advertising that we remove qanon earlier this week, it's important to our work. >> ned, i want to say thank you. appreciate t by the way, i saw you got a haircut, is everything looking good we saw your hair online the other day? we have that shot. >> i can't see the shot. >> we have to run. we are all doing the quarantine haircut. join us tomorrow, everybody. melissa, thank you for a great week all together. "squawk on the street" begins right now. ♪ >> good thursday morning, welcome to "squawk on the street." i'm carl quintanilla with jim cramer and david faber what a morning futures are steady but the news flow is fierce between earnings, microsoft, tesla, airlines, mnuchin on squawk as c.a.r.e.s. 4.0 takes shape, china and jobless claims up for the first time since march we will talk to the ceos of

southwest, at&t, dow and union pacific this morning, jim, the hard thing today, jim, is going to know where to start. >> yeah, i mean, look, i think last night the news flow was, as you said yesterday, heavily weighted toward microsoft which people regarded as disappointment i think that disappointment is not having the greatest quarter in the world, let's just say that today i think that the focus is what's going to happen when these benefits end and which companies are going to be able to continue to deliver the numbers. for instance, chipotle had a great number, will that be impacted whirlpool had a great number last night will that be impact snd what are we going to see with southwest air we had a fantastic interview with american and then secretary mnuchin i felt once again sounds like there's some room to get a deal done. we need a deal or else we're going to find ourselves with a consumer who is too strapped and i think that that's what i'm looking at for next week and then of course i'm looking at tesla because when i see a number like that i say to myself

this guy is everything that we thought he might be. >> i guess tesla is a good place to start there, jim, because the commentary this morning really pivots around the sale of those credits and whether or not that counts as fair profitability. >> yeah, i think the commentary should be two things, one, is that he has got this whole thing going on with solar and with energy that we don't talk about enough that he talked about. and then the second thing is he's got -- the world is his oyster right now i got the sense when he talked about berlin that he's so confident that berlin when it opens they have great pictures of it, it will be blow out austin when they do trucks, blow out, china, blow out the idea that he can sell 20 million cars when you listen to him you say absolutely, absolutely can sell 20 million cars it was one of the most impressive professional conference calls i have been on versus the amateur hours that he

used to run. >> david, it was so impressive. >> so, yeah. no, he's come a long way in that regard given what used to be, as you point out, more emotional responses to certain things, but then again, things are going extraordinarily well, so, you know, you're referring, jim, to times when there was a lot more challenging -- that were more challenging, times that were more challenging for your friend, mr. musk by the way, he still thinks ai because i always think of you and the simulation that he says you potentially are, he's still worried about it he says the people i see being the most wrong about ai are the ones that are very smart because they can't imagine a computer can be way smarter than them and that's the flaw in their logic they are just way dumber than they think they are. >> well, he should have stuck with nvidia, which a huge believer that the machines can be -- with guidance of people --

much, much smarter they seem to somehow -- they are not working out together one of the things that i thought was just fantastic was when he cried out and said we need more nickel for batteries which of course is valet, there's a -- in russia that's not going to help them nickel business reached 94.2 kts which is kill la tons so when he cries out that somebody has to help us in nickel it's valet i always like to help him because when i met him he was so miserable to me that the only way i could help -- the only way i can change the course is to be grateful and help him. valet, mr. musk. there. okay don't waste your time with anybody else. >> we do have at least one upgrade today as analysts play catch up cowan goes to market perform, they say we fully admit we've been wrong the last few years and the shares tend to work. they add when new things are coming musk did address the topic of

profitability last night here is what he said >> we need to, you know, not go bankrupt, obviously, that's important because that will fail in our mission but we're not trying to be super profitable, either obviously profitability is like 1% or something, you know, 1% or 2% it's not crazy last quarter was only .1%. so we want to be profitable, like i think we want to be slightly profitable and maximize growth and make the cars as affordable as possible that's what we're trying to achieve. >> jim, it's remarkable still for a company that has 1% of the global market, market cap of tesla is basically, what, three times the s&p auto sector. >> i think people if you listen to the call you think it's a big technology company and so, therefore, it's right up there with some of the other technology companies that we follow did they execute better than

microsoft? no but the expectations for their execution have never been higher, tesla, and they've vastly exceeded it i thought it was just -- it was a loveable quarter it was a teddy bear quarter. it was one of those quarters where the teslites have to be proud. it was just so strong. and that's because there's demand everywhere. he even says we don't have to to talk about demand. he talked about profitability, but when you have demand when the other guys are closing plants, what it says is you are not selling what they're selling. you're making something entirely different from what they're making we had mr. jackson on from auto nation and, yeah, they're selling a lot of pickup trucks, 150s, whatever, this man is selling technology i think he is talking about fully assisted, he is talking about driverless he's thinking so much bigger david, he's a big thinker.

he makes us look like lilaputians. >> he has always been a big thinker but he is executing on his vision which i guess is the key here despite what were the doubts and have been the doubts throughout and despite what is of course an extremely highly valued stock price based on the belief that he will continue to deliver not just cars but in so many other areas, whether it is tesla, solar, whether it is the promise of ai, controlled as musk believes it must be, but in terms of automated cars. and so, you know, we will just have to wait and see, jim. this has been certainly one of the more remarkable stocks of this year. >> right. >> certainly of this period. but then it does take me back, i guess, guys, to the broader conversation about the markets i mean, we've talked so often about them lately being about five stocks, six stocks, you can

throw tesla in there if you want. >> sure. >> facebook, amazon, apple, microsoft and google they are the five largest u.s. stocks we've talked about t you've seen this, but it is worth mentioning, jim, they account now for 22% of the s&p 500's market cap five names 16% of that market cap a year ago. they are up, what, 35% year to date where the remaining 495 s&p stocks are actually down 5%. >> what are we supposed to do, david? >> it is just about a few stocks. >> is it our job to tell people, listen, you have to sell this because it's too big a part of the s&p? what do we do? >> no. >> look, those are all -- netflix maybe -- they are immensely profitable, what are we supposed to do? blast them. >> not at all. >> saying it's too big a part of the s&p? >> no, but the concern is of course about market breadth, i guess, jim

it is the narrow west it's been in over 20 years. >> i know, but we don't know what to do. >> if you see any give up at all in any of these names, microsoft or any of them, the down side could be significant and to make it up for the s&p 500 index you're going to have to have enormous outperformance by those other stocks. >> you're right. >> those 495. >> there were a lot of congratulations on the mic soft call, satya did a good job, downgraded it today. i thought that was needless, it's a good quarter. if they do another quarter like this that doesn't blow the numbers away i think you're going to start saying, do you know what, maybe microsoft has hair on them because most of these companies don't. look at facebook he managed -- he, mark zuckerberg -- come up with instagram shops and immediately the numbers explode and he's going to be on capitol hill and he doesn't fare that well -- i know he has smart people working with him now when he is on the hill what am i going to do, tell

people to sell facebook because, you know, union pacific got a good quarter opta, z scaler, zen desk, crowd strike crowd flare. palo alto. what are we supposed to do what do we tell people >> well, i mean, jim, historically you've told people if you are sitting on a 20% gain don't feel guilty about selling. >> i think that there is a lot of people who are being hogs, pigs, they should sell some. i've been -- we had to sell some amazon for my charitable trust because we are the amazon fund, we had to sell some facebook because we were the facebook fund we refused to sell apple because you have to own apple not trade it, but i think a lot of us are stuck thinking about what else am i supposed to buy the etf-ization, there's so many etfs that have these and they're sticking money carl, i don't know what to do. i never want to repeat 1999,

