it is 5:00 a.m. here at cnbc headquarters here is the "five@5. we begin with the regional bank reckoning. another bank confirms it is speaking with partners and investors. also, the tenth time is the charm. the fed eral reserve raises rate again. possibly signaling the end of the fastest tightening cycle in decades. what it means for the economy and markets and investors. and it is not just the fed another major central bank is set to release the policy decision later this morning. we have a live preview from london in a moment.

plus, we are turning attention over to washington and it is all about a.i. as the vice president holds a face-to-face with those at the cutting edge of the technology. and later, can johnson & johnson consumer business spinoff reignite the ipo slump it is thursday, may 4th and you are watching "worldwide exchange" on cnbc. good morning welcome to "worldwide exchange." i'm frank holland. let's kickoff with the futures this morning, you see we are green across the board higher right now almost flat. something positive indicators for the start of the market day. this as investors continue to digest the federal reserve tenth interest rate hike and comments from chairman jay powell hinting

the tightening cycle could near an end we have a slight decline with yields on the 10-year treasury at 3.36. going down from yesterday. a bigger move when it comes to the 2-year treasury moving down more at 3.87 a few days ago, that yield was above 4% energy and oil with wti falling below $70 a barrel you see it down $69.30 the international brent crude at $73.30 natural gas is flat. time to get to the top story along with the fed and that is the state of the u.s. banking sector this morning, california's pacwest is in talks with certainly partners over the bank exploring optioning. pacwest has not experienced any

out of the ordinary deposit flows in the last week and cash reserves are solid despite efforts to increase confidence, shares are extending this morning down 37%. you see the weekly drop. sharp move to the down side yesterday. it is not just pacwest western alliance bank is trying to assure shareholders that bank saying it is not experiencing any unusual deposit outflows following the sale of first republic to jpmorgan chase. shares are down this morning looking at western alliance down 18%. week to date almost 35%. joining me now is brian swint. brian, pacwest is not seeing the o outflows like first republic what are you seeing? >> it just looks like the market ganging up on whoever they feel

might be next to be weak if the problems that hit first republic and silicon valley bank is something all regional lenders might have faced the worry is that, you know, they could all be running into trouble. pacwest statement suggests they don't have any fundamental problems right now you know, it is just fear that is guiding traders hands >> i know you don't have insight information and i'm sure you are working on reporting when they say they are talking to partners, who could they be we saw hesitancy to take over first republic and jpmorgan chase eventually did who are the partners to create a deal for the banks >> as you pointed out, i don't know anything for sure any of the bigger banks would be candidates they can put up capital right away

two could merge with deposits to create a bigger bank subject to different rules and regulations. it might instill confidence. it remains to be seen. could be anyone. >> i want to correct myself. pacwest is looking for potential partners as we go forward, what is the next inflationection point the loan officer survey is coming up. what will that tell us >> it will tell us something of how much banks are tightening credit to consumers and how the business models are doing in the face of the higher interest rates in the last year usually higher interest rates should help banks because they can charge more for loans. the problem is keeping up with the value of the assets on the books which tend to go down when interest rates go up so, it will help somewhat.

i really feel like right now there is no particular piece of news that could help or necessarily hurt one way or the other. it seems to be that investors and traders are not sure what will happen next they are trying to play it safe. >> right now, we are show the board with the year-to-date moves with the regional banks. are there others that you are watching that could face similar problems or a loss of investor confidence like pacwest and western alliance >> i don't know the banks actual balance sheets other than what pacwest told us. look at western alliance and comerica that is another big regional lender there is zinc on the list. there are five or six that are the same size that might draw attention from traders. >> brian swint, thank you.

>> thank you, frank. turning attention back to the federal reserve decision to hike rates the regional bank crisis will not end until the fed cuts rates. despite the belief from jay powell, the crisis i mproved, te depositors will continue to pull money out. >> there is no reason to keep money in you can get higher interest rates thanks to the fed's 500 basis point interest rate increase it seems to me the deposits will keep drifting out. i don't think this is the last chapter in this regional banking problem. >> gundlach showing powell has no signs to cut rates in the near term and recession odds increased. let's bring in matt maley. matt, great to see you. >> hi, frank how are you? >> i heard from jeffery right there. he had a big contrarian view

