. >> yeah. absolutely and look, i think the message from disney is he's leaving at the end of '21, there's a process in place the board is obviously heavily involved in that what happens then, obviously,

who knows? but they'll be sort of a third of the way through this streaming strategy they have laid out, so it will be an interesting time for transition, if it happens. >> all right, ben. thank you. >> interesting meaning perilous time seriously, what do you mean an interesting time for transition? >> well, you know, when you lay out a five-year vision that has you going from essentially zero to 70 million subscribers, and you're now essentially one year or two years in, to hand the keys to somebody else is an interesting point in time to do that >> okay. thank you. >> thank you still to come this morning, the tariff fear growing among retailers. a number of big names cutting profit outlook, saying that consumers are feeling the pressure probably the retailers, too. we're going to talk with retail expert jan nippen in just a bit. right now let's look at the u.s. equity futures dow futures still quaeted down by about 63 points, s&p futures off 8 1/2, the nasdaq down by 56 we'll be right back.

♪ so why don't you turn me loose, turn me loose ♪ ♪ turn me loose, i've got to do it my way ♪ still to come on "squawk

box," top retailers urging the white house against more tariffs on china we will discuss and get an outlook for that sector after the break. and then, facebook, amazon, and other big tech companies under the microscope, not only in washington but around the world. former ftc commissioner william kovacik will be our guest to talk about all this. and the u.s. blaming iran for yesterday's twin tanker attacks. new video in this morning. we'll have the reaction and what it means for the oil markets coming athe p tt toofhe hour. "squawk box" will be right back.

♪ take a load off fannie, take load for free ♪ ♪ take a load off fannie, and cnbc's all-america survey asking the question if mainland china matters when making a purchase our very own homegrown steve liesman joins us right now with the music. ah, i remember this! and the results of the survey. >> it was a funny thing we did with paula abdul. >> it was for paula abdul for bullseye. >> what was the show she was on? >> funny how funny, ha ha what kind of funny >> it was the judging show she was on, the simon cowell one.

>> it was canadian american, the band was now it's canadian american russian version -- because you've spent seven -- right? >> right, exactly. >> we threw you totally off guard. >> you know, i've played in russia. >> you did >> i had a band in russia with the bureau chief of the "boston globe" and two female russian singers, and we played at the first tex-mex place in russia that was owned by a former kgb agent. >> wow. >> what was the name of the band >> i'll tell you the name of the band we bought all this russian equipment, and it looked really great, but none of it really worked. >> like the whole economy -- >> exactly we called the band the technical difficulties, because every time we were on and playing, we had a technical difficulty. >> did you play a lot of jerry >> we played some jerry. we played some eric clapton, and the russians hadn't really heard music before. >> was it a riot >> it was pretty cool. >> are any members of the dead canadian can we somehow -- >> not that i know of, no. >> donna nothing? >> but you can always play the dead as far as i'm concerned can i talk about the survey now?

i'll talk about music all day long, but they're going to have a freak -- >> we're out of time no, go ahead >> so, we asked in our all-america survey -- this is 800 americans across the nation -- about attitudes towards china. and i'm going to give you these attitudes, then maybe talk about why they matter in just a little bit. but we asked people, does a "made in china" label matter to you, after all this anti-chinese rhetoric and the answer is it doesn't for only 34% of the public, they're less likely to buy a product because it's made in china. and we asked this question back in 2007. i don't know what was going on in '07, why we asked it back then, but fewer people are less likely to buy a product, and for more people, it makes no difference 57% say it makes no difference now, take a look at the individual demographics on this in the next screen, and what you'll see is it's very interesting when you break it down by party. 52% of republicans are less likely that's not a high number if you think about president

trump's support for almost all his programs in the republican party, 80%, 90%. but here, only 52% of republicans. and then you can see there's an age split. 47% of 50 to 64-year-olds. and a rural split -- look on the right side of your screen -- i'm sorry, folks, if you're listening on the radio here -- but 27% of urban, 25% of democrats and 19% of those younger folks 18 to 34. >> okay, can i ask one other question you asked, in 2007, you asked 12 years later in 2019. did you ask two or three years ago? i wonder how much of it is our perceptions of china improved over time or a change over the last year? >> you know, becky, ridiculously smart. we're just going to go to the next screen -- two screens away. would you hold that thought for me because i have something that was going to talk about that we asked also, is chinese trade policy fair? and here you can see the president kind of winning the hearts and minds of the public on this one. only 17% say it's fair

that's down from 30% asked last year fewer people think it's unfair but look at the rise in the not sure there we always put that up when that matters here and then one other thing which i hope addresses becky's question is, is china an economic threat to us? now, watch this thing move 49% back in 2016, came down, and now it's back up, while mexico and china are about the same so, you're right, becky, if we had monitored this over time, we might have seen, but we only get so many questions on the survey every month. >> right because i have to say, i got a "made in china" tag about a month ago and -- >> how'd you feel? >> i thought differently than i would have -- >> but you still bought it. >> well, it showed up in the amazon package >> ah. jan has some thoughts on that, but first i want to give you thoughts from walter russell mead, who's one of the smartest guys i know, talks about the politics of foreign policy he wrote in the "wall street journal" yesterday -- "first the u.s. is increasingly committed to a historic turn in relations with china as opinion hardens on both sides of the aisle. second, we aren't ready for

what's coming," okay and our data kind of supports that and we'll go to the next one "one of washington's highest priorities should be creating an approach to china policy that can endure from one administration to the next." which is to say, we have this very hard-line policy or this increasingly hardline policy about china out of washington. we don't necessarily have the political support for that across a broad swath of the american public. so, i think there's some work to do at the administration to kind of win the hearts and minds of the public on this issue >> i'm hearing that in china, there is a much greater "made in usa" -- >> backlash? >> antinationalism -- or i should say, nationalism, anti-u.s., growing at the populist level -- >> we hear that, too plus, they can kind of dictate how people feel a little bit more. >> right, they can control what people hear. >> than we can the other thing walter russell mead talks about is this is a place where we can find unity between the democrats and republicans. if you notice, schumer has not

really opposed the tariffs the democrats not really opposing -- >> no, it's been almost a united front. >> and the question, is how far down the road of -- we haven't fought an economic -- i think we know how to change public opinion on things like iran or iraq or whatever, much more than we do with economic war. we haven't done that in quite a while. >> all right steve, thank you for a look at how the trump administration's tariffs are actually impacting retailers, let's welcome jan niffin, ceo of jay rogers niven wwe and thank you for being here. >> first i'd like to say, if anybody at langley's listening, i barely know steve liesman. kgb agents, russia, nope we're not even friends. >> how big of a deal is tariffs for the retailers right now? i mean, they are starting to push back, but it doesn't feel like consumer prices have really gone up to this point. >> we haven't seen anything in consumer prices. the consumer's not feeling anything retailers are feeling something because they know what's coming and they know they're going to have to deal with it, and they're starting to change supply lines and all of the things they would have to do the consumer hasn't seen a thing. as we saw in may, 1.4% down on