2000 but to not repeat it would require people to say i don't care how much you like apple, it's time to sell apple and you've got to put your money in -- well -- i don't know dell dell is not doing as well. give me something. >> there's housing i mean, polti has brought their workers back, whirlpool, people redoing their kitchens like never before people are moving and staying indoors once they move that's one area ex-tech. >> i do like the housing sector, i like lowe's, i think lenar hit a new high yesterday, i like home depot, birl pool has been inconsistent but stanley, black & decker have been good. those are good ideas i think if you had something else that was really a killer you could pull back and sell some you could sell some facebook ahead of the capitol hill

antitrust, you could sell alphabet but i think the quarter will be a blow away, sell some tesla, but i think that in the end the other ones are not great long-term secular stories. remember what elon musk said to me before he pants me and said that i was just -- a figment of his imagination, a hologram, he said there will be a corner in the northwest colorado where he is going to have all the energy of this country coming from. giant solar field. >> really? okay >> when i request he had that at the dinner table is when he decided to mortgage phi me and make me look like the fool that i am i said i don't think that's possible >> i've heard about that conversation for years now, but i don't ever remember the solar -- the solar array in northwest colorado. >> in northwest colorado >> okay. >> i said american power wouldn't go for that, i don't

think d-- he said i don't knoyow what you're talking about. as a matter of fact, i don't know if you exist. i've never seen anyone argue like that. he said i don't exist, i'm just in his imagination that was new. >> i can't touch you you're not there look, see i can't get -- >> we will take a break and save some room for at&t, southwest, dow, chipotle, twitter, a lot to get to covid numbers of course, mnuchin on squawk and what pelosi told jim on "mad money" last night. don't go away. save hundreds on your wireless bill

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it will be based on approximately 70% wage replacement and we're also going to have a lot of tax credits to incentivize companies to hire people and then finally let me say you know there is a lot of bipartisan support for expending the ppp, i have had conversations with carden and rubio and we want to have second checks for companies whose revenues are down 50% or more and need more money. small businesses to get people back to work >> that's mnuchin on squawk this morning. the white house clearly softening, jim, their position on payroll tax he referenced c.a.r.e.s. 4.0 and there could be c.a.r.e.s. 5.0, but some believe if these benefits do run to the end of the year that this could be the last package of the year. >> look, i think the discussion

at the end of the year will be are you going to take the j & j vaccine or are you going to take the pfizer vaccine or the oxford vaccine. it is not going to be about c.a.r.e.s. i thought that what's great about what secretary mnuchin talked about, it was not a convoluted discussion about the payroll tax cut which does threaten the till for medicare, it was about coming together and making it so that the companies that are just closing let's say a restaurant, i know he cares passionately about this as does speaker pelosi look, it wasn't the fault of the restaurant and all those workers, it is the fault of the illness. i think secretary mnuchin has been saying it's business interruption insurance we are not going to help brooks brothers, we are not going to help niemann marcus, but we are going to help the companies that hire 18 people and have to close because they're not allowed to open the case in new york and the places i work, i own

i thought he was soft, i thought he has been compromised, in the end compromised commerce, wants to get the job done, more ppp is the way to get it directly to the institutions that are closed and can't hire until we get the vaccine and that's -- this is the bridge to the vaccine, this and masks and i think that without them it's a bridge too far. >> yeah. well, there's something else that's a bridge which is testing and being able to get results quickly and that still seems to be a problem the secretary did talk about an additional $16 billion you at it to the $9 billion that's in the pipe you get to 25 although the administration previously as you guys know had been against any additional spending on testing. texas and california our two largest states, california is now surpassed new york in total cases, i think it had 12,800 new cases on tuesday, texas added almost 10,000 on wednesday, hospitalizations still going up. it's not as though this crisis is somehow passed in terms of the virus itself, guys.

>> no. >> it's unclear where we are in testing, jim, in terms of our ability to be able to identify when the virus is spreading quickly in a particular area. >> do you think they're waiting three to five days at the nfl? >> no. >> the game starts, do you think they're waiting until the results on thursday night? i mean, obviously every player is going to be tested before the game starts and it's not going to be one of those tests where they have to wait three days, about i that point the game is over >> then they have -- >> i think there are two classes of people who get tested these days, david. >> right. >> all four sports will be playing in the next few weeks. i do not think any of those players will have to wait three days to get the results. >> no, i know. but how do you fully open up the economy as the secretary says he wants to without that testing capability and the ability to get results quickly? i think of colleges which many of which still plan thankfully to try to open with students on campus, but test something a real part of that. if they can't do it once a week or whatever it may be they are

not going to be in a position to understand if the virus is is there and where it's spreading it's not going to happen. >> they need a urine or blood test we need to do something at home, a pregnancy-like test. if we get that then these problems go away it's going to have to be invention. the current way to do it they can't do it unless you have the pull that the nfl or the nhl or the major league baseball or nba has. unless you have that pull then you are going to be left to finding out too late and in that interim be giving this incredibly contagious disease to everyone so it has to be invention. this current method ain't working. >> for sure. on a week where -- i know, labcorp this week, jim, said the caseload is outstripping its own capacity and the wait in arizona is not three days it's up to 11 days which completely wipes out any usefulness of contract tracing. we will take a break obviously the markets -- the markets are watching something else entirely as the nasdaq

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you can't look away from some of the airline results this week we got united, american, and we will talk to southwest's gary kelly in a few moments about the level of demand, deliveries and what airlines are in the era of post covid in a moment

>> announcer: the opening bell is brought to you by nuveen. a leader of income, alternatives and responsible investing. as you can see lots of ceo interviews to get torques lots of earnings to get to including chipotle mexican grill, that's the feature on the mad dash, jim. >> brian i believe will be on later this afternoon there are some people who didn't care for it, the stock is trading down a bit but i think that's nuts. why? because this company has perfected making more money digitally by people not going in the store than people going in the store. it's almost as if the stores

themselves, the restoration of the eating inside, huh-uh, doesn't even matter. there's so many restaurants that are dying, chipotle is thriving, the chipotlane is brilliant. the com store sales down almost 10% it doesn't matter. chipotle travels well, they have fantastic delivery, great deals with this is the store, the this is the restaurant that deserves to have its stock up 41%. congratulations to chipotle. not defeated by covid, but thriving >> and thriving because they were able to develop a digital channel or develop it even more robustly, i guess, during this period. >> right. >> something that will stay with them forever we have talked so often about how so much change has been accelerated, this is something obviously that chipotle was working on, was continuing but i assume it's now a lot more mature than perhaps they thought

it would ever be four months ago. >> yes what they have always been worried about are crowds, are lines. the line being too long. now suddenly social distancing makes it even more imperative that the line not be too long. their customers have been driven to picking did you ever up in cars, the chipotlanes or making it so there's contactless delivery what i love about it is they are going to the mall reads and saying you didn't like our chipotlanes, to hell with you, we want more chipotlanes, they need to put them in in as many stores as they can brian niccol is pure joy management saw and did what needed to be done quicker than anyone else. they are a technology company that sells an incredibly good burrito. david? david, have you ever had chipotle >> yeah, i have. i have. >> really? >> i've had it in. yeah yeah

it's a big favorite, my son likes it a lot he enjoys it a good deal. >> what's a queso? >> it's got cheese. >> have you ever had the bowl? >> it's good i have had a bowl. i have had a bowl, i've had a burrito. >> did you ever get the box? >> no. >> okay. that's because there is no box. >> i don't go there that often. >> all right just testing >> trick questions trick questions? really >> i go to tractor supply, too, carl >> did you see that interview on squawk this morning? wow. we talk about tail winds, jim, but you have multiple tail winds and you've got a couple of shout outs on that one. >> i'm a gentleman farmer, people may not know that, i will do 100 bottles of sauce, i believe probably do 40 bottles of pickles and in order to get the job done you have to go to tractor supply we had longhorns, man, you have to go to tractor supply. and they have a veterinarian and that's what you really need for