he doesn't see signs that the fed has immediate plans to cut rates. he didn't see a hint of it you believe we had a hawkish pause. explain that >> i think they said that they will keep rates higher he basically said we don't have plans for cuts he talked about how the inflation picture keeps any rate cuts off the table i do agree with jeff gundlach. at some point, they will be forced to cut rates. the problem is jeff is also right in that they will stay higher for the next several months that will -- the thing is, yes, it will cause a problem for the banks, regional banks. the net money in all of the banks will go down yes, all of the big banks are taking in new deposits from the smaller banks, but in net

overall, the big banks have the same issue where they can't compete with the money market accounts and t-bill rates. the net deposits will leave. that means less money to loan out and that means credit contraction. that will mean a slower economy and recession. >> speaking of credit contr contraction, that is somsome -- something that jay powell mentioned. what is your take on the status of regional banks especially with two more sending out statements trying to reassure investors as stocks fall >> we keep hearing all of the talk and i agree we are not in a situation where the regional banks will create a major league systemic crisis. where it will have an impact is on the economy you can't -- people say the banks are under performing and the stock market can hold up if

the banks under perform, that's fine the market doesn't hold up when the banks stocks get crushed we have to use common sense. what is happening is going to create a credit crunch or a lot less credit in the system. that always means slower economy. pretty much means recession. people looking for a soft landing. it is a harder argument to put forth when these regional banks continue to have problems. this is not 2008 all over again, which is fine. that doesn't mean the stock market which is expensive cannot come down more or the economy can slow more. >> matt, i want to look forward. jobs report on friday and cpi and debt ceiling negotiations of t the session. what is next >> it could be apple earnings. we saw what happened with oracle

with tough numbers which hinted to be a problem. apple will increase buyback. that could be one of the big inflection points. we have the employment number on friday and next week, we have the cpi numbers. that will give us more indication on what the fed will do on keeping the interest rates high a pause is not enough. jeff gundlach said it. until they cut rates, we will not get relief on the marketplace. the problem is from what everything the fed is telling us, they will not cut rates unless something breaks or the economy slows in a dramatic way. neither of those things is good for the stock market. >> matt, thank you looking ahead to apple shares down 1% in pre-market matt maley, thank you. >> thank you, frank. more coming up on "worldwide

exchange," and one word you need to know and the white house a.i. summit and what investors should consider ahead of that summit. and another hat thrown into the ring with an a.i. of its own. and regional banks and stephanie link weighs in on what to expect. we have a very busy hour of "worldwide exchange. stay with us ag . (seth) who, me? never. oh, excuse me. hello, your royal highness, sir... (cecily) okay, that's a brag. (seth) hey, mom. i gotta call you back. (vo) visit your verizon store during our spring savings event and choose the phone you want, like the incredible iphone 14, on us. verizon i think i'm ready for this. heck ya! with e*trade you're ready for anything. marriage. kids. college. kids moving back in after college.

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welcome back vice president kamala harris is set to meet with a.i. leaders today. they expected to discuss artificial intelligence. harris is expected to discuss the safeguards over the risk and emphasize the importance of the frank discussion with the ceos according to the event invitation which was viewed by cnbc let's get more insight into the meeting and what it means for a.i. with cyrus mewawalla. >> good morning, frank. >> cyrus, we hear a.i. dis disrupting businesses. what is the disruption of a.i. for the white house to have the meeting and open about the agenda and emphasizing the safeguards and addressing potential risk

>> i think big tech in the u.s. has been lightly regulated for very good reason the u.s. is in a trade war over tech supremacy with china. the u.s. wants to encourage innovation over tech and regulation doesn't do that with the advent of the language models like chatgpt, microsoft has partnered with and a.i. could be pervasive the question governments have to answer is is a.i. safe remember, there is a public backlash against regulation in terms of data privacy and obstruction of justice and misinformation all kinds of things. excessive of pornography and videos on web platforms. the governments all over the world are forced to act. a.i. really is a catalyst with advances these systems could be pervasive and governments need to protect

society to make sure big tech acts in society's best interest. >> we expect to see more regulation with a.i. going forward. this may be the first step i want to get to your research according to research, the adjustable market for a.i. is $1 trillion in 2030 of put us in context. where do you see the disruption happening first? >> absolutely. that is a big number it is about a third of the size of the global core industry today. when you think of a.i., the buzz word today is generative a.i that is what chatgpt does and other models unless you can see the algorithms behind it, you don't know if it is safe

