and guy, thank you >> y'all have a great day. >> we'll see final check on the markets then. now the dow has turned negative, just slightly. there's that -- i don't know if it's all important, but the s&p, right around 4,100 right now, and kind of wish it was -- i could see tomorrow, but i can't. we'll see what happens today after the fed. make sure you join us. you can see us tomorrow. "squawk on the street" is next ♪ good wednesday morning, everybody, welcome to "squawk on the street," i'm david faber along with jim cramer. we're live from post nine at the new york stock exchange. carl has this morning off. let's look at futures as we get ready to start trading a half hour from now. i don't know what you call that. not much >> inconsequential >> thank you inconsequential open, that's what we're going with right now. let's get to our road map. it does start with fed watch wall street is expecting another rate hike, and then hints of a pause.

but will the ongoing regional bank volatility perhaps change the path of rates? plus, we're keeping an eye on shares of amd and yum, both down in the premarket, that following quarterly results. we're going to have the ceos of both of those companies join us in this hour and ftc chair lena khan is calling for new regulations on a.i. and pointing to raw material controls as a path forward to do so let's start with the countdown to today's fed decision amidst concerns about regional banks, particularly yesterday, as i was getting ready to leave milken, we were watching many of those shares decline dramatically, jim. let's start off on the fed, though i assume you don't have any new thoughts, or do you, in terms of incorporating some of these continued concerns about parts of the banking sector? >> i've been saying that this is a hundred basis point problem, that you're getting a hundred basis points of tightening you know, even -- you go listen to the ford call, which i felt

was excellent. people are talking about how do you buy cars cars are done by regional banks. there are parts of the economy that are not controlled by regional banks a terrific quarter by simon proerpts last night. simon properties is not a regional bank, but when you get, say, your retailer, smaller retailer, and you have to have inventory, that's regional bank. and the regional banks don't want to watch their stocks we get a number of stories today saying that it's very easy to knock these stocks down using an etf, and then the banks have to spend a lot of time defending, and if they have to defend, they're not going to loan. so, it's kind of a vicious cycle downward right now >> yeah. right. the stock price can get people concerned, and as we pointed out so many times and what is so different now about really the state of affairs, even not that many years ago, is the ability to rapidly move your money at the stroke of a -- of your

finger >> right one of the worst things, david, is that we're not going to get how much is insured until the end of the quarter so, it's very possible that a lot more is insured than you realize. but if the fdic were to simply say, listen, we're going to insure by bank, that would take away the pressure. but right now, the fdic, which failed miserably this weekend because it it to jpmorgan without any thought about maybe it's important to have regional banks be strong, the fdic doesn't seem to have a plan for a pac west or zions. >> i assume it would be over time, encouraging consolidation. i did have a number of conversations the last couple of days, given how many people are at milken from -- >> and that was great out there, geez >> but you have the -- you go there, really, to have the off-camera conversations, obviously, and this idea that we're going to need another period of consolidation now, unclear how that will be viewed by regulators, but perhaps it should be encouraged in the

sense that you need to create even more -- we have more banks, by far, than any country in the world. we have this tradition of having these smaller regional banks and community banks. >> historically, we like that because it's good for the community. take a really excellent bank like kid they have a ridiculously high yield right now because the stock's been pressed down. they've got remarkable match they are one of the best operators that i have come across should they be so-called wiped out, chris gorman, who's done a remarkable job, because their yield is 8.44% and they happen to be in an etf? wow. they're like the savior of cleveland. they're the bank that you go to in cleveland if you're going to build a building or do a store i think they're vital. i think they're a vital company. >> and these are continued questions we're going to have, then, as to what you do if you're the fdic, and you know, if you were to say there's blanket insurance for everyone, then obviously you create potentially moral hazard, or you have to regulate all the banks

truly like utilities >> and you have to cut their profitability dramatically >> you have to cut their profitability or at the same time do you do it for businesses, which really are not looking out for a lot of different things but have a lot of money coming in and out of their regional -- >> how about if you guarantee to 500,000? >> or you could go to 500,000. >> a bank could apply for additional insurance but we can't have what is happening now. >> that said, there is this implied belief that every time they go into receivership, there's going to be a systemic exemption that makes sure every depositor is insured >> i don't want to get too granular, but a key or huntington bank, they're being punished because they own treasuries the fdic has been remarkably silent treasury has been -- it dumbfounds me. these are big issues we don't want the middle-tier banks that are responsible for a lot of the growth in america to be wiped out because of an etf took them down to $8

key. >> agree listen on monday, i sat down with marc rowan from apollo, and we had a broad-ranging discussion, and he has his own view of the world, and he's going to say things that perhaps also advantage their business in terms of private credit and so many things they're doing but what he had to say in terms of that second wave, i have heard now referenced so many times, so i want to play it again. he wasn't necessarily really talking as much about worries about commercial real estate, jim, as he was just this idea of not having a profitable business anymore, the idea that deposits can flow out simply for higher yield into treasuries so quickly and what you do about it take a listen. >> they're going to find themselves asking for leniency during what i would consider phase two of this, because their exposure to commercial real estate in particular is worrying that does not mean crisis. it doesn't mean imminent, but i think we will see the same kind of rolling wave of concern, which leads to loss of confidence, and likely more failures

>> well, look -- >> that was monday morning, and then obviously we've seen what's happened since then. >> i saw it, what would happen i'm a tv reporter. why did the fdic not see >> what could they have done differently, jim what do you think? by the way, again, we're not talking about deposits flowing out of these banks we're simply talking about a market-created concern as a result of short-selling and etfs that you're talking about that is then having us talk about it, and obviously, being -- >> look at the deal that jpmorgan got it was extraordinary 20%, they'll make on that, their rate of return, and it's a remarkable gift. no one else could possibly compete against jpm. should we just say jpm can get rid of the 10% rule entirely >> they got exempted from having -- the cap at 10% of all deposits >> but david, you and i talked about first republic as a problem for a month.

>> we talked about it. i talked about it from march 10th on. >> how about a 3:00 a.m. deal? are you kidding me >> they were out looking for the best bids. they wanted to have -- to pay as little as they can it was probably only $13 billion out of fdic, maybe as little as $11 billion. >> is there not an imperative to continue to have regional banks? right now, i can tell you that every bank that's in trouble should go to jpmorgan. it's a great deal. >> let's come back to the fed, then, and how all of this is going to impact, and whether we're going to hear about it from jay powell later, their view in terms of the path of rates, because you've -- we all hear these anecdotes, but you're talking about the lack of potential lending for many of these banks. it is so important in the economy. has he figured it out yet? he's brought it up as something he hadn't quite yet determined >> i think he's more clever than the fdic i'm not -- i think the fdic has acted shamefully, because you didn't think that there would be a moral hazard of having

jpmorgan winning this bank is this really 1907? it doey much like 1907 >> what does that mean, that powell has a better understanding? it's not as though the fed is not deeply involved in all of these conversations. >> i think he can say, look, there is an imperative i'm not hearing this from the fdic there's an imperative to have community banks. the fdic, which, again, i'm coming back to 3:00 a.m., because that's frightened everybody. it took them that long honestly, if they watched you on friday where you said this is probably worth zero, i would have thought they would have swung. obvious, they will say they did, but tif they really -- >> i was reporting on the fact that the fdic was talking to banks about a plan they would take bids in receivership. >> 3m is interesting here. they put that up it's more of an industrial >> look, here's the problem. if you're going to have a consolidation, jpmorgan wins

every time unless you decide, you know what we should do let say it's football. we give some points to -- we spot huntington. >> you didn't answer my question about what it is going to mean in terms of potentially more stringent credit conditions, particularly from these banks. >> of course >> for the fed's path. what's it going to mean? >> conference calls, they talked about how, listen, we're going to -- we're ready for the cutbacks we're ready for the stringent lending. >> how long until we get this 25 basis points back from powell? >> some people think it's by the end of the year. i think it's higher longer we'll get the adp number this morning. we're creating a lot of jobs every time they raise, mortgage rates go lower because people feel it's going to cause a recession, so they raise, mortgage rates go to 6%, they perpetuated their own problems >> we got a lot more big show ahead for you, including -- >> were we too granular about something? >> no, i thought that was -- i give that conversation like a b-plus an exclusive with amd's ceo

is next. chatgpt might have given us an "a." there's lisa su. she'll be joining us very shortly. the stock is under pressure. their guidance did overshadow what were strong quarterly results. let's give you a look at futures. we get started with tratdding i about 19 minutes from w.no measure "squawk on the street" straight ahead m® by td ameritrae is more than a trading platform. straight ahead with innovation that lets you customize interfaces, charts and orders to your style of trading. personalized education to expand your perspective. and a dedicated trade desk of expert-level support. that will push you to be even better. and just might change how you trade—forever. because once you experience thinkorswim® by td ameritrade ♪♪♪ there's no going back. what if beer could get to the right place, at the right time, all the time? not like that. like this. getting this beer... all over the world... right when they need it.

