good morning futures in the green so far, but a long way to the opening bell and more fed speak expected before the day is done we have a preview. disney's feud with the florida governor hitting home retail industry crime problem. the solution to slow down the shrink in inventory. it is friday and "squawk box" begins right now. good morning welcome to "squawk box" here on cnbc we are live from the nasdaq market site in times square. i'm becky quick with andrew ross

sorkin joe is out today it is friday the u.s. equities are feeling good the dow futures up >> fri-yay >> the nasdaq up 31. this comes after a gain an cros the board yesterday. the 10-year treasury is 3.6% major moves in terms of where treasury prices are right now. part of that is the data at 8:30 you saw things moving up you have signs of a settlement both sides are talking as if default is not something they are considering. as a result, look at short-term treasuries that is where the higher yields have been playing out. concerns with the debt ceiling one-month at 5.554%. that is a bit below the highest levels of 5.57%.

two-year is 5.815. andrew. >> talking about the debt ceiling and settlement pot potentially, let's update you on the white house. the white house and congress making steady progress and avoiding a u.s. default. mccarthy saying they are in a better place than a few days ago. all systems go the negotiations, however, continue as president biden attends the g7 summit in japan he is back on sunday the u.s. treasury now says the amount of money it has on hand to pay bills is lowest level since 2021 at $68 billion. a week ago, the balance was almost $155 billion. you see it shrinking by half we will talk more about the debt limit negotiations in a couple of minutes we have two members of the problem solvers caucus

maybe they can solve this problem for both sides of the aisle joining us in the 8:00 a.m. hour. we talk to josh gottheimer and representative brian fitzpatrick. >> we talked about this yesterday. the comments from the fed about whether or not a pause is a pause. will they hike rates at the next meeting? this is the end of may and then the next meeting at the end of june. >> if you get a deal, maybe you do if you don't, then you don't >> that's a fair point i still don't know if wall street baked that idea into the cake if it is not done, if the deal gets done -- >> they keep going. >> we have steve liesman and greg who will join us to talk about it in a bit. they are playing out it is weird. you are at an inflection point you will not get agreement with the fmoc members when you start

talking through. they speak more in sync. >> eventually a cut can you tell -- a cut is coming. market says the cut is coming. i don't think anybody in fed land thinks that is on the table. >> mohamed el-erian made this point earlier. if you see that, extreme volatility in the markets and the fed credibility is called into question. there has to are catch up there. >> this is the credibility in question story. disney scrapping plans for the $1 billion campus in florida in the latest future with the governor ron desantis. disney says new leadership and business led the decision to keep the 2,000 jobs to relocate to california to work on technology the campus would be 20 miles

from disney world. we will break the latest down and the plans to make espn a subscription streaming service in the next half hour. that stock down another 1% that was a point of contention a florida official says if my stock was down that much, i would be rethinking plans. the question is because of desantis is the reason or cost cutting moves? these were plans put in place by chapek >> i want to understand what does it do in florida? do the taxpayers in florida say this is reduck ridiculous >> the bigger question is going to be what it means for fund raising for desantis it is expected to reveal a statement that he is running for

president. republican donors are reluctant to sign on first, he has to declare >> i assume this makes it harder i wonder nationally if people go, okay, he did this to the company. >> it works for the base i don't know how it plays in the end. he has had great leeway to do this and a lot of times, the stance he has taken is popular within his base. >> maybe not with his people peculiar we have a couple of stocks to watch starting with the applied materials. the chip equipment maker beating forecast shares are lower as the company expects third quarter sales to decline as it deal was a glut of inventory and slump of memory chips. stock off 2% berkshire buying more shares of occidental berkshire added 3.5 million shares of occidental over the

last three trading days. that boosted the stake in the company to 217 million shares. this purchase follows a similar string of buys that totalled $130 million we hear about this routinely about them buying more they made a point of saying they don't want to own the company outright the next story is fascinating. i almost wish this happened before i had an turnopportunityo interview. twitter is accusing microsoft of using data from the social media platform in unauthorized way in a letter to microsoft, musk's attorneys claim that microsoft could be in violation of row vi provisions of data use a spokesperson telling cnbc, microsoft will review the letter and respond appropriately.

and apple tarle is restrict a.i. tools over fears it could mean employees could release confidential information if you put information in a chatgpt, then what is the security apple carrying out the a.i. efforts buying up a number of startups on the a.i. front, fair to say in the large language model chatgpt model, i'm a fan of apple and they are so far behind on this at the moment. >> i was going to ask for your interpretation on the microsoft story. i was confused over what is happening. it sounds like twitter is unhappy because microsoft is refusing to pay for the paid version. they want to stick with the free version and where that leads.

>> i'm unclear the truth is i read it and i didn't fully understand what the argument was i don't fully understand how much of this is also part of a larger upset that clearly elon has had over open a.i. and open a.i. relationship with microsoft. that is clearly something that elon with faber and everybody else has been upset about. >> just to back up a bit for people what did he put in originally? $1 billion >> i think it was $50 million. $100 million >> he put money in to get it started as a non-profit. >> it is still a not-for-profit. his view is it has been co-co-op

>> i thought microsoft is eventually buying and would become a shareholder that is what it looked like to me i get his frustration and concern. i don't know what the reality is that's what i thought when i read it. >> i think the commercialization of it by default is controlled by microsoft to some degree. at some level, it will remain -- the model itself will remain its own entity and remain a not-for-profit or capped profit whatever you want to describe that entity as and he thought when he was starting open a.i. that it was going to be sort of the separate thing that would push on the other guys and would not be partnered with the big guys >> if that is the case, i understand >> the problem is, of course, to develop this at this scale, you need the big guys or big money

one or the other if you weren't going to comm commercialize it, it is impossible >> i can understand both arguments. i think if he wei were the first person to put in, i would want right of first refusal we need to find a way to work or more money. >> he have left long before. he leave -- he left long before that i don't know if you get first right of refusal at that point. >> i put in the funding, but attracted the engineers because of me to work on this stuff. i got you started and i got cut out of the deal. >> i think he has that position and a lot of people are at open a.i. and i don't say this with any -- it doesn't make me happy to say this or sam altman.

when elon musk left, they threw a party. it has been published. in was a known thing a very happy day for them. >> i accept there is more -- >> i say that because he may have attracted the engineers and put the money in and i give him credit for working i did an interview with both of them about this at the beginning. i have watched them grow up together and grow apart. there were reasons for a lot of it >> i do accept it is more complicated than the surface issue. this is a long issue >> long issue. he will have his own version of large language model coming up, how much progress is made in the debt limit talks? plus, results from deere that stock is off and running. we will have that and a lot more after the break.

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welcome back to "squawk box. deere results out. company reported $9.65 a share

earnings revenue at $17.39 billion. that was well ahead of estimate. deere citing heavy equipment demand and raising outlook with the beat you have to see the numbers over the longer haul. they are looking for fiscal year 2023 and construction and forest sales up 15% they are again raising the full year outlook on heavy equipment demand that stock up 2% president biden and house speaker mccarthy avoiding fresh confidence that they will reach a deal before default. warning on both sides, leaders may face push back over conce concessions. joining us is jake sherman who is our punchbowl reporter and

cnbc contributor we may get there, but it may be nerve wracking >> i don't understand wall street's optimism. the odds today, andrew, they get a deal as you noted, there are massive hurdles here every republican demand, whether work requirements going back to 2022 or spending levels or length of the debt ceiling, all of these have oppositions in pockets of the party mccarthy and frankly joe biden will need to get their hands dirty to get this across the finish line. mccarthy told me yesterday if they meet the june 1st deadline, they need a deal by sunday a deal in principle by sunday or monday they are not close to that, but making progress. >> can you give us some sense of the contours of the deal we may not know about

we had hakeem jeffries on and he said we will talk about budget issues are you figuring that out in the next week? >> they can talk about taxes, but taxes are not part of the deal in anyany way, shape or fom this has been described by sources as a spending caps number two, the cancellation or reclamation of unspent covid money. $60 billion a year the most likely, not the most likely, but most done at this point is permitting reform reform to the process by which the government approves clean energy and fossil fuel projects. that is pretty much in the books. those are the planks i talked to house democrats and

including those close to jeffries who will not accept spending caps. andrew, this deal will have to be in the house basically with 100 republicans and 100 democrats and in the senate, it is 30 republicans and 30 democrats or something that looks like that. that is just very difficult because biden will withneed to e the argument here that it is not worth it for the political prospects to default or drag out the negotiations with the republicans. we have to see if he can make that argument. i would not be surprised to see him on capitol hill next week. >> jake, let's say the president is back on sunday and they get a deal in theory and they have to go to the hill and work it >> yup >> how much anchoring goes on sunday and monday over the ultimate get and is there a couple chess pieces available for members of the house to send it to negotiate? >> no, on the latter point,

absolutely not when the deal is done, it is done they will not change one letter in it. the challenge, andrew, from the practical point is mccarthy promised every republican he will give 72 hours to read the bill let's say tuesday and we are in the memorial day weekend for the vote there is not any changing of the bill this is a moment where political leaders say please stick with me we cannot have a default it is in no one's interest. i would not be surprised if it goes saturday and sunday next week and the senate takes a long time to do anything. we are butting up against the june 1st deadline. >> jake, nice to see you >> likewise. >> you bring us the news we'll read the newsleetter thank you. >> thank you, andrew when we come back, retail's time problem

shrink from inventory from threat is a bigger issue for the industry is there a bigger solution on the horizon? as we head to break, check out the big box retailers after the week of earnings target, walmart and kohl's and lowe's and home depot up this morning. "squawk box" will be right back. >> announcer: this cnbc program is sponsored by truist wealth. where meaningful relationships matter most. billy idol? i mean where's the skin-tight leather? my shoes are leather. where's the unnecessary zippers? that thing! billy, rock star is just how doug feels when he uses workday. thanks, rory. i'll show you rock star! be a finance and hr rock star. workday. for a changing world. billy idol just stole your golf cart! for a changing world. girls... the chess club has gained an edge on our bake sales.