of course, it could have enormous misinformation in the world if it is not safe. that is one type of a.i. it is changing business models if you look at stock markets yesterday, the tech sector took a hit. pearson and duolingo fell with a threat of these types of a.i. models many companies can profit from them you, for example, frank, can cut down the time to research news articles filmmakers can cut down on time it takes to make films most importantly, ctos can get software engineers to write code faster this will take off that is generative a.i there is decision making a.i if i run a factory, i can use a.i. to make decisions and so

on there are many types of a.i. >> many applications i want to ask one more question, cyrus. you mentioned something in the u.s. writers strike in hollywood. before we let you go is there anything the u.s. government or other regulators learned from other tech we have seen come out? bitcoin or the metaverse that they want to fix this time around with a.i. >> i think what the s.e.c. shows and the crypto regulation, you e problems in the case of a.i., there are issues regulators should address. is a.i. responsible? is there any bias in them? is a.i. systems transparent? do we understand in a matter of life or death? there are data controls with data transfer and security

politicians don't understand tech as a whole. they need have to independent auditors to ensure new laws on a.i. are followed. most important of all, you know, does regulation include contestability if entities are wrong by a.i. systems, they should challenge them >> i have to leave the conversation that. cyrus, a.i. stocks are up right now. always great to see you. especially ahead of the meeting at the white house ahead here on "worldwide exchange," the one big thing to watch. nancy tengler will join wh her take on the apple report what if buildings could tell you how they could be more efficient? i'm listening. well, with ibm, you can use software to help you connect and analyze data— from hvacs to elevators to lights. what if we use ai-driven insights to pinpoint inefficiency? yep. and act on it.

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welcome back to "worldwide exchange." the $20 billion market for messaging software is the latest battleground for a.i salesforce announcing the launch of slack gpt today this is a company provided demo of the a.i. platform to discuss more in new york city's event. salesforce is building a.i. into slack and enabling the use of the einstein gpt the goal is to use a.i. to increase productivity and generate reports and recommendations from prior conversations. i spoke with chief marketing officer about the launch and how

salesforce would make slack gpt enterprise ready >> that's what is so powerful is now a.i. can learn from your company data this helps all of us be better at our jobs because a.i. is here to help us and not replace us. making us more productive so we can have a.i it is learning from your trusted customer and company data. >> the company says it is creating salesforce for slack. it is fourth in the messaging space with half of the share of microsoft teams with a.i. functions. google and zoom made similar announcements. about 90% of u.s. employees are using that messaging platform to communicate in the workplace according to estimates from jefferys

a.i. can boost revenue at slack. i'll talk with the new ceo of slack lidiane jones at 10:00 a.m. straight ahead on "worldwide exchange," michelle girard is here with the odds of the pause and what it means for powell's policy playbook. if you haven't already, check out "worldwide exchange" on all of the podcast apps there is time to sign up for the virtual small business playbook. to register, scan the qr code on the screen or visit ev events.cnbc.com. "worldwide exchange" is back in a moment

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it is 5:30 a.m. in the new york city area we are just getting started on "worldwide exchange. here is what's on deck pivoting to a pause? jay powell is opening the idea following the central bank rate hike the regional banking tu turmoil. one top concern with pacwest calming investors as the stock continues to plummet weighing the options in the rapidly developing situation.

and cupertino is closing out the big tech earnings bonanza. it is thursday, may 4th. you are watching "worldwide exchange" here on cnbc. welcomek i'm frank holland. let's check on the u.s. stock futures. they are green -- a change here on the s&p it moved to the down side in the last minute. the dow jones industrial average and nasdaq both in the green higher at this time. we are keeping an eye on the developing situation with u.s. re regional banks pacwest is exploring options. it has not experienced any out of the ordinary deposit flows in the past week and its cash reserves are solid shares are falling in the pre-market down 36%

you see year to date down 80%. we are watching western alliance bank as well releasing a statement saying it, too, is not experiencing any unusual deposit flows. shares are down 17% this morning. better than they were earlier this morning week-to-date is down 34%. turning to the action overseas and big central bank with the decision on deck. julianna tatelbaum is live in the london newsroom with more. julianna >> frank, good morning yesterday was all about the fed. today is all about the european central bank the lead up to the decision is red across the board investors selling european equities it is a broad based and evenly spread pull back no major moves lower in terms of the magnitude. we are trading lower overall what can we expect from the central bank the ecb announces at 8:15 a.m.

