down by 150 points versus down 100 when we started. the nasdaq is the big issue. we're just about where we started the opening, down 224 points which is a decline of almost 1.5%. oil prices and natural gas is up by 3.8%. that does it for us today. join us tomorrow bye, guys. right now it's time for "squawk on the street. ♪ good tuesday morning and welcome to "squawk on the street." i'm david faber along with jim cramer let's give you a look at futures as we get to open the market a half-hour from now numbers just out home prices up 19.7% in july compared to a year ago you can see, of course, jim, where we are headed here

it is all about perhaps the nasdaq that's where our road map is going to start right now, actually, with the -- let's call it a flight from tech. nasdaq futures, they're down sharply. bond yields, they're up sharply, and investors are awaiting any tea leaves from fed chair powell and treasury secretary yellen who both will be on capitol hill this morning >> plus, with tech under pressure, we're live from code lisa su on the semi shortage and a lot more >> and robinhood's ceo defends the democratization of markets interesting back and forth with citadel. let's start with the markets you were talking about it at the end of "squawk box." we have a yield above 1 1/2. dollar hitting 11-month highs. continued concerns about supply chain. we were talking about that

yesterday. "squawk box" talked about the ports in l.a just one of so many different issues that business is dealing with now difficulty getting workers, supply chain issues on and on. >> people have to understand when they hear rates, they'll say, oh, wait a second, if the ten year is at -- you got bonds at 2 interest rates at two. big deal, right? it's not a big deal. it's a huge deal versus where they were. on a percentage basis when you start thinking about the 30-year, you may think it's nothing. where it was, is causing the speed. it's always the velocity, david, of where rates move. i think the people are re-adjusting very quickly. the amount of futures that traded last night to get out of what was today, beat the

sell-off, is often a sign of pure panic there is pure panic going on right now. and -- >> can we just call it rotation? >> no. >> no, okay. >> pure panic. no one cares about -- they're selling these stocks they're not analyzing whether it's time to buy cisco. >> it's the five largest market cap companies in the s&p that are going to be down 1.5% and they are roughly a quarter of the market value overall of that -- >> everyone sells them and they go back to buying. >> exactly this morning i have a couple calls, they're lagging, the rotation into them, and, of course, you're like, that's going to happen for how long when are they getting back to these five names when is that happening again >> they're going to report great numbers. facebook is the one that people keep telling me, jim, you're way

to complacent about, there are people going to tiktok and going to snap. and i understand that. but, again, facebook does not reflect high growth at 25 times earnings micron reports today and i think that micron, if they say that there's an overbuild or there's an inventory correction coming, everything that you bought today, if you're buying tech, is going to go down let's stay close to that >> we want to -- we're going to hear from carl they had -- >> that's why i wanted to talk to carl. >> before we move on to chips, broader market picture we're going to hear from powell and yellen powell's testimony, we've -- steve has shared a lot about what is expected there inflation is elevated, will likely be there for months we're seeing upward pressure on prices, particularly due to supply bottlenecks in some sectors -- >> housing prices are up 20%

the first thing i saw when he said that, i want to call my wife and say, do we have any houses left to sell? >> you're still buying houses -- >> we are selling the houses we bought with bitcoin. >> i can't keep up with you with the buying and selling of homes. there's some of what powell is going to say. >> that's really good. >> inflation is expected to drop -- >> when the is that? >> it takes me back to a conversation we've been having since we were -- i remember when we were in englewood cliffs. you would say transitory, and i would say maybe not. >> i have a new theory i call it the great resign everyone is resigning from these jobs people don't have -- they are done they're sitting on a lot of

money. trillions of dollars and they're playing games and not going to work work is not enticing to people who don't need it. they don't need it they don't want to be truck drivers. they don't want to be container operators. they have a lot of money and when that money runs out, then they'll go back to work not until the money runs out they're busy gamifying. >> you're uniting a lot of the different things -- >> i'm trying to weave -- you didn't like the great resign >> the great resignation has been used quite a bit of late. >> i got it last night from someone -- i thought it was mine >> the great resignation >> i thought it was really -- of course, the whole stack -- especially stack. >> stack is always good. just say stack that's a software thing. we have lance fritz from last night talking with you a bit about sort of where we are --

balancing capacity with supply take a listen to the ceo of union pacific. >> might take a little longer than six months, jim, but i believe it's transitory. i think it's all about balancing out capacity with supply and everything you see says demand coming inbound is substantial. way up and capacity to handle it just hasn't grown to match. >> i have to tell you, i followed lance's career. i've had him on many times when that interview finished, you get to speak sometimes i said, oh, my, you weren't the bullish -- i was hoping you would be more bullish. he said, i can't be more bullish. i said, you're always kind of positive about -- how about the trains, they go from west to east, and then they're filled with stuff no the containers are in the east maybe grain. i said, yeah, how about the

workers? >> that doesn't sound like prec precision railroading to me. >> maybe they lengthen the hours. and i said, lance, i got to go to work tomorrow, i need something positive. >> wouldn't give it to you >> he said, that's not the way it works he's not on there to say something positive. >> all of which means one, that the ten year will continue to kind of grind a little bit higher in terms of yield -- >> i said that on the earlier show. >> sometimes you say too much in the earlier show sometimes you forget, this is your show. >> i need carl quickly i don't want to get in trouble with boss man over here. >> let's do that let's get to carl. lisa su did have important things to say about chips and chip supply, carl, in an interview you guys did with her. >> guys, there's been a lot of anticipation coming into code this year, not the least of which because it was unable to

happen last year and day one has started out with a bang. we have satya nadella speaking, vertical integration given that news of the day, you have to start with lisa su talking about this supply and demand cycle and why this cycle is different take a listen. >> it has not cooled off i would say demand has -- if you think aboutthe semiconductor industry, we've gone through cycles of ups and downs where demand has exceeded supply or vice versa this time is different what's different this time is every industry needs more. and so, you know, the confluence of that means that there is an imbalance. i will say there's a tremendous amount of investment going in. over 20 new factories are coming online this year and 20 more -- 20-plus more in planning it's still going to be tight this year is tight

first half of next year likely tight. it will get better as -- >> where are the -- >> interesting comments coming on the heels of jim farley on "sqwauk" today talking about maybe not this year, maybe not first half of next year, but the situation getting better as we work our way into the second half of 2022 nadella, fascinating discussion about the types of tools that they're looking to buy or build and this particular moment, guys, on search and what in his view it's going to take to make that business competitive. >> one thing that i look at, when was the last time lots of funding went into search other than good old microsoft where we spend billions of -- >> good, old microsoft that's what i always say. >> we're going to be at it that market has to get competitive. it's like the most ridiculous thing, it's the biggest market in the world is just a complete

monopoly >> take a look at the lineup for later on today some big names elon musk, jason of warner media, mark benioff of salesforce the themes of code is mobility, regulation, streaming, cloud, crypto, gaming but it's a listen as to how live events happen, corporate conferences happen and hopefully we can get lessons on that as we try to find our way around this pandemic in corporate life the supply chain issues, whether it's china or europe are going to be key and lisa su definitely hit it last night. >> you know lisa as well or better than anybody. talked to her so many times. anything that you heard there that was new or updated from the last time you spoke to her >> yes, we're in this lose-lose

