president biden echoing some espe upbeat comments. a.i. shaking up industries at a rapid pace. we will look at the new uses in the medical field. it is thursday, may 18th, 2023 "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. futures are indicated higher dow is up 36 s&p up 7 nasdaq up 25 this comes after a day of significant gains for all of the major averages

dow was up 408 points. a gain of 1.25%. s&p was up 1.2%. nasdaq up 1.3% all of that after those positive comments that made it look like a deal on the debt ceiling is more likely to get done. if you are checking out what is happening in the treasury markets. treasury yields were higher yesterday. 10-year treasury is 3.587. 2-year treasury at 4.136%. we are looking at a higher level than we have seen over the last several weeks. in short-term securities, that is playing out with concerns over no deal the one-month is 5.716 below the highest levels we have seen you see it across the board with elevated levels. two-month has come down. let's update you on the debt ceiling and where we stand president biden delivering an up beat message on the negotiations yesterday before departing for

the trip to asia >> if we are going to come together because there is no alternative. we need to do the right thing for the country. we have to move on to be clear, this negotiation is about the outlines of what the budget will look like. not whether or not we pay our debts. the leaders all agree. we will not default. every leader has said that >> that's the similar message to what we heard in the day yesterday from house speaker mccarthy here on "squawk box." >> i think at the end of the day, we do not have a debt def default. we finally got the president to agree to negotiate that was probably difficult for him to say he would negotiate with somebody. it is the old joe biden who was good at that let's get the job done >> he said he will hold a news

conference on sunday when he returns from asia to share the latest on the negotiations hopefully they are having phone calls on the plane on air force one. >> that seems amazing. the one month. if you put $100,000. for one month, you get that -- there were days our entire life where the 10 and 30-year were 8% why didn't we think 8% was holy cow? >> everything else you were paying what were you paying on the mortgage at that point >> it is all relative. >> i know 100,000, you don't make a ton of money. berkshire put in $3 billion. suddenly from zero on the money the insurance companies had been doing to show significant

returns. >> we also are now -- wow. the 10-year treasury used to be at 3.5 the rate soared. from 3.5 to 3.58. >> we have been watching closely. it is finally significantly to 3.6% >> if you fell asleep or went away on a space ship and come back and say what are you people talking about? >> you would say that anyway. >> people following around their dogs picking up their poop you think dogs are in charge the dogs are in charge in my house. revenue beat expectations on cisco. guidance came in above estimates. that sounds good the full-year profit guidance

raised, but did not raise the top end of the revenue range for the year as some analysts expected orders were down 23% after a 22% decline the prior quarter. executives said supply chain resulted in shorter lead times and customers being less aggressive in orders last night, chuck robbins spoke out how the company is positioned for the rapid adoption of a.i. >> if you look back almost a decade ago with the first wave of the cloud build out, we were left out because we didn't have the right technology i would say we are running the infrastructure and networking for the language models. i think we are better positioned to take advantage of this in the next five years. >> shares of cisco were flat year to date before the morning move now people are saying if you are going to make money between now

and 2025, the best place to be is a.i >> who else said it? steve cohen p added his voice to that >> it is not the metaverse is it part of the metaverse? >> it will be. >> someone changed their name to meta maybe they should have changed it to a.i. >> a.i. will be built into everything. >> after social media, i kept asking all the futurists what is next i guess a couple said there are advances in a.i. no one said we are on the cusp suddenly you start playing with chatgpt. what was that? six months ago >> six months ago when it launched >> holy cow. look at this sdp >> i think everyone will have it. >> i know. it came out of nowhere >> my point is when you talk about the winners and losers, it

is not clear how it plays out. >> if every company is adopting it >> cramer said he likes nvidia it is powering everything. >> the nuts and bolts. >> the play -- >> chatgpt >> it is still nvidia. it is all about the chips. the reason we are talking about this today is about the chips. the chips speed allows this to happen >> chatgpt is not doing this live on the internet the chip power is still not enough to do it real-time instantaneously. >> not really the chip power >> the computer power? >> i would tell you, i think, from all my conversations with the sam altman's of the world,

it will be real-time they created the api which allows you to basically search different places in real-time. you could go get the sports score and the news that just takes longer not just built into the model. >> i don't know where i saw it couples are using a.i. to write their wedding vows to each other. >> how sweet. >> if it is a really good one and comes from a.i. and expresses your feelings. >> i have a friend who gave his wife a poem on valentine's day >> was it a.i. >> she started crying. he said it is from chatgpt she didn't know what it was. she thought it was great >> it can express your feelings. >> just like a hallmark card. >> you won't be as clumsy and terrible syntax. >> the stuff my kids' write

means the most. >> maybe they can write that and give it to chatgpt >> and fix it. people are writing and using it to fix it. >> i appreciate the writing. >> can i do it with my tweets? i guess i could. i already don't end in prepo prepositions. >> you avoid that. let's tell you about another story today. shares of take-two are higher after the video game maker missed estimates, but revenue beat the forecast for the year was weaker than expected, but the company signalled the next fiscal year is a launch year including "grand theft auto" title. the ceo struck a bullish tone for the 36 games the company expects to release over the next two years. check it out the stock is up 11.25% montana's governor signed the first outright ban of tiktok

in the united states law paves the way for the fight of the nationwide ban. the montana law criticizes free speech advocates the law would bar tiktok from operating in montana and forbid app stores from making tiktok available to download within the montana borders. the store would be libel for $10,000 per day for violating the law. individual users would not be punished tiktok owners said the courts will decide if this is constitutional this is a little bit like deciding that every state is their own country. there are states rights. we have seen this with all sorts of things. in the digital realm and some people are vpning and binance in

the cayman islands. >> someone will pretend you are not in the state >> are you not in montana and they use other services and then is apple libel is at&t and verizon libel? it becomes complicated quickly >> the aclu is saying this is a first amendment issue. that is how they will defend it. >> where have they been? they haven't been around for a couple of years. when everything else is suppressed. > -- >> suppressed. >> the question is can you prove there are national security issues and what do the courts rely on? the governor tried to change this it wasn't just tiktok to make it broader for other apps the language was any app that is potentially passing information back to a foreign country.

you couldn't get it back >> they are still mad about the balloon. it was doing circles around them the weather balloon. we don't have time to talk about deutsche bank and epstein or elizabeth holmes. if you are going to jail on may 30th, would you have butterflies knowing the date is coming i would hate that. >> whisk you off the streets and surprise you >> i don't know what i would have i would rather not be going. coming up, a closer look at the retail sector as we look ahead to the walmart results at 7 7:00 a.m and later we look at the a.i. on free speech. jonathan greenblatt will join us at the bottom of the hour. you are watching "squawk box" on cnbc

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stanley retail analyst in studio with us. you knew me. thanks for coming in >> thanks for having me. >> any problem with the security guy? >> i said the right thing. >> you had the code word >> yeah. >> and the secret knock. >> and handshake i heard that because walmart's product mix is different than others means they have an advantage. >> a consumable and frequency which is one of the few categories growing it has been the story of 2022 where the consumer the wallet shifted away from discretionary and moved to consumable. grocery is a good thing. the discretionary mix suffers just like the other big box retailer this week >> that was a theme in your mom note you had three or four of them to

distinguish retailers in many cases which were similar, but aren't the winners and losers >> if you look back at the retail sales report from april, you saw a big dichotomy between the consumable categories. food service grew and grocery and personal healthcare stores the ones that shrank are everybody else that sells durable. sporting goods and home improvements and furnishing. they declined. they grew. who wins right now those who continue to sell consumable and those who have a reason pto get the person to com into the store there is a mix of earnings with resets last year those are most insulated from the investment >> they warned and said it would be a rougher get go?

not working off as high of c comps? >> they warned and had a poor 2022 with the inventory debacles by default with a tough year, it is an easier glide path. there are two categories with more i hadiosyncratic component. holding on to cars longer and beauty beauty is a straight line. that category hasn't stopped. >> what about groceries? it is a lower margin business. it is great to have groceries, you bring people in, but you don't have great margins >> it is a dubious distinction that means we need to brace for a weaker broad mix in a way that was the theme of target yesterday product mix worse. target and walmart are lapping market erosion from the prior year with inventory. you think margins would be great

this year. they are, but the deceleration or weakening of that discretionary basket is hurting margin on a rolling basis. >> target talked about shrink. huge, huge numbers with organized crime being a big part of this. on a call, brian cornell talked about this and went on for a while about how they can't continue to keep these stores. they don't want to close stores, but unless the policy changes to help them with the issues, they said it is an additional $500 million in theft that will be taking place this year on top of last year which was $500 million. >> to put it even bigger context, target is $110 billion of sales we think the percentage of shrink is close to 3%. $3 billion plus and $500 million on top of that the amount of volume,

truckloads, and products leaving the store. >> it is not just target >> it is everyone, but we have seen it stagger. home depot talked about this a couple years ago they have been taking action >> how do you take lumber out of the home depot you can drive a lawn mower out. >> it is only made in home depot and wound up on amazon or facebook you know the stuff is stolen the online places make easy sales for all this stuff >> you had a buy on home depot what do you like which ones do you like and which do you not like? >> with home depot, you have to have a view we get through the cycle and we don't have a nas c -- nasty or deeper housing cycle. we might start to ease at some point and the worst of earnings and sales are roughly in the

stock. the last call of four-to-six months, at this point, you have to look at the rate of change for earnings and sales in big box discretionary retail, there are not many of the great companies. as long as we don't have a nastier housing cycle, this reward is decent. >> did you major in retailing? why do you come up with shrink acknowledge and leakage? is there something you can use that doesn't make i cringe leakage is where people leave a community to go somewhere else to shop at a big box instead of the local hardware or whatever there is a walmart or home depot everywhere within 20 miles of the rural areas. any of the local businesses -- i had to look it up. i couldn't believe it. >> i think of olestra.