evide eastern time there is a split over the rate hike of 25 or 50 in terms of the data, headline inflation in the eurozone rose 7% in april despite the central bank raising half a point at each of the last six meetings. core inflation eased 5.6%. here is a picture of yields. we are seeing yields move higher across the board in europe the german bund at 2.67% the italian trading at 4.16% frank. >> not just the ecb but investors digesting earnings out this morning what are you looking at with earnings >> a huge day for earnings in europe we are looking at sectors across the board. let's zoom in on two names shell in the energy space is 1 f f1.88% higher

$9.6 billion in the first quarter. it kept dividend unchanged and $4 billion of share buybacks and ab inbev came in at $4.6 billion. it is looking at growth in the premium beer and non-alcohol drink line up. those shares are trading higher. relative to the broader market, it is out performing frank. >> a lot of people will take the volume rebound as a sign of consumer spending continuing to be strong. julianna tatelbaum in the london newsroom, thank you very much. let's check on the top corporate stories with silvana henao. silvana. >> frank, good morning apollo global management is closesing in on the deal for

abab arconic for $3 billion the industrial parts maker was spun off from aluminum giant alcoa in 2016 and has a debt load of $1.5 billion johnson & johnson consumer business spinoff kenvue set to trade on the new york stock exchange today ahead of the opening trade, kenvue priced at $22 a share giving a value of $41 billion. above the expected range and france's anti-trust agency is giving meta two months for ad verificverification sayit was taking advantage of the online ads approach allowed data access to

the big of egest operators viewership is detecting fraudulent online traffic. >> more regulation in tech it is a htheme. silvana, thank you. turning back to the big story. the fed raising the interest rates by 25 basis points and marks what has become the most aggressive tightening cycle since the 1980s. jay powell striking a different tone with future interest rate hikes. hinting the current cycle may be coming to an end. >> people talking about pausing, but not at this meeting. there is a sense that we're much closer to the end of this than the beginning and as i mentioned, if you add up the tightening through various channels, we feel like we are

getting close or maybe there >> so addressing issues around the banking system, powell said it is monitoring the situations in the sector. joining me is michelle girard. michelle, great to see you. >> frank, good morning >> read the tea leaves with me on this one. we had another guest on earlier. is there a hint of a pause he said they getting closer, but powell said data dependent and no decision on the pause was made today i thought it was a lot of mixed si signals. >> they were trying to be clear there is no longer any pre-disposition that more rate hikes are needed that is most clear in the change in the forward guidance in the statement where they went from saying they were anticipating additional rate hikeswould be necessary to suggest they would be looking at a bunch of data to determine whether or not additional rate hikes would be

necessary. powell pointed to that change in the press conference calling it significant. i think they are trying to say now what we do going forward is dependent on how the data plays out. i think the data will suggest the fed has done enough for now. we think that is the last rate hike of the cycle. >> jay powell made it clear it is data dependent. jobs report on friday. another inflation report next week we still have the debt ceiling to deal with i asked another guest what is the biggest inflection point for the markets. he thought it would be apple earnings out of the three, what is the biggest? >> i do think that the inflation data is really important here. in the face of weaker economic data that i do expect we start to see is going to be the inflation numbers that give the fed or determine what or not the fed has the room to react to the weaker numbers

if we get weak economic data or weak earnings or trouble with the debt ceiling, the fed's ability to respond to all of that by moving policy to a less restrictive stance is going to be determined by how high inflation numbers are. ultimately for the markets, that is the key of determining whether or not we get rate cuts before the end of the year our forecast thinks the inflation rate now -- we think it will come down enough to give the fed room to do so. i think the inflation numbers will be key in terms of the market's expectation of how much the fed can react to bad news. >> jay powell emphasized inflation is coming down, but not fast enough for the fed. not yet. i want to turn to the banking crisis two regional banks falling hard in the pre-market. pacwest and western alliance how far is this for the fed and the broader economy? on monday, when jpmorgan chase

