make sure you join us next week not tomorrow "squawk on the street" is coming up in four or five seconds this isn't the end >> the end for now. >> all right "squawk on the street" next. ♪ ♪ good friday morning. welcome to "squawk on the street." i'm carl quintanilla with jim cramer futures looking to build with powell's testimony in the books, we're going to look ahead to earnings and today's tweets from the president on everything from trade to facebook and libra. make sure you keep an eye on europe and on yields as consumer prices end up warm economic fears are climbing, but so are the markets

s&p and the dow look to make some history again today crypto again as we said in the cross hairs getting blasted from all sides and a surprise for snap we're going to tell you what has that stock moving higher this morning. stocks are aiming to make some history again dow and the s&p on track to set some new all-time interday records. a day after posting record closes including the dow finishing above 27,000 for the first time, jim. as, again, powell was the name of the game. >> yeah. look, powell is giving you what you want if you're a bull. there were some great lines where you said, look, remember what my job is my job is if we have an expansion, keep it going and that is so bullish because what he's saying is we have an expansion. it may be slowing. we've got to keep it going so we have to do some cutting. the part of the game with 25 versus 50 is a setup the bears are saying we need 50 so that the stock market does not run down they're not going to get 50. i'm disappointed

i think what powell is doing -- powell got -- he got religion. the powell bear -- he doesn't want another powell bear market. you don't want to be known as the guy that causes a bear market i think things are pretty good -- a lot of companies have to do with international. >> you mentioned japan came up a couple of times. clearly that's in his head you're right about his discussion of lower income workers and if you can extend this sweet spot of the economy and get some of those benefits to truly trickle down, that was i think some of the most important part of the testimony. >> yes i think that he is in sync with the president about the idea that there's whole towns that have been decimated because of trade. these people are like the late alan kruger talked about, this is the opiate generation there's this group of people who have lost their job and need to get jobs it's hillbilly, and i like what he's saying because he's saying it's uneven. there are areas obviously where people are being paid -- we're

in one, san francisco, people are paid a lot, but there are other areas where if you are in the auto business, you're going to be firing people. by the way, singapore gdp shrinking 3.4% for the quarter we have some countries that are really on the ropes. the german -- the daimler -- >> the daimler warning today. >> oh, my. that is just a gigantic hit. basf this is a huge company, for heaven's sakes so there is -- they flood our country with cars. i see that's the area where if i were jay powell i could say, look, i'm looking at the world trade as it comes from autos and it's terrible. he'd be right. >> to that point, peter navarro of course on our air earlier today saying that we're in a quiet period when it comes to u.s./china talks in his words, jim, don't believe anything unless you hear it from

light lightheizer or the president himself. here's what he told melissa and joe. >> we're in a quiet period we're going to have constructive talks to deal with the significant structural issues. my advice for investors is to be patient with this process. >> that got followed up by tweets from the president saying mexico is improving. >> yes. >> they worked on this and, again, he insists companies will move back to the united states. >> i have to tell you that i think that navarro really subtly was saying when i say that things are going just okay and they're not changing, mnuchin comes out and says they are changing so you have within the white house people who want to sell more goods and then people

who want tremendous change the tremendous change and sell more goods, i don't think navarro wants this constant war where he needs to sound things are going badly and mnuchin saying it's going well that confuses the mashts i know peopledon't understand this, but navarro is someone who cares about the markets. always cared about it. i used to have him on kudlow all the time he's a wild man. he wants jobs. he doesn't want jobs worked out by the chinese y. why is that? >> he tells consumers they won't pay for tariffs which consumers simply don't believe. >> david was push back peter, it's okay when peter gives put-back that picture of peter, obviously he's 20 years younger, who wouldn't want that picture on right now. i do think that we all kind of felt that there was going to be gigantic chinese buys.

when i press people in the white house, i keep saying, where are the buys and i've got to tell you, they better start buying some. >> in terms of ag? >> they better the president is one tweet away from saying, look, they're not -- they are simply not playing ball mexico is really playing ball. i'll tell ya, the mexican situation is rather extraordinary because it's what pelosi should want higher wages for mexico, therefore, making it so that the u.s. -- u.s. worker did not have to be pulled down or be taken away it is a terrific deal for america when it comes to that. i still can't believe the mexicans were wanting to do that mexico is doing very well. if the democrats run against it, i have to understand why it's right in sync. >> heidi heitkamp, no longer in office, said passage is important. >> wasn't that amazing >> yeah. >> that meant that she did not hate trump at that particular

moment that's -- isn't that -- isn't that extraordinary >> b of a has a line out, the consumer appears not yet phased by the trade war, even in the areas most directly impacted. >> that's because of watch that's because of walmart, amazon, target, costco, home depot. those prices have not gone up. some of -- many of the prices have gone down because they're going to these suppliers and saying, you know what, here's the price we are now willing to pay. because we have -- well, they don't say wiped out the competition, but every one of those companies in the acronym watch are companies who do not listen to what you say you're going to sell them, they say, here's the price and that is the big change in the u.s. economy they have scale. you get the darn tariff, our customers aren't we're going to make as much money as we always made. it's incredible the change in the u.s. retail economy, jay

powell and i have to go, unlike david faber, we have to go to watch. i just want to show him the prices i hope he goes to amazon prime day because you'll see things that are cheaper this year than last year that are made in china because amazon has said this is what's going to happen >> yeah. >> i think people don't understand the change. >> yeah. even goldman yesterday, tariff impact on cpi appears modest. >> modest. >> basically .01 percentage points this is on the step up from 10 to 25. they do see this -- there's more in the pipeline, they argue, but it's a lot less than they expected for june. >> when you meet for the ceos of the retailers as i've had, they've all said the same thing which is, hey, we've made it through this subtly they say we were not the ones that were hit and the customer wasn't hit. it's the supplier. it's levi strauss. you don't want to be pvh right

now. you don't want to sell -- i know the world's gaga for stanley, black & decker but home depot is going to decide how much stanley black & decker is going to get >> that's an important dynamic. >> these companies have won. they have won. they have truly wiped out the competition. this very moment where the smaller guy has to take that tariff and pass it onto the consumer and the consumer says, the hell with them, i've got my card last night i admitted that it's even more important than my elk's card and my elk's -- my elk's card is a ticket to heaven but my costco is making me -- my wife has the executive card. i'm telling you, they are paying you to take that there's no explanation for those zania shirts, $7 how does that happen >> bitcoin is the big story. last night the president tweets he's not a fan of cryptocurrencies and unregulated crypto assets can facilitate

unlawful behavior including drug trade and other illegal activity facebook's libra will have little standing and suggest they may need a banking charter if it wants to launch a cryptocurrency he finished by calling the u.s. dollar stronger than ever, both dependable and reliable. that follows powell's criticism of which he said there are serious concerns listen to mark cuban talk about this to our own deidre bosa. >> i'm not a fan because of what they're doing, not so much because of what will happen in the u.s. but globally. there will be some despot that gets upset that they can't control their currency anymore and that's where real problems start to happen. i'm not a big fan of what they're doing. i think they're way ahead of their skis on that but it's only in the talking stage right now so we'll see what happens. >> this white paper is getting pummeled. >> yes, it is, and i have to -- i'm going to take the other side of the mark cuban trade.