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all right, amd's stock ran up in anticipation of a better

quarter. perhaps this was the clearout of the inventory. did not happen the shares are falling in reaction to the company's k quarterly result i think we got to dig deeper with this, because i don't think we should just think about the next quarter maybe the next year. ceo lisa su joins us now to discuss what's going on and her outlook. lisa, always good to see you thank you for coming back to "squawk on the street. >> great to be here, jim, with you and david. >> lisa, we can discuss the next 39 days, and i find that somewhat trivial, or we can discuss what could happen with chat or what happened with generative a.i i prefer to do that. i understand that some people feel there's too much -- too many chips in the inventory, but is it not possible that a year from now, we're going to have an explosion that's going to need all hands on deck from your company to be able to produce as many chips as you can? >> yeah, absolutely, jim well, first of all, let me start with saying i think we executed very well in the first quarter when we look at the overall demand environment

we actually were exceeding our revenue and earnings for the quarter. and you know, as we look forward, as you said, this is an incredible time for the computing industry everybody needs more compute there's so much excitement around what's going on in the datacenter we all need to build out more in the cloud infrastructure, and there's a lot of excitement about what a.i. can do for us in every industry going forward so, this is a big bet for us to ensure that we have all the computing capabilities across all aspects of cloud to client devices to really accelerate this generative a.i. boom that we're seeing >> what would happen -- i'm going to suppose something what would happen if you made a deal with microsoft, which is considered to be the advanced player right now in this where i could talk to my pc and just say, make me a reservation for two at 8:30. wouldn't by able to do that within the next two years? >> well, what is most exciting about it is we're putting a.i. into every aspect of our product portfolio. so, we actually have our first

a.i. pcs launching this year we actually have some of them in market already and yes, they're just going to get smarter and smarter going forward. the same is true in the cloud. we have all of our -- chatgpt is wonderful, but it can be even better as we bring newer models, newer compute, newer capability going forward, and really connecting what you're doing in the cloud to what you're doing on the client side is actually what we're best at, because we have all of these pieces >> okay, so, let's touch on what the analysts are you had inventory in the channel. a lot of the analysts are trying to say that intel has maybe gotten past you or you have a real price war on your hands in order to be able to maintain share. what's the true narrative of what's happened and what's happening in the next 90 days? >> what i see is actually is inventory conditions have improved as we have gone through

the last quarter or two. we've been focused on clearing overall inventories, both on the pc side, as well as on the cloud side what we see going forward is actually an improving demand environment, especially as we get into the second half of the year we're very bullish on our datacenter business. we have a tremendous road map. we've talked before, jim, about the italian cities, so genoa is doing very well. bergamot is our next capability. we're adding a significant number of new workloads across the industry so, we feel very good about the demand trends going into the second half of the year. and you know, from a cycle standpoint, we're actually through most of the cycle already. >> yeah, lisa, it's david. that was a question i got. short-term in nature from a number of -- a couple of your investors that i spoke to this morning, sort of, why do you seem to -- or why did there seem to be a weakening of demand on your front in pcs, perhaps, that was not necessarily reflected in some of the numbers or commentary we got from others?

i mean, why do you think that things are going to pick up in the second half? >> well, this is what we see, david. we see pcs bottomed in the first quarter. we actually see demand trends improving. when we look at things like activations, people who are turning on new pcs, those trends are improving, and we really like our product portfolio as well as i mentioned, we have a.i. in our new pc products. we have a very strong line-up across desktop and notebook, and then the real driver for us is our datacenter business. that's always been the driver in terms of our long-term growth strategy, and it continues to look like we have a strong product portfolio that really satisfies a wide set of workloads, even more so than with our previous generation so, very strong products good demand for compute going forward. and then as we go forward, this conversation about a.i., it's with every customer, every industry, every conversation, whether you're talking about datacenters or you're talking

about edge or you're talking about client devices everybody wants more computing with a.i >> yeah. that's what i hear about as well, in a different world, but everybody's talking about it but that said, i mean, the mi-300, in terms of when it's actually in the market, is there -- are things moving so quickly that you miss an opportunity here, and you know, is that a threat to you in some way as nvidia continues to just dominate >> well, david, you have to think about this as, we're actually at the beginning of an inflection point in the cycle. we're sizing the a.i. market in the cloud to be upwards of $60 billion over the next three or four years, so we're at the very early stages. we're very happy with our product capabilities we've spent a lot of time with a number of our largest customers who are excited about what we can deliver with mi-300 and more so than that, as i mentioned, it's not just a one-trick pony it's cloud, edge, client, a.i.

across our entire product portfolio. you know, i said earlier that this is our big strategic bet as the next growth driver for the company on top of the datacenter embedded businesses, which are doing very well. >> okay, so, lisa, i totally understand why we would have a problem in client pc, because there was a full stop -- there was a huge buildout. everyone was making pcs, hp, dell, and then they just basically had way too much inventory and it reverberated throughout the chain what i don't understand is why was there and is there a slowdown in datacenter, where there's some clients that decided, we have enough, and they gave you a full stop. doesn't make sense to me, given the datacenters should have been continuing to advance. >> i would take a step back, jim, and just look at what the last year and a half has been. during the pandemic, i think there was a lot of build-up of new capacity, and that's true both on the pc side as well as on the datacenter side, and now, as things have just normalized a

little bit, people are reoptimizing their inventory levels and just reoptimizing their overall compute capacity it's a short-term phenomenon it's something that we know how to work through. it's a natural phenomenon that you work through when you have periods of very high demand going to a more normalized environment. but what we do see is long-term demand trends are very solid, and that's what our customers tell us, particularly when they think about how do we catch this next wave of computing needs that we know is all there, and we all want to satisfy it, because it makes life better >> finally, a broader question from me to conclude here on a.i. you're having so many of these conversations, lisa. beyond their need for products you're going to offer them, is there a sense that many of the people who run companies you're talking to, what are their broader needs? what is it going to mean in terms of where we stand in the very beginnings, really, of generative a.i.? >> well, i think it's about how

do we bring it all into our work flows, david i think we're all talking about that so, as cool as the technology is, we want to make sure that it's really applied to giving us more productivity, more capability, and also just enhancing the way we're able to service our customers. so, there's a lot of conversation around that as well as the other piece of being responsible with a.i. and knowing that this technology needs to be very responsible as we use it going forward. it's a very sort of wide-ranging set of conversations that we're in i think we like the fact that we can be a partner and really help shape this industry as it goes forward, and so this is our focus over the next few years. >> well, i want to thank lisa su, president and ceo of amd lisa, thank you so much for coming on. very much appreciate it. >> great to be with you guys thank you. >> david, obviously, i've been telling club members, this quarter will be bad. there's way too much inventory in the channel stock is going to go down, and it's exactly as it played out. the question is where it's going

to be a year from now, and i think that what she said is that there will be an explosion one of the things we talk about, going to need a lot of compute power, so you can sell it today and buy it back, i don't know, $90 next year? $100 >> we're not done with ceos. coming up later in the show, yum! brands, that stock, at least, is pulling back from what have been recent highs after its quarterly results. we're going to talk to the company's ceo. we'll talk earnings, inflation, e nsumer lot more "squawk on the street" for you. stay with us ♪♪ ♪ a bunch of dead guys made up work, way back when. ♪ ♪ it's our turn now we'll make it up again. ♪ ♪ we'll build freelance teams with more agility. ♪ ♪ the old way of working is deader than me. ♪ ♪ we'll scale up, and we'll scale down ♪

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well, at least if you own the stock, to earnings and amd, we just spoke to lisa su starbucks, we'll get to those earnings so many earnings to get to this morning and an opening bell coming up. our customers don't do what they do for likes or followers. their path isn't for the casually curious. and that's what makes it matter the most when they find it. the exact thing that can change the world. some say it's what they were born to do... it's what they live to do... trinet serves small and medium sized businesses... so they can do more of what matters. benefits. payroll. compliance. trinet. people matter.

