available to do it. >> that would be my honor and after listening to mr. parsons, frankly, much more important conversation at the moment >> very gracious of you, henry thank you. and we will definitely do that, i promise you. henry cornell. that's it for us today really, it is. make sure you join us tomorrow those are futures, "squawk on the street" is next. ♪ good tuesday morning, welcome to "squawk on the street," i'm quintanilla with jam cramer, live from separate locations, faber will join us in just a bit futures suggest the bulls may take a break after the dow after the biggest 50-day rally in s&p history more commentary on the reopening from macy's and others, oil below 38 jim, some say the speculation, especially around some of these quallser cap names, definitely needs to come off of the burner. >> you know, i mean, look, the

most popular stocks yesterday, top ships, it's a ship company, we also had hertz, but that's -- that may not even exist as a stock, but there it goes, sea energy, oasis petroleum, we've got the volaris, cowan, these are all companies that may or may not exist in the future, but they're fun. there is a lot of people who are running stocks as almost as if it's some sort of like big game and that game does not last and that game is coming to an end probably today >> really? what makes you think today >> well, because they can't -- i mean, you need that backdrop you need to have oil going up for a lot of these stocks, you need to have what i would regard as being no articles written that are the equivalent of a very good piece in bloomberg, retail traders flout legal logic

by buying up bankrupt stocks you need to have a backdrop of enthusiasm that's hard to maintain and doesn't seem to be maintained today it's a shame, carl,it was so much fun for the people doing t they were betting double zero, it came up, thissen they bet double zero again, it came up, the conclusion is double zero comes up >> i saw your tweet about that, but, i mean, retail trading activities gone from 3 million average shares a day to nearly 8. you don't see that reversing, right? these accounts aren't going to go away. >> and i don't want it to. i love the idea that investors, new investors, are learning about the process. i disagree with ron barron who was great this morning, it's the same thing over and over again he said when people get scared out you need professionals i mean, people just kind of otherwise want to own index

funds. warren buffett scared people out because he sold all the airlines exactly when they -- some of these day traders decided to run it so it's the professionals that scared the people out, not the amateurs now, the amateurs i wish -- do i wish that they were buying bristol-myers? they will one day. after they've lost some money they will discover the idea that there's some really good companies, but this is part of the -- this is teething. they're teething and they've got -- right they're teething i'll lose some money on danbury resources, but i made some hertz. carl icahn sells 38% of hertz at 70 cents but these people feel it's worth $5. i don't know, maybe they're showing contempt for carl or maybe they just don't know what they're doing, but once they learn they will then fall in the line of people who have invested in great stocks like -- why don't they buy amazon in the reason is because it's going to 3,000, but they should just buy

a fraction of a share. it's been set up for them. you don't have to split stocks it's painful, it will be painful today, but maybe the solution is to buy a fractional share of amazon >> well, that education process, jim, is something we want to talk about with faber who is technically off this week but wanted to call in with some color, david, about the chesapeakes and hertz and jcpenneys of the week. >> and one other name, as well jim, as usual, carl, is right on it in terms of what i'm hearing this morning you can't get away from it which is just the high level of speculation that has crept into this market. perhaps something none of us would have expected when the pandemic began is that a few months later we would be watching the likes of some of the names that jim just talked about, but take a look at shares in nicola, this is a company i've gotten to know pretty well having interviewed the founder a couple times first when they announced the

deal, mr. milton came on with me at the ncc, one of our last interviews there, we did there, and then he was on last week when they closed the deal. take a look at that stock, it was up over 100% yesterday, poised to go even higher now, listen, it is a very interesting story, but it's still largely just a business plan waiting on execution. you know, that's kind of what we're talking about here yes, i think it's clearly gained sort of the -- grabbed the imagination of a lot of retail investors out there who have sent this thing sky high in a way that frankly i haven't seen since, i don't know, the days of ktel back in the late '90s i mean, you know -- now, hydrogen trucks and electric trucks all very possible here. worth $89 million last year, going to lose money this year. obviously no revenues.

he said last week when i interviewed him, until next year, 2021, but they've got the money and they've got the vision take a listen to mr. milton from last week. >> we raised a billion dollars -- almost a billion dollars through this ipo and some of the other offerings. so we have a lot of money in our account, we have no debt, but no doubt we're going to have to -- we're going to have to raise more money that will come down the road once we hit benchmarks and then the investors once they know you have hit your benchmarks they just open up their pocket books at that point, it's just all execution and that's we're right on the edge of that right now. >> and so that's kind of where things stand in some ways in reflection of where we are in the stock market right now by the way, there are warrants associated with this thing, too, and it's interesting because retail may not have been aware of a them, but they're out there. 1150, obviously they've moved up, 30 days after the close of the spac they come due

potentially. there is a ten-day period in which they can get the average price, the stock price and buy back the warrants. my point, jim, is that retail is fierce right now in terms of facing a lot of these things hertz, $14 billion of vehicle debt, $6 billion of corporate debt ahead of the equity are you going to get equity recovery value on hertz? i don't know >> let me play devil's advocate, all right? >> okay. >> dave, it's a tough time why can't people have fun, make a little money why do you have to come on and crush it >> that's what i'm here for. >> come on, david, the ferris wheel is going and suddenly you have to stop it? i mean, who are you -- who are you, other than someone who studied this all his life and realize it ends badly, who are you to come on tv and take away people's ability to make money who do you think you are

>> hey, jim, by the way, it went on for years when we sat there on "squawk box." >> i know. >> for years and back then i would get hate back then it was real mail. >> they hated you so much. >> you don't know how to count aol. went on and on but, then, with companies like hertz or chesapeake -- >> does that yesterday >> 70 bucks a share. now, granted the equity value there is not that great, but, again, recovery value on the equity situation -- by the way, jim, the airlines, american airlines added an enormous amount of debt to their balance sheet. enterprise value is what it was pre-covid. >> they're filling the planes at, what, 50%, 55% of what they did last july. who knows what they're charging. i have guys flying for like $99 all over the world this thing is crazy that we look at those numbers david, american airlines, ever

corp. was using a dollar price target when it was at 12 no the people have spoken it's like the people's court the people have spoken, da i have had. >> right. >> it's worth more witha lot o debt and fewer passengers. now, you know, we sit here and we look at this thing and we say, okay, hertz, the stock probably is wiped out. they look at it and they say, opportunity. all we do -- and, i mean, i couldn't look at my twitter following this weekend because i actually raised the possibility that hertz stock may be worthless, but it could be worthless. >> yeah, in fact, it's potentially likely to be worthless. carl icahn knows a thing or two, what did he sell 72 cents and he owns the debt. home springs eternal this is a period of incredible speculation that we've moved into and, jim, as you well know these can go on for quite some period of time they make for interesting conversation pieces and nikola will be that as they follow

that -- >> they have a plan. they have a plan, david, and they have a great name >> yes great name, plan, very young excited founder. >> yeah. >> new ceo he owns 135 million shares does mr. milton we can do the math there he's become a multi-multi-billionaire quickly. >> here is the issue, we listen to ron barron and ron barron is good, he talked about tesla -- i don't know, he can say ten times because he was right when it was $100 but tesla had certain things going for it, it had manufacturing, it had a visionary person who knew exactly how to get cars on the road it's not clear that this new iteration, first iteration necessarily is good, but, carl, i would come back and say i want people very badly to be in the stock market and how are they going to learn other than buying

these small dollar stocks and thinking that that is how you make money don't want them to be blown out. i do want them to understand that you can do small dollar stocks now, like never before. it's just that you have to do it in fractions and that fractions is a great way for people to learn how to buy an amazon or how to buy an alphabet so i just wish that they would switch the direction away from companies that may be bankrupt or overvalued and it is something you may -- look, you may think amazon is overvalued but you can own a fraction of it you can't say, listen, i don't have the $3,000. i just don't want them -- i want them to refocus. refocus. >> yeah. i mean, really, guys, what we are talking about is something that mohammed olarian has expressed on our air, that is the market suffers from a win-win mentality, either the company i'm buying is going to recover or if it doesn't there will be some external force, the fed, congress, some other form

of stimulus that will come in and rescue it. as for ron barron, jim, he did say he still owns vale, owns hyatt, added to activision and schwab tesla, he said if he could he'd like to get some money so he could buy more. >> i would like to be able to get more money to buy more tesla, actually. i thought we would make 20 times our money in tesla, so far we've made four times and now i think we're going to make double or triple again over the next five years and double and trim over the next five years. i think there's ten times more to go in tesla before i have to think about this if we're right. >> so, jim, you're talking about this education process, this teething process for new investors, what are they supposed to think when they hear that >> i know they have to look back and see the things he was saying early on, about how right he was. do i think he's irresponsible to say it the way he did?