i think that what facebook did was put this out there it's a currency -- paypal is working so hard to bank the unbank unbanked i have to tell you if i were alphabet, we're going to keep it in the currency. facebook is making it. facebook is trying it. but the concept is mark's right about despot nchs they did not have a bank. that's something that every democrat should be in favor of >> sounds like maybe paypal should have put out the white paper. you mention paypal every time. >> the guy who wrote it was a paypal guy and i think dan showman has

said, look, our mission is to have billions of people have paypal i bet you cuban will say, that's absolutely right if you want to empower people, which is what dan schulman is about, you get him on paypal paypal is from paper all the way to digital it's kind of like in africa where they went to cell phone without having land lines and that's what facebook should have done say, listen, plus if this thing works out, we're going to offer this they went too far. the white paper is a good talking point and that's so -- i mean, they decided to go far out and then they might be able to work it in but in the meantime dan schulman is the winner. look at this stock and facebook can be -- we want it because it's fin tech and we'll pay anything for fin tech. shark tank fin tech. it really doesn't matter

they care about their stock prices i know that's cynical but you have hopes for libra navigating this gauntlet? >> yes, i do it's not like the libra. we are going to see something. i used to press the administration on, please, regulate bitcoin they said it's not our purview they blew it they blew it they don't want to blow it again. so they're saying it is their purview. they just really screwed up on bitcoin because it was a great way to evade taxes there's a real underworld with bitcoin. they don't want a way to evade taxes. they recognize they made a mistake and they're trying to make reparations to the sellers. >> interesting really nice framework. when we come back, this new fuel rally for snap goldman upgrading the stock to buy. we're going to talk to heath terry later this morning on that callout at goldman take a look at the futures looking pretty good here talk about tropical storm barry and the impact on the gulf coast and new orleans when we come back in a minute

(indistinguishable muttering) that was awful. why are you so good at this? had a coach in high school. really helped me up my game. i had a coach. math. ooh. so, why don't traders have coaches? who says they don't? coach mcadoo! you know, at td ameritrade, we offer free access to coaches and a full education curriculum- just to help you improve your skills. boom! mad skills. education to take your trading to the next level. only with td ameritrade. dto experiencer gthrilling performance. now, at the lexus golden opportunity sales event. get 0.9% apr for 60 months on all 2019 models. experience amazing at your lexus dealer. like...

a business borrowing solution to help get a little more space with a lot less mom. or home insight, to search for a new house within your budget. because, they really need their space. pnc - make today the day.

♪ ♪ snap's up in the premarket goldman ups the stock to buy from neutral

raises the price target from 13 to 18 saying it expects user growth to outperform following the new android app, the launch of snap games and some new lens. we'll talk to terry heath and the analyst who made that call downloads, jim, after several, several quarters of poor action setting some records. >> talking about some viral new projects i'll tell you, one of the things we have to focus on is that the advertisers weren't happy. this note indicates that the advertisers are back i think the advertisers are also to some degree not happy with how much facebook is charging. facebook does reach the right people you need to have more internet companies that you can place advertising on until we get a younger demographic. this, by the way, i want to make it clear that juul is not doing well i cannot wait for your documentary. i talked about it with my wife she goes, this is the most important issue of our time because we cannot stop young

people from smoking anymore. >> yeah. >> you know, she's -- i said, no, but they don't want it to be under 21 jim, understand if they say no one under 21, that means, we've got to have it everyone knows as soon as liquor went to 21, every 18-year-old had to have it i just think that snap may be actually getting so it's a little bit older demo and advertisers like that. >> that's absolutely true. >> really interesting. >> terry's other call is on stitch fix. >> i like that call. i think people are really underestimating katrina. she is a force they haven't met her she's very nonpromotional. i think she's expanding to other categories i think that they are for real i like stitch very much. i thought the call was very good about stitch i liked it better than snap. >> his general thesis is that ecommerce is going to explode further and further as you see more store closures.

prime day next week. >> look at shop pi phi these are empowerments people want to own their stocks because the growth rate is extraordinary. stitch fix, shop pi phi. real real is real. i love the subscription business and stitch fix is a business that means you have a lifetime value you can build. people should read the goldman note it's way too long. in the end when you look at it, it has a lot of graphs katrina lake, when you spend time with her, she's brilliant she's thought this through better than most anyone and she's a disrupter and that's why i like the disrupter list. they have vision jur jordache has vision. the ceos are so smart.

we have to celebrate that. i know that's not fashionable among the elizabeth warren crowd but we should. >> changing the way we shop. >> wow, are we ever changing >> don't forget watch. you have kids that are still hat and jacket age. >> yeah. >> this stuff is just unbelievable we're going to get to cramer's mad dash countdown at the opening bell one more look at the premarket in less than ten minutes on this friday don't go away.

♪

♪ get the opening bell in about seven minutes. get cramer's mad dash. you're going to call an audible? >> yes i haven't focused a lot on guggenheim research. hard to get. very interesting today about sam. it's the summer of sam now this is boston beer. a lot of people think of it as traditional beer this weekend i'll have to change my pattern i am going to deviate from mescal and gnt i'm going to have to have spite sell selser. truly. it is the hottest drink. the millennials have found a new way to confound me constellation. there were so maniable lists who said when are you going to come up with a spite selser i'm going to come up with it spite selser is the hottest thing in america

even pepsico in europe, when you use soda stream, you use selser and put liquor in it truly is 5% alcohol. the millennials love it that i am going to up end my whole bar menu. >> it's in my fridge. >> it is >> i didn't buy it. >> yes i said, what is the stuff? and judy got to it how do we know it's not a fad? >> that's a great question because i think the constellation is trying to figure that out itself but the -- it came so fast, carl, it was just in everybody's fridge i'm going to have to talk to my kids about why, why but this became so hot that these guys didn't go up in part because canopy and in part because they don't have spikeseltzer. do they drink it with breakfast? what do they do with it?

>> i don't know. anything that takes shares back from spirits and liquor will be a plus. >> it's truly a game changer tru-r-u-l-y for those it reminds me of juul. no, i'm done promoting your doc and i'm going to have you on the show this is the big issue of our time are they good actors or bad? juul truly, juul. >> we'll talk about that more on monday thank you for that doc's coming monday night. opening bell in about five minutes.

you're watching cnbc "squawk on the street" live from the financial capital of the world the opening bell in less than two minutes. we should pay attention to tropical storm barry. >> yes i asked sharif suki. largest consumption project in the country. he said, don't worry this is not going to really impact the way people think. he said it's going to be a storm. i think having sent my daughter

to new orleans, i dropped her off into hurricane isaac where i dropped her off to be on the third floor and she couldn't get out of the dorm and there was no electricity. i disagree with sharif he's mr. platform. he told me not to worry about it he knows more than i do. >> all right there's that to watch. there's the u.k. sending a second warship to the gulf the "hms duncan" warship do you still believe supply shots almost impossible? >> i was using -- because it was scott sheffield who's a good friend of sharif this sheffield, that we'd be at 17 million barrels in five years. sharif is saying that's too conservative natural gas, by the way, they will pay you to take it. we have a rush of energy saudi rushes us and then soon it will be us and others. >> that's incredible. >> it is an amazing story.

we don't talk about it enough. we're going to the permian we're going to louisiana thank you, regina gilgan, for nailing that down. we have to go. >> you're going to be in the hard hat again >> oh, yeah. >> there's the opening bell. s&p 500, cnbc real time exchange celebrating an i.p.o. today at the nasdaq software company, fun ware what else -- phunware. the max program manager is retiring yes. >> i think when you have -- when you have the lieutenant's being retired, it begs the question, okay, is there going to be higher reaching people because he reported to people. you know how it works. top people are always going to have to be under scrutiny.

