department of justice expected to announce a transaction that they will be approving that transaction tomorrow, based on sales of assets to dish for $5 billion. that will be the news we will be talking about tomorrow morning still unclear whether the states have signed on and that remains a big issue. join us tomorrow, we're -- that will be front and center "squawk on the street" begins right now. ♪ good wednesday morning welcome to "squawk on the street." i'm carl quintanilla with jim cramer, david faber at the new york stock exchange. caterpillar's miss and soft guid guidance, so much else to watch, including the doj on big tech. facebook settlement, weak global pmi, mueller and more. europe is mixed. ten year yield below 205 the d.c. head winds for big tech record ftc fine and the s.e.c.

accusing facebook of misleading investors as the doj launches this antitrust review. >> corporate earnings going to be weighing on some stocks at least this morning boeing and caterpillar disappoint trade worries remain >> u.p.s. shares sinking ahead of the open. profits soaring more than 13% for the quarter. david abney joins us first on cnbc this hour facebook up first. three different government agencies today, the ftc formally announcing that record 5 billion settlement with the company over privacy violations, imposing new requirement oz on mark zuckerberg and making structural changes to the board the s.e.c. simultaneously announcing $100 million settlement accusing the company of misleading investors about the misuse of user data. and lastly, last night, the doj is opening a broad review of tech companies, that will scrutinize leading online market platforms. didn't name any specific companies, but obviously facebook, amazon, alphabet are all in play.

of the alphabet soup, what is most important here? >> facebook is a demonstration of what happens when a u.s. government is displeased with the company. i think this is very strict. they're basically reaching in. and saying, okay, listen, we're changing the way you run your company. we're actually literally going to monitor you, we're going to insist that you sign off on certain things we're going to go after you if you violate. david, i look at this, is there anything left that they didn't do to zuckerberg >> they didn't put an ankle bracelet on him. right? i don't think he -- i think he can leave the house without being monitored. >> this is -- >> my perspective when you look at governance and we all know mark zuckerberg has super voting, he controls this company through his super voting shares. but they're getting around that when it comes to privacy one of the more interesting parts of this, we heard bits of it, but looking at it in print,

it establishes an independent privacy committee of facebook's board of directors, removing unfettered control by facebook ceo mark zuckerberg over decisions affecting user privacy. you'll have members of the privacy committee, independent, and appointed by an independent nominating committee of the board, and they can only be fired by supermajority of the board of directors that's moving outside zuckerberg's control. >> this is what happens when you don't put in a so-called grown-up i was saying, listen, tony west in there from justice, a retired federal judge, you need to take care of these things ahead of it this government, this government, this republican trump government, put somebody in. >> a 3-2 vote. the democrats on the minority side blanket immunity for executives they complain. no restraints on the business model. they see this differently than you do. >> i still think it is corporate america. they have done a great job

yes, they paid the price for violating your privacy but i can't remember other than when bristol-myers, when they put -- they did not like the way bristol-myers handled rebates. remember, they handled the negotiations and concede -- it was like they bought off some companies, they didn't want to do generic. this is the first time i've seen since then this is extraordinarily tough. >> you think the fine is 9% of last year's revenue. does that strike you as being abusive? >> no. but the guy runs the company and now there is a major part of the company, he doesn't run. >> it is a committee >> committee of the board of directors. but they will not, in other words, he won't be able it replace them at his own whim, which he can as the control shareholder conceivably. >> sounds like what they were going to do with tesla.

>> with the s.e.c. listen -- >> of all of the $5 billion number which we have known about now for quite some time -- >> penny here, penny there, there is reaching into the board. >> it is interesting. >> aren't you shocked? >> it is strong. >> it is shocking. >> it is strong. i think that is fair to say. >> you got to take care -- >> couple that with the stories today about the increased focus of the department of justice on all of the big technology players. and including facebook, of course the ftc continuing its own investigations as well and we do know that the big tech is certainly under the microscope to some extent, unclear where it all ends up. >> where are their friends democrats hate them, republicans hate them. >> the customers don't seem to hate them. >> don't think we have seen any -- >> haven't seen an exodus of that. >> no. i've not washington, in is really -- the

only thing i'm seeing the republicans and democrats really agree on, you can say the debt ceiling. but these guys, equal opportunity hate fest. >> what does it mean for the performance of the companies and their stocks is there going to be a discount you have to apply for the possibility. facebook is an outlier because of the privacy deal. to the larger antitrust question of facebook, alphabet, amazon, throw apple in there, it is under investigation as well. do you have to apply some sort of a discount? this is years before you get any sort of decision by the antitrust authorities as to whether they want to pursue a case. >> i think it provides a discount in the sense that you're looking over your shoulder every second let's say guzuckerberg comes up with a great idea. we got to run this by people this is not something -- let's say they did -- had a version of augmented reality that made your facebook look older.

they might say let's see is this a good thing or a bad thing? yes, i think it stifles innovation, yes. yes, i think it stifles innovation, yes, bristol-myers had the same problem was not the same after they appointed a monitor. you're not the same. >> does it also stifle the misuse of user data? >> yeah, absolutely. >> that's a positive >> for who >> for users. >> not for facebook shareholders >> for users, yeah, absolutely i forgot if you're a shareholder, of facebook, you're saying, okay, wasn't the fine enough the answer is no the government is reaching in. it does not do that except for incremental cases, david criminal cases >> yeah. >> just department. >> what they call the conduct relief here as they say, unprecedented in the history of the ftc, specific to the board committee. >> you think there is any regulation inflation because of the turf war developing between

ftc and doj? >> wow just a battle to be tough. >> trying to look tough. >> i guess so. but can we come back and say this was a government that was supposed to be anti-regulation this government is so pro -- does the president know that his government is pro regulation i've seen this -- >> there is deregulation of -- >> anything involving the environment is deregulated >> that's true >> whatever you want to do there. >> warming thing, yeah >> spew into the air >> maybe they don't like single use plastic bags we should wait for dow chemical. i'm astonished i am astonished that there is this kind of intervention. if i were zuckerberg, i would say, listen, get me, i don't know, get me retired federal judge, i'll put them in the office next to me. and i'll run everything. what are you doing >> i'm reading an important text thank you. >> the dog is fine

>> as we're talking facebook, we do have special -- former special counselor mueller before house judiciary. kayla tausche is watching that >> the former special counsel robert mueller gave a nine minute opening statement where he reiterated his commitment not to veer from the text of his 448 page report, that commitment was reiterated in a letter from the department of justice. earlier this week. he also set some boundaries for his questioning today and said certain things are off limit, like the reason the fbi opened the russia investigation in the first place and that controversial dossier put together by former british spy christopher steel. that being said, he also committed to the legal bedrock of the report, this opinion from the office of the legal counsel that said a sitting president cannot be charged with a crime, he said that was his and the special counsel's office decision

then back in march and it remains his decision today. but the democratic chair of the committee jerry nadler asked what happens once president trump leaves office. >> is it correct if you had concluded that the president committed the crime of obstruction you could not state that in your report or here today? >> i would say you -- i could -- the statement would be that you would not indict and you would not indict because under the olc opinion, a sitting president, excuse me, cannot be indicted. unconstitutional. >> you could not state that because of the olc opinion if that would have been your conclusion. >> the opinion with some guide, yes. >> under the department of justice policy, the president could be prosecuted for obstruction of justice crimes after he leaves office, correct? >> true. >> thank you >> so this hearing is going to be something of a rorschach test, democrats want to use this hearing as a way to inform the

