subpoenaed him which is related to jeffrey epstein it is tuesday, may 16th, 2023 and "squawk box" begins right now. good morning welcome to "squawk box" here on cnbc we are live from the nasdaq market site in times square. i'm becky quick along with joe kernen and andrew ross sorkin. if you look at what is happening in the markets this morning, you see there are red arrows dow futures off 59 points. 69 72 we will talk about what we are seeing with earnings s&p down 5 points. nasdaq down .50% andrew and let's get an update on

the debt ceiling with the meeting expected today with president biden and congressional leaders. kevin mccarthy said negotiations are not near a deal. scheduling hurdles makes things difficult. president biden is leaving tomorrow for an international trip and the house and senate is expected to be in session one more week this one everything was going swimmingly and now it is not swimmingly if you remember yesterday at this hour -- very optimistic >> they have to do something >> guys, let me tell you about home depot stock off sharply. earnings are out earnings came in better than expected on the bottom line. 3.812. revenue was a miss $37.2 billion. the big deal is the guidance that they are giving for the full year. comps down 4.5% against 1.6% estimate

the full year, the company is now saying it sexpecting revenu to be down 2% to 5%. for the full year earnings per share, down 7% to 13%. the estimate was down 5.7% you see the stock down 3% and down 4% of bouncing futures are off 115 points against when the show started. >> the current quarter sales haven't been minus 4.5%. the outlook is not great macro. austan goolsbee wanted to go up 25 it looked like a hostage tape with him. >> and paul tudor jones called him out. >> ted decker said our sales for

the quarter were below expectations because of lumber deflation and unfavorable weather in the western division with extreme weather in california which impacted their results. however, the guidance for the year goes beyond the quarter and the weather anticipating with this unprecedented three-year growth with sales over $47 billion. they expect this would be a year of moderation for the home improvement market >> mortgages you know how quickly -- the fed acknowledges there are lags. you know how quickly a lag can become real? it could be a week and we decided, oh, my god. we have more to do or we have gone too far >> you might hear more concern about the consumer coming out this week. this is the first of those big

reports. joining us now for more on home depot is brian nagle senior analyst at oppenheimer. brian, this is a surprise. what do you think about the guidance >> good morning, becky i think you summed it up well. this is very clearly a miss and guide lower for home depot as you said, this is a surprise. a lot of concerns out in the market some are on wall street calling for this guide lower digging through the report now and this is a weak report from home depot like you said, we saw a clear sales miss in the first quarter. that seems to be weather and lumber prices which were shorter term in nature on the heels of that, management did take down guidance for the year there is conservatives in there. >> do you think there is a similar tale repeated by lowe's

and other retailers reporting this week? >> lowe's definitely if home depot comp is down in q1, lowe's is skewed to the seasonal category. this is more of a negative for lowe's in the near term. we heard from tractor supply i don't talk about them much they reported a few weeks ago. weather dependent. they talk about the weather as well the key point they made is as the quarter of march into april and as time progressed, sales picked up. will see if home depot hits it this is a negative for lowe's. >> there is lowe's now we needed to show lowe's >> this is going to be what sets the tone p today home depot down 5% a lot of times we say let's wail

>> this is a clear miss. i think this is happening against a very concerned back drop toward the consumer this is feeding the beast if you will i think home depot will say something on the conference call as the weather had gotten more spring-like, you see sales pick up >> brian, what other things do you want to hear from the company? what would make you feel better or is there anything to say beyond the broader macro picture here >> look, funny as we talk about this earnings did beat expectations >> on the bottom line. >> on the eps. eps beat expectation that is a testament to home

depot managing well in a softer sales environment. that is not much of a buffer for the stock. as we listen to the conference call today, i made the comment to the extent that weather is more spring-like and sales picked up and everything they could say with the underline home improvement customer. we have seen better housing data i put out a report last week talking about this this is not a coincidence for home depot when you start to see housing solidify, underline that positive for home depot. home depot talks about that and that could help cushion the stock. >> revenue was a miss. from what i hear, that was the biggest revenue miss since november of 2002 that goes back a long way. maybe it tells you the margins are actually holding up okay and that's been the story we heard from so many companies margins are safe and they rise prices to protect that

that builds into the inflation story. what do you look for along those lines? >> again, we think about 2023 and work through to 2023 and this is the comment i have been making shipping costs and logistics costs have come down significantly. we need to wait for the accounting to catch up shipping, lower shipping costs, on the heels of supply chain disruption later this year will be a positive. we have that coming, so to say >> i think we have the chart we have given back everything to the two-year low brian, if you are recommending the stock since march of 2021, you are back to square one you made no money. >> joe, i want to point out and

i talk about this on your show when i thought the pandemic was winding down, i was early in this this was back in summer of 2020 where we downgraded home depot with the post-pandemic reset the pandemic persisted longer than we thought. that is what we are seeing now again, with all going on, weather, lumber prices, underlining softer consumer. you are seeing this and home depot is talking about it in the release and the numbers down 4% and 5% in comps and q1 is coming on the heels of significant sales gains of the past few years. i do believe i put out a short article yesterday talking about the summer travel. we see indications travel is picking up that is probably a negative for home depot as people are traveling and spending more time traveling and more money

traveling and not spending at home depot. >> everything will eventually unwind from the pandemic labor market everything this is an algorithm for the whole shooting match that is unbelievable two years of no advance for a key dow come ponent which has dn well over time we were hyped up in the pandemic and slow unwind. you were early on that i think we will get a slow unwind of all of the stuff all of the pent-up demand gets satisfi satisfied. i think of this in light of the fed and recession. >> or all of the gains pulled forward. >> doesn't portend great things. it is lumber and you know,

mortgages. we talked about shelter. the weakest thing and services and travel has been solid. maybe their day will -- maybe its day will come, too. >> i see elsewhere in my coverage of the home fashion area which is ecclectic. home improvement held out better best buy and the consumer electronic space clearly seeing a post-pandemic low now. joe, you are seeing it and we will see more of it as the world continues to normalize >> brian, the supply chain issues do they still exist? i have a furniture place telling me the furniture i ordered in february is not there because of supply chain i thought we had too much. >> i will joke i don't think they do. when i hear from companies and

the way i think about this is shipping costs overseas shipping container costs are back to pre-pandemic levels a couple of companies said lower. it is not a perfect proxy for delays, but it means a lot i think the supply chain from the retail perspective is working well. >> brian, thank you. we will talk to you soon >> thank you >> talking about the debt ceiling. i think when mccarthy and biden met in february, the prospects for getting a deal was slim to nil with this caucus two or three months went by and it happened and now here we are. president biden is headed to japan for a week you know, waiting 90 days thinking there will be a clean deal because this guy is not getting a bill passed. it gets passed 80 days into it

i don't know now it is scary. >> both sides are entrenched it doesn't leave a lot of room. >> one side is saying please talk now we are in negotiations if they were -- >> and president biden saying they'll not vote. >> they have to get the normal democrats and normal republicans. >> shrinking pool of people. >> you can do it do it with both. that's how it is supposed to happen problem solvers on both sides. >> problem solvers is a caucus of two they have not been as effective as we thought. >> congress member josh is part of that. >> yes coming up, whale watching. we run through investment moves from regulatory filings. don't miss david faber's

interview with elon musk that starts at 6:00 p.m. eastern. yoarwahi "ua b" u e tcngsqwkoxon cnbc >> announcer: this cnbc program is sponsored by baird. visit bairddifference.com.

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time for a little whale watching portfolio moves revealed from the biggest investors. berkshire revealed moves in the

kw first quarter. it continued to move in activision-blizzard. that stake was worth more than $4 billion in march. berkshire with capital one financial with the stock up sharply on the news. and berkshire exited stake in bank of mellon and u.s. bancorp. >> by the way, the paramount piece. still? >> i don't know. did you read through it? >> i couldn't see what was going on it looked like it was still there. >> i guess there was no sale >> people were questioning if he was still in the stock or wasn't >> that would have been flagged we have tech bets. $1 billion bet on alphabet from

bill ackman's pershing square. it bought 10 million shares in the first quarter. david tepper bought alphabet raising the stake to $200 million. that was the top holding the firm boosted holding in uber by 390%. that makes uber the hedge fund third largest holding. the firm took a $20 million stake in cathie wood ark innovation fund. >> cheaper david einhorn bought 3 million shares of bank corp and first cit citizens bank. greenlight bought 22,000 shares. joining us to fwtalk about somef

the big bets is victoria greene. a cnbc contributor victoria, what stands out for you at this point? buffett is always interesting. i think the ark investment is interesting, too >> it is a bit of a bet on thematic it was a big play on tech which was the winner in the first quarter. nvidia and google twere big winners. you did not see a lot of regional banks not a sign of confidence in hedge funds. i think those two things were what stood out the most. a.i. piece being the winner and that really didn't see people coming in and saying these regional banks are cheap michael berry added pacwest and western alliance

you did not see others add to the regionals. that wasn't necessarily good they didn't see a value there. they saw a value trap. i will add berkshire did keep paramount. that stock has had a tough first quarter. he is still a paramount owner. >> that's what i can't figure out. i think a lot of people thought he would have sold some of it given the comments which were not the most positive. you asked about paramount. what he thought of streaming and it was let me tell you about the problems and i own this company. >> i thought that was interesting. that and the capital one move. he exits from bank of mellon he has done a lot of shifts in financials he got out of wells fargo and added ally

american express is the largest holding behind apple apple is 46% $151 billion he has a huge position his top five stocks are 75% of the portfolio. capital one for me was like a paramount play confus confusing. lower quality. maybe it pairs well with amex. charge offs are rising they have lower client base which maybe paired with amex makes sense. >> victoria, to point out on that, it was less than $1 billion. it could be todd or ted who makes the investments. i think todd and ted have $15 billion in their own portfolios. that's the only thing i would caution trying to look through and figure that out. the filings are as of what day

paramount slashed at the beginning of may i guess we know to a certain extent what he has and hasn't done the drop in the stock price came after the most recent filings due. >> through the 30th. >> maybe he sold after. >> right at the beginning of may. >> everybody loves alphabet and tech the next bull is led by the sectors, we are not seeing it here >> we are looking at the same verse and different song same song and different verse. sorry. a.i. and nvidia and google that's the theme that is what is working. these are 3/31 filings a lot has changed. paramount with the struggle and you are right with berkshire the confusing filing with the

fold in on assets. it jerked around numbers with the added positions they did not necessarily add. absolutely hedge funds saying tech is going to run it looks like a.i. is the name of the theme for 2023. >> all right victoria greene, thanks. >> have a good morning coming up, highlights from my wide crank rang ranging inte satya nadella. we'll talk about activision-blizzard. later, an update on the meeting with president biden and congressional leaders on the bt ceiling "squawk box" returns after this beautiful shot of the capitol. t. the smoothing benefits of retinol. are now for your whole body. plus, fast-working crepe corrector diminishes wrinkled skin in just two days.