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the opening bell is brought to you by nuveen, a leader in income, alternatives, and responsible investing. all right, we'll squeeze in a "mad dash" and then we'll get to an opening bell i mentioned estee lauder because it's the biggest loser premarket on the s&p looks like china travel or asia travel, i should say, specifically, is a problem for the company. >> right, now, we told yesterday at our morning meeting, estee laud ser going to miss the quarter, and they'll miss the quarter because they haven't been able to get the big travel out of china yet, and people will sell it obviously, this is a panic sell. this is probably the best consumer packaged goods person in the world, let the stock come in and then buy it i say it because cross-border will come back this is something where he is exceptional. but people don't understand, the way he works, they don't understand that he has a history of coming back i say, let them sell

this is what we said let them sell it they did this when it went from $240 to $188 let them sell it let them press it. >> so, let them sell and buy it. not good numbers not good >> no. but expected i don't understand what these analysts were thinking we knew that china was not coming back yet. he told us china was not coming back yet somehow, these people actually believed it was going to be a good quarter, and he told you it would not be an upside surprise. do these people do work with him? i do you buy it after today what can i tell you? buy it at the low. it happened the last time. >> all right you hear the opening bell. we're taking a look at the nasdaq there cpj, press freedom, obviously very important in particular think of evan being held in prison for no reason

here at the big board, celebrating their recent transfer from the nasdaq >> we haven't talked about lilly yet. >> let's talk lilly. we got to get to earnings from ford, from starbucks, but lilly, phase three, first time the fda said, you need more info now they're back at it >> they wanted to know -- obviously, people want to talk about -- >> we heard from dave ricks earlier. >> this one works. the stock was up at one point, and this is a sour market, people were talking about there were some brain-swelling incidents. the fact is it is now the superior drug. it will matter tremendously. the problem is, how long does it really keep you from having alzheimer's, and how do we decide who gets it when you look at the safety profile, which is okay, we would all take it. we would just demand it. that would break the bank. there's no way medicare can do it so, now, we have to do a kind of triage >> bank's already broken anyway, but that would break it even

more >> if you have two parentswho have alzheimer's, did you have parents who had alzheimer's early age, early onset will you get six months, a year and a half the fact that this stock is only up $68 is pathetic this is the holy grail >> the holy grail is the first generation of effectiveness. >> this is the first iteration, but well, if you knew that you had a 35% chance to not have early onset alzheimer's. >> or to push it out at least. >> what would you pay for it maybe anything >> anything. without a doubt. the ceo talking about it being a step change. take a listen to what he told the guys on "squawk" this morning. >> it's not a cure but it is a significant step forward today with its efficacy results, which significantly slows the disease down in our study.

beta amyloid removal is key. we're going to rush it to the fda and hopefully get full approval >> as jim alluded to, the history of trying to find drugs that combat this horrible disease is not a good one. biogen comes to mind, the very much questioned decision-making process at the fda for that drug, which was not accepted by insurers >> right >> and really led to it being -- this is considered to be, as he said, a step change, a significant move forward in terms of treating the disease. >> these are -- we really have to figure out how much -- look, the issue is what will the government tolerate? will the government say, listen, if this is only a year that it gives it -- gives you protection, what is that worth and i think that's going to be -- this is going to be a very complicated series of back-and-forth with lilly, you know, whether there's -- is there an imperative for how long

you should not have alzheimer's? i don't want it. you don't want it. if you've got six months, what would you do >> i know. it's a good point. it's obviously worthy of close study. and hope that, in fact, this is just the first iteration of what will be continued advancement in treating this disease. >> you know, i hosted the american brain foundation gala last wednesday and do a lot with the american brain foundation. they're all trying to figure out the same thing if you had a biomarker, when we knew that you were going get it, which is what they're really trying to find is a biomarker, then we can target the people who really should get it right now, we're just going to be saying, do your parents have it that's not enough. >> let's get back to earnings and some names we haven't discussed. starbucks used to be, on a day like today, would always be amd and starbucks as our guests, but we do not have their new ceo as

our guest. >> it's kind of like, where is he was there any percentage at all of him raising numbers was there any percent in all at saying china was going to get better china was plus three the numbers in america were sharply better than expected but the fact that he did not raise, we're in this moment, david, where some ceos like -- i got to tell you, jim farley's doing it making a choice. we're not going to raise right now. it's just not worth it we're not going to raise our estimates, give our forecast better and that's what is hurting starbucks is that, look, we're just -- we had a really good quarter. we're not raising. that implies that the second half is not going to be strong i think that starbucks is on a really good path here and china's going to come roaring back, and you have to buy starbucks here again, we sold starbucks from my travel trust, saying, they're not going to raise, the stock is going to come down, and you got to buy it. i'm not deviating.

sticking with my strategy right now. estee lauder, sell some, buy it back amd, sell some, buy it back. i'm sticking by my game plan 100% on this >> these are all stocks you own, right? >> yeah. i was saying, sell them and buy them back. >> ford, the same thing? >> ford sold some very high. and i would buy it back here >> first quarter, and the stock is up. >> good. it was very odd that it was down immediately given the fact that he made his promise -- this is farley -- he did his ev number he did better for his internal combustion number. his pro number was extraordinary. david, they can't make enough lightning, and they can't make enough mustang-e the story is complicated by elon musk changing the price every day of his tesla >> farley did speak about price as well. let's listen to him. this is jim farley from ford's conference call. take a listen. >> the message from me as the

ceo is that we are not going to price just to gain market share. we will always balance a healthy profit road map in the first generation of products, it's pretty challenging we didn't know what we didn't know four years ago when we designed them. >> such great audio quality. thank you for that >> he's a clear speaker. by the way, i find that he has really laid a road map down, but he didn't raise. and mary bara raised for gm. what was the percentage of raising if mary barra raised and the stock didn't go up why set yourself up? why not just say, here's our game plan and not create false expectations, because mary barra's stock should have gone up didn't happen. >> right now, ford is up 1.4%. tesla's also up 1%

obviously, well, well off its fairly recent highs. >> farley raised the price of the "e," the lightning f-150, pretty dramatically, and there's been no balking at all that's the truck that america wants, and people want electric. what's most interesting in the conference call is that if anyone listened closely, these are all new buyers these are not the traditional f-150 buyers f-150, the greatest-selling pickup of all time he's bringing in new buyers. >> couple things we want to keep an eye on from yesterday certainly, the regional banks, which we began the show discussing taking a quick look, jim so far, looks okay in terms of the performance of the stock prices >> yeah. >> there's a look at the regional bank index. >> they really overdid it. a lot of really good banks had very high yields, and that's been a sign, wow, that's bad news comerica, huntington, key, these