wide swath of the american public that is not familiar with the contents of the report, specifically the second section which deals with potential obstruction of justice republicans on the other hand want to focus on the first section, where there was a finding that the president and members of his family and his campaign did not collude with the russian government to win the 2016 election. they want to explore that. they also want to explore the potential integrity of the investigation. and the people that robert mueller hired to help conduct this investigation and that's where we're seeing the line of questioning fall even in the first few minutes. carl >> we expect that to be a big part of it, kayla, thank you we'll come back to kayla for updates later in the morning that will be part of this, guys, the response to accusations that mueller's team was made up of lawyers with an agenda of some sort. >> yeah. the -- washington, all over the place. i'm trying to factor in mueller's testimony into the price churnings ratio of s&p

that's harder to find. i'm still stunned about what happened to facebook got to go back to 2003, chris christie put a federal judge -- retired federal judge on the board of bristol and found out that internal, internal, bristol was violating the law. changed the whole company, got rid of dolan got to -- look, i'm not -- this is not elizabeth warren. it is what you would do. >> this is compared to what elizabeth warren would do. >> i'm not sure. i think elizabeth warren in terms of the board -- in terms of what corporate governance, i think it is elizabeth warren like corporate -- she is not trying to break up facebook. alphabet, yes. amazon web service would have to compete against amazon >> i'm busy getting ready for fresh -- >> you're frustrating me

>> it is a complex story we'll be dealing with. >> complex i'm just -- >> i want to make sure it is right. >> this is a truly invasive action against a company that may have violated privacy, but has been a -- it is -- you don't get to be the faang for nothing. >> so, wait, their market cap absolves them of corporate responsibility >> no. look, if people -- if the customer felt that they were -- that it was a destruction of their own privacy, why are they still there? >> that's the bigger question. >> yes that's what i'm saying he's got to do the t-mobile. they already broke that. didn't they already break that that was mean. that was very mean. >> my own guy. we're a team, remember. >> i know. i'm stunned. >> thanks for that >> there is no i in team i've known that for years. >> we'll get to faber on telecom. we'll get to earnings from boeing, to caterpillar, to u.p.s., both of those stocks are going to take about half of the

loss on the dow at the open. we'll talk to david abney of u.p.s. also this hour. back in a minute tell him we're flexible. don't worry. my dutch is ok. just ok? (in dutch) tell him we need this merger. (in dutch) it's happening..! just ok is not ok. especially when it comes to your network. at&t is america's best wireless network according to america's biggest test. now with 5g evolution. the first step to 5g. more for your thing. that's our thing. dto experiencer gthrilling performance.

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t-mobile, deutsche telekom, sprint, dish, they have reached an agreement for a settlement underwhich a consent decree will be entered into by t-mobile to

allow it to move forward with its acquisition of sprint. others have done that as well. we have been reporting on this for quite some time. the deal itself, well, fairly straightforward, if you want, though certainly a high level of complexity basically involves $5 billion being paid to t-mobile sprint by dish, $1.4 billion for the prepaid wireless business. they'll pay that at close. another $3.6 billion will be paid over time for spectrum. the hope is the expectation is that in entering into this consent decree, which may be shared with us tomorrow, though you do need a court to sign off on it, you will create a fourth competitor in the wireless business dish really has been out there with plenty of spectrum to have been a competitor already as a fifth competitor but now the expectation and hope is that it really will be a robust fourth competitor this is a tough consent decree in speaking to some people who are both familiar with it, and

with the history of these kinds of agreements. it is a tough one. and of course the question will then turn to the states that have also sued to block this deal and whether they believe it is tough enough for them to give up their cases to say, okay, we're willing to live with this. the trial for the states begins on october 7th the expectation on the parties is they can close this deal early in the fourth quarter of this year. and they do still need the public utility commission of california to sign on. but that is seen as not necessarily a formality, but expectation that will come in the next month or so so they're moving forward. t-mobile says it will have the same synergy numbers as what i'm hearing according to people familiar with the negotiations here it will still have a $43 billion net present value on synergies, $6 billion annual run rate no change, some had speculated, will they change the terms with

sprint no change whatsoever in the terms with sprint. and so as soon as tomorrow and you never know this can move a little, as soon as tomorrow we may see the actual consent decread decr decree, the deal announced with these parties and the question will be what does it mean for dish will they have a partner that comes in last wook last week i identified one key issue, change and control of dish wireless. and whether or not if a cable company were to actually buy control of it, would they still have access? they resolve that. it is complicated. any financial investor is exempted they can also -- they can keep voting control that is -- sell 45% economic control, one company and 45% to another company. the mbno regardless would stay in place with a two-year winddown they resolve that, they resolve everything now the question is what is dish going to be able to do with this business will they represent a true fourth competitor?

will they bring in a deep pocketed investor at close or down the road in thelike amazon this is justice. the ftc has done these things. they did it by the way with drugstores they got that wrong. they did it with supermarkets, they got that wrong. they give someone a business and then they just screw it up, like hagan, on the safe way deal. this reminds me more of constellation brands when they got madella and corona they wouldn't give this deal unless they know dish has something up its sleeve. >> three years unlimited capacity into the t-mobile network and that will pair down over time. dish has to build this thing make it happen 5g, nationwide, very well may need a partner the change and control provisions have been dealt with on the mbno.

but what i'm hearing more and more from some investors in this sector is that they think it is uninvestable generally f y lgen. do you want to own verizon or at&t, which reported numbers this morning at&t is free cash flow not bad free cash flow not bad they're by the way pointing to, what, $28 billion range of free cash flow guidance for at&t, guys dividend payout of 50% weird oest quote from randall, stevenson, saying we're going to look at buying back stock. >> are they kidding? >> we're going to take a look at it. >> will you stop i may have to go down there and be the cfo of that company he's a good cfo. that's ridiculous. wireless. >> no, it is not uninvestable. dish has got something up its sleeve or they wouldn't have gone there they can't afford to -- >> that's my point

you have four competitors, one of which has nobody on its network, 5g nationwide network why would you not think that's not good -- that's bad -- that's -- why would you not think that is not a bad thing. >> dish can't -- it is a good thing for at&t i would rather have them say, listen, we'll put additional money to find the next "game of thrones. honestly stevenson. we got to get him on the show. that is so ill advised. >> we'll look at the dt sub numbers, they're atrocious >> can you imagine dish talking to, say parent company of this network? alphabet, they can't seem to grow anything. amazon, they have to split the company up with elizabeth warren i don't know david, i have -- i told people it buy constellation constellation was a wine company. okay and when they were finished they became the fastest growing beer company. it is a win for dish you know those guys better than anybody. i see why you were making those

phone calls. >> thank you >> i felt slighted you were talking to chewy about getting the next month subscription is this the most important story oerhathotr ther than -- >> other than boeing, cat, visa, chipotle and snap. back in a minute

jim said, busiest new days of the year. we'll get to the earnings we have not yet craednd tck ahe mad dash and the opening bell. don't go away.