i'm not sure what's going to happen there i think they are still trying to get their arms around this thing. it's just not coming together for them it's coming together for the stock though, which is amazing the stock remains a loved stock. the stock's in disbelief and says that the max orders are going to come back so we have to watch it i think that the most positive to counter act that, katie saying about pcs, jpmorgan coming out, in the case of morgan stanley, and saying that really the iphone -- we're in the -- we've passed a trough of words. now i want to emphasize to people, this is channel check. i hate channel check because tim cook and company are very good at disguising what they're ordering the chatter about apple has become so positive it's really interesting. >> that's true meantime bernstein, tony saganaki has a saying saying pc

orders can grow and huberty echos that >> hpq is doing well better than last quarter this is a remarkable thing by the way, microsoft is such a -- microsoft, most of the business is still related to the office products. azure, they're getting to 100 billion in the next five years is going to -- a lot of it will be azure, amazon web services. the core microsoft is doing incredibly well so i know it's hard to believe that there's a pc renaissance i did -- i asked will frost whether i should say renaissance. he doesn't even say amazon anymore which is a shame i have the hewlett-packard they love it you can scroll on it, you can write it you can throw it it's indestructible. this is making a come back apple never lost its edge. especially people, i don't know if they understand, all of the

disney pluses, cnbc, they look so good on the ipad. ipad is such a blast. >> you almost don't need a television. >> don't say that. >> 9:00 you need it. no, you stepped up we still need that tv. there's faang for a second fang has been doing good you mentioned microsoft. they initiate. outperform 150 price target. we'll keep our eye on that initiation out of goldman of target, costco and walmart, jim. >> yeah, they were -- they were -- we were vying to get out my acronym first they like target i think target is the one that is going to have the biggest -- >> that's their buy? >> the conviction. the other ones they don't have as much conviction target's inner city and college decision by brian cornell to have many different formats rather than one size fits all is going to prove to be genius. he's opening stores in areas that are so under stored because

historically these bohemoth walmarts can't figure out how to put something into flat bush no, i want to win these neighborhoods. i want be to provide the school uniforms, sell them at low price. cornell is not heralded enough he has made -- he's reinvented this place like you can't believe. >> i can't not think of when you went to whole foods and their early attempts to go urban. >> well, they charge a lot but, yes, they did detroit. i hope dan gilbert is doing well i miss him he's the greatest. target's decision to go inner city queens, inner city brooklyn recognizing that these -- the people in those economies are getting strong, they'll own -- they own these parts of town and you're going to see, i think, many long-term good numbers from target and shipt, their online is surprising people

only 30 million people because walmart's got about 250 million people 30 million people visit target each week. that is enough to be able to have scale the prices at target are amazing and the strategy is brilliant. whoever thought that brick and mortar could still be built and make money, he did because he goes to neighborhoods with double incomes he's not after the dollar tree people as much as dollar tree is so much fun and he has got something going that says buy, buy, buy. >> that's a good way to put it, jim. netflix, even though it's been a record setting week for the markets, netflix is negative for the week. >> people are saying that maybe the signups aren't going to be that good. >> we did get a price hike recently. >> right. >> bammel suggests if we get a selloff on earnings next week it's a buy based on historic data if you get a price hike, 90 days later stock plays well >> that's a good way of doing it the people that are still buying

amazon in order to blow it out to how great amazon prime is going to be, i think that's going to be a crowded trade. be careful if you're doing it saying i'm going to buy amazon today and then when they report how good it is no too many people doing that that was an okay trade in the 1900s. not in the 2000s we should have our own divisor system carl, we have to mention nvidia. i have played this you cannot tell whether the disney "star wars" with the storm troopers is the same as the gaming they look exactly the same, which is why nvidia stock is going higher because the ray development -- the chip. unless you've seen it, right now video games you think they look life like. no, this new iteration that jenson wong has, you cannot tell the difference between actors

and their gaming version very excited. >> yeah, any gamer knows what you're talking about at 144. reviews for the "lion king" haven't been great across the board but it did have a decent open in china. >> i remain convinced that 38 weeks of the year will be dominated by disney in one form or another fund managers who don't get the consistency of the movie business should really just go into the proctor gamble clorox business because no one has this level of consistency it's never happened that 38 weeks we're going to have to talk -- now, yes, maybe lion king is one that doesn't work, but there will be 38 weeks where they make it and that is an amazing thing. i know i talk about iger possibly too much but he was instrumental in my career at "good morning america" when i started. he's so nice but i've got to tell you that i

am so blown away by his movie strategy the analysts have got to get over the case and start realizing the vision own the weekend. >> morgan stanley, jim, one of the earnings we'll get on financials next week citi does take it to a buy. >> it's been a big laggard and they hate everything else. i thought that was very important. i think gorman is doing a great job. enough, take it out of the dog house. buy the stock ahead. i think gorman is going to deliver a nice number. >> they do say relatively unexposed to lower rates. >> right. >> they do cut wells. >> how many days have we had wells without a ceo? >> do you think it's more that >> yeah, there's no leadership i want the job. >> you say this every time i'm not sure you do. >> i think it's a great bank i could make it work you know, elizabeth warren and i

have a datante we have a concordant i think they feel whoever takes the job it's going to be one of those things where their husband or wife will be in the supermarket and they'll be glared at. nobody wants that glared at thing. by the way, secretary acostas is not making it. >> he is resigning breaking a few moments ago obviously it's been quite a week for him. >> the epstein -- i want to talk stocks, right. all people want to talk about how he made his money, how he made his money epstein there's another casualty i don't think he's the last casualty of not a business story. we need pulitzer prize winner james stewart to make it that. bye-bye. >> you have him? >> he'll have a great response to this. i think the president and acosta are appearing on the south lawn

the president is saying it's acosta's decision to resign as labor secretary. there had been concerns about his tenure separate from epstein among some conservative leaders and his management of labor. >> yes i think there was a sense that he had no constituency i think the president truly wanted this man to go and so it's a resignation in name but he did not do -- it was not a rex tillerson where he got the tweet. >> you saw what he said about paul ryan this morning on twitter? >> wow, wasn't that vicious? >> vicious is the word. >> when does the pocahontas thing lose its humor about senator warren at what point? do you notice he never makes any sport of nancy pelosi. >> he tried nervous nancy once didn't follow up. >> she's a 79-year-old

powerhouse who is infatiguable at one point she said, you're not going to call me any names, chief. she made chiefdom. she's one tough person personally a lot of people know that she's charming and her husband is charming so they tend to be taken by her >> speaking while we're on politics, jim. we mentioned acosta. the pharma rebate reversal. >> wow. >> the census reversal how do you think the market sort of digests all of those things >> i think people are completely confused there was tremendous buying of merck. merck was one of the hottest stocks out there merck is a visible company it's a discussion. the markup of cancer drugs is outrageous at the hospital i think the president figured that out and that's going to be the theme unfortunately because the companies that innovate in cancer are so, so terrific

frazier has done such a great job at merck, but it's just more visible. i hope it doesn't go back to the skrel skrelli thing. what i'm waiting for is for pence to step up and say, wait a second, eli lilly is a great company. what a switch. apparently taking on the pharmacy benefits will cost a couple hundred billion he doesn't want that but going after the drug companies is easy. it's easy. j&j there was a recommendation today, very, very positive j&j has a lot of oncology. lilly is down to 105 oh, my oh, my they just had good news about -- for acute for the migraine drug. 105? that's extraordinary that's very surprising wow. people just -- i guess people feel it's going to be an endless

battle where he will pick seven or eight companies. >> there's a sense that the plan b, so to speak, of how he's going to address this could be just as -- just as vicious >> well, we are seeing the cignas of the world got a big boost but the health care story, these companies were all about to report good numbers, i was very excited about them with the exception of dollar exposure it won't matter if the president is after them. j&j is down, very positive piece. what does that tell you? the money is going right back to tech holy cow >> yeah, tech and some transports, too. and industrial itw, fedex. >> there have been two downgrades of itw in the last few days including a recommendation of a short. that's proving to be wrong there have been four downgrades of parker hannifin that stock is up three that is incredible there is a belief -- every day is a new -- today's the industrials.

