"squawk box. >> good morning. welcome to "squawk box." we're live at the nasdaq market site i'm melissa lee along with joe occur in an and mike santoli becky and andrew are on assignment take a check on u.s. futures right now looks like a down opening across the board dow indicated lower 129, s&p looking to be down 14, nasdaq down 55. of course building on the losses in yesterday's session overnight in asia, a negative day across the board hang seng down by three quarters of a percent nikkei managing to eek out a 0.01 gain. in europe, being weighed down by deutsche bank. red arrows across europe and treasury yields, since that jobs report, holding on to 92% level on the ten year and there we are again, 2.068% speaking of hong kong, leader carrie lam speaking out in an

attempt to quell protests, she said the controversial extradition bill that sparked the demonstrations is, quote, dead lam said there is no plan to restart the legislation and earlier work to amend the bill has been a failure lam suspended the bill but protests continued with calls for it to be withdrawn completely lam did not say that she is officially withdrawing the bill. she said the bill is in the coffin, the bill is dead and no one needs to worry that there will be any tactics to resume the bill in the lenggislative council term richard branson's space tourism company now planning to go public. that is according to a "wall street journal" report it will list shares as part of the deal with social capital company, spac. we've talked about it in the past it was created by a friend of

"squawk box," spac will invest $800 million in virgin galactic, it will get a 49% stake. the stock market listing is expected to take place later this year. virgin galactic so far sold 600 tickets to space at a quarter of a million dollars a piece. they took its first flight with a test passenger in february chamath and richard will be joining us live at 7:00 a.m. have you ever done a crowd funding type thing >> no, i'm a crowd funding virgin >> do you know allow to how to t >> nope. >> andrew has stated many times that he would like do this >> to do what? to go to space you want to crowd fund your own journey to space sxwli wa >> i want to crowd fund andrew's

journey. >> does he want to go to space >> he said he would. he is nervous on flights, but face he's fine my idea, and i'll talk to them about it, for me, can't we do like a realistic imax type of experience you know how they have the seats that move around and you are surrounded by -- do that for me and i'm fine and i can leave, still be home in my bed. >> like space mountain except better >> exactly >> seriously, that the point, would you be more inclined to -- >> real or virtual experience? virtual experience >> yeah. what would you do, are you going to be -- >> i would wait for a couple missions to go forth without me. >> so how much of this is -- these guys -- we'll talk to richard today. and you got the other guy, elon

and bezos, and they all want to -- why can't they just do cars, why futurist space stuff >> you know, a couple years ago prior to the killing of khashoggi, richard branson was in talks with the saudi public investment fund for a billion dollars. that fell apart because of khashoggi. and so then the need for capital arose. so it will be interesting to see how exactly the deal came about after that unwinding of the saudi deal >> this is more commercial space tourism as opposed to for the good of mankind we're going to mars >> tourism, a lot to -- how is the food >> you can come back and say you did it >> have you ever had that astronaut ice cream? >> exactly and other stuff that floats around accidentally. i don't know i remember john glenn, watching his face and the g forces and

will he come back. and this guy is the bravest guy in the world and i guess it has changed a little >> looks like that we have pepsi earnings crossing the tape a buck 54. versus consensus of 1.50 pepsi up 20%, double the gains of its rival coca-cola 50% of pepsi's revenue is a frito-lay snack portfolio, so more diversified stream of revenues here. immediately we're seeing just can a tiny flaks higher in shares of pepsi. but on the eps side, it looks like a beat. higher in shares of pepsi. but on the eps side, it looks like a beat.r higher in shares of pepsi but on the eps side, it looks like a beat.a higher in shares of pepsi but on the eps side, it looks like a beat.laks higher in shares of pepsi. but on the eps side, it looks like a beat.raction higher in shares of pepsi. but on the eps side, it looks like a beat. >> gar nrett nelson is joining . you've had 10 seconds to look at this what is your feelings about the numbers? >> thanks for having me.

looks like about three cents ahead of consensus pretty solid quarter i think pepsi has a pretty strong track record of beating earnings they have beat now eight of the last nine quarters so maybe agtsz disap pointment that they didn't do better than 1.54 because they have been so conservative with their guidance also it looks like they have maintained their 2019 eps guidance of $5.50. that is about a 3% drop in earnings from last year. the stock has done very well year to date pepsi is -- pepsico is up about 20% which is more than double what coke shares are up. and it is really 2020, 2021, 2022 story at this point obviously investors aren't buying the stocks with the 3% drop in earnings this year but looking out two or three

years, we think this is a company that could earn north of $7 a share and there has really been a lot of fun inflows into names with higher yield pepsi is yielding close to 3&. and so we like the stock here. but the quarter, you know, a little bit better than expected. looks like the top line was about in line with expectations. >> i'm being told $26 milli26 mn ahead. but revenue came in $26 million ahead of consensus but organic revenue growth was 4.5% which that is pretty good i guess, isn't it, if you factor out everything >> it is pretty good last quarter they did 5% organic revenue growth so it is down a little bit from the growth rate of last quarter. frito-lay has been a very solid contributor to both top and bottom line growth

pepsi derives about 50% of total revenue from snacks and foods at this point and so it looks like frito-lay had another solid quarter. and then the beverages business is still very solid, particularly in emerging markets like latin america and asia, middle east, africa. >> how do you interpret pepsi not raising full year guide even though it beats for this quarter by three or four cents depending on what consensus estimate that you use? are they just being conservative or leaving leeway for the back half >> we think they are you could get an upward revision next quarter but for now, it looks like they are just being tariff wiconserve >> so if you were running pepsi, five year plan, do you want to innovate and just as far as efficiencies go, do you make new

snacks for people like me that need a low carb -- something that ends in tos like cheetos, free free toe fritos would you go into cannabis, cbd, what should it looks like in five years >> so we think that is why the shares are up so much here to date there is a lot of excitement, they have a new chairman and ceo who took the reins last fall from someone who had been there 12 years b pled he's pledged to make the company faster, stronger and better. he is shifting their portfolio towards healthier food and beverages, snacks, and there is an expectation that growth will be more robust under his leadership and also that they will be more generous in returning cash to

shareholders one of the first things they did after he took the reins was they announced a plan to reprurchase 50% more stock this year so i think that you are looking at more generous cash returns to shareholders under his leadership >> buybacks about 3 billion in 2019 all right. garrett, thank you >> thank you >> stock trades 23 times forward earnings >> i was looking at that >> so taken up with all the yield stocks, all the high quality steady names and the fact that it is kind of holding these levels on these numbers shows that it wasn't just a quick sell the news even though yields are a little bit higher so you have to watch that dynamic. coming up, it is a big week for the fed. jay powell set to testify in congress tomorrow and thursday we'll get you ready. and we have a big interview

coming your way from the nation's capital later this morning, kelly evans is sitting down with larry kudlow we'll take you there live at 8:00 and take a look at the biggest pre-market winners and losers in the dow. moving is hard.

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fed chair jay powell begins two days of congressional testimony tomorrow morning joining us to to discuss, phil orlando from federated investors. good morning julian, 3,000 is your call for the s&p 500 and two rate cuts. so what are you looking for out of jay powell's testimony? >> jay powell will likely disappoint the market. it is quite frankly amazing to us how three months ago he our call for two rate cuts was looked at with extreme skepticism and now the market is look for almost three by the end of the year and four by the middle of next year. that is too far in our opinion this is not about an economy that is going to go into recession. this is about taking insurance to make sure that the growth path is maintained >> phil, you have two concerns for the markets. china trade deal, that that didn't happen, and the fed screws up monetary policy.

so what does that mean screwing up monetary policy, not cutting or cutting too much? what is the risk >> i think julian hit the nail on the proverbial head the core pc number a week or so ago was better than expected results of the g-20 better than expected nonfa nonfarm payroll numbers better than expected. if i'm jay powell, i'd let the market down easy and let them know that it is not a slam dunk that i'm going to cut 50 basis points on july 1 i may not cut at all there are other things that they need to look at over the course of the next few weeks. if the data is strong, the fed may push it out to mid september and the market may be disappointed >> is two days of softness after we got an all-time high kind of accounting for this a bit? we're seeing yields drift up a bit. maybe we're taking a little bit of the certainty as you say for very aggressive rate cuts, but

wou in the moment when they get the message from powell, is the market mispriced >> not radically mispriced the markets pulled in from the high about a percent very, very small amount. but that is walking back the probabilities of a cut in july and we think again as phil said you could walk back the probabilities more so to us, what it really comes down to is the market is in a holding pattern. there is an expectation that the fed is there, the fed is going to be there. but again, the other issues are still to be resolved china, brexit, et cetera and for us, the next data point -- >> but as traders, you don't know whether you want to result in good economic growth or bad economic growth. which is so annoying given that the previous jobs number was so weak and suddenly you get this

great number on friday which should have allied fears that recession is imminent or even likely in 2019 and instead -- i mean i always -- these crack addicts that love free money that trade stocks -- but this is three straight days, not two >> reflectionary reaction. >> i would have thought that removing some of the recession fears with the jobs number would have been a positive and it is not. how do we know that we want a resolution of the china deal that shows us down and we're back to the races. >> the real issue for the market here in making further up side progress is that long term interest rates in our you view are too low. they are reflecting something this fear of recession that we don't think is actually going to materialize. and so what we would like to see

in fact is the fed eventually creating some expectation of inflation, sending longer term yields -- i mean minus 40 basis points in germany? that doesn't rational sense to us those rates start moving up. you get a more sort of pro-growth mentality and a shift away from defenses into cyclicals like financials and energy that is what we like to see. >> some might criticize the recent all-time highs because we haven't had the transport or small caps to confirm the move at the same time you like small caps you think that there should be a swing higher here. >> we did like small caps. small caps have underperformed large caps by 12 percentage points here officer the last nib months or so we think that there will be catchup. the domestic u.s. economy is doing better than the rest of the world. so joe's point, our in-house model is suggesting that there is no risk of recession before the first half of 2021 at the earliest so the naysayers are saying that

we started a recession last year, we're definitely in one this year. we just don't know it yet so we think that once the market realizes that the economy is in better shape and we'll get data to that effect in the second half of the year, small caps should participate but in that environment given the fact that we're at all time record highs and the fact that we think that the fed probably ought to do less than the market is pricing in, we took some chips offer tchi chips off the tame we took from 5% to 3% in anticipation that the fed could disappoint, data is not that badly and as a result we could see weak neness the next couple months and we have the draghi transition, japanese vap tax, the brexit decision coming up. we could have a sloppy couple months here. >> phil, julian, great to see

you. thank you. any chance we do 3% gdp? there's not, is there? >> we think that the fourth quarter is likely to be 2.6. >> what about this quarter >> this quarter we're at 2.3 i think consensus around 1 pp.7 so >> we're 2.2 for the full year but again, the most critical issue is resolving the trade dispute. >> all right coming up, a new read on the health of small business the latest confidence numbers from the nfib. and later, virgin galactic announcing plans to go public with the space venture crowd funding andrew's ticket if you're interested. we'll bring you a first on cnbc interview with richard branson and at 7:00 a.m.

the nfib is out with its latest confidence report kate rogers is joining us with the details. i saw something go by on the wires about giving back some of the positive gains we saw in recent reports >> that's right. good morning so the index taking a slight dip this month of 1.7 points to 103.3 as uncertainty weighs on small businesses the group says about 30% of

business owners reported that recent changes in china trade policy in particular have negatively impacted their businesses the nfib noted there could be some tariff inflation pressures on main street as the number of firms raising prices also ticked higher even with the drop, we're still well above the historical average. this is a look at how optimism has been tracking. we're about 3.5 below the high and small business owners seem to express concerns over the economy and future business conditions nearly he have component fell. biggest drops were those who believe in those who believes it time to expand slight gains were in inventory satisfaction and inventory plant. skilled labor is also a major issue. 21% say it is actually their single most important problem followed by government red tape and regulations. and taxes. now, this has been the case for more than half of the year so far while trade and economic

policy and uncertainty are on the minds of small businesses so too of course is this labor problem we've been talking about for months and months. weighing on them for sure. back to you. >> kate, thank you coming up, a big win for the phrma companies after a judge blocked new drug price rule. all the details next and take a look at yesterday's s&p 500 winners. and losers. through the at&t network, edge-to-edge intelligence gives you the power to see every corner of your growing business.