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let's get to our mad dash, little less than two minutes before the opening bell. we haven't talked boeing, haven't talked caterpillar let's do that now. caterpillar. >> i always say what you got to do is practice upod, underpromise, overdeliver. caterpillar, underpromised, underdelivered, upud they did not make the number they did not make the number

the mix isn't that good. the sales aren't that good they kept their year number. they did have a restructuring that reduced what the reported number was so the analysts themselves are -- and the sellers i think are too negative they overpromised. >> overpromised but keeping a full year number you can understand why people may be more skeptical if they can make that number. >> absolutely. i think restructuring will wind down i guess what i was hoping fors with a more smooth caterpillar kind of a new caterpillar. this is like an old caterpillar. yes, they keep the year, but, you're right, will people believe the year, i don't know there was a sense that you didn't need oil and gas to be so high now, good thing. i found a good thing china is only 5% to 10%. i found that i found that good thing. there was a good pick.

i found that >> in your ratings here, the notes of a crazy -- >> you have to do that you know what also is a good thing? >> opening bell on the cnbc real time exchange, look at the s&p big board, it is owl rock corporation, celebrating the recent lifting inglisting at t. hms, on cat, they have raised guide for several quarters that was what -- costs up three on materials, tariffs, labor, it is not na that bad i went out earlier this week and i thought it was going to be okay to buy. if not one quarter makes, but this is a quarter that is too reminiscent of previous quarters they have to own that. i think he owns that

he has to own what happened here if it is going to be oil and gas, levered in what halliburton said or union pacific. by the way if you -- the fed is watching and i know they don't, they g not the least interested in what we have to say texas instrument, wasn't as bad. this is a day where the fed focused on the conference calls not the headlines. >> for the quarter, ten out of 11 seeing margin down year on year >> i think if i were the fed, i would say, geez, we got to cut >> yesterday saying the opposite. >> i said the consumer is strong don't -- >> only two-thirds of the economy. >> right >> true. okay i don't have -- i don't really have a leg to stand on today. >> look, manufacturing is serious. you see pmis in europe france, 50 prior 51.9.

>> brexit. boris johnson, holy cow. they're talking about trying to make sure -- when you're trying to make sure that the irish, northern irish border is safe, what the heck? van morrison, northern ireland, brown eyed girl. >> yes >> caterpillar, not good. >> your point on boeing, services would help and it did cash flow to a burn. >> not great i'm exhausted. they're targeting facebook the cyclicals aren't that good today. >> a bright spot. >> what do you got >> snap. strong quarter >> that was one of the best are they bringing someone to do a conference call? >> sometimes it takes time to figure it all out. perhaps the young mr. spiegel is starting to figure a lot of it out. management to some extent. they had a redo of the app, time

to get traction. now talking very, very positively and boldly about playing a central role in the lives of 13 to 34-year-olds, having two kids in that demographic, snap is what they use to communicate >> more than two-thirds. what is amazing, i have now found the ultimate gen z play. millennials, they're too old they're already too old. >> what is gen z what age is that >> your kids, my kids. >> millennials closing in on 40. >> strongest user growth since they went public 13 million by the way, stifel and goldman to a buy, going into this spread >> this is not done going up it should be up more come on, market. take it up i knew it was up already this was one hell of a conference call.

>> they're still losing money. >> less and less all the time. >> if you are old spice, if you're crest, if you're colgate, if you're tide, you have to give an ad to snap. >> he's in l.a., you can go visit. >> i'll go to l.a. it is okay i'll go see beyond meat. >> 12-year-olds are not buying bleach. >> nor captain morgan. >> girls buy a lot of makeup, though. >> fast food. >> what do you do, david, when you go out to los angeles, who do you see >> who do i see? i see my media guys. all my friends old media friends. >> you go see beyond meat. did you see today what dunkin' donuts had ethan brown, todd is the sausage rollout. i had the sausage rollout.

it was better than the sausage egg and cheese at mcdonald's it is better >> we got too much to deal with today. are you bringing him on? >> hoffman >> i was trying to facetime hoffman but too busy listening to the breaking of the story of sprint. >> big >> i was trying to facetime. i'll show you. i had hoffman, you believe me, right? >> this is -- this is not a manhattan rollout, but they have plans for -- >> it is so good, carl it is worth talking about. even at 9:35 >> speaking of food, jim, chipot chipotle, comps up 10, looking for 8.3. >> that quarter was so up. brian nichol is a genius comes in february, 2018. look at the stock. it bottoms 18 months after the rat incident -- that sent things back a little. that quarter is the sixth quarter of act is sell ration, they only had 5 billion in the

loyalty program, they can go up to 15 million in loyalty delivery is accretive. doing fantastic in delivery. they got all new items people's trust in them more than ever it is going higher it brought back a lot of stock >> stock up 200% since nichol's arrival. >> so likable. conference call so great i would stack that conference call against evan spiegel's conference call. that was a great call. i was so uplifted by that conference call. i'm going to change the menu tonight. >> did we look at the stock price. >> that's why i said caterpillar makes -- caterpillar looks very good. >> yeah. it is down over 6% did want to come back to some of the telecom names we spent a lot of time talking about. dish is up to jim's point earlier. he thinks it would be a winner at&t is the biggest winner in

telecom this morning after reporting numbers. >> they're saying it is additive to -- better to buy stock than debt i want to give them their due. >> a look at dish. we had this quote and we may -- randall stephenson said we continue to pay down debt. that's one of the key concerns, their debt load. your debt load really the concern is only a function of what your cash flow is and ability to pay it down they're focused on that. they know investors are focused on that. he said we continue to pay down debt and i'm more confident than ever we'll meet our year end deleveraging goal. we'll look at buying back stock. >> again, it is nebulous. >> front page of a press release. >> did you expect him to talk about jeff bewkes and just talk about hbo. >> straightforward on directv. look at directv numbers. they're 778,000 subscribers left

directv. we did this quote already. let's move on to the numbers >> the stock is up, david. >> yeah. >> amazing >> stock is up now we're trying to get the numbers for you. it is tough in the control room. 778,000 directv now also lost another 168,000 subs and it just keeps accelerating when you're losing almost 800,000 subscribers in a quarter at directv, that's quite something. >> yeah. >> the key for the company is being able to execute in terms of the plan when it comes to warne warner, when it comes to entertainment. this industry is changing so quickly. do they have the right management team to pull it off i don't know we'll see. stock is responding positively to the numbers today and the $28 billion free cash flow guide for the year. >> dividend safe that's my take they want that dividend.

we have an amazing dichotomy today. we have some companies that are just crushing it and then we have the companies that are being crushed. and whether it be -- off the conference calls chipotle was a marvel. snap was just -- it was close to perfect. though they admitted the d.a. used their daily average inflated by the recent lens product. those guys are hitting on all cylinders and norfolk southern and cat. you have the industrial economy, one third that is industrial jay powell, please help us and the other part is saying, jay powell >> texan not terrible. >> i didn't find a single line-item. i did something about texan this morning. there is isn't a single line-item that was good. automotive is bad. the semiconductor industry association said business is down 10% only down 6% this is all better than bad. better than bad. >> the split i saw a chart

yesterday, the split between semibookings and semimarket cap is bananas you can guess which is going up. >> i've got to tell you this industry is running more lean, they did this number in this depression for chips is extraordinary. extraordinary. their cost is so under control versus catcaterpillar, texas instrument should be up eight. it is better than what they lower numbers and they beat the lowered numbers. this is what we're seeing for a lot of stocks. fedex, they lower numbers and they can beat the numbers. you got this lower and now beat situation and the market is loving it, provided your raw costs are under control. the only raw costs that anybody seems to be able to dismiss is after caug avocado. o you would think they would come up with something that is not chipotle's style

abbott labs is doing well. the medical device business is doing well. >> technology stocks, the big names are not doing particularly badly. facebook is now down less than 1% >> i know. i guess people feel it doesn't -- >> seems to minimize the ability of mr. zuckerberg to -- >> my answer is preet barea. former u.s. attorney. >> your answer to what >> put him on the board of facebook. >> put him on the board. >> oh. >> reconstitute did. >> eric holder. >> they're not talking about add negative directors >> nick saban on the board how about nick saban. >> new committee to oversee privacy matters by underwhich mr. zuckerberg will not have immediate power to -- >> he's the ceo. now the government is saying he's not the ceo >> and controlling shareholder. >> this is not the government i