>> i do, too, or worse depends where you are leaking. you didn't major in retail >> no, just economics. >> you can major in retail there is fashion institute of technology >> you can do it there thanks for making the effort this morning and getting through the strict security we have. good to have you on. >> thanks for having me. when we come back, rapid adoption of artificial intelligence shaking up industriindustry s. we dig into the use cases of the medical field next. we have the telast from washington on the debt ceiling talks. "squawk box" will be right back. >> announcer: squawk picks is brought to you by wisdomtree the modern alpha pioneer

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as part of the a.i. impact series, we are looking at artificial intelligence in industries julia boorstin is looking at a.i. changing the medical field. > . >> reporter: surgeons are no longer operating on their own. they have an a.i. safety net the mayo clinic neurologist is one of hundreds using the start up theator in the operating room it has raised over $42 million from the mayo clinic has advised doctors about techniques and records surgeries and compares

to previous surgeries to identify the best outcomes >> we are enabling pattern recognition at a scale never been seen before and learning from that and to inform surgeons moving forward on the best approach to a situation. >> reporter: this doctor says reviewing the surgery videos can sometimes take surgeons months this a.i. helps them to jump to key moments. >> they can help predict if i make an incision here, it means something else or predict a complication or cancer recurrence things which are critical. >> reporter: a.i. is not just used in the operating room, but emergency responders >> okay. is he unconscious? >> evidently, yeah i can't get a response >> reporter: a.i. powered corti listens in on calls and analyzing voice and background

alerting medical professionals about any help the caller may need if a person is having a heart attack for example it equippeds nurses with real-time suggestions. like any new technology, there are risks. in healthcare, patient confidentiality is a top concern. that has been a big focus for companies applying a.i. in the medical space. many doctors see the upside from a.i. as massive. >> frankly, the obstacles are addressed. the sky is really the limit for the technology >> reporter: the a.i. use with the fixed data set for professional use only is different than the chatgpt model which captured the imagination of the public and raised concerns if you look at the medical field broadly, when it comes to drug disc discovery, a.i. is accelerating the process. >> crunch a lot of data.

and all of the things and promises still ahead of us this will accelerate it. i had a weird thought. you know how many surgical robotic procedures there are now. 50 years, will a.i. power the robot? there woen't be a surgeon >> you need a surgeon to access the a.i. data. >> now. >> yeah. now. >> i guess the concerns about artificial intelligence is misleading if you are working within a closed environment, it takes care of the concerns you won't have garbage put in. it is what you allow >> you look at the concerns with a.i. with hallucinations or nonsensical things often times a.i. is trained on the internet trained on the 30 years of internet data we have. >> and purging garbage out.

>> trained on fiction and this is inputting data from surgeons and they are inputting their surgery videos into it >> i had chatgpt tell me something and then apologize later. i had it apologize to me >> what did it apologize for >> a series of studies i was looking for research it gave me three or four i said three looks good. tell me the link for it or the year it was done so i can find it it came back and said i apologize. i included it. it was from a book from 1976 it is not a research study an author made a statement i thought okay that was interesting that could happen >> chatgpt is getting better it can tell you that opposed to lumping everything together. this is getting better six months from now, there will

be another leap. >> right >> better and more evil eventually. >> julia, thank you. >> mark my words. we will talk to jonathan gl greenblatt from the anti-defamation league about a.i. and a live shot of the capitol there. we will get the latest from washington next. during the month of may, cnbc is celebrating aapi heritage month here is the founder and ceo of poshmark. >> when i think of my asian heritage and how i grew up in a country with a lot of people, india is a country of 1 billion people, and a lot of population, you really have to work hard to distinguish yourself and stand out. that real focus on working hard

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good morning welcome back to "squawk box" live from nasdaq market site in times square the s&p up 8 points. nasdaq up 31 points. becky. president biden and congressional leaders continue to work toward a deal to raise the debt ceiling, but with less than two weeks from the june 1st deadline, house democrats are pushing forward on the procedural move to increase the debt limit should negotiations fail joining us now for the latest on the showdown in washington is elizabeth beavers. this potential deal looks like it is a lot more likely than it did a few days ago it seems like all sides are really focused on this and saying there is not going to be a debt default >> yes, becky. there is optimism that default can be avoided

you need to recognize they are far apart. the hope of optimism is coming from the new set of negotiators that president biden tapped and they have a lot of respect on capitol hill you have the senior adviser and the budget chief and the legislative affairs in a closed-door meeting where democrats applauded because they feel she will be out there pushing for their priorities or at least someone they can work with terms of negotiations democrats and republicans are saying if we reach a deal, it is with these people. that is a positive tone we are seeing this week >> if you want to look at the concerns, as you mentioned, they are still far apart. you have to wonder what they come up with they said this is a bipartisan

deal you have people on the right and the left who are unhappy with some of the details that come forward. you think this is a situation where if they get anywhere close around the middle, that the sides can say this is the best for now and is there a concern because mccarthy had a very slim margin to get his bill across and he will lose too many of the republicans to make this happen or will democrats maintain the progressive wing of democrats saying they will not go along. how many votes do you need and do you have enough in the middle to pull it off >> it depends on the plan and how many republicans or democrats they lose or gain in that particular framework. as you pointed out, mccarthy is walking a fine line. i have been talking to conservatives last couple weeks and said what happens if they negotiate with democrats and the

conservative members and freedom ca caucus say what we passed from the house is before and we are not willing to accept any watered down version that puts mccarthy in a tough spot the question really is how much can he negotiate with democrats without really setting them off to the point where they lose complete goodwill which they have right now for him after the series of legislative wins in the house. that is something we are watching there is an appetite with moderate democrats to make a deal with republicans and there was a decision my colleague reported of a decision to offer they will not support a motion to vacate if it came to that with house republicans if the right wing was upset with the deal >> if they threaten to take away

his speaker sship >> right they won't go along with that if you make agreement we can swallow. >> does any of this rely on mitch mcconnell passing something through the senator getting on board to pass a bipartisan deal in the senate or pass it back down to the house what is the legislative process from here? the likely scenario? >> likely, we will see the democrats putting back what they believe should be in the bill. mccarthy wants time for his members to be briefed and having the 72-hour rule mcconnell has given mccarthy complete control over the process. he is someone who will signal what he plans to do ahead of time he said i'm letting mccarthy take the lead. i'm following in lockstep.

i think there is a bit of past feeling he had to take the arrows for passing legislative bills and mccarthy opposed it. at this point, he is saying this one is all yours and we will follow in lockstep they had a good relationship in that i think at the moment, president biden and democrats need to look at mccarthy is the person they are negotiating with and mcconnell will not swoop in to help with negotiations >> olivia, thank you. >> thank you coming up, new data on twitter's power users since elon musk's takeover. and later, joe lonsdale will talk about twitter and a.i "squawk box" will be right back. >> announcer: currency check is sponsored by interactive

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welcome back to "squawk box. twitter power users are still using, but fewer are there the tier of active users cut back posting by 25%. that is bad news for twitter

that group of power users generates 98% of the tweets. the study found 60% of u.s. adults who used twitter have taken breaks from the service and 25% of the group said they didn't expect to use twitter a year from now. >> i find myself posting less. i don't know why >> it just happened. coming up on the other side, jonathan greenblatt will talk about the implications of the rapid adoption of a.i. and twitter. you can watch or listen to us live on the cnbc app or do it right now. we're coming right back. >> 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 advent of a.i. is called a singular ty because it is hard to predict what will happen after that i think it is very much a double-edged sword there is a strong probability it will make life much better and it will have an age of abundance and there is some chance it will go wrong and destroys humanity hopefully that chance is small we hope to manage the proba probability. >> that was elon musk speaking to david faber on tuesday night speaking about the dangers of a.i. joining us is jonathan

greenblatt from the anti-defamation league how concerned are you about a.i. being slanderous, if you will? >> a.i. or degenerative a.i. is not slanderous, per it's sland the modeling it's drawing from it's contains hate -- >> interestingly, if you look at the large-language models that are being created and controlled by chat a.i. on one end, i'm thinking of one -- i lost my train -- but all those to be honest with you i'm not worried about because they have some guardrails to me the question is, all these other a.i.s, these other sort of

large-language models are smaller -- frankly, what elon musk is hoping to do with his a.i. tool which to say he wants it so you can say, i think you'd be able to say i'm a racist. >> right. >> i want you to talk like the way i talk and this is how i am. he wants his a.i. to be completely open to what i'm doing. >> i'm home schooling my kids so give me history lessons of the holocaust that didn't happen i can standardize that i think that's real problem. the way that google and microsoft and the other companies are developing these technologies, like you said earlier, joe, they go gradually and then suddenly so fast, it's hard to say where this land. there's massive concern out there. the public doesn't understand what in these systems.