yesterday the industrials were weak because powell told us they were weak. the short positions in the industrials, very, very big. a lot of hedge funds coming in flush. it may not pan out. >> we're sitting above 3k and 27k. let's get to bob pisani. >> reporter: good morning, carl. all the major indices are at a new high it's a risk on day semis doing well, industrials doing well, consumer discretionary doing well there's leadership group tech is not in the big leadership group energy okay. health care, great day yesterday. lagging a little bit mr. powell is done where are we now we're in earnings season, folks. it's not the second quarter earnings it's all going to be about the second half guidance the bears are saying, hey, guys, guidance is going to be lowered because global slowdown and the tariff and trade wars are impacting a lot of the big

multi-national companies, period guidance has to come down. the bulls are saying, hold on. we have dovish central banks, not just powell and a trade deal will happen sometime later this year the market is going to give them time to figure that out. earnings will be fine. they're going to go up towards the end of the year. this is where the parameters of the fights are the problem is the market's expensive. just take a look here. we are flattish on earnings for the year that's fine. we have a price up 20% on the s&p 500. it means the market is really pricey right now it's expensive 17 and a half times forward earnings that's expensive and the multiple is up not because prices are up, it's just up on some vague hope. when can you have a high multiple you can have a high multiple when you have expectations that oerngs mig earnings might be going up you can have expectations that the global economy is expanding. you can have a higher multiple that interest rates are lower. that is happening. that's why they love powell. one out of three isn't going to

do it. they have to have a little more reason to keep the multiple this high they better get multiple deal or trade deal when i say flattish, this is flattish that's what i'm talking about. 1%, 2%, we don't know the exact parameters thingsare going to be tweeting better that some kind of deal will come down the road. a lot of this hinges on trade and the extent of the global slowdown that we can't really answer what is everybody doing? i can show you where the street is positioned. i can't tell you necessarily what's going to happen but, look, the s&p is up 2% since may 1st. look at this, all of the global cyclical stuff is flat to down material stocks, energy, transports the street's already betting that there is going to be some kind of earnings disappointment in the big global cyclical group. they're there already. what else is going on?

how about more defensive sectors that are out there put up the next sector the more defensive groups with the s&p up 2%, health care, utilities, real estate, they're all positioned so that defensive names are going to do a little bit better overall so the street is split and they're kind of like betting individually, the global economy a little slower. the more domestic oriented stuff is going to do a little bit better what should you do the pain trade is everyone's positioned for the global slowdown a little bit. might be, all right, how about going against it play cyclical. here's your classic cyclical since the dow transports it hit the highs way back, this is september. this is just year to date, but it was up here in september and it's been down more than 10% decline. so if you want to play the contrarian play, the pain trade would be to play the cyclicals but you're betting that the global economy is going to do better or some kind of trade deal you get the point, carl.

there's a lot of hinging on how the trade deal is going to come out in the next couple of months that's why we're watching the global data like chinese imports and exports very carefully carl, back to you. >> bob, thank you. bob pisani let's get to the bond pitts. rick's at the cme. good morning, rick. >> reporter: good morning, carl. inflation data has been running on the warmer side to be sure, and what a move on the long end. i'm not talking just u.s. treasuries, in every direction you look france, u.k., germany matter of fact, think about it this way twos are down one on the day, one on the week. ten year one on the week the french ten year is up about a dozen basis points now on the week and boons are up 15 basis points on the week. big week so let's look at the charts. if you look at a one week chart, two year note yields you see that deterioration whereas the next few charts are going to

show you a higher right end of that chart the reason i want to talk about the two year is it's mostly associated with the fed activity, interest rate differentials. look at the dollar index these charts really rhyme. that really speaks volumes especially if you're doing foreign exchange with the banks. obviously the dollar is ignoring the long end of it here's a one week of ten years you can immediately see the difference let's throw up one week of bo s bunds. it's a remarkable week for bunds. we saw the bottom in yields there with respect to their negativity finally, let's look at the french ten year. it's moved from minus 8 points to positive 4 basis points truly a remarkable move. we want to continue to pay attention to the notion that our long end did not do well in the auctions of course, all of these issues may come home to roost

especially with paying attention to equity markets. carl, jim, back to you >> all right rick, thank you very much. >> as we said a moment ago, labor secretary acosta is resigning. the president is speaking about it right now we're going to get the comments and pictures in a few moments and bring them we can. the president says he is a good man and we will miss him record highs for the dow and s&p 500. more "squawk on the street" on the other side of this break

thanks for the ride-along, captain! i've never been in one of these before, even though geico has been- ohhh. ooh ohh here we go, here we go. you got cut off there, what were you saying? oooo. oh no no. maybe that geico has been proudly serving the military for over 75 years? is that what you wanted to say?

mhmmm. i have to say, you seemed a lot chattier on tv. geico. proudly serving the military for over 75 years. you ok back there, buddy? join us monday night the new cnbc original documentary vaporized, america's e-cigarette addiction. a comprehensive look inside the rapidly growing and highly controversial vaping industry, expected to hit 9 billion the end of this year 10:00 p.m. eastern and pacific, only on cnbc

"options action," strategies from the street's top traders, new opportunities to profit from the market's hottest

time for cramer. >> this is a company that has a direct to consumer business that everybody is suddenly panicked about. this is a high quality company a lot of people thought medical -- this is very

visionary medical device company and it's always been considered a takeover candidate if you are selling it here, i really think wait until monday let the sellers finish and buy it they will fix the problem. they are a very good company. >> all right jim, have a good weekend. >> yes, yes, yes and i can't wait for the dock, nor can my wife. >> see you monday. >> thank you. >> "mad money" tonight at 6:00 p.m when we come back, more on the news out of the white house as the labor secretary comcast steps down don't go anywhere.

good friday morning. welcome back to "squawk on the street." i'm carl quintanilla with sara eisen. david faber has the morning off. building on the record highs we set this week, s&p above 3k, dow above 27k. we switch our focus from powell to earnings next week. in a few moments we will hear from the president the labor secretary acosta is

resfwlieng the president is talking about it right now we will get comments and pictures and bring them to you as soon as possible. our roadmap for the hour though starts with another day, another record high. the dow, s&p opening the fresh intra-day highs. are investors ignoring economic rip current? >> bitcoin and lgbt gettiibra gg attacked who the latest person is to jump on the bashing bandwagon. as we mentioned, record highs, wrapping up a historic week with the s&p 500 crossing the 3,000 threshold. the dow hitting 27,000 this as investors continue to monitor trade concerns with the president tweeting this morning, quote, when you are the big piggy bank that other countries have been ripping off for years to a level that is not to be believed tariffs are a great negotiating tool, a great revenue producer, and most importantly a powerful way to get companies to come to the usa and to get companies that left us for other lands to come back home joining us now to break this down, also a look ahead to bank

earnings, thomas, president and ceo at kbw overall, tom, stocks at a record high where do bank valuations sit going into next week >> we have been in a bear market regional hit a high last year. it's about the deceleration in earnings and revenue growth. we had eight straight years of double-digit erpgs per share growth that ended in 2018. now the outlook looks more like 6%. >> so net interest margin is the big boogeyman this quarter >> that is the driver. say on average the banking industry gets 75% of their revenue from spread income and the second quarter is going to be the inflection quarter since the end of 2016 where the net interest margins are now going down instead of up. >> because of fed policy expectations >> it's the yield curve.