are bedrock american banks if the fdic says they're not worth saving, i think that's a travesty, and if they decide -- >> let's hope they don't get to that point to begin with >> but you can't say they're buys because you don't have the data you don't know how much has been pulled out because we only get the data once a quarter, which is farcical in itself. >> may be difficult to say they're buys for some time until there's a long period because they have to live with this idea that at any moment, something could occur, even something completely fallacious, a lie that could have people start to withdraw money >> i agree, but if the fdic said, listen, we're going to offer temporary protection up to $1 million for u.s. bank corp., truist, fifth third, comerica, pnc, zions, you know where those stocks would be? i'm mentioned the ones on the board. for banks that are the size of "x," where the problem relates not to credit, but to

treasuries we're going -- because remember, we're punishing banks for having invested in treasuries i don't find that to be an impairtive of america. >> another follow-through from yesterday was chaga chorus, in part because we know the company, and dan is a friend of the network, came on later in the day yesterday, but also because there was -- it raised this question of, what's next in terms of chatgpt disrupting a current business for their part, it was, well, students didn't flock to us quite as much as we thought in terms of us helping them with studying and learning, which is chegg's business, because they went to chatgpt, at least some portion of them did. you have any number of investors looking for other opportunities on the short side to see what

chatgpt might disrupt. companies that rely on teaching people languages, how far away is chatgpt from being able to do that with you? for example. >> there are schools already which are coming up with anti-chatgpt -- do you know that i was, when i was at harvard, i got paid to see if there was any plagiarism i was a plagiarism officer >> schools are trying to deal with that. >> same thing is going to happen i don't know if you saw lena khan's editorial >> i did >> i actually -- she talked about collusion among the big companies. she talked about the idea that we are in a moment where the bad guys could take control. >> what has been interesting and perhaps distinctive about this period is how many of the b leaders in the a.i. have said, we need guardrails please help us save ourselves. yet it's unclear what we're going to get from the government or whether it is going to be in any way advanced enough in terms of doing the right and wrong -- doing the right things to sort of direct this technology so that it doesn't present dangers,

dangers in terms of, you know, simple fakes that people can do and obviously larger dangers to the species. >> how about -- david. >> i still got to go there, jim. at some point, we may get there. they don't know what they got. >> i listened to guys in the media, and yes, i'm worried about existential. but i would say, david, there is a concentration of people who have this information. and that's where lina khan is right. just a couple very big -- >> in order to be big in this, you need the computing power and that's expensive >> that was from nvidia. $40,000 per card if you want to go on ebay with me >> that's just buying it >> david, we have to go to kfc enough already enough with your crisis. let's talk pizza hut geez i mean, oh, david, you've got me all down and i'm trying to get a little -- i'm trying to get some taco bell. >> i'm hungry, and i think they got a breakfast offering >> have you ever had -- >> i see peter davidson all the

time talking about it. >> the stock is down why don't we bring in david gibbs, the ceo of yum. david, i can recall that at any given time, we always had, one of them was always awful i'm trying to find out they all seem to have gotten it good how is that possible >> you are spot on, jim, and it's great to be on with you and david. this was a strong quarter across the board. very proud of the results. our franchise partners put up. you saw double-digit overall system sales growth for yum for the quarter. that's our third consecutive quarter of double-digit growth, and that's a theme for the quarter, double-digit growth each of our brands had double-digit system sales growth we had double-digit growth in our core operating profit, and a metric i'm really tracking closely that our investors follow is our digital sales. our digital sales went from $6 billion last year to $7 billion this year in the first quarter.

double-digit growth. 45% of our transactions now are digital. if this keeps up, we're getting -- we'll be up to $30 billion for the year compared to just $12 billion in digital sales in 2019. massive shift in our business. >> okay, well, let's talk about the things that are supposed to be so worrisome. labor, food costs, and i know you have a franchise model, so it doesn't necessarily reflect on you there are definite implications. they didn't seem to come into play is something getting easier in the system are we, when we look at a company as big as yours, can we say, wait a second, maybe we're beginning to have an impact? it seems to be easier labor. maybe easier supply chain. what do you say? >> absolutely. definitely become a better operating environment for us, and we did well in the operating environment of the last few years, but we are seeing inflation in our input costs come down. we expect it to be low single digits this year in the united states it was well over double-digits last year. even with double-digit growth, inflation last year, we were able to put up record margins in

our taco bell business so, we can win in any environment, but as you say, the inflation is coming down our ability to attract and retain team members has improved our stores are back to normal operating hours. our applications for positions are up, and turnover is down so, everything i look at says the operating environment for us is really quite favorable. >> all right, we often talk about chipotle and maybe they'll have a certain dish that everyone's excited about i look at taco bell, and when i was at taco bell recently, the menu is very different from what i would expect you've got specials that are driving a lot of traffic >> absolutely. and the great thing about taco bell is how they play the high-end consumer and the low-end consumer we've got the grilled cheese burrito, but at the same time, they've got a $2 cravings value menu with burrito offerings that are fulfilling and a great value for consumers and taste delicious. we have everything -- something for everybody in the taco bell menu

that's the beauty of that model. you can take all those different ingredients they have in the restaurant and put them together in some amazing combinations >> pizza hut was exceptional because it was transaction growth, not price. pizza hut was problem for a long time, david, and we actually started hating to talk about pizza hut because it was such a poor third in the business what did you do to make it so that, if i were domino's or if i were papa john's, i would be concerned about you? >> you know, you can't point to one specific thing, because it's a wholistic approach to improving the business we have improved our franchise base we've got great franchise partners at pizza hut right now that are driving operational improvements the leadership of pizza hut is doing a better job with connecting to consumers through the product offerings. our melts product, which at a $6.99 price point is screaming value, but it's an innovative product that's resonated with consumers, brought in younger

consumers. that's working well. i've talked in the past about the fact that we've embraced the aggregator model to be incremental to pizza hut, also to bringing in new consumers at the end of last year, we were doing 50 aggregator transactions per pizza hut. now we're up to 60 aggregator transactions per week for pizza hut, so that part of the business continues to grow i think the team is just firing on all cylinders when you get the right feel and the right franchisees together with a great brand, the outcome is going to be fantastic >> david, on a.i., i'm just curious, we always talk about this future coming where everything's going to be automated. you know, what do you think of and how are you thinking about using sort of the advances that are being made right now >> well, we've obviously embraced technology as a big differentiator for us, as a scale player in the restaurant industry we should be the leader, and i do believe we are the leader 45% digital mix. but it's a wholistic approach we're using. it's really end-to-end in terms of the customer experience and the team member experience and

then how we're gleaning insights from the data. i'll give you one quick example. we bought a company called dragon tail, which helps us sequence orders in the restaurant so they come out at exactly the right time to be delivered to consumers, something that previously a restaurant manager would have to sort of sort out, looking at all the tickets, which one should i make first, which driver should i give it to i was in the uk restaurant, and i saw firsthand just a few weeks ago a pizza come out of oven, get cut in the box, and seconds later, the driver that was intended to take that pizza to the customer showed up in the store, grab it and run off no wasted time much more efficient operation. drivers on the road being more efficient with their time, and the customer getting a hotter product. it's one of just many examples we have where the technology investments we're making are really driving improvements for our franchise partners and customers and team members >> thank you so much to david gibbs. remember the stock ran a great deal, so this is a ceo of yum

telling a pretty good story. dave, it's good to see you >> thank you guys. >> cheese and a.i. i'll go for cheese >> they still have to improve on box technology for the pizzas. boxes. cardboard boxes, still kind of screws up the pizza. services pmi is out just moment ago the final reading for april coming in at 53.6. that was about in line with forecasts. it was up from 52.6 in the previous month let's take a look at yields. see where we stand on that two-year and ten-year. we've got the fed meeting a little later today ism nonmanufacturing data also due out at the top of this hour. we'll be right back.