bought first republic, i think people thought this was settled. >> i think our view is the banking story will continue to be pretty volatile in the sense we are not sure all of the news is out or that is something as you said on monday when everybody felt better and our view was unclear this is over. in terms of the macroeconomics implications, our view is really that this is going to contribute to a pretty significant credit crunch we had been expecting the economy would slow and dip into recession in the second half of the year all of these developments and particularly the fact that they are more likely to lead to sharper credit tightening than we anticipated that is a very significant head w headwind for the economy from our standpoint, it makes

sure assure of the economy slipping into recession. it makes us confident that inflation can get lower faster amid the economic back drop. as a result, we now think the fed can cut rates before the end of the year whereas before we really pushed back against market expectation which is something i expect for 2024. >> michelle, wait a second could? >> it is in our forecast that the fed cuts interest rates in the fourth quarter of this year. just trying to move policy back closer to neutral from a very restrictive stance beginning that journey we have inflation coming down. just over 2.5% by the end of the year against that back drop, i think the fed will have room to move. >> michelle girard of nat west thank you. coming up here on "worldwide exchange," the set up for apple the earnings we have nancy tengler here to break it down and what to watch

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welcome back it is time for the morning call sheet where we see the upgrades and downgrades by firms you know we start with da davidson with the buy rating and $30 price target the company shows buffett qualities unique within software goldman sachs upgrading cemex to buy. adding a key focus is regaining profit profitability. we have one more upgrade for you this morning this time citi is raising the rating from deutsche bank to buy. the first quarter results demonstrated the potential for the earnings upgrades. tonurning to the big p one e the bell today appl apple. the results expected to be

muted. steve kovach has the keys to watch. >> a lot on the line for apple report today the street is expecting the company to report the second quarter of falling revenue in a row as we see demand fall for consumer electronics analysts think the iphone business is resilient than m mac ipad due to china reopening and more customers buying apple products in the country. most are expecting apple to guide to another quarter of falling sales. it is the severity of the fall down 5% and apple is in line with expectations, but more than that, watch out. that is the sign that the apple consumer is tightening spending more than feared services growth is slowing due to fall in spending in the app store and pull back of

advertising. this is not hurting apple shares rallying as investors look for safety they are up 30% year to date frank. >> that was steve kovach right there. i'm now joining by nancy tengler, cfo of laffer tengler >> thank you, frank. good to be here. >> you are looking at estimates that apple added iphone users in the last 18 months what sense does that give you with what we will hear after the bell >> that number goes to the ecosystem, frank that is the real story behind apple's growth and sustainable growth the ecosystem which is services has slowed down in recent years. we expect to see with the growth not only in users, but demand for additional cloud service and

music and all the accessories. that will return to double digit growth what is important is china in the last 12 months has grown and companies gain share in china by 300 basis points i find that number remarkable given the tensions we have seen with the u.s. and china and the crackdown on business this china. i'm encouraged by that we will see what the company says today about guidance in china. >> i want to go back to what you were saying about china. gained 3%. we had another guest not that long ago saying apple has 10% market share in china. 3% in india. let's talk about china and india. which is more important for apple the and which will we hear on the call? >> we will hear china. increasingly, india is the port

for the supply chain they historically restored phones and serviced them in third world countries. as the average sales price goes up around the world, india will become more important in terms of marginal growth and what we will be watching is the sales prices going up ex-u.s that is impressive given that historically in technology what you see is prices come down over time that is not the case with apple. i got a new 14 it is remarkable how much you pay for the gadget >> remarkable is not the wordy would use, nancy expensive. we see a big pc slowdown they guided if there is impact from the pc slowdown how big of a story is that for the report how big of a story is the

dollar >> so i'm going to answer backwards first. the dollar to me is something no one is talking about we have seen a decline in the dollar against the world currency last year, the dollar added a drag on s&p earnings in 5% to 7 depending on how you view the math depending on the margin, that allows the company cushion with earnings growth and margins. in terms of pcs, that story is well known all i would say is a couple of years back and ipad was left for dead during covid, we saw a resurrection now you can't go to a retail establishment without interacting with an ipad i think they will get that under control and will see normal growth return to pcs that is not the story. the story is phones and services >> something we have to watch with nancy, great to see you.