and when bank stocks were at an all-time high last year, higher rates, strong economy, more loan growth now we have okay loan growth, but slower, and we have got lower and flatter interest rates in the curve and that's bad for bank earnings. so it's slowing down the growth. they are not going to lose money, but it's slowing down the growth in earnings per share. >> today when we get an upgrade of morgan stanley because they are regulartively unexposed to lower rates is that good >> the further away from the yield curve is the better. what i said i don't think is unknown. in other words, bank stocks are 20% below the performance of the overall market we are talking about the stock market at an all-time high hardly that's the case for bank stocks so there are a lot of really good companies ca up ught up ine sector wave. they are trophies on sale. >> like who? >> well, we have a couple. one is our favorite is western alliance bankcorp headquartered out in phoenix, arizona.

they haven't missed a consensus estimate in about six years. they earn two on assets, 19 on equity, trade at a high single digit ep mnt in florida, really good -- what i would do in a tricky environment is bet on the good management teams they tend to figure it out you are getting the discount and valuation from the whole sector being out of favor now is a good time to be a stock picker. >> are you convinced after the week and powell's testimonies that the cut is assured? because data has run warm here and in europe. bostick and barken are sort of trying to swim upstream a little bit today. >> in listening to that testimony and reading his testimony i think he was dropping breadcrumbs if he didn't cut rates in july -- >> there would abrevolt. >> now, i'm not on the parade that says we are just going to get a whole series i think they will cut and it will be data dependent with the

tendency to ease towards lending. i think an insurance poll i is not a bad idea. >> on banks, that will pressure the bottom lines as you mentioned, especially those lower rates. how do you balance that with some of the other positives like ipo activity, which has probably exploded in the last quarter. >> yes so the industry, even though the growth rate in earnings per share is slowing, the industry is very profitable we have recovered all of the profitability in banking from since the crisis so the industry is going to remain at a high level of profitability with slower growth, offset for banks that do ipos and things like that will help there is a caveat. the caveat is there is almost no credit expense so you need a steady economy to keep that story going. if you want to know, say, tom, what could be a surprise in the quarter? we had a blip up in non-performers in the first quarter. we see more of that in the second quarter investors will start wanting to think about what's happening with credit. >> leverage loans came up a

couple of times this week. powell doesn't think it's systemically dangerous doesn't that directionally increase the danger? >> it helps the underlying credit of the issuer that will take a little bit of the pressure off the quality of the issuer what's happening is there is this thirst for yield. my parent company stifle has a great retail business. investors are all over yield so we're seeing a lot of interest in yield. so to the extent that spreads tighten for riskier assets, that could be something -- >> new products or old traditional products >> old products. our preferred business is extraordinarily strong because those securities offer very good yields we also do a lot of retail bond issues i can see the thirst for yields coming as interest rates around the world are starting to go lower. >> so the president tweeted overnight about libra. just the latest sort of criticize, weigh in, slam

facebook for launching the crypto the lead question from the house financial services and senate banking committee to powell, here is the president. i'm not a fan of bitcoin and other cryptocurrencies which are not money and the value is highly volatile and based on thin air unregulated crypto assets can facilitate unlawful behavior including drug raid and other illegal activity facebook should probably have a banking license if it wants to operate in this space. are banks as threatened as central banks and regulators appear to be >> there is an area where i'm willing to give an "a" plus to the regulators the regulators have protected the payment system very, very well in the united states. you need to be a bank to get inside the real payment system of the united states, and they make sure that everybody is playing by the rules, following the nation's laws, bank secrecy, anti-money laundering. and i believe that's a positive. so as you start to see these other currencies develop,

frankly i think there is danger in the long term in those cryptocurrencies and i think that we are in a good time in the economy now but if you get to a point where safety and soundness really matters, the banking system is the strongest banking system in the world. i still think the central bank of the united states is the best central bank and most stable in the world. it will be really good having a safe payment system. i think ultimately safety and soundness and security matters, and so i'm not a big fan much the cryptocurrencies for that reason. >> it's also not clear without having a bank account how you get money into a libra account for all of these unbanked around the world. >> exactly i think there are other safer ways to help the u.nbanked. and i'd like to see the regulators leading that evolution to help the unbanked and those who don't have oaccess i think cryptocurrencies in an unregulated fashion are not the way to do it.

>> when we put the first batch of earnings into context, what will we see on financials? >> the trends of the past have been continuing, but some of these stocks are too oversold and we should be buying them. >> tom, good to see you. have a good weekend. >> thank you. so on those bitcoin tweets, what else is notable about the president's tweet, he is again commenting on the u.s. dollar. it shows his intensifying obsession with the currency. take a look at the word he uses. quote, the dollar is stronger than ever, dependable, reliable, dominant he wants it reliable but he thinks it's overvalued trump has complained in tweets, rallies, speeches. reportedly during interviews with fed board nominees. just last week he said china and europe are playing currency manipulation games we should match. trump, unlike all presidents in recent history who maintained a strong dollar is good for america, wants it weaker it's no wonder why this is a major setback for

corporate earnings north american companies reported $24 billion in negative currency impacts that's the most painful it's been since 2015. as you can see, much more than european companies and most other countries. on average, companies in north america took a 5 cent hit to their earnings per share during the quarter thanks to a strong dollar q2 earnings are about to start nike, fedex, levi's, pepsi saying it's still cutting into profits. so beyond earnings, strong dollar makes our exports less competitive and that's a big focus there aare to this presid. according to common measures of currency values like the big mac index, the dollar is overvalued against currencies especially in china which is almost 50% undervalued, the u an. he can continue to complain and talk down the dollar he could direct the treasury to direct the fed to intervene in

the currency market to sell dollars. hasn't happened since the '90s he could put sanctions on currency manipulators. none of those options have -- they have all failed in the past the market has fought back on all of these measures. as long as the u.s. economy remains the best looking house on the block, this could be a tough battle for trump to take on a currency market bank of america, scotiabank have talked about the rising probability of intervention from the u.s. in the currency market this week. >> i was think of a b of a note yesterday. potus's dollar comments are more frequent and targeted. we see a risk the trump administration may decide to abandon the strong u.s. dollar policy which would not violate g20 commitments. that would be a huge story. >> it may not violate, but it would piss off a lot of g 2 0 allies trump has shown he is not afraid to do.

it may not work, but brace yourself for earnings season any country from medical devices to business services that has exposure abroad is going to feel this it is going to cost the u.s. company earnings and the u.s. economy a economy. and so president trump, you know, is right to sort of focus on that, but it's just interesting because no president before him in modern history has. >> yeah. we will see how many other companies like those on the wall in the coming weeks. when we return, crypto getting attacked more details on that plus rocking the nation and now the white house. we will discuss the epstein scandal with pulitzer prize-winning columnist jim stewart. we will get comments from the president in a few minutes dow is up 127.