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welcome back you're watching "squawk box," live from the nasdaq market site in times square.

let's check out equity futures. down about 112 on the dow. down 48 or so on the nasdaq be and the s&p indicated down about 12 >> a federal judge are has blocked the trump administration from implementing a new rule requiring pharmaceutical companies to show the list price of drugs in tv ads the rule was set to go into effect today under the proposed rule, the list price would have been shown if the drug sold for $35 or more are for a month owe supply the government says ten of the most commonly advertised drugs have a list price of roughly $500 to $17,000 a month. merck, eli lilly and amgen sued claiming the rule could confuse consumers. drug makers have argued that list prices don't reflect the actual costs the junlgts sadge says that th

responsibility to act lies in congress hhs says they are disappointed and will work with the justice department on the next legal steps. >> those ads drive me crazy anyway any buy a song you don't want to hear anymore and they -- they do the oh, oh, oh -- and i don't need it whatever the hell it is. it is for some minor thing but the list of side effects -- sounds like you may not survive the side effects for this mine or thing that they are trying to selling to you that your doctor prescribes it. so why are you selling me ten times every break on something i'm trying to watch -- >> didn't that tell you how profitable it must be if a very small percentage of people out there might ask their doctor for it it is amazing. >> and the actors that they have got in the ridiculous things that no one would ever say >> or do

like two different bathrooms >> i like that at least they went there not out in the open, you know. >> they are in the open. look at that >> but then they leave and the bathtubs are empty, but they go into the -- >> nobody is there except the camera crew. >> they get a room finally pretty nice place to have a couple bathtubs. >> thousand i know what you like to do in your spare time >> and this and a pina colada. like walking in the rain japan's nintendo,this is about -- minute ten d nintendo from china to vietnam in an effort to dd diverse if i

manufacturing. nearly all is outsourced to manufacturers in china and a spokesperson says the shift was not related to the potential tariff fights by the united states on products i imported fm china. do we believe it >> no. >> how much of the production is headed for the united states that is what you'd have to know. >> probably a lot. >> and then we get double whammy but just hurting china i think is in the -- one of the rationales behind the tariffs as well causing some pain there. coming up, digging into the massive layoffs at deutsche bank and what effect will it have on the big banks here in the u.s. we'll talk to a wall street head hunter next. plus later first on cnbc interview to discuss the big news that virgin galactic is planning a public debut. as someone in witness protection,

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deutsche bank announcing a massive restrunktsing pl inrest involves slashing 18,000 jobs. it will be scaling back investment banking joining us now for what it means

for wall street, alan, you follow the financial job market. and on one level this is a deutsche bank story. they have for a long time struggled to make the businesses profitability. on another it seems to say something about wall street in general and what businesses they are shrinking and growing. so you have 18,000 people now over three years going to be shed by deutsche bank. >> and obviously first thing you have to ask is where do these people land. and the reality is some will land, some will land well. and others will have to sort of reinvents themselves and sadly there will be those that just don't land and they will have to figure out what that means >> and is this obviously part of a bigger long running project really by wall street firms to sort of say technology is displacing a lot of our people, cash equities has not really

made a lot of money for walling street in a long time. and so is there any kind of hope for new businesses taking up the slack? >> i think it is back to the future so when you think about cash equities for example, one of my first clients when i started in this industry was a company called incident. and in those days 90% of all trades were handled by two brokers on a phone and in less than a decade, now electronically through a black box. so without question this is an example of how the efficiencies will change the job structure. no question about it the other components though when i talk about back to the future, banks are in the business of helping corporations grow and of course helping individual households do well with their financial saving and investments. so i think that is what you will see deutsche do. and i think it is a quiet consolidation. what happens is the five big u.s. headquartered banks will have the opportunity to continue to dominate in those areas that deutsche was participating in. you will also see participants

like bnp and others take up some of the slack but it is a quiet consolidation by the withdrawal of deutsche. >> 18,000 people into the workforce, what does that do to wages? any effect does that mean that there is more supply in the market and banks here don't necessarily have to raise wages as much? >> wages have pretty much been flat for most of the crisis if not backwards and bonuses of course fluctuate last year wasn't a great year. it is a terrific question about the supply and demand issue. 18,000 people, but they represent a whole spectrum of jobs from people making $5 million $10 million to people in facilities management. so i think that the banks will pay people fairly, but i don't think that there is an opportunity with there to take advantage. and quite frankly if you are not paying your people well, somebody else will >> and the "wall street journal" spotlights the fact that the large bank ceo pay packages have

stayed relatively high even as share price performance has tracked. what goes into that equation is that leftover kind of habit of compensation for these big ceos that have been through the crises and are running these big institutions >> if you look at ceo pay across the world, in and outside of financial services, it is really driven very much now by a highly structured formula based approach these ceos are getting paid by boards of directors that have compensation committee members looking at the peer groups and how they are being paid, compensation consultants that are helping. we own one of the largest. and so this compensation game is not episodic by company. it is very much a standard in the industry so if you think that they are overpaid, you really need to look at the structure and framework that is being used to pay them performance shares are a great way to do that if a lot of their compensation is based on performance shares and the company's stock does not perform, guess what, they don't

get paid >> i guess you could say either the compensation formulas are flawed or the baseline levels are actually centered very high. so even if you don't meet the criteria, it is not exactly like you are suffering. >> very good point it is a system that they work in because obviously it if one organization decides that we want to cut ceo pay by 50% because we think that that person making $13 million is just as good as that person making $26 million, well, reality is that may or may not work >> what is the overall outlook in terms of hiring just broadly on walli street? you mentioned the electron if i indication of wall street. fees are coming down that has been a pressure over time. what does it looks like? >> if you are in a job that touches a client, you are in a

because clients are king so even with the quasi consolidation, i was talking to one of the top hedge funds just yesterday, and athey are confident that they won't have pricing pressure from the people providing them services. so at the end of the day, i think that it will be sort of business as usual in that regard >> so does that mean financial advisers, wealth advisers, investment bankers that are directly talking to clients but not traders on a desk somewhere? >> pretty much yeah. that is the group that will farewell and have good sticky long term. hard to eelectrlectronify that y >> that is not a word. i want to know whether that is a word >> you have to look it up. >> i'll make it a word >> i'm going to look it up in urban dictionary better not be anything filthy. >> electr electronification of

markets. >> you have to get into the english dictionary >> good strategery maybe w. used electronify. >> that is just updating it. >> okay. thanks a lot coming up, boeing losing a major deal from saudi budget either airline fly a deal over the weekend, we're getting june's numbers from the company. and we have a preview of what investors can expect, that is next as we head to break, here is a quick check at the european markets. only the ftse is green and that is just by a little bit. wow, look at all those decimal points a promotion. you should be mad at forced camaraderie.

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boeing expected to release its latest figures on orders and deliveries this morning. phil lebeau is joining us with a preview. and you've been watching closely because of the canary in the coal mine. i don't know what the airbus order meant or what we use, deliveries, production, orders they're all important i guess. >> they are all important, but i would say production and we'll talk about that in a bit. production is really what is driving the stock price right now. it is at 42 per month when it comes to the 737 max if doesn't drop much further, many believe that the stock won't fall much further. but in terms of delivery, we're looking at the backlog of orders when it comes to the 737 max and again remember this is the most popular plane this is the plane that has the

cash flow generation when they can start up deliveries again. that is why everyone is focused on it. there have been no orders since the grounding. cancellations 68, most of that because there was an indian airline that went bankrupt and that was before the grounding of the 737 max. but in terms of production, its 42 per months, that was brought down a couple months ago after the plane was first grounded it was at 52 per month dropped it down to 42. the reason that we show the 57 there, that was the original plan by the end of this year they are not going to get back up to 57 by the end of the year. the focus is simply getting deliveries to start up again so as you take a look at shares of boeing, remember that there was a lot of attention over the weekend about the dedeal cancel, a startup deal out of saudi arabia

they had never officially placed the order but said yeah, we plan to fly up to 50 of these, we plan to buy them and now they say instead we're flying the a-320 from airbus so we'll get the numbers at 11 production, that's the number that wall street and investors are focused on. bring in two analysts for more, ron epstein, carter copeland, founding partner and aerospace defense analyst. what do you think? i mean just listening to phil? do you agree with most of his points >> yeah. i think phil is dead on right. investors have been very, very focused on production and one of the key questions is, has been, with the delays and the 737 max going back too service, can they hold production at 42 or will production have to go down yet again? if you remember, it was just last week at another delay was

announced, came forth, on the autopilot on the airplane, the faa found another issue, and on that additional issue, it looks like the airplane won't get its air worthiness directive and go back into service until maybe the fourth quarter if that's the case, then there might be another cut in production we'll see. it's an open question right now. >> carter, we're -- what's your prognosis here i've seen some things written about the stock is in a vulnerable place, where there may be -- you know, i hate when they use like flying analogies for stock, but maybe an air pocket underneath boeing shares right now. >> we're in a data dependent phase here this process is not in boeing's control. it's out of boeing's control you know, i think it's right to watch production, it's right to be cognizant of the working capital thresholds they hit and

whether or not that needs to necessitate another production cut. that is a key variable for how the stock should perform short term longer term, i think what really matters is, what will the ultimate market share split between airbus and bogeing be an imply for pricing and margins. this is the highest airplane boeing makes we get the news from flydeal, i don't think in the grand scheme of things that is news and could have been dictated by schedule as much as anything else, but it does get at the point what will matter longer term is market share and pricing. >> as far as compensation for victims on the two crashes, that's going to be -- never going to be really material to the company, you would -- >> the non-recurring costs that you take to get through this are pretty immaterial in the grand scheme of things what really matters is, you start thinking about thousands of airplanes priced at a different level or market share