>> can you speak -- the other component part of that interview is elon's comments about george soros. >> right. >> he said he 's called him a pro-semite >> what do you think. >> elon musk is not antisemitic. he has jewish friends. i'm not worried about that it's unmistakable that he's arguably the most influential man on the planet controlling what's essentially our public square, when he repeats conspiracy theories, still when he's a supervillain trying to destroy humidity, george soros,

that's what's so dangerous >> a way to criticize george soros without raising the specter of being antisemitic. >> watch this. i think some of the support are bad for curbing crime. i think george soros support, got the nuclear deal on iran dead wrong i just did that. i don't think he's trying to erode civilization when he makes comments like that -- >> when you talk to elon musk about that what kind of reaction have you gotten in. >> i haven't spoke to him about this i didn't tell him i was going to criticize. i think he tweeted something like, stop defaming me

but it's not defaming someone to point out with their huge platform that they're peddling conspiracy theorys that could be dangerous. >> i think george wants a borderless world but i did see that it was a washington post piece i think trying to see whether antisemitism is on the rise. that was included in the calculation. >> you can criticize george soros not being an antisemite. we got guide with knowledge. again, last weekend was the anniversary of the buffalo massacre. >> the other thing was the s swastika here. that pretty sums up --

>> we got his hands on his online diary >> why did elon resisted -- see, the thing with conspiracy theories, only one out of ten is actually true there's a risk in sup pressing all of them in. >> in the interview with david, elon said the piece about hunter biden turned out to be true -- >> wuhan >> the originated -- >> it doesn't mean that jfk wasn't killed in dallas. it doesn't mean that jews are controlling the world. just because something is true doesn't mean everything is >> shifting to montana and this is ban of tiktok, free speech or security issue >> you know, look, i've talked about social media before, it can be incredibly dangerous but

i don't agree with banning books and closing off companies. the better approach would be number one, we need a policy environment in which all social media is regulated >> they're worried about information being sent back to china. >> i think there are ways that can be handled the bigger issue is how kids are using this outbanning the company i don't think that's the right approach. >> free speech argument or is that an argument about the practicality of putting something like this together >> it's a practicality, i believe in capitalism, i believe it works. >> we're going to have a big discussion on china that how over the years hope engaging them would change their system

that hasn't. became clear that tiktok was worse that balloon then you ban it in. >> then we'd have to take a serious look at it. retailer walmart set to report we'll bring you the numbers and the reaction on wall street. right now, ahead of that, stocks up by 17 cents let newage products transform your garage into an area of your home you can be proud of. modular steel cabinets let you pick and choose the storage solutions to keep your garage organized, with overhead racks and shelving, slat wall, workstations and flooring that let you create a showroom garage to call your own. designed for diy installation. all you need is one weekend to take your garage from unusable to unbelievable. visit us at newageproducts.com.

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let me tell you right now, good morning walmart is ready to report the numbers, a breakdown of the results and market reaction just seconds away a big theme for the retailers lately, shrinkage. we'll hear from the ceo of the national retail federation the debt ceiling front and center for investors after some progress in negotiations the second hour of squawk box begins right now good morning welcome back to "squawk box. right here on cnbc

got some green on the screen this morning the dow up about 45 points the nasdaq looking to open higher as well s&p 500 up nine points treasuries real quick, the ten-year note right now, flip the board around, sitting at 3.596. we want to show you short-term treasuries this morning, we'll flip that board around as well take a look at this if you could, because right now, the one-month t-bill basically 5%. not a bad deal not a bad deal, folks. >> you're correct. right now, we want to bring in the managing partner and portfolio manager at dcla. you know what, hold on for a second we got some walmart numbers. >> walmart is out, the number -- we're going to courtney. courtney regan.

>> hi there, joe good morning we have a pretty strong report here from walmart. it looks like beating consensus adjustments. above consensus for both walmart has been shifting its focus to profitability whether than scale the retailer is also upping its full-year guidance, bracketing guidance, although for the second quarter it does look like the earnings is a little shy of where the street is, u.s. comparable sales for walmart is up a slight deceleration quarter over quarter well stronger over what we've heard from other retailers gross margin did fall 18 basis points due to a high percentage

of lower margin sales in areas like grocery u.s. net digital grew quarter over quarter yesterday, target actually reported a deceleration in digital sales. global ad revenue grew 40% i spoke briefly to the cfo, while there's resilience but it's surprised us. consumers are trading down to smaller pack sizes when it comes to discretionary spending on items like tvs, they're waiting for those to go on sale. rainney said the cadence of growth was strong in the quarter we did see consequential declines as the quarter roar on

some of it possibly tied to the e her yensy s.n.a.p. benefits expiring by and large this report looks a bit stronger from what we saw from target. >> that's a big move that you're seeing now, up 2.5%. these are impressive numbers same-store sales may have been down slightly. up 7.4% is really strong joe, we were looking through some of the guidance for the second quarter, 163 to 168. >> below -- >> 171 was the mate. >> 14 cent lifo charge -- if yo add that back in, weif you added in the 16, 631

it doesn't look like they're boosting anything for the rest courtney, if you get a 15-cent beat in the first quarter and you raise cadence by 15 cents for a year that's either conservative -- they don't know -- they're looking for a little bit below expectations for the second quarter. >> exactly, exactly. like i pointed out also you remember yesterday target gave us a really, really wide number for earnings because, again, they just don't know i think that deceleration that rainney noted throughout the quarter with the sales cadence gives him prudence looking forward. >> it's not up as much now we had an interesting conversation -- >> they don't. most retailers don't in fairness i asked john david rainey about this on a brief call and he

talked about it as a bigger retail problem he acknowledged that yes he heard those numbers, this is a bigger problem across retailer he really pointed out communities, communities and police departments need to enforce this is a little bit better they have to keep their employees and the shoppers safe, many of these retailers basically instruct their employees not to do anything just a very anecdotal thing, i was at a marshall store, saw a man take a backpack off, put his items in the backpack. i told an employee, they said thanks, and he walked out the door the felony threshold >> they're not going to prosecute. we'll continue to watch. want to bring in managing

partner and portfolio manager at dcla i don't think you own this stuff, but what do you think you heard from walmart today and target yesterday >> in line of what walmart said, grocery is very strong you saw that at home depot as well same-store sales were down consumers are spending more money really on things like groceries, less on apparel and you're getting the comps on that, too, last year apparel was pretty bad, so now, comps are going to get better for companies like walmart, they're doing really well with e-commerce, they're taking share there and they're trying to expand their margins using technology at this point we're seeing more money is being spent on services and if the consumer is spending money they're going lower in terms of more groceries and

necessities. it's hard to grow your same-store sales because you got so much pricing embedded >> what does that make you think as an investors in terms of stocks you like and stocks you don't like. >> as an investor you have to be careful, because the consumer is being a lot more pickier, they're still traveling, still going to hotels, they're going out, where they're cutting back is what they bought a lot of during the pandemic, do they need more clothes? do they need more things for their home i'd be careful on things that are pre-bought walmart talked about it, they saw it consequentially decline you want to look at the tjxs

where they'll have diff differentiation. >> yesterday, stocks were up sharply on the idea that the debt ceiling might -- we might have a deal. there might not be a default do you think that's probably the most likely scenario anything you've done around that what are your favorite sectors if retail is not at the top? >> haven't done anything about the debt ceiling because it's so binary we've been positioned pretty defensively. we're overweight in healthcare, staples, areas we're thinking you'll get more value over the next couple of years the multiples there are much lower than the overall market. a relief rally if we get through this phase, becky, they're going

to focus on where companies are going to be, you got a lot of companies that have debt coming due and where is the demand going to come from you want to be in the right place. defensive companies, good balance sheets, good dividends if you look at theover all s&p, the afternoon stock is down for the year, there are plenty of opportunities there, you just have to be selective going forward. once we get through the debt ceiling that's the area where you'll pick up. >> thank you we'll see you again soon. a look at this morning's market mover >> on the earnings side of things, in addition to bwhat we saw with walmart, we saw a slide on cisco despite reporting quarterly results that beat estimates for both profits and revenues.

a focus on the company's orders which actually fell by 23% last quarter over the same period a year ago amidst some slumping demand from business customers some of the pre-market action for the regional banks, a huge banner day for some of the hardest-hit western-based u.s. banks. pacwest, western alliance yesterday was up 10%, pacwest was up 22% zions was up 12% other names like first horizon also getting a tailwind from this we're also going to cap things off with tech, shares of meta platforms are on the rise.

helped along by analysts over at citi group meta top pick when it comes to advertising. more adoption of its ad platforms by corporate advertisers. by the way, one of the best performers in the s&p so far this year. >> thank you for that, dom coming up on the other side of this break, combatting the economic threat from china, what congress is looking to do to protect farmland, u.s. tech and much more. we'll hear from both sides of the aisle. futures in the green s&p 500 up by about 10 points. "squawk box" returns after this.

