"squawk box" begins right now. good morning welcome to "squawk box" here on cnbc we are live from nasdaq here in times square i'm becky quick along with melissa lee. s&p futures are off by 6 nasdaq down 11 everybody is waiting to see what happens with the potential deal to avoid a debt default. if you are looking at treasury yields, you will see it looks like the 10-year treasury is 3.7% 2-year treasury at 4.38%

p interesting with the t-bills the spread has been inverted since july of last year. more than 220 consecutive days the longest streak since 1980. this is a signal of recession. this one has been flashing a long time. broken clock is always right >> waiting for recession it doesn't seem to come. kevin mccarthy had a productive meeting with president biden on how to raise the debt ceiling, but the two did not reach a deal let's get to kayla tausche for the latest developments in washington >> reporter: melissa, negotiators met to build on the momentum built by mccarthy and biden. both said the meeting was productive president biden said there are areas of disagreement, but the

two reiterated that default is off the table and the only way to move forward is a good faith bipartisan agreement mccarthy, speaking to reporters after the meeting, said this >> we only talked about where our differences were we talked about items that -- ideas. we are asking the staff to get back and run through the ideas to see if we could come to agreement. >> reporter: the two sides are arriving at some common ground sources tell cnbc and nbc news that unlocking up to $60 billion in unspent covid aid and reducing amounts to companies under medicare the white house estimates that negotiating more drug prices under medicare could save up to $200 billion over ten years. it is not the $4.5 trillion that republicans had been seeking, but it is a start at common

ground it is at least a sliver in the middle of the diagram that identifies some savings and trying to move the ball forward. melissa. >> kayla, if a deal is reached immediately, can you walk through the procedures for it to take to actually pass? in other words, can we make it >> reporter: once they reach agreement in principal, they have to channel that to legislation. that can take days it is technical and bulky and doesn't happen overnight there would be an expectation that at least if they reached a deal today, that the house could pass it by the end of the week of course, that window is closing. the senate comes back after its recess following memorial day. of course, there are two days before the june 1st deadline the important point is both sides, according to president biden, have committed to avoiding default at all costs.

if they are negotiating in earnest and reached a good point where there is progress to be made, there is a possibility of some stop gap or extension to pursue both sides said that is not the plan or option it is something waiting in the wings if they get close to the deal >> kayla, thank you. kayla tausche. >> sure. we have numbers out from lowe's coming in with $3.77 a share on earnings that is better than the street at $3.44 it is the guidance they are giving for the future that has the stock off 2% right now company is talking about how they are now looking at full year comparable sales down 2% to 4% previously flat to 2%. they are looking for sales down somewhere between 2% and 4%.

they are also talking about looking at their full year sales of $87 billion. and cutting the view for adjusted earnings per share for the full year. they are talking about looking at $13.20 to $13.60 on adjusted ep basis before it was $14. a little bit of bringing down the expectations about this. they do say the first quarter comps were hurt by lumber deflation. just like home depot earlier in the week, unfavorable weather and do it yourself sales they are optimistic about the long-term outlook for home improvement and ability to grow market share let's look at the stock right now. down 3.3%. joining us to talk more is brian

nagel from oppenheimer brian, what is your reaction >> good morning, becky you summed it up well. if it is very similar to what we heard from hoeme depot a week ago. you look at lowe's numbers it beat on the bottom line that is reflective of the company operating better you talk on the show with marvin ellison who is running this business better than historically on the bottom line. sales were weak. comps are own. that is softer than most people were expecting it is also very consistent with what home depot said they called out, like you said, called out the headwinds of lumber price deflation and unfavorable weather. those factors are transitory especially weather weather is starting to turn nice across the country i expect -- >> do you believe the weather? sometimes we look at that as an

excuse you hear it from more than one company. was it an issue? >> absolutely. really no question at all. you add a late start to spring across the country and this is what home depot was talking about among others in the western part, particularly california, with a harsh winter which is rare which delayed or cancelled projects or delayed spring spring buying. it is transitory. >> they talk about lower do it yourself discretionary sales what do you think with the big box retailers with the overall economy? >> a great question. that is the wild card here you know, i was talking to home depot last week following their report on this topic you really don't know. yes, they are seeing weaker and

this is what lowe's is saying. there is weaker demand for bigger ticket projects could that be a cost to the consumer absolutely could it be weather? absolutely we talked about this a lot through the pandemic, a lot of projects were done we spent a lot of time at home not traveling. we did a lot of projects as a community, so to speak we have the burn off now it is really not totally clear exactly why this is all happening. there is a weaker trend here. >> the company says that they are optimistic about the ability to steal market share. lowe's says this what do you think between lowe's versus home depot? >> you know, we like them both i think given the valuations here and i talk about this a lot. lowe's stock is cheap for lack of a better term