that's very different, three or four or five years from now, that will massively dwarf not only the upfront payments you may incur but how people think about the earnings algorithm of the company. >> at what point do you start pricing in a cascading impact of what the max is doing for its production line? for instance, could it keep customers from committing to the mid-sized airplane could it keep boeing from producing and getting faa approval of the mid-size plane >> those are great questions on the first point the mid sized airplane everybody thought would have been launched at the paris air show that didn't happen airbus did launch an a-321 xlr in the center of the segment a couple questions you have to bear in mind are, one, is boeing going to launch this airplane? their competitor has a very competitive project in the space. two, on the 777 x, it's going through certification right now and with the faa under increased

scrutiny and boeing, what impact will that have on the certification of that airplane i was a betting person i would say it's going to take longer for that airplane to get certified than anybody thought three, if they launch the middle of the market airplane what does it mean for it again, it probably means with the increased scrutiny on the faa and certification process, that brings that airplane into service will take longer >> airbus, they -- at the paris air show. >> they did. at the paris air show. boeing didn't get firm orders. airbus did under the boeing umbrella, embriar did. on the first day of the show, there was fresh orders for the xlr. >> the stock is exactly flat for the last year and a half, but doubled over the past two and a half years this plateauing of the stock price. what is factored in to the valuation level in terms of the pacing of production and orders

and the long-term pipeline >> i think the debate on the stock coming into the year, if you were bullish on the stock coming into the year, which we were, it was predicated on two things -- the commercial cycle extending longer and 737 production rates going up. now the commercial cycle so far has been very friendly the way the cycle has played out has been, you know, how can i say kind of softer than in previous years parts of the cycle are going up, down, but net it's been a robust cycle. >> go ahead. >> so the 737, however, you know, the production delays there, that's got a big impact on the outlook if you look at the street's earnings forecast for the company for '19 they will be cu in half and an impact in '20 for sure. >> carter, are you going to cover virgin galactic? do you have a buy on them? >> you know, as exciting as commercial space can be for some capital flows, there are areas

that i think are a bit riskier than others. i think you look at valuation of virgin galactic as, you know, i think a little north of 10x. the revenues that are implied in the backlog. there's going to have to be a lot of growth in that business or it's going to have to be significantly more profitable than any of the other ventures that we've seen to make that capital high return capital, but it's a sexy part of the market, no doubt. >> really? and is it time, ron? is it early? good to be -- >> what you're seeing now, there's been a big push by the trump administration on space. everything was space force a push into commercial space look at what secretary ross has been saying about space, there's been a big push. i do think it's time, right. on some degree i think the valuation, maybe this is where i disagree with carter, might be justified. it's a burgeoning industry we're just starting, right if you look at the changes that have happened with spacex, blue

origin, this is an exciting time to be in commercial space. >> maybe the business news anchors won't be able to use the word space anymore, because they will be saying commercial space space. >> oh. >> and they'll finally -- the space space. >> they'll finally come up with a word, the effort to come up with a word that don't sound so -- every time they say space. you know how they do the retail space, the space you can't say the commercial -- >> or industry -- >> you can't say -- >> sector over and over -- >> you can't say commercial space space. >> realm. >> realm. >> that's like "game of thrones. thank you. might go with epstein at this point. might be able to -- anyway, carter, thank you as well. good to see you both. >> thanks, guys. >> coming up, a new report out overnight indicating the federal government could hit its debt limit two months earlier than expected we'll discuss the comingudt tt sait ead.ge johnson & johnson is a baby company.

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the next fight in washington, avoiding the debt ceiling. the battle over the budget, taxes and the trump economy, minutes away. >> ready for takeoff, sir

richard branson virgin galactic's planning to go public before going to space. a first on cnbc interview with the men behind the idea and the financing is straight ahead. plus, the fight over independence >> if the fed knew what it was doing, they would lower rates. >> is policy holding back growth or does jay powell's plan for interest rates make sense? we'll debate the fed's role in the trump economy as the second hour of "squawk box" begins right now. ♪ you better stay here >> live from the beating heart of business, new york, this is "squawk box. good morning and welcome back to "squawk box" here on cnbc i'm joe cur no with melissa lee and mike santoli becky and andrew are off this morning. the dow is indicated down triple digits, it was down friday, down monday and indicated lower today

with the nasdaq indicated down about 46.5, and the s&p down about 12. here's what's making headlines. pepsico posted better than expected revenues. it benefiting from snacks, waters and juices. the cfo will join squawk on the street at 9:10 a.m. eastern time richard branson's virgin galactic is going public the company striking a deal to merge with the public investment vehicle sponsored by chamath palihapitiya social capital. the special purpose acquisition company will own up to 49% of the company. palihapitiya will invest $100 million once the transaction is completed. they will join us live in just about 15 minutes time, 7:15 a.m. eastern time here on "squawk." in other news, piper jaffray nearing a deal to buy sandra o'neill. the price about $485 million in cash and stock. more consolidation among the smaller investment banks. >> yes. >> kind of a similar move.

lawmakers may have another high hurdle to deal with by the end of the summer. elon moye joins us with more. >> the deadline to raise the debt ceiling could be a lot closer than investors realized the the bipartisan policy center says there's a significant risk that nation reaches its borrowing limit in early september instead of its previous estimate in october now that is important because it would mean that congress needs to deal with this now before they leave for summer recess at the end of the month the expectation on capitol hill had been that lawmakers could punt this until they examicome in the fall, but they may not be able to wait there is no consensus on how to move forward even among republicans. treasure secretary mnuchin was on the hill floating the possibility of a debt ceiling increase paired with a one-year deal to keep the government funded at current levels senator david perdue of georgia is leading a coalition of republicans pushing back against the plan

that coalition includes jim inhofe, chairman of the armed services committee and marsha blackburn. they called for more money for defense and warned against, quote, handcuffing the military with funding gimmicks. the broader challenge here is that lawmakers are trying to solve three problems at once they want to raise the debt ceiling, fund the government, and increase the statutory caps on federal spending in one package. guys, that is a very heavy lift and skepticism that congress and the white house can negotiate and get this done over the next few weeks. back to you. >> thank you for more on the looming budget battle on the hill welcome congressman josh got himer who represents the fifth district of new jersey, member of the house finance committee and congressman lance gooden who represents the fifth district of texas and member of the financial services committee thank you both for joining us. we appreciate it. >> congressman gothimer, what's your outlook

the way she put it, sounds like an uphill battle, got up tintile end of the month, off for recess >> you will hit a debt ceiling we have to address that. you have budget caps that have to be raised especially if we're going to address the military needs and we've heard clearly from the defense department we must do that, not because we need things like a pay raise which are critical to our active duty, but, of course, equipment and long-term planning the short-term puptsz down the road, it's no way to run a government i think what we need to do is have long-term planning to build what we need, be prepared and ready and take care of everything at home, our vets, homeland security, our infrastructure really, i think they're right, we have to be thinking this as a package and work together. >> where do you stand in relationship to the budget resolution committee is the administration helping or hurting the process here >> well, first i'll echo

everything my colleague from new jersey said. he's absolutely right. we have to come together based on what i've seen in the first six months i think my colleague would agree it's very difficult to see consensus among the senate and the house and hearing what i'm hearing that the administration and the senate are disagreeing when republicans are disagreeing we know that the democrats will disagree when we finally get to the end of the road here we're hoping there's consensus in the next few weeks before we go to the august recess. >> hope is a great strategy, right? it's not congressman gooden, how do you get past that when you have divisions within your own party? >> well, i think that the senate and the house leadership have got to work together what we saw the last few weeks before we headed to the fourth of july recess was the democrats actually came together at the very end, reluctantly, and we all agreed on the border funding package. i think we'll get to the point where we have to come to consensus again. some of the far left radicals of the house democrats are not

going to like anything that nancy pelosi does. it's not going to be good enough for them i think when we get to the end of the road you'll see agreement and this will work out. >> congressman, can you characterize within your party what the disagreements may be and where you might find common ground >> as was just pointed out, there's always disagreements with both sides and the white house. our job, we were able to do it on the humanitarian aid package we got to the border to help children before july 4th, the key now is how do we come together again and, you know, even if you have disagreements the key is to stay at the table. i co-chair the problem solvers caucus, one thing we've been focused on the budget deal, sitting at the table, not leaving, same with the white house, we have to get it done. it's how you do it in business and in the real world. it's okay, you're not going to get everything you want but most of what you want the key is making sure the country gets what it needs if we focus on infrastructure anding may sure our defense is

strong, taking care of the va and veterans, another issue, you can't ignore these problems and keep punting it's what we've been doing in washington you have to be willing to make the tough decisions. i think we can get it done my colleague is right, it's never easy but the key is to stay at the table until it gets done. >> josh, i'm confused, i was like trying to study up for this and i was -- i opened up your notes and it said, higher taxes are stifling economic growth for new jersey i opened up congressman gooden's notes and then i looked, is that a -- did you really say that >> i think we need lower taxes. >> whoa, whoa. slow down. slow down. wait see, we got you -- okay. you're the republican and congressman gooden is -- did we mess up the labels >> there are plenty of democrats for fiscal responsibility. >> i see that a lot. for the -- >> if every democrat in the u.s. house was like josh, then things

would move very smoothly >> i've said that before i don't know how long it's going to last or why don't you just do what you should do, josh i mean the lights have been left on by the republicans for you, just make the move >> how about focus on making sure the democrats, you know, come to the middle and my friends in the republicans in the middle and get it done. >> you're failing at that. if this what is we're seeing with your efforts right now -- >> i think the system right -- i think you would agree overall, we're overall we got to do a better job i think we have to be talking to each other the fact that we're coming together on this and have to keep coming together and you have to keep the pressure on us which is what is important >> we're trying to do that it is -- i mean even the speaker is having trouble wrangling some of the -- of what is going on there, don't you think she has no control, i don't think. she can't say anything negative or try to get, you know, bring any rationality to that wing without getting criticized

herself. it's a mess right now. i don't see how you ever talk -- >> i think as you know extremism on either side is the problem and the screaming is the problem. we need more people willing to get things done. and i think the speaker also is working at that as well and standing up to extremes and it's not easy, but it's what you have to do. you have to -- we have to come together to actually fix these issues and solve problems instead of screaming at each other. on your show you can have a constructive conversation, turn on other stations and it's just screaming, that's all they want. they think it's entertainment. we have work to do to govern. >> i'm not sure that's the only problem right now. >> congressman gooden, where do you think we need to go? are you optimistic or hopeful anything happens between now and the 2020 election? i'm not. >> i'm optimistic we get this budget problem resolved before september, but josh makes a good point, he didn't say these, don't quote josh on this, the fact that nancy pelosi is the moderate voice in the democratic party is -- speaks to what we're

dealing with in the u.s. house the far left extreme, not josh, have really caused problems with nancy pelosi and her leadership and we've seen a lot of interesting things over the last six months i think it's foolish to believe that any real meaningful reform will happen before the next election. >> i was going to say, it's going to take -- not just the house, the senate, too, and the white house. the three of us have to get together i think we can get something done on prescription drugs in front of us, we have to keep working on infrastructure. you're right we can get something done here on the debt ceiling and the budget there are issues we have to take on and have to get done. we have no choice. we better do them. >> that's right. >> josh, how will we get rid of s.a.l.t. i don't see how -- as an overall i sort of have sympathy for the idea of df of what the fax reform dr -- tax reform did of the states to get their act together and the

rest of the country shouldn't be subsidizing all their spending but then again, i live in new jersey and just can't believe what -- >> living in jersey, we are the king subsidizer of other states. >> i like when people tell me i'm rich and got a big tax break. >> what the big problem is, is that we keep in jersey subsidizing other states i call them moocher states they keep going into our pockets and taking our dollars. >> do you hear that congressman gooden >> part of the fiscal responsibility is -- >> i'm listening. >> the other states, go after texas -- >> is this cnbc or -- >> i'm trying to get fighting and arguing starting congressman gooden, he's pointing directly at you with that criticism. >> he's just too reasonable some days >> all right >> thank you. >> we agree, lower taxes and get our budget done. sounds like we agreed. >> you are an enigma wrapped in a riddle, josh thanks, guys. coming up, preparing for an ipo liftoff.

that's where billionaire richard branson looking to take virgin galactic before he takes tourists to space, he will joint us with founder and ceo chamath palihapitiya after the break stay tuned you're watching "squawk box" on cnbc ♪ come and ride a fantasy i consulted with your grandmother's doctor. we can do the screening at her house. hi. this is the man that's going to check your eyes grandma.