$1 billion worth of imports coming into the country. i mean, $1 trillion worth of imports coming into the country. that's $14 billion worth of good news, where the 10% tariffs on $200 million is only $20 million of bad news. it's darn near a wash. so, the consumer hasn't seen anything across the board. now, in any individual product, maybe. if you're an individual retailer and you're bringing in some specific sku and that's all you've got to sell, you may be seeing a lot but if you're walmart, you're not seeing anything yet. >> so walmart's not even seeing the pinch internally they're not even covering at this point >> yeah, they're covering and they'll say they spread out whatever we've got across the board, but if you look at their pricing, it's not up. >> is it going to impact their earnings >> they're not talking enough about it they don't believe it is, or they would be telling us that. we're not hearing that the retailers have all talked a little bit about it, but nobody's made a significant change in their earnings forecasts where we all went, oh, my god, this is a huge impact. we're not seeing it yet. >> we saw it all of a sudden last night with the chip stocks.

>> yes. >> you expect that to happen for the retailers at some point, too? >> i think what we forget about -- my kind of retailing -- apparel, footwear, accessories, all that -- there's a worldwide oversupply of goods. the ability, therefore, to pass prices through the consumer isn't going to happen. so, the consumer is not going to see it retailers will take a hit on earnings if it really goes to 25% on $525 billion, i said it would wipe out one year of retail earnings because it would take that long to offset it and transfer the goods out and all the things -- maybe even 18 months -- to offset it. but it won't get passed through because the consumer won't accept it. here's why let's say steve's tie goes from $25 to $40 because of tariffs -- >> this is not a $40 tie, for the record. >> there's another guy making a $15 tie that's going to go to $25, and steve will buy the $25 tie again, because there's all kinds of opportunity to substitute and i watched that through my whole career -- >> coming from different sources. >> the years of inflation -- you

take the $400 suit to $440 and the guy who was buying it would buy the $360 suit that went to $400 and just wouldn't buy the other one. and we see that all across you'll see that in my kind of goods. there's too much opportunity to substitute. >> fair to say that's not the same with electronics? >> i don't follow electronics, so it's fair to say that we know it didn't happen in washers and dryers, and that's about the only example you can find where there's been significant impact. >> isn't it also an issue of the tariffs so far have not been focused on consumer products >> right. >> where the $300 billion that would come next would focus more, and that would be a bigger test for what is absorbed and what's not. >> yeah, there's been almost no impact on my kind of retailing so far, because the first 200 wasn't included in my kind of retailing. the next 325 will cover everything we bring in from china. but i'm still saying that it will be a lot less impact than you see on things like steel and aluminum, because there's no substitution there. >> jan, what are margins in the business like? >> you mean gross margins? >> yeah. >> gross margins run about 40% in general. >> so, they have some

possibility to absorb -- >> well, not counting cost structure. why is walmart running robots through all their stores now because they can reduce not just the gross margin, it's also the sg&a side that runs about 20% for most retailers. >> did you see the producer price report which showed that wholesale trade services, which is the margin of wholesalers and retailers, down half a point the last two months, which suggests that -- you know, i think if it's like energy, right, you can't destroy it, but you can dissipate it and move it out across so, the importers -- the country producing takes a hit, the importers take a hit, the retailers take a hit, and the last piece, if at all, is the consumer >> yes and if you raised it high enough, you would finally start seeing some consumer impacts, and maybe 25% on everything is high enough, but as i mentioned to you a wheel ago, for the first time in history, in shoes, less than 50% of shoes are not coming to the states from china. in the last 25 years, that's not been true.

vietnam went up by 8%. we think by the end of the year, shoes is going to be down to 40% and may break 40% on the way down coming out of china and will break 40% on the way upcoming out of vietnam. that's one example and the pricing went down, not. >> just looking at the retailers, you have to be big to manage this stuff? is that the answer to it >> if you're walmart, you're a heck of a lot better off than anybody else because you're the biggest guy on the block at negotiating and you're also one of the best at managing costs. if you're well capitalized, you're a winner because you can invest in the robots it takes to drive the cost down. if you're small, poorly capitalized and narrowly focused on something that's about to get a tariff, you're toast. >> did it come back to the united states, the manufacturing? >> we will see some manufacturing come back to the united states, but we don't see any jobs come back, because all the manufacturing that's coming back -- >> automated >> is highly automated we're already starting to see that with shoes, but it's a shoe machine that makes the shoe, right? some guy pulls the trigger it's not a bunch of people making the shoe. and i don't see anything coming

back that's labor-intensivlabor. it's too expensive. >> jan, thank you for coming in. steve, thank you. former ftc commissioner robert kovacik kovacik? what did we do >> we'll ask him. >> on the battle over big-testimony regulation at the tom of the hour, new video showing iran's military removing what appears to be an unexploded mine from the side of one of the tankers hit in yesterday's attack how nice of them details at the top of the hour, what it means for oil shipping in the region. and as we head to break, here's a look aoipreshit l ic ts morning. "squawk box" will be right back. -driverless cars... -all ground personnel...

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i'd rather not. ♪ it's friday, i'm in love ♪ monday you can fall apart, tuesday, wednesday, break my heart ♪ welcome back to "squawk box," everybody. online product retailer chewy.com pricing its ipo at $22 a share. that was above its expected range of $19 to $21 that was reported earlier this week at $22, the offering is expected to raise just over $1 billion, giving the whole company a valuation of $8.8 billion. the stock lists on the nyse today under the ticker chwy. a programming note -- don't miss ceo sumit singh at 9:30 a.m. ahead of the debut. regulators around the world

gathered in tel aviv for the antitrust new frontiers conference this week a hot topic in israel, tech regulation back in the states after attending the conference now. and joining us now is william kovacik, former chairman of the federal trade commission and is now a law professor at george washington university. and bill, overall, what is your viewpoint on using tariffs in any way? is there a time and place for it and we do have the rest of the country still has some on us we've never resorted to it before, but is there a time and place for it >> i think in specific, extreme circumstances, there are, but it is a step that has, as your previous segments described, a very disruptive effect on a large number of commercial arrangements that have been crucial to the development of growth throughout the world. and it is an area where others can punch back so, you set in motion a process, which one of your colleagues