farm animals, you need a vet it's not like a dog. david has a dog. >> although your tweets yesterday about the dogs who cry out when they hear your name, that was -- that was a good one. there is the opening bell, guys. as we see some breadth fill in the enthusiasm for some of the earning might be offset by claims which we mentioned at the top. 1.4 million up for the first time since march you look at some of the high frequency employment data out of firms like jpmorgan and there are more talk that july non-farm could be a nail biter, maybe a surprise drop. >> i said that the market -- this is from larry williams, my favorite technician, that the market could peak on the 27th of july, he has been right the whole way, and that would be anticipation of a not great unemployment number, but that may again be a buying opportunity. what i like about this market is when you do blow out the quarter

as chipotle did, as whirlpool did, as tractor supply did, you are rewarded with a stock that goes higher. twitter actually did a good job. they reported a great frt. hershey was a great quarter. you report a freight quarter and the stock goes up. there is not a lot of thought to it anymore that was a good quarter let's go buy the stock. does it stay up all day, i don't know, if it's not a bank it tends to it's a different kind of market. it's positive. >> yeah, there is a lot of news on the twitter monetizable daus highest in the history of that metric expenses up only, i think, 15 -- or 5 versus what we thought was going to be low teens. this he did comment, jim, on this subscription service exploration which they said was early and dorsey did say on the call that it would be a high bar to expect people to pay for twitter, although we know how

excited the possibility got some people last week. >> in 2021 they will offer service where if you want to be able to have direct response in your area, if you want, say, a ten-block area and every time someone puts in some sort of let's say taco, i can go pay and have me -- have people directed to my restaurant that will be available in 2021 before you sell the stock remember that that's what the revenue stream that everybody wants, it's not ready yet but it will be six months from now. so i would not sell the stock. it's going to happen it is going to happen. and it's going to be a huge revenue stream, not unlike what happened when -- when zuckerberg realized that instagram could be amazing for small to medium sized business twitter is under invested in the ability to be able to take that check. i would like to write them a check, write a check to ned siegel, it doesn't work, he is the cfo.

they will be able to do that and i think that that is going to be very exciting. very positive revenue stream >> yeah. guys, as our viewers have seen of course we will have john stankey join us for his first interview as ceo of at&t he took over the job on july 1st, this is the first reported quarter. at&t stock, there he is, not doing so much this morning generally not -- not a bad quarter, you know, certainly in terms of on the wireless side, it gets a bit complicated, they have this pledge where they will not actually cut people off even though they are not paying their bill but they are not counting them so that was some 338,000 or so so they were down roughly 150,000 on wireless, you know, we always keep an eye on directv and how the subs are doing there. not particularly well as you might imagine. especially because bars, restaurants, places that often are subscribers have not been open to some extent.

on the call so far mr. stankey sort oftalking somewhat positively in terms of the at&t rollout and on buy backs saying, you know, listen, i will tell you on buy backs it's too early to call anything, the board is going to sit down at their annual planning cycle in september and broadly speaking going to talk about capital allocation they are talking about a dividend payout ratio of around 60%. jim, the free cash flow number actually people are saying is a positive, $7.6 billion for the quarter. >> i thought that that would be what people would focus on i think people continue to focus on, david, the 954,000, what, losses in directv, 338,000 people stopped paying their bill i think that that's an interesting kind of a strike can you imagine? 338,000 is a lot of people to just say, listen, i can't do it. all right? >> it's a lot and their pledge is they are not can you get them off but they are not paying their bills.

this he did not count them that by the way is going to make it potentially difficult in terms of apples to apples comparison between at&t and t-mobile and verizon we will have to wait and see >> you have a lot -- you have your work cut out with mr. stankey. now we have our work cut out with mr. kelly shares of southwest air symbol love, i always like that, love is for sale this morning, posting a $950 million loss, warning that travel demand will remain weak without the coronavirus vaccine, enacting a strict new mask and screening policy because he's got horse sense. joins us now first on cnbc, not second or third, south chairman and ceo gary kelly you continue to tell it like it is, cash burn tough, give me something to say buy love. >> well, what more do you need horse sense, that's all we need, right? that's what it's going to take to get through this crisis

our people have horse sense, that's for sure. >> your people are staying i mean, i think everyone else is trying to figure out how to fire people, who you to cut people's wages, how to make it so that everybody is miserable that's not your plan, is it? >> no, sir, it's not our plan. our people obviously they are the company and they're doing a fantastic job. they work hard, they're resilient, they persevere, they know that we've got a war on this pandemic and they're up for the battle jim, we offered an early out program, voluntary separation program and extended leaves away from work and we've got 17,000 takers of that program, but it's voluntary and the company was generous and thankful, you know, for all their service. so i think that helps. it cushions the blow in terms of the need for less flights right now because demand is down, but the good news is in the second

quarter we achieved what we set out to do and no one can be happy about losses, you know, that we're incurring here. but we're making progress and definitely seeing some good signs out there. we've got a soft patch here in the third quarter because of the spike in the covid-19 cases, but at the same time the people that are flying, they're very complementary of the product that we're offering and the execution we have against the southwest promise and all in all, again, i just couldn't be more thankful for what our people have accomplished so far. >> gary, one of the things that is painful is that here you've got -- i didn't want to fly on a plane where the person next to me is too close and i don't want to fly when a person has a mask -- if the person doesn't wear a mask. you have solved those two.

i am ready to fly on southwest i've got places i want to go the fares are incredibly low the air is better than in a building what is going on that people aren't taking advantage of this? >> well, i think even with those things people are nervous. now, you're right, the people either who have to go or who are considering it, they look at what we're offering and i think those that pay attention they judge it just like you do. it is a very high quality, very healthy, very safe experience. understanding, again, we are in a pandemic and there's risk, but the risk is significantly mitigated. i think the issue then becomes where can you go what can you do when you get there? are you required to quarantine is disneyland open and all of those things. so i don't know about you personally, but i'm continuing to find that, okay, you had planned to come here, we are going to limit the number of

people or you can't bring guests or whatever it might be. so i think until we get out of this pandemic you're going to see very few events or large gatherings, that's going to hurt travel you're going to have quarantines in certain places at times and then you're just going to have just general concerns about getting out and about. so i'm with you, if people wear the mask, please wear the mask, we can defeat this pandemic. the united states obviously is an outlier right now, we need to be doing what other countries have been successfully doing around the world in terms of crushing these cases >> what are you going to say to the government which you still -- you've got 2.3 billion in direct payroll support, 3.2 billion all together, nearly 1 billion unsecured term loan. you want to get rid of that loan as fast as possible. what can you do? >> what can we do in terms of just our financing --