situation. there's an outlet called news stream, and they put out a piece -- >> news stream research, yeah. >> but you heard what she said there's factories coming on. they're saying, time to downgrade. too many factories coming on you can't win here you want to buy -- news street says watch out asm -- >> you've pointed us to mu when they report as well. >> i got a note today from an outfit that says, look out, the numbers are going to be bad -- >> on micron we take a look -- >> i have him on tonight, why don't we just listen to him. when the stock was 30, 40, he said i'm going to buy all the stock i can. and then it went to 90. >> carl, i think you're still there. that nadella comment about

search and the biggest market is a complete monopoly, seemed to be a little -- i don't know if you call it incendiary, but interesting, throwing a rock at alphabet there >> yeah. i would argue definitely a little bit more fiery on stage than you might argue he's been on television. look at the numbers in terms of market share on search maybe you could argue over time it's gotten a little more competitive. i think he's talking about shaking it up and search is -- i don't know, jim. maybe you disagree it seems like he does see some white space for people to come in and stealing, nibbling at the giants >> maybe but i think, carl, those of us who have a hewlett packard system, all of a sudden bing is

up you're like, i don't want bing bing bing bang. i remember when -- i remember, carl, when bomber was in charge. and it's like, he was busy trying to be in search with msnbc. and now the kiss of death is when you get bing. carl, it is so bad >> you don't use ask mr. jeeves. >> i don't know where it is. >> you should ask nadella. when he gets bing, doesn't he say, shoot, i guess i got to go to google? does he use bing i remember at my college reunion, 35th, when right next to me, steve bomber put out dehad a microsoft flip phone and i said, what do people most want out of life and it said they want more time

and vacation and he said to me, look at this phone, i quit. now he owns a big team he's happier than anyone, except for maybe, maybe -- who is the happiest man in the world? >> i don't know. >> mark cuban. >> oh, yeah. he's got a lot of good things going on. >> mr. fabulous. >> that's tough. that was tough for me to guess that, who's the happiest man in the world. >> robinhood ceo is going to answer his company's critics it's in an op-ed in "the wall street journal" and we'll give you details of that. most importantly, take a look at futures. we start trading in 15 minutes and we're looking for a lower open, although, the nasdaq coming back ever so slightly we'll keep an eye on those mega cap tech names which do seem to be suffering when we start trading a few minutes from now we're ck wbaith more "squawk on the street." >> bing. >>

>> ! >>

working at recology is more than a job for jesus. it's a family tradition. jesus took over his dad's roue when he retired after 47 year. now he's showing a new generation what recology is all about. as an employee-owned company, recology provides good-paying local jobs for san franciscans. we're proud to have built the city's recycling system from the ground up, helping to make san francisco the greenest big city in america. let's keep making a differene together.

treasury secretary janet yellen has issued another warning to congress about raising the debt limit she said it will exhaust its extraordinary measures by october 18th she had previously said the measures would be exhausted sometime in october. now you've got the date, jim october 18th >> october 18th.

>> they can push things out and then that's as far as they can do it before they can't pay their bills. >> we know that they did some good work at goldman saying don't get overly concerned there are other issues on our plate -- >> you're not concerned about the raising of the debt ceiling. >> i get concerned watching stocks go lower. but he's saying it's an opportunity to buy, versus inflation. which i don't regard as an opportunity to buy. >> something we've talked about over the last year is robinhood, that trading platform. ceo vlad tenev defended his platform and users slamming the critics who call the app gamified he said a ban on payment overflow unlikely to helpretai investors. that was raised a number of times. we've talked about it. he goes on to say, the democratization of markets

threatens the existing orders. they're trying to build stable financial futures and reverse the inequities that plague our society. one wonders regulating modern design is about investor protection or really about control. >> i thought this was a very reasonable editorial i particularly liked the fact that he does say that new investors are trying to build stable financial futures i do see there are substantial number of people who trade options every day. but there's a substantial number of people who are invested. >>there are a substantial number of people who trade options. they're going to college campuses and giving kids money to open new accounts not a lot. but doesn't that -- i don't know is that about building for the -- maybe it is but i happen to know that cohort again. they're trading on their phones the same way they bet on games. >> they don't want to go to school -- >> they go to school they're going to class and then

they're buying and selling bitcoin. >> that's not constructive that's not constructive. it's going to end up where people are going to lose money i'll say that and these people come in and wreck my mentions column and say, you know what, jim cramer who doesn't know anything says we're going to lose money think about investing. don't trade. try to own good stocks in this decline and i think you'll do well i think that option trading maybe a sucker's game at this point. if you're trading in and out, in and out. >> and we see a lot of options particularly, again, the spac phenomenon i've been discussing for weeks now, kind of crazy -- i want -- >> do you have a new one >> i don't have a new one today. carl is at code and talking about some of these same things. >> reading that line from vlad

tenev about threatening the existing order is what was responded on stage last night. whether it was crypto or spacs. he argued that he's tech agnostic but he said when instruments operate outside of public policy, it tends not to end well here's what he said. >> very few things in finance end well when they stay outside of our public policy framework to think that a field that's grown tenfold in the last 18 months -- i don't want just tenfold in asset value but in terms of the lending, the underlying lending and so much more, to think that's going to stay outside of these big public policy frameworks and succeed, if you're protechnology, then i think you would want to also be -- find your way inside of

public policy framework. >> fascinating back and forth there. whether they -- whether it's a coincidence or not, the op-ed from tenev and that comment with preet bharara on stage. >> everything is a lot more in flux than i think. everyone keeps calling -- back to this situation where you have the stable coin that may not be that stable. and it's time for this tether to tell us what they own, typically if they have any exposure to china. >> hard to forget china given everything that's happening there. the investors who own significant chunks of those companies that trade here. but we're going to get jim's mad dash, count you down to the opening bell another look at futures before we do that about 6 1/2 minutes to go before we get started at the new york stock exchange

re" sqwkn e ua oth stetstraight ahead keeps me moving forward... even after paying for this. love you, sweetheart they guide me with achievable steps that give me confidence. this is my granddaughter...she's cute like her grandpa. voya doesn't just help me get to retirement... ...they're with me all the way through it. come on, grandpa! later. got grandpa things to do. aw, grandpas are the best! well planned. well invested. well protected. voya. be confident to and through retirement. your shipping manager left to “find themself.” leaving you lost. you need to hire. i need indeed. indeed you do. indeed instant match instantly delivers quality candidates matching your job description. visit indeed.com/hire

matching your job description. hey lily, i need a new wireless plan for my business, but all my employees need something different. oh, we can help with that. okay, imagine this... your mover, rob, he's on the scene and needs a plan with a mobile hotspot. we cut to downtown, your sales rep lisa has to send some files, like asap! so basically i can pick the right plan for each employee... yeah i should've just led with that... with at&t business, you can pick the best plan for each employee and get the best deals on every smartphone.

♪ got a few minutes until we get to the opening bell. we're weakening against on the nasdaq futures that will be a focus for us when we open. we'll see how tech is doing, given a bit of a rotation, once again, towards those underowned industrials, cyclicals we're back right after this.

wondering what actually goes into your multivitamin? at new chapter, its' innovation, organic ingredients, and fermentation.

fermentation? yes. formulated to help you body really truly absorb the natural goodness. new chapter. wellness, well done. need to get your prescriptions refilled? capsule pharmacy can hand deliver your medications - today - for free. go to capsule.com. we handle your insurance. all you have to do is schedule delivery. go to capsule.com to get started in 15 seconds today. we see access to fresh food being the global norm, not the exception. at emerson, our cold chain software and technology keep perishable food at proper temperatures, to assure its safety and quality. emerson. consider it solved.