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richard brans . welcome back take a look at the futures, small declines about one third of 1% on the s&p 500 and the dow. the nasdaq set to underperform a bit open down about 46 points. british billionaire richard branson's space tourism company virgin galactic is planning to go public. the firm is going to list shares as part of a deal with social capital, a spake created by chamath palihapitiya they will invest in virgin galactic for a 49% stake the stock market listing is expected to take place later this year. joining us first on cnbc, chamath palihapitiya, ceo, and founder sir richard branson. you always get attention so i want to start with chamath on

this this is huge muj th money. i wasn't sure of the $100 million -- >> 700 in the spake and 100 million. >> your own. >> of my own, yeah. >> the reason for that is? i guess you've got opm, other people's money, this is your money -- >> a fair amount of spake as well take a step back i've been an admirer of richard and this company for a long time much of my friends have been customers. i've looked at the technology. basically what happened about nine months ago when he decided to not accept the capital from the saudi government, i called and said can i spend time getting to know your team. and over the last nine months, i was just completely amazed by what he and his team built when we had the chance to do something, basically it's about capitalizing something that will put people into space, but build technology that over time will do everything from space tourism to potentially hypersonic air

travel and so this is an incredibly compelling next generation vis nags rir business. >> comauple aerospace analysts n they said now is the time and the time has come. i thought it was early i mentioned i still see john glenn, like still praying he comes back, know what i mean >> it's a very, very exciting time for space with virgin galactic and with what elon is doing, jeff bezos is doing, with what boeing is doing, and the investment community beginning to take a lot of interest in it and beginning to do analyst reports on the space industry and, you know, obviously we believe that it will be one of the big new industries >> will you never do business with saudi arabia again? >> i think what happened was very sad and a big setback for

the country. i would hope that they will have learned from that and i hope that one day we'll feel that maybe we are able to do business again. but i think they need to make -- they need to make some positive examples to -- some people are in prison perhaps unnecessarily to say that they've really changed -- >> a quandary for guests we have on, investment bankers, major -- larry fink, the people that, you know, we do business with saudi arabia, of course we do business with countries that have similar issues, maybe even worse, and it just got highlighted in this particular case. >> yeah. we definitely felt it wasn't appropriate at that time anyway. >> well, you know, their loss was your gain. >> absolutely. >> for chamath people have talked about, when we were talking to the analysts, on a valuation basis, you're at

a pretty big multiple to even projected revenues. >> that's not stretrue we have a customer backlog of more than 600 people, more than $80 million of collected deposits already these are customers from 60 plus countries of the world there's another people above 2500 more people have expressed interest in becoming customers that's the first two or three years of the business. and what the team has built and this is what was amazing to me, is a business that has software like margins this thing looks like a software business under the hood even though it's flying people to space. so this is, i think, actually a really compelling risk/reward. taking a general step back, i think i've had a really good track record right now of being a little bit ahead of some big trends, whether it was the transition to amazon, backing bitcoin, things like slack, and what i will tell you is i generally don't put my own principle capital on the table unless i think there's a really

compelling risk/reward and i'm doing that here. >> you sounded almost like you were talking about tesla in terms of customers putting down deposits for a product that's not yet commercially available and promising the customers down the road they will be able to take that trip into space? >> it's a fantastic example. you have to remember when tesla went public it was a -- i think a 2 odd billion dollar market cap, now 10 x in ten years if we are lucky to have that same trajectory and the same customer love, i think that we would all look back and say we've done something absolutely fantastic in human technology. >> since we put two spaceships into space earre earlier this y since 2009, we have had 2,500 people ask to sign up.

i think, you know, the market is enormous the amount of people who would love to go to space is enormous. and once we've got a lot of spaceships, which, you know, i mean the float will enable us to build a lot of spaceships the price will start coming down and increase the market even more. >> aviation began in a similar way, risky and enthusiasts and then wealthy people wanting to go for a joy ride and then became a necessity how long before space flight tracks similar to that >> well, you're absolutely right. in the 1920s, it cost the equivalent of $250,000 to cross the atlantic in a plane. and nows most -- lots of people are able to travel across the atlantic in an airplane. i think we can do it a lot quicker than aviation did it so, you know, ten years from now, we should see a quite dramatic decrease in our prices

every 50,000, sounds big figures, every 50,000 down, it expands the market. >> $50,000 down in the price. >> yeah. >> and i mean, let's say the market in the world for, you know, $300,000 is one and a half million people, once you start coming down, the market just -- >> can you drop me off in japan? >> yeah. >> can this be -- >> not today but this is another reason i thought this was interesting, what richard's team has built are technologies that eventually can be used in a hypersonic airplane. what does that mean? if you're used to a ten hour flight from los angeles to tokyo or los angeles to beijing, that becomes less than two hours. now, that alone if you look at the ticketing revenue for that in the airlines, that's $300 billion of revenue that should vaporize why would you not travel through a virgin experience to -- that's basically one-fifth the time. >> how far out is that how far out is the first

commercial flight for tourists how far out is profit? profitability? >> profitability is projected right now in august of 2021. that's where full-year profitability will be. we're going to be starting commercial operations within a year from now, which is really exciting in terms of the first question in terms of how can we get to hypersonic flight, that's a five to ten-year project. by building this, and being in this business, which is incredibly amazing, we get a free option to build this next business which is another huge step forward for human kind if you can do that in terms of transportation. >> we're fortunate we're the only spaceship company whose spaceship is shaped like an airplane and the -- our rival spaceship companies have giant rockets which take off as far as going to point to point in the future, we are quite a big step ahead

>> you say you have a lot of these. this is totally off topic. i mean -- >> what's coming. >> what's coming is these advances in part of about the singularity, major advances are coming quicker and quicker since the big bang really, quicker and quicker. are you going to be able to live long enough to see all of this do you have plans for that >> well, we do have a virgin life pill which we've just developed which should, you know, should enable me to live forever. for a small price. >> are you joking? >> for a small price. >> i am joking >> yeah. but what about -- is there anything to the notion that we can leave our physical beings. >> i'm serious. >> i want to be unloaded and my soul unloaded as well. >> my own feeling is that we should all lead extraordinary lives. >> while we can. >> and then pass it on to our children or grandchildren.

if we start -- us older people start living forever the world is already under a massive pressure. >> you're going to miss out on a lot of really great things. >> i'll -- >> chamath, unfortunately, chamath is -- he's going to be doing all this stuff and we're going to be looking down on him. >> i want that pill. >> i mean you're much younger. >> we live through our kids and, you know, how we bring our kids up and they then take these things forward >> yeah. >> all right i'm still going to hope for it as well. you had two years to invest this money, right were you getting close to where for the spake, were you lucky this came along. what would you have done >> we met probably 200 companies all over the world and i was very adamant when i raised the money i said i want something that's unbelievably iconic and doing something that's disruptive invaluable for humanity and i would have been happy to let it expire if i didn't find it when you look at traditional ways these things are done,

spaks are used in bland, boring businesses in this case, you have a visionary like richard and a team from the most incredible parts of aerospace and defense industry i mean it was just an amazing opportunity. >> change the symbol >> it will be something that's more akin to space and -- >> i want to know what it is you got any ideas? is it going to be four letters >> change the symbol of what >> of the spak. >> it will be a four-letter symbol that's related to space. >> you will have public investors with this business obviously you're going to have to assure them that the risks are under control. i mean regulatory framework and all that, how do you go about that >> i think one of -- one thing is the fact that chamath is willing to put $100 million of his own money in and independently bought a ticket to space and spent as lot of time doing due diligence on the company. >> in fact, when we went through

all of the checklists, from a safety perspective, how do we know this thing is going to be an incredibly safe experience, it was at the end of that process i bought my ticket because i just became convinced that this is actually as safe or safer than flying in a traditional airplane they're licensed by the faa and have all the regulatory elements in place to start commercial operations that was a huge part of our justification. you're exactly right that all of these things are critical to making sure the public investors have the full picture. i think the thing is once we're able to sort of file the statements, et cetera, and see the presentations and all the work that we've done, you'll see these guys have done an incredible amount of work and that they really are building something exceptionally unique and special. that's just rare these things aren't that common. people like richard aren't that common to be able to partner with them for folks like us is just a special opportunity. >> sir richard, can you walk us through the decision to take

this company public, versus remain private and accept private investor money it does seem like there is tremendous investor appetite for investing in space just by taking a look at spacex as the public funding rounds, been able to raise money fairly easily so far. does this give you some sort of an advantage over those competitors like a spacex or blue origin primarily funded by bezos? >> i -- when the saudi deal, when we canceled that deal, i side just decided to carry on and fund the operation through launch and then chamath came to us. you know, i must admit, i was slightly skeptical initially, but, you know, they did their due diligence. they took our team on around all the investors that were part of the spake. the feedback we got was

tremendous and yeah, then we thought, you know, this is the sort of thing that the public should be investing in a new, exciting start-up, well start-up, we've had 14 years of investment to get to this stage, but it's exactly what the public markets are for. we like chamath enormously and the team of people he's got around him yeah, so we thought let's go for it. >> do you have anything you want to say to kevin while we're -- >> i mean i was going to text last night but it was too late i hope he's recuperating i love him. >> do you think that we'll all be flying in space before the next time the warriors win anything >> it's an incredibly offensive question but the answer is absolutely. >> it's a win/win for you. >> win/win. >> space, another nba championship it's win/win. >> crazy stuff happened. >> it's incredible

>> really incredible. >> exciting what things will look like. >> lebron will be a point guard. >> what is going -- how are the dominant teams going to change what do you think? i mean what's your forecast? >> i think that we'll do great i think our players are great. i think brooklyn will put on an amazing show in a year when kevin is back. >> what should toronto fans be doing? >> that was devastating. you know i'm canadian. >> i didn't. >> it's tough that kawhi left. so be it. >> you're talking about, you know, traveling to space, so i guess basketball -- have you ever seen a basketball game? it's got a little -- >> i have. >> it's the round ball that goes into -- >> he was at the nba finals in toronto. >> i was lucky enough to, yeah, sit next to the owner and he explained basketball to me the ticket was slightly wasted on me, but it was a great experience. >> let's keep going here ipos, frothy