>> to be able to not have to take any money from the government >> well, i think we are in a great position at this point so as you saw in the release in 2020, which is, again, just a staggering number, we have raised over $17 billion so we've got total liquidity of $15.5 billion, which is way beyond anything that we would normally have we're still in a net -- even with that we are in a net cash position, cash versus debt so we've got our arsenal we're ready to go. we heed to manage our cash burn down every single quarter and that will be our goal here in the third quarter to reduce the cash burn relative to what we did in second quarter with an ultimate goal of getting at least to break even, hopefully by the end of the year i think the current spike in cases makes that more difficult. first quarter may be a more reasonable goal, but i'm not giving up on that goal to be break even cash flow by the end

of the year. how do you do that we've got to drive traffic and we've got to manage our costs very, very carefully second quarter is a great evidence of what our people are able to do on the cost side, they've done a phenomenal job. >> graer, are you surprised that the federal government doesn't mandate masks, masks the moment you walk into an airport so that we feel safe when we three, we are not worried? i just don't understand the laissez-faire attitude that could wipe out this industry. >> well, jim, i have a little bit different opinion and i have no problem with a mask mandate, i just don't think that it should be only for air travel. let's mandate masks. i mean, you have to wear pants, why can't we mandate that you have to wear a mask in a pandemic i think it's broader than air travel is my point i wouldn't punish the airlines relative to other industries in some people's view and only

require iton an airplane when you ought to be wearing it everywhere else. >> amen. >> especially when you are in close proximity. >> we can beat this thing in three weeks if we listen to you. three weeks. thank you so much to gary kelly who runs the best airline i know and will be -- i believe -- if you say you're going to make money by the end of the year you're going to make money gary kelly from southwest. luv, you are up on that store offering that you offered, always great to see you. >> great to see you, jim. let's go to david. >> thanks, jim we're going to go from one texas company to another at&t ceo john stankey will join us next. of course, his first interview since becoming ceo just concluded his first conference call as the company's ceo.

welcome back wireless and entertainment giant at&t reporting earnings this morning, the conference call around those earnings has just concluded and we are very happy to have john staengy the company's ceo join us now on cnbc john, happy to have you for your first interview as ceo you just concluded your first conference call as well. i guess i'd love to just start there which is the stankey era so to speak at at&t has begun. how is it going to differ from

that of your predecessor >> thanks, david we probably need to find a better way to brand that than the stankey era. that doesn't sound very good i need a different last name look, you know, i think there has been a lot of work that randall and i have done together over the last several years and we've been real close on a lot of things and i think there's a very strong consistency of our mind and i don't know that there's going to be any dramatic shift. what i would say is if i were to characterize what i would expect to see happen is i would be very happy with a business that maybe is a little bit more focused business, that as i've talked about and i talked about on the call, focused on our priorities of ensuring that we're growing connectivity, that's wireless, broadband and fiber broad brand, that we're focused on what we can do as software based entertainment products and

driving customer affinity on how to use those things. if we are focused on doing really well in those areas and we execute very well in those areas i will be very satisfied, you know, as my tenure in this job and working with the team to make that happen. >> yeah. you know, it's interesting, john, it's comments like the wnz you just made in terms of focusing on the assets that have been assembled, but making sure you sort of focus on those that are growing, and even a comment that you just made on the conference call when you answered the question about is satellite necessary. that gets people to believe that you may consider jettisoning directv. is that something you're considering? >> well, i'm not going to speculate on anything, david, we always have a policy as you know of not doing that. but, you know, what i care about are customers and our relationship with customers and as i've said from the start when we did the directv transaction what we were interested in is ensuring that we could build a platform that allowed us to do

things like offer advertising into our customer base, allow them to take their entertainment wherever they go to do it on their terms. we were talking about that back in 2015, hbo max and what we've done with atttv gives us very capable platforms to en thur we can continue to evolve the product in that way. to the extent that we are able to get customers engaged with us on those platforms, then, you know, we are in a good place and we are okay with that. if that takes us down a path that says satellite delivery is less important, so be it, but i'm not going to speculate on where we go. >> understood. although satellite delivery does seem to be becoming less important given that you continue to lose subs. this is obviously a very difficult time, bars and restaurants, for example, not open and they're big users of the product, but you've also said, john, as well, that tv and svod, you see them becoming one over the next few years. that would seem to indicate your

belief that it's not necessarily a core asset, directv. >> well, again, you're distinguishing directv and you're looking at it as labeling that i view the customers of directv oftentimes as not necessarily attached to the asset, per se. so, you know, what i clearly believe is that software based technology platforms are really important for our business moving forward and they are able to deliver the kind of product that a customer likes and that's where we're focused on our investment and what we're going to do moving forward. >> right all right. well, let's talk about some of that, hbo max of course launches during this last reported quarter. i'm looking at the sub numbers for hbo at the end of the year, 34.5 million you end june with 36.3 million are you happy with the progress you made, obviously the service was just rolled out at the end of may >> yeah, i am. i'm really proud of what the team has done and there were a

lot of execution steps to get this done in the time frame we got it done, to navigate through our existing relationships with many of our wholesale distributors, to build the software platform and do it in a way where it has performed in a where it's performed well. to build a brand and marketing position, there's not an insignificant amount of work, and if you think back to the launch of hulu or netflix and gaining subscribers to do what we did in 30 days there, i'm really pleased with the team, and it's very consistent with how we expected to come out of the gate we told you in october that this was not something we were in for the short-haul he indicated this was an impe y impertiti impertitive. we recognize we're going to have

to do it quarter by quarter and near by year, and we're right on plan with where we needed to be. and i'm particularly pleased with what i'm seeing in the wireless space right now our attach rates on the more premium unlimited plans and how we're seeing the buyup, wireless subscriber base is really encouraging to me. and right on point and consistent with what we wanted to see the sequential increase in our broad band subscribers over the last quarter, or fiber subscribers correlated to where we're offering hbo max with our dieb fiber product, so feel good about that >> yajohn, it's carl. a lot of movie lovers have talked about hen natenant you said it will not migrate away from theatrical release does that mean you're seeing something in theaters other than

consens consensus? >> i don't think so. i don't know what i can predict exactly when theater-goers are going to return. what's one of the problems around kind of reopening theaters is you can't go and release something like tenant and open it up geographically. when it releases in a theater, it needs to release nationwide if you have a major metropolitan area like los angeles that's totally out of check but you have some part of the country that maybe is more in control, it doesn't necessarily give you an option to go open it in half the country. it just doesn't work very well that way you know, my point on tenant is it's a movie and an experience that should be seen in theaters, and it was engineered to be that way. and as a result of that, it needs to show up that way, and certainly christopher would like it to be that way. that's how he wants that piece

of work that he's done to be seen by movie goers. that's why it's going to show up in a theater >> first time i've asked you a question so it's pointed 338,000 people stop paying next month we get rid of the $600 in additional i'm fortunate enough to have done well in my career, but the one thing i would do if i lost the money is say maybe i have to cut out att, but they don't care they won't cut me off. this is like one of the great free rides what do you do you're one of the great free rides. >> well, jim, first of all, feel free to call me john and i would tell you that i think we've been very disciplined around how we managed the keep america connected construct. in fact, the reality that we're

telling you there are customers we've pulled out of our customer accounts for the second quarter in anticipation that they may not pay us is indicative to the fact that we've kept a careful eye on this and been very aggressive around how we manage it there's a limit to everything. as you know, the keep america connected promise did conclude at the end of june that's why we're making this adjustment to the customer base now. we've defined it and contained it for you i think we've been very conservative in the assumptions that we've put out there and we talked a lot about that on the call so i don't feel this is something that's going to get out of control, and we'll continue to work with our customers moving forward as we always do to try to be as flexible as we can and working through with them. but i don't know that i would consider our business model right now a free ride business model. >> back to wireless being a key

part, you connect to a lot of small and medium-sized businesses what are you seeing on the ground you're not issuing guidance. i would assume that's because of a lack of certainty in terms of what's coming in the economy >> yeah. that's -- visibility is tough right now, david we've given some a little bit clarity right now what our investment levels are going to be for the balance of this year, and we clearly have given you indications that we feel very comfortable that the cash production of the business is going to put us in a very comfortable place on our dividend coverage as we move through this year. so we have reasonable visibility on what we can do to manage the cash dynamics on things. but where we are on the business segment in particular, it's a bit of a challenge right now to guess where that's going to come out or forecast where that's going to come out. we are in a bit of a unique position where our enterprise business definitely scales more

to mid and up market we're a little less dependent on smaller businesses i do expect that those types of firms are going to have a tough third and fourth quarter we've taken a lot of heat in the entertainment business in terms of bars and restaurants and what we do for satellite tv services into those locations and it has impacted us, but i think we've been very careful about our estimates on cash, assuming that we're going to see a high correlation to pressured economic numbers in the third and fourth quarter, how that's going to impact all of our customers. i had gary on right before i came on. we are wbig provider services into the airline industry. we've had to look at that and say what's that going to do to our business moving forward?

