good wednesday morning welcome to another hour of "squawk on the street. i'm carl quintanilla with sara eisen here on the floor of the new york stock exchange. bill nygren, why he is trimming netflix and using the cash to buy some banks >> speaking of banks, an exclusive interview with the ceo

of pnc, deposits actually rising there since last quarter he joins us live right here at the new york stock exchange. >> and finally, tesla cutting prices in the united states for the sixth time this year, ahead of earnings after the markets close. morgan stanley's adam jonah says that deflationary trend will continue we'll talk about it. >> 90 minutes into the trading day, and stocks are in the red but they're off their lows we have seen a little bit of recovery in the last few moments. earnings from morgan stanley and netflix weighing on investor sentiment, although morgan stanley did turn around and is now positive that's where we'll begin today the company's ceo, james korman, saying on his conference call that the federal reserve is not done with rate hikes and we could see one or even two more he certainly doesn't expect rate cuts this year treasury yields are higher the 10-year and 2-year now at the highest level since mid-march. mike santoli is with us. we always get into this thing, where the market talks itself into rate cuts and gets all excited about it and then the fed comes out and

talks and we get some data and it goes the other way. >> this was the reminder, i think along with the uk inflation number overnight, for those who needed it, a reminder that the fed remains many play that central banks are certainly not declaring victory, not done. if you look at how the yields have behaved, we're still one rate hike less than we were before svb failed, right so march 8th, if you look at the six-month yield, the one-year t-bill yield, you still got that one hike out of the market, at least by that measure. whether we get to cuts, i think that's for another day it's too far into the future the six-month yield is building in some debt ceiling weirdness you have to take that into county when we're getting towards the june fed meeting i think it's a reason at the top end of the range for the s&p 500 to say, okay, we've been digesting for a couple of weeks. it makes sense we're up 8% off the mid-march lows and so we've had a lot of back and forth, company by company. i think to me, the big takeaway

is, it's been relatively normal bafr stocks and sectors moving on their own, in response to fundamentals it's not macro, risk on/offtology at least right now and that would still be the case if we got a routine pullback as opposed to something where all of a sudden, it's, oh, no, the fed wants a recession and we have to panic. >> meanwhile, a lot of the desks last couple of days have talked about hedge funds, maybe getting a little bit of duration or length on this fomo idea, because earnings are not coming in as the disaster some thought they would be. >> feeling the need to participate, goldman had some of that data. and to me, it's the fast money, the tactical players like hedge funds have felt force to get more exposure and grab for it. i don't think the slow money has done that, so the fundamental investors are still saying, cash looks okay here. and what are we talking about? at least i have all year, is people discovered 4 to 5% safe yields, and thinking it was a magic trick. thinking, it's such a no-brainer to take 4 to 5% for this year. and what did the market do went up 8% in the third of a

year that shows you, it's never going to be comfortable to sit in cash if the market will rise. >> gorman, part of his comments this morning are, yeah, it's rationale behavior to chase that, but people are not going to stay in cash at 4 forever >> if the market looks like it can take off but you can't look at it as either/or. if you've got the 4% in cash, your next slug of cash can go into the market. you can support more equity exposure if you have a little bit more of a cash cushion there. >> everyone is excited about earnings being better. the financials are showing some relative calm in stability but i don't know if you saw cdw. this is i.t. software provider good barometer for business investment it was very much weaker than expected they talked about how companies are really pulling back and only doing, i think the word was mission-critical spending when it comes to technology and i'm not sure that that is baked in, if that is some sort of tell or bellwether. we'll get ibm after the close today.