i wish he had been less -- i wish he had been more tempered because now what will happen is there will be people who do buy it and it will go down 100 and they will hate ron and they will hate us and then ron will say i told them they should be with a professional manager they shouldn't have done it on the one hand it stimulates it because an individual watching is going to follow him because he is a great investor, on the other hand when the stock comes down he tells them what were they doing listening to him. my problem is always the same with the people who are really great like ron they have to say, look -- and i think ron tried to do this -- look, this is my long-term view, it certainly can have a lot of downs in the interim, but i want you to hold on some have said that but it's important for people to recognize if they're going to speculate which i'm not against, they should speculate wisely with companies that are very good not companies that are one step away from being delisted. >> david, you're finally going

on real vacation now >> i doubt it. i doubt it i will probably see you guys tomorrow. >> david, how about tiffany? tiffany. >> david, we will talk to you later on we know. david faber on the phone today on his technically his day off we will talk some retail after the break, macy's with some numbers out, there is tiffany lvmh news, sig net and others with futures indicating a drop of 350 at the open (music) anncr: give customers access to precisely what they want, when they need it the most. with adyen, the payments platform that delivers convenience for all. adyen. business. not boundaries. what do you look for when i want free access to research. yep, td ameritrade's got that. free access to every platform. mhm, yeah, that too. i don't want any trade minimums. yeah, i totally agree, they don't have any of those. i want to know what i'm paying upfront.

yes, absolutely. do you just say yes to everything? hm. well i say no to kale. mm. yeah, they say if you blanch it it's better, but that seems like a lot of work. now offering zero commissions on online trades. we charge you less so you have more to invest. ♪ (music) anncr: give customers access to precisely what they want, when they need it the most. with adyen, the payments platform that delivers convenience for all. adyen. business. not boundaries.

sawithout evenon yoleaving your house. just keep your phone and switch to xfinity mobile. you can get it by ordering a free sim card online. once you activate, you'll only have to pay for the data you need- starting at just $15 a month. there are no term contracts, no activation fees, and no credit check on the first two lines. get a $50 prepaid card when you switch. it's the most reliable wireless network. and it could save you hundreds.

xfinity mobile. watch macy's in the premarket, got some preliminary numbers, narrower than expected loss, 450 stores, jim, have reopened and then $4 wll in new financing, jan niffen says we know macy's is going to make it in his words do you agree >> jeff ginnet is a terrific guy. they have had so many different reversals, problems right now obviously in new york city, but the strong dollar has hurt them, they are in some not great malls. he's got to close the bad stores, but he's going to live to play again. therefore, that stock at 10 makes somewhat sense to me when it was the dark days and it was at 5 you didn't know if they could raise that money a lot of us are pulling for jeff and macy's just because it's

iconic be careful in the end it's a department store and those are fallen out of favor. >> you couple that with sort of the ongoing theme here, jim, of narrower than expected losses at tiffany and signet, you had mastercard saying not just volumes improving but in-person volumes as opposed to when you use your credit card online. that's pretty key. >> mastercard, they've been absolutely terrific, but cross-border volume is a problem. they have made a lot of money with that, it's down 44% when we think about these airlines, by the way, we have to remember when you travel you often have to be quarantined or you're not allowed to go cross-border has been a nightmare for a lot of different companies because if the government mandates that you can't go somewhere it's not like you're going to go somewhere and start spending money it's like what's happening in new york city where they're finally opening some places but you still can't open a restaurant like you'd like to. you have to remember when you look at signet jewelers, did

they do a good job i don't know so many stores were closed it's tough to tell if they did a good job. wendy's did say some good things about how they're doing with breakfast, but for the most part stitch fix i have them on tonight, carl, and there's two stitch fix, there is the one before the closing, before the one they had problems with their distribution centers and the ones after i can't tell how they're really doing. i think if you think you can, i really believe you're clairvoyant or wrong >> so that's why we're sort of leaning on this number, you hear it all the time now of the stores that are open, productivity is x. right? >> right. >> it doesn't mean that 50% of the stores aren't still closed. >> yeah, we can't -- i mean, the best stores open, i don't know some like starbucks where kevin johnson has got a plan he has a plan to be able to take advantage of all the abandoned real estate where people can't pay their bills and open up starbucks walk-throughs.

now, that's terrific i love something like that but a lot of these companies, i don't know, i mean, they're hopeful and i think it's very difficult to judge where their stocks are, which is why you see such wild speculation based on the idea that maybe things are going to be exactly back to where they were or even better i don't have a lot of companies that are even better than where they were in february. >> interesting kind of brings us to these new targets on amazon, jim, out of wells and b of a, $3,000 for each one, and their general thesis is as people go back to work and go back to school, it's going to feel momentum back to that i have to have it tomorrow. >> i was surprised they ceased on that. the more logical thing to seize on is they discover amazon for the first time, new people or they discovered how reliable amazon is for basic staples that

they would normally have gone to the supermarket for and so, therefore, they can -- they're hooked and they're never coming back i think that that's a bigger case i think amazon is going to blow through 3,000 but i don't want to be like ron baron, it may not go there in a straight line because the markets had a heck of a rally, but 3,000 that seems reasonable for me for amazon >> not the only big target increase we got today, there is another one for facebook out of goldman which we will get to after a break on this tuesday morning. don't go away. derek, seems like your team is operating just fine remotely.

yeah, everything is running smoothly with the now platform. (bling) see, incident resolved. how did you... gotta enjoy the small wins. you keep being you, derek. keep being you.

positive close for the year yesterday. of course, nasdaq hit that all-time high. it is a bit of a turn around tuesday. futures suggest a drop of at least 300 on the dow when the opening bellin isen nus. rgsn ve

why bother mastering something? because when you want to create an entirely new feeling, the difference between excellence and mastery

is all the difference in the world. the lexus es. a product of mastery. experience amazing at your lexus dealer.

the hoping bell is brought to you by nuveen, a leader in income, alternatives, and responsible investing. ♪ it's time for a mad dash with jim talk about turn around, jim, i know you're watching oxy today. >> well, look, this is out of synch with what's going on in the rest of market, but today is

the day that bank of america says, do you know what, it's time to take on more risk, the worst is over for occidental, now, occidental did limit its dividend, but they're saying that you should take off the table liquidity risk, there are some things that oxy can sell. last week it was at 15, yesterday it was at 24, so you could say you missed that quick 9, but i like the idea they're down grading chevron -- i like the idea of saying, do you know what, there's been -- chevron has been a blue chip, it's been terrific, now it's time to go down and start buying some of the down and dirty my problem is that i think chevron is a really great company and yesterday bp laid off a lot of people and i think you still have got to be high grade. i know there was a v in oil, the saudis and the russians i'm not exactly sure what strategy they were going for, it was probably the worst ever, took oil down to minus 37, but i just think oxy is great if oxy gets hit hard i just go

right back to that i'm sorry, chevron is really great. >> what's your broader -- >> here is the problem with this oxy. warren buffett got that great deal and the shareholders didn't and i've never liked that. buffett got a really good deal and that was the beginning of the end for oxy. chevron mike worth is the opposite, he's doing everything right and he cares tremendously about the dividend and chevron is a great company and i really think people should not sell chevron to go by oxy you don't low grade your portfolio at a time like this. >> is it your broader view, though, that -- i mean, when you look at what production is doing in the permian or the shale companies versus overall demand for oil and driving and, who knows, maybe aviation as well? >> aviation -- china has been a tremendous importer of oil of late china skewed the numbers i think the permian can start the spigot immediately i have been a big believer chevron is good, i like pioneer,