>> announcer: the opening bell is broughtto you by nuveen a leader in income, alternatives and responsible investing. >> we're going to squeeze in a very tight mad dash before we get to an opening bell wells argo. >> talked about when is the pack going to be lifted he said, it's going to take a little while now they're saying it's not

until the fourth quarter of '23. that would be bad for wells. >> movement for those who follow this closely perhaps as jim just said to the fourth quarter of '23. downgrading. here's the opening bell. [ bell ringing ] >> data analytics start-up, that was a direct listing, meaning they did not raise actual capital from the -- >> i went -- they're up against a tough competitive business they said one of their clients -- it no longer exists they should update their

website, if i were there >> that's good advice. >> when i do homework, i look at it i said, i would have updated that. >> back to the broader markets we're going to see a bit of a sell-off in some of the biggest technology names with the largest market values -- almost all over a trillion, facebook now below a trillion in part because it's been selling off lately. not due to rotation out of technology, but due to its own issues, particularly, as they pertain to "the wall street journal" series of stories a week or so ago when we see them sell-off a bit, come back a couple weeks later -- >> you have to wait. what happens is, we're at the end of the month whoever is trying to get rid of these stocks is not done they don't say, i'm finished they have huge positions in these names. when i used to be at a hedge fund, you would see this kind of selling and say, wow these broker are trying to get

ahead of huge sales. >> we talk about coming back to these stocks amazon and apple have lagged the broader market dramatically this year and continue to amazon is only up a little over 3% apple now backing off yet again from its recent highs. up 8% for the year it's not been a great year if you've owned those. >> no, it hasn't what's happened is you have to decide whether you want to be in or out of them alphabet was not a great time for a while. then it got reborn netflix wasn't great microsoft a good example i say, listen, if you flit in and out of these, you tend to miss the moves but it's been a trader's rally >> it has. let's talk about that for a moment nat gas is up again.

only 3%. >> they call it a widow maker. >> two bucks was where we were for song long. >> they say it falls at 6 1/2, they say it's going to run out of steam, 6 1/2, 7 there's a lot of natural gas it's like the gasoline situation in uk. there's a lot of gas. >> but we're heading into winter. >> don't blame the exports the exports are consistent blame the pipeline system which is not consistent. and it's very hard to get a pipeline built in this country you certainly don't have a -- >> the move over the last three months if you go back a long period of time, you'll see where nat gas has been for a long time which is a great deal lower. europe the suffering far higher prices than we are. >> if you want a $4 flier versus the 90s, bet on that one

that's one -- >> but it's not -- they haven't built their trains yet to actually get the stuff out of -- >> no, it's a dream. >> it's a dream. >> like vegas was. >> and i know free port pretty well one of the bigger exports -- $14 billion is what it cost to build those things. >> if we were down there, we would think, wow, america is industrial might when i listen to the railroads or anybody, we don't make anything here. we assemble, david. >> that's a perfect lead-in to ford we don't make anything here. come on. ford is going to be building new assembly plants for batteries and electric vehicles. >> this was huge remember, he's got a partner but it's $11.4 billion investment i regard this as the most important announcement from ford, i don't know, when >> a long time. >> this is it. this is it it's partly to the mach 5.

>> it doesn't take as many jobs on the assembly line, but it's better to have than not. >> and what i love about jim farley, he recognizes the bottleneck is the battery. >> right. >> and he's -- >> and they're partnering with sk. >> but they have a special battery that they're using that a lot of people who feel is very competitive to your guys david once had quantum scapes -- >> first interview never interviewed them again you did about 17 times >> what happens is, i make fun of him because my father was called the need ler and i am a needler. i'm a needless and needler people on twitter, people will say cramer knows he's irrelevant. >> do you think it's a threat to them longer term >> i think that technology may

be superior for ford i'm going to have the battery company on later this week. >> you're a farley fan boy, though. >> i am a farley fan boy you know why i'm a farley pfan boy, because the stock goes higher i'm a fickle friend. >> and a farley fan boy. >> it was ford versus ferrari and ford wins. ferrari has new, interesting designers. >> you like ferrari? >> that's a remarkable car most of them go to china, of course because the chinese have all the money. >> let's talk about some sectors, yesterday we talked financials they're up again today, jim. >> morgan stanley downgraded >> exxon and chevron up. >> i talked to the star board

guys engine one, they blew it at exxon. they did not have a real plan to de-carbon. but even the carbon guys who have deep plans, there are people who are suspicious of everyone in the natural gas and oil business. >> who say they're going to try to decarbonize i happen to think exxon's efforts are real there's no doubt that the board of directors and executive team is now dealing with -- >> what are those meetings like? what are those meetings like >> i would assume they're pretty constructive but i think it's a good question >> i would love to be a fly on the love in one of those meetings that's what they do. >> as we pointed out, the stock has had a nice move this year. more or less almost double that -- almost double of chevron's move you don't doubt mike worth's

efforts? but you doubt exxon's? >> i was talking to someone last night, there's a lot of people who doubt mike worth but when he upped it, he's not done spending. he does not want to be -- he doesn't want his legacy to be that he green washed he's investing in technologies that could be produced more energy with less carbon. which i think we all have to admit, isn't that what we want >> that's what we want and may seem committed to it on a number of fronts it's hard to imagine we're having a conversation about the largest oil companies in the world talking about -- >> footprint. >> yes and who knows, we may see one of them say they're going to be carbon neutral, as hard as that seems to imagine. >> what do they do they give big carbon to conoco conoco is a great stock. a great stock. mo morgan stanley, a piece on ford,

adam, could you spend -- i happen to like adam. could you spend five, six more minutes before you keep the underweight. hey, farley -- he's not a farley fan boy. >> not everybody can be. >> i went to an antique car show this weekend, i took picture and is sent them to farley to remember the legacy of ford the legacy he said thank you. >> good. are you upset that he was on "squawk box" and not with you? >> livid. >> okay. just wanted to make sure. >> spent all morning railing about it. >> you did i didn't hear about it >> to ben. i was just -- but i live phil so much, i didn't mind. >> tesla is up, gm is up -- >> tesla is up because of deliveries. >> you talked about wells fargo which is the only bank that is down because of this asset cap everything else is up. >> that is so wrong. the downgrade is wrong. >> what about the group?

is that generally -- >> the group -- look, interest rates go higher, they buy. here's the issue, people have to remember that these companies do report they report in about -- in a fortnight, all right, which is two weeks. and when they report, they don't say, you know what, our stock is up because ratesare up no, they have to deal with what they -- the hand that they dealt with >> i don't think i've seen it with a half a billion dollar market cap i might be wrong -- >> can you believe it sells for 11 times earnings. jamie diamond must get up every day and say i cannot believe -- >> i meant half a trillion. >> i say to my wife, the eagles. you're not the eagles -- >> get your earnings up enough i don't want to hear it. by the way, you missed a lot of this fintech stuff

paypal has $20 billion -- >> i think he said they stunk or something. how about this piece about disney, paradise loss, negative piece. >> who wrote that? >> wells fargo cut to 218 to 203. i'll take 203. they said they have a lot of wood to chop that's an interesting analogy. why didn't they say -- >> i think domestic subs, i think hbo max has more domestic subs than disney+. but disney+ has been an incredible success in terms of how quickly -- >> did you like paradise loss? m milton is hard to read what's the hardest book you've ever read? >> ulysses. >> i did a whole semester on that. >> so was i. i was an english major. >> were you really