mentioned a moment ago, in which you can't really product what will take place. and some of the surprises can in back to bite you pretty hard >> do you think anecdotal evidence of how it's playing out now and how it's going to play out, and how long? is it going to be the permanent state of affairs for us, at least until 2020 >> i don't for years, i think all of us who have been approving of the development of greater global integration have thought that the sides at each point of friction would ultimately sit down and reassess, would realize the benefits that came from this, but i think those assumptions no longer hold so, from week to week, from month to month, you can have stunning adjustments in the process. so, 2020, maybe beyond it's really hard to tell now >> i mean, the rest of the world has not removed barriers to trade unilaterally before. it takes two to tango, doesn't it i mean, should we just sit there

and just be subjected to it? i mean, you have -- in no way do you think anything is warranted at this point? you wouldn't have taken the tact that we have with china? >> i think a lot of commentators have pointed out areas in which the u.s. has been put to disadvantage by a number of practices of the people's republic and i think in selected areas, that has been an appropriate area for negotiation and i share your view that simply standing back and doing nothing is not an effective strategy, but i turn back to the approach that has been used in the past, which is usually involved -- difficult negotiations, but not the shocking adjustment that we've seen in the recent past. so, i agree with the idea that there can be a point at which a jolt to the existing relationship can change things the question is, are things reset in a way that bring back into play the kind of intensive, behind-the-scenes negotiations that had been useful in the past >> so, what worries you more,

the huawei situation or the antitrust approach to big tech now by the u.s. government, or are both of these things a stumbling block for innovation here in this country >> i think the huawei situation, the battle over trade is a more significant issue. the way in which related practices involving privacy, data protection, are far more serious threats to the development of an effective, innovative process throughout the world. the antitrust circumstances are important and have to be taken seriously, but compared to data protection, cybersecurity, i'd rank them as a secondary concern. >> if they ask you to rewrite the monopoly laws, how would you do it so that it would suggest some remedies for google or apple? i don't even -- they're not all the same, either -- or facebook or amazon. i don't know how you would write something that -- i don't

know -- that updates antitrust law for the current environment. do you know how to do that >> i wouldn't change the law the law is extraordinarily scaleable and adaptable. that's by design the real change has to come in the way in which our enforcement agencies go about developing programs, the way in which they cooperate with other government bodies and the way in which our courts view the behavior so, we have an antitrust platform that is highly adaptable. the real question is, can it be implemented in a way that's effective? because the authorities do have tools at their disposal to do this the question is, will there be the will and the capacity to make this scaleable system effective? >> which side -- and you know, it's a political year, obviously -- i guess every year is but the approach you hear from the left -- elizabeth warren, just for lack of a better spokesperson -- but take her approach versus the light touch that you might see from classic

republicans. i'm not sure about the trump administration but who's on the right track for making sure that we don't -- and i say this so many times, i might patent it -- but we don't want to kill the goose that lays the golden egg we have such great tech companies here versus the rest of the world we don't want to screw that up what should we do? >> i think there's a synthesis of these two positions senator warren is right to raise issues it's time and useful to have a rethink of what we've been doing. the more cautious approach that you see from the other direction raises questions about how you're going to do this, exactly what techniques lu use to make adjustments, so that the question of policy implementation and impact is kept in mind away. so that tends, i think, to point us away from grand slam solutions like breaking up existing tech companies. it points us more in the direction of more targeted interventions, the focus on conduct. and it raises the possibility that the simple fact that we have investigations and maybe

lawsuits running by themselves has the effect of opening up opportunities for other companies to participate so, senator warren performs a useful service in raising the issue. the more cautious, conservative approach of a number of republicans, some democrats, is to temper the means that we'll use to address them. that could produce an acceptable result. >> who's being harmed right now? i guess, you know, i've made this point a lot -- it's just hard for me as a consumer to feel harm because a lot of what i use is free. i guess they're stealing my information and my privacy, and maybe i don't -- they're selling it and advertisers are buying it and things like that but that's why i thought maybe we have to rewrite something, because it now looks like we're headed towards a european mode where you worry about competitors, not necessarily consumers. are new entrants into technology being hurt by the size and power of the big faang stocks? >> i'd say the single thing that

raises an area of consensus around a number of observers is that there seems to have been a drop-off in new start-ups over the last ten years, that we're seeing fewer firms coming into the market and stimulating continuing developments in this extraordinarily vibrant commercial ecology so, the main competitive concern i would identify for consumers is that we're not having the same level of vitality that we've had in the past. now, i have to concede, that is a subtle effect that most consumers can't see now. we tend to notice the price that we like, the variety that we have in many ways, the concerns being raised by those who say turn up the antitrust system, is that we are seeing a reduction in the number of entrants that are going to contest the position of incumbents that's going to reduce innovation in the long term. and over the years, that's what we'll suffer from. >> all right, mr. covacic.

>> just bill. >> just bill, thank you. we appreciate your time and analysis this morning. >> thanks for having me in. >> you're welcome. when we come back, did iran have a hand in yesterday's tanker attacks we'll discuss persian gulf tensions and what it means for the oil market. check out the equity market futures at this hour, too. we've paired some of the losses we saw earlier dow futures still down, but only by about 38 points right now s&p futures off by six, the quk x"ilbeig b 44. "sawbo wl rhtack.

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a blame game with global economic implications. with energy markets watching, the u.s. claims iran was behind this week's attacks on two oil tankers. biden versus amazon. the former vp calls out the retail giant for how it pays, or rather, doesn't pay taxes. and amazon is hitting right back and investors waiting to sink their teeth into chewy. not that chewy the online pet products retailer gets set for its first trade on wall street. final hour of "squawk box" begins right now ♪ 'cause i'm in too deep and i' trying to keep up above ♪

♪ in my head instead of going under ♪ >> announcer: live from the most powerful city in the world, new york, this is "squawk box. ♪ good morning and welcome back to "squawk box" here on cnbc live from the nasdaq market site in times square i'm joe kernen along with becky quick. our guest host, peter boockvar, chief investment adviser at bleakley advisory group and a cnbc contributor futures are at some of the, if you want to call them best levels of the day. in fact, you can see one little green part of the screen it was red for most of the session. but it equates to, if you take out fair value and futures, it equates to a little selling pressure in the dow, down about 37 points. nasdaq weak. broadcom had some weaker-than-expected results, down 41. s&p down five. treasury yields this morning, they've been quiet for a couple of weeks, sort of, i guess, but they're 2.06%. they were above 2.10% yesterday, but we'll wait for the one

handle >> not far >> no. >> no. here are the stories investors are going to be talking about today. online pet products retailer chewy is getting set for its first trade on wall street their ipo was priced at $22 a share, above the expected range. parent company petsmart will receive almost $900 million from the share sale we'll talk more about chewy in just a little bit. facebook is reportedly looking at some solid backing for a new cryptocurrency the "wall street journal" says that companies, including visa, mastercard, and paypal, have all signed agreements with facebook for a currency called libra that will be unveiled next week and launched next year the newspaper says that those companies will each invest about $10 million in a consortium that will govern the new cryptocurrency and the government is set to release the latest retail sales number at the bottom of this hour the report is expected to show that sales jumped by 0.6% last month, following a decline of