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innovations, cyberespionage and the importance of outcompeting china in emerging technologies former google ceo eric schmidt that it aims to achieve global dominance through supremacy, the ccp. >> this is my opinion for the rest of our lives we're going to be dealing with this i want us to win >> joining us now is congressman gal galloway welcome to you gentlemen, are you guys like finishing each other's sentences on this? there's no difference, i don't think, there's not a lot of difference between the two sides of the aisle on what the problem is in how to deal with it?

is there, congressman, gallagher in. >> i think we have a shared sense of the threat and shared concern about growing economic and technological aggression by the china communist party. some things i think are obvious and areas where we can have bipartisan cooperation i think there's a shared sense that we don't want to be in the business of funding our own destruction and that there needs to be some guardrails on outbound capital flows to china. for companies that trying to beat america in this a.i. race which has profound implications that you heard from former google ceo eric schmidt. >> we like competition everywhere, but it would be nice if one or the other side didn't

cheat, didn't steal secrets, didn't have a whole cottage industry based on using technology that's ill-gotten and i think -- how do we do that how do we make sure that's happening? we've been kind of gullible because we thought if, you know, if we engaged with china the last 10, 15 years that eventually they'd be more like us in terms of capitalism versus comm communism. >> that's right. i think we have to do a few things i think that first with regard to people that are entities or companies that are helping with the chinese communist party's, genocide of the uyghur people, we got to call them out, we got to do what it takes to both deter and punish those who would aid and abet these horrible

practices. secondly, i think that we have to do what the biden administration with high-end semiconductor chims that are used by the ccp to essentially help propel the effort in regards to their aggression against the u.s. we work with our partners, allies and friends around the world to help deny some of these high-end chips to the chinese and we'll require that type of cooperation going forward. i'd like to turn to one thing, in addition to doing thing, we talked about upping our own game in the u.s. with regard to our own competitiveness. upgrading the skills of our workforce. >> congressman gallagher, where some of the sides differ a little bit, do you -- the chips

act, were a proponent of that, congressman dmrag her? do you think the government can pick winners and losers in. >> i voted against it. that being said, even that scenario where we can identify some bipartisan agreement, for example, as my colleague eludes to we want to make sure that the recent export controls on chips that are key particularly for a.i. there aren't loopholes for those. that's something we heard about in silicon valley. even where we disagree i think there are areas where we can refine our approach. we want to enhance the terms across the taiwan strait so the ccp doesn't invade taiwan and completely disrupt the global market

even there i see areas of agreement. high-end immigration we can figure out a way with our trusted allies to have a better approach to pull talent as we're competing as a free world. >> congressman, as open we've been for the past ten, 15 years, you look at the multinationals with huge operations and interests in china, whether it be apple or just take your pick, is all that going to have to change with what's on the horizon? think about taiwan and think about what we heard eric say, they're looking for global domination, what are we supposed to do? it's a daunting and very complicated and nuanced approach that all of us need to take, all

of our companies >> you're 100% right and i think companies are already doing that, you see that apple is migrating a lot of their manufacturing forinstance to india with regard to their iphones. i think there's some companies that are going to bring back some manufacturing to the u.s. or to our partners and friends but this is already happening in the private sector i think with regard to the federal government providing more guidance, i think that you know one thing the chairman and i see one place where there's absolute agreement is that we cannot help to fund or to share technology with any entity that's going to engage in military or national security risks for the u.s., that's i think is a bright red line that everyone agrees on right now >> does tiktok represent such a threat, congressman gallagher?

and do crow degree with the state of montana. >> tiktok does represent such a threat we can't allow a chinese-owned company, to become the most dominant media platform in america. this issue is not they can actu actually -- particularly for young americans, given the ccp to control news in america strikes me as one of the stupidest things we can do either ban it or force a sale. we've been working in a bipartisan way on this issue we have to act before it's too late. >> very good, gentlemen. we get some pretty bad news in terms of bias from some of our own institutions now we have to worry about

china. congressmen, thank you both. it's an important issue and very complex in that at least it's bipartisan something is coming up on the other side, retail theft costing companies billions of dollars, it's getting worse. we'll hear about shrinkage, it's been on the rise and forcing store closures of chain companies. that group lobbying congress to do something head to the break, a look at the winners and losers from the s&p 500. "squawk" coming right back

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welcome back to "squawk" couple of analysts calls to tell you about. blackbox and charles schwab as the top. they say that blackstone is a top pick longer term, maco conditions improve and the fed stops raising rates. lowering their price target of the company to $150 from $165 that stock already at $154 the call is an valuation call. >> alibaba shares this morning

slipping lower, earnings grew 35% year over year above estimates. the company also said its board approved a spin-off of its cloud intelligence group it expects to complete the ipo of its smart logistics unit in the next 12 to 18 months. still to come, theft on the rise and it's hitting the country's biggest retailers. we'll talk to matt shay on what's being done to address the problem. st tuned you're watchiiing "squawk box" and he this is cnbc ♪ (upbeat music) ♪

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target's ce warned in commentary around first quarter earnings that the retail giant

expect to lose over $500 million more in stolen and lost merchandise this year compared to last year for a broader look at the issue this the retail industry we want to bring in matt shay, he's the national retail federation's ceo. i think $95 billion is the number that was anticipated for last year, that's what you think you all lost matt, welcome and thanks for being here why have things gotten so much worse over the last few years if. >> becky, good morning the whole issue of shrink and organized retail crime has been growing and a persistent threat the study illustrated. the conversations we've had with our members over the last several years has indicated that this has become an acute and

serious problem. some of the retailers have talked about this on a more individualized basis the real issue i think is what it does for customers and employees and what it does to the community at the individual store level. it's real problem. we've been working with congress and local, state law enforcement. >> the causes, the root causes, i hear two things, one is that rules were relaxed especially in urban areas where they're not going to be going after people for something like less than $10,000 walking out the door and that opened things up, the other reason i've given, marketplaces like amazon and facebook where you can sell things very easily wouldn't it being policed there, those are the two things that created this huge surge in the

problem. >> yeah, becky, i think that's right. couple of things that have contributed here it's a confluence of factors both unique to the industry and retail also what's going on as you referenced in enforcement, resources, sentencing guidelines, a whole combination of things, the ease and facilitation of moving these goods online we passed a law last year informed act, the source of the goods, identify cases and then also some real investigation powers so if you see a certain number of units within a certain number of time you can go after that individual or organization to ensure they're legitimate, that begins to address what's going on in the marketplace and push these things hopefully into fewer opportunities to get these out into sale. the other piece is coordinating

what goes on between law enforcement and stores create a department within homeland security, elevate this to a national issue, they can coordinate to provide resources, to report to congress, so those are the things that we can do. but you're right, the seeds for this has been sown over many years for a variety of reasons related to criminal justice reform, police forces stretched thinly, a number of events over the last several years, it's gotten to be a real problem that arises from a series of these issues in combination create this environment in which these very sophisticated, very sophisticated local, state, transnational organizations organized not just to steal at the store level but throughout the entire supply chain, on the docks, on the trucks, on the

railways, this is a really persistent problem and it's across the supply chain but manifesting itself now in stores now with act of violence with people being killed, horrible kinds of experiences and i think that hurts our ability to support and serve these communities, to get people back into these urban areas in some cases. so there's whole series of effects that go along with this. if this were a retail problem exclusively retail would have solved it by now this is much more than retail. this involves entire communities. >> what do the local authorities say, i mean, you hear the ceo of target saying yesterday, we hope to keep these stores up but they

need to see some changes in order to make that happen? right behind us there was a giant walgreens that got shut down because so much stuff was getting lifted out of there, what's the local community's response from the law enforcement from prosecutors and beyond when you point out and say, hey, something needs to be done or else you're going to lose more and more stores and these areas will not be able to help the community >> yeah, i think that's a sad reality that one of the potential outcomes and other ceos at retail companies this is going to impact these communities either it's going to drive up prices or take those goods off shelves or make them harder to access which is going to impact the consumer experience or it's going to force store closure in some places no retailer wants to close a store. i think part of this is the awareness.

bringing these resources together mayor adams announced in new york an entire approach here, a comprehensive effort in new york city to try and address organized retail theft and the violence that's taking place in new york city. i had a chance to speak with mayor adams i think that's exemplary of what's happening now. working with mayors, local police departments, the governors association, we're trying to talk to all of these groups to help them understand the nature, the parameters, the scope of the problem, it's just getting people to be more aware of and sensitive to this issue and really engaging at the community level, that's what it's going to take because this is going to be driven in many ways at the local level with resources and we know police officers are many short supply, many police forces have been depleted with retirements and

they're short on trying to attract new tall intoont the ranks. that's a challenge in enforcement and they're stretched thinly i think elevating the problem, becoming more aware of it, working with federal, state and local agencies >> the type of situation that took years to build up and you imagine it will take years to correct especially when you see things like in san francisco, nordstrom announcing it's going to be pulling out, it's hard to turn the tide once you've gotten to that point. thank you. >> thank you still to come this morning, top corporate stores outlook bank of america securities get the best of "squawk box" on our daily podcast.