>> i was going to say, we're on alert for that right now and you have to hear by company by company >> there's cbw >> and as we've talked about, financial services are the biggest buyer of at least software >> tech services >> thanks, mike. another rate hike in the cards, perhaps yields moving higher, as sarah said earnings season in full swing. where is the opportunity in today's market amid the banking turmoil. our next guest is adding to some names includie schwab and wells joining us this morning, bill nygren bill, great to have you. it's always interesting, given your long-term view, when you start to make some of these shifts, what brought this on >> well, carl, thanks for having me at oak mark, what we're always trying to do is invest the portfolio and the stocks that are at the lowest percentage of our estimate of intrinsic value. we really like netflix as a company. great admiration for the

management we're all users of the product and love it. and when that stock us with trading under $200, we thought it was at a bargain level. as it's gone from $200 to the low $300s, we've also seen some of the banks lose 30 to 40% in their market price and we think that was an overreaction to concerns about svb and the big banks, we think, really have very little in common with svb. so for us, this is just a very natural transition, because we tend to be anti-momentum investors, because we're looking for the best values. >> as you turn your attention -- you're obviously quite familiar with the financial space, but as you look there, is bigger better >> i think bigger has been better in financials for a long time the start of my career 40 years ago, there were about 14,000 banks in the united states that number now is down to about 4,000. the reason that happens is

because large banks are much more efficient than small banks are. anytime you have a merger of equals of banks, they expect to save something like 20 to 25% of their non-interest costs so the economic advantage that

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so here's the average size of silicon valley's deposits was measured in the multiple millions the average deposit account is $is 11,000 we have over $100 billion in fully ensured average life of our customer being with us 14 to 18 years, it's a wildly different model. that bank quadrupled size in two years with uninsured despoz sits of giant size. it hz nothing to do with what we do every day when we come to work

>> your stock is down 20%. you think it's wall street misunderstanding the risks >> i think some of it is correctly looking at higher for longer interest rates and the cost of raising depositisdeposis our multiple contraction issue is a little bit about this the headlines there's a banking crisis and thinking with a term regional and nobody knows what regional means and it's not globally systemic, so therefore, it must be bad it's absurd. and i'm personally biassed it will all sort out people will figure out what's happening and over time will be great. >> one thing that worked in your favor in terms of the branding and the optics is you participated in the deposit injection into first arepublic along with some of the biggest banks, which put you in the

category of we're the strong ones, we're doing okay what's going to happen with first republic bank? >> i don't have any direct insight into that. they have unlike some of the others you see headlines on securities that are held maturity or available for sale, they kind of have the old-fashioned problem of savings. they have mortgages funded, and i don't know what will end up happening to them. we were happy to participate in calming the storm a little bit they are a great franchise i hope they work their way through this >> what's happening? there's also a big fear now that banks like yours and others are just going to stop lending >> that's a good fear. the fed, first of all, through qt and the reverse facility, just growth and money funds ask interest rates being higher has drainedly kwidty out of the banking system the fear factor of being caught out and deposits shrinking is causing banks to full back

that's a real issue. we need to get through this period of time so banks get back to the business of being banks to support the economy >> so does that mean you have really pulled back on the loans? >> we haven't. if you look and watch what's happening with particularly the mid-cap smaller banks who are all the spotlight on what your deposit dots this quarter, we grew -- we're the only bank that our average and spot deposits grow quarter on quarter going back to when i told you in january that deposits will matter so we have been at this for awhile we're going to keep lending. >> so you and others are increasing the provisions. the qualities held up willwell why do you think that is >> corporate credit, we're coming off a period of record profit margins for corporates.

largest hedged out turn interest rate exposure. you're not going to see -- rates go up if the economy slows so they will reshuffle the deck and move on. >> everyone has to break out their office exposure. what does yours look like? >> that's why we highlighted it. by the way, there's going to be losses in it we showed in our earnings we break out office, we break out multitenant big part of our portfolio is government in washington, d.c. so not terribly worried about that but you get a multitenant occupancy of 70 rs% leases are

renewing 15% less than they used to the tenant improvement costs are 20% higher than they used to it's largely garbage so we literally building by building reunderwrote all our office properties. we're fully reserve d defaults and sells it at 30% on the original appraised rattle value when we underwrote the loan. we have 10% reserves against our full te than the >> you feel prepared >> we're going to charge stuff off. it's going to be volatile. it's not going to -- we already reserved for it. >> you think the economy can hold up and avoid a recession in this kind of environment >> probably not. we expect -- i don't know what a shallow recession is

but what i think a that is a strong labor market offset by slower, lower gdp in certain sectors. >> should the fed keep raising rates? >> right now, we have the next 25 just like everybody else. the market is over there i i think they are going to stay higher for longer. think inflation is there >> you don't see any blowoffs? >> there could be a couple more. but i think it's not the system. remember the banking crisis, financial crisis, think about ta that was all about residential mortgage and everybody had the same thing these are banks that grew double, triple, quadruple touch, no risk management, on their own.