the market builds on the records set earlier in the week. s&p 500 3,004. earnings season next week kirksd off by the financials and a couple of tech companies next week, too. >> as we wait to hear from president trump momentarily on secretary of labor acosta leaving and his replacement, i would note what's happening -- actually, let's go to the president now. >> not a good labor secretary. he has done a fantastic job.

he is a friend of everybody in the administration, and i got to call this morning thfrom alex. i think he did a good job yesterday. under a lot of pressure, he did a fantastic job. and he explained it. and he made a deal that people are happy with and then 12 years later they are not happy with it you will have to figure all of that out but the fact is he has been a fantastic secretary of labor, and alex called me this morning and wanted to see me and i said, well, we have the press right out here perhaps you just want to say it to the press but i just want toet will y let this was him, not me, because i am with him. he is a tremendous talent. he is a hispanic man he went to harvard a great student. and in so many ways i just hate what he is saying now because we're going to miss him. but please, alex. >> thank you, mr. president. over the last week i have seen a

lot of coverage of the department of labor and what i have not seen is the incredible job creation we have seen in this economy, more than 5 million jobs i haven't seen that workplace injuries are down, bucking a three-year trend workplace fatalities are down. we had the safest year ever in mining the lowest number of fatalities ever in mining i have seen coverage of this case that is over 12 years old that has input and vetting at multiple levels of the department of justice. as i look forward, i do not think it is right and fair for this administration's labor department to have epstein as the focus rather than the incredible economy that we have today. and so i call the president this morning. i told him i thought the right thing was to step aside. you know, having a position, temporary trust, it would be

selfish for me to stay in this position and continue talking about a case that's 12 years old rather than about the amazing economy we have right now. so i submitted my resignation to the president effective seven days from today, effective one week from today, earlier this morning. >> there is no need at all as far as i'm concerned, i watched alex yesterday i thought alex did a great job you know, you can always second-guess people and say it should have been tougher they do it with me all the time. i make a great deal with anybody, and then they say like the democrats, oh, it could have been better. i got $1.2 billion settlement fine from a company from zte, and the next day -- and everybody couldn't believe it. the next day the democrats said, oh, he should have gotten more so you could always be

second-guessed that's what people do. i just want to tell you this is a person that i have gotten to know, th know there hasn't been an ounce of controversy at the department of labor until this came up he is doing this not for himself. he is doing this for the administration alex, i think you'll agree i said, you don't have do this he doesn't have to do this we have, as everybody knows, we have pat pizella, who right now is a deputy, and he'll be acting for a period of time i think you know pat he is a good man highly recommended by alex but pat is going to be acting, and we've already informed him >> reporter: why did you have a falling out with jeffery epstein and did you ban him from

mar-a-lago >> yes, a long time ago. i haven't spoken to him in 15 years or more. i wasn't a big fan of jeffery epstein. that i can tell you. now if you look at the remnants, it hurt this man i hate to see it happen. i will say this. and i say it again and i say it loud and clear alex acosta was a great secretary of labor what he has done with plans and you see the plans coming one after another, you are just about done with the 401(k) and -- >> that's correct. >> things that nobody would even think of so it's very sad but at the same time he wants to focus, the focus to be on accomplishments, not on what you are talking about. >> reporter: [ inaudible question ] >> well, alex believed that. i'm willing to live with anything, john you know me. i have lived through things that you wouldn't believe

alex felt that way and he also felt we're so good, we're doing so well, the economy. the stock market just hit the highest point yesterday in the history of our country our unemployment numbers are the best they've ever been if you look at specifically certain groups, african-american, asian, hispanic, the best unemployment numbers in the history of our country. you know, there are so many good things and he didn't want to distract from that and i understand that 100% >> the president with the labor secretary alex acosta resigning. the president taking pains to note that he does not have to do this calling him a great labor secretary. one of the first casualties, obviously, of the jeffery epstein scandal. the president adding i wasn't a big fan of jeffery epstein, that i can tell you now the remnants hurt this man and i hate to see it happen. we will pay more attention to what it means for the labor department and labor policy in this country later

for the time being, it's largely about jeffery epstein. >> correct which the labor secretary acosta did say i don't hear people talking about the jobs market that we have helped create and that has been so strong. we talk about it every single day, obviously that has nothing to do with why he is living today it's a total tangent. >> elon is watching reaction in the district good morning what do you see? >> this is a dramatic development after just a couple of days ago acosta came out and very strongly defended his position as labor secretary saying he had an outstanding relationship with the president. he had an excellent relationship with acting chief of staff mick mulvaney, and any reports to the contrary were b.s. so you hear the administration today trying to frame this as acosta not wanting to des tract, as you mentioned, from the strong economy they appear to leave on good terms. the president and alex acosta did shake hands before the president boarded marine one

so there is some goodwill there. again, just a few days ago alex acosta was saying he was not going anywhere and had the support of the president now he is resigning. the president did speak for many minutes after announcing that acosta would be departing. he talked about immigration. he talked about the border he talked about the census we'll dig through the rest of the transcript and bring you any more interesting developments, guys. >> all right thank you very much. with us this well cnbc contributor american enterprise institute scholar and pulitzer prize jim stewart here at post nine who has done some reporting on this topic earlier in the week your thoughts, jim, to start >> well, you know, it's no question this is epstein related. i think what hasn't come out is that there are many, many questions that haven't been answered about the epstein plea deal at the time why it was handled the way it was. not that there was a plea deal, but terps of it, and especially

the victims were never told, the victims' lawyers were never told it looked like it was swept under the rug. i think there is still a lot that could come out on that front. >> what's fascinating is your reporting at "the times," the money trail and how rich he is and what exactly we know about his finances and his connections, including less wexner, the head of limited brands fascinating. >> it was totally fascinating to me i have met epstein and i have talked to him before, obviously, all of this sort of stuff came up i wonder -- i mean, everybody calls him a billionaire. i don't know that he himself ever called himself a billionaire. that has been a major calling card for him this is why nobel prize-winning people want too have dinner with him, he is dangling a research grant or why prospective investors meet with him, because supposedly he has all this, you know, incredible wizardry.

the way he -- he very charming, very glib. he name drops left and right frankly, it's the variation of what i encountered with elizabeth holmes they sound incredibly articulate it sounds kind of great and fascinating. but when you stop and think back on it and figure out what did they really say, it doesn't add up how many billionaires on wall street, they are always footprints, some knowledge about like what is the strategy. somebody who supposedly is out trying to get investors has got to have a message. i mean, i heard -- when i started to find out what did he do somebody said it's currency trading. someone else says, no, tax strategies somebody said arbitrage, some technology thing even bernie madoff had the same story. i mean, it turned out to be completely bogus there is no question that epstein has a lot of money but the more we delve into -- >> a lot of houses. >> the documentary record shows

something far more modest than anything like a billionaire. not the 150 employees he had, but he said he had 20. not billions under management, but a statement he filed in the virgin islands that said 88 million. even the real estate, which is probably worth over 200 million, how much money did he put in that real estate it's unclear the basis is probably very low the only known client is less wexner, who is a billionaire, no question about it who is not at all forthcoming. he seems to be like the only person who might know. did he have performance reports? did he have audited financial statements what kind of returns was he making for him on this money we have no idea. so it looks to me like there is a lot of smoke and mirrors here and nothing like $1 billion. >> what is the sense in d.c. is this going to end up being a wall street finance story or something closer to the government >> listen, it's been very difficult, even though the democrats have tried to sort of