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♪ good wednesday morning, welcome to another hour of "squawk on the street. i'm sara eisen, here with david faber. carl has the morning off take a look at stocks, calmer than yesterday's heavy selling, higher, s&p 500 is up a third of 1% nasdaq up a half of 1% happy fed day. we'll get the fed decision later this afternoon 30 minutes into the trading session. three big movers we're watching for you. ford moving higher after an earnings beat, getting a boost from its fleet and legacy truck divisions. but focuses on another loss for its ev business. kraft heinz helped by higher prices, the company raising its earnings outlook, a string of good news from those consumer staples companies, especially on food

not so much for estee lauder, citing uncertainty in post pandemic recovery in asian retail, describing the recovery in china as more gradual than some of the market hoped. >> the stock is getting hit badly. again, the lack of travel, perhaps, the -- in asia, china obviously. but clearly, more of a surprise, perhaps, than some would have thought. you know, jim was saying that he thought that they had kind of already gotten some investors accustomed to that possibility. >> clearly, there was a lot of excitement around china and the chinese consumer in general. overnight we got statistics that chinese luxury spending is up big, but it's not like a light switch, and not like the u.s. where it's a big reopening enthusiasm based on what i'm hear, it's a different psychology for chinese consumers. they were locked down for

months, years in some ways a little bit different and we're not quite seeing the spurt in activity as we saw in the u.s. though, there's still a lot of bullishness, particularly around consumer spending. >> we want to get to some economic data crossing the tape. for that we'll get to rick santelli rick. >> yes, david, our eye is on services information, hitting the wires atop the hour, on services index headline, 51.9, 51.9, that is better than the rearview mirror, 51.2, it's the best since february. services on the pricing side, the most important component, 59.6 that is higher than the rearview mirror, which means interest rates have popped up just a little bit on that number. we want to pay attention 59.6 last month it was 59.5 and if we look at employment, considering this is a big week for employment, 50.8 that is lower than 51.3 in the rearview mirror. and finally, on the new orders,

56.1 versus 52.0 that is a nice pop, and that is at the best level, 56.1, since april of 2021. c sara, back to you. >> rick santelli, more confusing data, better services data, adding to better jobs data, kind of being dismissed by wall street because it hasn't had a great correlation with the monthly government jobs report which we'll get on friday. but david, it's a fed day, and -- >> i know. >> we're seeing stability in the market. >> we are. >> and in the regional banks, which is important. >> it is, that's got to be top of mind for you as well. we left each other yesterday at mill ken with those banks in serious decline, at least the stock prices, you can see more or less a positive story, at least, now let's not forget some of them were down 20, 30%, the regional bank index was down sharply as well. there are bigger players. >> the bonds are trading like

high-yield bonds, the spreads are trading higher than the high-yield spread. these are investment grade credits. >> people are not unaware of the risk you get completely wiped out if, in fact, anything should go into referceivership how secure is your deposit base in a world in which we live right now? part of it is just higher rates, which the fed is going to give us even more today. >> keep going, yeah. >> and the idea that people are not blind and they see what's available outside of their bank, and then part of it is, of course, this sort of concern, this existential concern that any moment something could happen, even if it's not based in fact, that could bring to quickly withdraw money with the idea being what's the downside to me just getting out and moving it to a bigger bank. >> does feel like the market is pushing the government and potentially the fed for more, more assurance we talked yesterday to peter

orzag, formerly in the government in the obama administration, and now represented first republic bank before the fdic took over the deal talks here's what he said about the fact that confidence is still shaky here. >> we have i do sha bank like attacks on a bunch of regional banks. you short the stock and try to create a bunch of noise and the key thing, the reason that deutsche bank survived was the deposit base stayed in place the key question here is will those deposits stay in place at the regional banks so there are lots of things that can be done from avoiding, you know, closing the barn door at the wrong moment with regard to what the regulators do, to providing more assurance on uninsured deposits, because that's what would help keep the deposit base solid. >> i think that encapsulates what happened yesterday, and why we might not have this chapter

being over as jamie dimon said after he bought first republic bank the government hasn't taken steps to prevent the problem. >> or assurance. what would it be, what would that come in the form of >> they could signal they're working on this. >> does require legislation. >> it requires legislation but you could get a signal from treasury, fdic that we're looking into this, that $250,000 is probably too low, that we probably should be taking a look at businesses like dry cleaners and hairdressers that have millions of dollars of uninsured deposits coming now have of those banks. otherwise, what would keep them there if they see the stock price collapsing and that's blamed on short selling right now. >> yes. >> but clearly what we're tabing away from some of these deals is it's hard to figure out what the precedent is. >> then there's the other question, which we also have been discussing, and have to continue to, and i'm sure that chair powell will get today in the press conference, which is what is the impact of these banks and others pulling back

from being able to lend aggressively, or not wanting to, simply, and in part because they can't even get a spread to begin with given cost of funds as well. >> this goes into the question of what powell is going to signal today at the meeting. there are, you know, the notes are totally split when i read the research notes from economists and from the macro watchers about whether they should pause because of the regional bank stress look, i think three banks failing in quick succession is a signal that monetary policy is very tight, and there are lagging effects of that. chair powell is aware of that. but look, we just got services, we're getting inflation numbers that still show firm problematic levels, and he is a man on a mission to fight inflation so is he going to signal today a pause? that's what the market expects the june odds have gone down to zero they were at 20% before yesterday. so, there's a feeling that they're going to be spooked. last time, remember, they said look we have the macro prudential tools to deal with the banking problems, which they did and there was some relative stability. i don't know if they can say that again, right?

i mean, they can but ultimately there's going to be an impact on the economy, you mentioned the credit tightening, they get a look at the senior loan officer's survey before the public does. we get that coming soon, early may, they see that so if they're spooked about what they see on lending pullback, then you could hear that in the tone from chair powell, and maybe he'll lean more toward a pause. >> yeah, all right, let's get a little bit more on all of this from steve liesman he is in d.c., of course, as he always is, ahead of that fed decision i mean, when we go up 25 basis points today it's not going to help maturity or available for sale portfolios at the banks that own securities for lower rates, steve. >> it's a good way to put it, david, it's like, you're not helping, and not helping -- you're doing a little more than that, you're maybe hurting the idea of throwing gas on a fire that may be out there, maybe you don't know the dimensions of the fire that's out there but certainly something is wrong with the regional banking system in this country.

and you guys said there's stability. there is stability but if you go back and look at that regional banks index the one thing you definitely see is volatility sara mentioned their bonds trading like high-yield bonds. their stocks are trading like penny stocks with that volatility, up one day, down, big drop obviously yesterday but if you take a longer look at it it's way more volatile than it was before. and you have to really wonder what the fed gets out of raising rates today. yes, it will be still fighting inflation and doing so by reducing its balance sheet so, to me, i think the risk/reward, from a risk management point of view the fed probably ought to be pausing today. i'm not alone in that. if you heard the former fed presidents talk, if you look at our cnbc fed survey, dave, i've never seen this, 59% of our respondents think the feds should not be hiking today and the story is that almost always these a guys find a

reason to agree with what the the fed is doing they can't find it this time around. >> yeah, a lot of pushback if the fed has a hawkish sort of signal today on the inflation front, which brings us to inflation, steve, with know the problems in the regional banks, we know that there's going to be an economic fallout, the lagging impacts of monetary policy but on inflation the question is, is it coming down fast enough david and i already talking to all these ceos and investors, one common refrain is that inflation is going to be stickier than the market expects, and the fed is going to have to stay more restrictive than the market expects, which is the other way, the other side. >> i think that's right. but you guys remember the financial crisis and i remember i didn't take a vacation during the financial crisis when it finally dawned on me, you know, if i take a week off when i come back it will still be a financial crisis. it will be fine. there will still be plenty of story to report on there you know, the fed takes a break, takes a pause this time, gives the banks some time to catch their breath there's still going to be an inflation problem.