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welcome back to "squawk box. open a.i. founder sam altman testifying on capitol hill today. in an interview, i spoke with satya nadella about the company's relationship with a.i. which was founded as a not-for-profit >> it is important for sam and his team that they found a partner who understood that. that's why we were comfortable with it. one of my dreams is and the reason i want to work in information technology and work at microsoft is to be part of the democratizing force.

>> i don't know if yyou saw elon musk's comments although open a.i. is a not-for-profit, he said that he thought the company was effectively controlled by microsoft now and this is something he was unhappy about >> you know, in effect, microsoft has a strong say, if not directly controls open a.i. at this point. >> a lot of respect for elon and all he does. i would say that is factually not correct. as i said, open a.i. is grounded in the mission of being controlled by non-profit board a non-controlling interest in it we have a great commercial partnership in it. honestly, i am very comfortable in partnering with a capped profit company that has a mission of fundamentally

pursuing this powerful technology that ultimately will be controlled by non-profit. the last time i checked, we are the only for-profit company that is comfortable with a non-profit company and a board controlling technology i welcome others to do that as well >> right. >> we spoke more about that. i also asked satya nadella about the concerns of the technology moving too fast. >> a.i. is already there at scale. every news feed, every social media feed, search as we know chat plus search they are all on a.i. if anything, the black boxes the more i describe as auto pilot era. in an interesting way, we are moving from the auto pilot era of a.i. to corporate development of a.i ye yes, it is moving fast, but in the right direction where humans are more in control.

humans are in the loop versus out of the loop. it is a design choice we made. i feel it is more important for us to capitalize on this technology and its promise of human agency and economic productivity. >> on monday, european regulators approved microsoft's proposed acquisition of activision-blizzard for $69 billion. i asked nadella before the announcement what he thought would happen with the developments in the u.s. and uk. >> look, the fundamental londgi of the deal bringing more competition and more opportunity for publishers and gamers still holds. as far as i'm concerned, we keep going. we wait for the european union decides. we have a process. we respect the sovereignty of the united kingdom >> do you see the age where you

sell the products and approved and not sell in the uk if they didn't approve >> let's wait for it to play out. >> were you surprised? >> very much so. very much so in some sense, this is the most pro-competitive thing i have seen most people will say this is an interesting way which is using a large company's ability to persist to use more competition. i think consumer surplus and more comepetition is the goal ad it checks all of the boxes >> at the same time, i asked about the regulatory environment here in the united states. >> this time around, it looks like if you are big somehow, you should be banned from doing things. >> big seems bad right now >> i feel like maybe a little

reframing of -- let's take microsoft and google competing is that good or bad? in terms of consumer surplus and you talked about publishers. who benefits guess what happens if search becomes competitive, who benefits? every advertiser will get better yield and users get better innovation it seems two big companies competing might be a good thing. >> we will have more with satya nadella in the next hour including lina khan trying to regulate you can watch the full episode tonight at 10:30 on "nbc news now. >> let's talk about what is happening about the deal the ftc is blocking amgen's $20

billion deal for horizon thera therapeutics that makes you think lyina khan did not see a deal she did not like what is he going to do in terms of trying to extend the offer for activision they will not get through the regulatory approval before july. >> what does the eu decision do? >> he was not providing the answer of what happens i feel like i can't speak for him. clearly, you are right they have to extend this or not. >> was the eu not at the collusion meeting? what happened? >> i don't know about that the hard part -- put it this way, his answer to the would you ever sell just in europe and just in the u.s. -- you can't sell in the u.s., you are not doing the deal

could you imagine living in the world where you not sell in the uk, but other places maybe. maybe. >> easily. >> i don't know. >> easily. what is the size of that economy? >> and what will you have? you have a situation, interestingly, where people are going to buy consoles and other products in these other places and then vpning in who is the criminal? who is the customers living in the uk trying to use the service or the company how does that work does microsoft block those people it is complicated. >> you see a correlation they do things different over there. not necessarily historically for the rest of the world. >> it looks like they and the u.s. may be closer than you think about where they are going with this one. >> and who decided to do that? >> just saying when we come back, we talk about what to expect in the

markets. you see the dow has recovered a little bit down 89 points we will talk about home depot earnings and more when "squawk box" returns ♪ners and loser are sponsored by state street advisers 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? ♪ ♪

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good morning welcome back to "squawk box" live from the nasdaq market site in times square. checking the futures we are dealing with the sell off with the dow up. sell off in home depot is causing the dow to be down solely because of home depot which is down 87 points. do the math. home depot's revenues missed estimates. cut the full-year guidance

more on the storey at the top o the hour look around. the first thing we look at is lowe's think about anything that could be impacted by a weakness this the sector and you are seeing an effect in the individual stocks. retailers and furniture and paint and lumber any of it. president biden remaining optimistic a debt limit deal can be reached ahead of the meeting with congressional leaders kevin mccarthy had been optimistic, but telling reporters yesterday they are nowhere near a deal with default looming as early as june 1st joining us is chris coogler. okay what are the odds at this point? the expectation in the market is this deal still gets done maybe at the last second which always how this plays out do you have a different view >> no, that's seems about the

way this has set up to go. we have the meeting today at 3:00 p.m this leads to another meeting. we are still two weeks out >> when is the meeting supposed to happen? the president is abroad in japan. when is this supposed to happen? there is not a lot of time left to do it physically. maybe on zoom or something. >> i think if the last year has shown us anything, there are advancements with zoom and other things he doesn't leave until tomorrow. candidly, there are two weeks to go you know, the menu is largely set. they need to figure out the diagram that all sides can agree to at the end of the day, you need majority of the house and 60 in the senate and biden's signature. >> what is at the center of the diagram then >> i'm sorry the center of the diagram is

clawing back covid funds and call it $60 billion or $70 billion, discretionary spending on growth and permitting reform. to the broader issue, a week is probably not enough time to get that done. some time of bridge into september. >> you think we will have a two-stepper? we have to live through another and be back in the soup in august >> congress being congress takes august off probably september on september 30th, the government runs out of cash anyway doing something at the end of september seems likely which is where discretionary caps and permitting forms come into play. getting permitting done in two weeks is tough do a down payment and come back. >> and they already have that

written up from what they stiffed manchin on they have to resurrect it after they pulled the rug out from him. they may know what they want to do the question is the reason mccarthy got negative is democrats said we'll close tax loopholes. they did not say anything about covid. they didn't say anything about discretionary spending that was the first negotiation it was a negotiation they came back with something. that is not enough closing loopholes. what was that? >> what you are seeing is the far right and far left trying to get some things in the agreement. i think at the end of the day, it is going to be the center that carries this. seeing, you know, there will be another big push by the house freedom caucus on border security or others in reality, this is one of the big bills that will get done

this year. you see folks try to attach a number of policy items a lot of democrats point out if we talk about deficit reduction, revenue has to be part of the conversation >> taxes, you mean i like the way you say that. is that a code >> you know, revenue, taxes, fees however you want to address it right now, it is on the spending side of the ledger sdp >> you talked about permitting where is that piece of the debate lie >> so, there is the sort of shell from the inflation reduction act with senator manchin. what we have seen is an interesting -- again, the two-step narrative and not just energy permitting reform for fossil fuels and pop ipelines, t cetera, but you see progressives pushing for clean energy

this could provide a tailwind for both the inflation reduction act as well as the bipartisan infrastructure law and energy permitting reform that both sides can point to can be a positive outcome. >> make it happen. >> it largely has to within that diagram, there isn't much else there. >> okay. chris, thank you we'll see. still to come this morning, two congressional hearings to watch. we'll talk about the senate hearing on artificial intelligence straight ahead. inter, senator j.d.vance will jo us on failures of silicon valley bank and signature bank "squawk box" will be right back. , communities and the people who live and work there grow and thrive. we're proud to call these places home too.

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we are watching shares of wells fargo. wall street journal reporting the bank will pay shareholders

$1 billion to settle the lawsuit over the fake account scandal. wells fargo misled how switfly they where fixing the issues you may remember shareholders say when the slow pace became clear in 2020, the stock price decline cost investors that stock up on that news this morning. coming up, we will tell you what to expect from a key senate hearing today on the rules for artificial intelligence. that's next. reminder, you can watch or listen to us live any time on the cnbc app >> announcer: executive edge is sponsored by at&t business at&t 5g is fast, reliable and secure oh, i can tell business is going through the “woof”. but seriously we need a reliable way

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the senate you judiciary subcommittee will hold a hearing this morning on rules for artificial intelligence. steve ckova kr, s joins us from washington. >> it's the first major congressional hearing on the topic with open ai ceo sam altman being the key witness and christina montgomery and nyu professor gary marcus. this is going to be a different kind of hearing. instead of dragging tech ceos in explain their privacy failures this is preemptive taking a hard look at ai and what's needed to weed out potential problems today, already loads of ideas out there, how to regulate ai. for example, lena chon mentioned holding ai platforms responsible under existing law representative ted lieu used chatgpt to write a bill while

regulating chat gbi democratic senators releasing a new bill to regulate ads generated by ai requiring a disclaimer and you have ibm's montgomery calling for precision regulation in her testimony. you have to be more prescriptive saying what ai can and can't be used for this sentiment is echoed by many in the tech community for regulation altman had a dinner with a bipartisan group lauren finer spoke with several lawmakers who attended they said they were impressed with altman and saw it more as an educational opportunity for everyone attending these are all just ideas right now. worth noting i've been watching these tech hearings for over five years now no laws have been passed now even for things with broad bipartisan support like child safety. >> that was going to be my point. we spoke with aneesh chopra

yesterday, the former u.s. chief technology officer in the white house. he said, look, you really need self-regulation. it's been 15 years that we've been trying to get things done with social media and nothing's happened if you can't even agree to pass something when both sides seem to agree when it comes to things like child pornography, how can you possibly expect anything to come out of this it's a bunch of hot air. >> that's exactly, becky, and i almost laughed yesterday when that bill sponsored by klobuchar, booker and bennett came out because it remind med of the 2017 honest ads act which was kind of designed to keep those fake ads from spreading online, including a disclaimer like you see television and print ads. that never happened, and yet they're going to try and pass a bill on ai ads first i don't think that's going to happen it's very clear there's no appetite for regulation, and even though we hear tech companies -- i know andrew spoke about this, they call for regulation, but when it comes down to it, they fight it tooth

and nail >> steve, thank you. we'll be watching today anyway, let us know if anything actually seems like it has a shot at passing. i won't hold my breath. >> you got it. finally, the u.s. is soliciting bids to buy upped 3 million barrels of crude oil to refill its depleted strategic petroleum reserve. contracts are set to be awarded in june. trainers have been awaiting indications that the government will begin refilling the reserve as its purchases are expected to tighten the market a prior attempt to fill the stockpile was canceled by the energy department in january after the agency said the offers it received were either too expensive or didn't meet other requirements we're going to talk to presidential energy adviser amos hochstein. been a while since we've spoken to him, probably because we knew he would have asked him this and there wasn't a good answer

new data from china, industrial production in april rising 5.6% year-over-year, that's much lower than the 10.9% gain economists expected retail sales also missing coming in at 18.14% versus expectations of 21% fixed asset investment also rising less than expected growing at a slightly slower rate from the prior month. perhaps the most dramatic point was youth unemployment rate. the jobless rate for those age 16 to 24 rose to a record of 20.4% last month talk about problems. coming up, elon musk responding to a subpoena from the u.s. virgin islands in its lawsuit against jpmorgan related to jeffrey epstein musk says the subpoena is idiotic and a programming note, don't miss david faber, he's going to speak with elon musk later today, a cnbc special presentation starts at 6:00 p.m.