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inventory because of shoplifting and organized theft. courtney reagan joins us with more court, this is a serious issue which has been happening a long time you spoke about home depot >> exactly target spoke out home depot has noted a material hit from organized retail crime since 2019 cfo told mae shrink from theft s a big deal it is an issue that is bigger than the retail industry theft related crshrink is called out by dick's and ross as well as walmart stores. orc has increased with the

biggest increase in pennsylvania, maryland and delaware and california and an alaska and washington and mississippi. eric adams in new york said it was up 44% from the year prior the survey estimates the shrink was $3.76 billion more in 2021 than 2020 with 37% of shrink linked to organized retail crime. why is this happening? online marketplace and social media and peer-to-peer apps are harder to police thieves create online accounts quickly. further, orc rings instruct criminals to steal below the threshold of $1,000 and $1,500 in many states retailers often instruct

employees not to intervene for safety purposes. a home depot employee in california confronted a thief in april and was killed as a result 81% of retailers report somewhat or much violence associated with orc these days the inform act goes into effect on june 27th it requires to collect high volume marketplace seller information. theft lowers tax revenue and raise prices for honest shoppers 60 60% of consumers noticed more items locked up. it is a delicate balance to not make it a pain for everybody shopping honestly. >> it is a societal problem. we see it here in times square from stores that are gone. we were talking to someone this had morning. a store by her and they are locking up ice cream

people are walking out with that there are so many levels to this let's focus on the online stuff you talked about the idea that they will have to catalog high vollmer -- volume merchants will they say amazon is responsible for anything sold or stolen on its platform is there something to say facebook marketplace is responsible for it if they were stolen in the store front, that store would be responsibility >> this is a game of whack-a-mole game. this peer-to-peer. >> this is the technology at large. i was going to point out porno

pornography. it is not go to be stopped >> i can imagine this escalates to the level where this is something else we're talking about with free speech. >> the more amazing fact is it is not just they are saying somebody is selling here and i can't police it. they are profiting off every bit stolen >> they are. the way the marketplace sellers work is they pay for a fee to list the item. may not get a percentage of the sale to be honest, consumers are responsible. if you are buying toothpaste that is $2 cheaper from the marketplace seller than walmart first party owned. there is no way the smaller seller can get toothpaste at a cheaper price. we also all need to be aware when we buy online. >> i hadn't thought of that point of it. >> right >> good point. >> wow a lot to think about.

coming up, more fed speak adding fuel to the debate and more comments which are expected today and comments from jay powell we will breakdown what it could mean for thearts mke and the next fed meeting "squawk box" is coming back. >> announcer: executive edge is sponsored by at&t business at&t 5g is fast, reliable and secure but seriously we need a reliable way to help keep everyone connected from wherever we go. well at at&t we'll help you find the right wireless plan for you. so, you can stay connected to all your drivers and stores on america's most reliable 5g network. that sounds just paw-fect. terrier-iffic i labra-dore you round of a-paws at&t 5g is fast, reliable and secure for your business.

welcome back to "squawk box. the round of fed speak firing the talk of debate of cut or hike there is more comments expected today. steve liesman joins us now with all of it. steve, throw the debt ceiling debate into the mix. >> i'll leave that to the end. right now, andrew, the story is the pause could be in peril. the historic rate hike and some feds not sure and suggest they may not be done yet. dallas fed president lorrie

logan showing it could skip a meeting. we are not there yesterday and slower disinflation may want taking out insurance by raising rates more and fed governor phil jefferson is one we are watching closely he is nominated to be board president. among the things he said yesterday, we have not made sufficient progress on inflation. he also noted like logan the declines in inflation had slowed something to watch he went on to say a year is not a long enough period to feel the effect of higher interest rates. and another factor is uncertainty of tighter lending standards. an important part of the hawkish tone is the fed speak is more benign outlook on the banking

turmoil. f bullard said the decline was more important to the outlook and the tightening of bank lending standards. more fed speak today john williams speaks at 8:45 jay powell will sit down with former chair ben bernancke at 11:00 a.m. the possibility of another hike in june is taken seriously and the probability is trading at 40% of futures trading double where it was yesterday. i'll toss it back to becky the debt ceiling and all bets are off if we get a default, becky. >> you have to wonder how much of this is we're back on the potential for raising rates because of the chaos in the banking system seems to have quieted down a little bit. maybe we're on a week by week basis to see how hot some issues are and how cool some others

are. steve, stay with us. we'll talk more about this for more on the fed rate hike path, let's bring in greg. the wall street journal economics commentator and editor greg, you had a great piece early this week or last week it made me think about things differently. the idea this 4% to 5% inflation is lower inflation is getting engrained and consumers are getting used to it and companies can keep or raise. how does that worry you? >> the fact companies can raise prices without losing sales says they are not getting resistance from consumers consumers are feeling flush with wages going up and job growth is strong number two, i think there is an element of them getting used to it

if they were used to 2% inflation and the supermarket raised prices on them, they would say whoa i'll shop iaround that is not happening. going over the fed speak that steve was just referring to, the hawks and the doves agree that inflation is too high right now and it seems to have stalled out. we went from 9% to 5% on headline inflation rate. now we're stuck there. the core inflation rate is, you know, moving along at 4% to 5% not much evidence it is moving down the only thing that sets the hawks and doves apart is the doves say wait a couple of months and it will cool down the economy. the hawks are saying i don't think so both agree they are not seeing progress on inflation they hoped. >> steve, what do you think about that we are complacent to inflation which is higher than the fed

target at least double or maybe 150 times that. >> and i'm trying to imaginesci, but cultural the best to read about this is tom barkin who talked about the inflation run we are having now, the culture inside companies was one of you wouldn't raise prices the supplier would call and say i have to charge you more. the guy would say, you know, go back and sharpen your pencil and find a different price lower now the way i begin inflation speeches is the most important element, becky, is the cat is out of the bag cultural notion of the ability of companies to raise prices is now dramatically different from what it was. what i worry about and what the fed listening to greg, i think fed officials freak out with what greg is saying i got good news for you.

the price increase this year is not going to be 10%, it's going to be 5% if that 5% is engrained and a salve to the purchaser, it gets in trouble and losing the price target. >> greg, what are they likely to do at the meeting in june? >> i think pause is still the likely path forward. most of the cost leaders have been saying and i heard what jay powell said and what john williams said in the recent speech we will update those views once we hear from both of those folks later today. it is interesting as steve was saying the probability is shifting in the market there i do think that reflects the tone of the fed talk and flow of the data which is not friendly look at the numbers on jobless claims the rise in claims is the evidence of the labor market cooling off. it reversed in the last week

everybody seems to agree that a cooler labor market is a pre-requisite to getting core inflation down. >> if there is a problem in the banking sector that pops back up and makybe that changes their mind and the debt ceiling would change their minds does this other data weigh on them heavily >> for sure it does. i think the key here -- first of all, greg is right about the job market not going the fed's way i'm looking at second quarter growth forecast. you had jefferson saying he expects the second quarter to be below the first quarter. i have forecasters showing the acceleration from the first quarter. that is an issue i think another issue that is interesting out there is the idea that bullard has. you have the tightening credit standards on one hand. on the other hand, yields are lower as a variety of things

to him, that is more consequential for the economy. what we might be hearing in the hawkish rhetoric is the fed leaning against what the market has done with rates. >> greg, steve, thank you both >> all right thank you. coming up, we will talk about disney scrapping plans for the florida campus amid tension with governor desantis the latest from the sunshine atand debate it all. we'll be right back after this

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( ♪♪ ) ( ♪♪ ) ( ♪♪ ) constant contact delivers the marketing tools your small business needs to keep up, excel, and grow. constant contact. helping the small stand tall. sam zell, friend of "squawk box" has passed away he made a fortune buying distressed properties. today, the industry is worth $4 trillion zell was blunt and once called himself the grave digger that was a nickname that actually stuck

he is a very special guy we talked about his contrarian approach to finding opportunities and he spoke his mind at all times. even on camera let's look back at some of his appearances on the show. >> you are really, really liquid >> yes, that's why i think the stock market can't go down it only goes down when i'm liquid >> as the grave dancer, which was your old -- >> opportunistic >> imagine a good motorcycle trip and how few miles you go straight you don't want traffic you want pretty views. you want turns and twists and turns all day long if you are going to go on a motorcycle trip for a week, you want a consideration of where are the police less likely to give you a ticket. >> i like how you think, sam >> he's got it down.