expected we have a guest at the end of the table. there he is. david abney. u.p.s. shares moving higher this morning. the company did report a beat on the top and bottom line. u.p.s. announced expanded delivery to seven days a week. its intent to operatie commercil drone flights. i wanted to start off with the 30% move up in u.p.s. next day air volume why that's happening and what that means in terms of how the industry is changing and how you're trying to change the company to meet that change. >> it is a structural shift we're seeing and it is starting with the big e-tailers, but we believe everyone else is going to have to do the same thing what is great for us is we have the capacity we have added the aircraft, we have 11 coming in this year. so when you can time a structural shift with your investments, it just doesn't get

much better than that. and this next stay is not just air. it is also ground. and we have the capacity from the ground side to make late pickups and deliver 85% of the population the next day. so we're expanding in both areas. it is working out -- >> can you expect you're going to see these kinds of increases in the future? is it a one time surge or can we expect next quarter that it is going to also be the equivalent or close to it >> we think that it is a more of a permanent shift. we're not seeing who is going to be 30% certainly going to be high we'll see more and more customers join in on this. i think it is a good trend force we'll continue to maximize >> this is a clean beat, congratulations, really a fun quarter. you get a little more aggressive, you're offering sunday that's the kind of thing if i were amazon, i would love.

you're offering sunday that's something if i were to go to a cvs or michaels, i can give -- i can have my own e-commerce seven day a week this is the new ecome. >> it really is. as a company, we had to realize that sunday, saturday and sunday just like another day of the week we chose some maximum partners and michaels, cvs, advance auto parts and for sunday delivery. with those combinations, and with our network, we feel that we have another good offering for our customers and we're very excited about it >> you have to worry right now, christmas in july, are you going to be ready for what obviously has been an overwhelming -- your company and others when it comes to the holiday season? >> yeah. this holiday season is going to be a little different. it is a shorter number days between thanksgiving and christmas. but we had a very successful

peak last year we have added on top of last year's expansion 400,000 packages an hour capability we have added 5 million square feet and then with the additional aircraft, and the technology, so last year was a very successful beat we feel comfortable this year we'll be due. >> what is holiday hiring going to look like, you think? >> it is too early to say the numbers other than i'll tell you, going to be a lot and last year we were at that 90 to 100,000 i suspect it will be something similar to that this year. we will get those people in place a little earlier this year, just because of the shorter peak season. so that's the two things, we'll get people on earlier. also, would like to encourage all your viewers, feel comfortable at shipping a little

earlier this year. you don't have to wait to december 22nd. >> two things. does the gulf -- the iran tension over crude have you hedging more aggressively. what is unwip with labor unrest? >> as far as the oil crisis or the concerns, we haven't really changed our strategy we're watching it closely. but we think we're okay where we are. and i have to tell you, when it comes to other airlines and labor environments, i just haven't paid too much attention to them. i'm very happy with our labor environment, we just got the teamsters agreement few months ago passed we're in between agreements with the ipa, our labor union, for the pilots so we're in good stead there

and besides that, i couldn't tell you a lot more about others >> small and medium size businesses continue to be a focus for you. i would assume the sunday rollout is trying to cater to them as well do you expect they're going to become an even larger percentage of your overall shipping >> they will be. all of these initiatives, not just sunday, but all that we announced, it is a holistic plan to allow these small and midsize shippers to punch above their weight and this allows them to compete with these big e-tailers and we couldn't be more -- any more excited about what we can do from a customer base. >> when it comes to exciting, people look at this new drone subsidiary and get excited s it re is it something that will have a commercial opportunity for you and if so, when? >> it will have a commercial opportunity. we don't believe that all of a sudden everything is going to be delivered through drones but the healthcare industry, which we're so focused on, is

the first application. and so we have been doing that for years in rwanda, doing it in ghana and now started in the us with us wake med, the medical facility in north carolina we think we can copy that in healthcare facilities throughout the country. but the good thing about this part 135, it would give us, if we get -- when we get that certification, give us capability to do that, but also to go to other industries and not just be line of sight either, not be restricted to a number of drones or number of operators. so being one of the first to get this certification is a big step for us >> david, we're getting a lot of news about intervention. some of the great companies, amazon, facebook you're good partners with amazon i know they -- frenemy situation. are you surprised that the government is taking such a hard

look at private industry given the fact that it is republican government, pro deregulation these are some of your partners, very important companies isn't it a little nerve wracking >> you know, i don't know i would say surprised. because there does seem to be momentum that is building, not only in the u.s. government, but in other governments we have found the best thing we can do is to have early discussions to make sure we explain what we're doing, what our intent is, and if you start to hear concerns from any government, that you try to address it and address it quickly because it can start to mushroom on you and before you know it, something that you thought was pretty small can be very large we just have to be attuned. >> okay. i guess i'm so pro these companies, i know that shopify does small and medium size business i know they make as you said -- they make everybody into a

potential huge company are you seeing empowerment you guys are empowering smaller companies to beat big companies on the sur is as face. >> that's absolutely it, but internationally, too this worldwide economy service in partnering with companies like shopify and others. but right now the small and midsized customer is first they've got power they have never had. we want to make sure that we are the main enabler of that that's what our focus is. >> david, we appreciate you taking time with us. thank you. david abley, ceo of ups joining us. we have data as we were talking. let's get to rick santelli at the cme. >> you hit the main highlight, whether it's pmis or global weak data on the economic front we continue to observe how the influences of dropping rates

overseas and other large commissi economies comes home down fair basis points a two-day of tens. and we really were starting to move up in firm based on what originates economically here in the u.s. and, of course, maybe issues regarding china, but it really is difficult to escape the gravitational pull of what's going on in europe, japan, and asia two contin two-day bunds at minus 40. they are just a basis point or two away french ten-year more negative at minus 12 basis points. here is an interesting one this is a greek ten-year, trading around 2% or lower keep in mind that today's range is the lowest it has ever traded but to think that a greek ten-year is trading lower than u.s. ten-year, really encapsulates why the fed's mission to try to control the

yield curve or steepen the curve or actually get control of rates is next to impossible. finally, a four session of the dollar index, three sessions up. looks like the con staging is causing a little give back back to you. >> thank you. tomorrow do not miss the ceo of southwest airlines, gary kelly, as his airline reports results. there is so much to watch in aviation in the next hour, ftc chairman joseph sim mons on that record-breaking $5 billion settlement with facebook dow off the initial lows the s&p is green back in a minute

time for jim and stock trading. >> i apom jazz we covered so few stocks people are somehow -- they are nitpicking at the end of the day visa is a remarkable company they did a great job very solid. >> we have always said you are

welcome to stay for the second hour, third hour, fourth hour. we can cover more stocks. >> talk to my agent. >> what's on mad tonight >> first horizon we are talking about the tennessee area where we should have moved because of the state and local taxes, we can be kings. and you want to buy a stock ahead of it? go right ahead that one is going to blow the numbers away i believe caterpillar, still stunned that overpromising/overdelivering, that's not what you do as i took the brooklyn nets coach who was at my restaurant last night. >> no kidding? >> national tequila day today? >> yeah, i will be -- my drink is -- i'll knock back a couple. >> we're right there with you, jim. >> thank you. >> when we come back, the chairman mu chairman of the ftc on that record-breaking settlement with facebook down about a percent and the s&p 3,005.