0.2% in april. the united states and iran are sparring over this week's attacks over two oil tankers in the middle east. kayla tausche has more. >> reporter: after the u.s. blamed iran for those attacks on two tankers in the gulf of oman, u.s. central command now releasing some video, a grainy black-and-white feed reportedly showing an iranian patrol crew removing an unexploded mine from one of the tankers that was attacked this is the evidence that the u.s. government has released six tankers have been attacked in the last month, which secretary of state mike pompeo says is iran's response to sanctions from the u.s. and says the u.s. is committed to a diplomatic resolution, after two weeks ago suggesting he's ready to talk to iran with no preconditions. >> our policy remains an economic and diplomatic effort to bring iran back to the negotiating table at the right time, to encourage a comprehensive deal that addresses the broad range of threats, threats today apparent for all the world to see, to

peace and security iran should meet diplomacy not with terror, bloodshed and extortion. >> reporter: iran is rejecting the assertion the tankers were norwegianen and japanese and took place as japan's leader met with the ayatollah to mitigate tensions they say they have no plan of sending troops in response and stressed gathering independent information. president trump in a tweet thanked the japanese and prime minister abe for his efforts to mitigate tensions but said it is too soon for a deal. an iranian official says the fire has been contained on both tankers that were attacked, but becky, the market response has not been contained as of yet. >> no, although i was surprised to see oil was down only 2.2% by the end of the session yesterday. it had been down more than 4% in the morning, and i have seen a couple reports just saying if this is the new situation, there's going to be a lot more to watch from this. >> reporter: well, perhaps because both japan and the u.s.

are responding to this just with rhetoric and not with any sort of on-the-ground, combative commitment in this way perhaps that is why, that they don't see this as an escalation, even though secretary of state pompeo did call it an escalation on iran's part. >> 18% of all global oil exports go through the straits of hormuz, so this will be something people are watching pretty closely, too. kayla, thank you very much for more, we bring in american enterprise institute resident fellow michael rubin thank you for joining us this morning. >> thanks for having me. >> we say iran did it. iran says they didn't. what do you make of the video that we've seen? >> well, you know, there's very few suspects in this situation, and it's important to remember, back during the original tanker wars in 1987 and 1988, iran also regularly denied interfering in shipping, and that lie turned out to -- i mean, that lie was exposed when the u.s. at that time found video, or shot video of iran actually laying mines.

and it's not clear that the iranians actually know what the islamic revolutionary guard corps navy is up to. the islamic revolutionary guard corps navy has a new commander, so all traditional red lines are being re-established right now. >> i guess the other thing people said was why would they attack a japanese tanker when abe was meeting with the ayatollah? but it's not necessarily clear that they knew it was a japanese tanker, right? >> well, first of all, it's not clear they knew it was a japanese tanker. and oftentimes, if these operations are going to be put in play, they're going to be put in play before necessarily the guys on the ground, the guys in the speed boat know who the supreme leader is going to be meeting with and what seems to be the case, both in this instance and the couple weeks ago, when you had those episodes off fujera, the main oil export port in the united arab emirates, is that the iranians seem to be targeting third-country nationals. look, if they targeted u.s. ships, that would be a huge deal that would bring us into immediate conflict

if they target european vessels and asian vessels, what they may be trying to do is divide america's allies from the united states. >> it would seem that this would only make some of the allies maybe come down a little more more ashley againes harshly aga this is the case, no >> well, you never know, because in the past when iran has acted harshly, the europeans have met that by trying to ameliorate iran, by trying to win them over with concessions, rather than by taking a harder line, so iran may be taking a gamble here -- >> concessions that we'll stop bombing your tankers >> well, ultimately, look -- the germans, for example, and the european union more broadly, have this notion called critical engagement, in which they triple trade with iran between 1998 and 2005, at the same time the price of oil quintupled. they thought they were going to roll iran into the international community and moderate it in that way in reality, about 70% of iran's hard currency windfall went into

its ballistic missile program, and at the time, its covert nuclear program. so, sometimes the europeans miscalculate in this. >> mike echaemichael, you did re the tanker wars from the late '80s, when you actually had naval ships acting as, you know, protecting some of those tankers that were going through the straits of hormuz. that was when the iranians and the iraqis were fighting what happened then to oil prices, and what do you think the impact of something like that would be today? >> well, ultimately, what happened was "operation preying mantis," and that temporarily shot oil prices up "operation preying mantis" after a u.s. free flag ship hit a mine, what happened was we went after some of iran's oil terminals. the iranians chose to fight back, and it was the larger surface naval engagement since world war ii that created a spike in oil. now, the thing to understand about iran is their fiscal year goes from march 21st to march 20th, and since they are so dependent on oil, they have to

guess what the price of oil is going to be in order to set their budget if the price of oil falls below that, they're in trouble if the price of oil goes above that, then they have some more money to play around with. >> the oil prices were down 4% the day before this attack. >> right when you engage in this sort of thing, the price of oil shoots up, traditionally, you have the price of insurance increasing, and remember, while iran is under tremendous sanctions right now, the so-called maximum pressure campaign, for whatever oil they do sell, they sell it at significant discount, below market prices, in order to attract people to bust the sanctions. and so, what the iranians are trying to do is raise the price of oil whether or not they close the strait of hormuz -- they can't really do that militarily, but they do want to bump the price of oil up to punish the rest of the world and also to basically make sure that they don't operate too far into the red. >> so, what should the united states do in response? >> well, ultimately, what we're in a situation -- look, you have a new head of the iranian navy,

a new head of the islamic revolutionary guard corps navy and a new head of the revolutionary guard corps itself, all within the last 18 months and so, they're not used to operating with us. i do think it's essentially important to establish new red lines here, if only to maintain the peace. we don't want to get into a situation where we descend into a war which, as secentcom has sd and the supreme leader and as donald trump has said, nobody wants. >> got to be careful with red lines. look at syria. >> absolutely, but at the same time, wars in the middle east aren't caused by oil they're not caused by water. they're fundamentally caused by overconfidence it's been 30 years since "operation preying mantis. that's two military generations inside iran that don't know how the united states is going to react, and so, it's important to be very, very transparent with what actions are going to bring what reactions otherwise, it's a guarantor that we're going to stumble into a conflict. >> why did they call it "operation preying mantis"