>> people ask on real estate, what market are you buying i don't buy a market i buy a deal. >> sam, it has been a pleasure we appreciate it come back soon. >> what about a side car on the motorcycle i want to get the hell out of new york city. can i ride >> i don't know if i have enough sanitizing to do that. >> it is good having you here. >> thank you >> i was thinking about how long you have bb een coming on the show you spanned a lot of administrations. must be 20 years >> i remember when joe kernen was a young guy. >> very funny. you look the same the entire time, somehow. that's good and bad, sam i'm kidding. >> the only thing that really matters is growth and what the united states needs to do is encourage growth and that's how we also solve the inequality

problem. >> unfortunately, i'm almost 80 years old. i watched repetitive examples of unbridled optimism followed by unbridled pessimism and balance back to the center >> he will be missed our thoughts go out to zell's wife, helen and his family sam zell was 81 years old. >> sam, it has been wonderful having you on set. next time you're here, would you stay for an hour or two? we never get enough time. >> it's a deal. >> sam zell we'll see you soon

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governor ron desantis. disney ditching its plan dibble office complex. it will cost 2000 jobs. the theme spark -- to leadership and business environment. a spokesperson for governor desantis downplayed the news. the fight continues. joining us now is the founding partner in a newsweek editor. how much of this was a decision made as governor desantis says about the economics of what was going on inside disney and the fact that it might've been thing to begin with and how much of this was, let's stick it in the eye of desantis and see if it changes the dynamic in florida a little bit. >> i think it is a little bit of both. there is no doubt that disney is

in cost cut firesale mode. they are taking shows off of disney+ and hulu to save money and laying off 7000 people. while the move of this division would have save money in the long term, there were a lot of cost associated with it. i think they like the opportunity to poke desantis in the eye a little bit and say, listen, if you're going to battle is, you are going to lose these high-paying jobs. we will just take them out of your state. >> but the thing is, he will be governor for a while at this point. how much of this is about trying to poke him in the eye in terms of a presidential run? >> absolutely. this is a war. desantis declared war on disney and bob iger believe this is the battle he could win. he's doing in the courts and on the ground in florida. and he is doing it, i think in

the hearts of mines of his own employees. they like that he is standing up for the disney values against a florida politician that has made disney a punching bag in his own political ambitions. i think it is hurting desantis. >> i would think it would hurt desantis, but we were talking about, maybe it doesn't. this is what his base wants. what do you think? >> i think this is a lose/lose for desantis. iger is looking tougher than he is and when you are ron desantis are trying to show that you are tougher than donald trump, that is not a good look. the only way out of this now, i think, is to cave and that is a worse look. i think when you are trying to run to the right of donald trump, you are alienating the

corporate republican donor class and alienating independent women and you are arguing that you are more electable than trump is. but you have some general election on electability issues you are presenting here. this is not a good stance for ron desantis. but i agree with matt, disney has a real cash flow issue. they did a cash flow study and almost all of their free cash is coming from the parks. they've got to do something and this is a two for four iger. he saves cash and is fixing desantis. >> matt, in terms of additional chess pieces, that disney has and bob iger has in the fight with desantis, what are they? it sounds like they have committed to still build and

invest another $10 billion in the state of florida. could i pull that back? >> they can do little things, but the fact of the matter is, iger's hands are tied in respect to the parks themselves. disney is not getting out of florida. this movement to recruit disney to another state is not happening. the florida parks are the profit engine for this company right now. they are not going to get out, but there are things i can do with employees moving there and they can move conferences out of the state, and iger is already inviting and lgbtq conference to take place at disney world. things that highlight the division there. and, you know, maybe it works for desantis in the short term where he can appeal to highly conservative republicans in his faith like iowa and new hampshire, to win the nomination, i go to the right

of trump, but long-term, i don't think it works. but disney doesn't have that many things they can do outside of what they are already doing. >> tom, espn, streaming, that's the news. now, i think we have moved back a little bit, unfortunately, but what do you think? can this work? >> well, i think the news that they are actively looking at bringing the espn channel into the streaming world is isn't -- is a big news. eiger said they are facing a precipice and it is nearing but it is not imminent. there are 75 million cable satellites up still but there are 55 million homes that don't get traditional tv anymore. only get streaming. so, as those numbers pile up on the streaming site, nd the cable satellite growth declines,

they've got to figure out how to bring espn into that world, but right now, the cable model is so much better, they can't afford to move over and collapse the entire cable/satellite bundle. espn moving to streaming is what most people think will be the death of the cable bundle. >> thank you, guys. appreciate it very much. when we come back, stocked on the move this morning, plus, taking work on home -- we will tackle both sides of the issue when squawk box returns.

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♪ you find your new favorite color. ♪ ♪ and kyle helps find meds for under 10 dollars. ♪ whoever you are, wherever, whenever, at cvs, healthier happens together. good morning. we are live at the nasdaq market site on this friday morning. joe is off. take a look at futures this hour.

the nasdaq is up nine points and the s&p is up about seven points. treasuries, as we think about that debt default, and what that might mean, 3.648, and 4.251. we are watching short-term treasuries again this morning. right now, one month t-bill, 5.151 three is a yield. we want to get to a look at the market movers. let's start with the big earnings news of the morning. the farming construction equipment maker is up right now. around 7000 shares are trading after it reported better-than- expected profits and revenues raised its forecast thanks in part to continued strong demand for heavy machinery. the ceo says while supply-chain issues are present and exist,

they are seeing signs of improvement. deere saw gains in each of its key operating divisions. those shares are getting a nice bid. we are watching shares of disney, which are also down. the entertainment giant is looking to sell its espn programs to streaming. also, disney is canceling plans for a facility in florida and relocation plans for 2000 employees to that facility and what appears to be the latest salvo in the battle with the florida governor. desantis is expected to be a possible presidential candidate in the coming election cycle. disney is also getting downgraded to neutral. citing near-term uncertainties, valuation sentiments and those

shares are down three quarters of 1%. dell, training right now, and the company is getting added to the technical outperform list by analyst and they are looking to what they think will be a positive earning reports on june 1st. socks are on the move. by the way, i went to lake a look at shares of foot locker which are tumbling after they reported a miss. the revenue was also shy of expectations. store sales were down for the quarter and that sneaker retailer is cutting its earning guidance for the full year. the ceo of the company who is a superstar at all to beauty, has said since march, their sales have softened meaningfully --

it cause them to reduce their guidance for the year as they take more aggressive markdowns. she says they will be sticking with their long-term strategy including making investments to drive their plans and maintaining conviction in their ability to execute. you can see the reaction in the stock. the stock is up by 21%, a drop of $8.82 to $32.70. we are talking to the chief investment strategist and the managing director at rockefeller capital management. michael, let's start with you, because you say when you are looking at things right now, you think stocks are poised to break out on the upside. what makes you think that? >> there has been such a

resiliency on stocks with the overhang and banking crisis, i think earnings are coming in fairly strong. most companies are beating earnings for the first quarter of the year and into the second quarter. when things have finally settled down, post-covid, some of the companies are trying to figure out, okay. which employees do we keep and which ones do we not keep. and they have a positive job market and i think as long as there is no crazy more banking crises that hits stronger than we've already had, who would have thought that since 2008, we would even say this again in our future, but i think there is a resiliency to the markets. earnings continue to grow and it will beactive management

over passive management. i think we have a resiliency that will stay strong. >> there are questions, marianne, about the strength of the economy. they did see a slowdown in april that continued into may. and there are questions about what the fed will do next. what are you thinking overall about the economy? >> we had signs that pockets of the economy are weak and parts of the economy are strong. obviously, the consumer has been the strongest part, but we are getting signs that there will be a little bit of slowdown in consumer spending. for the next few quarters, the economy can do pretty well. as michael mentioned, earnings were not a disaster. they came in much better than the market was anticipating. and we are starting to see some positive movements within the market. i agree with michael. i think the likelihood is we will break to the upside, not necessarily because the fundamentals are strong, but everyone is positioned so negatively that there is really

on one direction or the markets to go and that is higher. >> one question, marianne. do you think we have seen the worst of inflation? we just had a conversation earlier and we were wondering what the fed would do next. even at 4 1/2, 5%, it is still stronger than the fed would like to see. what happens? do you think they raise rates at the next meeting and if they do with that worry you about the market's reaction? >> you are correct. we are in the belief that inflation has peaked, but it can be a zigzag. it can go down and we are seeing more numbers a little bit elevated. i think the fed would like to say kind of like on a whole, but they left the window open that if data continues to come in a little bit hotter than they like, they will have the