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good morning, quarterly results from home depot weighing on futures we have a rundown of stocks you need to watch ahead of the opening bell on wall street. elon musk firing back at what has been the u.s. virgin islands after being issued a

subpoena in the jeffrey epstein lawsuit against jpmorgan and janet yellen doubling down on her warningover a possible u.s. debt default as president biden prepares for a second face-to-face with house speaker mccarthy the second hour of "squawk box" begins right now ♪ ♪ good morning, and welcome back to "squawk box" right here on cnbc. we're live at the nasdaq market site in times square, i'm andrew ross sorkin along with becky quick and joe kernen you're looking at the dow off about 72 points this morning, the s&p 500 off about a point and a half the nasdaq up about nine points. let's show you treasuries, looking right now at the ten-year note, that yielding

3.470, the two-year now below 4.0. it's at 3.979. take a look at oil as we think about the energy complex a barrel, wti, you can buy it for 71 at a.21, and crypto, we d about bitcoin, he's sticking with it and says we're looking at bitcoin at $27,025. joe. >> let's get to dom chu with a look at some stocks to watch dom, what's going on >> so joe, let's start off with the big earnings story of the morning as andrew alluded to that's having a big influence on the premarket sentiment. it's home depot. the shares are down 4% off the premarket lows, just over 100,000 shares of volume america's biggest home improvement retailer and fifth most heavily weighted stock in the dow jones industrial average reported better profits that beat analysts' estimates it was its worst revenue miss in 20 years it also lowered its full-year sales forecast home depot saw colder weather

and falling lumber prices impact results this past quarter and noted that consumers are buying fewer big ticket items like patio sets and grills. those shares down 4% dragging down the overall market sentiment. we're also keeping an eye on shares of capital one financial which are higher by 6% premarket, just around 10,000 shares of volume the financial services firm behind its name sake bank and credit card products is getting a new investor and that's berkshire hathaway those shares up 6% not entirely clear whether it was warren buffett who had an influence there. perhaps it was his lieutenants that kind of made that decision. capital one is up roughly 6% and then we're going to cap things off with a check across the atlantic at voda phone the u.s. listed shares are down about 6% this is the british telecom giant, it said it would cut 11,000 jobs in order to rein in

costs and help improving operating efficiencies vodafone, these would represent the biggest cuts in the company's history. shares down 6% right now, joe. thank you. we'll see you i think next hour. >> you got it. prominent wall street strategists are warning about adverse market effects from the ongoing debt ceiling stalemate in washington. for more on the markets we want to bring in peter oppenheimer, the chief global equity strategist at goldman sachs. peter, the debt ceiling, is this something that you are now considering with stocks, or is this something that you think eventually will get resolved at this point >> hello, i think it eventually will get resolved. that doesn't mean to say it's not going to be a problem for the market i think really equities are priced for the best possible combination of a soft landing and rates coming down in the second half of the year.

then you think that dense consumer confidence, which has been holding up well to date raises the risk of some further weakness in activity, i think will push the active market down given that it has really a very high valuation we do worry about it in the near-term. >> so obviously we'll be watching the retail earnings very closely this week to get hints of what's happening with the consumer home depot out this morning, the first of those big retailers to report talking about how same-store sales were off considerably, more than had been anticipated, a drop of about 4.5%, versus a decline of 1.7% that had been estimated. talking about how they're lowering their guidance for the full year. they just point out that it has been a lot the last three years, they've had a very strong consumer, and maybe that is either reverting to normal or you're seeing a slowdown in the consumer what's your concern when it comes to the consumer? what do you think is most likely >> well, i think actually consumption will hold up quite well we're optimistic that the late market will remain strong, and

that's been really the key to keeping consumption relatively -- not just in the u.s., but actually in other parts of the world as well nonetheless, i think things like the debt cross-appeiling and the the regional banking issue do weigh on confidence, and that's something that i think will be reflected in some of the more discretionary parts of the market as we go through the remainder of the earnings season in the second half of the year so really what happens to late market unemployment from here i think is going to be one of the most crucial parts of the macro picture to understand. >> so what are you advising people to do right now when it comes to the market? >> well, there are a couple of things firstly, we've expected for a long time for equities to be snuck what we call a fat and flat rate, so relatively low returns. flat returns from an index perspective, but with quite a

wide trading range we think the market's towards the top of that trading range. in that context, two things i would say. firstly, we've been overweight with non-u.s. equities, which have a much lower valuation and relatively similar fundamentals, and secondly, really being up in quality focusing on those parts of the market that have strong balance sheets, stable and relatively predictable cash flows and high margins, and that's really where i think most of the return is coming from, but i think we'll continue in what's likely to still be a relatively unexciting prospect for broader equity index levels. >> peter, one of your recent notes, you pointed out that buybacks remain strong in absolute dollar terms, but they're down 21% year-over-year in the first quarter do you think that's because companies are reluctant to spend their cash, or do you think that that is because it's now taxed

because of the ira, stock buybacks are taxed. >> i think it's a combination of those things you know, i think if you look at the outlook statements, although the earnings season was relatively healthy compared to expectations in the u.s. earnings were down 3% relative to 7% contraction that was expected, companies are getting a little bit more cautious with their cash, and they're wanting to haul cash more given the uncertainties about the nearer term trajectory for the economy. so i think it is a combination of those factors that you mentioned, but it does, again, i think reflect the more cautious tone that companies are taking in terms of their overall balance sheets that's really what the market is rewarding as well at the moment are dividends declined by the same companies basically have two options, a buyback or a dividend if the buy back is now being taxed at a higher rate, are they

opting for dividends instead, higher dividends >> yeah, and again, what we're finding is that investors are beginning to reward companies that pay consistent stable dividends more than has been the case in recent years, and we think that will continue in fact, we think that the market is probably under pricing dividends in both the u.s. and, for example, in europe overall, it is worth stressing that corporate balance sheets are pretty strong and companies are generally do have the ability to pay dividends, they got relatively good dividend cover. so looking at companies that have strong balance sheets, can pay dividends consistently i think has been increasingly rewarded and will properly continue to be so. >> peter, thank you. >> thanks. coming up on the other side of this break, elon musk firing back at the u.s. virgin islands over a subpoena around its lawsuit, and convicted sex

offender jeffrey epstein. and satya nadella on whether or not the development of ai technology is moving too fast. big investor in open ai, his thoughts on the technology ahead of tod'seang iay hris coming up. "squawk box" returns after this. >> announcer: stocks to watch is sponsored by cla, business takes balance. we'll get you there. like your workplace benefits... and retirement savings. with voya, considering all your financial choices together... can help you be better prepared for unexpected events. for a brighter financial future. thanks. ahh, pretzel and mustard... another great combo. voya. well planned. well invested. well protected.

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a note this morning from bank of america global research, b of a removing coca-cola from its u.s. one list, also removing cr kraft heinz from the same list joe. >> the u.s. virgin islands issued a subpoena to elon musk in the jeffrey epstein lawsuit against jpmorgan chase eamon javers joins us with more. >> good morning, joe, that's right. elon musk's name has been connected to the investigation into jeffrey epstein for the first time yesterday as a new court filing revealed that a subpoena has been issued to the tesla ceo. the subpoena comes in the ongoing u.s. virgin islands lawsuit against jpmorgan, which alleges that the bank allegedly turned a blind eye to epstein's sex crimes because of his enormous wealth and a referral network of ultrahigh net worth men. in the filing, attorneys for the

usvi write upon information and belief, elon musk, the ceo of tesla inc. among other companies is a high net worth individual who epstein may have referred or attempted to refer to jpmorgan but the filing also says the usvi hired a private investigator to track down elon musk and serve him with a subpoena, but that effort has not been successful. the usvi wants the court to authorize alternative service methods to get the subpoena to musk because deadlines in the case are looming all of this comes ahead of the deposition of jpmorgan's ceo jamie dimon, which is expected in new york on may 26th. so the question there will be what involvement, if any, did dimon personally have in the decision to keep epstein as a client of the bank despite his sordid track record. late last night we got a response from elon musk himself on twitter here's what he wrote in response to a cnbc story about this on cnbc.com

he said this is idiotic on so many levels. that creten never advised me on anything whatsoever. the notion that i would need or listen to financial advice from a dumb crook is absurd and three, jpmorgan let tesla down ten years ago despite having tesla's global commercial banking business, which we then withdrew i have never forgiven them strong feelings here from elon musk in response to this subpoena what musk doesn't say is whether or not he's going to allow service of the subpoena and whether he's going to respond to it in due course we'll see whether that happens, guys, back over to you. all right. good eamon, you like being on that epstein beat, eamon, if it's epstein it's eamon. that's what we've kind of found lately it's pertinent is it ever going away? i don't think it is. it's like evergreen. >> i mean, we could be in this case alone, we could be talking about through the end of the year, right? we've got the jamie dimon

deposition coming up, and then we've got months and months to sort this all out. the question is going to be -- the only thing that can short circuit that is if jpmorgan decides to settle this thing and write a check and say we're not going to participate in this anymore. we don't see any indication of that, at least so far, so i think this could be going on for months, joe, yeah, it's an important story. >> yeah, it is i just wonder -- it's so bizarre. >> settle with staley? is that what they'd have to do >> they'd have to settle with the u.s. virgin islands who are the plaintiffs and the allegation from the u.s. virgin island said you guys at jpmorgan had all these indicators of sex trafficking. you had all sorts of systems designed to track and alert you if there's sex trafficking going on all that was happening inside the bank you made a decision to let him inside the bank as a client anyway jpmorgan argues if you say we should have known, you're the

u.s. virgin islands. he was there you should have known, how dare you come after us and say we were negligent there when it was the u.s. virgin islands government who should have been doing something about this that's the argument in the case, and of course jpmorgan has now sued jeff staley their own former executive saying it was ultimately down to him as the person who had the closest personal relationship with jeffrey epstein. jeff staley at the time he was at jpmorgan was going to epstein's island was sending emails back and forth with pictures of young women with jeffrey epstein they had a very close personal relationship between the two men. jpmorgan says, well, it's not the bank it's this one guy. >> so they are -- >> in the meantime, you're going to get more and more depositions and more and more information. >> a lot of high powered people including e loun muslon musk arg their names tangled up in this thing as the u.s. virgin island is sending out subpoenas.