is it because the map looks like a preying mantis there >> that i can't say. you've got to talk to someone older than me. >> michael, thank you. good talking to you. we appreciate your time. >> thank you. coming up, we investors are waiting to -- >> chewy. >> i searched that it's not hard to get ♪ oh, my god, it's going crazy investors waiting to sink their teeth into chewy chewy.com, after its ipo prices above expectations we're going to talk about what to expect when the stock opens for trading. plus, amazon hits back at presidential candidate joe biden after the former vp calls out the retailing giant for its tax practices, tax-paying practices. they pay exactly what they're required to under the law. joe doesn't like that. did joe ever have an actual job? do you know? i don't think so city council after college city council, then senate,

then -- anyway, amazon's created about 300,000 jobs we'll bring you back and forth ensqwkoxre th ns for bigec wh "ua b" turns. ♪

♪

>> guess who who is this? this is a canadian band, i think. no, it's turner overdrive. are they canadian? the rafters. online pet products retailer chewy.com pricing ipo above expectations now we await their first strength on wall street. where's the free stuff, leslie picker i've got three dogs. >> i think you may have to head downtown for that, joe listed on the nyse. >> they could have still sent us some stuff here for talking about it. >> maybe they're watching right now. we'll see. but it's the largest initial public offering for an e-commerce company, chewy and petsmart, a deal massively upsized, selling more shares than they expected to sell so what exactly is bringing investors in the door here well, americans are spending

more on their pets -- unless they get it for free -- and they're spending more online chewy says its customers each spent $334 on average in 2018. chewy says its sales last year would have grown 20% as a result of increased spending alone without even adding any new customers. all in, chewy's top line grew 68%. consumers are pivoting from buying pet supplies in store to online more recently e-commerce represented 14% of pet industry sales in 2017, up from 4% in 2015. it's projected to grow to 25% in the next three years but as these trends take hold, more and more competitors are noticing speciality retailer supermarkets, warehouse clubs, and larger e-commerce companies, including amazon, have all been making a big push into the pet world. if they choose to lower prices, that could put an even further dent into chewy's already negative margins, guys >> if only i knew like an

institutional investor, a board member of chewy. maybe i could -- >> good question >> wait, here i am >> joining us now, former chewy.com board member, former: got no pull anymore -- and its first institutional investor, larry ching, managing partner of volition capital you were the first one and a pretty big one, and you knew amazon was doing this. what about chewy made you think it would work? >> what we saw was the rise of the premium pet food market, and in the early days, the premium pet food manufacturers didn't want to work with amazon they didn't view amazon as understanding their product and being able to represent it well. and what they saw in chewy was a company that was totally committed to the pet category and to the pet customer. so, they understood the product. so there was a merchandising advantage at the outset for chewy in this category. >> and you saw that immediately. >> we could see that, absolutely, yes. the other distinction is chewy cares about the pet food customer way more than amazon. if you engage with them as a

customer, which i hope you will, you'll see that the level of service, the level of content, the level of touch to be able to give to a pet food customer absolutely exceeds what amazon can do. >> like what kind of things do they do? >> they will send you flowers if -- they will send you pet portraits. they will give you 24 by 7/365 service. so if it's 1:00 a.m. and you need advice on how to feed your dog with a certain type of product, you can call them and they will talk to you. and on any given day, the longest talk time between a chewy customer service rep and a customer is over two hours so, they are trained and they are guided to just wow the customer with service. and that's something amazons will never do. >> what would you take two hours on the phone describing to somebody >> if you have eight cats, maybe you need to talk about each of them for ten minutes >> don't bring up cats let's stick with pets that actually reciprocate -- >> i had a cat that loved me. >> huh >> i had a cat that loved me he thought he was a dog. >> are you sure? >> yeah, he used to follow me all over the neighborhood.

>> they've proven that they're aloof. are you sure >> cats are good, too. >> so, revenues are going crazy. the knock is that losses aren't really going down at the same rate that revenues are going up. >> it's a classic e-commerce play where they have tremendous customer loyalty and where they're losing money is they are spending on acquisition. because they're gaining customers and keeping them for life, so that's the logical play when you keep your customers forever. if they want it to be profitable, they could slow down acquisitions and be profitable overnight. >> you're fully behind this strategy at this point >> we started this many years ago. >> and you're going to do it this way >> it only makes sense it usually doesn't make sense, to be honest, but it only makes sense if your customers never leave. and that's the special sauce with chewy, which we talked about early on -- >> 50% of online sales, so that's unbelievable. >> it is unbelievable, but what's the most unbelievable, it's the customer, what they spent in year five is the same as they spend in year one, and that level of loyalty is really

exceptional. >> larry, we had a conversation earlier, just talking about how so much of this is going back to petsmart, so much of the money that's raised in this ipo, i think something like $900 million of the $1.1 billion, which doesn't leave a lot to invest back in chewy.com is that a concern? >> yeah, i think it is a concern, because to keep pace with amazon, you've just got to own this market. and right now it's probably a 50/50 battle between the two of them so chewy should continue to invest aggressively, continue to own this customer, and scale has always been their advantage in this category, so they can't slow it down i would say they need to continue to keep the pedal to the metal and acquire aggressively. >> are they going to need to raise more capital to do that? >> it's possible i can't predict that. >> when petsmart bought chewy, i assume chewy started to run the overall online business. now that chewy's a separate company, does petsmart.com compete against them >> when they were acquired by petsmart, chewy remained

independent. going forward, i think chewy really will become what petsmart could have been, and i think the days of petsmart and petco are more challenged as e-commerce continues to rise. >> so, go ahead. >> i was just curious -- earlier, you mentioned that in the early days of chewy, the pet, the premium pet suppliers didn't want to work with amazon. i'm assuming that's changed now, since you said that it's a 50/50 race between the two >> not entirely. there is certainly very high-quality premium pet food manufacturers that are even wrestling working with chewy because they're petsmart-owned what they really want is a handcrafted, custom experience for their product. so it's sort of like selling a louis vuitton product on amazon. they don't want to do that, and many of these manufacturers view their product as the louis vuitton of pet food, but i think the distinction is the level of service chewy is pouring into their customers. >> i'll tell you the wet dog food definitely helps with -- just putting a little bit in with the dry food, you know what

i mean >> in terms of their appetite? >> yeah. and then i can monitor and i know it's not getting stolen by one of the other ones. some of the -- did you see when frank ate some of that dog food? >> yeah, i did >> it's edible. >> yeah. >> it's like so good, it's like chicken and rice -- >> the real stuff. >> which is why joe took a big bite of it -- >> you can't eat any chewy dog food, can you? >> yes, you can. they have a brand that's human-grade and we actually ate it a at a board meeting because we're committed -- >> how was it? >> it was okay it's like stir-fry. >> like chicken? >> i didn't need the supplements they put on top of it, but there is a rise of human-grade pet food, which is really the highest end of the category. >> just need a little bit to mix in, like the taste of the wild or something, that's pretty good. >> yeah. >> and then a -- >> tricks them into eating the dry kibble that you're giving them >> fortunately, i brought some home and we've been doing it, and i don't know if we can go back to just -- >> maybe a future customer. >> is that private label >> do you have a card?