ability to raise, but i think they will try to pause and if we can get past the debt ceiling, and not have hot inflation numbers, that will allow the market to break to the upside. >> michael, if you are thinking the market breaks down but it will be a stock pickers market, what do you think people should be focused on? >> i think you have to look for the value in each arena. there is oil, energy, banking and some value in that. so as a whole, you can find value in a lot of the sectors, but to see the inflation starting to slow down, the market usually precedes the economy by six to nine months and i think toward the end of the year , you might see rake cuts and it seems as though we've gotten inflation under control. now, if there is like -- >> why do you think we will see rake cuts by the end of this

year? the market, obviously, has a bias built into it but that is not the case from any of the fed speakers we've spoken to. we're just trying to figure out where the disconnect lies. >> before we came on, you mentioned that the treasury rates, and that rates are at an inverted yield curve, i think part of that will be natural market moving, but it is also you raise rates so fast so far, there is an element that has to go back to the mean and to see, it's nice to see yields on bonds because we have not seen that in seven to 10 years. so people are -- but it is a short-term portion of the bonds that are outperforming. you just it river back and i think that, plus the fed, we have to do something to at least stimulate the economy

towards the end of the year. >> because you think the economy will fall that i don't think it deep recession. it usually reverts back and look at the yields right now. i mean, that's a massive change. it has to revert back >> how much do you think that is from the debt ceiling? one has come up significantly over the left two days. >> people don't like certainty and that is what is going on in the markets right now, but at the same time, there is always something geopolitically that effects the market short term but, again, we are all making the assumption that our government can figure this out with the debt ceiling. and revert back to focusing on where the earnings and clients should be investing their

money. >> michael, 43, thank you both. coming up, we heard from some retailers including walmart, target, and home depo . next week, we will hear from more. we have a lot on tap. we will break it down and what to expect and then, work from home back once again. it is a hot topic after elon musk says it is morally wrong, that's what he said, and we will debate both sides of that argument. "squawk box" will be back after this. welcome to our third bark-ery. oh, i can tell business is going through the “woof”. but seriously we need a reliable way to help keep everyone connected from wherever we go. well at at&t we'll help you find the right wireless plan for you. so, you can stay connected to all your drivers and stores on america's most reliable 5g network. that sounds just paw-fect.

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some of the biggest bellwethers in retail outlets earning this week's. walmart raising its forecast and targeting issues with in store theft and home depot posting its biggest revenue miss in more than 20 years. joining us now is the ceo of -- we want to talk about all the things, but can i get your thoughts on foot locker right now? they just came out with earnings much weaker than expected and seeing weakness and take a lot of discount to try and clear out inventory.

the stock is down by about 19%. >> that was a real beating and they also mentioned the fact. but, it's hard to be -- my guess is they will get it straightened out and they will get on the right track and they will see a come back. right now, they are one of the few retailers that are having a continuing problem with inventory. that's a big thing to get fixed and that whole segment of the marketplace and shoes, athletic shoes, i have been disjointed from the point of view of nike selling directly to the consumer. that's all being worked out and we will know a lot more about that as we go through this year. clearly, a disappointing report, but not too surprising since you have a brand-new management taking over. so, i have high hopes for foot locker, but this was a

terrible report. >> what did you think of the grouping of all of the retailers we have heard from? >> it tells you, you don't want to be selling electronics or home goods. but if you're selling something else, where inflation is over and that is most of the goods, if you're selling accessories, inflation is pretty much gone away and your problems with supply have gone away. the cost of bringing freight in is pretty much gone away. so, it looks like a pretty good time from the point of view of approaching the consumer with a price they are willing to pay. the problem is, the suit -- want to buy a seat on a plane or be a resort, they are not buying the goods or the consumer looks relatively healthy still but unemployment is really low and wages are still actually rising and the grocery store inflation, if it's going to fall in low digits, and it looks like it

could, the consumer is going to be reasonably healthy unless somebody stops them from having a job. so far that hasn't happened. it is surprisingly strong with the consumer and, yes, they are drawing down that excess money they had in their savings accounts, it used to be about $3 trillion and now close in $1 trillion. we think they will run out sometime near the holiday season which is scary, but they have the ability to borrow on their card and their ability to pay back is as good as it is in normal times. strangely enough, it looks healthy and spending, they are just the buying goods at the level they were because they are more interested in experiences and travel. >> let's play that out into the broader fed discussion we have been having. whether they will raise interest rates against. if the job market is strong and inflation is coming down, what would you do knowing what you

know having worked in the industry for decades? >> will, i look at this from a point of a retailer. this recession has been six months away for 18 months now. it still looks like it is six months away if you look at the consumer. most of the problem in our economy is consumer led. the consumer is continuing to spend. we have not scared them off. i don't see how -- and they just keep rising and inflation has come down to where the wages are. it now seems very, very tough to me to get the inflation to come down further than where it is unless something happens with the job market. right now, i don't see that. we have very strong jobs and we saw again in the last report. right now, we have a consumer who is getting raises, reaching the level of inflation and they've settled in and i don't see how we will change that

consumer unless the fed keeps raising rates. i don't want to see jobs go away, but you don't have inflation go away or recession said it when you have 3.4 percent unemployment. you have to have 6%. how do we ever get to that? >> finally, let's talk about the retail theft leakage that target called out this week, it's an issue that retailers everywhere are dealing with. what is the solution? how do you fix this? >> well, we have to quit -- obviously, if we were -- there are people out there now selling stolen goods online every day. somebody has to shut that down. the other thing that has to happen is there has to be some sort of enforcement of theft out of the stores and there isn't any right now. the stores aren't stopping it and local government and stopping it. actually, the

rules on that have gotten worse. you can still a lot more right now without being prosecuted. so, the criminals know that and they are taking advantage of it, and theft is rising at a rate we've never seen before. we've always had the problem. there has always been a death problem and we always had organized death from our stores and off the docks, but it's never been at this level and nobody knows how to put the brakes on her now because it is so easy to sell the goods once had been stolen. >> one quick question. what would you do if you were king for the day in terms of dealing with these items, maybe -- how would you hold amazon accountable if that is who you wanted to hold accountable? whatever marketplace you think the stolen goods are being marketed on. >> we don't have rules to handle that right now. someone would have to come in and say, you have some sort of

verification process on the goods? you don't see macy's selling stolen goods out of their stores. it's never happened and it's never going to happen because they are authenticating everything that comes into the store. we don't do that on the online businesses. how you would do that, i don't know, but until you can do that, there is no reason for someone who steals the goods not to sell them in a broad market. they are getting very good prices for it. when you had to sell in the back alley, it was hard to get a good price, but now you can sell it online and have the same profits as the retailer. >> thank you. we will talk to you again soon. >> thank you. enter coming up, the debate over working from home and if it is a moral life. trust that we will take a look at futures on this friday morning. back after this.

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now the answer to today's athletic trivia question. what year was the one-bar face mask banned in the nfl? the answer, 2004. a grandfather clause in the new rule allow players who wore the mask prior to 2004 to do so for the remainder of their careers. punter scott darwin player what the last player to where the face mask. you -- people working from home here? of course not. building cars, fixing houses, making food, making all the things that people consume, it's messed up to assume that they have to go to work, but you don't. it's not just -- i think it's

morally wrong . >> that was elon musk telling cnbc this month that work is returning to the office is a moral issue. this comes as tennessee senator marsha blackburn introduced a measure that would require federal workers to revert to prepandemic policies. is remote work in the ethical dilemma? >> first of all, happy friday. but, no, it is not morally wrong. my favorite thing about this is elon musk, the richest man in the world, is making an inequality argument. i'm just saying, if we are drawing up a list of morally questionable privileges, remote work for working moms, not at all.

-- or billionaires who by a social media company and refuse to pay money that those vendor . what office workers are pushing for is flexibility that saves them precious time and in his case, flexibility means taking a private jet and sleeping at the office and restaurant workers can't do that, but still, like stability isn't wrong. >> couldn't that inconvenience their employee? local businesses? everybody else relies on it? >> on the other hand, there are real moral problems with this work from home push. let's take elon musk out of it. look at what is best for teams, businesses, and communities. research from harvard business school shows that there are divides opening up. job posting allowing one or

more days a week of remote work are most common in san francisco, austin, and new york. miami and cities in the south are almost back to prepandemic working. then there is culture. automotive, half of honda engineering jobs offer options in tesla, not so much. what is a likely impact? in san francisco, nearly $1 billion to come out of the budget over the next six years from lost tax revenue from vacant offices according to a city economists. small businesses are getting to the truth of $3500 per year per remote worker that they are not spending near the office. young workers also get less benefit from shared knowledge and it is selfish. like elon said, wrong. >> lesko on this. we have been talking about this for a couple days. i will give you the morally wrong argument, but it's also

infusing the other side of it where you say you have to come in because the communities rely on it. what about the people working and going to starbucks in their own community? a lot of the reason a lot of people don't want to come back because it is hard to get downtown i can take hours to do it and when you get here, it is not that nice. if you want people to come back, make it nicer and so people feel safe. >> that is true. what are cities for? should the working class have to move closer to the more privileged class in order to do the services, or do densely populated -- >> that's a practical issue. that is a genuine crack -- genuine practical issue. i don't know if it is a moral issue. i live in new york city and pay taxes.