>> name after name after name that the virgin islands are coming after. >> they're alleging that what was happening here is even after jpmorgan pushed jeffrey epstein out of the bank they still had a relationship with him because he was referring all these rich guys as potential clients to the bank the allegation is that jpmorgan thought that was such a valuable stream of referrals that they kept having a relationship with him even though they knew about his sex trafficking and his criminal past. a lot of the people who are allegedly the people who were referred are now getting subpoenas. that's why elon musk's been dragged into this thing, and then you see his reaction. >> they sold the islands they sold it finally i know you saw that. >> they did. >> it's going to be a resort >> what do you say, i'm going to this great resort, it's on epstein's island is that good or bad that you're going to epstein island for a resort do you sell it that way or do you change the whole -- >> something tells me they'll change the name. >> they're going to change the name >> they're going to have to demolish every building on that place. >> walking around there, thanks,

eamon. >> programming note, don't miss david faber's interview with elon musk. >> you're telling me if it's a four seasons you're not interested. >> no. >> they're going to fancy fi it >> watch this interview tonight. we will.

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this morning, open ai founder and ceo sam altman testifying on capitol hill later today he's going to be questioned about artificial intelligence and the rapid growth of chatgpt. microsoft, of course, an investor in open ai and the pair have a strategic partnership which enables microsoft to employ chatgpt technology in many products. an exclusive and wide-ranging interview, i spoke with microsoft's ceo satya nadella and skiasked him about concerns whether this technology is moving too fast. >> it's already there at scale, right? every news feed, every sort of social media feed. search as we know of it before chat plus search, they're all on ai, and if anything they're black boxes, they're more -- aide describe them as the autopilot area an interesting way we're moving

from the autopilot of ai to co-pilot of ai it's moving fast but moving fast in the right direction moving fast where humans are more in control. first of all, humans are in the loop versus being out of the loop it's a design choice so i feel that it's more important for us to capitalize on this technology and its promise around human agency and economic productivity. >> i asked nadella about licensing content and the economics around artificial intelligence, an issue that barry diller has brought up and said he might even sue over. >> if there is no incentive structure, which allows for the people who produce original content to get compensated, then that will be a problem so the way at least i look at our business model fundamentally, that's why citations will be important. i think the question is do publishers allow ai to crawl, let's just say they will only allow it if they

see economic return, and we as providers of let's say chat with search have to be grounded in that, and we've already announced that, hey, we will have add units that we will share, economics around it, we will actually drive traffic back to you >> of course how to regulate ai front and center today on capitol hill, and i asked nadella if he were king for the day how he would do it >> one of the first things like we have done with cyber and other places, it'd be good for companies, we don't have to wait for regulation to have standards or adopt the misstandard, and use that as i'll call it the start of any self-regulation then on top of that, if you talk about regulation, maybe we can unpack it from the application domain, context in which something is being applied in education. it's being applied in health care, or it's being applied in retail i think we can have the regulatory frameworks that already exist in all these, but it's consumer safety or financial regulations or what have you, we can have the

current regs just hold ai accountable like they hold everything else accountable. >> do the regulators know enough to be able to deal with this because some of this ai, it's unclear whether the engineers know there are times when these things are ha louillucinating a that's uncontrollable at this moment. >> this is where a little bit my approach would be at least regulators know what they're doing. and sometimes the fact that we're having this dialogue, right, we were all -- a couple of us a few weeks ago having a dialogue, gina raimondo and the vice president convened folks to have a dialogue, i'm sure they're having dialogue with many other teams as well i don't think it's a question of technology knowledge it's just a question of how do we make sure this stuff gets deployed so that really the benefits of this are protected. >> the other question we'd ask you about is big tech and the

idea of incumbency we did an interview with lena chon, and she said she believes effectively that ai and these type of investments are going to help the incumbents, that actually it's going to be almost impossible for these smaller player to ever win given the infrastructure that's required for them to succeed. >> look, there's no doubt that so far we've seen how these technologies really thrive on huge data sets, huge amounts compute power and certain larg firms may have an advantage. what we need to do ensure that the types of opportunities and openings for competition that these moments of technological disruption can present that those moments are not being squashed out by the incumbents. >> it's a much more dynamic world. open ai is a startup, a couple hundred people, inflection startup, character ai.

>> could a small player win today in this space? >> could i mean, like, it all depends on what happens, right, which is what's the product market fit that one of these folks finds. it's not a given whether it's alphabet or microsoft are the only two games in town we want -- i'm glad, i mean, think about this, andrew, who would have thought last year as you were sitting here and somebody would have said to you, you know what, there would be real contest around search and people may actually have even a dream that there's an alternative to google, there is not just bing, there is chatgpt and bing and lots of other folks who have entered the search market that to me is to be celebrated. >> there's a lot more of that conversation you can watch the full episode of "special edition" tonight at 10:30 p.m. on "nbc news now. it will be available on demand on peacock, becky. >> looking forward to seeing the rest of it. still to come this morning, president biden set to resume

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in a letter to lawmakers, yellen doubling down on her outlook of a june 1st x date saying in her words we have learned from past debt limit impasses that waiting until the last minute to suspend or increase the debt limit can cause serious harm to business and consumer confidence, raise short-term borrowing costs for taxpayers and negatively impact the credit rating of the united states president biden meanwhile set to resume talks with congressional leaders today. joining us now is mick mulvaney, former white house chief of staff and strategic advisers, cochair and former u.s. congresswoman donna edwards. good morning to you both good to see you. mick, i want to start with you you were there for some previous negotiations, and i think you worked with secretary mnuchin.

i don't really understand, is treasury secretary yellen -- i've heard a lot of dire warnings, but is she in the weeds with mccarthy and president biden, is she mediating anything do you know? is she -- i haven't heard any -- might have helped for her to say look, we're going to get this done, calm the markets she just seems to be sort of playing into the administration's narrative that it's going to be the gop's fault and it's going to sink us. >> yeah, i've not seen her heavily involved at any point other than going in the press. i talked to folks, washington, d.c., republicans and no one says yellen said this, yellen said that. she's cheerleading certainly for the administration, which you would expect her to do it's a political position, but you do have to compare her to how mnuchin was conducting himself as treasury secretary in the trump administration you would think that the treasury secretary's job would be to calm the markets, to say, look, regardless of the

politicians, regardless what the legislature does and the president, we're doing everything to bring stability to the markets. she's doing the exact opposite you can come out and say it's late june and have it be july. that's fine, but you can't come out and say it's late june and have it be the first of june that's either really, really professional malpractice and incompetent, and she's not an incompetent person or it smacks of politics. that's what concerns me here is that yellen has contributed to that political turmoil as treasury secretary instead of trying to calm the markets, which is what you would hope a treasury secretary would do. >> are you suggesting the date's not real or she knew the date was worse than it was and didn't tell the public? what are you suggesting? >> i'm suggesting that it would not surprise me that elected republican officials are looking at this with a raised eyebrow going wait a second, how did that just happen and yes they are wondering to themselves if it's political keep in mind, there's a lot of investment banks around doing

their own calculation, they're saying this date could be as late as july there's other reports saying the june date might be right, but they're going to be asking themselves can i believe what janet yellen says or is she trying to politicize this, and that doesn't help negotiations. >> congresswoman, do you want to weigh in on everything you just heard? >> yeah, i don't share that view at all i mean, janet yellen is probably one of the least political persons actually in the administration i think she's a straight shooter. i think what she was looking at is seeing the revenues that were coming in, especially, you know, sort of after taxes are rolling in, and made an assessment that june is the date and i think her reinforcing that really, you know, ups the ante for the negotiators and the leaders to really come one something that's going to keep us from defaulting, and so i'm not going to place this at the

feet of the treasury secretary her job is to let us know when the drop dead date is, and the job of the president and the house and senate leaders is to come up with what's going to help us avoid a default, and we know that default really just can't be an option we already see the chinese sort of jockeying for the yuan to be the national currency. the world's currency is the dollar, and we need to keep it that way by making sure that we have -- that we pay our bills and that we avoid default. >> who do you blame, congresswoman? >> i'm not blaming anybody right now. >> we need to -- maybe secretary yellen during the 90 days when president biden was not meeting with speaker mccarthy and refusing to negotiate, maybe she should have been saying, mr. president, it's june 1st you need to do this. we need to do something like

this couldn't she have done -- you know, taken -- does she just nod when the president talks, she could have said that, right? she could have coerced him into coming to the table before two weeks before the deadline. >> this is such a distracting conversation the reality is that the president met with speaker mccarthy and the leaders one week after republicans finally came up with their budget number what was to negotiate if you didn't even know what was on the table, and so the president met. they're going to meet again today. i think it's helpful that they are -- that they're meeting. everybody knows this june 1st date is looming and we've got memorial day in between there, so we know that time is short. i think this is going to get -- you know, i share the president's enthusiasm because he's been a part of these negotiations in the past and understands that but they've got to get to work >> but it wasn't just they came up with some negotiations. they pass add bill to raise the

debt ceiling. >> two weeks ago two weeks ago. >> right but it's on the table to actually raise -- there could have been negotiations about how to do that and i mean, we're paying the price now for not having any negotiation, for refusing to negotiate at all, don't you think? mick, what do you think? >> joe, there's another data point, which is as far as i know as of last night and early this morning, last time i looked at it, president biden is scheduled to go to the g-7 in japan, i think. it's someplace in asia i'm pretty sure it's in japan. does that send a message that this is an morning, that things are urgent, june 1st is the right date or should he be saying i'm not going to be doing the g-7 name he's got a trip still on the books to australia and papua new guinea late in the month before this june 1st deadline there's conflicting messages i'm not saying janet yellen is lying. that is not my point if you are an elected republican official, you are looking at the