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good wednesday morning welcome back to "squawk on the street." >> i'm carl quintanilla with sara eisen and david faber at post 9 of the new york stock exchange incredibly busy morning as the markets recovers from some early lows watching earnings, boeing cap, dodger, mnuchin, pmi, facebook and more economic data crossing the tape. let's get to rick. >> yes, june new home sales expecting a number around 660,000, a little light. 646,000. this of course seasonally adjusted annualized units. that follows a downward revision of last month. it went from 626,000 to 604,000. so that makes it officially a number that is a bit higher just because of where we came from. expectations light sequentially strong. up 7%. diana olek will divine all that we need to know.

>> well, it's a miss, rick the street was looking for 659,000, but not surprising given the prices prices need to be lower for buyers to get in, despite the fact that we have lower mortgage rates. we had a median price of 310,400. that's not much change from june a year ago so very, very slightly lower the issue right here is that we have a very, very short supply of existing homes for sale the existing home sales numbers yesterday we saw an unexpected drop as well it's all about the affordability. new homes come at a price premium. we saw a report that buyers were coming back to the market. again they are citing affordability as the issue they are trying to put up more inexpensive homes, but again the cost for land, labor, materials continue to rise so it's harder for builders to b put up those affordable homes. again a disappointment you think we would be seeing more given that shortage of existing homes but again not pumping the

numbers because of affordability. back to you guys. >> thank you very much and rick, thank you. meantime, the big story today is facebook getting hit on all sides. the ftc hitting it with a $5 billion fine over data privacy issues the s.e.c. announcing $100 million settlement with the company. the doj announcing its own broad anti-trust review of big tech. ylan mui with the latest. >> well, that's right, carl. that $5 billion settlement is a record, and it places new restrictions on ceo mark zuckerberg and also makes structural changes to the board of directors the ftc said the goal is to change the company's culture along with the business practices. >> facebook violated the promises that it made in 2012 t the government and american consumer facebook promised not to misrepresent the control that consumers and users of facebook had over their privacy and not to misrepresent the kinds of

sharing of data that it was doing with third parties facebook also promised to have a reasonable privacy program they broke those promises. >> now, the ftc says that some of the specific changes that facebook would be forced to make include increasing oversight of third-party apps, reporting any data breaches within 30 days, and also assessing the privacy risk of any new products or services before they are launched now, as for the size of that fine, the critics, including the two democratic commissioners of the ftc, say that $5 billion is essentially a parking ticket for a company with $55 billion in annual revenue the republicans at the ftc pushed back against that >> i don't think that's a fair characterization this represents 9% of facebook's annual revenue, close to a quarter of its annual profits. that's the kind of money that no company parts with lightly >> now, as you mentioned, carl, the ftc action does come as the

doj is launching its own review over anti-trust concerns it says the focus of that will be on whether companies are reducing competition, stifling innovation or harming consumers. it's important to point out that no specific companies were named in the doj's review, but it is very likely that facebook could get swept up in that as well. >> all right ylan, as you pointed out, some of the dissenters on the commission already tweeting threads about what they believe. no direct fine on zuckerberg or sanders. no limit to their authority. no admitting of wrongdoing how widespread is that view? >> well, i think you'll find the view pretty strongly held on capitol hill at least. we've heard from a lot of republican senators as well as democratic lawmakers who say that this news of the fine is simply too low, that the company should be facing fines as high as $50 billion a whole year's worth of revenue.

so i think that this question of how much does facebook actually -- how much is it actually getting punished here, that is a question that will be debated in washington and amongst the regulators for some time to come. >> huge story. thank you very much. later this hour ylan has an interview with the chair of the ftc, joseph simons you do not want to miss that. julia has more on facebook and the ftc with the facebook reaction, julia. >> that's right. facebook saying the historic fine and agreement with the ftc will mark a sharper turn towards privacy on a different scale than anything we have done in the past mark zuckerberg writing on his facebook page that he is committed to set a new standard for privacy, saying, quote, as we build our privacy-focused vision for the future of social networking, it's critical to get it right the next focus is to build privacy protections. i'm committed to doing this well and delivering the best private

social platform for the community. in a post, facebook outlining how this new oversight will shift every part of the company's world, including building privacy into every product, stricter compliance measures with zuckerberg signing reports as well as independent oversight with assessments and a process similar to financial controls now, sheryl sandberg writing the settlement makes sure that we are clear with people about how we use their information and that we protect it this will help us better serve our community. now, the question is whether all this new oversight could stifle innovation or whether it would benefit the company by reassuring investors and consumers who are concerned about privacy. we'll hear more about the impact of the regulatory scrutiny so far and how much impact it's already had on users and revenue when the company reports earnings after the bell. one thing is for sure. facebook will continue to stress the sweeping nature of these restrictions after legislators have raised so many concerns that the ftc wasn't going to do

enough guys, back to you. >> i mean, is it your sense, julia, this went farther than the company was expecting in terms of the behavioral changes and the business changes that the ftc is requiring >> it's hard to say what the company was expecting. i think the company knew that there was going to be a lot more than just a fine i think the question really is whether or not this settlement is going to change how facebook uses our data and how facebook could use our data moving forward. i think it's interesting there are details like about facial recognition. they are going to agree that they need explicit consent from users if it's going to be using facial recognition technology. this may not seem like a big deal now, but down the line facial recognition could be huge for targeting ads as well as collecting data on users it will be interesting to see how these more sort of future-facing issues could impact their revenue generation. but i think no matter what, facebook wants to show that this

is a big deal because the more this seems like a big deal, the less there will be pressure from legislators on capitol hill to enact many more laws to rein in their power. >> all right julia, the story is not over by a long shot. it is a huge day of earnings as you know. shares of caterpillar under pressure after reporting disappointing numbers and rising costs. u.p.s. up with its profited revenue above expectations snap spiking joining us to break down these numbers, our own bob pisani. busiest day so far >> it is it's not the unabashedly great news we had yesterday. we care about guidance so far it's not materializing. now, yes, boeing coming out and saying we'll tell you what our guidance is going to be later. we don't have it for you disappointing. not a surprise that's a very, very specific story. if you look elsewhere it's really not that bad. so i see northrop grumman

raised i see u.p.s., good interview with the ceo, they affirmed. texas instruments new highs in the semiconductors q3 guidance was above the range. that was given for the analysts' estimates. caterpillar was always the wide card it was the hard one to figure out. they are guiding towards the lower end of the range two specific problems. one was obvious, and that was china. the other is shale we weren't sure how shale was going to come out. if you look at the numbers mining was a little better than expected not great, but construction was okay the energy business, because the shale business has slowed down, was down rather notably. i think more than some people anticipated. so you have china, who is -- can you be an american company selling caterpillar in china now? it's tough look at the numbers for the revenues by area north america did fairly well. europe, africa, middle east down a bit. that was a disappointment. and asia-pacific down 8%

so there is the issue that you had there. maybe a little worse than anticipated. overall, this was about in line with what you expected for the china numbers. so again this is the hard one to figure out caterpillar a little bit more disappointing, but not a terribly -- i'm really happy about the semis. historic highs on texas instruments. lam. micron high. teradyne at a new high the smh, the semiconductor etf, there is a lot of people playing this in the last few weeks this is up 20% and this is your proxy for global growth essentially. in may when we had all of the big concerns about the tariff issues, down 20% now tariff issues more optimism ontive issues, up 20%. you can see that v-shape that we have seen here so overall the bottom line was remember a month ago we were