i have not fled to florida or austin, texas. so you can decide whether these are moral issues or practical issues. >> maybe the suburbs themselves are immoral. >> all i'm saying is, is is actually a morality question? i think you raise it in the first part of your section. everybody gets paid differently. some people fly in the middle seat and other people fly in a private plane and others fly in their own plane. people are treated beautifully and is that moral? >> but i will give you both. take the moral question out of both of them. moral is silly, but i think it is a moral argument that says everyone has to come into the city to support it. what bothers me is a strategy

that you think, hey. i don't have to come in and its prerogative to work from home. no, it is your employer's prerogative. if you want to deal with your employee, go to it, but it's a deal that has to be cut. >> then it goes to the question of taxes. we have talked for a long time about the morality of taxes and the question of where fact -- fair taxes are. how you support a city and country. how you support the services behind the country. >> one of the most compelling arguments is younger workers could learn from make and more experienced workers who they themselves individually can be very productive at home, but will not teach anybody. >> that's an agreement you cut with your employer. >> i will give you the moral argument. you could say that the more

senior person has a moral responsibility to train the next generation. i can't get behind that, by the way. >> by the way, it is ultimately up to your employer. if you are a smart employer and there is a talented person who needs the flexibility, you cut the deal with them. >> people who come in and train the next generation, should they get paid more? just for coming in? >> i think you should get paid more to come in because there is a cost on top of that. >> teachers should get paid more. i think it's gross that they don't get paid more, but here we are and this is what is happening. it's a market-based economy and i think we have a lot of questions to ask >> and you can meet this argument in the newsletter. let's put up the qr codes. or you can just type in

cnbc.com/otoh. you can weigh in as we have been here and let me know what side you agree with more. here are some interesting results from last week. 60% said it would kill and 40 percent said it would create. >> what did the robot say? >> it probably tweaked the pole in the background. >> thank you. still to come, chris kelly will join us to talk about tiktok and montana's ban of the act. stay tuned, you are watching "squawk box." . this is cnbc .

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the governor of montana signing a bill banning tiktok, the first date to block the app and likely face numerous legal challenges. chris kelly, founder of kelly investments,, we want to thank you for joining us. is this a workable situation? this is really the first time we have had a specific app being banned in a state and

people talk about splinter for a long time. now were talking about states taking positions on particular apps. part of this will be a first amendment thing and part will be in national security thing. i don't know if there could be a state security thing. >> there are real national security consider and that is why tiktok has been banned on government devices for quite some time. individual states have taken steps to do it on state devices and the question of whether a u.s. state can step forward and ban it on personal devices is one that will be in the courts very soon. but it doesn't look very good for the state at this point in terms of how it might prevail against the first amendment challenges that also against a clause that says this is something only the federal government can do. then the question with the federal government is will it

be constrained by the first amendment? tram banning it on military devices is something that is well within the power of the u.s. government to do. for them to bennett on state devices is something well in their power and for them to step over and ban it on personal devices is another step forward that probably won't meet with success. >> speak to the brought implication of this. if something like this were to be allowed and take place, would we have splinter net happening all over the country? >> exactly. if governor desantis wants to ban the disney app, that will face a constitutional challenge, and this is the same situation. obviously, i think it is a serious national security concern that the chinese government and communist party

can have access to u.s. data very easily. the company is out there saying they got project taxes and they are trying to protect from that happening, but that's not a real power. >> can we drill down on this for two seconds? this is my phone. what would you be worried about? for me personally and for the country, the fact that i have this on this phone? >> i don't want to comment on dance moves you may have or not, -- >> i have it for that reason. it's too embarrassing. >> it is a -- the possibility of where you are , conversations you may have, if there is access to other material. google and apple and the device manufacturers and their app stores are trying to protect

against leakage from data around it. >> you don't believe this is picking up stuff on the microphone, do you? >> i don't at this point. there are protections against it, but those can be circumvented in a number of ways and tiktok has been accused of having a browser as part of the app that captures keystrokes. >> let's talk about project texas for a moment. so it would be physically located here in the united states, but you don't think that's doable and truth because? >> it is doable in truth, but whether there is corporate authority from the chinese side to still order somebody, a u.s. employee, who might be separated and part of project taxes to provide the data. the fact that it exists in the parent company may still have some control over it, continues

to be a realistic worry. >> an employee would download some piece of data and then send send it to china? >> we have real infiltration of technology companies and a variety of other attempts from a variety of other countries. it is one of the things we have to take seriously in this digital age. but to extend that to allowing a state to ban an app for all citizens and its jurisdiction is something that the u.s. constitution most likely won't allow. >> chris, i want to thank you for joining us this morning. it is a fascinating debate and interesting case. we will see where it had and we will talk to you about it again very soon. have a great weekend. >> you too. coming up, our worries about the regional banks subsiding. the breakdown of this week's hearings. qu> we will talk technicals.

"sawk box" will be right back.

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tumbling after a big earnings miss. revenue came in at 1.93 billion which was shy of projections. the sneaker retailer is also cutting earnings guidance talking about the weakness i have seen from consumers. if you take a look at some of the other athletic apparel retailers, all of them are down. the ceo of foot locker will be on "squawk on the street"

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-- the fed, his employees, the board, social media, --

>> it's hard to believe that they needed a road map from the regulators to find the obvious problems that needed to be fixed and worked. >> buckle up fixed but weren't. >> but buckle up that road where the map is leading is about to get bumpier for some banks regulators pledged ways they could beef up their own authority. the fed chair said they should evaluate everything from regional banks' capital requirements, interest rate and liquidity risk and called for more oversight of banking compensation it was noted the banks system evolved in ways thanks to social media and mobile banking legislation would require an act

of congress to change. any moral hazard that arises from deposit insurance can be combatted by supervision from regulators, guys >> thank you, leslie here with more on the bank hearing is fresh off her open testimony between the house and senate adrian harris is here, superintendent of the new york state department of financial services good morning to you. >> good morning. >> do you think there's a way to prevent these runs in the future is this about guaranteeing deposits or something else >> i think it's about a lot, whether it's modernizing deposit insurance. there's a lot on the table >> but is there something you think will be effective? i think we all immediately go to deposit insurance. if every deposit was insured, nobody would want or have a reason to ever, you know, leave the bank but then you start to think to

yourself if you were cfo of a company or treasurer of your company and you saw the stock tanking, you might say i'm going to move the money anyway and then what do you do? >> first it's important to understand that the banking system is safe and sound and resilient. the government's taken great steps to make sure that's through but they've put forward important proposals and it will be incumbent upon federal regulators and lawmakers to make the proper changes >> i would say the idea of insuring all deposits in some way is a bad moral hazard. you're basically telling the companies like silicon valley bank that their executives did the right things, which they didn't they were reckless and weren't watching what was happening and not paying attention >> that's the discussion, separating the accountability of executives and finding ways to protect consumers and small businesses at these banks.

>> is it possible we could argue that the banking model is fundamentally broken, that the d digitization has fundamentally changed the business there was a time you'd have to go around and wait to see the teller or at least call somebody and now you have $42 billion leave the bank in the course of two hours. there's no way to insure those deposits in any meaningful way and the mismatch of having deposits that can leave on any given day and loans that are going to go out for five, ten, 15 years and longer, that that just doesn't actually work >> i think that's why regulators are revisiting the liquidity models, the assumptions we use to model that liquidity to manage the runs that are now -- >> if that's the case, the economic impact is huge. the idea that you would have to reduce the amount of credit.

in the world you're talking about or the world i'm even mentioning, you're saying maybe leave all the deposits in one place so they're available at any given time if that's the case, it's terrible for the economy >> we have to make sure that small businesses can continue to get loans at marginalized populations. >> how do you do that? >> you have to preserve the diversity of banks and make sure the regulations are tailored -- >> do you? it's sacrilegious to say this idea of community banks nobody wants to undo. is there an argument that having six, seven, eight banks in this country might be better than having several thousand banks? i ask and then figure out a way to incentivize those large banks to loan money and participate in communities they might not otherwise? >> i think the diversity across the banking system is important. you have banks that understand

their individual communities and the businesses they serve and it contributes to making this the best banking system in the world. >> you think about the reason people are sometimes banking at those institutions it's because they're offering rates that the big banks won't. >> you hear from small businesses and students who bank at their credit unions that those institutions really understand them, they understand their needs, they understand their businesses and the local markets. >> that's because they're there right now. >> they're there and they're on the ground >> i guess i'm asking if you had seven or eight big banks -- i'm not arguing you with this. there is a completely fractured inefficient market and a market, frankly, to regulate properly. >> that's part of the duty of the dual regulatory system >> that has never covered

themselves in glory. do you disagree with that? >> no, i think the system works very well. w we've seen how resilient it is in this crisis so i this it actually proves the model. >> thanks for coming in this morning. >> thanks for having me. >> when we come back, katie stockton and what needs to be done to get a deal done in congress before the end date "squawk box" will be right back.

