initially the markets were up as we saw yesterday we'll run through everything jay powell said about the economy and the fed's plans. and elon musk is expected to tell twitter he still wants to buy the company. it is thursday, june 16th, 2022. a big day here on "squawk box. mike santoli is here we'll talk about this in just a moment good morning welcome to "squawk box" on cnbc. we are live from the nasdaq market site in times square. i'm rebecca quick along with joe kernen and mike santoli. andrew is off today. we got the fed decision yesterday. it was 75 basis points

yesterday, stocks were up. this morning, you see the doboue back dow futures down 540 s&p futures duown 82 this comes after what we have seen the dow industrials up yesterday. nasdaq was up yesterday by 2.5%. joe just said the swiss national bank taking the steps this morning. that set the tone with the futures, mike. >> that was 3:00 when the decision came out. the sharp break in the equities future we saw in the last fed meeting the rally when jay powell discounted the 75 point rise this meeting we got the three quarters. it was as expected and flexibility. it did unwind the effects day. i think it is about the sense of

the fed willing and now stating it might have to restrain the economy a bit to get inflation job done >> this morning, the idea of the swiss national bank which was not expected to raise, but raised 50 basis points it feels like 2008 and 2009. when you saw the global liquidity crunch with that and the ecb emergency meeting. there is a lot of liquidity and not just the fed tightening here >> they don't mess around. when they finally do something, the swiss, they thought about it they are neutral usually about a lot of things. we notice in davos, if the train is there at 8:01, someone is fired if it is there at 8:02 >> it is very organized. >> to see a surprise like that. >> once again, what do they know what we don't?

>> it enforces the idea that the central banks are desperate to chase inflation and get on top of it. it caused bond market volatility one reason stocks could rally is you have global yields getting jerked >> when i got here early, he was here i get here at 5:15 he was there he got the worm. you are a book end you will be here at the end of the day. you are able to think about a lot of things. we had the discussion. the discuss weion we had is what interest rate would it take to harness inflation in the past? it doesn't seem 3.5% or 4% would do it. >> particularly with inflation at 8%. >> do they have a 2% target? >> 2% is the target. they are willing to tolerate

above that >> they are willing to tolerate? >> listen, the big thing the market is concerned with is this if you are worried about inflation expectation, which they seem to be after the university of michigan report, that is gas prices you are targeting gas prices one way or the other that is not something you can do without slowing the economy. >> if you had to fix $120 oil only with the demand s measurin. it is not like it has to plunge. >> it is not just oil. it is the lack of refineries. $120 oil >> if you can't do anything about the supply and if your only tool is demand, you have to hit demand hard. we don't want that

none of us want to not travel. >> you don't want the recession with the job losses and economic pain >> nobody wants any of it. i will say i don't know if we put stock in it. gas futures are well off the highs in the last few years. >> oil is not 120. it is 115. >> as of yesterday let's look at treasury prices this is the market yields whoa are you okay >> i'm sorry i don't have my thing here literally fell off my chair. don't worry about it, mack the thing where i put my feet is here every morning >> yields of yields based in large part with the swiss national bank. had this

we will hear from the bank of england later this morning the 10-year treasury is yielding 3.441% that's right same thing that the 30-year is yielding you have inversion with 5-year the 2-year treasury at 3.366%. this massive move is what is concerning market players the most at this point people involved with that. anybody who is looking at risk assessment says this is where we start to pay attention. >> you throw out the playbooko absolute levels that we thought of historically. it is not 3.4% ten years ago it is the difference of under 2% and now 4% all of the dislocation. >> very short order. >> and dislocation that can cause. do you see any reason --

>> minus half percent to eight in no time >> the vix won't help us it is 31 31 >> if we get there if we get another flush. you know what? after tomorrow, we have the options expirations. there's too much talk about the vix getting at the magic level look how elevated it has been the last two months. they are not panicking a slow grind lower is not something you want to protect to the down side. >> the moves in the treasury market i heard measures from 1994 and orange county with the crazy things they were betting on. that is the dislocation you wait to see after the shakeup and move like this. >> you have to brace for

accidents. it is more than the bond market volatility you look at the bond market vix. that is the high that stabilizes capital markets. it doesn't mean something nasty is going to happen >> you have to add crypto to the stabilizing events now 9$975 billion that is not big enough to be systemic like a bond or currency effect it is still troubling. you know, i don't know 18,000 what happens to micro strategy what happens to binance? why are they at this point tied to 20 when they were in business when it was 8,000 >> they borrowed heavily >> if they were a growth stock >> the average volume weighted

price for bitcoin is not in the three digits it is way above. all of the volume happened >> remember tom lee? 20,000 by the end of the year. we thought he was -- we wanted what he was smoking at that point. let's get to steve liesman on what jay powell said yesterday and what it means for the markets. what did you think jay never really changes that much, steve? that's good. he's very level. >> joe, you are more observant than that. you didn't notice the big change >> i didn't think he looked scared >> you missed it the tie. the tie. wears a purple tie every time to the meeting. >> the briefcase indicator >> powder blue yesterday maybe powder blue is the new 75.

hard to know >> that's all we h do here, ste. >> you are a fashionista, joe. i'm surprised you missed that. >> in general, he didn't telegraph any change i want him to bare his soul. he will not do that. >> i'll get to that in a second. i want to talk about it. the fed delivers the massive 75 number rate hike and forecasts w will do more powell acknowledged he would not say if it was too much or too little here is what he said if the new 3.8% median forecast next year would be enough to solve the inflation problem. >> it certainly is in the range of plausible numbers i think we'll know when we get there. honestly, that would be -- you would have positive real rates

and inflation coming down by then you would have positive rates across the curve the neutral rate is pretty low these days i would think it would you know what? we will find that out imperially we are not going to be model driven. >> the forecast published by the fed is the sharpest change since the fed started publishing 3.4% this year it was 1 ap$ was 1.9%. long-run is 2.5% a soft landing got harder. it is not the intention to do so as for the next meeting, 50 or 75 it will do either way. we have to wait for the inflation numbers. joe, the market trading with

a a 78% probability of a 75 hike >> did you watch judy yesterday with the comment >> what did she say? >> she said kudos to steve for asking the most important question which everything is based on since you asked that question now we know that it wasn't the right answer >> quickly, joe, it was the dumbest and most obvious question i ever asked in 20 years. it is like i guess when you have an easy target, just step back and not miss it. >> i'll get deep in the weeds. her piece today in the journal, we don't need artificially high or low rates we need real rates real rates for price discovery we need to get there what is the real rate when we can't control energy prices?

i don't believe it is 8% the wage price underlining inflation is nowhere near that it is skewed by that we really can't control. the fed can't control the supply side >> i want to add to that interesting conversation you were having before i came on here the notion that mike was bringing up and were you talking about it you were, joe, that the fed can't control oil prices and has to set policy to the oil price just to add to that, the thing that powell pointed out was that gas prices set inflation expectations and the fed is very worried about inflation expectations that is the complicating factor. if the fed could, it would ignore the spike in energy and say we will do policy this way and let energy go like this. energy is the thing that sets inflation expectation and they run high and the result is that the expectations become

unanchored and the fed has a problem. it could be gas prices come down and inflation expectations go back to where they were. the fed doesn't have a problem the question is what you were talking about. the notion of changing what we are looking at and what should be the focus of policy to the headline number from the core number >> i can't imagine trying to get to 2%. that seems like an arrchaic number it is a fool's errand when the world is burning with inflation. >> it is a question of timing. if you look at the fed's own inflation forecast, that was a signal to the guys in the back i don't think you have the full screen >> do you appreciate it when we don't get to 2 >> they don't think they are getting to 2%, joe they have 2.3% in 2024

they are acknowledging that goal >> steve, thank you. we will speak with you later let's bring in gabrielle santos at jpmorgan chase asset management when you look at the swiss national baunk this morning and what the bank of england will do later this morning, is this a concern of central banks soaking up liquidity >> absolutely. what we have been seeing for the past week is central banks still have the ability to surprise us by being more hawkish than expected you saw that started a week ago with the ecb and the fed and th central bank we are in the environment where

interest rates are moving higher than expected and the fight is about bringing down inflation. what we heard yesterday from the fed was really important they signalled they are more willing to overtighten than under tighten. they are willing to be backward looking on economic data in order to realize when they overtightened. all of this, the fed, these other decisions, central banks increase the odds of recession happening by the end of the year or early next year this risk off reaction in the market this morning makes more sense than knee jerk positive reaction after yesterday's fed release. >> this is a cyclical market you watch the twists and turns if they don't do enough, inflation gets out of control.