my father said there was no future in that. >> i'm sitting here every day with you think of the things i might have done if i hadn't been an english major. i want to talk about streaming is carl out there somewhere in l.a. for us? netflix, where are they? 17 billion they're going to crowd everybody out in terms of how much they're spending >> david, ted came to play last night here at code opened the kimono on viewership data pushing back on the data that they're a little bit opaque and talked about hours watched threw a little bit of shade at other streamers, arguing that maybe they win their emmys on shows that are not widely watched while they winemmys on their biggest hits and talked a lot about how unlike other streamers, they're not torn or conflicted trying to serve the streaming audience as well as the exhibitor audience

take a listen to this. >> i believe our advantage is that we're not conflicted in our business we make our programming for our members on netflix there's other -- when you're managing through legacy businesses, you're trying nott kill them too fast you see how the studios today are conflicted about when to put movies out >> in his words, do they put them on direct do they put them on in theaters? do they wait 45 days wait 14 days those are problems we don't have one other thing, he talked about gaming as the next evolution, arguing that people are going to be gaming a lot more in 20 years than they do today he said at one point, when you think about netflix's evolution, there was a time they didn't do original content, there was a time they didn't do unscripted there was a time when they didn't do foreign language and one day we'll say when there was a time when netflix didn't do gaming, but i think that time will change. >> remember the metaverse, but

facebook is capable of making games in the future. you were able to watch yourself dance, you were able to watch yourself sing. i think we'll all do that. i think that would be a lot of fun. so i think that gaming is in the future but it might be facebook that makes the product, carl wouldn't that be something >> very possible, jim. i know you were all over the metaverse. it's all sort of funneling that way. this environment in which we listen to new music and we see new content all in a -- an environment that is kind of hard to envision right now. >> yeah, and don't forget, also, i keep coming back how many people are talking about tiktok out there as being the preferred way to reach people these days? >> yeah, tiktok was -- later on, we'll show you the sound bite

where nadella talked about the ti tiktok saga under the trump white house and how it was one of the strangest ordeals that he's lived through in his corporate career tiktok continues to make waves it's a big topic of discussion here >> i can't wait to hear that >> one of the stranger stories i've ever reported on. tiktok, microsoft, oracle, walmart and none of it ever amounted to anything -- they still own a lot of it. now the question becomes bytedance and what it's worth given everything that's going on in china >> are there any more billionaires that are under arrest -- >> none that i'm aware of. >> what do they charge them with >> they don't charge them. >> it's different from the united states. >> it's due process. >> i hear you talk about facebook and the metaverse that's going to work out real well, i'm sure. >> well, i'm -- >> for all of us

>> to marc benioff you're going to be able to create -- i can create you and i can have you -- jim, you're the smartest person i've ever met. no one will know it's not you. and then you can just say, you know what, jim, you should come on jeopardy, i think you'd crush it it would be none of the things that you would say and no one would know the difference. >> yeah, i think -- well, facebook -- hey, look the stock is down 2.5% >> it's probably a buy zuckerberg he's talking about how apple is not good about child i think apple is good. >> he's going to make sure the metaverse is a kind place. >> he wants to -- the problem is it's a platform. remember, you can get that room together and people can discuss shakespeare and they're not real people and so you don't feel like you're alone >> you do wonder what the impact

of the metaverse will be and/or advances in that kind of technology for work from home and/or the ability not to be in an office. yesterday i was with the cfo of a large company, they're offices are empty in new york. nobody. >> nobody. i know >> and the expectation really is, yeah, maybe they come back in january, some people -- >> february is the new one >> but maybe they just don't. >> the breakthroughs the breakthroughs are incredible what >> breakthroughs, you're not overly sick. i listen to gottlieb he's talked about -- >> masks off, how he got covid, hilarious. people must read this book. >> i know you like the book. >> the book is good. i had him on last night. i got him to smile he's on the board of pfizer. >> yes, he is. still to come, fed chair

powell and treasury secretary yellen, they're set to testify before the senate banking committee. of course, we're going to bring you live coverage of that. first, though, let's get to a bond report this morning we've talked about treasuries a number of times. the yields running back moving up of late ahead of that testimony from powell and yellen. you can see we're at 1.557 on that all-important ten-year note we'll be right back. today, things can be pretty unexpected. but your customers, they still expect things to be simple. and they want it all personalized. with ibm, you can do both.

businesses like insurers can automate it processes across clouds. so agents can spend more time on customer needs. and whatever comes your way, you've got it covered. saving time and improving customer service, that's why so many businesses work, with ibm.

take a look there at the nasdaq 100 heat map, as you see, of course, a lot of a red there. red sea, in some ways. it's not -- where is jacob now,

moses? >> that was brilliant. oh, my god, he's good. >> yeah, i'll do some garfield after we come back but you have to stop trading. so you can quickly check the markets? yeah, actually i'm taking one last look at my dashboard before we board. excellent. and you have thinkorswim mobile- -so i can finish analyzing the risk on this position. you two are all set. have a great flight. thanks. we'll see ya. ah, they're getting so smart. choose the app that fits your investing style. ♪♪ that building you're trying to sell, - you should ten-x it. - ten-x it? ten-x is the world's largest online commercial real estate exchange. you can close with more certainty. and twice as fast. if i could, i'd ten-x everything. like a coffee run... or fedora shopping. talk to your broker. ten-x does the same thing, - but with buildings. - so no more waiting.

sfx: ding! see how easy...? don't just sell it. ten-x it. in business, setbacks change everything. so get comcast business internet and add securityedge. it helps keep your network safe

by scanning for threats every 10 minutes. and unlike some cybersecurity options, this helps protect every connected device. yours, your employees' and even your customers'. so you can stay ahead. get started with a great offer and ask how you can add comcast business securityedge. plus for a limited time, ask how to get a $500 prepaid card when you upgrade. call today.

hi, let's get to stop trading. >> i like to find a stock that if it turns, you get more bullish. bullish note by piper, maybe margins good so, watch tesla. if that comes back, then you might see the nasdaq try to make a run, not necessarily to the degree, but it would be an opportunity to buy so, focus on tesla that is the stock that gives you the -- >> it is i think the sixth largest market cap after the top five >> it's for real it's much bigger than ford, even though ford's -- >> yeah. what you have on mad tonight >> everybody wants to have sonos. because whether you get a house, you get sonos. katy put the watch tech today. i mean, she was down there

giving live tick to bds. she loves sonos. >> we all love sonos one place i got to do the old software because i have old stuff. >> you been bringing bestbuy to anything >> no. >> really smart program. >> jim, i will see you right here tomorrow. >> exciting show i feel bad we're not with -- >> carl. >> -- carl but does he have a guest. his guests are amazing out there. >> you have a lot more coming up on tech check. >> we do, guys >> the eagles beat the cowboys oh, i like >> we're going to watch the tech sell off, obviously being driven by some macro issues you'll see elon musk on the tape later today. mark of salesforce and on tech

check, jim brieer will talk some things with briarcapitol watching all things tech and the code check >> this is just a fantastic day. you'll come back with more wisdom than we'll ever have. >> that's actually usually the case when we come back, we're going to hear from capital chair powell and secretary chair yellen ♪♪ in boxing or any other business, one day, you're gonna take a hit you didn't see coming. do you stay down? or do you get up? [announcer] and this fight is a long way from over, leonard is coming back.

♪♪ ♪♪

welcome back to "squawk on the street." live with breaking news. our september read from the conference board on consumer confidence 109.3. we're expecting a number closer to 115 this follows 113.8, which could get revived.