drag trump into these kinds of things, it's been very difficult for them to stick. shouldn't be surprising that acosta resigns since his role in this is encapsulated like these democratic vectors during the campaign if i could say how stunning this is this is how it ends for alex acosta the president was positive about him. that was widely shared in the republican party who really viewed him as an upcoming star and already a star in this administration at the labor department with apprenticeships. smart guy. well spoken. really considered a bright spot and this is how it ends. stunning >> yeah. i mean, it has to do when he was serving as u.s. attorney in florida more than a decade ago are you saying you don't think he should have resigned over this >> no. i'm saying it's not- i tend to think he was more than a little bit nudged here. i think it's obvious, you know, he was going to resign

again his involvement links us to the president it's an ugly, nasty story. i'm sure that even though the president is going to deny he had any role and barely knew epstein, didn't like him, it's starting to stick to him this is a way to sort of unstick it. >> jim, is it your sense we are going to learn a lot through discovery, or is it going to be up to reporters and journalists to figure out? >> it will be both there is a bail hearing for epstein coming up on monday. his lawyers have acknowledged that they have not provided any kind of actual financial disclosure in a typical bail proceeding you have to disclose your assets they nt wap to do it under seal. they say the press will get on it of course. the public has a right to know especially when, you know, he got this deal. he is supposedly under supervision. and i think the public is entitled to know what his assets are. and where they came from, frankly. by the way, if i was the government i would be looking to

that as well who knows, you know? it's worth -- i think -- >> you mean a review of the actual deal back then? >> yeah. i would, i mean, obviously the statute of limitations may have run in some cases. if i was an fbi agent or assistant u.s. attorney i would be curious to know more about the source of this wealth and the kind of representations made to potential investors. >> jimmy, jim, clearly not the last we will discuss this. thanks for helping us understand it in the wake of this breaking news. >> sure. when we come back, nike reaffirming its going to arizona despite the state pulling funding. the governor is changing his tune this morning. details on that developing story straight ahead. and getting a check on the major averages at this hour, intra-day high alert all around. doesn't take much from the levels the dow above 27,000, adding 0.5% "squawk on the street" will be

right back these folks don't have time to go to the post office

they use stamps.com all the services of the post office only cheaper get a 4-week trial plus postage and a digital scale go to stamps.com/tv and never go to the post office again.

i went straight to ctca. after my mastectomy, i felt like part of my identity was being taken away. my team made me feel whole again. cancer treatment centers of america. appointments available now. your daily dashboard from fidelity. a visual snapshot of your investments. key portfolio events. all in one place. because when it's decision time... you need decision tech. only from fidelity.

welcome back everyone. i'm sue herera here is your cnbc news update. president trump announcing just moments ago that labor secretary alexander acosta is stepping down following criticism of acosta's handling of a plea deal with jeffery epstein who was accused of sexually abusing dozens of underage girls the president announced the news with acosta by his side at the white house. tropical moisture barry's wind and rain hitting parts of louisiana this morning from what could be the season's first hurricane. it is expected to hit landfall early tomorrow after months of rain, the mississippi river has been at flood stages in louisiana longer than any other time in history. the first shipment of a russian missile defense system has arrived in turkey. this moving the country closer to possible u.s. sanctions officials will decide how the system will be used when operational. and r. kelly was arrested on federal sex trafficking charges in chicago last night. it comes nearly five months after he was released on bail

for additional sex abuse charges. he was arrested by homeland security agents and the nypd public safety task force. you are up to date that's the news update this hour back downtown to you >> sue, thank you very much. let's get our etf spotlight this morning energy today crude trading at the highest level, got to go back to may u.s. oil producers in the gulf of mexico cutting half of the output due to tropical storm barry. you have the xle, oih, xop all up today, xle on pace for the seventh straight day of gains. that is the longest win streak since february the group's top holdings exxon, chevron, conoco, all trading higher today we pay more attention to this. and the president with a federal declaration of emergency. >> yeah. look, there are a number of factors moving i think the inventory data this week also helped propel crude oil. you have got iran and british iranian tensions ramping up this week, and this tropical storm,

as you mentioned, in the gulf. >> meantime, crypto getting attacked from all sides. the president, the fed chair, congress, and now mark cuban hey, deidre. >> cuban mincing no words when it comes to facebook's new currency >> what they will do with libra is to be determined. you know, we'll see what happens. i am not a big fan i think it's a big mistake not so much because of what will happen in the united states, but globally i think globally and in countries where there isn't a lot of rule of law or a lot of government stability or currency stability, yeah, then it could be dangerous. >> carl and sara, as you have been talking about this morning, his comments along with congress and the president's criticism of libra certainly feels like everyone is bashing cryptocurrencies, but you have to note that some of the biggest names in this space are actually welcoming some of these attacks.

ceo and co-founder of crypto plot from coin base brian armstrong tweeting in response to the president's comments. he tweeted, i dreamt about a sitting u.s. president needing to respond to growing cryptocurrency usage years ago first they ignore you, then they laugh at you, then they fight you, then you win. we just made it to step three, y'all. this attention, i guess it goes to the theory that there is no such thing as bad publicity when it comes to cryptocurrency got a long way to go, clearly. >> "squawk on the street" will be right back with the major averages all higher again notching intraday record highs for the dow and s&p 500. don't go away. is where people first gathered to form the stock exchangeee, which brought people together to invest in all the things

that move us forward. every day, invesco combines ideas with technology, data with inspiration, investors with solutions. because the possibilities of life and investing are greater when we come together. ♪

after months of talks, ford

and vw working together in developing electric and autonomous vehicles. phil lebeau with the story good morning. >> good morning. this was the worst kept secret in the auto industry these two companies formed an initial partnership in january now they are going to expand to work on electric and autonomous vehicles how did this come together here is ford's ceo. >> herbert took the initiative to see me first. when he first took over as ceo, i had only been in the job, you know, four months. and very early i saw the chemistry between the two of us. there was a humility from both of us about these kinds of situations and how we could learn together and make progress. >> jim hackett has been ceo of ford since may of 2017 you take a look at the stock since then the question now, can this partnership actually deliver savings for both ford and volkswagen here is the ceo of volkswagen.

>> it's very hard to say, but at the end if you share a technology which might cost you still 5 to 10 billion, if you share that, you can adjust cheaper. i think it's relatively easy then to decide where are we going to use it. >> bottom line is they are not saying exactly how much money this partnership will save as long as we have both of these ceos with large operations in china together today, we had a chance to ask them about what they are seeing with the auto market in china, and both are very clear about this. they are seeing a slowdown brought on, they believe, due to the uncertainty created by the trade tensions between the u.s. and china. >> the surprise, you know, a few weeks ago that we had made progress and then we didn't sign it i think threw all of us for a loop my confidence is higher that at the g20 the idea that they have said let's, you know, pull back from any future actions and get this solved, i'm hopeful again

now because of the year delay, i'm afraid to just assume that it's going to be resolved quickly. so we're planning both ways. >> by the way, guys, both herbert december and jim hackett believe the chinese auto market is on the cusp of greater consolidation in part because auto sales have slowed down so much over the last six months. guys, back to you. >> thank you, phil. when we come back still going. nike's keeping its plans to build a factory in arizona despite backlash from the governor details on that story next. the black market of cannabis where illegal dispensaries openly break the law it's part of a $70 billion nationwide illicit market crippling the legal industry a sneak peek into our n'gowarsation weed kille dot ay.