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that's decision tech. only from fidelity. good morning futures in the green ahead of the opening bell the s&p has steadily broke gains this week, on pace for its best week since march and a standoff in washington what's still standing the way of a deal and china thinks it has an answer to chatgpt but does it measure up that and more as the final hour of "squawk box" begins right

now. good morning welcome back to "squawk box" right here on cnbc we're live from the nasdaq market site in times square. i'm becky quick along with andrew ross sorkin joe is out today it's friday. everybody's feeling pretty good about things, including people in the markets if you check out u.s. equity futures, you'll see some green arrows it looks like the dow futures are up by triple digits, s&p up by 12. yesterday the nasdaq saw their highest closes since august of last year. that's some pretty significant progress that has taken place. in the treasury market, the 10-year is yielding higher at 3.665%, the 2 year is at 4.272%.

foot locker getting slammed. they missed street estimates on top and bottom lines same-store sales fell. down 25% this morning. shares of other sportswear players getting hit on the foot locker results nike off 2.5%s are underarmor off by close to 2.5% the company will appear later this morning catch that interview on the upswuning is deere it raised its for for the rest of the year. and berkshire hathaway adding to its stake in occidental petroleum. it now owns 24.4% of occidental.

warren buffett said he doesn't want to own the entire company outright we're now just about 90 minutes to the opening bell on wall street i want to check in with mike santoli. happy friday >> you as well, andrew premarket moves could push the s&p 500 above this 4200 level, which i think people have been using at the top end of the expected range it has been the top of the range. august of 4300 since then we've had some pretty constructive action, the succession of higher lows off of the october base, a lot of people scrutinizing and criticizing how they've gotten here this week, relaxation of the debt ceiling concerns. some of the stocks and cyclicals have bounced take a look at the nasdaq 100. this goes back almost 3 years

here and it shows you capturing the whole upswing into the peak of november 2021 it went from roughly 10,000 to 16-6 and that's a way of thinking about what this move has been since october it has broken out of its own august highs, whether it has been mostly a rebound move and accelerated by some of the a.i. excitement running through a handful of stocks and it has recaptured half of what was lost last year. is that enough or are we just seeing one of these very strong snap-back rallies? remember last year the story was it's all about bond yields going higher i've always said not really. that was definitely happening but it's not the only story. the etf was tracking the nasdaq

100 and now the nasdaq has diverged some people are going to say we're going to wake up and notice bond yields are higher. earnings estimates have base and that's a duifferent part of the story. if you took this back five years, it's not exactly as well linked as it was last year so something to watch as we get into the next week in the fed. >> mike santoli, thank you, sir. >> and we want to bring in katie stockton, founder and managing partner of fairley strategies. you say the 415 r5 range.

>> it's super important for any breakouts to wait for confirmation we like to see with a major level like this 4155, which has been in play for several weeks now, we'd like to see a couple of weekly closes above if we see a close above today, which seems likely and then also next friday, that would be confirmation the market is in a better position to do that than it was in late april when we saw one close above but failed to confirm. that failed confirmation usually is a setback we want to make sure that we wait for confirmation. it was somewhat of an emotionally charged environment at this time because of that, it's somewhat prone to these kind of false breakouts. i would argue the nasdaq 100 index seems a bit unsustainable. so i don't think folks should feel bad about waiting that extra week i think we'll see consolidation short term even if we do get those confirmed breakouts, which we would see as bullish

longer-term developments >> and you would then say that's a buy signal because the next level is what? >> the breakouts, they do tend to be actionable it doesn't mean you have to buy right away us usually we like to wait for that first pullback the next levels are only about 3% above but you can get a target based on a measured move if the s&p confirms its breakout above 4500 to me that seems like best case scenario for the s&p 500 with interim resistance above 4300. we did see the russel 2000 index got above its 50-day moving average for the first time since early january. it the first signs of life we've seen in the small cap arena. if we do get those small breakouts, it would be a great

trigger to add small cap exposure if you look at the ratios there, they're relatively oversold. >> it has been for a while, too. >> that's right. they've been down trending in relative terms for some time the russell 2000 index does have some pieces. i suspect if we do see those confirmed breakouts, that would confirm confidence in those stocks that have underperformed so dramatically. we have seen the markets, including financials which were relatively oversold and i know the russell is heavy on that sector >> what's the finance signal that you watch >> well, with the financials we watch the indicators for the first time in this downdraft, we have pretty widespread signals from the bottom-up perspective. we're not advocating counter

exposure but we do expect a bounce what we're recommending to our clients is to wait for a better selling opportunity for existing exposure and the bounce will at least get these back up to their 50-day moving average. the 50-day moving average is a great gauge of resistance in a down trending stock. that's the expectation we have from financials. >> what's the buy system you say you've seen in wti oil >> in wti crude oil, it manifests itself on a daily bar chart. i it's a short-term momentum buy signal it was a bit tenuous for a while. but we do look for at least near term with resistance defined from the daily average, roughly $80 per barrel and that can be a boone to the energy stock.

>> and there are other broader macro issues into it, whether that be the fed or the debt ceiling or anything else is there anything you can glean being indicated because of those larger issues? >> we listen to all the other macro strategists out there and think through that in our own investing. but we really focus on our primary expertise. we believe a holistic portfolio manager will use all disciplines so we think technical analysis is a great complementary discipline and there should be a macro and fundamental component to things. but we pay attention to the same headlines and we like to see the reaction of the major indices.

i've seen both sides in terms of what i've read if we see a breakout confirmed irrespective of what's happening with the debt ceiling, we would believe that breakout, but of course there's a lot of sort of potential headline risk between here and next friday >> thank you have a great weekend >> you, too, becky >> coming up, the latest on some promising debt ceiling headlines out of washington. first take a look at shares applied material, down after the company said it expects third quarter sales to decline, though still coming in above analyst estimates. you're watching squawk and this is cnbc. lily! welcome to our third bark-ery. oh, i can tell business is going through the “woof”. but seriously we need a reliable way to help keep everyone connected from wherever we go.

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. welcome to "squawk box" this morning. we're about 90 points higher on

the dow, the nasdaq up about 3 1/2 points take a look at the price of crude. now we're above the $73 level and on pace to break a four-week losing streak. >> and that is what katie stockton was just saying, that she's getting a buy signal >> that's the sign >> and the battle over tiktok in montana in full swing. a group is suing the state the plaintiffs had collectively have more than 500,000 followers allege that the act in their words attempts to exercise powers over national security that montana does not have adding it likely violates the 1st and 14th amendments as well. andrew >> twitter accusing microsoft. this is fascinating. we're trying to make sense of it of using data in the social platform in unauthorized ways. elon musk attorneys claim

microsoft could be in violation of its agreement with twitter over data use. a spokesperson saying they will review the letter and respond appropriately. watch this space >> apple is purportedly restricting the use of external artificial intelligence tools among its employees. it's over fears that workers could potentially release confidential data. >> and disney scrapping plans to build a new $1 billion campus in florida. it's the latest chapter in what has become a bitter feud between the entertainment giant and governor ron desantis. disney saying new leadership and business decisions that led to that decision. it would have been located 20

miles from disney. i always wanted to be an imagineer. when was a kid and i heard your job was to imagine cool new things, i thought that -- pretty cool, right? >> when we come back, china's answer to chat gpt, cnbc got its hands on the technology to test it you don't want to miss the top takeaways. but next we'll ask the co-chairs of the bipartisan house problem solvers congress if they see a light at the end of the debt ceiling tunnel and whether or not that light's a train isquk x"ndching "sawbo a th is cnbc no big deal? go on... well, what if you partner with ibm and red hat, use a hybrid cloud solution to connect data across multiple systems globally, then analyze all that data with watson. okay, but this needs to meet our...

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welcome back to "squawk box. getting things ready to go for a friday morning you can see the boudow is still about 93 points. the nasdaq is flirting right around the flat line at this level. we were looking at all three of

the major averages higher yesterday, reaching some levels we haven't seen since august of last year. >> we got some big news on wall street lazard ceo preparing to step down from his current position the decision comes after he reported a loss in the first quarter and was warned of an uncertain outlook for the rest of the year. i'm not sure that's what's making this move happen. former obama administration official and someone who has been a guest on this show many times peter orszag is expected to become the new ceo of lazard. we'll keep our eyes on that one as well. coming up, we're going to dive into this week's regional bank rebound and the risk that remain for these key lenders. and economist tom johnson will join us to talk about that and more, as we head to a break. can you get the best of squawk on our daily podcast