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everything i need is right there on my phone. (female announcer) dexcom is the number one recommended cgm brand. call now to get started on dexcom g7. how do we show strength and stability? (eagle call) a mountain? a tree weathering a storm? (thunder) lions? nope. (lion rumbles) we do it with our people. welcome back to "squawk box" take a look at futures right now. nasdaq up 36 points. the s&p 500 just up about eight

points right now couple of big corporate stories to tell you, netflix has nearly 5 million monthly active users speaking during a virtual upfront presentation, netflix's ceo said the tier member base has more than doubled. montana, first u.s. state banning tiktok within its borders. maybe one of the biggest policy stories in a new law signed by the governor there it would be legal for apple and google apple store to offer tiktok as digital download it creates new questions about free speech but all big tech companies would police such a thing walmart with its latest

results reporting this morning, beating consensus estimates for both adjusted earnings and revenue up 1$150 billion walmart shifting its focus to profitability. the retailer also increasing its full-year guidance that stock up this morning coming up the nba playoffs in full swing and having their best ratings in years. we'll speak to kevin durant about the nba's success on the business of sports and a big event with cnbc. kevin could veha been here, too. check out the futures at this hour we're in the green we'll be right back.

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welcome back we're now joined by a special guest with an important announcement about upcoming partnership between cnbc and boardroom. game plan with influential leaders across the sports and business world lot of big names on that screen. for more want to bring in the ceo of boardroom >> this is going to be a big deal thank you, cnbc. who's on top here in. >> travis scott, kevin durant.

we'll have handful of more guests announced in the next few weeks and you. >> i'll be out there what are you trying to do with this. >> i've been very fortunate to go to a lot of these the last few years, i think the point of boardroom is create a brand that could be a vision of this intersection of sports, music and entertainment that i've grown up, i have seen deals and collaborations happening and i created a vehicle where we can storytell around it. bringing what we do and our program point of view, this would be different and relatable conference where people could feel like they can engage and where they can get the opportunity to be there, get the information, get the education and leave there -- >> what do you think the biggest

issue is between sport and business >> a lot of opportunity. i think that, you know, there's a lot of new emerging sports leagues, a lot of diversified ways. >> you're doing pickleball as >> i told you last night i was under. like an idiot. how does anyone beat avis? that guy is -- >> but i watched yokich and that was something special. >> you watched him from the other side that must have been painful. your guy durant, he's like a 7-foot guard he's fluid >> he is

>> what about this guy victor? is he going to be the one? >> are you betting >> i'm betting on every game so, yes, i do. on draft kings you can bet $10 and then if you don't win, you get it back. you bet again. >> i want to go to a different topic. he did this deal with nike, like a lifetime deal for durant >> kevin was fortunate to put out 16 seasons of signature product. i think as he's coming a the tat this point in his career that nike is part of his portfolio for the rest of his life that doesn't just entail putting out shoes, that's creating his retro business when you have 16 years of product and by the time he retires 20 years of a signature

business, that's a business that you can continue to nurture and build over time. i think the biggest thing was that historically nike always imagined that the lifetime deals were for m.j., lebron obviously but i felt like this was a rare time in that those guys are here but this business that kevin had done in the nba was warranted for a lifetime deal as well. >> we were just watching on air. m.j. makes $400 million a year, a couple bucks on every shoe what's a non-m.j. deal look like >> a non-m.j. deal could look very different it's really a commitment to like kevin being a representative of the brand and the brand being there for him. it is what it's about. >> this is a shoe question

because i'm sneaker crazy, in the kind of shoes on the court in helps to sell off the court the early jordans obviously sell like crazy now lebron's shoes for the most part don't necessarily have the same kind of shelf life people who are going to wear those shoes are going to wear them to play them. a lot of the early sure are there to play with, not necessarily full on fashion shoes. including what lebron is doing, the shoe shape is changing, everything about it. i think you guys are saying maybe there's an after life with these shoes that will live in a different world. >> i don't think the technology and the performance is ever compromised. i know it's not. we start there always. kevin has so much say in the design, our creative team is

incredible at nike it's also about understanding where fashion is at. i think at times in kevin's life cycle in his product, wearing low top basketball sneakers was in fashion and then times when it was so out of fashion and now again i think there's an appetite for that transitional shoe that you can play with and be able to wear as fashion item as well. >> but the function for the high top is there so you don't roll your ankle >> yeah, but a lot of guys wear low tops high tops are in no way as predominant in the league as they used to be. >> what do you think will happen to the nba tv rights a big debate on whether they end up with amazon, what disney dod does >> what you look at what the nba is doing, it's about

understanding how to be creative with who you give what to and carving out certain rights but the money is so big that somebody will probably end up being the anchor rights holder always and you'll be able to potentially down the road have a la carte >> an investors and also represents a player. >> and has a media company >> for a long time it's been about exposure some knocked the nfl deal with amazon because it seems like the reach has not been the same in terms of ratings >> murdoch just said it was down 43%. >> the sport >> no, the nfl -- >> lauchlan murdoch said it was

down and what does it mean for players. for a long time roger said i need to be linear. i don't know if i'm going to capture the same type of audience same thing happened with the u.s. open, tennis. tennis used to be on cbs, you'd watch it on sunday, huge exposure but they are didn't want to pay the same money espn did. >> i think that's tricky i think in the case of the nba where you've seen ratings down at times but the impact and the influence that the league has is rocket ship. >> those are the old days before gambling so back to gambling. >> you don't want that answer. didn't like this question.

can i give him a quick answer? >> it's going to be fine >> i think this transition process, i think you're going to see a bit of decline, the consumer will have to learn how to go and get it people in my generation not having cable people 10, 20 years younger than me can't imagine having cable. >> you called me about gambling. it's a first >> i'll give you his phone number you guys can take it off loine. >> you can take it off air >> the game plan is july 25th, it's in l.a., we're going to be there to host whatwill be a fantastic event. thank you, guys. we're back after this.

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and he'll say what he wants to say. that was the message from elon musk we'll ask what that could mean for the larger issue of discourse online as the final hour of "squawk box" begins right now. good morning welcome to "squawk box" here on cnbc i'm joe kernen along with becky quick and andrew ross sorkin u.s. equity futures are barely up walmart looked pretty good at one point. the lead story today is on shrinkage. i don't know how to say it any other way. i did not realize that $3 billion number that we heard about target, that in theft, target, it's 3% of total revenue. >> and other places 2%, maybe

more got to look at the breakdown of the stores >> you go in, you bring your shopping bag, if it's under 10 grand no one stops us because of the safety of the customers and employees. >> what target was focused on was the organized crime aspect of it. you have a crew. >> all along the supply line there's shrinkage. treasury yields, i never know whether that's good or bad when treasury yields really drop, it's because we have a really bad economic number titi typically. so when they go up, i think that's good but that's all bass akwards >> is ass backwards not okay

>> let's move on we heard from target yesterday, too. they said things slowed down in april and continued in may walmart pulling back for the second quarter but for the full year still looking at numbers that are in line with what they've been expecting the first quarter up by 7.4% in the first quarter. that's way better than other retailers and well above expectations for what the street had been looking for u.s. net digital sales saw growth quarter over quarter. e-commerce was up sharply. walmart's cfo saying while the company sees some strain on the consumer, it's been surprised by its resilience at the same time. on the problem of theft, hearing target's painful numbers yesterday, he characterized shrinkage as a bigger problem across the entire retail sector.

check it out walmart shares up by about 1.5%, amazon up by 0.8%. >> dom, good morning >> good morning, andrew. let's kick things off with a check on earnings overseas this time it's from chinese e-commerce giant alibaba after what investors are calling the amazon of china reporting mixed results. the profits came in better than estimates. revenues, though, were a miss. also the board of directors said it approved a spinoff of alibaba's stock paying unit. a spinoff providing up side.