109.3 is the lightest confidence level since february, when it was 95.2 it moved from 147.3 to 143.4 and finally what lies ahead were expectations, below 90 86.6, verses our last read at 91.4 and our september read on manufacture index expected a positive number of 10. a shocking minus three first negative number since may of 2020. and a big miss there the story of the day, the world reevaluates the word transitory as break evens in europe seem to be pushing sovereign rates to the upside david, back to you >> rick, thank you good tuesday morning and welcome to another hour of "squawk on the street "we're live right here at the new york stock exchange.

carl is at the code conference you're going to see him in the next hour on "tech check." secretary powell and janet yellen are going to be testifying we'll take you there as soon as the question and answer session begins there and as we wait for that, let's take a look at markets you can see we're down across the board and the s&p actually giving up a bit more ground in the last few minutes it has been, of course, the nasdaq that has been the biggest laggard this far the rotation, we often talk about on days, when you see the 10-year yield moving higher. other names seeing movement in oil and gas. banks benefitting but mega cap tech is down >> to your point that we've seen in the last couple of days n to the reflation trades and out of

the tech names, as we've seen a pretty dramatic spike in yields over the past week i mean we were 1.31 on the 10-year in term of yields. and now we're well above 1.5 i think 1.56 last i checked this morning. to your point, that's part of why you're see the rotation out of the tech and growth names as well as we break the technical levels, where we go from here. we're 30 minutes to the trading session. we're going to start with ford, announcing plans for a new u.s. assembly plant and three battery factories. they'll invest more than $11 billion in the project they're going to hire thousands of workers as well you can see share thes of ford are 1.5% and data >> children between 5 and 12 to the fda.

it plans to send a formal request for emergency use authorization in the coming weeks. those shares are down about 2% we're going to end with a look at big tech name president apple, microsoft, alphabet all under pressure as bond yields hit the three-month high and i know we're going to talk about it a lot but the fact the s&p, and nasdaq are weighted to the big tech names. >> in part, up about 8.6%, far lessen the at the market's advance. let's go to bob and get a lot more on the weakness we're seeing overall bob. >> we're in a tricky moment for the markets because we're in the middle of another rise in interest rates and it's causing traders and investors to move a lot of blocks of stock around. you mentioned tech all down. and in the last few days,

they've been under pressure but it's not apocalyptic apple's 8% and microsoft is only 5% it seems like it because it's moving down notably in the last couple of days some move downs in semiconductor stocks and maybe a little worse in terms of being off it's only 4% off of its 50, two-week highs we're going to wait for micron, by the way, with some of their numbers. the problem is this is where the money is 40% of the s&p is essentially tech, communication services and technology when you have something like energy, which has a great run in the last week and a half so, the indexes don't really move here. yes, we've had amazing moves it was -- $22 today. enone month, these stocks have

been moving up and only 3% of the s&p. so t doesn't move the s&p when people move out of tech and into energy meantime, bank stocks have had a good run andf banks have had a good run, about since last monday, we've had nice move ups. and they tend to be flatter today. it gets even more complicated, when you realize they should be rising a bit as the global economy recovers but they have faultered this month because of problems in china, additional quasi-lock downs going on other parts of the world. cater pillar and dou have faltered it's 10% of the s&p 500. and at the same time, consumer staples have had a tougher time

this month as rates have risen coke and walmart and palmallive. and interest rates cause a lot of complications you throw in global problems with covid and delta variant, it gets complicated it's not the apocalypse though even the nasdaq 100, guys, is only 4.6% of its two-week high and ins&p 500s down about 2.5% this month but 3.1% from the 52-week high and again, you got to remember the indexes, the major indexes are all weighted towards tech. so, you can have all the rallies you want in energy but it doesn't move that much it's all weighted towards tech >> such key context, putting the moves we're seeing today into focus and context.

and mack noting we saw this play back a year ago and interest rates began to climb too treasury secretary has a warning about the debt limit as she testifies on the hill. >> reporter: secretary yellen is warning the nation could hit the debt limit by october 15th that's the day the treasury will run out of, so called extraordinary measures and have low ability to manage the cash flow to avoid hitting the deblt ceiling. this after the senate yesterday failed to advance a bill that would have continued to fund a government until december 3rd and raised the debt ceiling until december 2022. democrats have signalled they could come up with a way to

avoid a government shutdown, when the government runs out of money thursday but unclear how they would handle the debt ceiling. there's some talk they could use a fast-track procedure to do it on their own and that could still take one to two weeks. you would be coming up against the wire as the treasury secretary sets a new deadline of october 18th for hitting the dead ceiling >> thank you staying with secretary yellen, steve leaseman has a look at what to the expect from both fed chair powell and secretary yellen that's underway >> picking up directlyen the comments about the debt limit, secretary yellen is going to say the u.s. faces default for the first time in its history and risks a financial crisis and a recession if the debt limit is not raised fed chair jay powell is going to be asked about what the fed can

do to off is this the fallout and face questions about high inflation, the outlook for policy, with the fed reduced asset and conflict of interest questions that led yesterday to the resignation of two officials, caplan and erick rosengren. powell's going to strike a more worrisome take on inflation than in the past. bottle necks has lasted longer than expected and he'll say the fed will riact to longer sustained inflation, even though he keeps to his 2% target by next year. the recent rise in bond yields has pushed the probability of a rate hike in november above 50%. the first hike, originally, was priced in for december both are going to paint a relatively positive outlook on the economy. they'll say the delta variant has taken some of the shine off.

>> thank you for more on today's hearing, let's bring in former dallas fed president, richard fisher. always good to have you. i'd love to start off, i want to get your take on today's hearing. i'd love to start off on this -- these resignations rosengren and caplan, particularly, who took your seat what are your thoughts about these questions? and many may be perception related, nonetheless, the decision caplan made to trade certain stocks and other financial instruments. >> well, neither of these bank presidents violated the existing rules. i think the rules are going to have to be changed it is a perception issue in the case of rob caplan, who's a very good policy maker and excellent successor to me, and did even better than me, i

think, in managing the bank. the timing creates perception issues it's basically a risk mitigation strategy using calls and puts, which is almost incomprehensible to anybody who looks at the system and doesn't understand finance. it was timed very poorly so t was an area of judgment i think he made the right decision and i think erick did also, given his kidney problems. although, he was going to retire in a couple of months more and very importantly, for the federal reserve bank, the dallas board, to create some new boundaries, new baselines. but please don't miss understand, neither of them broke the rules. they just had bad judgment and are paying the price i hate to see them go because they're very good, they're

independent thinkers and i hope replacements will reflect the same >> we understand we have rules in place here at cnbc, in many ways for the same reasons. not necessarily because we think we're going to buy stocks and benefit from it as much as the perception that we might do that but that goes a long way, doesn't it >> yeah, it does again, i did it differently when i was there. instead i bought rare editions, first editions, rare books, all of churchill's first editions, etc. i suppose you could stretch that and say i violated my knowledge but i don't think it effected the book market. and stocks in the case of puts and calls in the case of caplan. but yes, i do think the rules need to be changed they will be and i'm pretty sure the board of governors will work

the with the banks to make sure it doesn't happen again. >> just to stick with this, you mentioned these were two presidents, that were, in many ways, independent thinkers and strong members on the fed's composition. pr what do you expect that replacement process to look like i'm seeing notes saying there's potential dovish risk. giveen the fact you're talking about presidents that were the loan voices that highlighted potential risks around financial stability and the like sglitsz up to the board of the banks. you have to remember the selection is made by the board of directors of those two banks and all the federal reserve banks. the dallas tends to look for independent thinkers and the boston federal certainly want to find someone as strong as erick. he was carefully listened to,