parsley a lot, pe, diamond back which is the other faang is very good eo go. is a conservative company, i like those i don't like fossil fuels in general because i think that a lot of the younger portfolio managers who are eventually going to inherit the earth think that they're dirty, like they are coal but i do appreciate some of the work like parsley is trying to do in order to cut down flaring and some of the work that mike worth is trying to do to make it to chevron is the greatest oil company. i think he's made it much better than exxon which has been the dean of the group for the last 30 years. >> of the names we were tossing around earlier in that speculative bucket i know widing was in there, too. >> whiting -- you know, i don't know how to value whiting. i don't know how to value chesapeake i mean, these are not in the hands of common shareholders really you have to look at the bondholders and i don't know -- i think whiting can come out of

bankruptcy pretty quickly, but i'm not sure what that will leave for common stock, but i know that chesapeake is -- the common stock is worthless. they have so much debt they could have hurt a lot of companies, too, that they owe. [ bell ringing ] >> i mean, bonds trading for cents on the dollar and then the common at the bottom of the cap structure behaving the exact opposite. >> i wish, carl, that people understood that common stock is the lowest rung on the totem pole in a bankruptcy people say of course it is, jim, but a lot of the neuropeople who are coming in want to make quick money they seem to think if they buy chesapeake there will be someone willing to pay even higher that's what happened yesterday it was a good strategy but i question whether it's something that is really a longer-term strategy and not just a dice roll back alley dice roll, no at real

dice roll. >> yeah. jim, if we were at the exchange this morning we would be talking to online automotive retailer vroom they rang the opening bell in person. we will talk to the ceo, though, when the stock opens. i know you talked to was it ford last night, jim, about sort of overall consumer attitudes regarding driving versus flying versus cruises. >> i think that when i look at the -- there's a big, big issue with autos that i think is really right and i know we will talk to phil lebeau about it, but the cdc says you can't have carpool, if people don't want to ride in mass transit, then autos are going to have a rebirth and i think that autos are the last area, carl, this have not run yet and so i think you have to find something that is auto-related i know that ford is interesting at 7, gm, i saw mary bauer speaking on another network, but

my favorite is dupont. ed breen is running the company now and he is just so-so good, the previous ceo left, now ed breen was the architect of this dow/dupont merger that hasn't worked out that well, but i think dupont, wow, i think he's really on the case to make this stock great and there is a terrific report out today if you really want to follow what's going on by citi about how insights from conversation with dupont management, this is a must read. i just think the world -- i just think the world of ed bream and this piece is going to make people money they are looking at boosting price target pretty significantly. recognize that auto is no longer going to be the thing that hurts them i think that that's what people have to focus on >> interesting overall, jim, sort of a net defensive picture obviously. j & j and merck leading the dow along with walmart, proctor. i wanted to touch on apple because there is a bloomberg piece at wwdc later on in the

month that they will announce a shift in mac processors from intel to their own news out of taiwan semi saying they could make up the order book if there is a ban on huawei business interesting time in i think is i business pulls back you want to be on. focus on analog devices and texas instruments. those are auto, they have a lot of auto, and xp has a lot of auto i think that those are the ones that you would reach for first on any sort of pull back i heard bob swan yesterday on intel talking pretty positive. amd has some competitive chips coming out i like amd more than i like intel. you're not going to go wrong on nvidia because jensen wong put together an amazing quarter. the semis are doing to well. last week broadcom reported a number that was good, wasn't fantastic, but they do have a 4% yield. the semis are still a great

place to be. they will be brought down today as high flyers in what i regard as being a day of profit taking, but the semis come back earlier than a lot of others in terms of apple, i think the last few days we have learned more and more about how apple's service revenue has gotten even bigger, there are so many analysts, carl, that got off of it, they felt it can't go any higher and here we go and now you're headed into 5g. apple is good stock on a pull back >> a couple of halts to watch, jim, one is chesapeake for news, we've been talking about that name all morning. >> right. >> the other stock we were talking about with david which is nikola, first halt of the day on that for volt tilt. >> yeah. >> your opening comment, jim, about what today could bring starting to come into view. >> look, there are a couple services out there and i'm not going to particularly name anyone, some very nice people, that have been very good at running stocks now, running stocks is something

that of course is illegal, that used to be -- the sec used to look into these things and say, okay, is someone doing a pump and dump scheme? what is someone doing here i don't find that to be the sec as active as they used to be with things like that, but you do have people running stocks and, you know, it's kind of like confessions of a street -- well, when i talk about -- confessions of a -- in my first book i talk about what i see these people doing these things, which is that they pick a stock and they run it for the day and how horrible it is that they do that because you never know when they're going to be done and they catch people -- i was talking about last time they bag people, gun the stock and liquidate the stock into the people they've gunned it to. it's a process that is even made worse by twitter i mean, twitter has got guys bagging and gunning -- gbl,

bagging, gunning, liquidating everywhere so you have to be very careful there is a lot of people playing games right now. the most i have ever seen. i'm sure david would say, too. i've never seen so many games played with stocks which is that, hey, we're taking this one up today, we're taking that one up today. they used to do that japan in '89 and '90 and we know how that ended be careful when you see a reference in twitter which says we're taking up hertz or get on board the chesapeake train because you're not going to be the one who makes the big money. you will likely be the one who loses the big money. i want to warn people. carl, people hate me for doing what i just said, but people have hated me for a lot of things just add that. >> eventually you get used to it, jim. on the transports every component in the dow jones 20 is lower. we mentioned boeing obviously, we're going to get orders, i think, today, but we've had negative orders for four straight months. it's added 580 points to the

dow. >> right in six sessions, jim how durable is this turn around to the down side >> i think that -- i actually think that boeing is okay because i think that we're on the verge of the max being approved i don't think it's going to be that much longer and at that moment if you want to sell you can sell, but i think that does matter i do think that we're not hearing enough about -- we are hearing a lot about planes and how safe they are to fly in terms of the illness they're safe as buildings. what i would point out is the great thing about a building and you can go look at what cisco is doing before you get there in the "new york times" today, in a building you can stop people who are sick and they're not going to sit next to you, but when you fly, no one is going to stop that sick person from being next to you that's what i think that is the biggest fear that people have in flying so i'm not a big fan -- the airlines stocks have had a major move, i think you would be good to take something off the table in every one of those.

same thing with the cruise ships, by the way, the cruise ships try to stop people who are sick, but there are people who get on and they get sick while they are on. it's not like a building where you can say, listen, i'm going home you are on a cruise ship, you're not going home so these are situations that i hope they solve. because i think these are great industries but in the interim if you're sick -- if you're next to a person who is sick, even if you have the mask and you have the goggles, there's a good chance you're going to get sick and that's what i think we should have to remember that's why flying is down, not just because the business travelers are using zoom we have not figured out a way yet to be able to -- i know united arab emirates is trying to have an up to the moment test, get actual pcr test that says that you can't get on, even though your temperature is fine. that's what we're going to need in order to be able to get flying back to 100%. that's going to be very hard to get.

>> that sort of reinforces the view that we're in a bit of a fog of war when it comes to the illness, i'm sure you read all about the confusing headlines from world health organization yesterday about asymptomatic spread versus pre symptomatic. right? there's hope that if you're spreading you have to be showing symptoms, but we just don't know. >> look, w.h.o. has not really been -- they've made a lot of ill-advised statements i think we've seen over and over again that the -- initially we felt that the asymptomatic couldn't give it to people and then 100,000 deaths later, you know, while it's happening we discover that they can now the w.h.o. comes out with this this would be, for instance, what the chinese would hope, the chinese would hope that they would say that but i think that we've had so many doctors come on, so many great papers written that those three, four days before you are symptomatic are the most deadly days w.h.o. is -- i think they're -- they're offering a lot of

suboptimal advice. >> yeah. yeah and their communication strategy has been challenged because of twitter and a bunch of other reasons. >> right. >> jim, ten year back to 82 basis points we should mention, of course, td fed meeting begins today, we will get the statement in the newsroom tomorrow, but there is some discussion about how far ahead our risk assets are, up from the fed, and whether or not they need to let this ride or whether we get a push back in the fall or what >> yeah, look, i think that that's definitely in question. i do feel that we do have the runoff of the big unemployment boost, the $600 and that the fed shouldn't do anything until we see what happens then. i know when you see these pictures of the casinos being packed and you see the pictures of people ready to go to bars and go out, if you're jay powell you might say we've done enough, but remember the unemployment number is still ridiculously high and i think he needs to wait until that gets down from