cisco systems down roughly 3 1/2 to 4%, 150,000 shares of volume. it reported a beat for profits and revenues but some are focused on the 23% decline in customer orders. now on a more positive note, cisco ordered a more upbeat revenue forecast and we're tracking a call out of deutsche bank which updated on fed fedex. target goes to $282. it was 240 the firm issued a shorter term catalyst buy call saying next month's earnings release could provide meaningful momentum for the stock. some see it as an economic bellwether

i'll send things back over to you. >> way to go, dom. not a word, right? maybe we shouldn't talk about it for us until 9:00. >> did you see that the frost delay was in effect? >> so the 7 a.m. times >> yeah. they were going to give an update earlier on this last hour so i'm going to go check things out right now. >> it was 38 degrees where i got up >> it was 41 when i got up >> what was the most compelling threesome? >> you got jon rahm going off early. if you have some of these guys, especially the world's number one player teeing off that early, you got to kind of feel like that's the group to watch >> yup, i think you're right >> probably a good bet on him, at least to make the cut i bet you don't get any odds on that >> i bet you you probably could but they would be pretty short odds >> thanks, dom >> let's get deeper into the

markets. joining us the head of u.s. equity and quantitative strategy i saw you nodding. you think jon rahm is a shoe-in in this tournament >> i -- >> you're not ready for that >> you might have been nodding at some other things you heard the brief discussion on, gee, the economy might be stronger so rates go up. >> yeah. i think it's good. i actually see the world through a rare kind of a half-full lens these days you're always accusing me of being too bearish on markets >> it's been good for two years. >> i think markets are in an interesting spot right now to borrow one of your phrases, i think that positioning right now is bass-ackwards

>> you're going to the cable >> when you look at where investors are positioned, we've been talking about the recession for six quarters folks have been getting more and more defensively positioned and the recession keeps getting pushed out >> and defensive because it hasn't happened, has it? >> it hasn't happened and it keeps getting pushed out to the future now a lot of economists are dialing back their recession forecasts altogether our team is forecasting a recession of peak to drop 0.8% drop, which is kind of a non-event if you think about it, half the typical magnitude of a recession. meanwhile the world has bought bonds, sold equities and all the cyclical stuff does well when interest rates rise i think is going to be the pain trade going forward. >> we've seen and mentioned it

yesterday that we always hear there's going to be a change every time there's going to be a new up trend, you hear a change in leadership. tech is going to be leading again, isn't it? >> i don't think so. >> the reason the s&p is where it is because of four tech stocks >> i think the s&p might not be the s&p you want to buy. you want to buy the s&p big tech >> because of valuation? >> because of demand we just heard about demand slowing down i think we're in an environment where tech is showing its cyclicality. so companies, consumes are s consumers spent on tech and now we're seeing declining sales volume and i think that still hasn't been priced into technology stocks.

i think they're bullish theme but there are pockets. like a.i. is a great bullish theme. for the overall market, what makes me excited is companies are actually spending on efficiency games they're spending on productivity this is something we haven't seen in a very, very long time we've seen cost cutting, we've seen buyback driven per share growth and engineering driving growth but we haven't seen a strong productivity growth no one thinks the multiple of the market is too low. they think it's too high i think the multiple could move higher on the idea that we're at a point where cyclicals could actually really grow earnings and expand margins i think it's a case-by-case market you don't want to buy mega cap tech that's old leadership. >> what's the multiple on an average cyclical now

single digits? >> the multiple the are high right now. in our view we're going to see earnings trough by the end of this year or thereabouts next year we could be setting ourselves up for a pretty healthy recovery this is assuming the consumer holds in when you look at consumption trends, the only area of weakness is in higher income that's the other difference today is that luxury and high-income spend is no longer defensive. you want to go discount trade down i think that's the other sort of raphael interesting cross current that's driving markets today. so the danger is and i think this is a really interesting time to be an investors and there's lots of output to be made but the danger is using 2008's play book because that's wrong. we're not in a market environment where credit and banks and cyclicals are going to drive the economy lower. we're in a market environment where the big asset bubble is in

long duration growth stocks, and that still hasn't, you know, fully right sized. >> but if the fed is done, you are won't have to worry about multiple for that either >> i don't think the fed is done >> really? >> you think they keep going >> i think they could get going. i don't think they cut rates this year. >> right >> but the idea is the consumer is actually really hard to slow down, right? consumer balance sheets are still at pre-covid health levels >> everybody's trying to bet on when that gets bad >> when the consumer turns -- >> yes >> i think what we have to remember is that consumes are h consumers have been relatively disciplined over the last ten years. they haven't taken on floating rate mortgages, savings balances are higher the real pain is being felt in higher income consumers on wall

street, silicon valley, kind of the coast basically. but the middle seems to be doing fine and on top of that -- sorry, i'm just so excited about all of it. >> go for it >> but on top of that you have this manufacturing boom taking place in middle america, tech companies moving out of china back to the u.s. i think there's a lot of underappreciated cyclical themes that investors have summarily dismissed because we're all talking about this recession that may or may not happen any time soon. >> right thanks >> it was all about the pta, one of the majors, jon rahm. >> i got the golf part >> you don't have a pick jack nicklaus maybe? >> i have to tell you i don't follow golf at all >> arnold palmer

>> i know arnold palmer. >> he's dead >> i love him. >> thanks. >> thank you >> when we come back, investco's head of public policy talks about the hurdles to getting a debt ceiling done in washington. and a few more top business stories. netflix executives say the company's new ad supported streaming tear has almost 5 million active users a month and u.s. base semiconductor mike crone plans to invest in chip making in japan with help from the government there stay tuned, you're watching "squawk box" and this is cnbc. o. burger and fries... soup and salad. like your workplace benefits and retirement savings. with voya, considering all your financial choices together can help you make smarter decisions. voya. well planned. well invested. well protected.

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welcome back to "squawk box. signs of hope on a debt ceiling. president biden saying he's confident the u.s. will avoid a first-ever default speaker of the house mccarthy telling us the same thing. the tightrope walk is what concerns our guest most. that's what we're going to talk about.

andy is the global head of public policy and consumer affairs at invesco they say they're confident are you? >> the fact that they're saying positive things the last couple of days, the fact that they shortened the size or limited the size of people negotiating in the room is all good things the issue is actually getting to the deal they've got discretionary spending caps and work on covid spending but they're still part apart. the devil is going to be in the details over the next week >> is your expectation a deal gets put in place for a year or two or is it a two or three month situation that gets recast as a budget deal >> i think to do a deal on the democratic side. republicans may want to do a shorter deal, two, three years

and come back and get more i think if i'm going to bet on a deal with all this, if june 1 is the real x date, i think they're going to move hard to get a longer term deal with all the elements we just talked about. >> if you're gambling -- first of all, there's two gambles. one is you are taking off the table i think, andy, any sense that this turns completely wrong, meaning the movie does end with at least some kind of relatively happy ending or at least not a disaster of an ending but then is it a long-term or short-term ending. you say long term and i'm curious why you think that >> any kind of short-term extension, republicans are going to extract a price out of democrats and democrats don't want to pay twice. they want to pay now for the short-term extension and then come back and pay another price. so i think it's best for the democrats and for the republicans to kind of just get this all done if you can i just think that right now, though, with mccarthy, that's

the interesting thing i'm looking at is that he is a very raucous caucus and he has a tightrope to run to vote for his party, knowing that half of them won't like the deal but then have those people not try and go and vacate the chair and remove him as speaker that's his tough job >> we've seen the vix start to move up. you think it should be higher in terms of volatility? >> i think it's high enough right now. normally you don't really see reaction in the market until a week out we've seen it in the t-bill market for at least a month now and cds for a month. so it's much earlier we're seeing some of this reaction i think what i'm looking at is when biden comes back from the g-7 conference, when he does his press conference, what is his

tone is his sttone are we still makig progress it depends on his tone will determine how i look at this >> let's talk dates. there's a timing issue you take a look at at calendar you got president biden over there in asia, he's back on sunday how quickly -- i mean, that last week you talk about the vix really moving and the market really getting anxious if it is that last week, when are we talking about you think this is going to happen at midnight kind of situation? >> i think it's going to get closer to finally getting done closer to the x date or even maybe beyond it. but i think we're two weeks from the x date today so i think next week when biden comes back, they really need to get this done sometime next week to get through the house, senate and be ready to go. >> okay. aaron, it's great to see you appreciate it. that's a jocke, andy aaron is a fabulous writer he's just not me