there's aspects of manufacturing hit harder than others we've had to make estimates on that we're not thinking we're going to see a strong economic recovery that's going to help our enterprise space in the third and fourth quarter and our forecasts have tried to include that as much as possible >> and finally, john, just to end on 5g. many people expected this would be the year of a big rollout you're spending 20 billion in capital. a lot is going toward 5g you said you're overindexed to apple products apple doesn't have a 5g phone. i would assume we're not going to talk a lot about this for at&t customers until next year >> not at all. in fact, today is the day we went nationwide on our 5g coverage whether you're an apple customer or if you're, for example, a samsung customer right now that has a 5g device, you now have 5g access on the at&t network

nationwide as of today and that timing to get that work done was very much coordinated to an expectation that in the latter part of the year we may see other devices from other manufacturers that are more broadly available, and we would expect that when that occurs, we're going to be in a great position, and i expect as we've communicated, we're going to see an increase in the hand set upgrade cycle as we get to the latter part of this year in fact, that's one of the things that gives us confidence that we can still continue to grow our wireless service revenues as we get in the latter part of this year and what we had originally communicated. you know, we said that combination of what we're going to be able to do with hbo max and getting people to buy up in unlimited plans and what would happen in 5g upgrade cycles would give us an opportunity to get customers into the more

robust unlimited plans whether we can get that growth in service revenues with the economic environment remains to be seen, but we still expect that there's going to be a pretty strong bicycle in the latter part of this year that we'll benefit from >> john, we have to leave it there for now. we appreciate you taking time with us this morning thank you. >> i appreciate you having me, and i hope you guys have a good rest of the week >> you've got it we won't be calling you -- the ceo of at&t. over to you. all right. good stuff, david. jim, what's coming up on mad tonight? >> mp materials which is people want to know about rare metals and then lemonade. a hot stock. it's not about lemonade. insurance. i can't wait for tonight's show. john and gary.

i think they're doing okay >> jim, look forward to hearing from lum nad just a few weeks after the ipo. we'll see you tonight. >> thank you >> jim cramer and mad money at 6:00 p.m. eastern time welcome to "squawk on the street." the market is not changing a lot with price, but it has a defensive tilt most sectors are down. dow red by pfizer and procter. how to rick santelli >> we're expecting a 2.1 to 2.2 % economic rebound 2 .0 up 2% for the month of june. in march we made the all-time worst month over month minus 7.5% in may we made the best showing up 2 .8 %. so up 2 .0 fits right in and it comps to that reading we just

had in may h in terms of the last time we had that amount of strength it is a june read. and we know a lot has happened since then interest rates still hovering very near all-time low closing yields on twos, threes, fives and sevens ten-year is 4b -- 4 .5 basis points away. >> rick santelli there's virtually no company in the transportation index that phil is not covering today let's get to him on american, tesla and a lot more >> hey let's start with the airlines. we have three reporting earnings today. we're not going to run through all the numbers. they all posted large losses that's not a surprise. let's give a flavor of what the ceos and executives are seeing right now for the end of the year southwest, we heard from gary kelley about 20 minutes. we know the problems southwest

is encounters. gary kelley is serious when he says there's going to be limited demand until there's a vaccine how much is it down 30% it remains to be seen. it's going to be limited as a result, they're going to be adjusting their schedules in august and september to meet that plateaued demand we're seeing alaska airlines, it has cut the capacity by 74 .6% in the second quarter. don't expect a lot to be added up in the third quarter. because of that limited capacity, and by the way, their load factors, this is in the industry right now, as traffic levels plateau the load factors have trouble rising. 38.4% in the second quarter. and there is american which also reported earlier this morning. it's raising a fresh round of debt this morning. announcing 1.2 million in a new debt offering. the total debt right now at american is about 40 billion here is doug parker, ceo of america, talking about the company's debt position right

now. >> our debt levels are high. we came into 2020 looking to -- we raised a good bit of debt as we modernized our fleet. it's changed we and all airlines continue to raise liquidity. much of it through debt in order to get through the crisis. that's something we'll have to deal with. once we get to be cash positive again, but it's necessary to do in this environment. >> all right so that's the story with the airlines let's shift and talk about tesla. tesla reporting its fourth profitable quarter in a row. we've talked about what that means about possible inclusion in the s&p 500 also announcing it's going to be building a second final assembly plant in the united states just outside of austin, texas. in terms of maintaining profitability, here is ceo elon musk on last night's earnings call about what he's shooting for. >> we need to not go back out.

that will fail in our mission, but we're not trying to be super profitable either. obviously, profitability is, like, 1% or something. 1% or 2% it's not crazy past quarter was only .1%. so we want to be profitable, like, i think we want to be slightly profitable and optimize growth and make the cars as affordable as possible that's what we're trying to achieve. >> in terms of deliveries, they are maintaining their target of delivering at least a half million vehicles this year now, they're going to have to step on the gas in the second half of this year. they delivered 367,000 last year but they're maintaining the guidance that they plan to deliver at least a half million vehicles this year >> yeah. it's really a tale of two different modes of

transportation, phil i have to say the profitability comments from musk remind me of how amazon approaches that as well phil, thank you for breaking down quite a few earnings movers for us this morning. mike is back with us to break down a busy earnings day mike, i think i'll start right there. the fact that it is essentially and we've talked about this before it is essentially a tale of two i guess sub markets, if you will i mean, when you see the jobless claims numbers going up for the first time since march, you have the las vegas strip casinos announcing layoffs and furloughs because of weak demand you see airlines perhaps not surprising to see the economic recovery and the stocks that are tied to a potential reopening under pressure while some of the big high flying growth names like tesla continue to move higher. >> right and the question within all of that is what does it mean for

the nontesla huge cap tech stocks they've been in a mode where they need to cool off after microsoft's numbers last night that's backing off it's not withbeen any kind of a nasty selloff. they've just sort of had to take to the sidelines for a little while. markets held together okay tesla seems to me a different response to results last night up 1% for the stock seems like it's kind of a tossup in terms of the interpretation. clearly there was no surprise in the numbers on deliveries, on anything that was front and center financial or production-wise. certainly nothing that would tell you why this stock was up 60% in less than a month so that's its own animal, i think right there. the rest of the market is trying to metabolize this stuff and the context of treasury yields that are still plumbing their recent lows or getting close to them. what does it say about the outlook for the economy or is it just that people are buying government bonds like every

other kind of asset as the dollar goes down and we have a highly liquid environment. >> yeah. definitely a fair point there. i am curious, though, mike, because you've been looking at this for a while we got a fourth consecutive quarter of profitability for tesla. it's the 12th largest market cap right now. is it inevitable it's now added to the s&p, and it also raises the question, how much higher would the s&p already be if it was in there >> well, i don't know about inevitable, but it's just highly likely i think in general the s&p wants to have the index represent market -- the market as best it can. market cap-wise. it's certainly likely to go in i would expect the thing that puzzles me is i've never experienced a situation where there was so much focus on the potential for the entry in the s&p 500 as if it was some kind of decisive move and meant a lot for the long-term returns of the stock it doesn't tend to be the stake. if you told me there were