double digits before he can take the foot off the gas pedal. >> yeah. that was -- that was jpmorgan's point yesterday, the unemployment to population ratio still 8 points below the prepandemic levels even though, i mean, the administration would love to reinforce the empirically through fact that it was the biggest creation of jobs in a mon in history. >> right. >> you're way below where you were a victory lap in jpmorgan's words needs to pump the brake. >> if you take a look at the wendy's announcement, they haven't open -- they are trying to open the physical stores. the number of tables is so low that you just don't have that -- you can have good drive-thru, you can have good delivery, but when you cut the number of tables at a restaurant, you're going to cut employment at a restaurant now, wendy's is fast food so you can say, well, wait a second, that's wrong, but you may not need all the cooks if restaurants are uniquely

vulnerable to rent that stays the same but revenue that goes down a lot, which is why i think the biggest you're going to be seeing is the ensuing back and forth, the restaurants that have gotten away with a couple months because they feel like, hey, you got my security deposit, but push comes to shove this is the month where people can't just keep -- on the real estate expenditures i don't think -- it's just still too early for jay to say, do you know what, it's all clear. but before we find out what's going to happen when the rent money runs out. >> yeah, no, we use the term fiscal cliff now sort of gene c generically and we have a couple coming up at the end of july and then again at the beginning of october. >> oh, yeah. >> so we were down 400 -- we were down 400 just briefly let's get to bob pisani. >> we're getting, carl, a much needed pause and a little bit of consolidation after remarkable run in some sectors that had

been losers a couple months ago and have been extraordinary winners in the last month. let's take a look at the sectors today. what have been the big winners bank stocks, energy stocks, retail stocks, industrials what are the losers today? exactly those four groups. health care is relative outperformer, but that has been a relative underperformer in the last month or so same thing going on in europe, we're getting the same type of pull back. if you look at the movers rvs the bank likes society general and ing are down, airbus is down, the autos like daimler with down, the energy stocks, ina the big italian oil company are all down same phenomenon happening over in europe. and that's because we've just had an extraordinary run in a certain subsector of the market in the last month. let me show you here, banks have rallied 25% in a month 25%. you don't think this is a rough climate for banks? loan losses, fewer loans out there, lower interest income

and yet look at that rally there. home builders up, retailers have been extraordinary that's an equal weight index that i'm using i'm not talking amazon there industrials as well, energy stocks up 20%. retail has just been extraordinary. we've been talking about this this morning, of course, macy's had a smaller than expected loss and raised a bunch of money and macy's is up nicely this morning, but look at these moves, macy's, gap, kohl's, l brands, this is one month. this is a 30-day period that i am using and everything has been rallying rather dramatically here i think our mission here is to explain the decoupling between the earnings estimates and the market performance, what exactly is going on. i think if you look at what moves the markets, i've used this often, the market is assuming, it's ignoring the trough earnings and assuming that the policy decisions are all going to be right by all the actors so on the reopening the market is assuming that the decisions of the state officials to reopen has been the correct one and the timing has been correct. "on the money" tear stimulus it'sassuming the fed's action

on monetary stimulus has been not only right but sufficient. on treatment of vaccines, we're assuming that the vaccine research is going to be successful on trade war with china we are assuming there's not going to be a massive trade war. now, this is not fantasy, this is not breast dij tags there is some evidence that the bulls are correct on all of these positions.

and do a little bit better, but that's the valuation problem that we're hitting right now today on a day like today. carl, back to you. >> thanks, bob pisani. let's in with rick santelli. >> hi, carl. yes, ten year note auction and let's not forget, of course, fed meeting and what the fed will do ultimately may not be a surprise, but all the things they have done certainly have been surprising in their effects. bob talked about all the fundamentals we learn when we go to school about what moves stocks but in the most simple form it's money. money flying in makes stock fly up and that's the phase we are in, whether you believe it's rational or it can continue, just remember there is a lot of

liquidity that's being created that's why i'm talking about the fed. in the last meeting it was the 29th so let's start right at the last meeting and see how markets have done as we go into tomorrow's decision day. let's look at two-year notes, 21 basis points last meeting, they are basically 21 basis points now. but as you move down the curve what a difference, look at the ten year since the last meeting, we are up 20 basis points and we are not on the highs that we were at the end of last week which was whisker shy of 90 basis points and 30 year bonds each more aggressive obviously the curve has steepened dramatically since the last meeting and bob was talking about banks. well, sure the financials are cooking in grease. let's put it on top of the tens to twos, the banking index and you can clearly see both are zoom, zoom, zooming to the upside, even acknowledging today's set back and finally the dollar index, boy, since the last meeting the dollar index has lost a boat load of value as you see there and zoom it back to year-end, we are hovering just above unchanged on the year

on the dollar index. carl and jim, back to you. >> all right rick, we will see you in a bit rick santelli. we will take a quick break as the market is lower led by financials to some degree, some retailers, definitely the transports and airlines that have had such an amazing run we are back in a moment. this is decision tech. find a stock based on your interests or what's trending. get real-time insights in your customized view of the market. it's smarter trading technology for smarter trading decisions. fidelity. as business moves forward, we're all changing the way things get done. like how we redefine collaboration... how we come up with new ways to serve our customers... as the market is lower led b

one thing never will - you can rely on the people and the network of at&t... to help keep your business connected. dad, i'm scared. ♪ it's only human to care for those we love. and also help light their way. it's why last year chevron invested over $10 billion to bring affordable, reliable, ever cleaner energy to america. ♪

find a stock basedtech. on your interests or what's trending. get real-time insights in your customized view of the market. it's smarter trading technology for smarter trading decisions. fidelity. this country has endured

wars, warren buffett talks about this all the time, depressions, recessions, crises but every single one of them comes about, soon afterwards we recover and go on to new highs >> that's ron barron this morning on "squawk" talking about the tens aity of the american spirit when it comes to at least markets and business, jim, kind of sounds like that schwab materials >> "we have wars" it does. the american stock market is very vibrant you mentioned early on, heather bellini piece goldman sachs about facebook i urge people if they can get this goldman sachs not going to give away the research but it's really about the greatness of small business and how it's going to, if there's millions of them, and how it's going to go to the next level using the internet and ron barron talked about how the internet was the equivalent of the interstate highway system for the tish family, seeing what was going

on, they recognized that you could see that areas of the country would never be exploited without the fact of eisenhower building the interstate highway and he's calling the internet that, in this instagram portion of this heather bellini piece and the facebook shops portion are so brilliant because they're really talking about the new way that we work and the new way that we shop i have always loved her stuff. she is such a smart analyst, and this is a very, very thoughtful piece. facebook, fb shops to drive greater customer checkouts and not only that, it will send facebook stock to much higher. its that he good a piece >> yep you don't want to give the target >> well, you want to see it. >> they were at 220. they go to, heather goes to 250. it's abinteresting piece >> well she's a conservative person she's just a nice person, too. i meet her at these charity things and it's like, wow,

heather bellini, i don't know why i expected her to be some sort of figure who would be like $500 just nice person, good to see you, how are you, heather? real person. nice to see. >> we'll take a quick break here more in just a moment. don't go away. can i find an investment firm with a truly long-term view that's been through multiple market cycles for over 85 years? with capital group, i can. talk to your financial professional or consultant for investment risks and information.

talk to your financial professional or consultant yeah. this moving thing never gets any easier. well, xfinity makes moving super easy. i can transfer my internet and tv service in about a minute. wow, that is easy. almost as easy as having those guys help you move. we are those guys. that's you? the truck adds 10 pounds. in the arms. -okay... transfer your service online in a few easy steps. now that's simple, easy, awesome. transfer your service in minutes, making moving with xfinity a breeze. visit xfinity.com/moving today. here's a look at the s&p, only about 10% is green but it's largely the stay-at-home names, ebay, amazon, netflix, regeneron, tom know's, crolox, nvidia and lilly we're back in just a minute. it started with a few smaller bills.