it's we appreciate the thoughts going on >> thank you very much for joining me ceo of don't call it a regional bank we're going to continue our coverage of the banks tomorrow at 11:00 the ceo will join us after its results ahead of the bell. >> still to come, netflix planning to start its pass word sharing crack down of the united states don't expect a jump in revenue right away we'll talk more about that plus watching united posting that net loss to start the year, with us they did forecast a return to profit in the coming quarter. scott kirby says the corporate customer bookings were weak. some impact from silicon valley bank we continue after this

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restrictions today this comes two weeks after a texas judge ruled to halt access to the abortion drug nationwide. the court temporarily blocked the decision on friday so justices could review the case heavy fighting continues in sudan after an international ly brokered truce fell apart. the conflict caught millions this the cross fire as rival groups battle residential areas with airstrikes. according to united own envoy, 300 people are dead. over 2,000 wounded since the fighting erupted ukraine's defense minister says u.s. made patriot missile s systems have arrived in the country officials haves previously said the systems would be a boost in the fight against russia this marks the latest contribution from western allies who pledged other military equipment. back over to you welcome back it's good to see you time nowfor our story abroad european markets are mixed here in into the close as investors

digest higher than expected uk inflation. that's the story abroad today. cpi dropping to an annual rate of 10.1% that was well above the 9.2% forecast looking through the numbers, household services seeing the biggest jump up 26% food and beverage up 19% things like sugar and oils up 40%. restaurants and hotels jumping 11%. they are pricing a 72% probability that the bank will hike by another quarter point. the pound is moving higher as a result it was sharply high er early it's come down a little, but treasuries moves on this our wonds here in the u.s. sold off because the idea is, oh. is inflation happening fast and far enough for the federal reserve and others to really pause. now they are worried about the economy. the whole worry about slower growth and higher inflation,

very much alive in the uk. it does make you wonder how fast it's going to come down for us when food are the culprit. >> food is the problem the strange trade was the fact that west texas and brant cracked below the 200 day. and as for gas, record storage for any april going back to 2011, imagine how much worse it would be if they hadn't as assembled so much gas in storage. >> it's why europe has remained resilient. the fact they are storing it and we have seen prices go down. i feel like the market waivers as far as the oil prices and equity markets between this idea of softer growth and recession and higher interest rates. and inflation sticking around. higher for long er they are going to stay high. >> the best part was him shaming what he basically called adolescentbanking practices

>> wanted to draw a clear line between how they handled what they should have learn ed in business 101 on how to do banking and manage their interest rate rask and all the worries about regionals. he was pretty up front up next, morgan stanley says competition from china will be biggest reason prices fall that's when tesla reports. check on stocks here down 124 on dout s&p 500 down a third of 1% you have a in the more defensive groups like utilities and real estate it's being offset by weakness and energy, technology is lower today. consumer discretionary materials and the banks. we'll be right back. we planned well for retirement, but i wish we had