incremental buyers for a .8 % waiting, it's significant. but it's not something -- i think to me it's bearish if that's your bull case on tesla at $300 billion you'd better have other reasons why this thing is going higher than that. >> that's a good point i think i've seen numbers that indicate the actual buying that it would create would only be about a day's or so worth of volume we're just not talking about something -- >> absolutely. >> yeah. so those looking for a big pop may be disappointed. it gets back to the narrowness of the market. something you've talked about endlessly, and it comes up again today. i'm looking at the latest note from goldman sachs facebook, amazon, microsoft, and google account for 22% of the s&p 500 right now. up from 16% a year ago >> yep yeah i mean, it's very stark. it's -- you know, getting close to unprecedented you can go back in the distant

past and find times when at least a top ten was similarly large. but no, this is definitely a unique feature of this environment coming out of a bear market, whatever you want to call what we did the issue, though, is calling it narrow, is if you look at the kind of running tally of all the stocks going up versus those going down, the so-called advanced decline line, it made a new high on the new york stock exchange while the biggest stocks keep accruing more market value, kind of eating more than their share, everybody else is also getting a taste. not everybody. i shouldn't say that a majority every day is also on average getting a taste. so you can define it how you like there's concentrated bets that the dominant companies are almost in an annuity situation where they've going to keep collecting taxes on the global economy as they have been doing through their platform not you have to consider if it's smart or not at these levels

i think in the context of where corporate bond yields are, you can see why we got here. >> mike, you know in the absence of guidance, hard guidance out of companies, the color commentary from ceos is taking on greater weight. and as we assemble tom, american, for example, it's brutal in terms of demand. goldman, i think we're in for a bumpy ride, economically is this all pointing to what jamie diamond pointed to, that the recession is still to come >> i think there's going to be a long tail to this defensiveness and maybe the cost cutting impulse is going to be something that lasts for a while a lot of these companies, they're not going to pencil in a quick rebound in the top line. what does that mean for how they budget i think that's something we should expect. and the longer this goes on with the economies operating in this impaired condition, i think the more we have to be concerned about the successive waves of

that cost cutting. but ultimately, ceos are people who watched what happened to the markets and watched what happened to society. i think they're more reflecting the recent past and what's going on now than conveying some kind of privileged intelligence on where things are headed in the next several months. >> right that might be asking too much of anybody right now given so many uncertainties. mike, thank you very much. one of the big stories of the morning, of course, is twitter trying to reacquaint itself with 40 julia has news >> twitter's shares surging today on the company's fastest growth in its daily monetizable users since it started reporting that metric. you see shares up over 6%. now, that key metric, daily monetizable active users rising by 20 million from the first quarter to the second quarter. that's soaring past expectations of the addition of just 7 million users. despite the user growth, revenue fell faster than expected down

19% from the year earlier quarter as twitter suffered from a broader advertising pullback as well as the reliance on brand advertising and on live events still, the company says it's building out the ad tools to better monetize the new users when the ad market does return saying it's working on direct response ads and jack dorsey weighing in on the company's plans to build a subscription service >> we have a really high bar for when we ask consumers to pay for aspects of twitter, and this is a start, and we're in the very, very early phases of exploring as you mentioned, there have been a number of ideas over the years. we have focussed our attention on increasing revenue durability, meaning that we have multiple lines of revenue to

pull from. >> dorsey also apologized for the big hack that happened last week and he said that they had fallen behind on restrictions, on internal tools and other things related to the hack. so they will continue to invest in security. david? >> julia, thank you. well, dow reported earnings as well this morning. we're going to be joined by the company's ceo. you can see the stock is suffering this morning after what appeared to be a fairly good quarter ♪ come on in, we're open. ♪ all we do is hand you the bag. simple. done. we adapt and we change. you know, you just figure it out. we've just been finding a way to keep on pushing. ♪

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shares of dow are moving lower this morning after a quarter that saw the chemical and plastics giant cut about 6% of the work force and reported a wider than expected loss for the second quarter down about 4.5%. let's talk to the company's chairman and ceo, jim fitterling always good to have you. i'd love to start off with the decision you made to cut your expense or increase your expense production, i should say from what had been a $350 million target to $500 million for what you're calling additional structural cost interventions. why are you doing that >> good morning, david good to be with you. we went in to the quarter looking at this as a quarter where we needed to deliver very strong cash flow, and with some

of the demand destruction that happened because of covid-19 and some of the related lockdowns that had some parts of the industry shut down, we decided to look at competitiveness long-term and make sure we had the right structural costs moving forward to manage through what could be an uneven or prolonged recovery >> it's one that's difficult to ascertain in terms of what's coming in the future you did see improvements in asia pacific but not much in north america during the quarter right? >> we did see china post 3.2 % gdp rate we saw double digit volume growth in most of our segments in china we did not see the u.s. come back until really late may and the month of june. from a north american standpoint, you might think of it as second quarter was a

quarter with one solid month, and it was the month of june but our july order book looks good, and that's a good sign we're starting to see some sectors start to pick up automotive is back in production automotive sales are good. housing starts are up. we saw yesterday whirlpool announced great appliance sales. we're starting to see that pull on the appliance part of the chain. consumer packaging and items that are going into cleaning and ppe, those continue to be strong in fact, packaging was up 6% year over year >> yeah. you mentioned the july order book, jim, i wonder how confident can you be in that given we've seen a resurgence in the virus in the largest states, california and texas, for example, and certainly there's the possibility that economic activity is stalling if not moving backwards in some of the key areas?

>> we have pretty good metrics on the customers we've been in very close contact with them through the second quarter. very strong relationships there. we've been turning on a lot of visibility for them for shipments and things that are helping them manage through the pandemic so we're in daily communications with them, and we watch order load and we watch shipments and july looks very solid to us. and the outlook from their standpoint is for a good august. i think some of the things that are in question right now really relate to back to school in august, and how that's going to play out >> jim, it's morgan. i know companies generating cash from operations right now. there's been a lot of i guess concern on the street about the state of the dividend which yields more than 6% right now. is that payout safe?

>> our priorities for cash are very simple. one to safely and reliably run the operations, two, to support that dividend, and three, to pay down debt. if you look at second quarter, we generated $1.6 billion of cash from operations 1.3 billion of free cash flow and we paid down 600 million of debt and we've still got really good liquidity and cash on hand. we have $3.7 billion of cash on hand and $12 billion of liquidity. we're managing through this well and we want to make sure we continue to do that. we manage working capital well we released $526 million from working tap cal in the quarter that's because we focussed on cash and not just run and put material into inventory. >> the incredible drop in natural gas prices over the last couple of months, how much of a tail wind is that for dow and where do you expect the prices

to go headed into the second half of the year >> natural gas is helpful to dow, because our energy costs are largely based on natural gas. propane and ethane are feed stocks propane has been low, and ethane has come off the highs of second quarter. i think the outlook is oil has firmed up. and oil looks like it will stay in this range maybe as high as $45 a barrel that means there's enough for ethane for feed stocks for us. that's improved. the forward curve on natural gas is below 3 for as far out as we can see. i think watching inventories and how much we have into storage going into the winter is more important as we move forward >> finally, jim, you know, we started with obviously the decision to continue to cut costs even further i wonder has the pandemic forced you to do things you might not otherwise have in terms of at