here and i was getting -- i call them four exclamation point emails saying, pisani, they are going to drop the numbers in the second half. you are too bullish. you are not getting this that was the big worry yes, there are a few concerns, about you overall we are not seeing the wholesale downward revisions in the second half estimates so far now, it's still a little early i know sara, you are giving me that look over there, that "but" look. >> i have something to say what i have seen in the earnings, especially in the consumer names, which china is strong if you are in the consumer business. we saw that yesterday in coca-cola, nike,apple is a little bit of a wildcard on that one. heavy machinery bad. consumer space good in china the other theme is that north america is coming in i think better than expected even those numbers show that north america -- >> construction numbers were excellent. >> you know, that was kind of a mystery. we have gotten mixed messages on the economic date in the u.s

looks like companies have a good operating environment which leads you to wonder what the angst is about over at the fed and people calling for a recession. >> what you are saying is that things are really complicated. there is a lot of stuff to tease out. then the dollar bulls out there saying, oh, this is impact and we have seen some companies call the impact of the dollar. that's your area there is some kind of slowdown in asia. it depends if you are dealing with machinery or any kind of heavy equipment. the consumer generally is slower but better than the industrial economy. this all kind of makes some sense. the coke numbers yesterday were fantastic overall. you covered that very well so - >> and the theme was that the storm that coke was expecting in terms of lower earnings guidance in the year never happened, that things were looking better. >> that was the best quote of the day from the ceo, that there are storm clouds on the horizon, but -- >> the storm never came. >> right.

>> bob, thanks. >> taking a closer look at one of those earnings, boeing. phil lebeau with that blurry outlook, phil. >> it's a blurry outlook because we don't know what their guidance is. it was an ugly second quarter fwich that the max is grounded they are not delivering them they are not taking in much revenue. eps they lost $5.82 a share. revenue just under $16 billion by the way, the analysts' estimates are all over the place. there is no way of saying it's an accurate compareston coop census the free cash flow of negative 1 billion is half as bad as what analysts were expecting. there is no guidance from the company in terms of third quarter full year. that's because they have all these max planes that are parked around the pacific northwest they haven't -- the expectation is that they will deliver in the fourth quarter one other interesting note from the earnings and the conference call begins shortly. look at shares of boeing

the company has said the 777 x, which they are in the process of developing, well, that first flight has been pushed back to next year. the assumption all along is that this would happen this year. they believe they will do deliveries by the end of the next creek this will get some questions in the conference call because the 777 x, if you look at that and you say, okay,will we see further delays this is one area we might see it with a new product like this plane. >> people pointed out cash flow negative $600 million cash burn. >> right. >> the backlog down two-nine how surprised were you by that >> not a huge amount look, the backlog, you know, as they start to eat through this, i think if it was a dramatic drop in the backlog, i think it might get a little more attention. there will be a question or two about that on the conference call in about ten minutes. almost all of commentary is going to be focused on the 737 max. i am not sure analysts are going

to be satisfied with what they hear because i think boeing's going to say we are working on it we're making progress. they are not going to give guidance. >> phil, thanks. boeing down about a percent. >> tomorrow don't miss an exclusive interview with southwest's ceo gary kelly tomorrow 9:30 eastern. they have been exposed to the boeing 737 max problems. the biggest u.s. airline. when we come back facebook's former chief security officer going to join us and give us his thoughts on this ftc settlement, which has raised all kinds of debate later this hour, ylan mui an exclusive with the ftc chair joseph simons. the market continues to rebound. we are back above 3,007. the dow is down 62 we're backn mont ia me moving is hard.

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with a few simple steps. really? really. that was easy. yup. plus, with two-hour appointment windows, it's all on your schedule. awesome. now all you have to do is move...that thing. [ sigh ] introducing an easier way to move with xfinity. it's just another way we're working to make your life simple, easy, awesome. go to xfinity.com/moving to get started. former special counsel robert mueller testifying before the house judiciary committee. kayla with the latest. >> sar, a the committee is reconvening after a short five-minute recess about halfway through this hearing so far where the former special counsel has been mostly offering one-word answers to stand by the text of his report. the republican members of the committee so par, thfar, they a questioning whether he overstepped his authority as special counsel, whether he was conflicted during the

investigation because of his friendship with the former fbi director james comey in a notable exchange he was asked why in particular he didn't use the same language as ken starr, the independent counsel from the investigation into the clinton administration that led to president clinton's impeachment hearings listen >> you never used the term "raising to impeachable conduct" for the instances that the gentleman from texas did is it true that there is nothing in volume 2 of the report that says that the president may have engaged in impeachable conduct >> kept in the center of our investigation, our mandate, and our mandate does not go to other ways of addressing conduct. >> that was jim sensenbrenner of wisconsin with the questioning there. on the other side of the aisle democrats have been exploring

every single detail about the dozen instances in a second s.e.c. of the report focused on on potential obstruction of justice. in addition to that, they have been asking why president trump asked his former attorney general jeff sessions to recuse himself and whether that, in and of itself, skirted ethics rules. listen. >> the president told sessions you were supposed to protect me. you were supposed to protect me or words to that effect. >> correct. >> and is the attorney general supposed to be the attorney general of the united states of america or the con siglary for the president? >> united states of america. >> so that gives you just a taste of what we've seen so far. as i mentioned, we are about halfway through, an hour and a half left to go. a third of the committee has asked questions. some of those members are on another committee set to hold another hearing this afternoon back to you. >> keeping us honest on the mueller hearing as we throughtr

focused on earnings. when whe come back the chair of the ftc to discuss a big settlement with facebook take a look at the markets cat and boeing pinch the dow the s&p's up back in a minute let's do it. [ sniffing ] come on. this summer, add a new member to the family. hurry into the mercedes-benz summer event today for exceptional offers. lease the glc 300 suv for just $419 a month at the mercedes-benz summer event. going on now.

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welcome back time now for etf spotlight we are taking a look at aerospace and defense. the ticker is ita. trading higher this morning. the sector recovering from some early losses industrial heavyweight boeing remains the exception in the sector the company's stock is lower you just heard from phil lebeau on that large quarterly loss of course, the shares still remain volatile after q2 earnings fell short of expectations we also mentioned northrop grumman. you can see it is the winner so far amongst that group stronger earnings this morning lockheed martin's numbers were fairly strong yesterday. ra raytheon, bought by united technologies, will report earnings tomorrow morning.

>> also a nice boost from the new spending bill. the compromise on the debt ceiling. >> yes. >> if that actually goes through. when we come back, facebook paying a $5 billion penalty over privacy issues we will speak to the company's former chief security officer alex stamones xt the dow is down 91 points. 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. ♪

. here is your cnbc news update national security advisor john bolton meeting with south korean senior officials in seoul. high on the agenda, the denuclearization of the korean peninsula. >> the main objective we have, and i know that you have, is to emerge with a stronger rok u.s. alliance that really has septembkept the peace in this part of the

world for a long time. >> iran's president suggests iran might release a british flagship if great britain releases an iranian oil tanker seized by the royal navy earlier this month britain has announced plans to devel safeguard shipping on the strait of hormuz. arrested by place after leaving his home to go jogging this morning it's not immediately clear why he was arrested. his spokesperson says he is expected to appear in court later today. facebook will pay the ftc a record-breaking $5 billion penalty to settle charges that they violated an order by s deceivi deceiving users about the ability to control the privacy of their information also $100 million for making

disclosures. the former facebook chief security officer alex stamos appreciate your time very much today. thanks. >> thank you, good morning >> so facebook says it's a fundamental shift in the way we approach our work. some of the dissenting commissioners say it's blanket immunity which is it? >> i think it's actually both. the order does give facebook immunity for anything that happened before it so it does -- it is comprehensive. it doesn't have to list out any potential issues that the ftc would address. it requires facebook to establish a new parallel track of privacy officers and privacy management that will look over all of the different decisions being made in its various products and then report up to an independent portion ever tofe board of directors who will now be responsible for attesting personally that these controls are in place. >> how much power do you ascribe to this committee?