environment going, wait a second, is this all politics is there any politics here is there any doubt about this june 1st date, they didn't talk to us for the longest time janet yellen keeps moving the date the president is still going overseas you know, we passed a bill a month ago to raise the debt ceiling and didn't hear anything that's what the republicans on the hill are thinking. >> what has to happen, nmick, today? >> they need to make some progress today the fact they canceled a meeting last friday was concerning to me even though they said they were doing it because they were making progress, you don't cancel meetings in washington when you're making progress. you cancel meetings when you're not making progress. the fact they're going to meet today, my understanding is they will, means they did make progress over the weekend, whereas they weren't last week it sounds like negotiations have begun in earnest some democrats now trare talkin

about looking at the work requirements republicans have proposed some democrats are talking about accepting the covid clawback on the coronavirus spending the negotiations seem to have started in earnest, and that's a good thing. >> congresswoman, what do you think finally would bring the two sides together to get this done what does that look like >> i guess i still see two pathways, two parallel pathways. one is the raising the debt ceiling so the biden administration, the president gets his no negotiation on the debt ceiling and that we don't default, and then i see another pathway that has to do with budget and spending that is going to come probably alongside that and some minor things that maybe satisfy at least the majority of republicans and democrats to get on that bill. we will see coming out of today where some of those lines are drawn, but i think all of the leadership now fully understands that june 1st date is the x

date it is the date that we're all looking at and that the economy hangs in the balance, and they're going to get this done i mean, this is -- you know, this is part of the sausage making that takes place in washington, but i think both sides are going to come out with something that they can hang their hat on i mean, that's kind of joe biden's hallmark, but the reality is we can't default on our debt. >> congresswoman edwards, thanks mick mulvaney, thanks. and we all -- you know,we're bipartisanly hoping this happens and happens soon, hopefully today so we get an idea. markets are pretending like it's going to happen. we said that things happen gradually until they happen all at once, and we don't need to see that replay of 2011, but thank you both all right, still to come, a preview of today's ai hearing and what congress will take away from testimony from open ai's ceo sam altman plus, jpmorgan chase is

facing claims of religious bias as the nation's largest bank heads into its annual shareholder meeting today. a number of companies facing social and political differences at the state level, we'll talk to a professor who may have a playbook for h cpotis oworraon can deal with controversy. we'll be right back.

welcome back to "squawk box. the futures right now continuing to trade a little bit lower, a lot of that has to do with home depot and the report that that dow component had disappointing in both the previous three months and the outlook, and we've got lows down as well, but that is affecting the dow to some extent. congress is trying to tackle the risks of artificial intelligence, and today open ai founder sam altman is heading to capitol hill to testify. our julia boorstin has a look at congress's track record with this type of regulation, let me

guess, not good. >> not so great, congress does not have a great track records when it comes to regulating new innovations. over the years there have been bipartisan calls to legislate protections for consumer privacy. that regulatory push has come out of europe with those european gdpr privacy regulations. for years there has been bipartisan support of reform of section 230. that's what protects tech platforms from liability for the content they host. and this reform has been intended to hold these platforms accountable, but it has still yet to happen. back in 2018 when mark zuckerberg testified about data privacy and russian disinformation, lawmakers revealed their lack of understanding of the technology and business models. >> we believe that we need to offer a service that everyone can afford and we're committed to doing that. >> if so, how do you sustain a business model in which users don't pay for your service >> senator, we run ads >> i see

>> now, as we look at ai, which is even more complicated and confusing than social media is, we'll have to see how the committee approaches this technological leap which could certainly have more risks than social media. >> we were talking about this with eamon earlier and his point is he's been watching this for years, he's been watching it for five years, hasn't seen anything gotten done. we spoke with a former white house technology officer yesterday who said he's been watching it for 15 years >> i've been watching it for 15 years. >> can't get anything done. >> 15 years ago there were a lot of concerns about privacy at facebook, which is what it was called back then there was this understanding that there needs to be regulation, but really so much of the regulatory push has come out of the eu. so what's happened is that you see the eu pushing the regulatory charge and a lot of the u.s. companies are complying with those eu regulations around the world. it's simply easier to have that as the standard.

here with ai we're starting to see different states come up with their own regulations about ai. >> that would be a much bigger mess. >> it would be much easier to have one standard. we are starting to see these bills being debated in different state legislatures, but also some states are already starting to pass things. >> that might be a time when the industry actually does want federal regulation, at a time where it's one set of rules to follow instead of 50 sets of rules that they have to go about doing. >> it's always easier to have one set of rules, but the industry really wants to make sure that whatever the regulation is does not over regulation we're going to hear probably a lot today about the dangers of over regulating or regulating in the wrong way and then the u.s. would lose this new space race, which is an ai race with china, and that's something i've heard a lot about. >> what they really want is a federal rule that says there's basically no regulation that would override the 50 states from doing any of these things my assumption is they don't want anything changed in the 230

rules. >> section 230 reform has been one of these things which is so complicated. if you really were to hold companies liable for all the content shared on their platform, there's something that's violent or misinformation or disinformation, that could be problematic. i think the same question holds for the likes of chatgpt are you going to hold open ai liable if chatgpt says something that's offensive or violates some rules in some way it is very complex and the question is do you regulate at the top. do you regulate the inputs or is it more about transparency a lot of the suggestions have been making it about transparency and making it very clear where these comments are coming from if you're interacting with a chat bot. >> so would you say that the tech companies at this point -- for years they've benefitted from congress not being able to get anything done. maybe that's about to flip maybe if there is no one to come through and say, hey, here's the federal law that's very loose

regulation, then they're not going to be the beneficiaries of that in fact, they're going to be in big trouble, some of these states will pass things that are much more heavily burdensome it's hard to tell what's going to come out of the states. i do think having a consistent federal law would be similar we are hearing from people like sam altman who's going to be testify today that he wants some regulation, and part of that is because we're hearing from people like elon musk that they want to put a pause on ai development. and sam altman is saying don't put a pause on ai development, let's just create clear regulations so we can all moving forward together. >> good to see you. the playbook for corporations dealing with controversy at the state level. and later ohio senator and banking committee member j.d. vance will be our guest. we're going to talk about today's hearing on the failure of silicon valley bank as we head to break, here's a look at the winners and losers in the s&p 500 this morning. "squawk box" will be right back. ♪ would you stop calling each other rock stars?

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thanks for being with us today a lot more of these issues are being raised, not just at jpmorgan, but at companies around the country >> it's a new world for companies having to get involved in social issues, not something they signed up for, i'm sure and one of the things that's a problem is trying to remain silent or not taking a position is no longer really an option for anyone >> i almost feel like it's the opposite of that i feel like the push from both sides, you know, the right and the left on this towards companies probably has got to the point where they don't want to comment on anything >> yeah, exactly but that's not really an option. i think remaining silent is a very profound statement that you make to the world and particularly your employees will take that in the wrong way i think the biggest challenge has come from internal audiences rather than externally for companies. >> i don't know.

warren buffett has made the point that the public is pretty tribal right now and it's hard to weigh into the fray how do you know exactly what your employees want, what your customers want a lot of these issues are, you know, it's not a 90-10 vote on some of these issues maybe it's a 45-55 or a 47-53 vote on those issues so why take sides at all if you're going to alienate potentially half of your customer base or half of your employee base? >> yeah. i think the problem is that most companies don't really have a strategy for dealing with this at all and it starts with a set of values and what really guides your culture to begin with and what your own belief system is and you know, many companies haven't gone through that exercise once you know that, then you have to ask yourself, is this particular issue somehow related to our business or our strategy. is there something we can actually do about it, and how much controversy will it cause if we wade into that and i think that kind of a

calculus is something that you can then go to your employees and the world and say, we're not commenting on this, because it doesn't connect to our strategy. we can't do anything about it. and it's just going to cause controversy and not help us in any way. >> so what would you advise -- let's use some real-world examples jpmorgan in this case. >> in this case, i think they do need to speak out, because it seems like there's some kind of an issue with, you know, an account that was opened and, you know, and something weird happened there and they need to kind of make that right and it sounds like already, they're doing a pretty good job of responding to that. they have a really, really good communications team. sk and jamie dimon is a little bit more sophisticated than most ceos i think they do need in this case to actually respond in other cases, take a look at disney i think there, they ran into a problem because initially they staid out of the fray, didn't say anything, and then jumped in and said, yeah, we really do want to participate. now they're in a battle with the

state of florida and ron desantis and you don't want to get mixed up in things like that and if they had really thought it through initially, they probably would have had a different approach to the whole thing. >> some of the esg standards that have been put on companies consist of checking a lot of boxes, saying you're doing something here or signing up and checking boxes there i don't know how effective some of that is i don't know how useful it is. my thought is, there are a lot of issues companies do care about, and they tend to prioritize those things. but if you have a situation where now with the new voting rules and the new ability to put things with universal proxy, get those votes out in front of the shareholders, it can be a pretty long laundry list of issues that very minor shareholders want you to take a stand on they want to be able to get to the microphone and have their voices heard and it can probably be pretty distracting for management what do you think of the new universal proxy laws >> yeah, i think you're right.

i think it's very distracting. i'll go back to something you said at the beginning of that comment. it's true. a lot of esg work is basically box ticking and public relations, rather than really reflecting what an organization wants to do in terms of its strategy, particularly around the environment. and today, you better have a stand, rather than just trying to make yourself look good in the world, if you want to score with all of your stakeholders. not just your employees, your customers, and all of the people that can move things in a direction that might be uncomfortable for you. and i don't think most companies have thought this through as much as they need to now there's a reawakening. companies are starting to realize they can't escape and have to take a position in some way. and that is difficult, for exactly the reasons you pointed out. you're likely to make about half the people angry if you can figure out a way to tie it back to what you really stand for and who you are and what you believe in, then you can make those choices and

decide when you're remaining silent and explain why you are doing that to your various constituencies >> it is a tricky proposition. professor argenti, thank you very much. >> thank you, becky. coming up, white house energy adviser amos hochstein joins us to talk about refilling the u.s. oil reserves and we're expecting the last rteead on retail sales futures ahead of the data. only the nasdaq is in the green. "squawk box" will be right back.