fifty dollars here. eighty dollars. a hundred dollars. i had good health insurance. why isn't this covered? well, then they started getting bigger. eight-hundred dollars. eighteen hundred dollars. i saved for this. but not that much. i'm glad i had aflac. they gave me money when i needed it most. that's why aflac is here, to help with the expenses health insurance doesn't cover. i love that aflac duck. aflac! get to know us at aflac.com

it's time for jim and "stop trading. >> not all speculative stocks are created equal. one i like is beyond meat. it's down 12 btigs noted a big china distribution deal that's important. they have good deals with starbucks and dunkin', maybe even mcdonald's. ethan brown is on a mission and i'm not saying that this is the next tesla i'm saying this is a bigger issue about how to get protein into your body than a $9 billion market cap would indicate so if you want something, if you're one of those people who says what a buzzkill cramer is, here, i offer you beyond meat, when the stock goes down below 150 because ethan brown's real he comes to play and the stuff tastes good, too >> it's interesting, jim

back when we were really worried about meat supply and wendy's today said that their beef supply was pretty much back to normal >> right >> this was starting to get talked about as a substitution once meat is plentiful again you don't show that going back >> no. one of the things i love about eth ethan, he's cutting price because he feels people feel that the meat chain has been spoiled and he thinks that his chance not to be able to high grade but come underneath and make it so people recognize that the cows he always tells me is one lousy way to get protein you want to go grain you don't want to go grain to cow to your stomach. you want to go grain to your stomach. the cow doesn't help, it adds a lot of gristle >> docusign tonight and what else >> talk about stay-at-home, you never have to deal with anyone i love docusign. this guy singh from chewy, he sent me actual pictures of my dogs, nvidia painted it's so perfect, have it on my

wall stitch fix, katrina lakes trying to, made a lot of money for people, see if she can keep it up chewy is great we like using chewy and they really care about your pet they do. >> we've been talking about those guys for a while >> what a dog. >> yep jim, we'll see you tonight 6:00 p.m. "mad money" eastern time. welcome to "squawk on the street." i'm carl quintanilla with sara eisen and mike santoli we continue to talk about the activities swirling around a lot of speculative names for the time being we'll get some data, this time jolten inventory rick santelli? >> our april read on j.o.l.t.s., two months in arrear at

5,046,000 and the rp this is so important, of course is because the employment picture is really the game change as we notice what the employment report last friday this takes us back to first half of 2017 since we've been at levels at this area under 6 million and do remember that the j.o.l.t.s. is a combination of so many different variables. it takes a while for the market to assimilate the moving marks it was close, a little bit less than expectations around 5.6 million. our april final read on inventories comes in up 0.3, pretty much exactly as expected. it usurps the 0.4 the place holder mid month and finally the april read on sales minus 16.9% put it this way the old record from 1992 was 2008 at minus 8.7

so we clobbered that by a factor two of which sets the new low bar in this numbers series, and as we've learned for many other parts of the economy that are measured that we cover every morning, april seems to be the turning point, so of course we're going to pay close attention to inventories and sales for may. sara back to you. >> all right, rick, thank you. take a look at stocks right now, as we mentioned we're pulling back a bit after a very strong run, six days in a row of gains for the dow, down about 1.4% boeing is the biggest loser 400-point decline right now and i guess, mike, the question is, is some of the froth coming up, coming out of the market you saw the froth in many places, guys were talking about some of the speculative stocks like hertz, post-bankruptcy soaring but how about a macy's macy's announcing that it's raised money from the debt markets, $4.5 billion of liquidity. the stock is rewarded on this idea that it's going to be okay. it's going to make it. it's not going to go into

bankruptcy because it has enough liquidity. that doesn't tell us anything about demand doesn't tell us anything about the consumer, and whether the reopening is for real, and that, mike, i think ultimately is going to be a question and that's what some of the fundamental analysis, the strategist, the economist, the investors who are scratching their heads at the fact the market's up, the dow is up 50% from the march lows are wondering when is that going to catch up, the fundamentals, whether it's a macy's or a hertz? >> we have an entire market that has basically been granted a reprieve for a stretch of time nobody much cares about what the second quarter looks like earnings wise. you have a lot of stocks like macy's and the cruise lines that were priced for something close to extension near their lows many of them got a lifeline, the credit market's created that cushion and they've come back from there macy's as you mentioned up big but still cut in half, from a year ago in terms of share price so i think we're operating in exactly that zone, where you can just say it's still down a lot,

they're not going away nobody's expecting them to deliver on the numbers very soon at some point, yes, it's all going to matter. i don't know if it's july 31st, if we're talking about a fiscal cliff for the stimulus or something else has to come into play but right now i do understand why you've seen the pockets of froth in the market because it's the kind of extreme extension of what's been going on in the overall market, which is completely blasted out sections of the market, when iffer theif they're not going away are worth the speculation. carl, you could say the market needs to cool off, it's been a bit stretched but we can't say the froth has been wiped away because it's only been a half hour >> right so what does that do to the dry powder argument that we've been having for a couple weeks now, mike that money is obviously itching to get out >> it's fascinating, because we do have these opposing realities where you see have gresive tr v

action and in a lot of the markets and bankrupt names and some of the long shot type stocks at the same time longer term protraditional investors are reluctant to play this rally there is a sense people perceive themselves underinvested if the market isn't pulling back. i think we're meeting in the middle on that it's less persuasive to say everybody is fighting this rally than it was a few weeks ago but on the other hand i think that there's still some skepticism. data from strategis that 60% of stocks are trading above their analyst price target it tells you fundamental analysis has been left behind to some degree by the power of this rally. >> you've also got oil lower today which doesn't help on word reports that the saudis might not go along with the cuts that's factoring in. energy stocks are the worst performers let's continue the conversation about the economy and the outlook. today is day one of the federal reserve meeting. former reserve bank of indian

raga rajan from chicago's booth school of business thank you for joining us clearly the fed is not necessarily feeling better about the outlook, just because the market is up yesterday we got word that they're going to expand the criteria for the main street lending facility what else can the fed do here? >> it's done a lot the fed has gone up $4 trillion to $8 trillion it's lending to anything it can lend to, plus more, lent to firms, lent to municipalities. the fed pulled out all stops in terms of what it can do more on the monetary policy side very little apart from saying we will not raise interest rates until such and such criteria are met and we'll be a little more tolerant on inflation, perhaps some word on that will come in future meetings, probably not

this one and as far as expanding the balance sheet, it's hard to think what else it can buy it provided an enormous amount of support which is why the fed chairman is saying it's up to the fiscal >> we were just having a conversation about the market professor rajan and the junkie companies getting bought, companies in bankruptcy or companies that are just getting a liquidity lifeline but have poor fundamentals. do you think this is because of the fed? >> well, the fed has a role here because it has intervened substantially in markets and it has propped up even the fallen angels by intervening in the corporate bond markets so yes, it has some role the key concern for the fed is in the short -- it doesn't want financial markets especially credit markets to break down, because the concern also is, if it props up companies that are better off restructuring, going

through bankruptcy, sometimes in closing down, it may prevent the economy from going to what, where it really needs to go over the medium term. in the short term, i think it's pulling out all stops and support. if this continues and the level of uncertainty about reopening continues, it will have to start reconsidering how much support it provides. >> why what's the danger here of propping up these zombie companies, as you describe it? >> well, the problem with propping up zombies is you create more zombies. if you are propping up unviable firms in a particular industry, they tend to, you know, in a sense reduce the profitability of other more viable firms this is the experience with japan. the second problem is that you build up the need for restructuring and it may all come to a peak at the wrong time, when bankruptcy courts aren't able to handle them, when there's too much demand for

restructuring. you need a steady posture of restructuring, more and more firms going through bankruptcy that need to you don't need to pile up front, but you also don't need it to pile up down the line when bankruptcy courts don't have the capability to invest it. the real issue is we don't know how this crisis is going to play out so what is important is on the one hand, we provide what support is obvious but also you need to ensure that in some sense the market forces are allowed to play out over time. >> so obviously sharepal has to walk that line delicately. what do you expect to hear from him tomorrow what do you expect to see? >> i think they will make comforting noises about being around providing what support the market, the economy needs about not raising interest rates any time soon. i don't think they will be very precise about what that means but they will certainly indicate their, they're going to be around, and also making sure