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for today's from the desk of, let's turn to a chart. take a look at netflix after reporting that revenue missed for the first quarter. stock did rebound, but it's been sloping down this morning as well there's some optimism on the street ubs upgrades noting they expect revenue to reaccelerate as content stabilizes the company noted the content spend dropped more than 30% year on year. that helps their push to more than double free cash flow let's bring in julia the miss was based on third party estimates that need to

refine their own models. >> just to update that, we had seen data from street account that indicate d that the company had actually reported far more subscribers than anticipated, but in fact, the subscriber for the quarter were pretty much in line at 1.75 million so that was actually an in line number there's a broader question, do subscribers matter as much anymore if there's this increased focus or does the number of subscribers matter if there's this increased focus on revenue and profitability. and this question of what's going to happen when they roll out this crackdown on pass word sharing. they seem optimistic they will see an uptick in revenue and a result of this crackdown on password sharing that will really start in the second half of the year. that's one reason why the guidance for the second quarter was lighter than anticipated we won't see the positive

benefit until the second half. >> then there's the new ad tooer, how is that going >> well, they did write down exactly how much revenue they are generate ing. i would love to see the detailed numbers, but the color was very positive they are going to continue to roll out more features they are working on more tools for advertisers so they could have more granular information about measurement, but they were bullish about that going forward. this was a small mention, but a very important one in the u.s., the subscribers who were taking the ad tier are more valuable generating more revenue for netflix than the people doing the subscription only option so they are laying out the a ability to reach more consumers but not to make less money from those sub skriebsers that's essential here to not be cannibalizing the core business, which is the ad-free version, but to to be generating more revenue from the subscribers paying less. a lot of bullish commentary.

between that and the fact that they are doing this crackdown on password sharing, this is driving the expectation from ubs as well as some other analysts that we'll will see a reacceleration >> the other thing we learn is we hit the story about the love is blind technical glitch. they talked about that on the call they put in some bug to try to improve the service right before and it went wrong. there was some scrutiny on how they would handle live tv. >> they said that this was a bug they didn't see in testing they seemed to try to reassure the street that the technologies there to do broad live events in the future >> yeah, they said they have the technological abilities this was a one off bug. they had success doing the live stream of a comedy special that worked just fine. so they took responsibility. they apologized and understood just how frustrated some of their fans were. but it doesn't sound like that's going to discourag and meghan,

second most popular docuseries on netflix >> you took that as a personal affront. >> i would have expected it to be the most popular given how much buzz. i don't know what the most popular is after that. >> julia, thanks let's turn to tesla. stock dropping this morning following price cuts ahead of earnings tonight chinese car makers are put ting part more pressure on the space going forward. he points to sea gull, a new model at the shanghai auto show. $11,400, nearly $30,000 less than tesla's cheapest model. let's bring in our own phil lebeau it's no wonder tesla has been cutting prices >> they are under intense pressure when it comes to pricing, particularly in china the price cuts here in the u.s., that gets a lot of attention

people are like, what's going on with prices here in the u.s. understandable this is the second largest market in the world for tesla and it dominates the ev market here china, that's really where the price war is going on when it comes to evs right now and byd is nip ping at tesla's heels in terms of market share tesla is still number one at the entd of last year. here are the price cuts we were talking about. but tesla is number one in ev market share byd is not far behind then volkswagen and gm. gm has had success for a number of years with an entry-level ev model. you wouldn't compare it to a tesla, but that shows the appetite that is there i think eventually we start to see this play out here in the u.s. and in europe as well china is really going to be front and center over the next several years in terms of lower-priced evs >> now phil, jonas says we're not going to see seagulls on the

streets of new york or miami, but maybe it comes to war saw. we have talked about the way the chinese are trying to make end roads in europe. >> that's the next battleground. the chinese are nowhere close to selling vehicles here in the u.s. for a variety of reasons. in terms of when you look at this market, i i don't think anybody is thinking about the chinese here near term what they are looking at, europe the uk is red hot in terms of the competition for the chinese. other markets in europe are s seeing the same thing. the chinese believe if they can show that they can win in the ev marketplace in europe, especially against volkswagen, they believe that gives them confidence ultimately to try to sell here in the united states but that's a way, way down the road >> we're going to get earnings it's always margins, the number one thing to watch >> it is but it's more so now because of these price cuts 20% is essentially the line that people are looking at. anything above that might support the stock.