very independent thinker and always spoke last of all the presidents and when he spoke, he would sums are everything so succinctly and well that everybody respected him. so, those -- remember, these are independent banks. they're not part of the federal system the way the system was constructed in 2013 is to have this federal system. so, those boards will make the decision and let's pray that they get good men or women to replace these two that are depart, who were very good leaders within the federal reserve system >> so, as fed chairman powell is testifying on the hill today and we're seeing a pretty dramatic, over the last week in particular, higher move in yields in the bond market. why do you think rates are rise sng the supply issues, rather than demand side of the puzzle

seems to be very much in focus, which points to inflation. >> i want to go back to the comment a minute ago they're spreading out. in the u.k., for example, the current inflation break evening is back to july, 2008. remember, we were having a surge of inflation back then across the world, and particularly in the united states the 40-year japanese has served as well and we're seeing euro bonds come up simultaneously so, obviously there's skepticism about the transitory nature of inflation. we're hearing every company talking about the need to raise prices and to deal with, not just the supply size but the cost size of their inputs. and i expect you're going to hear a bit of questioning here of powell, in particular, in his testimony, about his transitory nature

there's cynicism about transition and also, of course, they're going to start trimming the balance sheet growth at a time when federal debt will expand in terms of issuance. we'll be the only central bank that will be doing that. the japanese are not doing it. so, of the big banks, this is a change the way you discount the value of future cash flows it's not nirvana like before and prices have to adjust. to me, it's simple mathematical solution if they rise, you have to notch that calculation down and that's what's happening across the board in the marketplace >> you talk about the cynicism in the market, when you talk about the transitory nature of inflation. where are you in that overall? every day we get anecdotes, hear

about all sorts of different things and supply chain and commodity prices rising and wages going up it does seem more than transitory, doesn't it >> depends how long your transition is. i'm 70 and won't be here in 30 years. it's a long transition you're seeing the so-called dots moving as a result of the last meeting. the first thing is to bring down the balance sheet and start raising rates. those rates, tend to be raised earlier than was originally projectd and the market is noticing that and beginning to discount that as well. my own view goes to what i learned. to me, these are not traded companies. national federation of independent business if you go through their last

report, more companies are aggressively raising -- these are men and women that run and build small businesses, create jobs historically. 80% of jobs have been created by that data base over time and what they're doing is raising prices at a rate we have not seen since august of 2008, when theflation is running at 9.2% so, obviously, these little companies, which are the backbone of america and the big trader companies are all saying the same thing they have to move their pricing in order to cover their costs to protect their margins. this is the impact that works through the real economy of the inflationary pressures and supply chain pressures keep your hats on. we're in for some volatility >> and 30 years is not transitory i'm glad to hear you're going to live to be 112

>> i want to be as old as quarterback brady. that's all i care about. >> that sounds good. richard fisher, thank you. >> bye >> well, staying with the markets ahead of the big hearing, we're joined by a texas chief economist of the americas, former special assistant to president trump and senior investment portfolio manager and head of asset strategy joe, i'm going to ask you the same question i just asked richard fisher why do you think rates are rise sng >> rates are rising, morgan, because fed was hawkish last week where we think it's going to be. it's about 30 basis points, about 150 to 180 and that's almost been a parallel increase in the yields. so, it's all about success >> yeah.

given the fact we're seeing rates climb higher, we see major averages under pressure. the rotation out of big tech, where does this go from here and how would you position yourself in the market? >> hi, morgan. thank trz having me. i 100% agree that what joe just said about the rate rise being driven by real rates and typically, when real rates rise, that is a point where it's important to look at what's happening to break evens also. if they were falling, i would be really worried about the markets. but thir they're not they're quite stable and have risen the last few days. that is a paositive signal i think market will have indigestion as they look at rates.

rates were much higher than this and the markets did fine through that period. so, the isis a period of transition one is digesting the higher rate environment. but growth dynamics is still very strong. and so, we are likely to see some movement. and every 3 to 5% dip in the market has been very quick >> sounds like you were looking to answer that question as well. so, i'll put it to you too and i'll fold in if supply constraints are the focus for why we're seeing revisions lower for economic growth, what does that signal about the quote/unquote transitory nature of inflation >> i don't see it as being transitory anymore the issue is unsustainably fast.

the question is what does it slow to? right now i'm going to say slightly above 2%. however, it seems like that's the case labor really have the upper hands for the first time in many years and we see that in the fact that [ inaudible ] and inflation, the market has come down a tad but surveys of consumers do show noticeable increase that may be sustainable. seems to me they might be continuing having said all that, meaning to go above 2%, very aggressive stocks don't occur until the recession. so, we'll have bumps in the growth >> all right on that note about equities,

give us your take right now. has it changed lat given the interest rate picture or are you where you've been previously >> i think we have not changed equities at all. and the worries about another slowdown in a few weeks or so has kept us from being max over rate plus, this fed hawkish tone that we just saw last month that, as i said, will take some time for the markets to divest ges. that keeps us from being over rate but there's still stocks over bonds you don't want to hold bonds in this environment and equities and they would have a multisector perspective like commodities as well. they're a good place to be when everyone's worried about inflation.

those two areas. >> the shenanigans in d.c. i like the way you put that. you're no stranger to the stock in d.c. and certainly, looking at some of the drama and legislating happening this week, we're showing images of chair powell and a few moments ago it was treasury secretary, yellen, who has said the government has until october 18th to raise the debt limit how real is the risk >> i was surprised the secretary gave a date. both parties [ inaudible ] there are ways [ inaudible ] 1995/1996. as much as i love what's going on there, it's anyone's guess

what happens there will not be a default. and what i mean by that is a missed interest payment. it will get resolved but how the road map is, i don't know. >> we'll leave it there as we take the testimony now we thank you both on a day where the dow is down and the nasdaq is down. we're going to bring in steve leaseman as we awaited the beginning of q and a in the senate right now with the treasury secretary and the fed chair. steve, i will start with you in terms of headlines that we have gotten from both of these officials so far in this process. >> jannet yellen is warning abot doing what treasury secretaries do when they're up against a deadline like this, telling them

there's going tobe a financial crisis and recession and chair powell is giving an upbeat picture of the economy, except saying the delta variant is taking some of the shine off the growth out there striking a more dire or concerned tone about inflation, saying the bottle necks are lasting longer than expected and preparing the market for the possibility that high inflaltion numbers will last through the year a sglrm >> the other side is what we're going to hear, if anything, in terms of the debt ceiling and other authorizations any expectations there any expectations she'll go beyond what she's already said >> one thing she's been adamant

about is the debt ceiling be raised in a orderly fashion. republicans have made it known they will not help democrats through the process. the way the democrats could do it on their own is through this fast track reconciliation process but to do that would require them to go back through the committees, hold multiple votes on the senate floor. they need at least three to get it done and the problem is all of that takes time the expectation is that could take a week, perhaps two and when you're looking at just 18 days until you hit the debt limit -- >> i'm going to cut you off right there. thank you. we're going to tune in here to the senate committee on banking and the and, and, a. >> be brief, if you would. what would be the impact on the economy if they block all efforts to raise the debt