>> no. >> no? >> no. >> none of them. >> here's -- it's not that none of them are frothy we're at a point in the cycle where two things are happening one is, folks like me who have been building businesses privately for a long time or people like richard building businesses privately for a long time, want to make sure the best of what we've done is exposed to the market at large. that's one class of company that's happening then there happens to be at the same time folks that say hey, there's a window where there's so much money sloshing around that has to find a home, and i think it's up to the investor, discerning investor, to figure out where any given ipo lands. what i can tell you right now, i have not seen a batch of really compelling companies go public until right now. like it's really quite amazing whether it's virgin or it's slack or a bunch of these companies. it's really, really interesting point in time in the cycle where entrepreneurs are creating a lot of value that's nice. >> can i -- >> sorry

>> can i use bitcoin to buy my ticket >> you can. >> to go up? >> you can. >> i don't need quite as many now. i didn't look at it just now, but will were you surprised at the speed -- >> you need 20 of them. >> yeah. >> how many times -- >> from 4,000 -- >> i recently became more in tune with how it works i was down at about 9,000 when i realized that distributed ledgers probably more inherent value on something than a government -- >> we've had this conversation for five or six years. >> i didn't listen back then. >> the same thing i said six years ago, $80 a coin, the single best hedge against the traditional financial infrastructure whether you support fiscal and monetary policy or not, it doesn't matter this is the schmuck insurance you have under your mattress. >> that's been default. >> if you look at anything that has inherent value, that

distributed ledgers and decentralization and peer to peer and no double payment, that's worth more than the current things that we use right now. you're just using it as default. do you see what i'm saying >> you may be a spokesman for some ibm commercial with that. maybe true just buy the coins i mean it's a fantastic instrument just in case just in case all these geniuses may not turn out to be geniuses. >> i think that was an insult, joe. >> was that an insult? >> no. >> i think you're incredible i really like you. >> you don't like -- >> really do. >> really do no >> this is scaring me. >> don't be scared >> you're one of my favorite people too. >> thank you >> okay. >> sir richard, what we haven't gotten to, what is the actual experience what is going to happen on these flights? >> do you get peanuts or a drink or anything? >> it will be -- first of all, moving our whole operation to new mexico, where the government

built with us a beautiful space port anywhere in the world, the only space port anywhere in the world. all our staff, spaceships are going there, motherships are going there. the rockets are going there. and people will turn up two or three days before, they'll go through centrifuge training. the families will go on balloon trips. we may do some zero gravity flights as well. then on the ta they'll come to the space port and they'll put on their space suits and then they'll climb into the spaceship and they will be taken up to 60,000 feet. the spaceship will drop away and they then have the ride of a lifetime 3,500 miles at eight seconds and head into space. the five people we put into

space this year just came back with their eyes twice as big and, you know, just couldn't -- just -- you know, it was -- it was so exciting that i'm really looking forward to going. >> there's only in human kind only 570 odd people have ever been to space. >> wow. >> and so just virgin galactic alone will double that number. >> is there a little part of you, sir richard, happy you beat out the other billionaires in terms of bringing the first publicly traded space company to market >> they're doing very well i mean, i think -- it's quite an interesting example. elon started with i think his company is worth about a billion, you know, the space company, now worth about $30 billion. i mean when one thing we haven't tapped into is the government money for, you know, which elon and jeff have managed to do quite well i think in the future that's another whole upside for virgin galactic i honestly don't see it as a

race i think it's -- we're all doing things slightly differently. you know, what they're doing is extraordinary. i think what we're doing is extraordinary. we'll remain friends. >> that was such a nice way she asked it i would have asked it, is this all about your ego, sir richard, to try to beat -- >> he's a nice person. >> to beat bezos and -- >> that's probably how i would have asked it. but you -- >> i'm sure -- >> you're british and laid back in how you explain things -- >> i'm sure that we all have a little bit of ego in us, but i think, you know, the thing we get the -- the most satisfaction from is creating something unique, special, you know, to be able to watch -- came in on virgin atlantic, to be able to talk to the passengers, have them say to me, you know, i've never flown on virgin atlantic before it's that kind of feedback that makes this deal. >> we'll talk about huge car

bonn footprint that you're generating, but thanks -- >> i'm happy to. >> said at the end. >> unbelievable. >> after you started it. >> and my friend chamath palihapitiya thank you, gentlemen >> still to come this morning, president trump ramping up the pressure on the central bank saying yesterday the fed has no idea what it is doing. the latest in a series of attacks. >> the fed is very, very destructive to us, even without a fair playing field, we're winning. >> i'm not happy with what he's done i'm not happy with the fact that they've done quantitative tightening. >> the fed has not been of help to us at all. >> we don't have a fed that knows what they're doing. >> we'll discuss the fed's role and jay pollwe's upcoming testimony. "squawk box" will be right back.

still to come on "squawk box," futures pointing to a lower open ahead of fed testimony from jay powell. speaking of jay powell, should the fed remain independent the president lashing out again against the fomc stance on the

economy and rates. we'll debate that issue. later the man who has the ear of the president when it comes to the economy, hear live from national economic counsel larry kudlow in the 8:00 a.m "squawk box" will be right back. we built it to help them go beyond. because beyond risk... welcome to the neighborhood, guys. there is reward. ♪ ♪ beyond work and life... who else could he be? there is the moment. beyond technology... there is human ingenuity. ♪ ♪ every day, comcast business is helping businesses go beyond the expected, to do the extraordinary. take your business beyond.

welcome back to "squawk box. let's dominic chu. one stock will have a bigger effect on the dow, that's 3m, shares lower by over a percent premarket, the conglomerate behind scotch tape to filters, downgrade to a sector perform from prior outperform. the target price to 176 from 207. they cited their recent string of guidance cuts and continued weakness in china and automotive and electronic segments. they reiterate that 3m trades compared to peers. shares of square up fractionally over 10,000. the processor gets an upgrade to market perform from a prior under perform. they think the negative case for that stock that led to their janua janua january 29 downgrade played out. they don't see another potential negative catalyst on the horizon. end with shares of snap, which

are lower by around half a percent, 20,000 shares premarket, despite an upgrade for target price by credit suisse, to $18 from 15 the parent of the social media company snapchat, they keep their outperform rating citing better growth trends and advertising markets and platform costs. shares up 175% this year to date still about half what it was, mike santoli, in march of 2017 post-ipo. >> quite a ride. looks like the 3m move coming up, the fed's role in the economy and in the next hour, a big interview from the nation's capital, larry kudlow, live from cnbc's capital ehae.xcng "squawk box" will be right back. these folks don't have time to go to the post office

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i don't understand why the fed is independent, to be honest fiscal policy is not independent. military policy is not independent. social policy is not independent. why should monetary policy, this very powerful tool, to control the economy, not be subjected to democracy, just like every other instrument of government i mean it should be controlled by the president, by the legislative and the executive branchsz it's not >> that was art laugher yesterday here on "squawk box" talking about the trump economy and the fed. markets are gearing up from testimony from fed chairman jay powell, that is happening

tomorrow steve liesman joins us with more on that. >> the idea of central bank independence being challenged like no time in the past several decades. saturday turkey's president fired the central bank chief and there was little criticism, notably none from the united states in the u.s. president trump routinely criticizes the fed raising the prospect of firing the fed chief if he doesn't cut interest rates the hayday of central bank independence lies behind us. not only true for emerging countries like turkey but rich nations like the united states in a world of rising population, pressures, low interest rates and bloated balance sheets independent monetary policy increasingly looks outdated. we could talk forever about t implication of the fed's independence a weaker currency and higher interest rates since creditors to the u.s. might be less sure the feds has their back.

for now, it might mean lower rates as the fed and other central banks move to stave off criticism and other drastic actions like giving the politicians what they want >> this is getting. >> it's getting -- >> interesting. >> from her rasy to we're going to have a couple guests on now, one which says milton friedman would have been with laugher talk more about whether the fed should remain independent here now steven hanky, cato institute, professor at johns hopkins institute for applied economics, chris campbell, former assistant treasury secretary and the trump administration feels differently, strategist at duff and phelps steve, go back and look at some of not only milton friedman's writing, but also talk about rand paul and you think this is not hair rosie, in the current unit it's not insane to think maybe the fed should not be as independent as we have viewed

them in recent decades >> yes i agree with friedman. friedman concluded in 1962, he said, the case against a fully independent central bank is strong, indeed it's the same as the line i like, the former french prime minister and president, he said, money is too important to be left to the central bankers. rand paul, of course, is on this page because of the audit the fed idea now paul's audit the fed, that's taking just a look at the fed and what they're doing,in othe words it's a good audit, a good financial audit, which they're not really audited now in a financial sense, and also you would be auditing their monetary policy decisions which have been exempt from any kind of audit or oversight since 1978 my view, it's like a private

corporation. you have a board of directors. the board, the rule is, nose in, fingers out. that's the kind of approach that paul and i and milton friedman would suggest would be appropriate. and it's in principle, the same as what laugher is saying. exactly the modalities laugher has in mind, i don't know. paul, we know, exactly what he wants to do because he has a bill that he's reintroduced in january of this year, audit the fed. >> chris, it's like pick your poison for me. we can go with a group of unelected academic bureaucrats or with politicians from both sides of the aisle, everybody would want to keep rates at 0 as long as their party was in power. >> i worked in washington for a long time. i tend to favor -- i know and love a lot of politicians -- >> it's the worst of pick

your -- >> i think i would tend to go with the economists that will take a longer view on the economy and perhaps not be subject to the daily machinations of the market and make some decisions that are good for the long term of the gdp and our economy. i love the politician, they're great, i just don't know if they're the ones we want making the decisions. >> you understand that in the past, if you are too ivory tower-ish, don't live in the real world, i mean i hate to say it, but trump sort of -- and i don't know how we ended up being on to something a year ago with this, but what seemed like her rasy when he was saying it and self-serving when he started, suddenly a lot of people have come around to his way of thinking maybe they shouldn't have raised and been more accommodative. >> working for this president, he's more strategic than people give him credit for and his team are as well.

i'll say this, the fed's independence is important. i think if we erode it and put monetary and fiscal policy together it's a challenge. i think you have possibly from -- >> steve hanke, how do you respond to that? does that -- i know you've thought -- it's nuanced and you thought of these issues. >> well, the rand paul bill leaves the fed independent he's basically saying we better look under the hood and see what's going on. for example, the great recession, if we looked under the hood to see what fed was doing, they weren't looking at the most important price in the world which is a dollar euro rate from july to november of 2008, the dollar soared 24%, gold crashed by 22%, oil crashed by 57%, the cpi went through the

floor. the fed was way too tight. no one has ever looked at this to see what was on their dashboard. we foe the dollar/euro rate wasn't on their dashboard. look at the lehman bailout the fed has covered that up completely lehman, under the federal reserve act, section 13-3, can and should have bailed lehman out. lehman was solvent i it was illiquid. it had capital read larry ball's book published by cambridge university press, where he lays it all out and this should be laid out in an audit the fed kind of thing looking under the hood what happened? what did we do wrong now, the fed has dissembled everything and no one has a clue about the lehman fiasco, the big

blow that kept us under water for many years in the great recession era. >> and you can take it all in. i understand in a five-hour play lehman chronicles or something, which -- >> i heard that. >> man, i don't know i need something to get through that anyway, steven hanke, thank you, chris, steve liesman as well. another big interview still to come here on "squawk box. cnbc's kelly evans speaking live to national economic council director larry kudlow. his comments and market reaction is straight ahead. they're changing by the nanosecond. that's why cognizant created a unique engineering approach to design and build new digital products. learn how cognizant softvision designs experiences and engineers outcomes. ♪ cool. ♪