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good morning home depot's first quarter results weighing on the dow. the futures will get you up to speed on this morning's earnings, moving the markets key players in the nation's debt ceiling drama set to meet again with president biden but opposing messages in recent days leaving some investors confused about where the talks stand exactly. and fill her up. white house energy adviser amos hochstein joins us on president biden's plan to refill the strategic petroleum reserve as the final hour of "squawk box" begins right now

good morning and welcome to "squawk box. welcome back to "squawk box. this is cnbc and we are live from the nasdaq market site in times square i'm becky quick along with joe kernan andrew will be joining us a little later this hour if you've been watching the u.s. equity futures, you know the dow has been in the red for the entire three hours we've been here so far. right now indicated off by about 93 home depot part of the problem we'll talk more about that in just a moment. s&p futures down by just under five points. the nasdaq in positive territory. it's up by just about three points if you're watching what's happening in the treasury market, the ten-year is below 3% and the ten-year just below 4% here are some of the top business stories this morning. former executives from svb and signature bank set to face a congressional grilling today the senate banking committee is going to question former svb ceo

gregg becker former signature chairman, scott shea, and former signature president, eric howell we'll talk about that hearing later this hour with ohio senator j.d. vance and wells fargo is going to pay $1 billion to settle a lawsuit accusing the bank of defrauding shareholders about its progress in recovering from a series of scandals investors accusing wells fargo of overstate how well it was complying with orders from regulators, including the fed. and two days after reports emerged that activist investor engage capital is looking for board changes at shake shack, the burger chain says its recent agreement to add an independent director in a press release, shake shack says it will keep working with engage to add another independent board member with restaurant operations experience >> all right now we want to get over to dominic chu. he's been looking at some of the top stock movers today and we've been talking about home depot all morning that has certainly been putting pressure on the dow and raises a

lot of concerns about the other retailers we're going to hear from this week >> the bulk of the pre-market losses we're seeing in the dow to your point, becky, have been around home depot. those shareses down around 2.25%. about 6 points to the downside call it roughly 50 points that the dow's dropped imply is just home depot shares. about 300,000 shares of volume so far it's now off the worst levels of the pre-market session america's biggest home improvement retailer and dow component reported better than expected profits, but revenues fell shy of estimates for its worst revenue miss versus consensus in roughly 20 years. it was driven in part by the impact of colder weather affecting shopping patterns and falling lumber prices, as well home depot cut its full-year forecast, as they spend less on patio furniture and outdoor grills home improvement and home depot have very much a focus there. and we want to get a check on lowe's, america's second biggest

home improvement retailer. and those shares are down 2% right now in what's seen more of a sympathy move because of home depot's losses today we'll keep an eye on that retail picture. also news on the merger front. in this case, the danger of a deal falling apart we're watching shares of horizon therapeutics they're down sharply, roughly 17 to 18% over 1.3 million shares of volume. this is after reports that its deal to be bought by amgen will face challenges by federal regulators on potential antitrust concerns amgen shares are fractionally higher on that news. we'll keep an eye on that. we're watching what's happening with capital one financial those shares are higher by 6 to 7% roughly 20 to 23,000 shares of volume it's getting a new investor and that's berk share hathaway warren buffett's firm built a new stake worth rough ly $9

billion. it's unclear if it's buffet himself that was behind the investment, becky, but as you know, anytime berkshire gets involved with anything with a new position, it tends to move markets. i'll send things back over to you. >> that it does. let's bring in liz young, head of investment strategy at sew f sofy and you say there are a lot of warning signs that make it pretty tough to feel good about the bull case. what are those signs what are you seeing? >> they're very classic sort of late-cycle warning signs things like yield curve inversions across different terms of the curve things like retail slowing down, continuing jobless claims ticking up and continuing to move up, month over month. and when you look at even just things that are happening more recently, things like defaults rising in the consumer space you're seeing a lot of credit tightening, commercial real estate defaults, even some consumer discretionary bankruptcies being reported, that sort of stuff is very

late-cycle behavior and it doesn't necessarily mean that we have to go into a recession or that we have to have a contraction, but it's very difficult to move from late-cycle back into early cycle without something like that. so making the bull case would have to assume that we somehow smoothly make our way back into early cycle. small caps pick up, cyclicals pick up, the retail stocks survive it the consumer survives it and continues to spend and it's just difficult to understand how that's possible after an environment of raising rates 500 basis points in 12 months >> having said that, we have been waiting for this recession for an awfully long time and maybe it escapes, maybe it's not as bad as some of the worst-case scenarios that have been printed and seep their way into the market mentality. that's what's hard to break out. the economy so far looks pretty good it could change and that change could happen very rapidly, but i think a lot of people have been surprised that we've done so well for so long >> yeah, well, that's sort of

the mentality that this time is different, right that's the temptation to say, it's going to be different this time the catalyst in what takes us into a recession is always different. the thing that gets us there is always different or maybe the big piece of news that finally tips us over the edge is different. but a lot of the things that we see, look at in hindsight, the activity that happens during a recession or the market does before, during, and after a recession aren't always all that different. and this is a time when if it's the fed hiking rates and pulling liquidity out of the market that takes us there, that's a pretty classic cause of a recession so the length of time that it could take to get us there is going to vary. and if you look at things like when the twos tens yield curve inverts, the shortest amount of time we went into a recession after that was about six months. the longest was 22 months. there's always sort of been this big range of outcomes. the average is about 14 months and we're sitting right on top

of that 14-month mark right now. we're looking at 14 months after the fed started raising rates. july would be about a year of when the twos tens inverted and stayed inverted, right so in these long and variable lags in monetary policy, usually take 12 to 18 months so despite the fact that i'm impatient, we're all impatient, right, we're kind of watching this and waiting, when is it going to happen, when are we going to come you have it unscathed or go into something, but in real, we're right in the window where this kind of stuff normally happens >> so a lot of big investors are hoarding cash recently is that a good strategy in your opinion? >> i've been talking about cash as a good way to kind of wait this out and find out what happens on the other side. but cash doesn't have to be just putting it in a cd there are a lot of ways you can get paid while you wait. you can still buy short-term treasuries, look at cds, do money market funds gold is still an okay place to be here.

and it's an environment we haven't seen rates like this in so long. >> and that battle is a precarious place to be the market is saying the fed will cut at least twice, maybe three times. the fed is saying, no, we're not, we're not moving until at least 2024 one of them is going to be wrong. at some point before the end of the year, that movement will occur. if it's the market that's wrong, there will be some adjustment that happens so the chances of us staying in this tight range on the s&p and having yields stay exactly where they are, i think, is low. we can move on very small pieces of news. the debt ceiling could be one of them so we're sort of ripe in this place where if we expect the fed to pause and hold rates high, we're ready for little bits of

news to take us in a big way, one direction or another >> liz, thank you. liz young, thank you >> congress is set to grill former executives in the wake of silicon valley bank's collapse we'll preview the hearing with ohio republican senator j.d. vance. but next, why is now the right osme to start revilling the spr. am hochstein will make the case stay tuned you're watching "squawk box" on cnbc (swords clashing) -had enough? -no... arthritis. here. aspercreme arthritis. full prescription-strength? reduces inflammation? thank the gods. don't thank them too soon. kick pain in the aspercreme.

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welcome back to "squawk box. watching the futures this morning, and again, we've been in the red for most of the morning. dow futures off by 90 points we're watching shares of regional banks, western alliance and first horizon. bank of america resuming coverage of both of those institutions with buy ratings. b of a says that it's spoken with management at western alliance and thinks that the impact has been manageable on first horizon, bank of america says that it sees 4% potential upside for the stock after the termination of its merger with td bank. western alliance shares are up by about 3%. first horizon up by 2.5.

joe? >> thanks. the biden administration is going to buy 3 million barrels of crude to help refill the strategic petroleum reserve. last year's record sales drew down the stockpile to its lowest level since 1983 joining us now, amos hochstein, special presidential coordinator of global infrastructure and energy security. it's a fascinating -- the whole spr is fascinating, amos and we need to worry about when it's half full or it's been depleted is the infrastructure in great shape to be refilled at this point? is that something to worry about? >> good morning, joe you're right, we should keep being concerned about the sbr and making sure it's a strategic asset that we can continue to use. as you noted, the president took the decision just as the war started to respond to the emergency and reduce some of our -- release oil from the spr

to support the economy, which worked well. and now that we are in a position where going in the last few months, we're able to start with 3 million barrels, but this is beginning of the next several months it's as good a deal as possible in this price environment. >> when you eventually leave the administration and go on to the private sector, are you going to say, look at my timing and how i -- an oil analyst. what was the average price -- i mean, i'm not saying it's serendipitous, amos, but to see all of the cuts that we saw from opec plus and all the things that could have really, the war and everything else, we could

be, i guess the skeptics said we could be refilling it at $150 a barrel what was it sold, average price of about 95 and we got a chance to buy it back -- that's almost like you're a trader buy low, sell high -- you sold high, you can buy low. get your resume for -- >> president biden wants two things help the economy during the turmoil of last year remember, we were above $120 a barrel a number of decisions, the spr was only one of them to bring down inflation that we're seeing now that was, you know, really oil prices and which affect food prices, were really affecting inflation rates. we brought down the price of oil and the price of gasoline and electricity and food for the consumers. and now that we sold it at 95 and able to buy it back at

roughly $70, which is what we said all along if you remember, back in october, i came on your show and we talked about something between 67, 72, $73 was our target price to buy it back. it took us a little longer, because congress mandated us to sell oil, actually, this year. so we had to -- we have to complete that sale, which will take still a few more weeks or several more weeks to complete and once we're done, we'll start buying we have to make sure we're doing it in a way that is safe and for the spr itself, and make sure that we're good stewards of that infrastructure but this is the beginning. and later this year, we'll continue to buy more and significantly more than that into next year but joe, i just want to note, before we ever started releasing oil from the spr, we were mandated by congress to sell over the next several years 140 million barrels.