if it's well into the teens, you could see pressure on shares of tesla. what people are looking for now is how much further does this go because these are just reflecting first quarter price cuts in china and u.s. there have been more price cuts since then here in the second quarter. so what are we going to see for q2, q3, is there any sense that tesla can say we think it bottoms out at this point. it's a guess right now among analysts how far they go down before they ultimately set the limit at a certain point >> and if they see a huge surge in demand, which we saw in january in response to the price cuts if they have that to show for it >> absolutely. here in the u.s., there's a huge appetite for a lower-priced ev that's why these price cuts, i couldn't be surprised if it stokes the market a little bit in the first quarter, sales are below tesla etc. oorks but the bolt was the third best selling electric vehicle in the u.s.

that shows that there's a market there. and gm is hitting on that. everybody wants that lower priced ev. that's really you're going to see the competition play out over the next couple years >> you have given us a lot to look for after the break, we're live on the floor breaking down earnings trends. plus speaking of earnings, two more big interviews here tomorrow phillip morris, all that in the 11:00 a.m. hour tomorrow as we continue to monitor earnings trends, especially better than expected earnings numbers and whether growth is holding up in revenues we'll be right back.

a couple hours into trading. i managed to sneak down to join you. >> it's like old times come on over here. this is something you're not going to see very often. this is called a low beta stock. it almost never moves 6% this is one of the biggest moves in many years. this is a dow component. this is the main reason the dow isn't even down more that alone is 75 points on the dow jones industrial average we always talk about the reporting about the storms that are happening, the wind storms and hailstorms that's the company that has all the exposure this is one of the biggest property and casualty insurers in the united states business p and c and home, home and auto casualty.

so these have been very, very rough months for insurers to do property and casualty. a lot of catastrophic losses they have been chronicling that in their earnings report they are raising prices particularly on the commercial lines. this is one of the reasons that the stock is up so much because they have been able to raise prices on the commercial side of things now curiously, they reported losses on auto they are actually paying out measure they are taking in that's a loss on the autos they are going to have to raise prices on that not sure why that's happening, but they highlighted that. so a mixed report, but overall, the numbers are better than anticipated. same situation with eunited airlines, a different business, but i'm listening on the conference call. i was listening in on that still strong consumer demand they are talking about services generally strong overall. two-week drop in business around the banking crisis and quickly recovered. they really highlighted that it was not a permanent drop they saw. business travel, not fully

recovered, but corporate business in may is and june, bookings, well ahead of the previous months. this is what everyone has been waiting for. business travel has been lagging, personal travel, when are we going to see the turn back that comment helped the stock overall this morning that was on the conference call at 10:30 we'll see what goes on with these here this demand is still strong. international is very robust they reiterated the 2023 outlook. these earnings reports are coming in generally better than expected we really cut the numbers down dramatically nobody wants to believe it's going to be a soft landing in the second half. this is one of the parts of the big resistance we're getting to the rally. people hate this rally >> a but of a tail wind this time around. do you think they got too negative >> the problem with the analyst community is they don't really want to move unless the community starts moving them down dramatically. when they saw the bank ing

situation, we saw another move down this all comes from last year. october, we hit a bottom in the market the analysts started cutting numbers believing we were going to be in a recession by now. that's what the analysts tried doing. so far, they have been wrong on that and it's interesting because usually the market stops bottoms before the analysts do and we'll see. so far the analysts have been getting it wrong >> thanks. we'll see you in a bit >> up next, google still thinks people want to fold their smart ene meacon wh wco bk in two minutes

welcome back cnbc reporting google is planning to launch its own foldable smartphone this june, making a big investment in the product while cost cutting still remains a priority elsewhere that's the focus of today's "tech check" segment with our deirdre bosa what do we know about this, deirdre? on the digital side google is planning to launch a foldable pixel smartphone that will cost upwards of $1,700 and in doing so directly challenge samsung's dominant position in this foldable space, kind of, though. google smartphone business is a near blip on the global market share chart here it has about 2% of north america. when you go global, it doesn't even register. apple and samsung are the clear leaders, which raises the question why is google still pouring money into this business when its big tech peers are scaling back and focusing on costs and efficiency