it wasn't going to go away tomorrow if they raised a quarter point and it probably won't go away. you're probably -- i want to almost say certainly, sara, long-term correct, the fed may have more work to do above and beyond this 5 and an eighth. but it's the getting there that seems to be the problem without giving banks time to adjust, get their deposits and liabilities what bank does not have 3% mortgages out there and has a need or requirement at this point to start paying 4% on their deposits that's the problem it's something that works out over time, sara, but i just don't think that it's going to -- today as david said at the very beginning, another quarter point makes that problem worse. >> absolutely. steve, thank you steve liesman, appreciate it let's continue the conversation with adam parker, who's here at post nine and has been a little more cautious on the market, right, you're what, went to neutral on stocks? >> well, i mean, i think the banking crisis has probably bad

for loan growth, tightened financial conditions aren't great. but, you know, i think most of the conversations i've had with investors recently have been what am i missing, why is the market so resilient? what is the bull case besides something around positioning and sentiment? is there something underneath there? a lot of us are trying to create a belief that we can be 10% up in a year and what would cause that obviously you guys are focused, and a lot of people on gpm and the conversation around it if you're investing and looking out toward year end or farther. >> what would cause us to go up 10%? >> i think it's got to be -- >> it's always positioning. >> that's always the throwaway if you look at valuation or premium or asset classes or earnings expectations it's hard to tell a sexy story about equities, that's a challenge people are going to say there's a fear of missing out and the flows and all that there's some logic we wrote a big note a few weeks ago about a.i., it's come a

little bit to fruition, we typed in chatgpt, give me terrors related to a.i 15 terms, artificial intelligence, networks and then we used language processing to search be tigest growth stocks transcripts from this quarter and sorted by the ones that referenced it the most maybe, referencing and don't have anything. but you look at the names, nvidia at the top of the list. we created a basket. performance of the growth universe ex-a.i., and a.i. has beaten and i think it's real i think that if you're saying i'm investing, in your personal life you want to not touch it for five or ten years, you definitely do not want to be short a.i. you want to assume that tons of human behavior is getting -- >> it may be generational. a lot of companies in 1998 that weren't around in 2001. >> the lightning bolt. the other side of the interesting conversation is what about things that aren't a.i.-able? i'm still going to want to

travel, eat, use utilities, think about what happens when the wifi is down, nobody can function there's got to be some staple-like things that maybe will create a higher and higher multiple, they're not a.i.-able, and you have bimodal distribution of two different types of stocks. there's some thought out there about maybe not all of this is just people got dovish about the fed and growth stocked ripped because of fed fund futures, that's some of it for sure but i think underneath it there's some real things that are happening that are changing the probability. look, our job as equity investors is look at a range of outcomes and say what's in the price, and is it dislocated? the popular press can say it's all short salers, if i'm a short saler, i'm looking at distribution of outskom comes, i'm going to short some of those until the government comes in and says the deposits are safe i think it's distribution of outcomes people are focused on

and there's some positives underneath. >> there's another group on the a.i. front, you mentioned those that are the beneficiaries, those that are a.i. proof, there's those we learned yesterday that are getting disrupted by a.i we saw the reaction there where chatgpt is a competitive threat for them on homework help. who else is in that basket >> college students, and high school students, i can tell you they're all trying to figure out which teachers understand what chatgpt produces and not, and they all use ched during covid none of that surprises me, i was surprised that wasn't in the price on that one. but i agree, there's tons of other businesses like that the trickiest one is software. there will be some a.i. that will produce some software that will obsolete the need for some software programmers that's a little bit of a weird one. so, but i kind of -- you know, i think this is where a lot of people are thinking i'm investing, you know. >> where do you stand on the larger macro issue of

productivity enhancement from this technology and whether it really will start to show up and when. >> i've been thinking a lot about -- not to reference another network, but the 60 minutes interview with google's ceo a couple weeks ago where he talked about hallucinations. a.i. produces five books on inflation, and none of them exist. so there's still a long way to go for me somebody like me the holy grail would be i basically take all the information realtime that's out there, have access to borrower risk and anonymity and trade on it immediately and i win, you know, because i'm processing the information but when there's all these hallucinations and crazy things happening. >> it's being used as a productivity tool right now. >> it is and it will continue to be i don't know if it's 10 years or 20 years or 10% or 50% of human behavior, but that's my current box, a lot of human behavior is going to get commoditized. >> i did not expect this conversation to be a.i. >> he comes on all the time, got to find something to talk about. >> what is bull case the fed pauses, say they're going to do something to the bank deposits and the market

goes higher, people say, oh, you know, they're going to pause and multiples will expand. but tomorrow we've got to wake up and say there's probably a little bit of economic growth, see what happens. >> recession oil telling you that but my question, adam, is can you get behind the market while regional banks are still making new lows >> yeah, i mean, banks have never been a sustained outperformer since the financial crisis and they weren't great before that. banks aren't great businesses. i mean, so -- you know, underneath that, like sure, i mean, the problem is if nobody can get a non-recourse loan from any regional bank for construction that's not great for growth so i think the question is, you know, getting some more -- >> that's where we may be headed. >> that's the main issue. >> yes. >> the question is, what kind of -- the other thing that nobody talks about, by the way, as somebody who switched from, you know, first republic to, you know, one of the big banks is like those smaller banks have better service and better, you know, prices, and better rates

so that's also a bit of a problem. yeah, you switch to the big bank, worse service and worse interest rates that's not great for the consumer in the small business either. >> we love our community banks in this country. >> yeah, otherwise we turn into all the european countries and stuff where there's like four terrible banks. >> can't happen, can't happen. there's a community bank in every congressional district can't happen. >> i think there's a three to six month window where this kind of isn't great and then the bull case would be, you know what, we get this under control, get a little bit more loosening of financial conditions in the second half of the year. >> adam parker, good one, thank you. >> good to see you guys. >> no fed, it was great. >> it was, it was nice. >> hit the fed hard coming in. our road happen for the rest of the hour, closer look at eli lilly, positive data from its alzheimer's treatment. plus, we're going to give you a check on the chips, amd shares down after results. qualcomm will be reporting after the bell. and crude oil extending its losses, dipping below $70 a barrel

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regional bank stocks staging a comeback following a very difficult day yesterday. let's bring in leslie picker to discuss what we're seeing and why we're seeing it. >> the why is the big question mark here, david, but there is a bit of relief for regionals this morning after yesterday's biggest slump since mid-march.

pac west led the industry, seeing the biggest gains of the group today. like we said the recent moves appear to lack a clear catalyst which that has industry watchers focused on short interest, and other technical factors at play here short interest is a percentage of shares outstanding in the spyder regionals have jumped from 95% to 79% a week ago that's note worthy for etfs. seven percentages higher than last tuesday goldman saying to clients yesterday the initial selling was indeed experienced by those hedge funds due to short pressure but others, other types of investors quickly jumped into the selling frenzy as well as individual names began to fall and that created a spiral from there. from a fundamental standpoint bank of america saying in research this morning that

skittishness over deposits, insured deposits versus uninsured and profitability challenges, both pressuring names this morning as is regulatory -- or sorry, yesterday as is regulatory uncertainty and credit concerns amid a late cycle mind-set so all of those kind of fundamental aspects weighing on investor's minds as we saw the selloff yesterday, getting a bounce this morning, guys. >> leslie, who -- name some names for us, who are we watching, who's most vulnerable looking at some of the fundamentals i was reading notes last night where everyone is going through commercial real estate exposure and share of uninsured deposits and unrealized losses, all the things we did for svb, and first republic who are you watching >> in talking to analysts and investors those are some of the key issues that they're looking at, the aoci marks as well, just kind of where their securities on their balance sheet stand, how much of those are under water, also a key tenant here. i mean, the biggest losses that we saw yesterday were exhibited

by some of the west coast firms, pac west, western alliance, did see significant moves to the downside they're not the ones, there isn't a direct correlation, we broke this out in a spread sheet yesterday, they're not the ones necessarily with thelargest proportion of uninsured deposits that data, though, is a little bit stale. some of the banks do report that once a year to a group within the fdic, to regulators. so we don't have the exact amount of uninsured deposits you have to play a little bit of guessing, use alternative da to to figure that out in terms of how that all has transpired since march, since that data is kind of backward looking also, commercial real estate exposure is a key point of this as well as you mentioned, sara. >> leslie, thank you, leslie picker. a slew of restaurants reporting results this morning, including star bucks, yum! brands, we'll dig in lyine brands is up 9%. everybody else selling off we'll be right back.