if they do a lot, then the market will crash. that is the reality there are no good options here and the only way is down by bringing down the economy and bringing down demand >> exactly there are no good options. either you have inflation risk or economic risk we're trying to juggle the two policymakers are and investors when you think about portfolios, you have to make sure there are enough assets to protect from both sides of the risk in terms of inflation risk, asset classes are being reviewed especially commodities and commodity produces companies and countries. we are looking at real estate and reits or physical real estate and infrastructure. both infrastructure equities and funds. the recession risk, though, that's where we're feeling more comfortable adding duration and

adding core, quality fixed income with the 10-year treasury near 3.5%, you are closer to the top of the range if anything, yields are likely to be lower next year as you see the recession odds increase further. you have to have both. it is certainly not an easy environment for investing. there are ways to monetize that through covered calls and investing and flexible asset allocation to get to the clients goals which have not changed although the environment has. >> they want to make money why are reits a good applplace b when recession is on the horizon and people haven't gone back to work and people haven't expanded their footprint with office space? >> i think within reits and real estate, you have a lot of types

of real estate now the office particular type of real estate is still challenged we are still trying to figure out how much office space companies will need. i think what you are starting to realize it is not as bad as previously expected because companies sktill need to have space when all employees plan to show up rather than just for the days when half the employees are there. it is a tricky environment we are still taking a close look at residential real estate you have a lot of under supply of real estate which needs to come online. keeping that market stronger than the case with mortgage rates over 6%. we are also taking a look at a lot industrial real estate >> gabriela, thank you >> thank you coming up, elon musk is set to meet with twitter employees at the virtual meeting today

we'll tell you what to expect next. and former fed vice chair nocer ferguson weighs in on the anunment yesterday you are watching "squawk box" on cnbc so you tap ibm to un-silo your data. and start crunching a year's worth of transactions against thousands of compliance controls with the help of ai. now you're making smarter decisions faster. operating costs are lower. and everyone from your auditors to your bankers feels like a million bucks. let's create smarter ways of putting your data to work. ibm. let's create

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elon musk will speak to twitter employees at the virtual all-hands meeting. wall street journal report says he will confirm his desire to buy the company. you see the stock trading at 39. musk is expected to clarify remarks about work he says he wants tesla and spacex to spend 40 hours a week

at work. twitter shares trading below the $54.20 purchase price. this is a on 40% gain from here if the deal happens at that price. >> all-hands is all eyes i don't believe it >> all employees are invited. >> i don't think all hands will there. all eyes you think all eyes are on the fed? walk around the country. were you watching the fed yesterday? i guarantee you only a few eyes. >> my complaint about that, if it is true, it is redundant. everyone is already watching >> that's pretty good. you are a thinker. >> i think about how things are worded. i have been thinking about this i don't want the crappy tesla for $65,000. do you i want the cool looking one. how much is that

tesla is hiking prices for all cars in the united states. the company's web site shows the long-range model y, the crappy one, has gone up $3,000 to $65,990. this is the point you are making, becky sdplc. >> this isexpensive. it is not an every person car. >> the politicians said i didn't notice gas prices. i'm in a tesla and the little one is $66,000? >> yeah. >> that's what a corvette costs. that's 80. >> you can get some when they were incentivized. it is an expensive car. >> the model s >> the ex? >> chevy volt cut the price?

>> you can't charge it in your garage >> tesla had this has to do with the price hikes. cost of raw materials. aluminum things used in cars. the list of things in a tesla which are important. >> combustion engine is going up >> what could it cost if it really is difficult to find lithium and cobolt >> yeah. >> that's a problem. the economy is at a critical juncture in the recovery cnbc has a list of advisers. i spoke to kyle bass about the threat he sees from china. >> back in on 2013 the largest pork and chicken

producer in north america. this week, they announced they will close down the western division of the largest chicken and pork producer in america because prices are too high. that doesn't sound like an economic decision. that sounds like a geopolitical decision those kinds of things need to be taken care of at the highest level of the government. we need more of a strategy and less of a revolving door >> kyle, let's push back on the smithfield pork. i know of other business leaders who are considering shutting down because prices are too high not because they can't get great prices for products, but because it is not enough given inflation on the unput costs energy, labor or raw materials i hear your point. the idea we could be left in a

very bad position and it may have more to do with just economic decisions and they may be decisions that the u.s. government won't have as much control if it is operated by a foreign company. >> right i know one of the big topics today is whether or not there should be a repeal of the tariffs that we put on china for steel and aluminum if you go back and read the back and forth and rationale for why we put tariffs on china in the first place and president biden left them on is really important. let's say aluminum for example and the chinese state actors were giving free electricity to the aluminum smelters to under cut price in america that took the aluminum smelters here from high 80s to 70 in one year when you drop below 80%, you

lose money as an industry. we put those tariffs in place not because we were looking to put extra duties on china, but because they were acting in an uneconomic fashion to try to put our industry out of business >> bass is also bearish on the fed moves and impact between now and 2022 mid-term elections. >> our belief is that you will not -- the fed will not pull $1 trillion out of risk asset although the balance sheet is north of $8 trillion. i don't think they can go ten months at $100 billion a month or 11 months before the stock is down 30% or 40% from here. >> from here that is a really big drop. >> i think the fed is laser focused on arresting the inflation problem. they are not necessarily concerned with what is happening to the stock market.

i think that has a lot to do with what happens as we go in november becky, i think between now and november, things are going to materially worsen. when i think about where to put money today, i would wait until you see the fed start to use the word pause more often and say maybe the market dropped enough. maybe $30 trillion out of investors pockets will have a severe chilling effect it will. it will take time. i think a lot of the job is already done i think inflation is going -- you think you will see food and energy prices continue to head higher unless we have a massive recession. >> to see more of the interview, do to cnbcevents.com joe. coming up, we'll talk about the rate hike yesterday and the path forward and the view of one gentleman by the name of roger ferguson

former fed vice chair. throughout the month of june, wij june, we are celebrating pride month. here is julian woodhouse. >> to make sure people never feel alone is incredibly p important. when you are growing up and in the closest and no in the environment that is supportive of you and it can be lonely. i'm proud of our community for being so inclusive and warm to all of us cabeuse we all need each other at the end of the day. >> announcer: the cnbc fa summit is sponsored by capital group.

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good morning welcome back to "squawk box. we are live from the nasdaq market site in times square. we are giving back more than yesterday. dow futures down 540 points. s&p futures off 84 nasdaq off 313. fed chair powell outlining the thinking of the rate hikes at coming meetings >> clearly today's 75 point increase is a large one. i do not expect moves of this size to be common. from the perspective of today, a 50 basis point or 75 basis point increase seems most likely at

the next meeting we will make the decisions meeting by meeting and communicate our thinking as clearly as we can. >> joining us now is roger ferguson, former fed chairman and cnbc contributor that is like alphabet soup, roger. all of those letters good to have you on. >> nice to talk to you. >> i can summarize this and we heard it before. don't we need to always remember the term data dependent? the fed is not omnishent? >> it was something that moved from 50 basis points to 75 that we saw yesterday i think chairman powell was clear they will look at and responding to the incoming data.

both the actual inflation numbers and labor force numbers and inflation expectations >> it does feel like incoming. it is not good let me ask you this, roger there was some disagreement all along in the use of the term transitory there were plenty of doubters and skeptics and people on the other side of that argument. i don't know where you were. is it your contention that data at that time, let's say six-to-nine months ago was it was transitory or can we say that was a major mistake and not taking it more seriously did that put us behind the curve? >> let me start with the last

part the fed will admit they are behind the curve they got started a little later for sure to be fair, it was ambiguous at the moment obviously, people saw supply shocks and weren't sure how long it would take to clear up. some of this was due to the war that russia started in ukraine very unpredictable having said that, stimulus in the system from the fed and from other decision makers. so, it was ambiguous my view was and i did not engage in the permanent versus transitory debate. my view was it was important to make the inflation as transitory as possible. there is a sense they got started later than they liked and they are rushing to catch up >> you are so nice he said my view was that the fed should make the inflation

transitory which means it wasn't at the time. you thought maybe they were rose colored glasses at the time. >> look, i thought they had to recognize they had been putting a lot of stimulus into the system as have others for good reason because we were very concerned about the lasting impact of the pandemic there was a fog of uncertainty part of the process. unless, a modelling -- everybody's modelling missed what was happening with inflation. models are not set up to deal with the shocks that occurred. there were a couple of big shocks that occurred from the reopening of the economy with supply chains uncertainty and the war. there are also historical precedents that people didn't look at. i think they are now in a process of trying to make up for lost time.