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speaker of the house kevin mccarthy sounding more

optimistic about a debt ceiling deal saying he sees a path to a possible agreement in the meantime, the white house says president biden has been requesting receiving updates while in japan to meet with g-7 leaders, but the treasury department says the amount of money it has on hand has fallen to the lowest level in well over a year joining us for more on the debt ceiling standoff are the co-chairs of the house problem solvers caucus josh gottheimer of new jersey and brian fitzpatrick. >> it should be common sense i introduced similar legislation when we had the government shutdown effect. i wrote a personal check in excess of $10,000 of my own funds back to the treasury when we had a shutdown in my first

term it shouldn't take that to force congress to do its job >> why the heck didn't they pass it in. >> it just got introduced. hopefully it gets taken up i also introduced a stock trading plan when you was in congress we tried to get that taken up for consideration last congress on successfully, hopefully the fate of that bill changes this congress >> can i add one thing to your legislation maybe? not only does congress not get paid that the debt ceiling is defaulted on but there's no back pay either so if it takes you three weeks to work it out, that's three weeks of lost pay. >> correct that's an important discontinues a lot of state legislatures have introduced a gimmicky bill that

delays pay, doesn't forfeit it completely it should be forfeited that's what our bill does. >> congressman gottheimer, do you feel like there is a deal that's going to get done it sounds like it. >> first and foremost the deal has to get done. it's not an option to default and not pay our bills and to send our markets and reputation in the world in a tail spin. it's a good thing. we've focused the players in the room i know they're incredibly hard at work. we've got to go fast time is not on our side as secretary yellen said. to me that's good progress brian and i have been pushing for people to sit down and actually talk. we put out ideas, including suspending the debt ceiling, taking it off the table and not playing politics with the full faith and credit of the company

and setting up a bipartisan commission to deal with long-term fiscal issues with our country. >> so the freedom caucus has been complaining about some things that might be changed the progressives have been complaining about things they don't want to give away. do you guys feel like you're getting what you want basically if there is some agreement worked out between the two sides? what do you think, josh? >> i think if it's worked out on both sides, we're going to get what we want echb is not going to be happy with everything. it's not going to be perfect but the bottom line the full faith and credit of the u.s. is there and that we pay our bills and do the right thing to me, listen, it's going to be tough choices on both sides. in the end we cannot afford to even think of doefaulting. some of the colleagues on both

sides think that's a good idea that's a terrible idea for our country and people's savings and pensions >> it was put forward saying here's what can be agreement on both sides is what you're hearing reflective of that or are there places that broadly differs? >> i haven't heard any talk about a commission to deal with the long-term sustainability of our debt and deficit that doesn't mean that wouldn't be brought on the table. this is exactly what our caucus does we're a bipartisan centrist group that give a signal to leadership in the house and senate as to where the points of u intersection are between moderate democrats and republicans. we don't want extremes controlling the day. we want the pragmatic people that reflect the majority of

americans. mostly what's being discussed right now is very similar. the only exception is the long-term commission, which i referenced the fact that the president and the speaker are sitting down one on one, negotiating in good faith, that's exactly what we want right now that's a very good indication for what's to follow >> congressman gottheimer, the red lines are the work requirements tied to government plans and programs, how does your caucus feel about that? >> democratic caucus or problem solvers? >> problem solves rs >> the work requirement piece is tough, especially putting work requirements on older folks who need food help and which is what that's all about, the snap program. so that's a tough issue for

taking food away from hungry seniors and older folks. but there are plenty of areas where i think you'll find strong common ground. i think you'll find places where there will be caps in place, which is a good thing. so i believe at the end of the day in order for a deal to happen and brian's right, it's a good thing we've got folks sitting at the table now, the president, the speaker and others and their representatives. that i am find the place where they can meet up and both sides are going to have to give. and the give can't be just we're not going to default we have to work it out so we'll get there as brian said, the fact that there's such a strong group of us in the middle who think it's critical we get there, they know we can work this out >> does that mean the bill that is eventually presented to you includes work requirements you would sign it because it's the deal that the two sides worked out? >> i think this deal is going to

happen through the center, you know, you're going to have blocks of democrats and republicans who come together and we may lose some folks on both sides again, it h's hard to predict i'm not going to talk about a deal that i don't know exists yet. whatever that deal looks like has to be one that can get the votes on both sides and in the senate that's the sweet spot. that's what that your working toward and i think we've got good negotiators you got to sit down and talk it takes days and days and days. i know that from brian and from just working with both sides all the time that's what's happening now after, in my opinion, too long so that's a good thing >> congressman gottheimer and congressman fitzpatrick, thank you both >> from the debt limit negotiations to the state of the financial sector after weeks of pain, regional banks continuing to rebound we'll go over to leslie picker

>> regional banks getting a nice bounce after spending what seems like forever under pressure. the s&p regional bank gaining 10%. the pacwest has lost value this year western alliance shares garnered a nearly 30% increase this week, thanks in part to a disclosure that it has continued to draw on deposits that provided a boost to other regionals and a sign that customer concerns may be stabilizing, may be abating a little bit 13 revelations notched a few votes of confidence for regionals. berkshire hathaway disclosed a $1 billion stake michael barry known for his part in the big short also showed small positions in beaten down regional means on the training side we're

seeing a high proportion of shares in many individual names and overall regional etfs held short. shorts have been added but longs haven't meaningfully been cut, meaning they're not really pressing that negative trade too strongly so not too much in the way of momentum to the down side this week in the absence of negative head headlines, for example >> leslie, appreciate it thank you very much once again >> right now let's go over to steve liesman. he's been talking a look at the view from the fed about risks from the banks hey, steve >> listening to what leslie has to say about higher stock prices, that's part of a confidence out there and part of the hawkish rhetoric about rates from fed officials whhas been a downplaying. folks you would think have been most concerned about bank issues have been about those saying the fed might need to hike again

lori logan ran the portfolio when she was at the new york fed to respond to the pandemic yesterday she told bankers get more prepared yourselves for any financial troubles she suggested the fed may have to tighten again and downplay risks at the banks she said "tightening credi standard is not a huge surprise, bankers have been telling us since last fall causing credit conditions to tighten. and a banker from kansas chairs the fed's subcommittee on smaller regional and community banks. she said last week, "should inflation remain high, additional monetary tightening will likely be appropriate." the key is these officials are not moved or concerned about the health of the financial system, at least not enough to keep from warning against higher rates that's been shown more widely by the fed's own actions. the fed has raised rates by 50

basis points since the two biggest failures in u.s. history. so, becky, this idea they can do monetary policy with this and supervision and regulation with the other hand,that's somethin being sustained at the federal reserve. becky? >> what would you suggest or just from all of the ideas you've heard, what might be the best way term o improve things will it be they'll be able to fix it themselves, the talk of account and changes or there's more oversight needed because that's what senator sinema was talking about. >> i think there's an argument that supervisors ought to sharpen their pencils and be looking more closely at interest rate risk. you assume since silicon valley that's been the case i think there's an open and interesting question as to whether or not new regulations are needed especially in that middle-size bank range, the one above 100 billion, which some of those

regulations were relaxed for them and there's an open debate about whether that was a factor in the failure of some of these banks and it may be, becky, if you read michelle bowman, she says banking has risk to it. it has to to be a free banking system the key is to mitigate the risks. i think the fed believes it done that through liquidity programs available. if you read lori logan, she's like go open an account at the fed, don't be surprised by this, that's what the liquidity is there for and you should be ready to use it. and the unspoken part is we're not changing our monetary policy because you guys are going through a few bumps in the road. >> is it fair to say they would be listening to the regulators, the fomc would listen to regula regulators about where they are

think things stand do they get reports? >> the feds are the regulators >> i know but it seems like there's a chinese wall between the two sides. >> now you put your finger on a big, big question, becky, which is the cultural gap that some told me exists in the federal that monetary policy is up here and supervision is down here it kind of like that -- what do you want to call it, the unfavored cousin or child of the federal reserve. remember, in 1998, i blow, the bank of england separated supervision from the bank of england. they put monetary policy and supervision in two different departments there's an argument for that and whether or not the fed has ever treated supervision as seriously as it treated monetary policy. >> steve, thank you. >> okay. we're going to continue this conversation our next guest says this year's banking crisis is not over yet it inappropriate to compare it to the 2008 meltdown

joining us, simon johnson, professor at m.i.t., with a new book "power and progress." good morning to you. not 2008 what is it then? >> we're about to find out when commercial real estate goes through the presumed downturn. it might have some resemblance to the 1980s, the savings and loan crisis where relatively small financial institutions caused larger systemic problems. that's why we're supposed to have prompt corrective action. >> what would have been the right decision in your mind? you say we didn't. >> earlier intervention by the supervisors addressing interest rate risk, after silicon valley bank they let it slide. that was based on the decision of congress and the guidance from the top of the fed in 2018. >> how concerned are you about

other regional or community banks going under or becoming insolvent or being resolved, if you will, in the context of the problems of the real estate office and everything else >> i don't like to speak about specific institutions but broadly i'm very concerned there as no protection of essential business payroll accounts what's happening among people i know is they're starting to shift their footing, open an account with one of the largest banks, maybe we can call them too big to fail now and hedging against there being further disruption in the smaller bank sector, the flightiness of deposits has increased and nobody knows who is going to take what hit when the beans are -- banks are in the line of fire >> the digitization of this has made the flight unimagine ative

and how do you force people to keep an amount on hand at all times? >> digitization has sped everything up but the underlying vulnerabilities are the classic -- >> if euyou were going to guarantee deposit, would that solve the problem? >> for transactions. >> don't you worry people will use these accounts in unusual ways it's not an exact science and becomes very difficult to police >> that's absolutely true but the fdic does keep track of transaction accounts in 2008 they put a program in place. you make it a temporary program. you don't make it forever. without that kind of safety net business deposits are going to