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watching consumer names today, here's starbucks down 7.25%, despite beating on

earnings kate rogers joins us now to break down the quarter and reactions here, kate. >> sara, that's right, starbucks had a big quarter last night, beats on the top and bottom lines. topping estimates across the board up 11% overall, 12% in north america and china in particular showing comp growth of 3%. that's key because it's the first positive comp for china since q1 of 2021 china was a challenge last quarter due to ongoing covid lockdowns, story traffic has surpassed pre-pandemic levels in the company's busiest day parts in the united states and the cfo said this is a big performance in the u.s. in particular given the seasonality the company typically sees despite that performance the stock as we all know down this morning as the company reaffirmed its revenue growth guidance of 10 to 12 #%, adjusted eps growth on the low end of 15 to 20%, and full-year sales guidance in the u.s. between 7 and 9% investors clearly looking for more this morning, cowen saying this reflects a desire to set

the barlow for the new ceo, and btig echoing that point saying it's conservative given the performance in the quarter and the surpassing in particular of the pre-pandemic traffic levels. one more thing to note here, starbucks rewards was another important jump for the company up 15% from a year ago to 30.8 million members, that's going to be very important moving ahead, guys back to you, david. >> thank you, kate eli lilly gets a boost this morning from promising clinical data for alzheimer's treatment bertha coombs has the story. >> alzheimer's treatment showed the ability to slow the pace of memory loss in alzheimer's patients in a late-stage trial almost half of the patients taking the treatment 47% showed no clinical progression of memory loss after one year compared to 29% of those on the placebo. after 18 months patients showed 40% less decline in their ability to conduct daily activities, like driving the treatment cleared the beta

ameloid plaque that leads to memory losses. with intermediate levels of that protein that cause it. eli lilly's ceo david rick says the company is going to file for fda approval by the end of june. >> it's not a cure but it is a significant step forward today with the efficacy results, significantly slows the disease down in our study. the removal is a key to slow down this disease. it's not the only thing to do but we have a new tool today and we're going to rush it into the fda, and hopefully get full approval by the end of the year. >> like biothe drug poses a risk of brain swelling and bleeding, mild cases on an mri, 1.6% of those cases were serious, sara if they have this application along with manjaro, the diet drug, two big potential drugs

for lily going to the fda this year. >> yeah, i mean, could be blockbuster, a lot of need out there in this country and beyond thank you, bertha, bertha coombs. let's get a check on the markets right now. we're a little bit higher but we've lost some steam. the s&p 500 is currently being driven by industrials, which is best performing group, consumer discretionary, communication services, financials are higher, energy, consumer staples and real estate weighing on this market and nasdaq remains higher by a third of 1% all ahead of the big fed decision at 2:00 p.m. we'll be right back your brain is an amazing thing. but as you get older, it naturally begins to change, causing a lack of sharpness, or even trouble with recall. thankfully, the breakthrough in prevagen helps your brain and actually improves memory.

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update at this hour, russia claiming today that ukraine tried to assassinate president vladimir putin in a drone attack on the kremlin russia did not provide evidence to support the claim which was first reported in state media. a ukrainian politician said his nation is reaching a defensive war and does not attack russian territory. authorities in texas captured a man accused of killing five of his neighbors after a four-day manhunt the suspect was found hiding in a closet in a house less than 20 miles from the site of the shooting the san jacinto sheriff's office did not say how the suspect evaded capture for so long but they did say they have made other arrests in connection with the case. and u.s. and mexican officials have agreed on new immigration policies meant to deter illegal border crossings ahead of the expected end of title 42 as part of the agreement mexico has agreed to accept thousands of deported migrants while they await processing in the u.s. david, send it back to you.

>> okay. well, investors are, of course, closely watching today's rate decision. expectations are that we'll get another quarter point hike, but with signs for a pause or rate cuts before even some believe the end of the year. joining us now is former philadelphia fed president charles plosser, charles always good to have you i'd love to get something we've been discussing a lot about here, how you think powell will address it later today, which is the impact of the banking crisis, the continued volatility on these banks' willingness to lend and what impact that's going to have in terms of economic growth or actually preventing it. >> david, good to be with you again, nice to see you, and yes, i think this is an important and interesting question, but it's far from certain in my view. i think that yes, the rate hikes and the trouble in the banking system is likely to be tightening credit somewhat but i don't think anyone

actually knows by how much lending doesn't just occur through banks. it occurs through other mechanisms, and everything from money market mutual funds to other, sometimes call it the shadow banking system. i think it's really hard to tell at this point the magnitude of that effect, and whether it is offsetting rate hikes at this point or not, and how much of that is going to account i think we have to be a little careful about assuming too much here about those effects. >> charlie, you were always known as a hawk, and worried about inflation. does that suggest that you still think they should stay focused on that and signal more hikes ahead? >> absolutely, sara, good to see you again. >> you too. >> yes, i think they need to stay focused look, the banking troubles, there's volatility there but at this point the impact on

the economy, on the real economy, employment, spending, other things, has been fairly muted. and so i think the fed needs to focus on not making guesses about what their policy on interest rates, should it pause, should it continue to rise it needs to focus on, what i like to call its reaction. what will the fed do under certain circumstances? rather than making promises, or suggestions about what it will do, it needs to -- what will it do if inflation falls or rises or output and employment falls or rises i mean, if inflation were to fall as rapidly as the fed seems to think it will, at least reflecting in its s&p projections, interest rates are likely to come down this year. or if unemployment rises a lot faster than they anticipated, interest rates may come down

but i don't think you can talk about those options -- you can talk about the past of interest rates, without asking the question what it will be responding to. if inflation doesn't fall like the fed thinks they may not see it at all in interest rates. we need to change the framing of the conversation into a reaction discussion about what will the fed do if such and such happens rather than trying to predict what that might be. >> here's the problem, and here's the argument against what you're saying is that leading indicators suggest inflation is coming down fast you can look at the new york feds leading inflation indicator, it's really rolled off. inflation peaked last june, and has come down. i know it's still too high, but all the commentary you hear from the conference calls, even on labor, appear to have -- appears to be that that problem is getting better and what's getting worse is the regional bank problem and not just the potential spillout for the economy, but a

potential contagious situation it's not clear that the markets are done when it comes to panicking. some of these banks were down 28 to 30% yesterday so, i think the counterargument would be the fed should do no more harm. it already appears that they're in a very tight spot it's been very aggressive tightening and we know there are lagged effects the leading indicators on inflation are coming down so why should they go further with rate hikes? >> that's certainly a fair question but, i think that the answer to that is far from obvious i mean, look, the fallout from the banking volatility is far from obvious you can argue that it is, in fact, the fed's response to volatility is making it worse. there are large depositors, uninsured depositors that bailed out or not, should they run or

stick it out because of -- you know, the response is the policy responses are so intertwined with the consequences we are facing it's just really hard to say so i think that inflation -- i agree with you, inflation continues to come down there will be pressure on the fed and they'll want to begin to ease back. >> right. >> but that's not here yet and yes, it's lower than its peak, but it's still 2 1/2 times higher than the target. >> yeah, okay. >> and the fed was so far behind the curve when they started this rate hiking that they're still catching up. >> okay. >> they might be behind the curve on recession, though, is the worry. >> charles, we've got to leave it there always appreciate it, thank you, charles plosser. >> thank you turning to the credit market, our next guest's advice to corporate america is to clear the decks and ensure conservative positions, joining

us on set, johnny fine, goldman sachs, head of investment grade syndicates in the americas how is the market trading here ahead for the fed? >> corporate finance perspective, difference to how we saw it beginning of the year when there were a lot of incentives for corporations to come to market and finance early. i think we now havevery clear signs that there's obvious risks and worries ahead of us. we have the debt ceiling debate that's going to play out, less worried about the volatility going into the ultimate extension, more worried about some of the effects after the extension we can talk about a little bit more. obviously, the ongoing fallout from the regional banking situation, and the fact that we're going to be at peak rates very shortly with questions being asked as to are we really going to tip into recession later on in the year or in 2024? >> what are you -- how do you position around the debt ceiling? we've seen it impact the three-month t-bills, cdss, not a whole lot else so, what should you avoid, and how should companies think about