>> both fiscally and monetarily, we spent a lot of money the last two years, obviously deficit hawks, the ones that don't go back and forth. there are long-term deficit hawks complain the fed can be a an a partner and alllow spendin. you need the fed to finance the deep rates low we did the american recovery we were proposing another $3 trillion or $4 trillion at the time we were trying to decide if inflation was transitory do you think that was a mistake and do you think to continue to push $1 trillion in the build back better, is that something you would be in favor of

>> joe, let's go back to that moment we were worried about coming out of the very deep and sharp recession. we also had the experience earlier, i'm talking 2008 and 2009, where perhaps stimulus was too small and took a long time to get job recovery. when you look at some of what was proposed, it certainly would be in the category of a long-term investment it would have had a stimulus impact infrastructure was called for. at this stage, we have to be circumspect about parsing blame for where we are the other thing that chairman powell said that they are focused on and do what they need to bring inflation under control. some forces outside of their control. at this stage, instead of

understanding how much or little should have been done, wherever his attention has to be is driving the skid out of inflation the best we can. >> the fed is asked to do too much and it is too large of an influence in our economic life if you think about it, the fed, when there isn't any natural demand, the fed steps in with demand they provide too much demand and inflation goes up. now we are asking and a year later, they will step in and try to hurt demand squash demand. here we are. your mother. your sister. stimulate. now cut off demand maybe that shouldn't be the fed's role in the first place. someone wrote price discovery or dollar stability focus on that and let the

markets take care of the rest. >> to be fair, if one thinks about why the fed was started, it was started because of b boom/bust economies and the need for the central bank to create the currency to keep the economy growing smoothly i think the fed's dual mandate is the right thing to do for sure i'm very supportive. having said that, we also know in moments of crisis and we had one in 2008 and 2009 and we had one around the pandemic. monetary policy and fiscal policy work where they are s stimulative. during normal times, you expect the fed to raise rates to keep the price stability. i like the dual mandate. i like the fact they occasionally have a central bank that steps in with the crises

and we need extra assistance right now, the element of the mandate that is most important is price stability one of the things, i think, that where the fed is helpful is explaining to the american people why the pain that might be coming forth is necessary to get the inflation under control which is a problem for everybody. >> we're still, you know, we're still hopeful for a soft landing, roger i hope in the last chapter and when it is written that we don't have an epitaph. it could get bad there could be finger pointing at that point. i hope we don't get to that. thanks for your sober analysis and you make some very good points nobody wants to throw stones at jay powell or bernancke or janet. it is a tough task we have given

them impossible >> it may not be able to be fixed. >> you have a cake job, roger. you like it? tv's back. >> it is a tough ob. >> thanks, roger >> i don't know, joe take care. >> okay. when we come back, a activision's board on the harassment allegations at the company. we have details after the break. and later, inflation and what the government can do about it we talk to senator rob portman >> announcer: currency check is sponsored by interactive brokers. the professionals gateway to the world's markets.

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welcome back u.s. equities are under pressure this is a reversal from yesterday's fed decision which was anticipated at 75 basis point hike the market took that in sprtrid. the swiss central bank hiked 50 basis points that has people thinking about the implications around the globe as central banks tighten we will hear from the bank of

england later this morning in the last few minutes, activision executives found there was no evidence to suggest that seniors executives down played the incidents it said no employee tried to conceal information from the board. the probe found harassment, but the company says there is no systemic issue and behavior is not tolerated. that stock down 2% coming up, natural gas prices climbing in europe again after russia hit the brakes on shipments to germany helima croft is joining us next to discuss you are watching "squawk box." >> announcer: executive edge is

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natural gas in europe is surging after gazprom announced it plans to reduce deliveries through the nord stream pipeline to germany but some say it is political rather than technical. joining us is our contributor. ratcheting up tensions

you've been focussed on the potential fracturing of this sort of alliance in support of ukraine, mainly due to concerns on commodity price how do you think this maplays o from here now that the price of natural gas has soared and the european central bank raising rates. >> nord stream one sis operating at 40% capacity. this is coming on the eve of the visit to zelenskyy there is a real concern that the europeans are facing such serious economic pressure that russia's been successful in weaponizing exports that the cost of the war stoois too high,

they may push zelenskyy to bring the war to an end. >> you have the u.s., uk, some of the eastern european nations are more staunch and want to take a harder line then you have president biden going to saudi arabia and driving to work that potential angle. do you see any hope for an easing of the various supply bottlenecks here >> i mean the problem that we're facing right now is that we have very little spare capacity when you think of oil, there's very little left in the system probably opec, there's 2 million barrels. if saudi arabia were to say we're going to give it to you all now, there wouldn't be anything in a supply disruption. probably why the europeans are getting very nervous is, their sanctions does not kick in until january many so if this war

continues to january, we're going to see another drop in russian oil exports, further tightening the market. and that u.s. sdr relief winds down in november if you're looking at getting more gas cut off, higher oil prices, you're looking at a winter of discontent i think they're getting nervous about this war >> as you see on a country by country basis saying that they're going to essentially take russian oil, whatever price is out there there's this view perhaps that there really isn't a lack of supply coming out of russia or at least maybe not as much as is stated above board so how much of that is actually feeding into global supply >> theiis is a really important

question russia was really able to place those barrels into india, into china, into turkey, india, particularly, is the one to watch. they've massively ramped up their imports, but they're getting like a $35 discount. and they're basically saying the price is too good to pass up the europeans have also passed sanctions, basically saying that their companies cannot ship russian crude to a third country, they cannot provide insurance for those cargos and the u.s. and uk dominate ships and insurance for this trade. ly swill you see the indian government say we can't take these barrels because of other sanctions. how serious of a shipping and insurance sanction will kick in at the end of the year as well >> a lot of key decisions on many front thank you very much. >> thank you coming up, first the fed,

then the swiss swiss national bank, now bank of england is set to announce its latest policy decision within minu minutes. when "squawk box" comes right back new projects means new project managers. you need to hire. i need indeed. indeed you do. when you sponsor a job, you immediately get your shortlist of quality candidates, whose resumes on indeed match your job criteria. visit indeed.com/hire and get started today.

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good morning the fed stepping on the gas to outrace inflation, rolling out its biggest increase in years. investors at first cheering the move, but now futures are down sharply as wall street eyes a likely recession jobless claims and housing start numbers, the second hour of "squawk box" begins right now. good morning, and welcome back to "squawk box" here on cnbc, live from the nasdaq market site in times square. andrew is off today. u.s. equities at this hour are giving up more than yesterday's gains. the s&p down about 86%, that's

over, you know, 2% at these levels dow jones industrials down more than 550 and the nasdaq closing in on the lows from earlier this week, down 300 at this hour. bonds are a big part of that story. the ten-year note yield eased back after the rate hike of .75 of a point yesterday but getting back up to that, it's at 3.43%. oil is kind of hovering in a range here down 1.2% has not given up too much from the highs many natural gas higher this morning of and watching crypto again this morning. i would say modest weakness in the context of how crypto has crashed. we see bitcoin, about $21,000 per coin

the bank has raised interest rates once again, following the fed's move to raise rates yesterday. the bank of england raised its key rate by 25 basis points and says it's ready to act forcefully to stamp out the dangers from rising inflation. >> bank cease the uk economy contracting by 0.3% in the second quarter not very often you hear a central bank say, yeah, we're expecting a down turn. that has been the move this morning. the euro versus the dollar the movements on this, i think the swiss franck was up. let's get over to dom. >> you mentioned this notion of the fed trying to outrace, outpace inflation here, when you have a global coordinated move

these days to remove cash from the global economic system and tamp the brakes on the economy from a global perspective you start to see the reverberations all over the market. some of the movers have stilted toward the trade with regard to whether or not a recession could be more likely going forward and whether central bankers will have to deal with that likelihood so the mega cap has been a huge focus. apple shares are down about 2.5% off the premarket lows but still down 2.5%. similar move from microsoft and amazon and tesla's down about 3.5% as well these names, the biggest are showing weakness so they're going to be a big contributor to that nasdaq that you see right now. also you mentioned oil prices. is there any relief in sight for

oil? there might be if there is a slow down. so wti crude down about 1% now $114.16. some of the bigger premarket moves have been in exxonmobil and chevron, down about 1.5 to 2% and the energy sector spider. often typ oftentimes the orange line is the etf ticker small caps have been taking it much more on the chin over the course of the last year. as you can see in this latest

move lower we have seen that widening out in the gap. back over to you >> dom, thank you m fed chair j. powell explaining the fed's move yesterday. >> we got the cpi data and also some data on inflation expectations late last week, and we thought for a while, and we thought well, this is the appropriate thing to do. then the question is what do you do do you wait six weeks to do it at the next meeting? i think that's not where we are, so we decided to go ahead. >> joining us, from baird company, jason, maybe we should

be thankful m we don't know if there's going to be a recession. we know they're inevitable because we haven't cured the boom-bust cycle of the economy sometimes they don't come for three and four years at a time we kind of know now. we should thank the fed. they are telling us, most likely, you're going to need at least a, you know, you're going to need to hurt demand a lot, whether it gets to the level of recession is one thing or not. but we're probably going to have a recession, self-induced. >> well, listen, joe, i think recessions are a natural part of the business cycle they hurt people people lose their jobs but i also think that one of the compensating factors that you are allowed to essentially grow wealth much more quickly than in

any other system but you can't outlaw recessions. i think the roots of a lot of this date back to the financial crisis, when we started qe we started qe, the fed largely tried to outlaw a business cycle so that the fed's balance sheet were $800 billion. now they're 9 trillion now i think the fed really got into the business of trying to be hard scientists like physics or chemistry instead of understanding this is a social science. and so while it hurts people, no one wants to see a recession again, it is part and parcel of the way the economy works, and i think there's just been too much money, chasing too few goods, tch money going into financial assets, and this will be a reset of expectations which i think in the end will be healthy. >> it's a grand experiment that

you just described and maybe we have minimized some pain back in the financial crisis could have been much worse no one expected us to sit back when there is a pandemic and not help people that needed help, so we had to do that. but 800, what did you say, what was -- >> $800 billion to 9 trillion. >> go ahead. >> yeah, so you're doing that in 13 years, you know, it's not, in some ways, in retrospect, it's not surprising that you have an inflation problem, especially when you layer on top of that all the fiscal spending that we did during the pandemic. >> we paid everything forward. and during the pandemic, i mean, we spent a lot of money, and we've been living high off the hog for, as you say, 13 years. because the fed has sort of

enable enabled that to happen i'm wondering how bad will the hangover be. that's my biggest fear it might be commensurate with the amount of high living, and i'm not saying that it's been high living for people that aren' aren't wealthy but somebody's benefitted. and someone's going to have to pay the piper. and unfortunately, a lot of times it's the wealthy get hurt a little but inflation is killing the people who can't afford to be killed >> absolutely. inflation is the most regressive tax there is, because working class people, people at the lower end of the income spectrum, they pay more of their income on staples like food and energy, which seems pretty core to me. i don't know, eating and staying warm seems pretty core but for whatever reason, i think

it's largely because it's harder to forecast and analysts tend to exclude them but it is true and i do think the hangover in financial assets is going to be significant. hopefully the hangover in the real economy won't be gquite as bad. my own personal opinion is recession is not a foregone conclusion, although we have to acknowledge that the chances are, in 2023, at least, are significantly higher than they were a few months ago. >> who's the dog and who's the tail was it the fiscal spending that ca caused it? or the fed a combination of both, i would imagine. fiscally, we've lived beyond our means. did we spend too much money?