i mean, what are they going to be able to do in terms of pinching the business model as we know it so far? >> that's an interesting question i mean, the fundamental issue here is the united states does not have a substantive privacy law. there is no law that tells facebook what it is and is not allowed to do with data. what the ftc can do is they can punish companies that they believe have been misleading, said misleading things or have unfair practices under an effectively 100-year-old definition of those practices. while there is a separate organization here, it doesn't really speak to substantively what decision does facebook immedianeed to make. i think this shows that we need a law in the united states that defines how we want tech companies, other kinds of companies as well, to handle our personal data. how do we want them interacting with one another and how to balance the privacy issues with some of the important security, safety, and competition issues that are brought up in this

order. >> so it sounds good on paper to talk about designated compliance officer, responsible for the privacy program, that then is subject to the approval of this new board privacy committee, but you seem to be, as i would assume many people are, whonder what it means in practice. >> that's right. it's hard to know what it means in practice. the other core issue is it's clear that the animating complaint behind this entire ftc order is the cambridge analytica situation, right to recap briefly, the cambridge analytica situation was the fact that an external developer had access to user data via facebook's apis, broke facebook's terms of service and then kept that data and sold it to cambridge analytica the problem here is that a lot of the privacy issues people have with facebook really are not related to that kind of issue with a third-party app developer. a lot of people are concerned about what kind of information the big tech companies have about them and their family

members. this doesn't substantively address that it creates people to study the issue, create a parallel process for reporting to the board and reporting publicly that's why we need some kind of legislation now to back this up to decide in the united states how do we want to balance not just the financial equities, but the competition and safety equities for some of the privacy decisions we are going to make. >> the timing of this alex is interesting because we get this settlement and these restrictions and these new rules less than 24 hours that we learned that the doj is opening a wider anti-trust probe against social media companies and big tech firms i wonder if it has to do with the other or will impact the doj's findings or investigation or whatever we are calling it at this point >> that's a good question. the doj announcement was extremely short on details, right. they didn't speak about what

they are investigating my guess is that they are not related. to the extent that this order is going to be impactful though, it's actually going to help facebook and the other big tech companies from a competition issue. the truth is that the apis, the interfaces that allow cambridge analytica to get that data also allowed for a little bit of competition in the social media space. wi what this order does is effectively orders facebook to never again build the capability for other companies to use their data that would have been a real problem for facebook seven, eight years ago when it was growing rapidly. now that it is in a dominant position, hoarding that data is great for the company. so it seems to me we are going two different directions that are not compatible if you want the companies to have competition, you need to require them to allow other people to utilize the data they sit on the number one piece of value they've is they are sitting on the data of billions of people but by ordering them to never again allow that data out of

their control, it kind of -- immunizes them from criticism. i think it's really confused i think critics. tech companies are a little bit confused about what they want right now. the ftc is the first one of all of these organizations to get an agreement. but that agreement leans very hard one direction. >> that's a very tough needle to thread would you want to work -- i mean, your tenure at facebook, would you have wanted to work under a settlement like this >> actually, yeah. i think this is -- one thing that the settlement will do that's a positive thing, it is empower the people at the company that care about privacy and user trust, right. that is always a problem at tech companies. there is this basic assumption that the products that we build in silicon valley are good for people, right. that everybody we do just by usu doing it makes us the good guys, and that's just not true the fact that there are people whose job it is now to think about the trust and privacy

implications is a good outcome and will make it better for the people at the company who care about these thissues. >> interesting insight alex, appreciate it. an extremely important day for those who follow the company >> thank you. as we head to break, let's take another look at some of today's big earnings movers. most positive. check out snap, adding 16% to its already more than 150% rally this year. boeing and caterpillar notable lose losers taking down the touchdown, off 71 points s&p remains higher later the chair of the ftc on today's facebook fine. more "squawk on the street" coming right up. ...or trips . $4.95. delivery drones or the latest phones. $4.95. no matter what you trade, at fidelity it's just $4.95 per online u.s. equity trade.

it's a social showdown as facebook and twitter gear up for earnings find out which name one trader says could be setting up for a breakout that's on tradingnation.cnbc.com nor "squawk on the street" is coming up.

♪ another earnings mover, chubb out with earnings after the close yesterday. second quarter numbers with net income at $1.2 billion here in a cnbc exclusive chairman and ceo of chubb, evan greenberg. welcome. this was a little bit of a different direction than travelers posted and displayed yesterday in the market. tell us about the underlying business and what's driving it. >> well, the underlying business is strong on a global basis. half of our business approximately is outside the united states, half in the united states, and we're experiencing favorable, more favorable conditions in the u.s., asia, latin america. broad-based growth a lot of organic strategy driving that in different territories, different areas of the business, and then pricing

and terms from an insurer's perspective are improving. so we're taking advantage of that. >> pricing you mentioned a lot of the analysts are writing about it today the environment is becoming better what kind of rates are we looking at and what is driving the increases? >> it varies by class of business, but for a number of years now rates have not kept up with the rise of loss cost inflation. so that creates march pressure and, in some cases, balance sheet pressure for insurers. so it's rational after a time that those who chase market share rather than a proper price start to pull back, and that creates opportunity. we're a very professional and well experienced insurer, and we see opportunity to take advantage of better trading conditions. >> there was one issue that you highlighted that i think we got out of travelers as well, and

that is the rise of securities class-action litigation against corporations what exactly are you seeing? >> this is a trend that has been going for a number of years. by example, there is over 80% of all m&a that takes place in the united states has a suit against it you paid too much or you paid too little or dish closures weren't good enough most of that is a drive-by shooting by the trial bar which is a money-making industry to get a quick payout and move on no aggrieved shareholders share in that money in the money that's paid. wi there is one example it's across a number areas of securities where you are seeing a rise of directors and officers suits for a variety of issues. anytime a company announces bad news wheresomething unfortunat happens in life, it results in a

shareholders suit. >> when it comes to portfolio management where is yield attractive, reasonable, underpriced? where is risk right now, do you think? >> it's pretty hard to find where it's underpriced and we don't chase yield we're not going to move up the risk curve we invest on a risk-adjusted basis, and you are kind of playing between the wall and the wallpaper there right now, carl. >> yes. >> but our invested asset base is growing, and that helps to amiel i don't remember ate to a degree a decline in yield and so helps us to maintain growth in investment income. >> you and your family, so to speak, have a long history in asia and china and doing business there. >> yeah. >> you are the chair of the u.s./china business council. is there any business that's going to be done between u.s. and china in the future? are you concerned given the current environment? >> i am concerned.