>> not the private label. >> do you have a card? >> yes. >> do you have a business card thank you, larry and don't miss a first on cnbc interview with chewy's ceo coming up on "squawk on the street" at 9:30 eastern time still to come on "squawk box" today, the corporate tax debate on the campaign trail joe biden hits amazon on twitter for not paying federal income taxes. and amazon answers right back. we'll bring you what the former vp said. amazon's response and what it all means for the broader debate over taxation and inequality in america, not to mention regulation of the big tech companies. you're watching "squawk box" right here on cnbc

all right, let's check out the futures this morning we've been in the red all morning long right now, about the lowest level of losses that we've seen through the morning. dow futures down by about 33 points s&p futures down by just over four points. and the nasdaq down by about 43 points right now coming up, retail sales numbers for the month of may are out in just a few minutes, and we'll be watching for the market's response, if there's a surprise one way or the other. breaking economic data is next when "squawk box" returns.

♪ all by myself ♪ don't wanna be all by myself ♪ anymore celine dion. ann murray what's that song

something about -- >> canadian singers in honor -- >> in honor of the raptors it is. you're smart >> caught it >> yeah. were you watching or did you figure that out? >> saw some of it. >> oh, you did okay wow. is that the voice of god what was that? we're just seconds away from retail sales data for the month of may futures, as you can see, down about 45 rick, the numbers. >> all right our may read -- advanced retail sales about as expected, up 0.5%, maybe 0.1% light if we strip out all-important autos, it's still up smartly up 0.5% as a matter of fact, 0.5's wild. ex-gas up 0.5% the control number 0.5%. full house of 5s and if we look at revisions in the rearview mirror, all positive minus 0.2% is our last look, moves to positive 0.3%, a net move of 0.5%

and that move with ex-autos. all of the revisions in rearview mirror pretty good we are now on 2.09% on ten-year note yields. listen, i like to look at closes intraday moves are important, and intraday, of course, we have been lower, as much of the globe has, digesting whether it's poor data in china, ongoing issues geopolitically, but at the end of the day, retail sales, at least for u.s. investors and maybe global ones as well, forgives a lot of sins not a bad number i would like to see a one handle but all in all, we still have investor and production capacity utilization university of michigan coming up remember, 2.07%, 2.07% is the double bottom we currently have in treasurys a fairly significant technical level for a variety of reasons we want to pay attention for that particular level with regard to the weekly close joe and the gang, back to you. >> rick, we just saw the ten-year yield pick up a little bit. what's the technical level again that's so important to watch

>> 2.07% on the close. i'd watch 2.07%. >> we were below that earlier. >> we can get all the minutia -- yeah, but the big, wide double bottom we have at 1.35% -- the second leg of that happened in 2016 -- to the high yields right around 2.34% if you take 62% of that, you technicians know that's the magic number -- it pretty much comes right out to that 2.07% level, so we want to pay close attention. >> rick, stick around. let's talk more about this constance hunter is kpmg's top u.s. economist and cnbc's markets commentator mike santoli, also economics reporter steve liesman. steve, let's get your take on the headlines. >> yeah, resumumors of the deat the consumer are greatly exaggerated. this revision to april is very good news. the solid number in the control group, missing by 0.1% on the top end doesn't bug me at all. it is a little weird this data has been unusually

choppy, and i don't know if it has to do with the weirdness of when easter fell or all this other stuff. been saying for a while, you have decent wage growth, widespread employment. there's no reason why the consumer shouldn't be doing well and this back revision kind of helps to square the circle on that, in that april is -- as rick said, 0.5% better than we originally thought, and may is pretty solid department stores, they were up, now they're down miscellaneous stores were up, now they're down but the strength was in health personal care, sporting goods, and hobbies. i think we're on a good track now. we may even get an upward revision to the second-quarter growth forecast as a result of this. >> so, constance, what does this do to all those who are concerned about an approaching recession? >> yeah. well, it doesn't so much change that picture, but i think it changes how long the fed might be able to get some extra

innings, right so i don't think we're going to be able to avoid the business cycle. it's not dead. but we probably are going to be able to get some extra innings and if we think about this in a year -- >> extra innings for the economic growth, you mean? >> yeah, extra innings for the growth -- for the expansion that we're experiencing so, if we look at this retail sales number, it equates to about a 3.1% year-over-year pace now, that compares to a 5% pace we saw in 2018 so, we still have some slowing consumption compared to last year, but the consumer has been the backbone of this recovery and this expansion so, we expect that to be maintained i think that certainly there is a strong case, and we have been saying the fed is probably not going to lower rates this summer they're going to wait until they have that second-quarter gdp data, i think, before they do anything, which would put them at a september time frame. >> mike, what do you think if the fed doesn't lower rates in july >> i think we can -- june will prepare us for what they're hoping to do in july

my thought has been for while as well that they're looking for the ability to stay patient as opposed to rush. but you know, the bond market is not making it comfortable for them at this point to do that. i always say, tell me where the market's trading the day before the july meeting, whether they do or don't, and i'll tell you what the market's response will be because if the market says okay, fine, we'll have to live with this for a while the u.s. domestic activity is a pretty good buffer for the stuff the market is truly afraid of, which is the global industrial picture and the rest of it and i guess you could have a good-news situation here where the fed is really responding to shortfalls in inflation and the bond market and the global risks where they're not really responding to any softness at home, which, you know, i think to a lot of people is what they would -- >> becky, can we bring rick in real quick i want to see. rick, i've got a 30% probability on the june cut, and i think that's a little higher after the iranian headlines, is that right, when you had a bit of a downdraft in yields? >> yeah, you know what, we can