that didn't go directly to the people who needed it it filtered to everyone. robinhood benefitted because of people gambling in the stock market >> housing was up 20% last year, joe. you think about a, a market, the real estate market in the united states, the housing market as mature and as large as it is, it ended up being up 20% in a year. that is not price stability. that is a policy error on the part of the fed. the other thing we did was drop a lot of money into the economy into a supply-constrained economy. last march we drop $2 trillion into the economy when there was really no place to spend it. that's almost the classic definition of too much money chasing too few goods. now as you said, there's a hangover, we're going to have to deal with it it's going to be painful for

everyone, and i think, i'm not sure there's a lot of places to hide here, as far as the market is concerned but i do take some comfort in the fact that, again, we're recognizing that we have a problem. and i think it was wise for the fed to do more earlier, at least now they're getting back on the program. >> do you think that time will heal this? to where it doesn't become, you know, life changing, like something in the '20s and '30s or maybe we don't go back to that but whatever happens, do you think we're going to reconsider the role of the fed? do you think there will be guardrails put in or will they end up getting some blame for this >> they will absolutely get some blame for this and i think it's, it's deserved. and i think again, that has its roots in not qe 1, which was to bail out the financial system in

2008, 2009 it was qe 2, qe3, qe 4, essentially using printing money as a swiss army knife to solve all the world's ills in the last couple years they've been talking about the fed solving climate change and social injustice and all these things that the fed has no ability to impact. its primary role has been and should be price stability. >> right >> full employment should be part of that as well, but i think the primary role is just focussed on getting the surprise right. and once you get that right maybe you think about doing something else but they haven't had a great record >> that mandate's been neglect that's issue, they have 15 other mandates, and that's one think forgot, price discovery and price stability. i hope we're not on the cusp of something that's worse than what

we think when we grind lower like this, we don't make decent bottoms i don't know where the bottom is don't kick bottoms nobody needs that. jason, good to have you on >> thank you for having me on as always, joe. >> you're welcome. coming up, news out of washington on the summer travel season in the airlines details are straight ahead jet fuel as we head to break, take a look at this morning's lag ards "squawk box" coming right back

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yesterday. higher rates are great if you want to stop inflation, but the way they're going to do it is by bringing down demand if you think about that a while, that's what investors are doing, thinking that through. you also have the swiss national bank hiking rates by 50 basis point. they were not expected to raise rates at all it's a reminder that central banks are going to be tightening -- >> what was it last thursday >> two days into the fed meeting, down 10% on the s&p >> thursday, friday. if it traded on saturday and sunday, it would have been down. >> 2200 points >> 2200 points one weak bounce yesterday based on the fed and back down pretty obvious why we're down. >> there are no great decisions.

>> raging inflation, a recession or both. >> are we, the worry is the fed can't get inflation under control without a hard landing that's the concern if you get a recession, the stocks are going to go down. >> global central banks are chasing inflation higher >> who thinks they're going to be able to do it you think a soft landing's coming >> i think a soft landing is plausible, not probable. and i also think we have to define our terms here. everyone loves the 1994, 1995 s soft landing unemployment went up in 1995 >> what was the inflation rate in 1995? >> actually t nit never got to 4 >> that's a concern.

qu we're already at 8 but if we can't fix supply, and demand is the fed's only tool, that is pointing to a real sharp slow down, which is not, yeah, it's painful >> in your outlook, they projected unemployment's going to drift a little higher that's kind of a first >> if you've been watching treasury yields, they've picked up, too. the ten year above 3.4%. those sorts of moves in the treasury markets are a very big impact, too many g mortgage rates above 6% already. all of that adds to the pain >> the s&p as it stands right now would kind of retest the lows from this week. breaking news. the department of transportation is expected to meet with airline ceos to discuss of summer travel season phil lebeau joins us now hey, phil. >> we have learned from a source familiar with this meeting that

it will be taking place later on to today. pete buttigieg calling this meeting after seeing what happened on memorial day weekend. we know it was a bumpy one buttigieg wants to make sure does not happen again as we head into the fourth of july season and labor day at the end of august here's what's going to happen. you have the goal of limiting major issues that's the topic, according to our sources, that will be discussed. this is major ceos june passenger levels up 24%, compared to the same time last year so yes, we are seeing considerably more people who are flying we don't have the same level of capacity within the airlines certainly don't have the staffing that many airlines would like to have, and as a result, the transportation secretary wants to make sure that the d.o.t., faa and

airlines are all on the same page in terms of what can be done keep in mind a number of the carriers have already scaled back what they initially planned to fly for the summer, because they realize that they did not have any slack in their systems when it came to pilots, crews, et cetera, as a result, they have pulled back their schedules and are hoping it will be a smoother summer in terms of travel we've seen some issues already we saw them during memorial day and the transportation secretary wants to make sure that does not happen again so, guys, at this time you've got 2.25 million people, average, every day, who are flying compared to last year when it was about 1.8 million. so considerably more people are flying that's why we've learned that the transportation secretary will be meeting with the airline ceo to discuss making sure it's a smooth summer in the skies >> is there a sense of getting on the same page and

coordinating what the airlines meet want out of the department of transportation to help this process along to make sure there aren't as many issues? >> they want to make sure the air traffic control system is not only adequately staff, the air traffic control situation has not always been optimal. they're in the process of recruiting more air traffic controllers at the department of transportation, and they made some changes a while ago in florida. remember when there was some real issues in terms of nifligh in service in florida. they brief telieve they can tak blueprint. the d.o.t. believes they can take that blueprint. now the d.o.d. would like the airlines to say don't overschedule don't stretch so thin so that if a storm pops up, boom, it's a bunch of dominoes falling down and the airlines, i think, are

getting that message, based on the people i've talked with in the industry, they're much better scheduled in terms of this summer than they were last summer >> we still have some supply issues here. i'm just talking labor and everything else, and you figure demand is really, really strong this summer. is this going to be a microcosm? >> the demand is there, joe. the demand is there. >> what are prices going to be when this is all said and done, with jet fuel and everything else i can't imagine the prices don't double >> well, i'm not sure if they'll double in the latest report from hopper, it shows that there is a limit in terms of domestic, how much people are willing to pay because we've seen domestic airfares start to edge down a little bit i've talked to a number of people who said yeah, i planned on taking a trip this summer not doing it there is a limit like all things, you will see people say "i'm not flying."

>> and you can't replace it with driving, it's just as expensive as flying. >> keep in mind a number of these trips were bought or booked several months ago. they're booked people have paid for them. they may not be crazy about the state of the chieconomy, but they're taking these trips coming up, the top risks for millio millionaires and then a mid-year market outlook from henry mcvey "squawk box" will be right back. time now for today's aflac trivia question. who is the longest-serving ceo in the world the answer when cnbc's "squawk box" continues the aflac pre-pain show. aflac! paul is about to suffer a shelf-inflicted injury. luckily, aflac will help cover his unexpected medical bills. aflac! maybe you could use the money to buy a step stool.