>> it's like a happy ending. you were trying to figure that out. like "the graduate," was that a happy ending they're going off together in the bus. remember that? i'll give them a year maximum. no more. >> that's why you need a sequel the problem with this movie is you always need a sequel >> where is it in any movie you're going to have a permanent happy ending we're all going to be dead like "casablanca" was not happy. >> do you have any happy ending in a movie a cartoon. >> disney is not happy $92 today, disney stock. coming up, we're going to dive into debates over a.i., development and free speech

online that were reinvigorated this week. joe lonsdale will join us for that you're watching "squawk box" on cnbc

montana's governor signing a bill that bans tiktok in the state. it's the first bill of its kind. it makes it illegal for google and apple's app stores to offer tiktok to customers who live in the state. they won't be penalized but

under the law tiktok and the american tech giants could be fined thousands in violations. the law is expected to face heavy legal challenges before it goes into effect in january of next year. in a statement tiktok said it will work to defend its users' rights but this is going to be interesting but it's certainly one being watched at the federal level, too >> this guy really had a wide net, did he not, epstein deutsche bank will pay $75 million to settle a lawsuit brought by women who say they were abused by the late financeeer epstein he was a client of deutsche bank way after everybody should have known better court approval is still required coming u wllp,e' bring you the new jobless claim numbers

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new jobless claims data. manufacturing numbers expected from the philadelphia fed. you can see the futures have actually given way when it comes to the dow futures they're now down only by about 2.5 points, positive up till now. s&p futures up by about 5, the nasdaq up by 30. if you're watching the 10-your note, it is yielding -- the latest is 3.5. it above 3.6%, 3.604%. rick santelli, the numbers, please >> those interest rates are hovering at one-month highs based on closing levels. initial jobless claims 242,000 that's lighter than expectations, lighter than the 264,000 this the rear view mirror what's notable before any revisions may show up, 264,000 was the highest level since october of '21 so we have moderated a bit and we slipped under 1.8 million on continuing claims.

i can hear yields rising on tht that that was a very significant level. we haven't been below 1.8 million since the first week of march, which would be our comp here and last month gets revised a little bit to 1,807,000. it breaks the records after benchmark seasonal revisions that we have now eight above 1.8 million, the streak ends philly fed for the month of may expected to be minus 20 is minus 10.4, minus 10.4 what's notable there is not a good thing but maybe not good things are good if you're looking for the fed to ease back a bit. this is the ninth negative month-over-month change on this

outlook. that is not a good streak to have minus 10.4 is the least negative outside of january when we were just short of minus 9. interest rates moving up basically hovering near one-month high yield closes pretty much on the entire curve. should you look towards that dollar index which a couple of weeks ago we were talking about how notable, legendary traders were looking to short the dollar i'm not saying it's not going to be a good trade but it's always about timing, timing, timing, it's now above 103 hovering over two-month highs. we want to continue to monitor whether it's sticky inflation even though it's come down or a very solid labor market, at least define what we're looking at and some of the best ways to handy cap the labor market in terms of jobless claims continue to remain on the lower side

potentially keeping the fed on the wafrrmer side. becky, back to you >> yields picking up a little bit. we were at 3.6 last i saw was 3.617 the latest is 3.619. >> exactly right >> steve liesman joins us for more steve, what catches your eye here >> got to be sadness on wall street that the news isn't bad enough you know, you have this jobs numbers and i think rick used the term resilient the job market remains resilient. if i were to take an analysis of what we've seen so far in the jobless claims data, what appears to be happening and this is early days with this rise we've had and you have this weakly increase, it's a bit higher than it was in that 242 level. the appearance is people hitting initial claims, the number is

not really accelerating when it comes to continuing claims, which could be telling you folks are getting unemployed, losing an initial job and finding other work that's another sign perhaps of tightness in the job market. you still have elevated openings relative to where it should be normally you have strong jobs numbers last month so it seems as if you have -- there are adjustments going on in industries, some remain overhired, some underhired and i think all this tells you is that the fed will continue to focus on the jobs market because especially because again anecdotally it doesn't seem like the banking issues were much worse than they were before. famous last words. g i got to talk to a few bankers at an event and they feel they have this under control.

i asked is it a crisis they said i wouldn't call it a crisis i think turmoil is a good word from their perspective they don't seam to be sweating the details. that's important there will be some restraint in bank lending whether or not it just sort of normal for the cycle, that's what it sounded like to me it doesn't sound like an all hands on deck from what i could tell the job market, people are losing work but finding work again. >> people may be waiting for the shoe to drop one of the western banks reported a big surge in deposits and that took concern away, too, that people are feeling better about things and it's showing up in deposits. >> steve, what do you think about the solution to a debt ceiling and the banking industry the newest research that's coming out there says maybe a solution to debt ceiling would bring a deluge of t-bills to

catch up on all the issues of foreign policies and capital and that that issuance, that issuance of t-bills could drain liquidity from the system once again. anybody thinking or discussing or talking about that, steve >> well, i did hear that one major bank set up a war room for the possibility that the debt ceiling -- there was an actual default. i think that's an interesting outcome -- >> i'm saying if there's a solution, if it's solved, there's immediately going to be lots of t-bill auctions, i think. >> and that would raise yields one would imagine. is that what you're saying, rick >> and take money back out of the system is i think the general concern. you got to be careful what you wish for exactly. >> gentlemen, thank you. >> sorry the idea of a default was definitely one of the major risks that were out there, at if

they don't have enough to navigate it was something that was repeated several times i think, becky, what has to happen here is they need to overcome this issue and get back to the idea of navigating the economy. i don't want to say it too early here but maybe this is the guaido recession, there was some thinking that the recession remains pretty resilient right now. >> thank you >> coming up, tech investors joe lonsdale will talk about urgent issues that make news every day in his industry, from the a.i. development to free speech online ♪ ♪ the biggest ideas inspire new ones.

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welcome back to "squawk box. the dow is down 30 points down, it's moved lower throughout the morning, nasdaq up 10 points, the s&p 500 looking to open call it almost unchanged. nice to be in the green but basically a point at beast >> a survey says twitter users haven't been as active posting volume by the most active users on the platform has declined since musk bought it for $44 billion. average tweets per months by these users dropped by about a quarter and about 60% of adults who used twitter in the last

year say they have recently taken breaks from the service. >> elon musk suites have long been a lightning rod for criticism and controversy, even more so now that he owns platform in an interview with david faber this week, musk said it's all about free speech. >> you know, i'm reminded of a scene in "the princess bride" -- >> great movie >> where he confronts the person who killed his father. and he says "offer me money, offer me power, i don't care." >> so you just don't care. you want to share what you have to say >> i'll say what i want to say and if the consequence of that

is losing money, so be it. >> joining us right now to talk about musk's commentary, free speech on social media, joe lonsdale you know elon very well. i'm curious, what was your takeaway from that exchange? >> well, you know, andrew, i'm glad he's being a role model in this sense to so many others i think the biggest towers in america are those who run fortune 500 companies. there's a sense that one side is corrupt and you can't criticize. it's a side you're not able to go again, they want a victory of their ideology and everyone needs to shut up and go along, it's breaking lots of things and it's the duty of people to speak up and say what they think >> can you square one part of this, though, for us elon says money, power, i don't

care and yet the truth is when it comes to doing business in china, when it comes to doing business in turkey, you know, he's now limited what's publishable in turkey in part because the country has said we don't want you doing that. other tech companies, google, facebook, others, have said we're not going to play in these markets because we don't want to have to deal with those laws and those rules. >> i think that's a very fair point. i think every company has a very tough decision to make do you turn off everything in that country or do you leave things on in that country and go along with the rules >> what does that say then about power and money? if power and money don't matter and you'll say whatever you want to matter what you want, if this is really about just straight up principles, you'd say, you know what, i can't do business with those people i can't do business in china this is not for me, i'm not doing it

the stand i'm taking is a strictly principled one. you're suggesting there's something else here beyond -- >> i think you're right that everyone running a big company on the international stage today who does any business at all in any of these countries is going to make some compromises i think it's good to be transparent at the very least about it and social media companies do follow the rules in turkey as well, they just don't talk about it out loud. i'm very troubled by that. i don't think the guy running turkey is a good person. i think he's very scary. but i understand you're right, companies do make compromises to do business in these places it's very hard to be a perfectly pure person. i think being able to stand up as much as you can is a good things and people will make trade-offs where they decide to stand up >> let's pivot this to a.i elon to, to the extent he's pursuing a competitor to a chat gpt or to a google or entlopic

or what have you, is really about creating an a.i. where you can say that the a.i. will speak in whatever language and say whatever it wants, whereas what you've seen over the last several months is chat gpt now in partnership with microsoft, they've put some guardrails around what a.i. will come back with in terms of the responses and answering and reasoning and google and bard are been even more uniquely cautious perhaps are those good decisions, bad decisions and what happens on the other side if the view is there's no decisions >> i don't know what elon a saying i have a lot of friends that used to work with me and i think opening a.i. is doing extraordinary things i think the trade-off, andrew, is, first of all, yes, you must censure yourself i don't think the government