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this hour on "squawk box," larry kudlow, live an interview with the national economic council director on trade, taxes, the fed and more. >> taking flight richard branson's virgin galactic space tourism company planning to go public by the end of the year. and the year of the deal, as we get ready to reveal america's top state for business, a cautionary tale that may have given too much to attract jobs and manufacturing. the final hour of "squawk box" begins right now ♪ this is ground control

♪ you've really made >> 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 with melissa lee and mike santoli becky and andrew are off today futures down almost triple digits they are down 100 points on the dow. the s&p indicated down 11. nasdaq indicated down about 35 this would be the third straight day after the jobs report of pulling back a little bit from recent new highs treasury yields quickly, take a look. i think based on friday's numbers too, those have now moved solidly back above 2% on the ten-year investors might be talking about today, we don't want to

presume, investment banks, piper jaffray and o'neill, announcing a merger agreement worth $485 million. the company will be named piper sandler companies. piper jaffray will pay $350 million in cash to sandler equity holders at the time the merger closes and agreed to provide long-term retention incentives richard branson's space tourism company virgin galactic is planning to go public later this year. the billionaire's firm will list shares as part of a merger deal with a special purpose acquisition company, created by venture capitalist chamath palihapitiya the last hour on "squawk box," branson made the case for the space tourism industry as a business >> the market is enormous. the amount of people who would love to go to space is enormous. and once we've got a lot of spaceships, which, you know, i mean the float will hopefully

enable us to build a lot of spaceships, the price will start coming down and increase the market even more. >> all right virgin galactic expects to be profitable within two years of its public listing and its first tourist flights. what do you think? >> the float, he said, should enable them to build more spaceships people put their money up for deposits, that's the float. >> profitable within two years >> he suggested that profitable within two years. >> i don't see the reason to doubt it, right. they know the prices, they know what it costs to take somebody up longer term is the big question. does it become transportation as opposed to -- >> mass market as he predicted that slijdseemed like a term ofa path later on. >> bring the price down. better not have mishaps ever. >> space is big enough for at least three companies at least three entrepreneurs. >> unless just being nice about it. >> yeah. >> he was differential about

that i think -- >> he doesn't -- >> they always do. >> hong kong's leader says a controversial extradition bill that sparked the recent demonstrations in her words dead leader carrie lam said there's no plan to start the legislation and early work to amend the bill had been a failure she said the bill is in the coffin, the bill is dead sounds worse no one needs to worry there will be tactics to resume this bill she said this in the legislative council term. pepsi reporting top and bottom line beats this morning for its second quarter the stock you see there indicated open up 1% actually after a strong run this year sara eisen spoke to the cfo and joins us with more >> so the big headline, like joe, people love their salty snacks pepsi also owns frito-lay, doing

nicely you mentioned the top and bottom line beats the other highlight of the quarter is organic revenue growth up 4.5% it's the third quarter in a row where pepsi has turned up the growth notch since their new ceo has taken the helm how are they doing it? >> they're reinvesting and spending a ton right now on marketing, on streamlining manufacturing, on sales people on the ground, and that is leading to lower earnings, but higher sales growth. the other highlights i would call out from the quarter to give you a snapshot of what we consumers are doing right now, smaller packages pricing was the growth here. it wasn't that pepsico was raising prices on consumers, it's that people who go out to grocery stores are increasingly buying the smaller packages or at least the ten packs or 12 packs of the smaller snacks and as a result pepsi gets a little more price out of the consumer than a big bag of chips or frito-lays

the other thing i would mention -- that goes for mini cans with pepsi doing very, very well quaker foods, they own quaker oats, returned to growth, having its best quarter in years, not so much the oatmeal but other brands under the umbrella like aunt ja my ma, if you spend a lot to market you can get the brands back to growth and then the other shoutout i would give is buble, the sparkling water. it just launched early 2018, really exploded in growth and i think the only thing you need to do is look at a chart of national beverage which makes lacroix, basically straight down to show how the big boys, the pepsis and coke and especially pepsi with the buble and the new flavors is taking a ton of market share i asked how the economy is doing, they always have a good handle on spending, international looking strong saudi arabia was a little soft, all the key markets, russia and uk looked good asked about the u.s., in his word solid any signs of recession, he said not in these results we'll talk to hugh johnson on

"squawk on the street" in the 9:00 hour. we'll talk to the ceo of general mills because it's interesting, the pepsi number was a real standout not just in consumer staples but the overall food space. food has not been growing. big companies haven't been adapting pepsi has really been an all star and mike, you mentioned the outperformance, up 20% this year. >> you saw the branson interview, will you say space space or will you come up with a new word -- the beverage space, will you call it a sector? you can't say the space space. >> space frontier. >> you're an expert on all the things that these like coke and pepsi. is the future about just getting better at execution and shelf space and all that and -- or is it innovation with new things as tastes change? i'm wondering, smaller bags of

unhealthy food or bigger bags of stuff i don't really want to eat because it's made out of things that are good for me i think it's everything in moderation, right? >> moderation, for sure. >> people still want their pepsi and they want it flavored now. >> their doritos which are -- >> the smaller packages are better it's a combination, i think you hit it, of innovation, which drives pricing and drives consumers to buy more, right, and also, e-commerce and digital and hugh johnston was huge on this building a big office in manhattan, hiring a lot of young talent to try to drive more personalized marketing and better e-commerce relationships with kroger's and walmart. >> you've tried everything haven't you in what do i -- >> the naming hot white cheddar popcorn the smart food that pepsi makes. send a batch of -- >> i try them all and none of them -- >> it's good. >> the healthy ones are like, you know, eating packaging material half the time. >> so just get the smaller bag. >> get us 100 calorie pack of

whatever you want. >> all right. >> we have breaking news here. thank you. >> breaking news i could talk about this -- >> a multibillion dollar deal. >> $70 a share. >> i did that on purpose, joe. >> $2.6 billion is the price tag there. acacia up 40% in the premarket session on this deal so again, cisco buying acacia $2.6 billion the price tag. >> look at this. larry kudlow >> when we come back, it is larry kudlow time. he will be live. we have an interview with the national economic council director coming up in just a few minutes. from cnbc's capital exchange event in washington, d.c., all of kudlow's latest thoughts on d , rks d e fsmaetanth feafter a quick break. "squawk box" will be right back.

. we were waiting comments in a few minutes from director larry kudlow he'll join kelly evans at the capital exchange event in washington, d.c. we'll bring you live coverage when the conversation begins you're taking a live look at the stage. ahead of that joined by two guests to talk about the state

of the economy and what to expect when fed chair jay powell testifies before congress this week and more, seth hanlon, a senior fellow for the center of american progress and alex is a fellow at the american enterprise institute seth, start off with you, trump's attacks on the fed, they are corrosive in what way? i mean, larry kudlow has come out and said the fed will do what the fed is going to do. the president has his opinion. how is this corrosive? >> i think by threatening to fire the fed chairman and i think, you know, sort of over time this is really sutley corrosive of the fed as an institution and independent institution and another way that trump is really trying to undermine the independence of the fed is by who he is appointing or looking to appointing someone like judy shelton, who i think, you know, who was sort of adherent of the gold standard, just a couple months ago, now

for easy money, seems her only qualification is to do whatever is best for trump politically. this is a five-year term politics change. i worry trump is really focused on appointing people who are out for his political interest rates and not the long-term interests of the economy. >> how does jay powell answer that when he's on the hill he will get that in terms of the fed's independence. >> jay powell and the other members of the fomc have to put their head down and do their job -- >> excuse me alex and seth. straight to the capital exchange and listen to larry kudlow being interviewed by kelly evans >> okay. >> stronger than ever. >> veep brought notes with me. i have to fulfill tyler's mandate. >> how many days has it been in the white house now? how long >> i think i'm -- almost a year and a half. >> wow. >> yeah. time flies when having fun i will say, this is the most wonderful job i've ever had. it's a great honor it's a great blessing.

and it's -- we get involved in everything, the national economic council is a heck of a operation. probably a bigger job than i realized when i first took it. very proud of the policies we'll talk about that in a few moments. but yeah, year and a half. it's quite remarkable. i guess, you know, in terms of the old cnbc duties and so forth, one of the things that's been an eye opener is so much international. the national economic council has a section which we share with the nsc, john bolton, who is a very old and dear friend going back to regan days, so i've been heavily involved in national security and especially trade. >> wow. >> trade has been the big one. >> before we get into that the first thing i want to ask you, larry, is after the strong jobs report on friday. >> yes. >> great jobs report much, much, much stronger than

expected how can the federal reserve still cut interest rates at the end of the month which the market seems to expect and which the president is still calling for? >> well, look, i think, you know, you know, tyler knows and others, one of my credos down through the years and decades is that rapid growth, low unemployment, solid job creation, does not cause inflation. does to the cause inflation. and so-called phillips curve has been dead for a very long time in terms of what you're asking, fair enough, but i would say you should be looking at the price indicators, not the job indicators >> we'll get that this week again. >> and yeah, i mean you've got your reported pce deflator and cpi number this week, in the

market watching price signals is a better approach to the fed look, this is analytic i'm not here to bash the fed and i respect their independence jay powell is a friend we have lunch every month, as an old forth. they'll do what they're going to do i'm just saying analytically i look at things like inverted yield curve, which i find somewhat troubling and i think as a signal to the fed, if anything, it's a deflationary signal, just something like the five-year break evens, lot of jargon here, but i think this audience understand that jargon, but they are running at like 1.5%, which is the c pi break even, pc deflator, 1.25 or less,

their target is 2%, and actually, you know, when you -- goods prices are by and large deflating, commodity indexes have been sloping lower for quite some time. i'm just saying, on that basis, watching price signals, not jobs, there is room for them to, as i have said, take back the december hike. >> sure. but what about the people who say they only have what's the number eight cuts to give, why give one now the stock market at an all-time high, unemployment at all-time lows does it seem like it's really that urgent right now? >> look, again, i would say they ought to stay with their price targeting, they ought to throw away their phillips curve, they ought to give long vacations to senior board staff who run those phillips curve models, i also

think -- >> go ahead, yeah. >> respect to the world economy, perhaps we'll touch on that later and these very low interest rates in the marketplace, i don't have a problem with an insurance policy i think that's something to consider i also think very good wage gains, overall, 3.1% the last 12 months i think, but when you dig too, that things like nonsupervisory workers, manufacturing is higher now, i was at the beautiful dinner hosted by my friend steven mnuchin and the treasury department in the old cash room, about 100 people plus including potus, my point is there are a lot of ceos there talking about how strong wages are, but the