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who is the longest-serving skroechlt ceo in the world the answer, roger penske he founded and has been in charge of penske corporation for 42 years the latest millionaire survey showing a rising fear of recession. how are they changing their pl portfolios to adapt? >> this is a group that owns about 90% of individually-held

stocks so they really matter. they say inflation is the top threat to their wealth that's where they show inflation is far and away the number one risk to the economy. they also cite inflation as the top risk to their personal wealth ahead of the stock market most say the economy is headed for a recession this year, or that we're already in one. mil millionaires think inflation will be lasting, lasting a year o or two one in five saying it will last more than two years. most are very confident that the fed will be able to manage inflation. it is highly political democratic millionaires more than twice as confident in the fed than republicans and they are raising cash. nearly half say they have kept

more money in cash going forward. they plan to move money into short-term fixed income. tr when it comes to stock, twice as many plan to buy than sell but the overall allocation is a lot lower than it has been this is the most pessimistic we have seen in the eight years that we've been doing this survey >> that's a silver lining, i guess, to some extent. it's always confounding, because when the market grinds lower like this, you think they think they can't sell now, but somebody's selling to get us to these levels where we are. do you take this as a positive

>> you're right in that twice as many plan to buy stock than sell them but the overall you allocation is the lowest that we've seen. they're kind of sitting tight. it is encouraging that they say they're not selling. this is a survey we did largely back in may. so things may have gotten even worse since then but you're right in that we don't see panic with theis group we don't see selling we do see that they're going to see inflation going forward and recession's going to last. but you're right they're pretty much holding firm on their portfolios. they're staying the course >> i think we still have the view of a garden-variety recession, too and they aren't always garden variety. and if it's a recession with persistently-high inflation, then that's the death knell for financial assets that's why no one's stepping in here quickly and buying all

these stocks on sale for 50% some of the faevorite names are 50%, 60% cheaper than they were. is boeing bouncing >> and this is the group that typically would be among the first to come in we saw that, when we did an april 2020 survey, so theiis is during, we took the survey in march when the market was coming down we're just not seeing it yet with this market >> robert, did you say the survey we did in may or this is an update from one we did largely in may >> well, we go out, we go out largely in may, and with this survey, may and early june so it doesn't capture the sort of past two or three weeks of the market activity. that's my point. >> okay. good point

thanks, robert still to come this morning, the fed raising rates by .75%. but did they say and do the right thing? we'll hear from jon fortt. senator rob portman will talk about these issues and more the future this morning are sharply lower. we were up yesterday after the fed. futures were higher overnight. and now they're not. s&p futures down by 83 the nasdaq off by 307. "squawk box" will be right back. , the biggest accomplishment, the sale of a business, or an important event for their family. for them, it's the first and only time. we have seen this literally thousands of times, in thousands of iterations. ♪ ♪ i am vince lumia,

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the federal reserve raised benchmark interest rates .75% yesterday. the most aggressive move in 28 years and said more of the same could be coming next month did the feds say and do the right thing? jon fortt is here to way in. at the end i want to suggest a future for you >> always, hey, suggestion box is always open joe. >> way nup in the tree >> 75 basis points was the right move bit fed and chair powell's tone was just right on future hikes which j treasury and futures stocks responded the way they did

it's like disciplining an unruly teenager you've got to apply consequences that make their risky behavior more costly and lay down the law. but you can't go so over the top that you crush interest confidence and send them into a depression or steep recession. of half a percentage point seemed normal >> the important part, beyond the hike itself is the message is getting across. mortgage rates shot up to 6.28% on the 30-year fixed in anticipation of this homebuilder sentiment fell to the lowest level in two years. crypto's cooling headlines suggest the labor market might be loosening. overall, this economy seems to be getting the message that any more of this foolishness and you are grounded for a long time,

joe. >> couldn't you do the buck. >> you could say 100 or 50 you need a couple extra hands, maybe a foot >> you know, fingers on the other hand, joe to really get ahead of this, the fed should have gone a full percentage point i know there was no way that was going to happen. but the very fact it wasn't being considered shows how far behind the curve the fed might be a full 100 basis points would have been a scared straight, visit the prison experience for this economy and that kind of shock is probably necessary, pausbecause people still have this weird idea that recession isn't as serious as it is if policymakers had accurately gauged reality, they should have been at 75 all along and considering 100. i know, nobody wants to bring the hammer down too hard and

break the economy's stride but let's remember how spoiled things have gont too too many people have been rolling over consumer debt rather than rolling up their sleeves and getting back to work your mother and i won't always be here to bail you out. time to step up. 100 basis points did i lose themetaphor for >> i wish the fed wasn't such a big part of our discussion it's tough what tool do they have let's kill the economy it's counter intuitive that that's a good thing to do. today the u.s. open starts, phil mickelson is there

my suggestion is, is it okay is it terrible is it immoral? while the president's going over to saudi arabia, hat in hand, to ask for more oil, if phil mickelson, total earnings on the tour was $95 million that's a lot of money, but he's 52 years old now, and they gave him 200 million, he says this is for my family. what's right is it tokay to take that saudi money? what's the right snanswer or should they have said no? keep your money. i don't want your blood money >> a lot of people seem to come around to saudi money event limit remember elon musk and the funding secured? >> good on the other hand. i can argue, i wish those guys wouldn't, but then again, if you were 52 and you could get a lump sum 200 million, are you

supposed to say no on principle? >> i'm going to think about it, joe. >> will you think about it >> yes >> and we'll know the winner of the open next week could be phil, think about that. probably not, though i think he's got too many things going on too many questions being thrown at him thank you. is that water or coffee? >> tea >> or gin? >> one of each on the other hand. coming up, kkr's chief investment officer sres hahis outlook and talks about the rate hike and fear the of recession we'll be right back. ct hundredsa points like hrv and rem sleep, so you know all you need for recovery. and you are? i'm an investor...in invesco qqq, a fund that gives me access to... nasdaq 100 innovations like... wearable training optimization tech. uh, how long are you... i'm done. i'm okay.

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hello. everybody here for the interview? okay. what do you drive? i ride a jet bike. welcome back to "squawk box," everybody. if you are just warkiking up ths morning, you might be a little surprised with the futures lower. yesterday it was up a couple hundred points around 3:30 eastern time this morning the swiss national bank unexpectedly hiked rates by 50 basis points future does drop on it that news the bank of england also hiking rates, talking about how they're

anticipating a downturn for the second quarter, the quarter that we're in, gdp dropping by .75% right know we're joined by kkr's chief investment officer, henry mcvey, the author of the mid-year outlook report which leads with this message "walk, don't run. henry, pretty dire message that you're talking about you've never seen it this choppy in your career, tan's and it's for the adult swim in the pool and everybody else out >> in '94 we had a lot of tightening this is a similar environment. that's going to create consternation in the bond market where we differ is a couple things corporate profits declining. consensus is up nine and wall street thinks 85% of

companies are going to have rising margins i don't think that's going to happen in the inflationary backdrop that we see i think oil's going to stay higher for longer. particularly when you think about 2023 and 2024. our view is it's going to be sticky for longer. one because commodities, two, the russian invasion of ukraine and three, the supply chain. what did powell talk about yesterday. we're going to try to blunt demand he used the word, there's some things out of our hands. and those are those supply shocks so our view inflation does come down but it stays around and is stickier the good news is we're going to see a boom in services target's announcement that it had inventories up 43%, sequentially, that's a massive number there's a good slow down in the

u.s. economy, the european economy and chinese economy that's filtering through the numbers right now. that's going to put down ward pressure on inventories and create deflation anybody that's traveled or gone to a hotel or trying to go to a concert, ticket prices are going up meaningfully. there's still a lot of money in the system, consumers want to spend, but they're going to spend on services. that's going to drive the economy. but for wall street, most of the earnings come through on the good side. that's where we're going to see weakness >> a lot of people looking at this and thinking it's a pretty dire outlook, and there are a lot of bad things to come, nowhere to hide. but you say now credit looks like a better buy for you than equities >> there are a couple things i would note we do a lot of relative value, we manage almost half a trillion dollars across private and public assess. the front end of the credit card

and insurance companies. we are seeing some good buys there's value emerging in munis. most people think kkr is a private equity firm. that's, what people aren't talking about is what we've been doing across infrastructure, asset-based finance, real estate we're up meaningful year-to-date why is that? people can have pricing power, cash flow, up front yield, fan wed if we're right, they're going to want to own those assets the thesis was this is a different cycle. so we've been shifting i think the war in ukraine exacerbate exacerbate this idea of buying

security around everything we've been active around cyber security, supply chain management we're short houses we're short workers and vital commodities to create the decarbonization transition so all those are creating shifts in the economy you've got to be thematic, top down i heard your earlier speaker i think you've got to separate the signal from the noise on what people are doing. near term we should all be eyes wide open. the corporate profit estimates are too high and second is the fed is in an aggressive tightening campaign, something that most investors have not seen, last time was in 1994 there's a lot of damage that's occurred in the market 60% to 70% of the s&p's down 20% or more. that's typically where you start to see value come in, but you've got to be thematic you can't randomly go out and buy etfs and index

cap tech 127% of the s&p index you want a much more targeted pr approach you walk, don't run. we're not treating this as 2020. right now we are seeing value emerge, but we'd like to see the fed back offe a little bit. but we don't think that's going to happen until 2023 >> thematically, you like real estate and infrastructure. we'll have you back toosoon to k about that coming up we hear from orlando bravo.

as we head to break, here's what investors need to watch. jobless claims, housing starts elon musk is going to meet with twitter staff for the first time since he announced the deal to buy the company and kroger set to report sus.relt and then adobe reports "squawk box" will be right back. okay season 6! aw... this'll take forev—or not. do i just focus on when things don't work, and not appreciate when they do? i love it when work actually works! i just booked this parking spot... this desk... and this conference room! i am filing status reports on an app that i made! i'm not even a coder! and it works!... i like your bag! when your digital solutions work, the world works. that's why the world works