that all these programs that they've announced are, in fact, fully rolled out we saw as you said yesterday some tweaks to the main street lending program, that is important, because it targets mid-sized companies, and they will also make sure that the other programs we have in place are working as advertised. to my sense is this is really a meeting where you're not going to get a whole lot of new news, but you'll get a whole lot of comfort that they're working on the job. >> do you see this dynamic we've been talking about as uniquely american, because the dax has had just as dramatic a channel to the upside and monetary policy over there is a lot more layered and difficult as they try to get all the partners on board. >> yes, but i think in terms of the amount of support that governments have been giving, i think europe has also done a tremendous amount, especially with some of the new announcements which go to the

countries in europe, the southern countries and help them also with their fiscal so i think across the industrial world, the combined support of central banks and governments have been tremendous if anything, you could argue that in europe, the fiscal effort will be there for a longer period than in the united states even though the united states has done much more up front. so my sense is a lot has gone out to support the economy at this point, and some of the reaction you are seeing is because of that. germany for example is doing a little bit better than people expected and therefore markets are reacting there is still a lot of uncertainty which is why i hear the commentary that this may be premature. >> finally, just your outlook at this point, professor rajan, impossible to know what the shape of the virus is going to be, whether there's going to be a second wave, but based on what you see in terms of the economic

damage, how long and how deep is this recession, that the nber finally said it was a recession that started in february before the lockdown began >> well, i think what we're going to see is some amount of rebound if the virus doesn't recur and we don't have a second wave my sense is that is limited. at some point we will hit the place where manufacturing is largely back that will take some time but it will largely come back, and then we're down to the areas which need a vaccine in order to come back fully, travel, hospitality and so on. we're talking about a recovery of course but perhaps to 95% for the foreseeable future until such time as we have a remedy like a vaccine >> thank you for joining us this morning. >> thank you >> good to speak with you. carl when we come back, shares of

tesla coming off that record close yesterday, still doubling for the year so far. we're going to break down the run-up for that name, and hear what ron barron said about it on "squawk," when we rerntu a grandfather of 14. a newlywed... a guy who just got into college... that's why behind these masks, johnson & johnson scientists are working to accelerate development of a covid-19 vaccine, drawing on decades of experience responding to public health emergencies like ebola and hiv. for the life behind every mask, the clock never stops and neither do we.

yeah. this moving thing never gets any easier. well, xfinity makes moving super easy. i can transfer my internet and tv service in about a minute. wow, that is easy. almost as easy as having those guys help you move. we are those guys. that's you? the truck adds 10 pounds. in the arms. -okay... transfer your service online in a few easy steps. now that's simple, easy, awesome. transfer your service in minutes, making moving with xfinity a breeze. visit xfinity.com/moving today. shares of tesla slightly lower this morning following the broader market, but they are coming off record close on monday the stock now up more than 350% from its 52-week low about a year ago

ron barron joined "squawk" earlier to talk about the stock's recent surge here's what he said. >> i would like to be able to get more money to buy more tesla actually i thought we would make 20 times or money in tesla. so far we made four times. i think we'll make double or triple again for the next five years and double or triple again over the next five years i think there's ten times more to go in tesla before i have to think about this, if we're right. >> oppenheimer's tesla analyst colin rush, good morning, good to talk to you >> thanks for having me. >> let's not get into, you know, four times, ten times the money. at this point i'm wondering what's embedded in the stock price right now? went from over 900 at the high in february, down to 400, now back above 900 all in about whatever, 15 weeks or something like that what in terms of production and profitability do you think is now built into the share price >> at this point, the key is really around cycle time for the

company ramping up the factors and products in terms of what the actual numbers are, there's a lot of uncertainty around where the real production of numbers will shake out. what we heard from clients is that there's some head room in terms of the actual direction numbers that folks are looking at so our price target is based on just a little over 1.2 million vehicles sold in 2024, probably 30% head room in terms of where folks are thinking about where production models are. if they are able to ramp up in china and the way they talked about the schedule that they've got in germany as well, certainly there's this upside to those numbers from where we're seeing some buy side >> yesterday's move was pinned to some production or sales numbers for the month of may, i guess, out of china. big comeback in volumes though of course after a bad april.

how much of that is catch-up what is the sustainability of the current sales levels in china, and what is it worth to tesla? obviously there's some price cutting and some subsidies in there. >> certainly we're in the china market right now well below a percent in china for light duty vehicles there's a lot of room to run for them in terms of the sun sids, there's a step down plan for early july, and that's driving some volumes today the company's prepared to take prices lower in line with the subsidies, and maintain margins. the question for us, where do they get a cost structure perspective on the factory to maintain the march number on a per vehicle basis. so far we've seen them exceeding expectations on that front >> in north america obviously you have this massive unemployment at the moment

anyway u.s. automakers no doubt about it are going to be massively incentivizing purchases. it's going to be pretty competitive and we don't know what the consumer looks like how much of that bears on what you can expect out of tesla sales here >> i think it's important to remember that there's a wide range of consumers for vehicles and in the economy and certainly the high percentage of unemployed folks are not typically a consumer, said to be a little more tech savvy, have a higher income and a lot of those folks have been through the pandemic and turned out pretty well and so what we're seeing is pretty substantial resilience in terms of that part of the consumer base, actually continuing to make purchases as we go forward, it's difficult to tell with the secondary and tertiary what the impacts will be in terms of the broader economic downturn so we're

watching this closely. i think still there's enormous amount of enthusiasm for this brand and for these products and certainly been a queue of folks waiting to buy the products and i think they'll continue to move forward but it's certainly an important question and one we're monitoring very closely. >> there's only 3% to 4% upside to your price target and that price target based out in sales in 2024 so clearly a lot of play in how this stock might trade based on incoming data and sentiment. what do you think is the biggest risk tactically to the story right here for a stock that always seems to find a reason to have a big run in one direction or another >> we're really looking at third quarter direct to market the next key for folks to look at second quarter is a bit of a wash with the factory shutting down in some supply chain issues as they get back up to normalized production levels in the third quarter, we're going to be looking at the margins from the resiliency of pricing in the u.s. and asia as well as where they're at with the cost

structure and the upside case for the stock and part of the multiple support is really about the operating leverage on business so as we see those gross margins trend and we expect them to trend higher, there should be a fair amount of leverage and operating leverage within the business so that's the number that we're really looking at, the third quarter gross margin >> colin, there's so much news about this company we easily forget things that happened a few weeks ago i wonder, do you think the threat to leave california or at least alameda county was ever real and how much of a variable is factory location in maintaining their operating leverage >> you know, it's an important question and i think there is a credible threat when elon says something in public like that. the logistics and expense around that, what has to be justified but what we're seeing is certainly that he hasn't said anything in public that he hasn't thought about at least in

some substantial regard so i think it's credible. i'm not sure if it's practical to be honest given the concentration of people that they need to maintain on staff, or the organization. and in terms of the second part of the question, you just repeat that i'd like to address that specifically >> my question, the second part was whether or not factory location is really a key variable in maintaining their operating leverage >> i think we're going to see some very interesting things we're definitely seeing decreased localization on factories and the level of automation that they potentially can actually implement into the factories and it's driving a different cost structure than we've seen in existing factories today, and so having local factories i think is important in terms of what we're seeing in the supply chain and

transportation expense for the vehicles but i think honestly, as we see it increase in automation and moremanufactur manufacturable designs there's potential for efficiencies in western europe and the west so i think being close to home in terms of where the end markets are is going to be the better and more profitable reality for automakers on a go-forward basis and tesla is certainly leading the way. >> colin, have you been following the cola corporation shares have been rocketing higher, this is a company that doesn't have any revenues yet but they are billing themselves as a maker of batly electric and hydrogen electric trucks named for the first name of tesla, inventor nicola tesla. is this a tesla competitor >> we don't particularly comment -- not watching that

closely and certainly the competitive environment for tesla, you know, there's been some equal designs people are excited about for the heavyduty market and nicola is certainly in the conversation there. the reality of actually producing those vehicles i think for any oem is extremely difficult and i think there's certainly a learning cycle to be had for anyone trying to go from designs into real production you have to get into production to know what you don't know so that's a major question for anybody that is going into the heavyduty market at this point and something that we're going to be attending to >> yes, well that's something i think people have watched tesla have learned over the last decade or so we'll see how it plays out with nicola colin, thanks a lot for your time this morning. >> thank you time for our etf spotlight today the retail sector ticker xrt, under some pressure today

but up 8% so far for the month macy's is in the green today but off its highs of the morning the company reported better than expected preliminary first quarter results saying reopen stores are performing better than anticipated, despite an 80% jump over the past month, the stock is still down more than 40% so far this year they've also secured some liquidity funding that will take them through the year and into next we have an exclusive interview with macy's ceo jeff gennette on requesting closing bell" 4:00 p.m. eastern time. we'lbeaconsqwkn e street."ua oth stay with us you can't predict the future.