and we worked with congress to void those mandatory sales so in effect, we pretty much have bought back 140 out of the 200 that we released so i think we're trying to do this at as good a deal as possible for the american people and selling at 95 and buying at 70, i think that is as good a deal as you can get. >> so how far do you have to go at this point, to get back to what you would say is an optimal level? how many barrels how many million >> well, i think earlier this year, we talked about over the next year buying at top of what we're doing now. i think that we'll -- we have to make sure that we have the financial resources to be able to continue to buy we'll work with congress on that and i think that we should make sure that we are at a level that can address future disruptions what we've learned is that we

have the spr for a very good reason we need to use it, keep it there to use it in cases of emergency and to safeguard the u.s. economy. and that's something that we did this past year the president was resolute and remember, people didn't just criticize the decision as far as and predict that we'll be buying at 150 they didn't think the spr releases would work in the first place. so far, we've done a pretty good job of this. >> it depends -- it may turn out that it was really pretty good, which you don't see a lot in gover government >> but the other thing, the criticism -- is the economy and inflation, is that an emergency or is that where you're going to actually have to turn off people's electricity is that the emergency -- or there's going to be gas lines? an emergency is, is inflation, i guess you can argue that it was, that was what people said at the time >> i think, joe, you have to look at the root cause of what

it is -- it's not about is the price high or low. that's not what we're talking about here we went from roughly $80 a payroll to about $120 a barrel in -- when there was no impact, no changes to the fundamentals of the oil markets of supply and demand that all happened because a war erupted in europe involving the second or third largest oil producer in the world and freaked out the markets. and these -- >> so amos, if prices go back up again this summer, that's the question, will it change anything the driving sueing season, you o that if it goes back to 90, 95 -- >> will you be part of the problem? >> will that be considered an emergency and say, forget it, we're not going to refill it, or we'll start releasing again. what is an emergency >> i'm saying the emergency is not sometimes just the high price itself it's looking at the root cause

of what is happening for right now, the -- where we are today in demand. we are still looking at what's happening at the demand in china, the demand in the united states and how the economy is shaping. i don't see a big surge in prices this summer that will threaten where we are. so we're in recently good shape, which is why we're taking the decision, the department of energy seeing buying back into the spr. we'll continue to do that so that we can address emergencies. look, i think the difference between this year and last year is also that the market understands that despite the fact that russia was part of the war and the remarkable sanctions, the price cap has allowed us to keep russian products on the market so supply

is there while restricting the revenue and we've chosen to have that kind of approach that will stabilize the market for the global economy, so we're not rewarding putin twice. >> amos, although i said, and i'm not saying it's serendipity, it ended up working out, but that's not going to keep republicans from saying, we need some oversight on how the spr is managed. they'll still complain that it was ash trash. you are able to buy low, sell high, that was the result, but they'll still criticize the a arbitrary -- why are you laughing >> why am i laughing joe, i love this the president takes a decision, that is really difficult, to do 180 billion -- >> i said it was good -- >> oh, that's just luck.

part of being president, joe, is making tough decisions on the behalf of the economy when people criticize you, at the very least, i think the other can come and say, you know what, we were wrong. theth mapresident managed the energy economy quite well in the face of the war. that's where we are now skbooel continue to do what's right for the american people and what's right for the economy. >> i'm still mad you ghosted me at the white house correspondences dinner what happened there? you got a better offer what happened -- i didn't get -- >> i was talking to andrew, so >> that's it that's it! man, that hurts. amos, thanks we haven't seen you in a while, because you haven't been able to buy any back you were afraid to come on good to have you on. thank you. >> thank you good to see you all. when we come back, legendary trader paul tutor jones thinks that the done is fed is raising interest rates is he right? we'll debate that and the debt ceiling standoff with former two chairman of the president's

counsel of economic advisers and a reminder for you, don't miss david faber's big interview with elon musk that is tonight at 6:00 p.m. eastern time it's right here on cnbc. stay tuned "squawk box" will be right back.

coming up, breaking economic data april retail sales are next went "squawk box" returns

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welcome back to "squawk box" right here on cnbc we are just seconds away from april retail sales data. take a look at the futures we are in the red after we heard that news from home depot in terms of their earnings. you're looking right now at the dow up by about 85 points. i want to get over to rick santelli, standing by at the cme over in chicago. rick, the numbers, sir >> yes, thank you. good morning, andrew the advanced read on retail sales for april hitting the wire, expecting up 0.8 on headline remember, all metrics retail sales have been negative the last two months. we turn it positive, up 0.4% it's about half of what we were looking for, but it sill is the first positive number since january. and in this case, that was up 2.8% in january. that's your comp you still have auto sales, you get up 0.4 so it didn't really change the dynamic and that actually is

exactly as expected, in the rearview mirror, we have down 0.4% and of course, it's been negative for two months running. and if we consider, so up 1.9 was january. that's your comp on that now, auto and gas station sales, up 0.6%, triple what we were looking for. and if we look at retail sales control group, which gets plugged into higher up the food chain economic statistics, it's also up nearly double the 0.4% it ends up at 0.7% that follows 0.4% and january was up 1.7, that's our positive comp, the last time these numbers were positive. interest rates have moved up markedly on that better-that-expected retail sales. we move from under 4% to over 4% on a two-year note yield and we're now above 3.5%, 351 on a ten-year note yield. that is now up nearly two basis

points the big news yesterday in the auction was one-month bills, a historic high at 5.65% debt ceiling issues. yet, fed funds are over 5% your three-month bill went off at 5.6 your six-month bill went off just under 5% at 498 we want to pay particularly close attention that these meetings are all over 50% on a rate cut whether you believe that or not, that's what's in place that's what's priced at current levels and of course, the safe harbor trades continue to be treasuries and tech-related investments becky, back to you >> rick, it's weird to see the two-month so much lower. i mean, it's lower than the one-month or the three-month why do you think that is >> you know, i just think that there's a lot of nervousness regarding all the t-bill issues, when you have both the fed, are they going to pause, are they not going to pause

we have, of course, what's going on with the debt ceiling, the kabuki theater late get-togethers there's a lot of anomalies with t-bills, those who want to hold them for juicy rates knowing that the administration is most likely not going to look good if they let this go too far and those who may be selling a little bit nervous about what may happen on the debt ceiling, pushing those yields a bit higher >> it's so strange to hear people talking about the risk scenarios when you're talking about t-bills. it's some weird stuff happening. >> well, it shouldn't be surprising we're talking about risk scenarios one of the main street media and everyone has been talking about this for mfive months now. i've never seen a debt ceiling lead the politics this long ahead of the event >> when we were down in washington for the inauguration, i remember thinking at the time, why are they talking about it now? it's crazy it's months to go. >> because, they want to make it

the -- politicians on all sides want to make this an issue and it's really quite sad. don't any of you people out there that are voting on this or not going to meetings, do you have kids? do you have grandkids? where's your heart in all of this seriously! it's really quite -- quite evil, i think, to be honest. >> yes let's get something done rick, thank you. billionaire investor paul tudor jones making a prediction about fed tightening with us yesterday morning. he joined us immediately after we spoke with chicago fed president austan goolsbee, who he references right here >> i think they've done hiking i'm so glad that i don't have his job, because listening to these guys try to not say what they really want to say and what they really think -- >> what do you think he really wants to say >> he wants to say, we're done, we've gone too far, and enough's enough that's what he wants to say. he just can't say that because he's -- he's new on the

board and he has to follow the chairman but that's what he wants to say. >> and do you want to say? >> i think he's right. i think they're done >> you think they are done >> definitely, i think they're done >> joining us for more on the fed's rate-hiking campaign plus the latest on the debt ceiling is glenn hubbard he is former chairman of the white house counsel of economic advisers under president george w. bush. and now an economics professor at columbia business school. also, jason ferman, who's also a former chairman of the council of economic advisers he served under president obama and jason is now an economics professor at the kennedy school of government. gentlemen, paul tudor jones probably right probably, austan goolsbee right on this that they're not going to hike rates any further from here but the question becomes, how long do they leave these rates high and that's the real debate between the fed and the market at this point. glenn, what do you think do you think we'll see a rate cut before the end of the year >> i think the fed is going to have to hold the funds rate for a while. inflation is still relatively

sticky way apart from the fed side target monetary policy is tighter than it looks because of credit crunch elements. probe about a hundred basis points extra effective funds rate from that so it's pretty tight, but i don't think cutting is in the cards in the coming months i think the fed is right about that >> jason, how about you? i think i know what you think? >> look, i think the fed will pause at the next meeting. if you told me the fed will make a move in the next four months, i would tell you, i think that move is a rate hike, not a rate cut. you look at core inflation, underlying inflation it's been stuck at about a 4.5% pace it's barely made any progress. history says it's not easy to bring it down. i agree with glenn that the credit crunch may be enough to get it down, but look at those retail sales numbers you were just talking about there's a lot of strength in this economy so if the fed moves, i think

it's more likely that they'll have to hike i don't think they'll be able to cut very easily in the near future >> glenn, i see you nodding at that are you in agreement at that point, too >> completely, as i said, i think the fed cannot really cut at the moment, given its inflation target >> but raising could be their next move if there's another move to come this year >> oh, for sure, for sure. >> let's talk through what we just saw from the numbers that rick was pointing out and then what's happening with t-bills with the yields on them. it's been crazy to watch rick pointed out yet, we saw the highest one-month t-bill auction that we've ever seen what would you have thought? both of you were advising at the counsel of economic advisers in charge there what would you think if you were in that position still and seeing these type of moves in short-term treasuries? jason, you first >> yeah, look, i mean, they're not telling us anything about the economy.

they're telling us something about the debt limit brinksmanship. and even just the brinksmanship itself has a cost. it's completely unnecessary. you know, i would have loved to have seen the debt limit ab abolished, seen a clean increase, but the faster they can get to some sort of agreement that involves discretionary caps, permitting with and the debt limit, clearly, that's where this is going to end up, the sooner the better >> glenn >> i would agree with that i think there's an agreement to be had with some near-term restraint, for example, returning unspent covid funds, near-term-spending limitations but really what we need is a pivot to a budget framework that if followed, we would just have clean debt ceiling increases this periodic theater as jason suggests is just not very productive >> jason, i'm just trying to figure out what the actual role of the debt ceiling is because when we talk about it,

what you just said on the one hand, let's say we get rid of it so there's never a debt ceiling that needs to be raised if congress spends the money, we're going to cover it without a debt ceiling raise i guess that's one option. would that be a bad option because the other option is if we do have a debt ceiling, the reason it's there is so we take a step back and at that point, say, in the future, we've got to cap something. or we've got -- here it is this is too high we've spent too much, we've got to -- so, it's like, if you're going to have one, it seems like you have to use it to try to, you know, to try to moderate spending in the future otherwise, why have one at all that's what i don't understand it's like a catch 22 >> look, look, joe, i think it's a really costly way to bring that about the brinksmanship always costs us -- >> should we get rid of it >> there's other mechanisms there. the discretionary appropriations -- >> yeah, get rid of it

i would get rid of it. by the way, in 2019, we got a deal that had higher spending levels -- >> it depends on who's in congress >> i would use the annual appropriations as the way to force things, and then beyond that, really, we want the deal with revenue and entitlements. those are the two big pieces in dealing with the long-run deft picture. and unfortunately, neither one of them is really under discussion right now >> jason, would you ever use the 14th amendment and try to actually bring the case? >> look, i think it's worth them studying every single option my guess is that option is definitely a bad one i think it might be a truly terrible one -- >> it may be a terrible one to use in the moment, but the question is, is there some legal way to effectively bring that kind of case, when it's not up for grasp, so that you could actually establish some real case law around it, if you thought that was a winning argument >> i'm not a legal expert, so i can't tell you if it's a winning argument, but i wouldn't want to

be rolling the dice on that at a time like this you asked about it doing it outside of a time like that, i don't know how you would get something like that to the court. i think, unfortunately, congress probably needs to get rid of this once and for all at some point. maybe in zhexchange for some broader budget path forward. but that's not where we are now. now we just need to get through the next year or two >> glenn, we'll give you the last quick word. >> really, what we need is a long-term budget framework not a debt ceiling battle, not a battle over the 14th amendment when we have that, we'll get sanity back. >> then we're never getting sanity back. when's the last time we had a -- >> when's the last time we had sanity >> exactly >> glenn, jason, i want to thank you both for being with us hope to speak with you again soon coming up, ohio republican senator j.d. vance will tell us what he wants to know from executives on two failed banks when they go before a senate committee later this morning and a reminder, you can catch my

interview with microsoft ceo satya nadella, all about the future of ai, the benefits, the perils on special edition tonight at 10:30 p.m. on nbc news now and it will also be available on peacock stay tuned you're watching "squawk box. this is cnbc switch. it's your business. it's your verizon. 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. saving energy, money... ... and emissions. yup. that's a big one. now you've built something better for everyone. that's the sustainability solution ibm and a global real estate company created. what will you create? ibm. let's create.