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meeting in berlin. leslie picker is there and joins us with a special guest. hi, leslie >> hey, mike, thank you so much. i am here with orlando bravo, the founder and managing partner of homa bravo. we saw the 75 basis point increase yesterday i'm curious, this news suggests that we're near a bottom is it present ago buy opportunity? or are we not quite there yet? >> first of all, it is great to see you, leslie, here in berlin instead of puerto rico like we spoke about before and look, you and i spoke about it growth at all costs is over. that's what we said back then. and now everybody has got than memo everybody believed that.

thousand now where is the bottom here that is so difficult to tell there are so many things on the horizon. there's a big recession in front of us. investors want profitability in software and it's very hard to call the bottom of revenue multiples for these companies. investors are trying to figure out what is the bottom revenue multiple before these companies come in and get profitable >> what would you signal to exec executives right now we've seen layoffs in the sector there's more focus on ebita. >> i tell what you we do in private equity among the things that i did yesterday during my keynote speech on software is to celebrate private equity and

software because this asset plan runs great innovators in a really profitable way so it show it is can be done private equity is very small in software but it is to get really big. what we do, and what i would tell public company ceos, in times of crisis, it is much better to be overly conservative than overly optimistic that means that you re-forecast your business for a much more difficult scenario on the top line where you take out costs, and you do that decisively because if you're wrong and things turn out great, can you always readjust. but if you're right and things turn out to be quite difficult, you don't get behind your plan you don't really have to scramble thin, and then you have a big problem. >> so essentially, hunker down, because there could be more pain to come. i want to ask about elon musk.

he is meeting with members of twitter today. there were talks that thoma bravo was involved what do you think ultimately happens with this deal >> great question. first of all, elon musk is one of the greatest innovators of the century, and certainly one are the best operators he will make this deal work. we don't have a question about that i don't have a question about that and yes, we looked at it we looked at the deal in many different forms. we have a fiduciary duty to look at all the big december. adecemals. at the end of the day, when we

look at something adjacent to enterprise software and it's not exactly that, we revert back to our core competency. >> it's a matter of kind of the sector that they're in want to ask you about bitcoin another time unfortunately, we have to go this time. orlando bravo, founder of thoma bravo. thank you for joining us from berlin when we come back, we're going to talk energy picoly, inflation and more with senator rob portman. "squawk box" will be back after a quick break. son gave me a 23andme kit, it was a wake-up call. this father's day, start a new health journey together with dad with $50 off every kit.

good morning futures pointing to major losses when the opening bell rings. and a surprise interest rate increase from the swiss national bank overnight and just minutes, we will be talking inflation, surging gas prices and what if anything washington can do about it ohio senator rob portman will be joining us in just a minute final hour of "squawk box" begins right now

good morning and welcome to "squawk box" here on cnbc, live from the nasdaq market site. what happened? oh, santoli's over there they've got the camera right here >> you can touch it. >> i can i can reach out and touch. andrew is off today. the reason they moved that is you got out of the way let's get right to the markets what we've been seeing this morning, and mike's been digging into that, and you can show us in pictures. >> yes let's just track the last two days in the s&p 500 futures, joe. it's dramatic enough for context, coming into yesterday's regular session, the s&p was down we at 4100 last thursday here are the gyrations typical of a fed announcement.

mostly as expected a little hesitation. you got through the j. powell, fed chair's press conference and relief at the end of the day the big catalyst was out of the way. treasury yields came back in a little bit what we did see, things fall apart overnight, 3 c:00 a.m. is when the swiss national bank announced an asset hike of its own. volatility as the central banks are in hot pursuit trying to get control of inflation the bank of japan with a big decision coming up as well that has put the s&p 500 futures right around the lows for the week, 3700ish is where things did bottom out a couple days ago. take a look at the two-year treasury yield, this is what

sectiois expected over the next couple years. it judgmemped on news that the was going to raise rates and then we've got lift again. the fact that yields are going up take a look at the german ten-year yield this is dramatic, a decade-long chart. less than a year ago, let's say ten months ago, were you at negative .5% that's not a big number in absolute terms but look at the velocity that mirrors what's going on in developed market moves you have another gut check in stocks to see how much we've priced in. and the stubbornness of inflation on the year side >> we are in mid swoon in this most recent downturn, which i guess could you say started

thursday but it had bounced a little from the lows, mike, and then we got back above 4,000, and then it started in earnest last thursday and except for a brief respite yesterday, fundamentals are not going to cut it. you have to read the technical tea leaves and katie stockton's going to be non on in the 8:30 hour. if fundamentals can't really explain things, that's a good place to go just so can you figure out, i guess it measures investor impulses and -- >> supply and demand >> supply and demand >> it's trend. and the trend is decidedly lower. the rallies have been very brief, 4, 5, 7% rallies along the way since january. none of them have held,

things get so desperately oversold and you have people indiscriminately liquidating you say fundamentals don't matter can you believe the earnings estimates? if you can we're 15 times earnings. doesn't mean it's cheap on an outright basis, but that's one thing to keep in mind. >> when you live with the fed and die with the fed, we're going to return to that. and as long as j. powell's saying, ye as little more sanguine about whether we can harness inflation. >> ultimately, we do one of the silver linings yesterday was what the fed itself was projecting for the year-end levels of fed funds rate and things like that was

not out of whack with where the market had already been. we're waiting for the moment where the market is in tune with what the fed's going to do and that seems like maybe it will be enough we'll see. >> at this point, we need to keep thing, all our opinions are transitory that word is still in the dictionary so we're going to change transitory and data dependent. >> central banks are the story of the day, the week, the month. the year, hopefully not the decade steve liesman joins us with his insight on some of this too. kind of getting whipsawed this morning. >> investors learning there's no place to hide around the globe from rising rates. swiss national bank surprising with the rate hike taiwan raised today also the brazilian central bank to raise next month all of this on the fed's expected surprise of a .75 basis

point hike >> clearly today's 75 basis point increase is an unusually large one, and i do not expect moves of this size to be common. from this point today, a 50-point or 75-point hike seems likely >> the fed is no longer in dream land thinking it can solve the inflation problem with a few modest hikes you can see that change by looking at the new median funds forecast it was 1.9 for this year, now's 3.4. a lot closer to where the market is at 3.6. it's at 3.8. the market's at 4. so a better meeting of the minds

here ther then you see the rate cut the long run remains the same at 2.5% steven stanley writing, the fed is attempting to gracefully stage manage what is in reality a panicked rush to the end of easy money he held out hope a recession could be avoided becky? i know you're talking to rob portman later about institutional reform >> we were going to talk about inflation and oil prices go ahead, what would you like that hear? >> good idea though. >> if you're going to reform the fed, what it did, the mistake it made is what every institution make the idea of fighting the last war comes from the army. powell had the perfect policy, i think, for fighting the great financial crisis, right? but he didn't count on fiscal coming forward so what we need to talk about is

how should the fed respond when the fiscal sidesteps up. should the fed have started to hike or ease back on stimulus once the trump administration and biden administration came forward with big fiscal packages >> which gets to the point of is it a political institution it would have been very difficult for j. powell to do that, especially when he might not have been renominated for another term, had he done that and got against the administration's wishes. we can say it's non-political, but every job is >> they don't exist in a political vacuum, that's for sure could you have said hey, we need a six-year term for the fed chairman i d i don't know maybe that's possible. we try to stag terger it with administration but i don't know if you want to

geof give that kind of tenure to an unelected official was powell, were people inside the fed that powell was not listening to saying you're flirting with a real inflation problem if you do for example. 120 billion. where did that number come from? why was it open ended? why so much in the way of mortgages? i have a lot of questions here he needs to answer them. >> they're good questions. >> then we'll get g williams for six years. >> or burns. >> we could get stuck with a lemon. >> arthur burns. >> steve, thank you, look, the fed just catching one what the market was already saying. i was just saying it's kind of like when analysts change their price targets. >> i will say this the fed, who's catching up with whom is another thing we can talk about i think the market adjusted when

it bri it believed the fed was going to adjust as well when we come back, we're going to speak to ohio senator rob portman on the fed's interest rate decision record high gas prices ideas for bringing down inflation and fed reform first as we head to a break, let's get a few of the other top business headlines a source telling cnbc pete buttigieg will be meeting with the u.s. airline ceos today to talk over summer travel, the goal to avoid issues over the july 4 weekend similar to the problems experienced over memorial day that means staff up, make sure you have plenty of backup plans. elon musk expected to reiterate plans to buy twitter today and struggling with a $3 billion debt load, revlon, filing for