should be involved that should be terrifying to all of us. i don't thinks that right. i think we got to be very careful. i think there is regulation we should think about, which is that it's not clear we want autocrats to have access to this i think this idea of a regulatory agency that touches anything other than the existential issues is a mistake. maybe the in 12 years they're powerful enough to destroy stuff. the question is who gets to have giants and there should be multiple of them >> how much even in the conversation about regulation on a.i. is just hot air when i say that, i'm not being dismissive i'm glad folks are so early in bringing this conversation to the discourse. but washington, as you know, has been behind in terms of even

thinking about regulation the entire time. we're still debating whether there shouldi be regulation around social media and so many issues if there was regulation, you would have thought those things would have been dealt with already. >> you know, if this stuff works the way it looks like it's going to, this could be a third industrial revolution, this could be the late 19th century all over again a lot of people save they don't like that era. you have to keep in mind the average wealth doubled in this country, more than doubled in this country everyone benefited from that massively. it's going to be really interesting. it's no longer like the shoemaker and barrel maker, it's going to make lawyers, bureaucrats more efficient, a lot of people who run everything in our government are going to be able to be replaced with a ratio of 10-1 getting more done. i think right now they have no idea how to do it. i don't think we do know how to do it until we see what happens. >> what is the most interesting

use case in the next 12 months that's going to be a game changer? i think a lot of folks right now are using it to help them write an e-mail, they'll write a funny poem, stuff like that. in terms of meaningful, game changing next 12 months? >> i'll give you two number one right now in our society is is making a lot of coders more efficient. my friends were trying to debug something really complicated and any apps and it figured them out for them they showed me, it's amazing it's very complex. and the second one, we sold a company last week that had been struggling to grow for a long time it was legal tech, they partnered with open a.i. and they started growing ten times fasters fa faster that they were making paralegaling so much more efficient that someone bought it

for ten times. you're going to see it in legal tech and all kinds of applications >> it sounds like it's going to exist just like technology it's not necessarily a.i. companies that will be all the rage but just a.i. technology used everywhere? >> that's right. it's the same way we use the cloud and everything else with coding it's going to affect so many different work flows and make so many things more productive. the question is when does it show up in productivity numbers and create wealth in society as a whole. the regulation question is funny. you regulate your stock but that's the question. >> when you think about china and where we are with regenerative a.i. and they are, what's the distinction right now? >> i think we're way ahead of them in a lot of areas i think they're probably ahead in using a.i. for the security state. they're probably ahead for using

it in certain health care genetics, where we're not allowed to but in terms of depth and sophistication in the technology, the u.s. seems to be a couple years ahead and so many more people openly exploring with it here it's easier to do that and we're in a race. the best people we're in a race. hopefully we can keep hiring the best people. d.c. has to get its act together >> as a venture capitalist, do you look at what's happening and say to yourself, this is going to benefit the incumbents, meaning, for these large language models to succeed, they need to be partnered with a microsoft, they need to be with google, does anthropic end up getting bought by apple? does that happen because they need the processing power and infrastructure, or is this a great new opportunity for smaller companies that beat the big guys at their own game >> there's -- it's both.

there's a ton of new companies that are going to benefit from this, from helping with new types of tooling and infrastructure and ways of safely applying it privately with our data, but i do think this technology uniquely benefits companies that already own lots of interesting work flows, because it can make those work flows more productive and more profitable, so while this benefits all sorts of companies, i think it benefits society as a whole with productivity, and it benefits big companies and work flows the most, along with society. >> joe, it is always, always great to talk to you about all these issues thank you. >> thank you, andrew coming up, what to watch suggestions. you don't have to do it. what to watch ahead of the opening bell on wall street. u' wchg quk t yoreatin"sawonhe street" on cnbc. hey corporate types. would you stop calling each other rock stars? you're a rock star. you are a rock star. no more calling co-workers rock stars. look, it's great that you use workday to transform your business. but it still doesn't make you a rock star. so unless you work with an actual rock star.

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welcome back to "squawk box," some key erarnings this morning, walmart autoout with results, raised its full-year forecast of second quarter earnings guidance that was a little shy of the street walmart's cfo telling cnbc that while the company sees some strain on the consumer, it's been surprised by the consumer's resilience

>> some new comments just out from dallas fed president laurie logan. prepared remarks for a speech today, she says that the current economic data points so far don't justify skipping a rate hike in june she said that the data in the coming weeks could yet show that it is appropriate to skip a meeting, but she says as of today, we just aren't there yet. logan, by the way, is a voting member of the fomc check out the dow futures right now, down by about 70 points, which is about the weakest level we've seen this morning. we're just over a half hour away from the opening bell on wall street, so we want to talk markets right now with kristen bitterly, the head of north american investments at citi global wealth. this inserts a new idea into what we expect from the fed. i think the market has pretty much factored in the idea that there will be a pause this next go-round >> i think that's right. so, the market has certainly priced in the fact that they're going to be a pause, but i think one of the things we have to be cautious of is when you look at the fed's mandate in terms of

price stability and full employment, you still have a 3.4% unemployment rate, and in addition, from an inflation standpoint, when you look at core inflation, yes, we've been trending down in the right direction, but core inflation, if you look at the past four prints, it's averaged about 5.05%, and we haven't seen a lot of material movement there so, while the market's pretty confident, obviously, the volatility of rates, we've seen that that's been the story year-to-date, so i don't think we're out of the woods quite yet. >> yeah. we're looking at the ten-year yield right there and it's picked up too. by the way, it started rising earlier this half hour when we got those numbers, jobless claims, lighter than had been expected too 242,000 versus the 250,000 the street had been anticipating you're now looking at the ten-year yield at the highest level it's been in over a month. >> absolutely. and this is, i think, one of the confusing things in looking at what the fed has been doing in terms of tightening financial

conditions and when is that actually going to flow through into the economic data i think one of the things we've been watching very closely is we do have to remember that the fed, what they're watching is lagging economic indicators and we've been keeping a close eye on the leading economic indicators and when you look at the deterioration of that, we've seen a decline of about eight percentage points, which puts you right in line to some of the deterioration we saw in the depths of covid, and so i think we do have to think about the impact of all of this cumulative tightening ultimately, it does have to flow through to the economy and earnings there is a lag with that, but it's something that it doesn't mean it's impossible to be profitable in this environment, but it certainly means it's more challenging. >> we heard from walmart this morning, and it did have much better numbers than had been expected, came in with stronger sales too, but the company did say its guidance for the current quarter, right now, is below what the street had been expecting. yesterday, target said that they saw weakness in sales in april and that's continued in may too. they also lowered their

expectations for the second quarter. does that tell you it is here if you're looking at realtime numbers? >> i think the thing about the consumer as well is when you look at what we saw out of the retailers was the composition of spending has changed substantially as well, and almost the retailers from last year that were the losers in terms of performance due to some of the inventory builds and some of the disruption there were the winners here, and then you're looking at areas like grocery, consumables, which are lower margin products. i think stepping back and taking a look at the consumer and consumer health, i think one of the things we've been watching very closely is the shift away from what was stimulus-fueled spending last year and now dipping into savings and also dipping into credit-fueled spending we look at credit card balances that have eclipsed pre-pandemic highs. you're looking at the impact that interest rates have on the consumer the average credit card rate is around 25% and that doesn't even factor in the increased cost of housing, so you add all of this up, and yes, the consumer has

been resilient, but ultimately, all of this is going to have an impact in terms of topline revenue growth for sure. >> so, you tell investors to do what we have about 45 seconds >> still playing defense here. i think that's the thing our portfolios, we've been overweight fixed income relative to equities, focused on quality. we do believe we're going to see an earnings contraction to end this year upwards of about 8% and we will see a recession, and so it doesn't mean that you're sitting on the sidelines but you're playing a healthy amount of defense, and for those who are worried about some of the upcoming volatility events, whether it's the debt ceiling or potential continued hikes, take advantage of the low volatility environment and put some hedges in place to withstand wahat coul be some volatile months ahead. >> okay, thank you final check on the markets you can see that the futures continue to weaken in fact, the dow is now down triple digits. the futures there, off by 106 points the s&p has been dragged into negative territory as well in the last few minutes, off by

about 7.5% if you're watching the nasdaq, it's down about two points ten-year yield continues to climb, now sitting at 3.629% after starting the morning below 3.6% that does it for us today. join us tomorrow when it will be tgif "squawk on the street" begins right now. ♪ good thursday morning, welcome to "squawk on the street," i'm carl quintanilla with jim cramer and david faber at post nine of the new york stock exchange coming off the best day for stocks in a couple of weeks, nasdaq at new highs for the year that labor market data this morning comes in a little warm futures do lose some gains and that two-year yield back to 4.2% our road map begins with retail and the consumer walmart rallying after raising their full-year guidance plus we've got the return of that big-tech trade, nvidia and meta, they're both up more tha