amazon hasn't frrefreshed its eo device in years. google, though, is going in the other direction, doubling down on pixel phones. the cfo on the last earnings call said we continue to make sizable investments particularly to support investments in our pixel family the answer may not lie in the smartphone race but operate down and the strategic position in the ecosystem. pixel smart phones may be a blip, they are a blip, barely, but android dominates. it makes up more than 70% of global mobile operating systems. it is the os of choice for basically any phone that is not an iphone. it has this giant presence even without actual google hardware and google is still, above all else, a search company having its search engine integrateded into all android devices is about protecting that moat and one of the best business models in history one, by the way, starting to show cracks in the face of microsoft

and chatgpt and samsung, one of the biggest android users, was considering replacing google search with bing on its smart phones so taking all of that into consideration, a flashy new foldable phone may signal google isn't going to step back here. >> deirdre, thank you. deirdre bosa very interesting still to come, wall street's buzzing about elon musk, and it's not just because of tesla reporting nitoght. that story when we come right back you founded your kayak company because you love the ocean- not spreadsheets. you need to hire. i need indeed. indeed you do. indeed instant match instantly delivers quality candidates matching your job description. visit indeed.com/hire the first time your sales reached 100k with godaddy was also the first time your profits left you speechless. at the counter or on the go, save 20% with the lowest transaction fees

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if somebody wants to say something that's technically legal but is, you know, by most definitions hateful, they're not -- we're not going to promote that to people we're not going to recommend hateful content to people. we'll put that behind a warning label saying this speech is probably something you don't want now this is something we have to be careful to roll out in that it does not become what is intended to be good does not become bad >> elon musk, of course, creating a buzz this morning after speaking yesterday at the

conference in miami beach trying to woo back advertisers to the platform, an advertising conference companies including coca-cola, merck, among two-thirds of twitter's top 1,000 advertisers that left the platform at the end of january however, last week musk said in a twitter space interview hosted by the bbc, quote, almost all of them have either come back or said they're coming back this is notable for a few reasons. number one, that he did the conference he said multiple times, he was speaking, by the way, with nbc universal, our parent company, that he wants to hear from advertisers. bring me your concerns, your complaints he wants them to come back he doesn't want them to deck tate what to do on twitter but i think this is also interesting because it's his first attempt, carl, at content moderation freedom of speech, he said, but not freedom of reach we'll let you say whatever you want but we're not going to amplify the hateful bad stuff as twitter has done in the past >> there had been some reporting

of various marketing officers who were suspicious of musk going to the conference, how hard-hitting would the conversation be. he definitely had to face some tough questioning from linda about -- >> 100%. >> -- about his new policies. >> she said, does it apply to you? >> and to his, i would argue, gutting of the workforce affects their ability to moderate because he's laid off a lot of people >> he's laid off a lot of people he took a lot of questions, and he seemed really amenable to some of the advertisers' issues, concerns it felt like the crowd really liked him. speaking of elon musk, he tweeted about taylor swift, calling her smart. why? well, here's some news an attorney leading a class-action suit against celebrity ftx ambassadors, the crypto firm that failed, noted taylor swift sideswiped it with one question she asked if i'm getting involved with unregistered securities under state securities law if you promote an unregistered security for financial benefit, you are

liable she asked a simple question. she didn't get involved. that's why i love taylor swift >> can she do anything wrong >> she can't, nope >> pretty incredible >> one for the swifties and i love how it related to ftx >> ibm, tesla, tomorrow taiwan semi -- >> and more regionals. >> let's get to "the half. carl, thanks so much welcome to "the halftime report." i'm scott wapner here at post 9 at the new york stock exchange another test for tech hours away when tesla reports we debate what's at stake for the nasdaq as the biggest market cap companies begin to release their earnings now joining me joe terranova, liz young, kari firestone, sarat sethi. let's check the markets. we're still in the red across the board. we've moved off the lows, though yields are the story today joe, you said on monday, if i recall, you didn't like the setup for this week. >> no. >> in part because of yields, and here they are moving