>> thank you. coming up on "worldwide exchange," the one word every investor needs to know today h hightower's stephanie link has the word and the items on her shopping list. and we are celebrating asian american pacific islander month in may we are sharing stories of business leaders here is ceo and president debora lee. >> i grew up in a small town in south carolina one of the few asians in the state. i grew up going to football games and eating hot dogs. i learned a different language at home and eating different foods. being able to share that with others is what it means to be asian american i'm so proud of that that is also why i'm part of ancestry i help people connect with family history we all bring the experiences

that we have and cultures and history and make this country as hitch as it is because we can bring it all together. ♪ ♪ the biggest ideas inspire new ones. 30 years ago, state street created an etf that inspired the world to invest differently. it still does. what can you do with spy? ♪ ♪ (cecily) you're looking pleased with yourself. (seth) not to brag, but i just switched to verizon. (cecily) so you got an awesome network...

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welcome back to "worldwide exchange." time for the "wex wrap-up. the bank pacwest shares dropping as it is exploring a potential sale. and china tourism returning to pre-covid levels. trips in the five-day period toppt topping 274 million. and shares of etsy popping in the first quarter hollywood studios have started stopping payments to

producers as they deal with the ongoing writers strike contracts will no longer get full pay and still perform roles for the studios. france's anti-trust body is telling meta needs to change its verification process. and opening up the new bing search engine is open to all users. three months after microsoft debuted a limited version of the browser. let's look at the busy trading day ahead with stephanie link with hightower. great to see you >> good morning. great to see you >> every day, we asked wall street's brightest minds the one word to describe the trading day ahead. what is your wex word of the

day? >> interpretation. i think all day long we are slicing with the fed yesterday was he hawkish was he dovish? was it a pause a lot of varying opinions. >> you and i seem to be the only people who felt it was ambiguous. with ambiguity, what does it mean for the markets today where do you see the markets and action going >> we are in this trading range, frank. i think he was less hawkish. we are still data dependent. they are focused on 2% inflation. he did not waiver on that. i think people thought he would. so, i think it is just this back and forth. that's why i say interpretation is what is the word of the day i think if we step back, we are

in the ninth inning with higher interest rates that doesn't mean they will start cutting. i think it will take time and as a result, i think, the market is in the choppy trading range environment. >> i think it is interesting you said ninth inning. baseball is known for going into extra innings. interpretation i want to get to your stock picks. tech focused stock picks and consumer facing names. why consumer names right now >> i think the consumer is still quite strong $2 trillion in savings we have a lot of momentum in jobs and wages i know the job market and the initial claims will come out later this morning i know we are starting to see the creep in initial claims and jolts numbers were disan poinpo -- disappointing. i think the consumer has opportunities. for example, i have no idea why starbucks was down 9% yesterday. they crushed the quarter

you have a new ceo very conservative historically i think there is opportunities to be had. >> some of the picks are tjx operator of tj maxx and marshalls and ge when it comes to ge, it is not consumer facing. what gives you confidence of that >> it is interesting, frank. it used to be a con skconglomere it is getting simple they spun out ge healthcare. they are spinning out in january the power renewable business i think it becomes more of an aviation pure play they have done a good job of that business. that's the gem always has been. it got lost in the shuffle because it was a conglomerate. they reiterated guidance for free cash flow >> good point. stephanie link, we have to leave

the conversation there you are buying into the market appreciate you being here. one quick check of the futures. we have been watching them all morning. the s&p taking a dip to the down side dow jones industrial average in the red. nasdaq is higher that will do it for us here on "worldwide exchange. "squawk box" is coming up next thank you for watching it's official, america. xfinity mobile is the fastest mobile service. and gives you unmatched savings with the best price for two lines of unlimited. only $30 a line per month.

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good morning stock futures are relatively flat after yesterday's lower close. we'll talk about the fed decision to hike and hold. straight ahead and here we go shares of pacwest bank plunging on reports the bank is considering options and cnbc has

learned that alphabet employees have been mocking their ceo on an internal forum for taking a $226 million pay package amid layoffs and cost cutting it is thursday, may 4th, 2023 and "squawk box" begins right now. good morning welcome to "squawk box" here on cnbc live at the nasdaq market site in times square. i'm melissa lee along with joe kernen let's look at u.s. equities futures. jay powell delivered the tenth rate hike. we have futures down for the s&p and dow. this is afte