doing refinancings around this time >> well, we're seeing strange things play out as a function of the debt ceiling debate. as on example we were raising commercial paper this morning for well-rated corporates in and around x8 at lower yields than t-bills were trading to that date that's effective of negative credit spread. now, what i think really the playbook is, is we know we're going to have volatility going into "x" date, we know we're going to have a ton of t-bill issuance post "x" date to rebuild the general account. i think that what means is if you're a corporate treasurer thinking about liquidity, you want to take yourself out of being needing to be in short-term funding markets in the run-up to and in the immediate aftermath of the debt ceiling extension. >> how do you want to position yourself long-term if you're a treasurer? have you adjusted to the move in rates at this point or are you hopeful later this year you'll be issuing at far lower numbers? >> you've adjusted to it

even in an environment, next year maybe we'll see fed easing as priced in by the market don't think that necessarily means the ten and 30 year treasurely hold a lot. as we get well into the cutting cycle in the months and years to come, the interest rate curves will normalize and move back and tango. as of right now you have this phenomenon, if you're an investment corporate issuer, there's 160 basis points of inversion between six-month t-bills and ten-year treasuries. what that means is, is that the majority and, in fact, pretty significant majority of corporate america can issue ten-year debt, part the proceeds in six-month bills and actually make a profit. that's not how corporate america works, they're not trying to make a profit out of doing that but you can see the corollary, if you have a financing or liquidity need that you can see or you think you might have in six or 12 months time, the

market incentive remains in place more than ever to go and do that financing now and fortify the balance sheet. >> we've got some strange moves in the overall market. i mean, regional banks at this point, sara's made this point, some of their bonds are trading high yield, they're investment grade still. do we start to see jound grades with things of that nature, and i wonder about the ability of people to own certain pieces of paper and not others in terms of their rating. >> you've seen the rating react in a number of regional banking situations the reality is the smaller regional banks don't have a whole lot of wholesale debt outstanding in the bond markets. so it's a relatively small portfolio, generally further down the capital structure overall. from that perspective they're not significant users of my market, occasional users of it overall. of course, they're having to replace a lot of the wholesale deposits this they had, that were non-interest bearing with interest bearing or market-based funding from the homeland banks, from the broker cd market, for example, that's expensive,

obviously impacting that bank's ability to generate a return on capital and that's, i think, feeding through into some of the things you were talking about with your guest just before about tighter credit conditions and so on. >> what about commercial real estate they're a user of your market. how much distress is priced in >> the commercial real estate story is not a new story this is not a new story that suddenly broke when svb went down in march. this has been around for a while. the migration of the office worker to working from home, working remotely, et cetera has been with us for quite some time there's been very low originations of new commercial real estate loans within the banking sector for some time banks have been very well provisioned, continue to be very well provisioned against potential losses in the commercial real estate sector. i'm not saying it's not going to be a problem. >> it's more about the refinancings than it is about any new business at this point or things that are coming due and therefore what are you going to have to pay >> correct and it's going to be expensive and we're going to have of to see transition of

inventory in that market overall. there's a focus on office, class "a" offices doing pretty well but anything below that is obviously a challenge. >> looking at the bond market is the risk going into today for powell, that he is hawkish the market is now expecting a pause afterwards, and potentially a signal of that. >> 100% agree. i think this is probably the most important fed meeting in a decade and it's -- >> oh, my gosh, we've been saying that every fed meeting this year. >> really, why >> it's not about the hike. >> a signal of the pause. >> 25 basis points hanging on every single word that's said in the presser, and how it is said as well, to give us an indication as to are the fed going to move, for example, away from being focused on the near term spot economic data are they going to take their pause and say like david -- our cheer u.s. economist says they're going to take a pause to be able to assess the cumulative impact of all the tightening done to date, plus take time to

assess the fallout from what's happening in the regional banking sector which is going to play out over a very long period of time it's not measured in weeks and months. >> that's the consensus, that they're going to do that >> i think that probably is the consensus. although if we get that there's probably a relief rallying risk assets overall i think there's concern what have we lived through 15 months, hawkish surprises in commentary. if we don't get that the setup is favorable for risk to rally. >> johnny, great, learned a lot. got a lot of information thank you very much, as always, johnny fine from goldman sachs. next hour, big interyou, the commerce secretary gina raimondo, she's hosting a select usa conference all about investing in america right now. 11:00 a.m. eastern, we're back in three minutes dow's gone negative, down 77

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as we go forward, this conversation about ai, it's what every customer, every industry, whether you're talking about data centers or edge or talking about client devices, everyone wants more commuting with ai >> that was lisa sushi joined us in the last hour of course, talking about her outlook overall for ai, as demand continues to rapidly rise around all parts of this technology for amd it's particularly their mi-300 chip, which will be available later. nvidia obviously seen as the leader but it's well beyond that. i'm sure you picked it up. we did the last couple of days in milliken. a lot of the conversations i had came back to that, not on-air, but off air, in terms of the impact of chatgpt, generative ai, what it's going to mean, the productivity enhancements. the amount of money that's going

to be spend. how it's going to destabilize other businesses it goes on and on from there and obviously, you would expect that the ceo of amd would be very much focused on it as an opportunity. >> levi's is experimenting with ai supermodels instead of real models although he said they shouldn't worry about their jobs on amd, it's interesting that the marketing isn't giving them credit on the ai story like we saw with nvidia. i was going through some of the research bank of america downgraded amd to neutral, 95 bucks kind of a bunch of reasons, one of the weaker half, over half of data center growth, which is obviously -- >> and pc demand was -- you know, she stays it was going dom back, but it was weaker -- >> the number three reason, on ai, still a modest position on ai accelerators. less than 5% market share against nvidia >> and that's the key. the questions were also, where else were their customers spending their money nvidia is the clear winner

>> so google versus microsoft. >> it may be a big enough market that you'll want to -- and then there are also a lot of companies that are developing their own chips. don't forget about that. don't mention that enough. tesla and apple and microsoft -- at they all develop their own chips and send them over >> quick note as we head to break, we're a few days away from berkshire hathaway's annual shareholder meeting. head over to cnbc zmband cnbc.cm to watch it live, this saturday, may 6th. and join this year's woodstock for capitalists. our becky quick and mike santoli are live in oma.ah we'll be right back here on "squawk on the street. s&p barely positive, the dow down 32. nasdaq stays strong despite the loss for amd we'll be right back. match your. visit indeed.com/hire and get started today.

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you've been watching oil it slid to a five-week low, well below 70 bucks a barrel. pippa stevens is tracking the action, telling us what's going on >> oil is now down 10% in the last three sessions, as demand concerning a potential rate hike takes center stage on top of that, the recovery in chinese demand that all the bulls were pinning their hopes on has so far failed to materialize, while russian output has remained resilient.

crude is responding to fears around the financial sector. on this chart, you can see how the banking turmoil in march sent a drivedown in oil. and opec and their allies announced that surprise output cut, but since then, we are down more than $10. now, part of what's also pressuring energy equities, with the sector closing below its 200-day moving average yesterday for the first time in more than a month. halliburton is the biggest loser so far this year, followed by exxon, which did hit an all-time high last friday steven >> pippa, thank you. of course, speaking of losers, amd,tauc, srbksand estee lauder are all down after earnings. we'll get to all of those in the next hour of "squawk on the street" which starts right after this when you set up direct deposit. sofi get your money right.

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indeed instant match instantly delivers quality candidates matching your job description. visit indeed.com/hire good wednesday morning i'm sara eisen with dom chu, live from the floor of the new york stock exchange, setting the agenda today, commerce secretary gena romando. >> and krishna deguha with us t expect on the fed this afternoon and the rumble in regional banks. >> later, ceo of