but a resilient business can be ready for it. a digital foundation from vmware helps you redefine what's possible... now. from the hospital shifting to remote patient care in just 48 hours... to the university moving hundreds of apps quickly to the cloud... or the city government going digital to keep critical services running. you are creating the future-- on the fly. and we are helping you do it. vmware. realize what's possible. this moment right now... this is our commencement. no, we'll not get a diploma or a degree of any kind. but we are entering a new chapter in our lives. our confidence is shaken; our hearts cracked. the kind of a crack that comes from the loss of a job; from life plans falling apart.

we didn't ask for it... but we are rising to meet it. and how far we've come isn't even close to how far we can go. we just have to remember how patient we were... how strong we can be. (how strong you can be.) and remember this; there's a crack in everything for a reason. how else can the light get in? ♪ tomorrow starts today. we thought you can help ray bring hiwhat?s to school. kelly, do you know him? -he's a new friend. you ok? you know you can tell me. i'm ok. oh, i trained her in the car. she's not gonna break. [ laughing ]

here in the u.s. retailers are expected to close between 20 and 25,000 stores this year according to core site research, a sharp increase from the group's previous estimate of 15,000 closures. you can get more on that at cnbc.com and the outlook for retail bankruptcies. and in the uk, government officials say primary and secondary schools are unlikely to open fully before september

and possibly later england's children's commissioner says the country risks leaving children behind even as stores and theme parks are allowed to reopen. a debate they're having here in the u.s. as well carl, i'll send it back to you >> all right, sue, thank you very much. we'll talk to you in a bit when we return david kostin of gold man will talk to us, talking about a host of issues including their forecast for the s&p, obviously the generation of retail traders and election risk, when we come back. just over a year ago, i was drowning in credit card debt. sofi helped me pay off twenty-three thousand dollars of credit card debt. they helped me consolidate all of that into one low monthly payment.

they make you feel like it's an honor for them to help you out. i went from sleepless nights to getting my money right. so thank you. ♪

rallies taking a bretter today. dow session low was down 421 a good time to check with goldman sachs chief u.s. equity strattist david kostin who joins us this morning. welcome back good to see you. >> nice to see you, carl i can't actually see you on the tv but it's okay >> i know, it's the age we're in last week or the weekend prior

you said that in order to get the s&p to rally meaningfully higher, we needed to break away from the high concentration in the five big names, get participation to be broader. we got it. i wonder if you think we keep it >> well, i think you've got three issues that are on the table with fund managers with whom i speak the first issue is the momentum, which is that broadening of the rally that talked about before the second is valuation and the third is taxes, and those three things to me suggest that the market is at the high end of the range at 3,200, and our target for the end of the year, the s&p 500 is around 3,000, and there's more downside than upside as a result if you think about the momentum, clearly that has been the cyclical laggards that have

become the darlings at the moment, having moved up a lot in last couple of weeks the real drive off the bottom of the bear market was driven as you just referenced by the big five stocks, which really powered a good part of the recovery, and then it was transitioned over to the momentum now, clearly the momentum has benefited from the, some of the data on the virus, and the medical front, certainly the economic front, the data has been better than expected, and that's benefited some of the more cyclical related stocks, but i think if you look out longer term, still the technology and some of the more secular growth stocks are of greater attraction i think the second big issue is valuation, and here is where i have a significant amount of concern. so the market as you know is trading at the same level as it was pretty much at the start of

the year, but the multiple two years out looking at 2021 earnings is basically gone from around 16.5 to almost 20 times, so we're in an expensive level relative to history, even if we adjust for an interest rates, we're at sort of an average level. at the current expected rate of profitability in 2021, which then leads you to the third issue which is taxes now, the assumption and carl, i want you to think about the following. every business in the world is in a joint venture, and the jv partner is the government, and the jv split is the effective tax rate, and for many years, in the u.s., the effective split was 70% for the investors and 30% for the corporation -- for the government that's basically your jv split >> yep >> after the tax reform at the end of 2017, in the last two

years, the effective rate of taxes is around 19%, so call that 80/20 you go from a jv split of 70/30 so 80/20, that ten percentage points lower taxes, all that future value in yours to the equity investors, that's been the story behind the bull market in stocks n my opinion now, where i'm going with this is when you look at 2021 earnings, that is potential for the tax reform to get reversed either in part or entirely, and as a result of that, that's a $20 a share estimate in our calculations, a potential d dimunition and that's 420 points on the s&p those are the big issues we're talking right now investors. >> yes, i've highlighted your election risk thing a couple

times and you say it could cut 2021 eps to 150. others argue nobody knows, even five months in advance hout election will turn out and after that, david, you have no idea what the democrats' true policy on tax will be how do you respond to that >> so look, it is absolutely the case and i want to be clear, i'm not advocating for or against that as a policy decision or not a decision that's really up to the american voters, but when we do the mathematics of what the various proposals are, and you look at the predicted markets and you see what is anticipated for the house, the senate and the white house, it certainly is a risk that one should incorporate in thinking about risk of stocks relative to credit or treasuries or gold or other type of assetses, and so that's a variable that we want to incorporate. now, it's fewer than five

months it's a little less than five months away to the election. the market hopefully will transition a little beyond the virus we all hope and the medical situation will recede but then the tax and the policy decisions of the new administration could be the same administration, the trump administration again, thinking about those risks will become front and center in my expectations within the next several months that will really be a sense of questions and i can say that based on the questions we're getting from portfolio managers both globally as well as domestically focusing much more now on the election risk as opposed to the recovery, so cyclical recovery last couple of weeks now more of the questions are front and center on tax policy and what else would happen in terms of political outcome >> it's interesting, david, given right now we have plenty of issues unresolved issues to still chew on and focus on

the fact that we're still in the middle of a pandemic, which has improved, but is not over in this country, that the economic and earnings outlooks are pretty uncertain, as uncertain as they might have ever been, the fact that the two biggest economies in the world have rising tensions with the u.s. and china, and that we're having massive social unrest in this country. do the fundamentals matter to this market? >> sara, it's an excellent question i have been really surprised, extremely surprised at the power and the persistence of this rally, straight up in the face of what you hear from corporations is more concerns about the restarting process and the exact way that they will have their employees come back in different ways that retailers, et cetera, will begin to reopen the stores so i think a couple observations, sara first is the economic data, absolutely has been better than

was feared or than was expected and was projected, and you saw that most prominently with the unemployment rate of course on friday's jobs numbers. so the economic data has been betters aassuaged some people's concerns i look out and say gee, everything has to go right for our earnings forecast. my earnings forecast of $170 of earnings for the s&p 500 in 2021 now that compares with $165 in 2019, so kind of over a two-year period you've gotten all the way back to where you were two years previous and so that would be a really i think achievable but certainly optimistic forecast, and the risk in my view would be that's lower. now most portfolio managers on the buy side are of the view that earnings will be something closer to $150, which puts the

pe multiple into the 20 times or greater multiple and as i highlighted before, i think the risk on taxes is those earnings come down and the multiple goes higher i'm surprised. now what we see, sara, is that the positioning of portfolio managers, i'm talking about hedge funds, mutual funds, international investors, retail investors, all the different components of the ownership of the u.s. stock market have moved slightly above trend or slightly above average. for a while they were hovering between average and modestly below average so people re-risked, consistent with the stock market having rallied so powerfully, but now there's arguably less potential to kinetic energy, less ability for money flow to drive the market a lot higher companies as you know are not repurchasing shares as a broad statement and that's usually the biggest source of demand so we need something to be the handoff