study it with a microscope, steve. there is no way the june contract is going to give us a green light on a tightening. it would need to spend some time solidly above 55%, 60%, and that isn't -- >> no, no, i don't mean that. >> but yeah, it moved around a little bit but see, like volatility, an option close to expiration, you don't pay much attention to the greeks anymore because of the distortions of time premium. the closer you get to that june meeting with the averaging and the number of days in that contract, that you're actually better off to look at july, because small fluctuations in june contract will make percentages move generically, we are now down 1 1/2 ticks in july, august, september, right now and of course, audience, investors, listeners, as that contract moves down, it actually lowers the chances of a fed ease >> and the fed knows they do not need a meeting to cut. they can cut with their words. >> absolutely. >> they can do nothing in june

they can do nothing in july. but all we need is a speech from jay powell and it's essentially cut -- >> before you comment, i want to set the scene a little bit a, this is the last piece of data of any meaning before the fed meets. of course, there's the fed survey next week, which is very important to them, from cnbc but other than that, this is it. you go into the meeting with the consumer doing 3% plus, as constance said, 3.2% are you going to send the signal to the market that you're going to cut is that what you expect them to do >> i am hoping that powell is careful with his words and says, i'm going to wait to see how things play out. i think we're going to hear a lot of that. >> that's going to disappoint a market that's trading with an 88% probability of a rate cut for july. >> for the july meet 'but i think the fed is going to try to skirt by the june one without necessarily precommitting. but yes, the market is right now offsides if they do not cut -- >> constance, are we headed for a disappointment from jay powell is he going to let us down about

this certainty about a rate cut? >> look, if you look historically at what the market has priced in for the fed versus what the fed has done, the market usually gets ahead of the fed and then has to -- and then they have to meet in the middle, right? so, all during the expansion, the market was saying, ah, there's going to be 100 basis points of cuts over the next year in 2012, 2013, 2014 it didn't materialize, right and then the market adjusted and we're seeing the exact same thing in the opposite direction, which we often see ahead of a fed rate cuts. this is not unusual. and so, we've seen this movie before the market may end up being a little disappointed, but i think the fed is going to do what is prudent and what is the right thing to do is, as peter said, they're going to wait and see how the data comes in. >> steve, this is also the last big number before we get gdp, right? >> yes. >> the big input to gdp, right so where is it tracking now? over 2%? >> we were tracking 1.7% going into this meeting and i've got to see where it is i don't know where everybody put their retail sales number for the past two months --

>> so 2% -- >> i imagine it will be higher towards 2%, yeah. >> nominal gdp 4%ish for the second quarter i'm more interested for the market's terms is how that flows through to earnings -- >> but mike -- >> it also matters what the composition of gdp is. because even though we got a big headline number in the first quarter, consumption was only 1.3%, so if we're looking at a 2% gdp in the second quarter where consumption is back above 2%, that is a very different composition of gdp, which is actually stronger for the economy. >> right, and i just want a point of information -- the fed's going to look at this as a first-half number. >> yeah. >> they're going to take the 3.2%, average it with the 5.2%, and they're going to come up with 2.6 is what they're going to come up it. they'll be like, hey, that's 0.8% above potential, and i'm cutting it to that i don't know >> rick? >> yeah, you know, i just want to get back. i don't mean to belabor this point, but i can't stress enough that we'd be doing a disservice to traders painting a picture that the odds of the st. louis

blues in january winning the stanley cup was astronomical, but yet, they won it fed fund futures, especially the back months you should take in consideration. it gives you a glimpse of where the money is thinking the fed's going to go. but the operative word is thinking and this jay powell isn't ben bernanke, isn't janet yellen and isn't alan greenspan, where he's going to stack the blocks ahead of time before he sees the data and have these assumptions he's going to go a quarter, quarter, quarter i think you have to be really open-minded about this fed and the fact that this economy, maybe like the st. louis blues, may defy the odds, and the economic expansion we all want to put a gravestone on -- >> but rick -- >> -- probably had a bunch of innings that didn't count several years ago. >> i agree with you. but the question is how much money is on the blues right now? is all the money on the blues? is some of the money on the blues? or is none of the money on the blues? and when the blues win, is there a big loss -- >> they won!

>> -- or a big adjustment -- right -- when the blues won? >> well -- >> is it the big adjustment as required >> as the season moves on, as percentages come through, as jay powell and company see what you and i see as the meetings get closer -- this crystal ball stuff is insane. seriously. >> but it's not crystal ball stuff, rick. >> it is >> it's trying to understand -- >> it totally is >> -- where and how the market is priced and is it correctly priced -- >> where was it priced in october and november of last year >> it was priced for rate hikes. >> how many? >> i don't remember. >> three >> two or three. >> three. >> threeish. we need to learn from that this is a different market than all the markets in the past -- >> but rick, what -- >> -- where it was just on a cycle, where they had the plan already -- >> you just made my point. >> they didn't even need to go to meetings. >> you just made my point. what kind of market adjustment was necessary to get back to the right place for the pricing? it was not a fun experience. i don't know about you -- >> well then you're making my

point! if you're saying that, why are you telling me what the target is before any of that occurs >> it's so nice of you to compliment each other and make each other's points. >> i'm just saying -- rick, i don't know the answer. and maybe peter wants to pick this up. >> right, and neither does the fed. that's a good place to stop. >> no. my point is, is the market in the right place relative to what the fed is going to do, relative to the economic data or does the market have an adjustment to make >> i think the market is much more confident about what jay powell will do than jay powell is himself. >> right. >> you corner jay powell, he would say, you know what, i have no idea what i'm going to do because i need to see more data and i need to see how the trade talks with china play out, and i am not going to precommit until i see that so, if -- >> and there are six weeks until the july meeting it's at the very end of the month. and what would it mean for the market to reduce its implied expectation to rate cuts >> right. >> well, yields would go up. it's not an awful situation if the market decides, okay, we're not going to get the july cut. you don't know how it's going to -- and to your point, peter,

from december to april, it was words that got the market back on track. >> right. >> it wasn't policy, per se. >> and that will continue to be the case, i believe. >> except at some point, constance, i think they have to deliver policy to justify, or at least rationalize the market's pricing. >> they don't have to rationalize the market that's not their job their job is to have full employment and a steady economy -- >> bingo >> and so, but one of the -- let's not forget, this moral suation has taken down mortgage rates 80 basis points. >> right. >> and you look at that weekly data on applications for refinances and new mortgages, they're up they're going to wait and see -- >> right, but constance -- >> -- if we get a reversal in the housing -- >> i agree it's not their job to juft market, but they have to meet eventually. >> right >> if you have one year at 1.97% and a fed funds at 2.40%, do you

exist in that zone forever or does something have to change? >> sure, let the market do the lifting. >> the market will have to adjust to where the fed is. >> that's my point or the fed comes to where the market is. >> which one is the -- >> i think it's going to be a little bit of both. >> who blinks? >> the tail and the dog is what you're going to say because we have chewy's ipo. >> that wasn't what i was going to say, but that's a good one. thank you. thanks, guys. >> all right, good very good. we've been playing canadian music all day. i think i've got something queued up here ♪ but when you're with me, i gave you a taste ♪ >> i thought it was "happy birthday." >> was there any doubt toronto was going to win given "game of thrones" the north. the north won! >> let me just say that katy perry is not canadian, and she is definitely not a trump supporter, as we know. but that's why i'm using her enjoy, katy. before we go to break, happy birthday to president trump, 73 years old today.