there is a lot of business that is done between u.s. and china by the way, we are pretty well interconnected in many ways. and i think we forget that an awful lot. i think the u.s. consumers and u.s. workers benefit from our trade with china at the same time chinese benefit tremendously from the market prowess and the capabilities of u.s. companies i think the notion that we are going to decouple from each other is ultimately a fiction. i don't think it's going to serve the interests. not going to serve prosperity or security of either and so, you know, we need to find a path to reach an agreement that addresses the grievances that are legitimate that we have. >> what are your thoughts about that i assume you have some deep relationships in china itself. we hear about more hard-liners now in terms of at least some of the negotiators that are taking to the table there is going to be a new round

coming up. do you think progress can be made, or the two sides simply too set here and the issues too large to really be able to be addressed in the near term >> you are not going to get 100% what you want in agreement this won't be the last agreement. but if you can get 50% of the way, or greater, you made great progress to are advance the interest of american business, which i think is to the interest of china as well we know the economy is slowing down we know that the more market oriented they become, the more every dollar that is-nvested in china has a greater return we are seeing a decline in that return as they are more centralized and more party oriented in how they allocate capital. so we're on both sides both sides have hard-liners. both sides, the room to maneuver, the political room to maneuver has been narrowed, but there is and there should be

room to make a deal because ask yourself what the alternative is there would be great er depupling. who wouldbenefit from that the notion that we start framing china as an enemy and china starts framing america as an enemy i think starts to fulfill a future that is not in the interest of either country. >> for those who argue that their intentions are not genuine, that they walked away from bennuenos aries. christopher wray's testimony yesterday about the number of ip investigations the fbi has i mean, to what degree do you think they are trying to play us or wait out the clock? >> i think there is an element of that. look, i'm for k-- and we have t protect our interests as a country. we are a nation of laws and we are not -- we shouldn't be allo ourselves to be -- we should defend ourselves against theft of property. of course we should.

and we are more market oriented. therefore, chinese companies can enjoy the benefit of the american market. we should be able to enjoy the benefit the chinese market the same way those are legitimate and we should choose those. simply a path of tariffs and yelling at each other from afar is not going to solve that china's interest, i believe, i think they know it's in their interest to engage in a productive path to this with the united states. >> i want to bring up the pafact that you have a big joint venture, correct, with one of the chinese -- >> i have a joint venture in china. we have 100% wholly-owned subsidiary in china. >> what do you see as a result of the friction and the tariffs and that's happening is it affecting your business? >> no. there has not been any discrimination against our business and i think if you talk to most american companies, it's been a mixed bag, but it's been marginal, the impact to date.

>> evan, finally, as a chubb customer, are my rates going to go up next year? they went up last year. >> they went up last year? >> yeah, and then i had a call, worked through it, figured out some coverages. >> i can't react specifically. i'll take this offline with you. i have got it. >> as a general customer, should i expect my rates to go up >> loss cost and homeowners insurance, so you know, have been rising at 9% a year and there is a variety of reasons we could go into about that we're just trying to make a reasonable return, not some out-sized return on you. but you will never be delighted about the premium you pay us you will be delighted wiabout t service if you ever have a claim. >> i hope i never have to use it. >> i do, too. >> thank you very much. >> thank you very much for having me. let's send it over to john >> record fine for facebook and the pressure is on even more for

all of big tech. so we have got regulatory experts. we have big tech critics coming up is this really going to change things that's coming up on "squawk alley. 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. >> thank you very much for things

lets get to ylan mui who's with a major news maker of the morning, the joseph simons for an exclusive ahead of his news conference in just a few moments. >> i am here with the chairman just before he heads into that news conference to talk about facebook's record settlement with the ftc chairman simons thank you so much for joining us. >> thank you for having me. >> you have said that you want the settlement to change the culture within facebook. how is it going to do that >> what we're doing is we are imposing a system of belt and suspenders for appliance, and what we are doing is we are creating five channels of overlapping compliance channels that are augmented with mandatory information flows into those channels for transparency and accountability such that if one or more of the channels fails to notice a problem it's likely that one of the other channels will see it and prevent the issue from becoming live. >> so increasing transparency

within the company, but there are also a lot of questions about the fine that facebook would have to face, part of this $5 billion some people say that's not big enough is this just becoming a cost of doing business with these companies? how do you defend that >> a couple of things, one is that we don't have the authority to fine facebook ourselves we'd have to go to court to do that, and it's very unlikely that if we went to court that we would get anything near $5 billion so this is the choices we have, and we think this is a great result given our circumstances >> should mark zuckerberg have been held personally accountable as part of the settlement? >> i think mark zuckerberg is held personally accountable. he's signing the order he's named specifically in the order. the order requires him personally to certify that he's -- that the company is in compliance with our order quarterly, and if he files false certifications, then he's

subjecting himself to civil and criminal penalties. >> you mentioned that the ftc doesn't have the authority to impose some of these penalties directly it'd have to go through the doj. do you think it meansthat the ftc should have enhanced authority to effectively regulate tech companies? >> the problem is that we have to go to the court and we'd have to convince a court to try to impose a penalty of this magnitude, and given the history of these types of cases, the chances that a court would impose a $5 billion penalty for something like this is very remote. >> down the road, do you think that the ftc should have that power to impose penalties on its own without having to go through the court system >> that's something that's worth thinking about. >> the other big question around facebook is the number of violations that it has, that you guys are alleging that it committed. one of those violations occurred just four months after the previous settlement was agreed

to back in 2012, so how do you assure consumers that these regulations and the settlement is actually going to be strong enough to make a difference? >> yeah, so this was a systematic failure within facebook in terms of how they did compliance, and that's why we're imposing on them this belt and suspenders approach with multiple overlapping channels of compliance. >> you did that previously -- >> no, no. >> back in 2012. >> these are new. >> these are stronger. facebook is creating a new committee of the board that deals solely with privacy and has only independent directors on it. we have the certifications that mark zuckerberg has to do personally, also the chief compliance officer is going to have to do them subject to the same penalties, and thecn we've got an independent third-party assessor that is going to conduct an audit on facebook and we will have control over that approval of that assessor ask we can fire the assessor. we get a lot more insight into

what their doing through these mandatory inflows of information which we get ourselves and we have greater power to ask for whatever else we need to get from facebook. >> what are some of those other things you feel you might need to see from facebook >> one of the things is essentially create a privacy impact statement for every new or modified product, service or practice they plan to implement. before they put any changes into effect, they have to do a privacy review and we have access to that. >> can you also update us on the status of other ftc inquiries into facebook, ftc is looking at antitrust very broadly you guys have a new task force going on, so can you tell us whether or not facebook might be swept up into that effort as well >> let me put it this way, i've said this before is that the technology task force is set up to look at big tech platforms because those are companies that have either market power, monopoly power or at least potential for it, and so those

are the places you look as an antitrust enforcer for your cases. you look in those situations we set up a task force designed to specifically look at that i can't talk about any individual cases because our investigations are non-public. >> final question for you, the doj did say yesterday it's going to be launching its own broad antitrust review are you concerned about any regulatory overlap there >> not at all. they're doing essentially what w we're doing. we have this technology task force and they're doing something similar. we always coordinate we have a clearance process in place so we don't duplicate what each other are doing. >> great, thank you so much, chairman i really appreciate the time today. >> thank you for having me. >> thank you. >> we'll send it back to you in new york, we'll let him get over to the press conference. >> thank you, ylan mui interviewing the ftc chair, obviously one of the more important stories today. sarah you're going to have a few more to cover later in the day on the closing bell. >> we're going to have facebook earnings to cover which is going to be extra interesting after all of this, what the company's

executives are saying and what the analysts are daring to ask them about this, about the new doj probe and how's it all impacting user numbers, which the stock has been a rocket so far this year, mild negative reaction to today's news, to yesterday's news, to all the regulatory scrutiny that's piling up. >> not to mention ford and tesla tonight. it's going to be quite an afternoon as we continue to look at that live shot there. dow is down 117 here, and the s&p 500's ldhoing at 3,007 we're back in a moment how do you gauge the greatness of an suv? is it to carry cargo... or to carry on a legacy? its show of strength... or its sign of intelligence? in crossing harsh terrain... or breaking new ground?

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