fly at first signs of trouble. >> are you a long term fan of having the number of banks we have in this country is that a good thing a bad thing? >> i like competition. i think competition is very healthy. when some of the smaller banks go all in on a particular geography, there's going to be a reckoning. >> should the fed have picked up on this sooner can we guarantee they're going to be watching for this problem more closely next time it feels like we're all reg regulating for the last crisis >> they created a vice chair to elevate supervision and regulation within the fed ecosystem. the legal responsibility was there and political support and what did the people do they backed away from regulating and supervising mid size and regional banks and that's a

major problem. >> the messaging coming from congress and other places saying having a lighter regulatory touch. how do you keep that from happening? especially when you have barney frank lobbying to have the rules watered down because he was on the board of one of these banks? >> we just saw that in action. the job of the fed is to be professional, be object ive and say there's a limit to where we have to go it needs to be fixed by the fed. >> if you do believe that there's a number of banks that will run into trouble because of commercial real estate falling in, what would you do to get ahead of it now? would you start resolving banks in advance >> i think the banks should be allowed to fail. having any part of the economy to be too big, too complex or

too big to fail is a problem that's very inappropriate and not suitable with the transaction account guarantee -- >> do you factor a.i. into all of this? >> deep fakes, we already have a big problem with identity theft. >> the idea that someone is going to fake the voice of the ceo, it's going to leave a voice mail for the cfo and say please transfer x amount of money o over here and they're going tho to do it >> if i call you, you should ask me for unique identification what did i have at lunch when we had lunch. that's what you need to ensure identity people are going to have a lot of identity theft and they're going to lose on the financial side and that's currently not being regulated. >> it's a much longer conversation you must come on back.

congratulations on the book. we'll talk to you soon thanks >> when we return, what our owa eu eunice learned you're watching "squawk box" on cnbc are needed most. drawing on deep expertise across the world's public and private markets in pursuit of long-term returns... pgim. our investments shape tomorrow today. your shipping manager left to “find themself.” leaving you lost. you need to hire. i need indeed. indeed you do. indeed instant match instantly delivers quality candidates matching your job description. visit indeed.com/hire

breaking news. we want to get to steve liesman.

>> the fed president is talking now and together they worked on ground breaking work on estimating what the right sort of what they call the natural rate of interest is. it's an idea that goes back to a long past but very notable economist. what he's saying here is that reworking the model since the pandemic shows no evidence that the era of a low natural rate of interest has ended they had to redo the model because of what happened with the pandemic they redid it. they came back again and said rates should still be over the long term low. it does show a decline in economic growth since the pandemic what's interesting here is that while the fed has been forecasting higher rates than the market, the market itself is almost more of a believer of

what williams is talking about that williams himself. this fed sees this declining rate and joe has been on this idea has the world ended before the pandemic of low interest rates? maybe it needs to be high now to bring down inflation but where does it settle long term williams is saying at least his model, which is full of uncertainties but is a cornerstone of economic thinking is suggesting in the long run when we get past this nonsense, interest rates could be low for some time. andrew >> morgan stanley saying that the ceo, james gorman, is expecting to step aside as ceo sometimes within the next 12 months gorman says the board says

identified three candidates. the company has had a pretty miraculous ride over the last three years. it has far out performed the s&p 500 and outperformed the other banks as well. and james gorman had a vision he put together after the financial crisis >> after the financial crisis he realized they had to be a different bank and is the model that other banks have now copied it changed the wealth management business in a major way. they very different types of institutions >> the company is expected to hit 10 trillion in client assets over the next decade the question is how long gorman would be there looks like he would make the transition from ceo to executive chairman in the next 12 to 14

months and sticking around at the company as well. >> china has what it thinks is the answer to chat gtp eunice, good morning or good evening where you are. >> reporter: it's called ernie d with so many topics here politically sensitive, we found that this chat bot wasn't always very chatty. when asked if president xi jinping will rule china for life, ernie bot declined to answer in chinese and english, suggesting we start a new conversation while suspending the window that had allowed us to type. we made a general inquiry about president xi's u.s. policy and got warned to test out the chat bot in a civilized way we switched topics to covid-19, asking where the virus originated from. in english, the response didn't mention china. in chinese, it had no response, advising to change topics. ernie had no comment about why

the chinese government abruptly ended its zero covid policy but when asked, could compare itself to open a.i.'s chatgpt ernie is more suitable to specific tasks, it said, while chatgpt is more general in its ability to understand and generate natural language. just don't ask what the relationship is between president xi and the character he's often compared to, winnie the pooh or risk getting banned. the challenges for ernie bot are the same and really hot for the rest of the industry and really highlight the core conflict that china's technology policy has at the moment on the one hand, the government wants to be an a.i. leader on the other hand, it's worried about the political consequences so, as of today, the draft regulations are under discussion so far, one of the points that we know of is that they cannot subvert -- these chat bots

cannot subvert state power, and from our discussions from people within the industry, they say that companies are just second-guessing what beijing might deem politically sensitive, and that -- those parameters are really changing day by day, and because of that, a lot of folks in the industry are worried that the development of the industry will really be held back. guys >> so, this is a fourth rule you have to add, isaac asimov's three rules for robots this is the fourth rule. protect the chinese government at all lengths too before any of the rest of it >> well, i mean, there are just so many different rules but that aren't necessarily official. you know, i know that you guys have been having a lot of discussions about ways to regulate a.i here in china, there are perhaps two big differences from what the discussions you guys are having one is that here in china, i think that the consequences for a mistake are a lot bigger

i'm not sure whether or not sam altman, for example, would worry that he could be disappeared if, for example, open a.i.'s chatgpt spewed out something offensive also another big difference is really the scope of the information that would be deemed harmful here, and so because of that, it could potentially mean a deeper regulation, more restrictions, and then we're in the same place where a lot of these folks are saying within the industry that you just create a lot more uncertainty as to how the whole industry can develop and really compete, and that's something that the chinese government wants to do >> eunice, thank you it's fascinating, and i'm sure we're going to hear a lot more about it good to see you. coming up in the case, what to watch ahead of e eng thopin bell on wall street. stay tuned

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morgan stanley's ceo james gorman saying he expects to step down from his position and for a new chief executive to be named within the next 12 months. he made the comments this morning, gorman saying morgan stanley's board has identified three very strong senior candidates and that he does plan

to stay with the firm as the executive chairman we'll see what the implications are, really. brenda is here this morning, cio of sandhill global advisors, and cnbc contributor you've watched the banks you've seen what morgan stanley has done over the years. what do you think the implications are >> well, i think there's no doubt that the banks, really, many of them, especially large banks like morgan stanley, really benefitted from the environment that we saw during the pandemic years there was a lot of investment banking activity, asset prices were rising, really helped the wealth management side of the business now, we're on the other side of that after having a terrible year for both stocks and bonds last calendar year we have an investment banking environment that's slow right now, not a lot of companies going public and we have an environment where regulation is likely to increase, although it's already high for a bank as big as morgan stanley. really would be the smaller banks that would be impacted by that, and we have an inverted yield curve, an environment where lending -- demand for

loans is very low, so the dynamic has certainly changed here >> does the morgan stanley model, though, and the shift that james gorman put into place after the financial crisis, and that's really the focus to move into wealth management in a meaningful, meaningful way, to capture as many assets as he humanly could, is that still the model you think that's going to work the best in the future? >> i think it will still be a growth area for many banks you know, if we think about the environment that we have been in, a lot of people may be self-managing. they've decided that's not for them or just, you know, the safety of dealing with a larger organization like a morgan stanley may also be of interest, so i do think it's an area where there's likely to be growth and stability for many of these banks. >> brenda, we want to thank you for joining us this morning, especially as this news is crossing the tape. have a great weekend >> thank you you too. >> thanks. let's get a final check on

the markets as we head into the weekend. you're going to see the futures this morning, yeah, about a at the highest levels we've seen. dow is up by about 118 points, nasdaq up by 29, the s&p indicated up by about 16 points, and remember, we saw closes yesterday that were near some of the highest we've seen since august of last year. if you're taking a look at what's been happening with the treasury markets, the ten-year sitting at 3.692%. the two-year at 4.294% and by the way, if you also take a look at oil, this is one where prices have picked up, but about 2% today to $73.44 we did talk to katie stockton earlier today, and she pointed out that, look, this is somewhere where she sees a buy signal happening, just watching what's been happening with the tape over the last couple minutes. one thing we want to do today, give a shoutout to our executive producer, ann. it's her birthday today. happy birthday, ann. >> we could sing we could sing, but we won't.

we'll save you >> all right, have a wonderful weekend, everybody we will be back here with you next week. right now, though, it's just about time to get over to "squawk on the street. we're going to talk for just another second or two so we don't give them a heart attack and toss to them early bye, everybody have a great weekend "squawk on the street" begins right now. ♪ good friday morning, welcome to "squawk on the street," i'm carl quintanilla with jim cramer, david faber at post nine of the new york stock exchange heading into the weekend with a boatload of news powell is on deck. options expiration we'll be looking for debt ceiling news on sunday futures holding up on this best week for the s&p since march our road map begins with rally mode s&p, nasdaq eyeing the biggest weekly gain in several weeks big tech leading the way, apple and alphabet, highest levels in over a year. plus disney ups the ante in that