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our next guest, one of the top economic voices in the capitol says he wishes the fed would have acted sooner on rate hikes. we had a conversation with steve liesman about things he would like to hear from you. and that included what's going on with the fed. is there, what went wrong, why weren't they able to raise rates sooner what do we do about that? >> i heard what steve said about institutional reform i'm not saying that's not helpful. but becky, it's not really about reform it's about reacting to the obvious situation, which was that a year and two months ago when the $1.9 trillion stimulus package was put out, people said from the right and left, and democrats and republicans, larry summers said look, the economy's

already performing welcoming out of the pandemic. all of the indications are that we will be back to pre-pandemic levels by mid year this will overheat the economy if you put this kind of stimulus out. so i think was pretty obvious what was going on. at that point, it would have been more helpful if the fed ha had taken action you can armchair quarterback in retrospect but that was the moment. and i don't think it was necessarily in 2020, but in early 2021, it was obvious we were seeing a big mismatch between demand and supply, and that's when they should have acted in my view >> senator portman, we've made the point repeatedly that the fed doesn't have the tools to deal with a supply shortage. the only thing they can do is smash down demand, and that's pretty painful can reelead to downturns,

recessions and we're wondering khow that landing is going to be. >> now and again, the fed by t auah authoritiry language, this is not just about monetary policy but fiscal policy, energy policy he didn't use these words specifically but policy changes to improve on the supply side. the situation we're in is caused bay by a lot of factors. most of it i would argue is because of bad policy decisions. one, the administration way overstimulating, the biggest spending bill in the history of the country, chock-full of stimulus less to do with the pandemic and on the supply side, the regulatory efforts this

administration has take n to add regulation, what they've done to the oil and gas business, we're short where we were pre-pandemic we are not reaching our capacity yet, why because the administration gave signals like saying we're not going to produce more on federal lands or federal waters and stop the investment in the production side i think the fed does have a role there, and i'd be happy to hear the fed talk more about the responsibility that congress has and the administration has on the policy side. >> that's interesting. have you made those thoughts known to anyone at the fed >> well, i just did. look, i think it's important that the fed speak out clearly in terms of maupt policy as their job. but my point is that they also have another role that they can play, which is to say this is not all about monetary policy. we have limited tool

fiscal policy, monetary policy, tax, stimulus. there's talk thonow in congress about another build back better plan >> president biden sent a letter yesterday to the energy companies, a lot of different oil companies, saying that he would like to see them get back into the position of bringing more refineries online quickly not so easily done maybe avoiding some of the big are prbige problems how effective is that? >> i saw that the oil and gas companies came back with a ten-point plan, and part of that is hey, loosen the restrictions on energy resources on public land and public water. what the companies are saying clearly is we need to have more certainty in terms of making the investment, and i think it's going to happen.

it's going to happen more slowly than anybody would like. that's just the way the market works, but it's no wonder, when you have an administration that comes in, day one, says we're going to end xl keystone pipeline after billions of investments on the private side, and then we're going to close down this waters of the united states effort. and public lands and public waters and to say we're going to have a halt here in terms of new exploration and production it's this we're going to make the transition from fossil fuels to greener energy right now. and we're not ready to do it right now. certainly not at the time when we have this increase in demand based on the increased stimulus. it was a bad policy decision that's now affecting middle class families in my state and around the country $5 gasoline, 8% inflation.

things like food and clothes so it's really rough on people it's the most punitive tax of all. >> senator, you've always been someone who i think is very reasonable, someone willing to work across the aisle and look at a logical way of moving forward with things but is there any talk of that sort of logic of people getting together on both sides saying here's where we're going to try to fix things to make things better? i just hear a lot of rhetoric right now. >> in this case it's going to be tough to do anything proactive, because we're nin a political year, unfortunate limit one is to unfortunately. if you deregulate as much as possible, in every sector of the economy there's growing regulation that needs to be pulled back.

and then in terms of where we go going forward with this package that's currently between the house and the senate being debated which is called the competes bill. that could help. that could actually be counter inflationary if it's done properly, which is to stay would increase the supply of things like semi-conductors there are some things that we can do that are very much in the process, because you have republicans and democrats trying to work out a compromise my hope is that the house democrats are willing to be more flexible because we had a quite partisan bill out of the senate that was negotiated with democrats and it got 19 republican votes. we need to stick with that, but it would help somewhat and send the right signal to the markets. in terms of specifically ensuring we have supply chains for some of the products like

semi conductors. that's one thing congress could do in my view that would help. >> what's the number one complaint you hear from constituents >> gas prices. i got an earful from other whose were filling up their cars and trucks around me this is a killer people commute to work people on fixed incomes. young people i don't know how people can do it because it's take ing a huge bi. i had the truckers yesterday talking about $1500 to fuel up i think fuel prices one, and second food. people going to the gross cery store and looking at a huge increase in the price of basics. that's the number one issue i'm

hearing about. >> an economist looking at core inflation, it's everything but core >> unfortunately, it's an election year. you want to change that? >> well -- >> just giving you the opportunity. i think we're fortunate it's an election year. reevaluate >> look, i guess we'll see a change in the house, maybe a change in the senate certainly a change in the house, and that will help that hadwill put guardrails on e administration, but it doesn't keep things from that aren't a result of legislation. the administration has to look at this inflation issue as an opportunity to deregulate. to increase them on the supply side and dial weal with the mis between supply and demand. i think we're looking at

unfortunately, another quarter ofegiv nate economic growth. >> senator, thank you. "squawk box" will be right back.

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welcome back to "squawk box. rick santelli here, live at hq with the breaking news for this thursday our may read on housing starts, a huge miss, 1 million we were expecting 7 million.

but 1.549 is the lightest rate since april of '21 if you look at permits, a really big miss there and a subtle revision the important thing here in some level is the fact that permits are still running ahead of starts, that's technically a good sign, but we can see the deterioration there. if you look at philly business outlook, the june read, the first minus numbers since may of 2020 on initial jobless claims, they move to 229,000, and they stood at 229,000 they're unchanged until the revision comes through the lowest level in post covid going back to the 1960s is 166,000, and that was in march of this year finally, continuing claims to weaken arrears, 1,312,000.

we're a bit above the historic lows there which was 1,306,000. we had it back to back two weeks ago wasn't that stands the low. these numbers on continuing claims go back to 1967 we see interest rates have moved dramatically higher, but really it's all relative. yesterday's rally in large part was due to the way the yield curve moved. yields dropped rather aggressively they're back there's an easy way to look at this i said it many times during all the great days of that full punch bowl that all stimulus is fungible if one country add s a lot of

capital, it float around the globe. when that ends it is widely shared and all of this shows that there's no free rides when it comes to stimulus. there's a price to pavey. steve liesman join us now. liesmania. >> i'm interested to see the level of claims ticking up remember it was running above 200, in the 230 area i'm not worried about this level yet. i think what we have is some, a little bit more churn in the job market there are some sectors like housing and tech being hit on the head by what's going on with interest rates and some of the weakness in the economy here, that's going to mean people are going to lose their jobs hopefully they find them

someplace over time. hous housing is a real pity interest rates are high, but what we should be having is more supply that's area where if you had your druthers, you'd say yeah. we want to take the froth out of the housing, but what we don't want is to ruin supply, and you can't help that, because a blunt instrument of the fed. i hear a lot of talk about people wanting a big washout and hoping things go back to the way they were. i don't think they're going back to the way they were the swiss national bank raising by 50 basis points other central banks raising, i think we may be in the beginning of a period where we are going to eityxit the era of easy mone, where we don't have a positive curve. that's going to change i wouldn't be sort of saying

well, when do we reach the bottom and then we can go back to the way things were i don't think that's going to happen >> all right, steve, we're going to continue this conversation. because it's front and center. thanks joining us now on the markets, the state of the economy and the three big central bank hikes, mohammed al erian. it's always been the case that the path to a potential soft landing was going to be narrow, in doubt, bumpy. there seem as fed acknowledgement there or an assessment of what price may have to be paid. what's your assess month how powell addressed it yesterday. >> this is the great awakening the great awakening to central

banks due to the fact that they are way behind on inflation. words are not enough, actions are need and whether it's the 75 basis points i know it's strange, but it's more significant than what happened last night. >> why is it more significant? >> because the swiss national bank always fights a strong currency a way to get ahead of the ecb and hike 25 and not 50 shows that we are in the midst of a fundamental regime change. >> historically, snb is more in l line with what the fed does or the ecb does >> the ecb does. too and to get ahead of the ecb is significant. >> is it because they think the

enter ecb is wrong >> they're worried about the italian spread, that they're making monetary policy, and b, n nobody want as weak currency they look at japan, the united king do kingdom. they don't want to be that >> it's crazy. can they ever get it right used to call multi-speed economy. >> that's one, but i think l and jit's time we exit this artificial world where everybody gets used to zero interest rates, where we do silly things whether it's investing in parts of the market we hunshouldn't be investing, zombie companies, we are exiting that regime, and it's going to be bumpy >> it's going to be painful. we've tried to minimize the pain

for what, 13 years is there a day of reckoning? it's now >> yes, 8.6 inflation is a day of reckoning you cannot ignore 8.6% inflation. >> there's a waive pry of prese things financial conditions have tightened a lot. yes, it hasn't been just words, but the words over the last six or seven months have gotten mortgage rates up where they are. we saw the effect on new home sales, credit spreads and things like that. the move from very easing levels to neutral has been dramatic does that leave us in a position at some point in the relatively near future where the fed can say maybe we'll see how this plays out and see if growth can survive it >> no, because if the fed doesn't validate the markets, then we get an even more disorderly outcome