least how you focus on the overall business at this point sort of has it challenged you in any way to take a look at your assets in a different way? >> it has on the asset part of the restructuring. we've had a plan, and we looked at our footprint that we want to have in the year 2030. and i think what it's done is it's forced us to look at the cost competitiveness of the assets at the end of the cost curve and challenge ourselves whether they'll be competitive for the long-term, and we also have to look at what's happening with trends and mixed shifts in the marketplace. we're seeing maybe a trend away from office buildings and that kind of construction, and we have to watch public transport and are people going back into cars and so what we're trying to do is consolidate that footprint, make sure they're low cost and in our business, you've got to keep lowering your break even costs every time you go through

one of these situations. make yourself stronger for the next time around >> yeah. well, we understand that jim, always appreciate you taking time. thank you. >> thank you, david. jim fitterling, the chairman and ceo of dow >> it's time now for our etf spotlight. we're going to look at shares of -- or i should say i-shares, ticker iyt this tracks the dow transports it's up over 20% in the last three months still under pressure today bolstered by one of the larger holdings in the etf, union pacific. carrying a weighting of over 11% in the etf it's up double digits on its own over the same three-month period shares of the stock are moving lower. they're down about 2 % post earnings we're going to ask the ceo of union pacific about the quarter and also the guidance in just a few minutes. stay witush

welcome back, everybody. i'm sue. here's your cnpc news update amc is pushing back the reopening of u.s. theaters from the end of july until mid or late august. amc is the largest chain of movie theaters in the country. and the move is after key summer

movies had their releases delayed due to the pandemic. in portland, oregon, the mayor was in the crowd when federal agents fired tear gas at protesters wheeler can be seen with goggles and gray hair. later said he saw, quote, nothing which provokeed this response, end quote. you can go to cnbc.com for more on the story the summer olympics are set to begin one year from today a poll shows just one in four japanese favor holding the games next year. about 70% say they should be postponed or cancelled cnbc's parent nbc universal is the u.s. broadcaster of the olympics you are up to date that's the news update "squawk on the street" is back in a minute.

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welcome back to "squawk on the street."

metropolitan transit showing a deficit. now announcing more budget cuts and asking for additional federal aid to get through our next guest says hard choices are ahead. mta chairman joins us now. chairman, thank you for being with us. >> thanks for having me. >> all right so $16 billion deficit through 2024 just had a meeting yesterday about additional cuts and where those could take place i guess outline those and the fact that you're calling to the federal government for additional federal aid how much can be done if that aid doesn't come through >> well, first, the mta is facing a once in 100-year fiscal tsunami which has left our infrastructure untouched but demolished 40% of our revenues this is a national crisis. it requires a national solution.

mta revenues have gone down about 40%. we received close to $4 billion of funding in the cares act. i think i'll make news now we're going to exhaust the last of the cares dollars tomorrow. we'll get the last installment from fta in august to get us through the rest of the year, our revenues are $17 billion agency, about half our revenues come from our customer fares and tolls. subways, buses, commuter roll and mta bridges and tunnels, the rest is taxes and subsidies over the last period of decades most those revenue sources are down we need another $3.9 billion from the federal government to close the deficit through the end of 2020. the heros act included that $3.9 billion in the united

states senate. we're hoping transit agencies, i'm hoping especially the mta will get an additional $3.9 billion to close the deficit through the end of the year >> yeah. and the mta, as you mentioned, just covered the new york metro area, but it is the largest prbl transit authority in the country. this is being watched very closely right now. i wonder, though, when you hear about demographic shifts, people moving out of, say, manhattan into the suburbs or other parts of the country right now, the fact that the city overall is facing huge deficit issues of its own, how you account for population in your deficit estimates, and what do you anticipate over the coming years in terms of structural changes to the way the mta operates within the city and the area >> look, the good questions. our ridership at the depths of the pandemic just fell off a cliff. declines on subways we're now carrying

about a million one. we're about 50% of prepandemic levels on buses and about over 20% on subways and buses lesser on the commuter rails and we're basically down about 20% on mta bridges and tunnels which is a significant source of revenue and operating surplus which goes to fund mass transit which obviously is a deficit-making operation to the extent customers move around new york, they serve them now and will continue to serve them in 2021, we have a budget cutting program. our financial plan already includes $800 million of additional cuts. we've identified an additional $340 million i'm certain we can do more but even at a billion one, you can't cut our way out of this.

it's estimated that our 2021 deficit is about $6.5 billion. we can make contributions in terms of expense cuts and the mta has reduced expenses by a total of $3 billion on an annual recurring basis over the last period we're adding another 1.1 billion in 2021, but we need federal support and we need it in the short-term, we're out of the cares act funding. >> yeah. it's david faber as a life-long new yorker and someone who took the subway three times a day, i know how central it is to the economy and the city you keep mentioning you need aid. this is what secretary ma newspaperen said earlier quote, the president is not going to bail out chicago and new york and other states that prior to the coronavirus were mismanaged what's your response that? >> in 2020 we prior to the

pandemic had an operating surplus of about $80 billion that's a small number on but we would have made a small airporting surplus ridership on the commuter rails was at record levels three, on time performance had increased every month for the last 12 months prior to the pandemic and actually, on time performance continues to be high in the pandemic period but obviously we're carrying a lot fewer customers. the point i would make is while the mta has had fiscal crises in the past, no fiscal crisis has ever equated to what we're facing we have not been mismanaged. we're going to take an additional $1.1 billion of expense out in 2021 and we've taken over 3 billion of expense out on our annual recurring basis. we'll do our part at the mta, but this is a national crisis.

it requires a national solution. other government entities around the country may be ismanaged and maybe should not be funded that's not the case at the mta and the mta is really critical and pivotal to the recovery of the new york city regional economy, and i'd say the national economy given that about 10% of gdp is generated in new york region. >> yeah. well, an important component, of course, of your overall budget was also spending to modernize the new york city subway an enormous capital project. i would assume that is in dire danger of not being able to be executed >> it's at real risk, you're right. look, the board approved a $51.5 billion capital plan highest in the history of the agency would have increased accessibility on subways dramatically resignaling a great part of the system, and would have touched subways, buses, commuter rails,

largest electric bus order in the history of the nation. the capital plan is on pause as a result of the pandemic, and challenges to various revenue sources that constitute the funding for that 51 $.5 billion. i too have lived in new york and ridden the subway since i was a kid. we've all seen the movie as to what happens with the mta when investment is not made in state of good repair and improving the system and increasing capacity no one wants to watch that movie again. that has consequences that last years and decades. >> speaking of which, patrick, i don't know if you saw this report out of the partnership for new york it found a quarter of office employers intend to cut their footprint in the city by as much as a fifth so assuming that you get fngsing to get past this crisis but that structurally ridership comes down for good, what kind of

service cuts could we be looking at for the long-term >> i read the partnership report i read everything the relationship publishes look, the remote working is going to be a challenge to urban centers around the world i've lived in new york city my entire life. i'm bullish on new york. i believe that new york will recover. it is not going to happen in a period of weeks or months but new york will recover and we'll provide the service that's necessary for our customers at whatever levels of customers are riding subways, buses, long island railroad. if we have to increase it, we will do that if it makes sense to downsize it as a financial matter, we'll do that and be sensitive to the growth across the entire system. we'll right size the system. we'll do what we need to do to cut expenses, the 1.1 billion i mentioned, but to get through this, we're going to need continuing financial support

from the federal government. >> patrick, you mentioned the continuing financial support from the government. the fact that the cares act funding runs out tomorrow the mta in general is a huge player in the municipal bond market. you're able to do another raise back in early may. is that on the table for you again? i ask in part because many retail investors are in the muni market and certainly what happens with the mta has ripple effects. >> there's no question we have a substantial amount of municipal debt standard downgraded us and other transit agencies we're now a triple b plus credit our bonds have traded up following the latest offering. we believe that with the federal support and the actions that we're going to take, we will be able to make progress to close the deficit which is created by the pandemic