workforce is earning it because the productivity rates got back to about 2.5% yearly all that is fine you can take out an insurance policy again, the price signal suggests, as they have all year, going back to last autumn, that last policy move in december was unnecessary and they could take it back, call it insurance, call it price level watching. i don't -- it's funny, try as i might, for so many years, so many ways, and so many shows, so many interviews and so many commentaries, price level stability at a steady dollar is what the fed should aim for in my view. again, this is an analytic i'm not here to -- >> but you're -- >> not -- not employment

i mean i knew -- when the jobs knew bunched up as you said and beat all the expectations, which made the president very happy when they gave him the news, i love people working, more people working is joyous, july 4th week, being fulfilled in america, life, liberty and pursuit of happiness is not inflationary and should not be crushed by central banks, i just discard all that stuff. >> if fed chair powell -- your point is very different than the fed orthodoxy, a lot of academics and economists have -- >> but you know -- >> is the president going to say, that he wants somebody as fed chair perhaps with your support on this issue, who sees

the world and understand the world that way and not powell? what kind of discussions about saying, powell gets put into a different position, the jockeying in public is pretty clear, the way that other members of the fed are out there with their, you know, points of view or their -- their -- they are clearly messaging to the president, you know, hey if you're looking for someone else to do the job i'll do it >> well, that's an interesting last point you make there. i've been leading the search, the selection for the two open seats on the board, and i think you're quite right, there's no shortage of candidates, you're quite right. one outstanding candidate is quite interested, but he's already running a federal reserve bank and wondered if he could be a governor and continue to be the president of a reserve bank. >> talking about the bank of england or european central

bank >> i'll never say. it was -- i had to exercise some executive guidance and say i didn't think that was really going to happen. >> could someone like mario draghi be our fed chair? any reason why not >> do you have to be a citizen >> i'm asking you. >> that's a delicate point nowadays he would -- is ecb, where is it in frankfurt or bruise sells >> frankfurt. >> you've got mark carney, apparently might be elevated to the imf leaving the bank of england. i don't know if the president feels warmly about his tenure. >> we could probably -- i'm not sure where you're going, but we could probably give them green cards. i don't know if that would work. that was a joke. just kidding i don't know mr. draghi. i know mr. carney.

my statement doesn't necessarily mean overseas. i would simply say that to your other point, the fed and the new management at the fed in the last year or so, is not so far from the view that i'm expressing i think that chairman jay powell and vice chair richard clarida, have in their public speeches, expressed a lot of skepticism about the models to which you're referring. a lot of skepticism. i know some of the messages are mixed and probably got lots of brilliant fed watchers out here, but if you read carefully and listen carefully, i guess jay will be in front of congress this week and we'll hear some more, they're having a lot of questions about some of these, you know, what should the

unemployment be, what should r star be, p star be, the right neutral rate, so i'm not so sure that view i've expressed on price signals or the views that the president has expressed is necessarily so far from where the fed is. >> jay powell's job is safe? >> yes i believe it is. i will say that. there is no effort to remove him. i will say that unequivocally at the present time, he's safe, yes. >> when art has been saying that monetary policy should be accountable to people, the same way that any other kind of policy is, especially through the executive branch, when he says that maybe the fed shouldn't be independent because then it can't be accountable to voters, is he right? >> you know, i haven't talked to art. i read some reports about his recent interviews. you know he just won the medal of freedom, presidential medal

of freedom which is fabulous great. such a distinguished person. no surprise, not breaking news, but he's a dear friend of mine and a mentor i haven't really had a chance -- i better call him today and find out what exactly he's telling all of us on this point. let me say i personally believe the fed should be independent, but that word independent, it doesn't mean they operate from another planet as arthur said, the fed reports to congress, that's in the constitution, and the fed is appointed or governors appointed by the president, so i think in a day-to-day sense certainly thei they're independent but that doesn't mean they shouldn't listen to advice from their

elders if you will i think that's what art is saying i'm not 100% sure. i'll leave him to clarify that. >> he just says why should monetary policy, this powerful tool to control the economy, not be subjected to democracy just like every other instrument of government it should be controlled by the president, legislative and executive branches, but it's not. >> well, i think that's an interesting point of view. i think that's a good point of view it is a democracy. as i said the president appointments the governors and they report to congress. congress has, if you want to get constitutional, congress has the authority to set the value of money. you don't hear much talk about that nowadays. throughout american history, whole presidential elections have been fought over the value of money and tying it to gold or silver or some such. art would be right i'm not sure operationally what that would mean. in an operational sense and

traditional sense, i support that independence. >> as you can tell we have been watching national economic council director larry kudlow speaking with kelly evans at cnbc's capital exchange event in washington let's bring back our panel for some reaction. seth hanlon, senior fellow at the center for american progress, alex brill is a resident fellow at american enterpri enterprise institute i don't know which you found most compelling, mr. kudlow appreciates fed independence and would necessarily go with his colleague and friend art what did you make of his comment? >> yeah. i mean larry said a couple things i think we hear what we want to hear what i wanted to hear was his respect for the independence of the fed and he said that on more than one occasion in his remarks just there i think that he recognizes the importance of the independence

he maybe danced around comments from his friend art lafer taking a different view of this, of course >> what do you think, seth >> i mean, look, he says all the right things, i think about fed independence the constant question with this administration is, is he really speaking for the president or is he really speaking for the president today? so, you know, we have to look at the whole pattern of behavior from donald trump, his appointees, tweets, comments about the fed and not just what larry kudlow said. and i will say, i mean, he said that wage growth is very strong and we're not seeing inflation, that's true on inflation, but one of the reasons is that wage growth has been kind of disappointing. it's, you know, sort of in real terms barely over 1% even with unemployment so low. that's one of the reasons we're seeing, you know, inflation in check. i agree with a lot of things he says about what the fed should do, but i think it's partly because of wage growth in the

united states is so tepid and seems to be decelerating >> is that what you're seeing? i thought we were seeing a little bit better wage growth? >> yeah. i think we are so i agree with seth that, you know, it could be better i'm not sure that i agree it's deaccelerating you know, we've seen an acceleration, i believe, in wage growth and i think we should have expectations for that number to be better and hope that that number continues to improve. that is certainly one of the things that folks are watching here it's difficult to measure this inflation issue, of course, and so it's obviously easier to know what our nominal wage growth trends are than our real growth trends i think we're seeing some good news, particularly on nonsupervisory workers. >> i'm going to leave it there thanks, seth thank you, alex, as well >> thanks. coming up, shares of netflix trading higher this morning. the company announcing strong viewership numbers on trge"sanr

things." what investors need to know when "squawk box" comes right back.

♪ welcome back to "squawk

box. crossing the wires ibm closing its acquisition of red hat for $34 billion. ceo ginni rometty and jim whitehurst will join "squawk on the street" at 9:00 a.m. eastern time. >> news on one of the f.a.a.n.g. names. netflix saying in a tweet the newest season of "stranger things" has broken its record for viewers in the first four days of release with almost 41 million household accounts watching, but netflix continues to selectively release viewership data. does the streaming giant have more to gain by hiding its full figures? joining us on the newsline, piper jaffray -- actually piper sandler now analyst mike olson did you see that news, or did you just wake up >> i did see that news good morning >> when do we need to change it on your -- we haven't changed it we'll change it. is there anything to this and i will tell you that, i don't know, i tried to watch the jenner in aniston movie, that was supposedly going to do 120

million in theaters no way those viewership numbers accurately reflected what that would have done in a commercial release what about here? >> yeah. it's hard to say this is a different way of measuring audience, but what i can say for sure, another example of how netflix is using data to predict the content that the user base will be most engaged in and really engaged user base sticks with the service and is willing to absorb future price increases it's a good thing. you have more than 25% of all netflix subscribers have watched some portion of "stranger things" season three which is quite remarkable >> that really is. my son, he has been watching that already it is a big advantage to get that immediate feedback that a lot of media entities don't have, and that can help with future content and commitments and everything else. >> absolutely.

i mean one interesting thing you mentioned murder mystery and the difference between this and recent success of that, netflix original, is murder mystery was obviously an entirely new content and the company was correctly able to craft something that subscribers wanted to watch. this is an example of the company using their data to determine which existing series to continue to invest in and obviously "stranger things" was one of those and there's more to come later this year with the new season of orange is the new black and a couple original films, "irishman" and a film called "six underground". >> no doubt netflix uses the eur data to know what people's habits are, but they serve up the show to everybody, put it behind whatever you just watched in the queue, and that's why i wondered their use of publicizing the numbers seems almost just like pure tweaking of the competition, p.r. all that matters is subscription

numbers. we're going to get those every quarter. that's what investors are paying for. so along the way, netflix just kind of gets to boast and use its own metrics? >> yeah. i think that's right i think it's good from a competitive standpoint and also i just think it's good marketing. like if you are not a netflix subscribers and seeing that such massive numbers of your peers are watching this content, it may create a fear of missing out situation and so i think it's good marketing, but it's also definitely good from a competitive standpoint it's good from a competitive standpoint to attract talent as you know they've used these metrics to attract talent in a way that's been successful over the last couple years. >> mike, how do they calculate if viewers actually watch "stranger things"? how many minutes to i have to watch to be counted as a viewer that's watched "stranger things" or any other show they're talking about? >> the benchmark they've used is

70%. if you've watched 70% of any content, so in this case, 70%o an episode when they were talking about the 40 plus million viewers of any episode and 70% or they said the full season for the season and then for like a murder mystery, it's 70% of the full film >> everybody is going to be in this business eventually, mike i'm wondering is this helping with a little bit of a moat do you think for netflix? >> yeah. i think so i think as you look out over the next, you know, few quarters and years, there's certainly going to be more competition with disney and warner and others but at the same time a lot of content dollars shifting from at least consumer spend dollars shifting from traditional tv over to streaming services i think people are going to be willing to subscribe to multiple different streaming services as a larger percent of that pie shifts to the streaming aggregators. >> has anyone told jaffray yet

that he's -- >> i don't know. >> broken the news i mean it's happened to all of the firms. >> they always lose. they have to lose a name, otherwise it's too long. >> piper sandler. >> the whole jaffray family is like what? >> o'neill >> and o'neill yeah. >> both mourning >> they're off with all the rest. >> and ef hutton ef hutton. anyway, thanks, mike you're handling it well. we'll see you soon >> take care. we're getting ready to unveil our 13th annual rankings of america's top states for business and if you want to know what's at stake in the war between the states for business and jobs, just look at some of the massive economic development deals being signed scott cohen is in ourmystery top state with exclusive new details on the biggest deal of all. scott? >> yeah. we're going to reveal the top state, where i am, 24 hours from now right here on "squawk box. it really is something that we've been talking about we look at in top states as these big deals.