in the proverbial relay of what drives the market higher if you think about a structure, a framework, you think about the framework of the economy, that's getting better you think about earnings, that's a big question mark to your point exactly what will happen with margins, how many of the employees will get rehired, what is going to be adjusted in terms of margins, so that's an issue that valuation i've highlighted is extensive on many metrics, not all metrics but some and the money flow a lot of that is put forward so i would argue that at 3,200 the market is at a high end of the range and the risk is asymmetrical lower probably than higher from these levels >> david, certainly all makes sense. you referred a little while ago to the end of the bear market, presumably talking about the five-week bear market that ended march 23rd what do you say to those who say look, the way the market is behaving in the strength and persistence of this rally resembles the beginnings of new bull markets, when the prices

race ahead of the observable fundamentals and by the way, right now, we have rock bottom bond yields, lots of fiscal stimulus, lots of monetary stimulus and investment grade yields are 2.5% or below at the moment so how does that change your valuation expectations >> so mike, it's an excellent point. the market has rocketed up 40% plus from the low. it is driven largely by some of the big tech companies to a meaningful amount at least at the beginning, and i look to the future and i would say where is the best prospects some of that secular growth in my estimation on the forecast would be a place to be focusing that the trajectory of the economy is less important for these companies, in terms of their cash flows, in terms of their business model, and the others you've had a great cyclical rally, really powerful in the last, you know, several

weeks, and the question is, how much more sustainable is that likely to be i think a more attractive strategy would be focusing on the tax rates of companies with the lowest tax rates would have higher risk of negative eps revisions. ultimately eps revisions i think is going to start to matter, and so i think that would be an area of vulnerability the cyclicality, some of the businesses have taken on a lot more leverage in the form of trying to bridge the lack of revenues in the second quarter so i think that's an important factor that these companies will be continuing as existing entities they have solvency and liquidity but they are a lot more leveraged so there's less flexibility in terms of their business growth. so i would say theidea of the market moving higher and we talked before, the top five stocks are now 20% roughly of the s&p 500 equity cap so the direction of the market will

clearly be dictated by the performance of some of these major companies. we looked at nasdaq. those five companies that are 20% of the equity cap of the s&p 500, 45% almost half of the nasdaq nasdaq is in new high territory so there's a lot of buoyance in the market, given the uncertainties which is significant at the present time but there is no alternative -- there are alternatives of course but where is that opportunity for investors in the context of a 1% or 80 basis point bond yield? you know, some of the credit opportunities may be risk/reward may offer better risk/reward at this juncture. >> well, the pictures have all been quickly as you said, we look forward to talking with you a lot more in the coming four and a half months.

thanks, david. talk to you soon >> okay, be well be safe. >> david kostin. sara big show ahead on "closing bell" today. an exclusive with macy's ceo jeff gennette on earnings reopening and the future of that company. we'll hit it later and morgan stanley's ceo james gorman joins us, starts this afternoon 3:00 p.m. eastern time and also the ceos of cigna and brown forman "squawk on the street" returns in two minutes when they need it the most. with adyen, the payments platform that delivers convenience for all. adyen. business. not boundaries.

(music) anncr: give customers access to precisely what they want, when they need it the most. with adyen, the payments platform that delivers convenience for all. adyen. business. not boundaries.

one top strategist sees the ten-year yield staying below 2% for this year. find out what it means for the stock market on tradingnation.cnbc.com more "squawk on the street" coming up. for as little as $5, now anyone can own companies in the s&p 500, even if their shares cost more. at $5 a slice, you could own ten companies for $50 instead of paying thousands. all commission free online. schwab stock slices: an easy way to start investing or to give the gift of stock ownership. schwab. own your tomorrow. what do i need from a partner right now? an insightful outlook that comes from experience navigating multiple bear markets. can i find a partner to help guide me through this uncertainty? with capital group, i can. talk to your financial professional or consultant for investment risks and information. makes it beautiful. state of the art technology makes it brilliant.

the lexus nx experience the crossover in its most visionary form. experience amazing at your lexus dealer. welcome back is your trash an indicator of how well or how fast the economy may be recovering? jane wells is dump sterp divisto explain. >> of course, i love indicators like this. this furniture in north hollywood is called luxury design, owned for almost 30 years by george nazaretti but he had to shut down for two and a half months, lay off his six employees, lost about $20,000 in business before he was able to reopen he asked everybody for a break on his bills and he only got a break from his trash service >> and for two months and a half, we had no bills from republic services and that was something that we saved money on

>> reporter: how much did you save >> i would say over $600 >> reporter: republic services operates in 42 states and the ceo says a commercial volume's dropped 11% during the shutdown. residential volumes were up at times 20% but residential margins are much weaker so net net it wasn't good >> volume is coming back people are returning to work, our drivers are working more hours again than they were a week ago so sequentially, week after week, the business is improving now and that's the good side. >> well, george is paying his $270 a month trash bill. by the way the trash i'm not kidding just five minutes ago the truck was here picking it up ceo don slager said 2020 was supposed to be republic's best year ever now the business is stabilized and he's aiming for 2021 >> jane, we're in the game now of non-traditional indicators.

that's a good one. appreciate it. let's get a check on where we stand so far in today's trade. actually up about 0.5% on the s&p off the morning lows, a little bit of a rally led by the old nasdaq stocks, reversal in the recentotio ratn. don't go anywhere. back in two minutes. i'm searching for info on options trading, and look, it feels like i'm just wasting time. that's why td ameritrade designed a first-of-its-kind, personalized education center. their award-winning content is tailored to fit your investing goals and interests. and it learns with you, so as you become smarter, so do its recommendations. so it's like my streaming service.

well except now, you're binge learning. for a limited time, get up to $800 when you open and fund an account. call 866-300-9417 or visit tdameritrade.com/learn. ♪

welcome back to "squawk on the street." stocks are lower today with just about every sector in the red. in the out performers are communications and technology. we see chip stocks and payment service companies. apple today hitting another all-time high over six of the

lastev tdi senrang days. "squawk on the street" is back in two minutes

can i find an investment firm with a truly long-term view that's been through multiple market cycles for over 85 years? with capital group, i can. talk to your financial professional or consultant for investment risks and information.

as nationwide protests enter a third week, we continue to look at corporate america and facing the precision contract manufacturer named one of this year's most influential black executives thank you for joining us, victor here we are several days in now and we're beyond the point where

ceos are reacting, listening, and pledging to change how do we keep this movement going in big business? >> first of all, george floyd's death was horrific and very painful for many in the black community and many from around the world. also, the protests, that is a sign of optimism and to me it means that we have hope that things can and will be better and how do duo thwe do that it is something you have working on with your employees, what sort of best practices should companies be doing >> i have been in my role for about a year and a half and i started by bringing in a hr leader that i worked with in the past and we had really good

success in creating engagement of our employees so i brought her in, she is a black african-american woman and together we have been opening up the conversation around our company having more tra transparen transparency i remember our early presentations. after a couple months i started to ask and answer my own questions. today we just had a bit of communications in the last month and there was so many questions that we went beyond 40 minutes i think it starts with creating dialogue, building trust, and transparency and then beginning to engage in

conversations like this. >> should they publish their numbers so they can make targets. people like to talk about better golf nance, but no one is really being graded on any metrics. >> it is interesting that we're not publishing those metrics that are like diversity metrics. it should be part of the annual we ports and the key metrics >> i want to also ask you about the business you make a lot of important

supplies, what has covid-19 meant for you? >> well, tecomet is a global company. we're the largest contract developer. we make products from implants for knees and hips to air space and defense products we are an essential services company. we put in place guidelines around keeping our people save i'm pleased to say we only had 13 cases in our 3,000 employees around the world we had really strong safety guidelines and strong business through couldn't newty plans so ke we can continue throughout the world.

>> an important dialogue, thank you. sarah, thank you, we'll see you this afternoon good morning and welcome to squawk alley futures were week before the bell rang and we had a recovery. that is another all-time high has it is for apple, home depot, and amazon the latest survey says the economy may not be fully recovered until 2022 steve leisman has more on that >> it is interesting to look at the survey and look at what is actually priced into the market. but it is going to be a long road back. those are th