reduction in fare revenue and medicated package of taxes and subsidies. we're going to do everything we can, but the deficit is so large that we can't cut our way out of it, and we'll right size things during the pandemic when we were carrying first responders. we need federal support this year now that the u.s. senate is back in session. we believe that they will pass i'm cautiously optimistic. we have importantly to support senator schumer from the great state of new york who is committed to obtaining $3.9 billion of funding for the mta. that's pivotal to our recovery and to the recovery of the new york region. >> yeah. well, we wish you luck as you navigate this. patrick foye, thank you for joining us today >> thanks for having me. from the subway to railroads at large, we're going to talk to the ceo of the union pacific stocks down about 2 % here

and lance fritz will jn oius in a few moments. don't go away. (gentle music) - [presenter] stand up if you are..: (audience applauding) (dramatic music)

i will tell you this. southern new hampshire university can change the whole trajectory of your life. a professor says the latest rise in u.s./china tensions is simply politics. is he right? find out more on trading nation. more "squawk on the street" coming up. for as little as $5, now anyone can own companies in the s&p 500,

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co-vid pandemic or at least, so to speak, seems to be real estate in the ham tons robert frank is an expert in that real estate and he joins us now. >> good morning. prices in the hamptons hitting all-time record as new yorkers left the city and plan on staying east for months or years. the median price of a family home was 1.1 million in the hamptons that was the highest ever. the average sale price now $2.1 million up 21% from last year. sales fell slightly because of the lockdown the 15% drop was better than manhattan that saw a 54 % drop in the quarter new yorkers who started renting in march turned into buyers by june signed contracts in june up 88 % over last year and it's just going to get stronger in the third quarter. a lot of sellers have agreed to sell their homes and close once the summer renters leave on labor day.

the most expensive homes sold in the a quarter was an ocean front estate that went for 45 million. it was the most expensive sale in the hamptons since 2016 it has a 5500 square foot main house and a guest house. the owner is likely to tear it down and build a new house a $45 million teardown >> you know, you pay what you want for what you want, and a lot of times that means you want to tear it down and make something custom i guess if you have all that kind of money, all the power to you. robert frank, thank you for bringing us that >> coming up next hour, baseball is back. kicking off tonight with a defending champion nationals taking on the yankees. we'll ask scott boras about that and the protocols for preventing co-vid in the clubhouse. stay with us

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we are looking for good news on this thursday and mlb opening day first times the bill >> carl, that's right. baseball is back after a four-month height us tonight the washington nationals host the yankees and the dodgers and the giants play out west tomorrow all other 26 teams will play dr. fauci will throw out the first pitch in washington today. that role is usually reserved for the president, but not in 2020 with no fans in the stands,

you'll see cardboard cutout fans but also look for high-tech additions. fox sports will experiment with overlaying virtual fans in the stands to be seen only on tv they start mainly with wide shots. fox is hoping to improve the technology they can even adjust the crowd's reactions during the game, their clothing colors to match the teams and make them leave early if it's a blowout. this is a short season teams are onlyplaying 60 games instead of 162 there's also no bubble as teams will travel around the country so mlb put out a massive health rule book which limits all kinds of activities related to in and out of the stadium the toronto blue jays doesn't have a home yet. canada won't let them play in toronto and their plan to play in pittsburgh was squashed by state officials. they might end up as a nomadic team traveling around the east if they can't find a home. most importantly, the league is

hoping the season can start and end without a major surge of co-vid cases shutting the whole thing down carl, back to you. >> 60 games. homeless blue jays mets for sale. it's not the season we're used to we're going to hope in the best here. that's right baseball's opening day stocks down 2.5% don't go awa y. experience the joy of a bigger world in a highly-connected lexus vehicle at the golden opportunity sales event. lease the 2020 es 350 for $359 a month for 36 months. experience amazing at your lexus dealer.

welcome back to "squawk on the street." union pacific is down after reporting a decline in quarterly profit as the pandemic continues

to disrupt global supply chains. joining us now is ceo lance fritz. good to see you. >> good to see you as well thank you for hosting me >> so 20% drop in volumes for the second quarter do you think that q 2 was the bhot m in or do you think that either putting a pause or pushing roll backs in parts of the economy or it is too tough to say >> the depths were 25% down year over year, and what was unique is the pace and the depth come biebed i think it is too early to tell

to put a stake in the ground so say that that won't happen again. but think that the recovery is bumpy and slow, but i just don't anticipate seeing another hard shut down like we saw in the second quarter i'm not sure that i know that it would not be good for the u.s. population, particularly those on the lower socioeconomic part of the spectrum. and i don't think that is the right reaction i think we have a little more data to work with and that we can be smarter from a risk mitigation perspective >> i guess along those lines the fact that you're now expecting volumes to be down 10% give or take compared to that, how did you get to that best guess

number >> it is a lot of effort for our commercial team and operating team they have done a great job to react to the productive city our freight car velocity is up double digits. our efficiency is up our network efficiency is up our trip compliance is much better across the spectrum of products and our commercial team is using that to win more business, and now they're using that and developing business both with existing customers and with and that gives us some optimism when we look into the second half

which is why we put down the marker that full year volume will be down 10% and that says that second half volume be will down between 8%, 9%, or 10% as well >> it is remarkable the way that housing appears to be leading here has that taken you by surprise and does that seem like something that might be more elongated more than a quick snap back from q 2? >> for a long time we have been troubled by the current generation and their approach to housing. millennials or gen z a lot of them were telling us that they want much of the same of what their parents had, but they don't want it now maybe what we're seeing in covid is the acceleration of not

wanting it now and accelerating some of the decision points. i'm certain that i'm seeing in our community in omaha, nebraska higher demand coming from large population centers because we offer a lot of what people are looking for. you know, you have an opportunity to enjoy your community, there is much to offer from a arts and leisure perspective, but you also have a little built of an ability to lower the density of where you live which is, i think, part of what is driving the current housing market >> lance, on the one hand at the beginning of the month the usmca was implemented. you continue to see rising tensions between the u.s. and china economically and geopolitically how are the different trade cross currents playing out

>> it is deeply troubling. clearly there are certain aspects of chinese and over the last deck add or two that need to be addressed and the unfair posture that many of our industries face when they're competing in the chinese market. i think thoses have been highlighted and they are teed up to be addressed. it is very troubling how china is now being broadly vilified in a number of ways some of the behavior has to be addressed, but they are a large market and a large part of the global economy they are important and they are very significant supply chains that are sightly prove within china. that is troubling to me.

there is a path forward, i think it is continued engagement with a. broader consortium i do think that the phase one china and u.s. deal is a way to cement the relationship in a more positive fair when i switch over to usmca i'm very optimistic about it's implementation and the impact that it will have on the u.s. economy and north america more broadly. usmca fixed a couple small things and some big things that needed to be addressed and i know that canada, the united states, and mexico were all very much dedicated to using that agreement and becoming more competitive. certainly it will do that for the united states.

>> lance fritz, thank you for joining us on the heels of those earnings today >> thank you very much >> carl, back to you >> david, morgan, we'll see you later. good thursday morning, everybody. i'm carl with jon and deidre. staples and utilities are the only sectors that are green. covid cases now surpass $4 million in the u.s., rising by $1 million in just 16 days and job less claims up for the first time since march did not help. >> that didn't help and we have microsoft earnings last night. that stock is down a little less than 2% this morning let's take a look at why a solid quarter for microsoft. overall revenue growing anderro 13%.