the biggest one of all, at least the biggest crintive de incenti in the u.s. is the foxconn deal in wisconsin $4 billion or so in taxpayer money at stake a lot of questions about that and for now, wisconsin is filled with buyers remorse. >> reporter: it is not what was advertised. >> this is the eighth wonder of the world. >> reporter: a $10 billion factory building giant video displays, employing 13,000 people a year later, still no plant and a tiny fraction of the jobs. governor tony evers elected last year as part of the backlash is trying to adjust the state to the new reality. >> we now have clarity, exactly what the first phase is going to look like. >> reporter: in his first national interview about the project, he says he and the company have now reached an understanding. >> they are going to be making smaller items, probably tablets, glass for tablets, and phones and things like that

they're looking at i think 1500 employees, which certainly is less than the original thought. >> 1500 is a far cry from 13,000. >> we will take one step at a time. >> reporter: foxconn says it will keep its promise eventually >> i talked to our corporate and they have reiterated that we are committed to 13,000 jobs. >> reporter: if it doesn't hire all the workers it doesn't get all the money. close to a billion is already spent on infrastructure and land ken mahony's house is the last one standing >> the homeowners didn't know that we would be directly impacted until the day of the public announcement. >> are you comfortable with how this was done? >> well, no. i never have been. it became part of the campaign, frankly, about trump coming and saying it's the eighth wonder of the world and all that stuff i think it set people up for expectations that probably could have been handled differently. >> reporter: and an example of that, you heard governor evers

talk about 1500 people next year when they supposedly start production that is still short of the level that foxconn needs to start collecting those incentives. we've got a lot more on this, including the full interview with governor tony evers at top states.cnbc.com. more about foxconn and deals and incentives which figures into our cost of doing business category in america's top states for business where am i does this give you clue. i am in the top state for business we'll give you our first top state's diabolical hint. it is our lips are sealed, our lips are sealed. so that song is going to be in your head for the rest of the day. we'll have a lot more coverage coming up in the top state revealed, 24 hours from now, right here on "squawk box." >> the worst shot you've ever given us there where -- >> the worst meaning the best. >> i can't read what is on those tablets. i mean, i can't -- are you in a

church where the hell are you are you praying that -- why do you say that >> interesting. >> santoli has a guess. >> but -- >> of course he doesn't get to -- >> tomorrow morning. >> oh. >> yeah. we don't want to -- this is always fun did you say you're -- you're interviewing -- who are you interviewing, the governor of wisconsin? did you say that what did you say >> well, we just heard from him. >> okay. >> i was saying that, you guys speak the same language kind of. is that chicago? where are you from >> they froze the shot maybe because he was on the verge of revealing something that would give the whole thing away. >> oh, my gosh. >> took him off the air. >> that's sad. we lost the -- did you hear that >> we'll get more hints -- diabolical hints >> remember the alamo, right, santoli. >> i would like to try to remember it. seemed to be in a church coming up, key data from

boeing later this morning. orders and deliveries for june and the importance of measuring the company's 737 max planes after a big order last month a live report just ahead with all you need to know ahead of this morning's numbers stay ted u're watching "squawk box" on cnbc fun fact: 1 in 4 of us millennials have debt we might die with. and most of that debt is actually from credit cards. it's just not right. but with sofi, you can get your credit cards right - by consolidating your credit card debt into one monthly payment. you can get your interest rate right - by locking in a fixed low rate today. and you can get your money right. with sofi. check your rate in 2 minutes or less. get a no-fee personal loan up to $100k.

some important numbers from boeing due out this morning as the company tries to get back to normal following the two fatal 737 max crashes. phil lebeau joins us now with more hey, phil. >> every month, melissa, boeing reports orders and deliveries and for the month of june, we'll get those numbers later on today. mainly the focus of what's happening with the 737 max no firm orders, remember the grounding was in march, not in april, not in may. will this be the third month of zero orders and then the question is, what's the strength of the backlog in terms of the 737 max it's at about 3400 planes, dropped down about 68 planes this year, partially because of a bankruptcy of an indian airline this year that planned to order about 75 maxes that's the focus take a look at shares of boeing versus airbus. typically these guys are moving pretty much in lockstep. they have split within the last

month with airbus outperforming shares of boeing certainly in the last month back to you. >> phil, thank you very much. let's take a closer look at boeing shares. joining us to discuss what charts and technicals are saying, chris, partner and strategist we were talking about how remarkably sideways boeing shares have been for a year and a half, absent the spike into march. >> 18 months of no price progress after a 330% gain, the prior two years. the question is, is this just a pause in a longer term uptrend or the start of a change for the bulls you have to defend the 330 level. those are the june lows. it's been a key test as far as the market call is concerned, boeing is an important weight here, 8% of the industrial sector. is this a commentary on the market or just on that one stock? if you actually look at industrials, equally weighted, industrials equally weighted are

improving here we think this is a boeing problem, not an industrials problem, not a market problem. there's actually some improving charts within industrials, cat getting better, deer getting better i think the broader picture is okay with boeing on the sidelines here. >> the broader pictures for industrials looks okay, improving, that would suggest that they may help lend support to a market that had previously been relying on some of the more defensive groups where is the overall market trend look >> we've seen the modest turn over the last couple weeks a couple ways to look at that discretionary staples, semis, versus software. all starting to see turn there when you look at industrials in particular, the sector has the highest r squared with s&p when the industrials are going up the market tends to go up last week about 60% of stocks make a new high. under the surface the participation is actually broadnd out in that sector and we welcome that. >> what does that mean for interpreting the mild little pullback we've had over the past

couple days for a record high? >> what's been telling there's been no selling pressure on the downside even on friday, which was a sharp down day at the -- you had more advancing stocks than declining stock, very similar setup yesterday, if this is going to manifest into something more serious we would expect tog pressure and that has not shown up yet i think you have to give this market -- look at it so 2960 area, good support, be a buyer or pullback, the trend is still up. >> do we need transportation to confirm this rally >> what is interesting about small caps in particular if you look at the 40, 50 years, small caps tend to underperform in secular bull markets, one of the most misleading things you would ever expect. look at 82 to 99, small caps were laggards that entire 20 year secular bull market i'm not that concerned that small caps aren't leadership i don't want them going down but i'm not that concerned that they aren't leadership if you look at the transports, quietly some groups are getting

a little better. airlines in particular over the last -- >> real bifurcation. >> air freight and trucking may be starting to turn here a little bit but i think the airlines in terms of what is is timely is worth a look here. jetblue, delta, ual, all getting better >> treasury yields going higher? >> i think we're at a point here where there has been a buyer's climax in bonds. you look at flows, the tld, the long bond etf, you're in the 99th percentile of all observations over the last number of years. you've seen an extreme in flows. you started to -- i think see some extremes in prices. notable to me the banks did not take this last leg lower with bond yields. citigroup, goldman sachs turning a little bit i think there is some equity market signals that would suggest you're at least close to some type of a bottom in bond yields >> pepsi reported earnings better than expected top and bottom lines this morning. what do you see for staples in general and for pepsi in

particular since it doubled the performance of its closest competitor, coke >> i think you look at staples, it is such a bifurcated sector look in may, when the market was weak, but you own the wrong staples, colgate and clorox, you weren't rewarded for being defensive versus pepsi or coke which has been good, walmart fantastic, costco has been quite good it is one of the most bifurcated sectors in our work. i think broadly the defensive trade that we saw so dominant in the first half of the year is showing some signs of exhaustion and that may be a message on bond yields here as well. >> if you're seeing this subtle turn toward more cyclical areas, what does it mean for the kind of formally bulletproof big cap tech faang type stocks >> that's the big question here. >> they have worked well in different environments >> faang is another area where you're actually starting to see some bifurcation facebook acts great, despite the bad stories and the quietly acting better. amazon on the verge of new highs. apple not so much. so it is a very bifurcated

group. as far as cyclicality goes, watching the semis and the software stocks i think will be a very telling barometer as to whether or not the economy picks up in the second half of the year we have started to see that inflect positively over the last couple of weeks. we started to see, i think importantly, discretionary outperform staples here, high beta outperforming low beta. those are the market tells that we want to look at. >> all right, keep an eye on them, thanks a lot white house economic adviser larry kudlow, former jim cramer partner, speaking now in washington here's what he said earlier this hour about fed independence. >> operational sense, traditional sense, i support that independence. but i also believe in a democracy that the president has the right to make his views known. as do members of congress. and other interested parties.

>> new york stock exchange, life after kudlow and cramer, tough for larry, for a while finally i think he's at least -- not quite matched his prior stature, but not too bad, right? >> yeah. i mean, look, i think he made some great points. i think he really put in perspective the long tradition of presidents being critical of the fed. and house and senate be critical of the fed i think that was really good because there are many things that this president does that have never been done and then there are other things that people are saying are outrageous that aren't sure, i think powell might have to assert -- listen, i won't listen to him, has that goal, but larry always adds a noninflammatory perspective and i think all of us who invest in stocks feel better after larry speaks. >> he can talk to robert rice and they look like best friends. i don't know how -- we can definitely learn from that, jim.

>> with all due respect, you lazy -- >> yeah. >> exactly >> you love it eviscerates you and he's your pal. but what i think that larry does is put things in context to make you realize, it is not a cowboy economy. it is an economy actually quite strong, but has little inflation. and the fed has a mandate and if the inflation numbers are weak, it is okay it is okay to admit that the december hike was wrong. now, of course, larry is too diplomatic to say that the president is not. >> right and that -- we have talked about how we would rather have jobs than lower interest rates. do you care if they take back the december hike? i didn't like to respond it is not a lot the last two or three days, but just seems like the wrong -- >> i don't like to respond i think what powell has done is say, if we get weaker numbers, i can shift. i like it out there. i like the -- i didn't like the

rate hike. i'm with the president on that i think a lot of us are, look what the market did. the truth is, joe, i want it as ammo i'm not as concerned about what is going to happen these next three weeks. i am concerned about what the tenor is going to be now and year end if things get weak, we have got that in the -- in the back pocket why is that bad. it is good >> okay. jim, we will tune in at 9:00 to get more nuance, more color on everything you're saying we'll see you in a couple of minutes. don't miss an interview, just after the top of the hour on "squawk on the street" with pepsico cfo hugh johnston following this morning's earnings stay tuned "squawk box" will be right back. for your heart... your joints...

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the tech sector jumped 26% in the first half after similar gains the group tends to finish th

final check on the markets triple digits again on the dow, down 108 100 some yesterday, 40 on friday so it is percentagewise it is not even -- like 1% pullback from strong jobs number so far the ten year back above 2% after that we looked like we were headed into the 1s for a while. >> that's what you want to see, actually >> check out the dollar, dollar

index, quick look at that before i find out who is here tomorrow. are you here, santoli? >> yes. >> excellent. >> here the rest of the week. >> are you >> i am. >> wow did you draw the short stick or bribe someone? >> you know. >> a little of both. thank you for -- >> maybe one more than the other. >> a long day. thank you. join us tomorrow "squawk on the street" is next ♪ good tuesday morning welcome to "squawk on the street." i'm carl quintanilla with jim cramer, david faber at the new york stock exchange. big show this morning. in a few moments, ginni rometty and jim whitehurst also pepsi's hugh johnston as well, as they beat as well futures imemploy the third day in a row, though, of triple digit declines for the dow downgrade of 3m not helping today. road map begins with stocks in the red. fed chairman jay powell testifies tomorrow on the hill and