ceiling? >> [ inaudible ] event in american history it would be disastrous for the american economy, for global financial markets and for millions of families and workers, whose financial security would be jeopardized by delayed payments for example, nearly 50 million seniors would or could stop receiving social security payments or see them delayed troops would not know when paychecks would come 30 million family whose rely on the child tax credit would not receive the monthly payment on time unemployment would surely rise and as we saw in 2011, even coming very close to the deadline without raising the debt ceiling can undermine the

confidence of financial markets in the credit worthiness of the united states, that led to a debt down grade and soaring interest rates, which ends up raising payments on mortgages, auto loans and credit cards. >> thank you you made clear the debt ceiling's about money. we've already spent the cares act that republicans voted for and president trump signed into law and now they want to pay the bill we know it's wrong and they know it's wrong chair powell, the most recent jobs report saw an employment decreasing generally and showed a continue racial unemployment gap in the unemployment is rising for black workers you committed a hearing on the side of unemployment thank you for that but last week you announced policy tightening will begin in

november, and inters rate targets will increase next year. why take back economic support and when the recovery has failed to reach so many black workers >> right now we're buying $120 billion of security and all of the purchases add to accommodation. they're increasing accommodation and we set a test for beginning to taper the purchases for substantial further progress for statutory goals. we haven't met that yet but i think we've all but met it on the path that we're look ath we would continue to add accommodation, not subtract it until well into the middle of next year. and we think that's appropriate given the strength of the economy. the test for raising interest rates is substantially higher. and we want to see a labor

market that you both indicates that is very strong. we want to see the kinds of reductions and disparities and the kinds of things we saw before the pandemic arrived. >> thank you the senator said it would result in hundreds of thousands of jobs in local communities, particularly rural communities we know raising a child is work and most of the children getting ctc are do two jobs at home and in the labor force does the expanded child tax credit, particularly a fully refundable child tax credit, does it boost local economies and improve labor force? >> i think the evidence shows very strongly that it helps parents take care of their children, as i mentioned in my opening statement. we have seen that hunger, the

number of families that feel they don't have their children don't have enough to eat drop substantially after the first round of payments. we see that parents are using the ctc payments to pay for basic needs, including food and clothing and of course, it can be used for child care and provide the kind of support that enables parents to take jobs >> thank you sorry to interrupt thank you for the way you and treasury have gotten the checks out monthly, starting in july. chair powell, the "the new york times" reported in february only two out of 417 economists employed by the board of governors, two out of 17 are black. i appreciate you made diversity at the fed important institutions that focus on diversity and do it well are the successful institutions of our society. i agree.

taking it closer, no black woman has ever served in the board of governors, not one ever. do you think the board of governors will be a more successful institution if black women had a voice and the seat at the table should we make that a priority >> i would strongly agree we want everyone's voice heard around the table we have no role in the election process but we welcome >> secretary yellen, do you agree with that? >> i do. i think diversity is extremely important and that would certa certainly be a very welcome achievement. >> thank you >> let pme begin by stating the ocious

if the government goes on a spending binge, that will require more borrowing topay all that spending? they're threatening to dramatically expand that and if they get their way, that will involve more borrowing than we would otherwise need the democrats have chosen to ignore our warnings about the excessive spending but want us to vote to raise the debt ceiling to permit the massive spend spending increases they're planning just as they have the procedural ability to pass spending on their own, as they intend to, they have the exact procedural ability to raise the debt ceiling on their own, which they will have to end up doing. powell, earlier this year, there were sectors of our economy, especially the sectors sensitive to reopening experienced pretty

dramatic, but largely temporary price spikes it seems we're seeing a broader more troubling kind of inflation. input prices are soaring across the board, raw materials, energy and consumer expectations seem to have internalized this. the new york fed's most recent survey shows they expect 5.2% inflation over the year. as you point out the fed is still buying $120 billion insecurities every month i guess my question is doesn't the inflation we're seeing now seem broader and more structural in nature than the brief flip we saw in used car prices earlier this year? >> mainly what we've seen is the supply side restrictions that are so much at the heart of the inflation we're seeing have not only not gotten better, they've

in some cases gotten worse look at the car companies, the ships with their anchors down outside los angeles. this is really a mismatch between demand and supply. and we need the supply blockages to alleviate, abate before inflation can come down. we believe it will but most -- however, if you look at measured inflation, most of it is from a very small category of items >> i know you're aware of this but the fed's projections have been consistently low and off. so, i'm increasingly intrigued by the qualities that a properly

designed bank and in our operaability with smart contracts. international competitiveness. getting it right is essential. privacy of rights has to be respected. we shouldn't -- have a dollar that spies on consumers. we shouldn't try to turn it into a retail bank. in my view, privately issued digital currency should be able to coexist with the digital dollar, if we go down that road. and private developers should be able to innovate on an old fashion whiff. i'm not asking you to opine on any of these things but seems to me the decision about whether or not to go down the road is transformational and there are very important and sensitive

design issues that would have to be resolved. i think all that ought to be done in a transparent process with political accountability. which is to say with congressional input. could you comment on how important you think it is to have congressional authorization if we're going down the road of a digital dollar >> i'd be glad to and by the way, i agree this is critical work we want to take forward the relevant parts of our law were written long before digital finance was a thing. and a central bank digical currency could take many forms it's possible under some forms you'd be able to make an argument for it to be authorized under current law. it would be ideal if this was a product of broad consultation and ultimately rising inflation from congress. >> as you know pillar one will

fundamentally rewrite how profits are allocated among countries and we'll seed u.s. taxing rights to foreign jurisdictions to some degree current bilateral treaties would need to be ratified to reimplement this allocation and in fact, the international agreement itself, i think it acknowledges that, by referring to a multilateral instrument, inlayman's terms is a treaty so, do you acknowledge that pillar one require as treaty and therefore a senate ratification to implement it? >> i believe there are a number of ways in which congress could implement it but certainly ratification of the treaty would be one way in which congress could authorize and certainly congress has to authorize the transfer of taxing rights that's kacontemplated

>> i want to stress that we have, for many decades, had bilateral tax treaties that govern the amounts and manner by which foreign governments can taxes american companies changing those treaties requires ratification in the senate there's no way around that, that i can see. thank you. >> thank you, senator. senator tester is recognized from his office. >> thank you, mr. chairman and i want to welcome both the chairman powell and secretary yellen the first question is for secretary yellen for the rescue plan we fought for and got relief concern in montana is some of the funds you've gotten to treasury specifically aren't getting out for projects that proposes problems, especially with winter coming in montana.