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later this morning, the senate banking committee will be looking into the failures of silicon valley and signature banks. greg becker, scott shea, and former signature bank president eric howell will be answering questions about what went wrong at their institutions. joining us right now to talk more about that hearing, ohio senator, j.d. vance. he's a member of the banking committee and good morning to you, senator let's talk about it. what you trying to find out from them and how much is it, in your mind, a problem of what took place at those banks, specifically versus policy and maybe the supervisors? >> well, i think, clearly, these

guys were way oversupposed to long-term interest rates that's what happened to silicon valley bank. we're looking at clawbacks, whether we should basically take some of the money that these ceos paid themselves out as their banks failed and try to get some of that back, especially because taxpayers are implicitly picking up the tab here question number one for me for silicon valley bank's greg becker will be, look, you paid yourself a $3.5 million bonus two weeks before your bank failed did you know at the time that the bank was in serious trouble? and if you didn't know, what the hell were you doing? >> used to be you would talk about the idea of clawbacks. the big question in this context is, my understanding is that you also talked about taxpayer funds. this really is the fdic that's managed this thus far. how do you square that circle? >> yeah, so, so here's the basic problem, right the fdic pays for these

uninsured depositors that's the way that marty and others at the fdic have set up the system but that fdic fund is paid for by regional and community banks. and of course, that is born by our taxpayers in the form of higher fees at millions of banks -- excuse me, thousands of banks all across our country it's going to be borne by taxpayers, not directly, but this will see an increase in the basic cost of banking by our small businesses, by our middle class families, all across the country. >> on the disagree with you. of course it goets passed on to the customers. but i would think the way the fdic works, it's an insurance program, it's about as free market a system as you could, the question is where is the government's role or not on the clawback side of this? >> well, i think the basic argument is, you cannot have these ceos who run their banks into the ground, but benefit personally in the process. i don't think that's a free market system. i think a true system, i mean, the good thing about a free market system is accountability. and you suffer consequences for screwing things up

and there's clearly been a failure here when these banks are able to pay the ceos large sums of money or have the banks off-load a ton of stock right before the bank effectily crashes into the money >> i don't disagree with you at ul, but the question is, is it the role of government to do or the role of shareholders, debt holders to effectively sue what's left of the company or the individuals civilly to get money back >> i'm happy for the shareholders to sue, wbut i thin it's our job to provide some proper oversight we all know that shareholders have limited options after these banks have been run into the ground i think it's important for us to do something proactive here and make it clear to the ceos while they're making these decisions, if you turn your bank into a disaster zone, you're not going to get a fat paycheck from it. if you turn your bank into a successful enterprise, by all means, pay yourself a fat bonus, but not if you run your bank

into the ground. >> senator, where do you land on the idea of deposit guarantees effectively, whether it's codified in the law or not, we have explicitly, if not implicitly guaranteed their depositors their money and people talk about personal responsibility, where are the two ideas land >> i think most people when they're banking at a bank, they don't think that they're lending the bank a ton of money, but that's how it works in our system i think that we need to have federal deposit guarantees we need to make sure that people don't get completely hosed when you have a bank collapse the problem is we need to have that proactively, not rea reactively the problem i have with how the fdic handled silicon valley bank and signature is that they effectively changed the rules in the middle of a game if we're going to have fdic insurance, and we should, it should be clear about where the rules are, where the lines are we can't change those things and increase the implied deposit guarantee in the middle of a

bank panic i think that makes things worse. it adds risk to the system if people assume the fed is going to step in, the fdic is going t step in and guarantee every uninsureded deposit. that uncertainty and implied assumption of risk is a big dryer of what's going on in the banking system today >> senator, there's been a lot of conjecture that maybe regulators dropped the ball. and they were there, they even knew about the mismatched liabilities. it was the san francisco fed, to some extent, and they've had, i don't know whether you have an opinion on this, but a lot of the recent papers emanating from the fed out there has been managing climate risk. a lot of bragging about managing climate risk is that factor into -- it would have been good to manage liability risk for the fed in this case. i think. i mean, by the time we were at zero carbon, none of these people are going to have jobs at

silicon valley they may be living in an environment, but they have no jobs at this point >> yeah, you're exactly right. so the san francisco fed really fell asleep at the wheel i think a basic examiner test would have went into silicon valley bank, realized a disaster it's frankly shocking that the san francisco fed didn't realize what was happening as this whole thing was unfolding, but it also raises difficult questions about the revolving door in our banking system greg baker is the ceo of svb and sat on the board absolutely the regulators fell asleep at the wheel here this is a catastrophic outcome and something the sfan fed should have seen very clearly very early on and they didn't. that's a problem. >> senator, while we have you here, the other big issue in washington and around the country is the debt ceiling. we're getting awfully close to

midnight, as they say. where do you think things really stand? >> look, i think where they stand is mccarthy and biden are the two parties that have to cut a deal here. the senate republicans can't really drive this process. the senate democrats can't drive this process this is between mccarthy and biden. they need to come together and offer a deal i believe mccarthy has done exactly that agree or disagree with the plan he's offered he's at least advanced something that will pay the country's debt and in my view get us on a more sustainable pathway. if the democrats don't like it, that's fine, but they have to come to the negotiating table and advance an alternative solution what i really worry about is the media has framed this as republican brinksmanship i think joe biden is the one playing games with the country's credit he's the one engaged in brinksmanship. >> they're wrapping us i want to get this in. the "wall street journal" had a

piece that if former president trump is the nominee, then even if biden were responsible when it came right down to it for a default, it's still not going to put president trump back -- that biden is going to be re-elected. he's teflon and knows it he doesn't have to acquiesce on this, senator. i know you're a supporter, i think, of former president trump. do you think there's anything to that, that he can act with imp impunity, they think president biden is going to win if it's trump again. >> i'm a strong supporter of former president trump joe biden is the president of the united states. they played this game of fiscal brinksmanship for months the president has refused to negotiate with republicans even though republicans have actually advanced a plan. so i don't think that president biden can cover himself in glory here and pretend this isn't his

fault. if the country defaults, if the country faces serious economic consequences after we pass the x date, that's on joe biden for failing to show leadership here. i don't even think a sympathetic press can cover that up. >> senator vance, appreciate seeing you on the program today. hope to talk to you again very, very soon. coming up, what to watch ahead of the opening bell on wall street. stay tuned "squawk box" comes right back. ♪ to help you see untapped possibilities and relentlessly work with you to make them real. ♪

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a little more than half an hour until opening bell. joining us from jp asset management, merritt, it's good to see you what's front and center. home depot didn't look too good. do you glean anything about the u.s. economy from that >> it will be a slow slowdown. it will take some time the consumer has been holding reasonably well. we need to consider where are the potential pain points going forward. it may be that the consumer slows in a slow pace it may be that housing has stabilized when we think about what could be the drivers of the recession occurring at the end of the year into next year, a slowdown in businesses potentially followed by a slowdown in the labor force. i think we need to be cognizant that people are getting complacent about the jobs market it takes about eight months

between the bottom of the employment rate and the start of a recession. we need to be attentive to those risks. >> we're getting there there can be a lag that's one of the criticisms i always have on the fed it really is a rear view mirror mentality. it's not their fault no one has a crystal ball. it's a tough way to make decisions when right around the corner, it could be a totally different environment. there's a meeting at 3:00 today about the debt ceiling the world can only end once. people always say that a lot of people think, if we default, that that's the financial equivalent of the end of the world why aren't people more worried about it because they don't really believe it >> what we've seen in the past is lawmakers have come to some sort of agreement on the debt ceiling, whether it's raising or suspending it, over 100 times since world war ii i think lawmakers are aware of the severe economic risks and the financial market risks all we can do in the meantime is

try to manage risk around this potential outcome that, again, is definitely not our base case. from a risk management perspective, if we use 2011 when we had a debt ceiling standoff, we saw the safe haven rally, whether it was treasuries, the dollar, gold i think what's different this time around is rates are not at zero, so ultimately the opportunity cost of being in gold is a bit higher, and we don't have a sovereign debt crisis going on in europe. in fact, the opposite, european outcomes could be better than what we're seeing in the u.s areas like high quality bonds could benefit. if we don't, slowing growth and slowing inflation should still be environment in which bonds can benefit. so that's how we are hedging some of the risks around the debt ceiling, again, not our base case for default. >> a slow slowdown that's a good way to put it. we don't have much time left,

but how long does it last? i know it's slowly how deep does it go? >> it's likely that it could be a mild recession if we do see one. again, the labor market is strong not that it's going to avoid some of the cyclical patterns it typically does it could also be a slower one because we're not likely to see the government or fed step in with massive fiscal monetary stimulus we have to be prepared for a mild recession, but potentially also one that lingers. >> very good we'll have to end it there, meera, thank you all reasonable conclusions to be drawn. 3:00 we might know a little more or at least after that not a lot of time left final check on the markets, not a lot of time left for us either all red now, the dow, and obviously with home depot, and anything you can tie to home depot is probably down. >> lowe's doesn't report until next week.

you'll hear a lot of the other retailers. i think target tomorrow, walmart this week. a big interview at 6:00 p.m., david faber will be sitting down with elon musk must-see television. >> i just -- anything -- >> that's what i mean. it's live. >> the richest guy in the world. he can basically say anything. what are you going to do sue me tune in tomorrow to "squawk on the street." good tuesday morning welcome to "squawk on the street." i'm carl quintanilla with jim kraerm at the new york stock exchange david faber is in austin, tesla's annual shareholder day he'll be live tonight at 6:00 eastern time you cannot miss that meantime, a packed morning retail sales returns to growth debt ceiling, home depot cuts guidance our roadmap begins with home depot shares shrinking after