one, financial condition type. two. have they tightened in an orderly fashion or somewhat of a disorderly fashion we are more toward a disorderly. three, has the fed been leading the process or lagging the process? and the fed has been lagging the process. as long as the fed lags the process, it's going to be problematic for markets. >> we were talking about this earlier. the fact that powell is leading quite a bit it seems on the inflation expectations factor. and especially from the university of michigan gas prices at the same time, he talked about you have headline inflation. other commodities by the way well off their heiighs

it's really energy drive things they can do what they can to suppress demand across the economy, but if gasoline and energy remain stubborn, they're going to overtighten at some point? >> they have no choice we have been talking about everything else, but when inflation is this high, it is headline that matters. people's expectations are managed by headline. if headline stays high, i not only come to you as my boss and say compensate me for past inflation but future inflation that's why the focus has changed. is it a trap they didn't respond. and now whatever they do -- >> what are the chances that the fed gets a little bit lucky, inflation, there are signs that it can maybe settle down a little bit through the summer of course

maybe you're going to get another 50, 75 in july, but beyond that, are you seeing inklings of that at all? >> i worry if we see it, we will see it for the wrong reason. we are getting consistent signals that the economy is slowing. that affordability is eating into demand. if that continues, it will tamper inflation but for the wrong reasons. we then end up with another problem, which is dealing with a recession. my great hope, and i don't think it's going to materialize. my great hope is that somehow the fed can buy enough time without inflationary expectations getting out of control. but now all of us are going to be talking about five to ten year michigan surveys. >> right especially when you look at the market that look less troublesome. >> is that right portman was just saying the number one complaint he hears from his

constituents is about high gas price. number two, food prices. >> correct >> people are feeling it when they feel those things, when they see those things. that catches them every day. >> because demand is elastic what does it mean? we continue buying even though prices are high. so we crowd out other purchases. and we saw that in the retail sales number and this inflation hits the poorest technically hard there is a whole angle we have to take seriously. >> the cure for high prices is high price, because you get more production normally, that's what we would count on and time heals that. i worry, though, that, about a lot of the overregulation m the industries that we're talking about where we need the production i hate to be at 8% a year from now. that would be tough, because i don't know how many, i don't know where we'd be for rates. >> if we have 8% inflation in a

year from now, we will break quite a few things, not just in the markets but economically >> will high prices cure high prices this time around? >> so high prices always cure high prices while destroying the market you'll see the commodities, but that's not how you want to solve this issue >> the supply comes up people say hey, look what i can get for copper i'm going to go start another mine >> takes time. takes time >> the fed officials have consistently said we're operating from a position of strength the economy had momentum coming into this year corporate balance sheets look fine you don't see the excesses having built up. that may be true, but it's also what they would say maybe if it weren't true and you have this idea that the fed is targeting job openings. and that's not going to sacrifice people who hold jobs now. and the numbers yesterday, they

acknowledged that maybe they expect unemployment rates to drift higher can we take any comfort that on a nominal basis the economy had a little momentum? >> job market is strong. we need a more honest fed. we need a fed that first acknowledges why it got its inflation forecast so wrong for so long. until it does so, it's not going regain credibility it has to be honest. a lot of people criticize the bank of england for being honest, but that's what you need it's an apolitical institution otherwise you mislead people and get a really negative reaction >> mohammad, great to see you. >> thank force having me when we come back, katie

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all right, let's get down to the new york stock exchange and check in with jim cramer i've been waiting to talk with

you. how to you read it >> it's interesting everyone could be so wrong last night or this morning this stuff started 4:00 a.m. we'll know when europe closes how much of it is europe i parsed every single word of the fed yesterday and dealt with a rlot of companies subsequent. he is targeting the notion of jobs he wants to end job hop. powell said i will take as much unemployment as necessary to stop inflation i don't hear enough people saying that. i think he can get away with it. but what mierk said is just true if can you get that demand down by having a lot of people be laid off and not being ailble to job hop for higher wages he wants to be bailey and not potter that's a hard thing for him. he's more george bailey like than he is henry potter.

>> but he may seem like potter, but what you're trying to do is stop this inflationary spiral, and that hurts everybody, especially those at the bottom rocks. >> i think's interesting, until friday's number, you would have said i've been listening to everybody this morning most people think he's a fool. everyone wants to know how he could be so wrong. that's kind of -- you know, it's ill-advised to say that. let's look forward i wish he hadn't say, listen, 75 he keeps doing this stuff. he makes his life so hard. say listen, we'll do whatever it takes to make so it inflation comes down, even if we have a big unemployment problem he won't every time he's about to really get serious -- he has to stop being george bailey. there's nothing wrong with being potter right now as bad as potter was because he needs to be able to say, listen, i have

to side right now with the side that says we have to kill inflation, even if it means we have to take a lot of jobs lost. we can do that because the economy is so strong every time he gets there, he pulls back >> taking the explanation a step further and explaining he's doing this because he doesn't want to hurt the people at the bottom rungs, continuing to spiral >> he even looks like jimmy stewart. 's got to stop being like george ba bailey >> jim, thank you. we'll see you in a few minutes lle stintoeathe rest office full of peyton mannings. what's up, peyton? good morning, peyton. hold for peyton. they'd huddle.... welcome to the peytonverse. such a visionary. game plan... you go. no, you go! and call audibles... double our investment in omaha! omaha! omaha! omaha!

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futures pointing to big losses joining us with today, a technical look at the markets, katie stockton it's still fresh in our minds what you said. lit's talk about what has changed in the last couple sessions the oversold conditions short term are probably more

pronounced at this point, which could be more widespread and you say until momentum changes it doesn't even help and these type of oversold conditions can be sustained for a while. >> that's right. we look for oversold buy signals in uptrending markets, and yet in downtrending markets like we have now, the personal ingredients aren't necessarily a good thing we have an extreme reading from measures like the percentage of stocks in the s&p 500 that are oversold based on their daily fantastics for the tech nixes. that is around 90%, a reading rarely seen. the first instinct is to react to that and say an oversold bounce is likely and we'll see a rebound in the coming days, yet that rebound i think would be very difficult to trade and, you know, so much short lived in the big scheme of things with this downtrend still very much supported by negative momentum across time frames

we also had on tuesday the most oversold extremes registered by the market internal measures that we track since the covid pandemic low and, again, the inclination is to think that's a positive and yet even at that low, those conditions have been maintained for about three weeks, and of course we're in a worse environment now that is really something closer to 2008 in the way it sets up in 2008, for one, the percentage of stocks above their 200-day moving averages got to zero and it's currently around 18%. so, oversold can obviously get more oversold. >> we haven't seen any type of signal from the vix that it's gotten to the point where the oversold condition would change to maybe a buy signal either >> that's right. it doesn't show the capitulation as of yet. it does have upside momentum supporting a test of resistance for the vix, which is roughly

38 and if we were to see it clear that 38 hurdle, then that might be indicative of a spike from higher levels. but of course it doesn't -- >> yeah, i don't even want to -- give me an idea where the s&p would be if it hit 38 on the vix. you're talking some of your initial support at 3,500 and then even maybe better support at 3,200 on the s&p. that's where you perhaps see 38 on the vix >> that's right. so, i think 3,500 would certainly be enough to do it, just shaking people's confidence what i've noticed from a bottom-up perspective is a lot of needs, especially on the high-growth front, are still actually above their main lows i think that might be giving folks a sense of safety, like we don't have new breakdowns unfolding, but there are so many that are right on support that even a day like today where the futures are down 1.5%, 2%, we could see these support levels take that.

so it's very fragile, i would say, for the s&p 500 if we see two weekly closes below 3,815. that's a breakdown to us and would target the 3,200 level in the coming months with support at 3,500 it suggests there's more downside risk and to not get that false sense of safety from the oversold readings. >> same story with bitcoin 19-5 still in the cards for you now i want to get on the 10-year. >> that's next support and it looks like it's in the cards bitcoin has outperformed ether it suggests we'll see more the same risk off in the cryptocurrency market. the treasury yields have cleared that pretty decisively and that breakout, if it is confirmed, it's likely to be a closing basis. it puts next resistance around 4% these are really meaningful

numbers. >> that sounds like the bond market's in the same state as oversold but heading lower >> and it's really interesting we're seeing from the indicators a lot of countertrend signals on the macro front. bonds have buy signals yields have sell significant nams the dollar has sell signals looking at the dollar index. we still suspect we'll get some digestion here with sideways choppy action from the likes of treasuries and also the dollar, and yet it hasn't tested itself yet. >> katie, thank you. good to have you on, and we will hopefully revisit soon, and someday you may say something is different. but here we are. thanks, katie. a final check on markets dow down 500 points. as you can see you heard katie talking about some of those numbers on the s&p we're nowhere near 3,500 yet,

much less 3,200. >> 200 points above 3,500. >> and then 4%, 10-year? we'll continue coverage with jim and carl and faber and everybody else looks like a tough session join us tomorrow the sun will come up that's about it. "squawk on the street" is next good thursday morning. welcome to "squawk on the street." i'm carl quintanilla with kjim cramer and david faber the bank of england and the swiss hike interest rates adding to brazil, taiwan, and the fed philly housing starts disappoint oil is back to $113. we begin with the post-federally reversal, futures pointing to a sharply lower open with rate-sensitive tech stocks