markets banking on a fed

rate cut this month. one top strategist talks about how it's getngru resquawk on the street" is coming up. plike... zelle. to conveniently makesend money sier, to your babysitter. for overtime. or pinacle, to tap into your organization in the office,

on the go, or in the stop-and-go. pnc - make today the day. want to give you an update on a story we have been following. nike is reaffirming it will open that manufacturing facilityin arizona after the state's governor doug ducey withdrew the incentive package for nike to build the plant when nike pulled a sneaker design featuring a colonial version of the flag last week they moved to cancel the shoe in a long series of tweets writing, words cannot express my disappointment at this terrible decision i am embarrassed for nike. i have ordered the arizona commerce authorityto withdraw all financial incentive dollars. but the governor is changing his tune today after the announcement that nike is still coming to to the state, he has tweeted, this is good news for arizona and for

goodyear 184 million in capital investment arizona is open for business and we welcome nike to our state jobs, economic growth trumps, i guess, that political backlash over the betsy ross flag what a back-pedal. >> would you argue nike successfully got through some of these crazy cultural stories that's gotten intertwined with -- >> i think we will see the results will be in the earnings the stock price has largely brushed it off the past controversies, nike has completely brushed off in terms of showing revenue growth, higher selling prices. as long as they keep the innovation train going and keep their message to their consumer -- >> they know who that is. >> they know who that is better than anyone else so far, it hasn't hurt nike. no question this latest flare-up the company didn't welcome they didn't intend to take a stance against the betsy ross flag and was very defensive when

people criticized them saying they are unamerican and came out with two different statements saying, hey, that's not the case that's what we were trying to do. closing bell >> we are on record high watch that's the biggie. the second reek in a row of gains. all three major indices could see a record we will see if the s&p can manage to close above 3,000. that would be the first time ever we will take a dive into next week's earnings. and everything you need to know, whether you should buy ahead of their reports. also netflix is out next week. >> wow look at that. >> we are going to prepare you fully. all right. "squawk on the street" will be right back don't it go away.

♪ welcome back to "squawk on the street." the booming business of cannabis is what many investors are calling the new gold rush. but with those potential riches comes this reality there's a much bigger boom in the black market of weed that's crippling legal sales. only a fraction of total cannabis demand is being met due

to the illicit market. what's really going on inside these unlicensed dispensaries, which play by their own rules? our melissa lee has a preview of our investigation, "weed killers. . >> reporter: it's a weekday afternoon in los angeles, the epicenter of cannabis in the united states. this busy dispensary is open for business >> hi. >> reporter: but if everything looks normal, it isn't this is, in fact, an unlicensed, illegal dispensary part of the booming black market in california and around the country. it's what the cannabis industry says could be the biggest threat to sky-high expected revenues. case in point, california. early projections of more than $1 billion in annual cannabis tax receipts in 2018 are far from the $345 million collected.

that's in large part because the illegal market can easily undercut the costs of running licensed dispensaries. it's not hard to see how >> you guys ready? >> yeah. >> all right >> go. >> reporter: a team of cnbc producers equipped with hidden cameras visited ten illegal dispensaries throughout l.a. most aren't hard to find and they're open day and night this is exactly why legal store owners like cameron walt, executive vice president of project cannabis, is outraged at how bold the black market has become >> we're facing, especially inka and l.a. specifically, an illicit market that is extremely strong we're outnumbered three to one, illicit operator to legal operator so we have outrageous price compression that we have to see at our stores. >> how much easier do you think it is to operate as an illegal dispensary compared to what you go through >> it's a lot easier they have no compliance standards, no permitting

process, no documentation, no legal process that they had to go through >> reporter: so they're breaking the law, potentially threatening the health of consumers, and they're threatening your business >> correct >> reporter: and they're doing this in plain sight. >> in plain sight. >> reporter: we should note that our producers did not buy anything from these illegal dispensaries, which didn't respond to our repeated request for comments there are 186 licensed dispensaries in los angeles with more than 250 illegal ones according to authorities, but no one knows the exact number for more on our story, you can head on over to cnbc.com >> how much cheaper is the pot -- >> 40% >> 40% >> 40% and you have to think about the quality of the pot everybody is into organic. there's one case where the city attorney has found pesticides, pesticides that are used on golf courses to make the grass greener on the pot so you have to know what you're buying >> not to mention the lost tax revenue, right, that you're not getting from the illegal sales, that these states were counting on >> right and every single state that's

pressing for legalization of marijuana, part of the story is the tax receipts in california, though $1 billion was projected, $345 million last year was collected so that big shortfall -- >> why don't they just crack down >> they are. it's a whack-a-mole situation, though you can hand out these fines the max fine is $1,000 so if you can sell weed for 40% less, $1,000 is like a slap on the wrist. >> your fine pays for itself right there. >> and then they reopen. >> how much of it is because of the multiple layers of city, county, state regulation, and it may be federal one day >> most of it is and that's why states, when they're thinking about a cannabis program, they have to be careful about how much they want to tax the sales, because taxing the sales creates this price discrepancy. in california, you pay a cannabis, an excise and a sales tax. three taxes. that's most of what makes the price of cannabis in the legal dispensaries so much more expensive. >> is this happening -- so you mentioned california was sort of hot for this, colorado, canada

is it everywhere where pott's been legalized >> to some extent, but california is by far the biggest black market in cannabis in the entire country they had a strange system before, where dispensaries were able to exist, in 2016, they passed proposition 64. they just made those legal -- well, they were legal then those dispensaries get a license. not all of them did. so they just continue operating. >> wow that's a crazy new chapter in this story we've been telling for a couple of years. >> yet to think, all of these projected revenues for the entire industry, part of the assumption is that some illegal dollars will be converted to legal dollars. if that doesn't happen, all of those rosy projections may not come true. >> i can't wait to see more. thanks, melissa. good to see you. speaking of smoking, do not miss our new cnbc original documentary, "vaporized: america's e-cigarette addiction," a look inside the highly controversial vaping market, a market that's expected

to hit k$9 billion by the end of the year a stock that we want to mention, take a look at nap. goldman upped the stock today from neutral to buy. target goes to 18 from 13. heath terry says he expects user growth to outperform after this new android app, the launch of snap gains, some new lenses going. we'll talk to heath goldman in the next hour on "squawk alley," the analyst who made that call >> the stock has tripled since the record low in december face swap filter viral, driving engagement, who knew >> we're back after a break. tre. twenty-four people came together to sign an agreement that created the stock exchange. just the right elements coming together. it started when scores more people came together, just down the street and traded bonds that helped pay for the revolution, and the nation it created.

it started in an office on the corner where the right people witnessed the telegraph and brought information and humanity together forever. it started with the markets, bringing together steel and buildings and silicon and medicine and rockets. we believe the possibilities of life and investing are greater when we come together. it's why for eighty years we've connected ideas with technology, data with inspiration, investors with solutions. so that every day together, it all starts again. ♪

good morning it's 8:00 a.m. at facebook headquarters in menlo park 11:00 a.m. on wall street and "squawk alley" is live ♪ ♪

good friday morning. welcome to "squawk alley." i'm carl quintanilla jon fortt is off we're going to start the hour in washington, getting some news out of treasury today. elan el elan ylan muy has that >> the letter says that it is impossible to know exactly when the treasury will run out of cash, and so mnuchin called on congress to raise the daelebt ceiling before they leave at the end of this month. house speaker nancy pelosi is scheduled to have a phone call with mnuchin today she said yesterday she's open to negotiating a deal to raise a debt ceiling along with the federal spending caps over the next several weeks we'll bring you any deta