before you haters can begin it, i got it, orange man, bad. i know, i got it i understand please, don't send any tweets in coming up, it's his birthday can we say happy birthday to the president of the united states >> a desperate plea for tweets please don't tweet me. >> got it. former vice president joe biden goes on the offensive against amazon on its record of fa paying or not paying taxes, but amazon comes right back with a response we'll talk about yesterday's twitter back-and-forth and whether a big tech breakup would al be good for stocks, when "squawk box" comes right back

an unusual collision of tech, politics, and policy playing out in public online yesterday as concerns over big tech's power collided with a national debate on inequality. first, presidential candidate joe biden tweeted out a link to a "new york times" article which says amazon paid no federal income taxes last year the former vp added a comment saying "i have nothing against amazon, but no company pulling in billions of dollars of profit should pay a lower tax rate than firefighters and teachers. we need to reward work, not just wealth." a little while later, amazon's official news account tweeted a response, which i actually retweeted because i liked it so much -- "we've paid $2.6 billion in corporate taxes since 2016. we pay every penny we owe. congress designed tax laws to

encourage companies to reinvest in the american economy. we have $200 billion in investments since 2011." and here's what i wanted to mention, 300,000 u.s. jobs "assume vp besiiden's complaint with the tax code, not amazon. i did the math, that's 300,000 more jobs than joe biden ever created. he became a lawyer and the next year was elected to city council. after that, he was one of the youngest senators ever elected, and he's been there ever since as far as i know, not a single millisecond spent in the private sector anyway, let's bring in our guest to talk about this and the growing pressure -- i think that's what we're trying to say there, p-r-e-s-u-r-a-e -- on big tech we have an analyst from jefferies. do we need to change the laws, amazon should we look down on them as greedy corps tests what's the answer, brent

i know what you should say, let's have the discussion, based on what vice president biden said does it get us to the discussion should corporations -- are corporations undertaxed, and is that the way we should look at it >> yeah, good morning. look, i think amazon is amazon g their taxes. they do have their losses moving forward. i think what's happening right now is politicians having a free hall pass, they're trying to protect all of us consumers against big tech companies and the power they are generating. going forward, there is not likely a break up or change in the tax code we think that effectively, right now the politicians are just making, certainly lagging and doing the fly over to keep us all safe they're doing their job, the tech company is trying to do their job and they have their perspective. this war is going to go on for

quite some time. we can talk about the regulatory of what's happening on the break upside we think these companies are following the tax code it is a bigger issue that's going on >> i wish the connection would be made between private sector jobs and the creation of wealth and prosperity and whether the government itself can ever generate wealth or prosperity. when the government is in a sort of a hustle, sort of a position to the private sector, i don't understand how that's self defeating to our efforts to raise taxes. >> did tax reform give a break to corporate or did it make our corporations more competitive globally so they can succeed more while hiring more people who then pay taxes and have jobs

in the united states is vice president biden know that >> this is a bigger issue. you saw this last year of the investigation of mark zuckerberg maybe politicians don't know how facebook made money. they didn't know their business model. >> an election is coming up and nothing is going to change and nobody is going to connect to any bots, are they >> they have to understand the fundamentals of how these businesses work before they can attack them. primary of what we are taking away last year we didn't see what our governor is doing across streaming digital tax. the question is what are you going to do? we'll get back to you and evaluating it. right now there is a lot of snowballs being shut but again not a lot of rational. so i think we are going to continue back and forth for

quite some time. >> as an analyst, you have to take political risk into account or do you think lelizabeth warrn or people on the left have this sort of draconian, they're going to present it as trying to help workers verses the people with t the capitals i want workers to make more. do you think once they are elected, will they follow through all of this or do they realize jobs come from the private sector and this is rhetoric in silly season, cam sa campaign season. i mean you would have to -- i take by rating off if that's going to happen. >> regulatory is the number one question asked by investors.

many have been having calls with the lawyers, big tech break up likely this week and i would say we never had this many clients dialing in for a call. the answer is there is no big break. the microsoft case clearly if tl there is as break up, this is good for stocks. so, you know if they do break them up which is a low likelihood, there is a great case for investors to be involved right now there is a lot of pressure on these names because of these concerns again, right now many of the regulatory experts are saying to thus and we are not tech analysts and regulatory experts. the regulatory experts are saying the politicians are doing their job and tech companies are doing their job. being big is not bad but being

bad is bad right now we think this is going to be an ongoing fight for quite some time. the microsoft case lasted almost ten years and nothing came out stocks went down 10% and rallied 900% investors can use this as an opportunity. >> being bad -- it is not like michael jackson is being bad is good remember that? it is like i am bad -- it was good to be bad >> we are all mourning this morning for the warriors last night. >> really? >> that was a uphill battle with some of your best players, or one of your best players >> tough to beat >> kawhi >> and also you had a lot of success out there. i want to get down to cramer jim, we cannot control what happened

i would ask you about whether amazon is under attack this is not what we do >> it kept the price down. people like amazon i think that broadcom, hock tan miss judged when he tried to buy qualcomm the big change that people are misjudging is that xi may not be letting huawei going down the train. our president is on a mission, to humble the chinese and win. this president is playing to

keep they keep thinking he's owned by the corporate interests? wow. no hock tan misjudged the president's results. >> yeah. we are not used to seeing resolved we are used to seeing war. >> thank you, jim. we'll see you in a couple of minutes. we'll be right back. to customize flood coverage for this house. so that this team, can inform this couple, that their payment will arrive faster than this guy. hey. ♪ ♪ so whether i'm processing claims due to this fine gentleman... (car engine starting) or suggesting premiums for this young lady... ai can help change everything at this company. expect more from ai. ibm watson.

i want to make sure you all have a great weekend i would like to see you her next week right now i would like to head over to "squawk on the street. ♪ >> congratulations to the toronto raptors! speaking of dinosaurs on their first nba championship i am carl quintanilla with jim cramer david faber has the morning off. futures is on a packed day the president is talking oil and iran and now u.s. retail sales coming pretty good for may. we got some selling in europe.