we may have an opportunity to upgrade to broadband i have heard some folks in montana, leadership, blaming this confusion, that's caused by the treasury department. it doesn't make a lot of sense to me. so, beyond the restrictions on uses of these funds, provided by congress and through treasury's guidance, is there anything the treasury department is doing which would prevent states like montana from receiving the funds and using the funds that they have already received now >> [ inaudible ] that could be

done now there's absolutely no need to wait >> okay. so, they can use that right now. no need to wait because your mic was on and off for a minute. >> that's right. >> thank you do they need your approve to start planning what they might need the rest of the funds for and states with split payments do not need treasury's approve to start using the funds they already have out the door, just to make it absolutely clear? >> that's correct and they can plan how they intend touse thi seconds traunch of funds as well they can begin doing that now. >> on the second tranch, do you have a timeline for getting the funds to the states, who have

received these >> i believe it's a year lag that -- between the payments >> okay. it is my understanding the process for these funds has worked just as congress laid them out and it's been pretty predictable. would you say that is correct? >> yes, i think it is correct. >> okay. and can you talk about the impact from the local and state relief fund are getting? >> i think we're already seeing a significant impact of these funds. some of it is being used for immediate pandemic response, vaccination efforts, helping unemployment workers, supporting small businesses and some of it is being used to address longer term needs, including broadband

infrastructure, water, sewer so these funds can serve a variety of needs and are doing so >> okay. secretary yellen, i want you to respond to something the ranking member said and i thik he knows better he said democrats want republicans to expand the debt limit so they can spend money. is it not true that the debt limit expanded because of money that is already spent? that it would be similar to you going to a restaurant, ordering a steak dinner, paying for it on your credit card and-the credit card comes back, you would say no, i'm not paying for it? isn't that similar to what we're talking about? >> that is absolutely correct. it has nothing to do with a future programs of payments. it is entirely about paying bills that have already been

incurred by this congress and previous congresses and it's about making good on past commitments. as you said, paying our credit card bill. >> thank you very much thank you, mr. chairman. i yield. >> senator shelby from alabama is recognized. >> thank you welcome both secretary -- madam secretary, chairman powell chairman powell, i'll direct my first question to you. the phillips curve represents an inverse relationship between inflation and involvement. historically it's been yutdallized to understand the relationship between unemployment and inflation, particularly in relation to the federal reserve's dual mandate of price stability and maximum employment you're aware of this some economists question the current validity of the concept, as the connection between

inflation and unemployment is seen to grow weaker. chairman powell, is the phillips still a valid economic model and have you noticed a strengthening between inflation and unemployment >> you go back 32 high inflation we recall a one for one kind of relationship or close to it between unemployment and inflation. that is no longer the case we say the philip. s curve is flat but not completely flat. there's a relatively modt relationship the slope of the line is 7 degrees or something so, very flat. is there any change we observe in the near term not at this point, no. >> do you watch the phillips curve? >> we do but if you saw, we had

3.5% unemployment and very modest inflation for a couple of years before the pandemic. so, it's not a top of mind concern. the inflation we're having is but it's not related to the phillips curve >> would you say the phillips curve concept is not valid right now? >> it's not particularly binding right now. inflation is high and unemployment rate is high, so it's not really the binding constraint >> to secretary, the stepped up basis is a tax revision that allows for a beneficiary to adjust the basis of an asset to its current value, rather than at the value when originally purchased. this provision allows for beneficiaries to avoid paying high taxes on assets that have increased over time, largely due to inflation president biden's american families plan includes a proposal to eliminate the

stepped up basis a lot of people believe such a change would result in a costly tax increase on family-owned businesses, particularly on farms and ranches. according to a study by the texas a&m agriculture and food policy structure, 98% of the farms in the 30-state data base, would be impacted by the biden administra administration's proposal. this is the average tax liability to be over $720,000. madam secretary, do you support eliminating stepped-up basis for a state beneficiaries and if you do, why? >> senator shelby, i do support eliminating stepped-up basis the reason is that a very large share of the income of wealthy

individuals is simply never taxed. individuals hold on to these assets during their lifetime, that income is never taxed and we know that, for some of the wealthiest individuals, in the country, they pay very be taxed and with careful consideration, not in any way to harm the prospects of family owned farms or small businesses. there were substantial

exceptions an heir would inherent the original basis of the asset and when that person eventually sold the asset, taxes would be paid i regard steppu up basis would allow the wealth of the wealthiest individuals to be taxed. >> thank you senator warner is recognized from his office remote >> thank you i want to go back and revisit with treasury secretary some of our concerns about treasury default. i think some of us all and

ranking member were around in 2011 when our nation got close to that default. madam secretary, i worry about some of my colleagues concerned, right fully, about additional spending but if we were to go into a default basis, wouldn't that be expected that that would cause a lack of faith on the americans which would in all likelihood result in a spike and is my math correct if there were a 100 basis point increase in interest rates, 1% increase when we are looking at $27 trillion debt, you are looking at more than a $200 billion a year mandatory interest payments because of that spike in interest rates comes before payment of social security, military and any other

priorities if you extrapolate that, wouldn't that be close to an additional $2 trillion is there anything faulty with that analogy or math >> i don't believe there is anything -- i don't believe there is anything at all faulty about the image. i think there is no question but if congress were to fame to raise the debt limit or even if it was feared if we were getting close and if it looks as in 2011, like congress might not raise the debt ceiling and we might not be able to pay our bills that you would expect to see an interest rate spike if the debt ceiling were not raised, i think there would be a

financial crisis and calamity. absolutely, it is true that interest payments on the government debt would increase i would be concerned that dollar and treasury assets which are regarded as the most secure in the world and serve as the basis for the dollar to be the reserve currency that it would undermine confidence in the dollar as a reserve currency the interest payments of ordinary americans on mortgages and cars and credit cards would all go up in line with higher treasury borrowing costs and it would increase our spending absolutely >> and again, this is not something you could then reverse if suddenly congress came its senses once you saw any spike in interest rates, once the genie

is out of the bottle, there is no putting it back in. is that correct? >> that's correct. this would be a manufactured crisis we had imposed on this country which has been going through a very difficult period is on the road to recovery it would be a self-inflicted wound of enormous pro proportions. >> we all know we are in an economic competition with china. would not this effort in terms of a chinas that trying to put off our withdrawal from afghanistan, would not this give additional foder to the chinese occupation and undermining the confidence in the dollar as a reserve

reaction to the currency wouldn't that give china more action and give them more reason to default the currency? >> certainly it would undermine confidence in our government and the role of the dollar and the safety of the dollar, which has really never been questioned the dollar is safe haven asset when times are turbulent that people feel is absolutely secure ch china has a long way to go before they are a serious rival to the dollar as a reserve currency i can't think of anything more harmful to the role of the dollar than failing to raise the debt ceiling >> the interest rate spike and

interest rate spike, $2 trillion over 10 would be spending we don't need to do and we can avoid that >> thank you senator warren. senator kennedy from louisiana is recognized. that is both the treasury secretary janet yellen and jerome powell. secretary allen talking about, quote, the manufactured crisis this country would face if the debt ceiling is not raised it would be a financial crisis and recession and undermine the dollar's dominance on the world stage pushing up interest rates on mortgages and cars and that the u.s. is in a fragile by rapid recovery the fed chair, a lot of discussion around inflation

noting there is upward pressure from supply bottlenecks. noting that the supply would respond to inflation and reiterating that the u.s. has, quote, all but met that from last week as well. >> interesting diversity questions you point out. clearly inflation is key for powell fiscal questions for yellen too. questions about taxes and step up basis for capital gains, which is part of the plan to pay for not this infrastructure bill but the $3.5 trillion infrastructure bill. >> this conversation happening in the midst of a very busy week in terms of all of the legislation in d.c let's get to dom chu the dow flirting with going negative for the quarter >> it is one thing when we talk

about a 300-point drop for the dow. in the nasdaq, that's what you are seeing right now it is double the effect. a huge move lower. interesting rate for that picture. you can see in the beginning of the year when we made that big move higher, it did have a big impact on technology stocks. playing down similarly as well we look at some of the key parts of the market that were taking hits look at cloud computing or software-type stocks or internet services names back then in the february to march, april, when we found some real valuations of these they were down 17 to 20% playing out well now megacap technology and communication services all down. five biggest stocks.

apple, microsoft, amazon, facebook all moving lower on the day. i'll send it back to you >> those names inindi nvidia down as well. that's it for us tech check starts now. ♪ good tuesday morning welcome to tech check. we are live at the code conference in los angeles. jon is in san diego at q