i think lowe's is the better investment opportunity as far as the market share side, this is the case for a while and post-pandemic, this is more the case well run and strong and digitally driven companies like lowe's and home depot are able to take market share once we get through this sluggishness, 2024 and 2025, we will see a clearer path to companies like lowe's taking more market share. that is the reason you want to buy the stocks that's the real opportunity and call the intermediate term. >> we talked about the 2/10-year inverted yield curve showing recession. it has been a long time coming once we get through this, will we get a recession >> i joke with my clients. i'm not an economist i had this discussion a long time i think what it comes down to

and some economist friends will be bothered by this. what do we mean by recession look at home depot and lowe's. the last several quarters, simplistically, sales have gone from plus 30% to down 5. that is recession. it is not recession in the traditional definition, but it is recession >> recession or just all of the sales got pulled forward >> there is a big piece of that. that change in growth rate and plus 30 and negative 5 that is a slowdown the negative 5 is on a higher base lowe's as the example, those sales are higher than they were historically that is happening on a higher base that would be recession. this would be a different dynamic coming out of the pandemic. >> let's talk about how long that lasts if you are talking about a

higher base of, how long is it before you see growth like that again? will you see growth like that again ever it took a crazy pandemic to get the crazy growth numbers like before >> i don't think we with i >> i don't think we withl ever see plus 30% that was a unique event. the better answer is we are in the down single digit dynamic. as we look out to 2024 and 2025, we get back to normalized growth rates of t rates. that is plus single digits we are several quarters away. >> 2024 to 2025, brian, it sounds like the stock is treading water until we find that normalized ground is that the case this is a long slog for investors to wait it out >> that is the case.

one equalizing or factor of the discussion, melissa, is the multiples. that is now discounting well for a lot of bad news or potentially bad news in the near term. you are right. that is how our clients are positioned toward the names. it is soft i don't need to own them for the near term. when i see this historically and when this turns and normalizes, these stocks react quickly my advice is of the risk of dead money near term, own the stocks for the gains in 2024 and 2025. >> brian, thank you. good to see you. >> thank you coming up, jpmorgan chase's ceo jamie dimon warnings rates could go higher than markets expecting. and tiktok firing back over the ban by the state of montana.

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jpmorgan chase ag's ceo jame dimon warning about commercial real estate loans. he said commercial real estate is the problem for lenders it will happen in certain locations and office and

construction loans it could be isolated and not impact every bank. smaller banks may need to plan for interest rates which are higher than most expect up to 6% or 7 pp%. -- 7%. >> he talked about qt. we never had qe. we never dealt with qt you don't know how this will play out that is a word of caution from somebody who understands the market >> you have to wonder if this is part of the risk manage ment on the bank plan for the risk or is this the scenario they believe in unemployment would peak at 5.8% in 2024. >> a big jump from now sdplchlt -- now. >> a lot of pain >> and that conservative to

manage risk or assumption they see happening? >> bullard made comments yesterday, too he would like to see two more rate hikes during the year his point was it would be better because you encounter inflation when you still have a strong job market that argument makes sense. i get it the question becomes how much do you damage the job market by doing these things you are right. if you think inflation is pers persistent, it is a fair call to say something like that. >> absolutely. >> can you imagine if you are dealing with inflation and you have a problem in the unemployment you are talking about stagf stagflation. >> he is addressing, dimon, that is the departure of the counterpart in morgan stanley. dimon says he knows he can't do the job forever, but he will stay while intensity is the

same james gorman will step down in the next year and assume the role of executive chairman no ceo should retire in place. >> no quiet quit >> right >> i like they were needling him about it trying to comment on how long he will be around he is 67 they were needling him 3.5 yooears that is how long that is left on the stock plan >> you do have to wonder if it is 3.5 years. tiktok filed a lawsuit against montana after the law passed last week banning the app from being downloaded within the borders. the suit argues the illegal suppression of free speech lawyers state addressing the

national security threat is a federal level. tiktok said it will soon grant oracle to the source code to alleviate the security isstssues it will begin monitoring the gateways speaking earlier this morning at the conference in doha, the tiktok ceo said the american data is stored on the american soil by an american company. speaking of oracle, larry ellison will back tim scott and his campaign for president ellison attended senator scott's announcement yesterday in south carolina sitting in a vip session of the rally senator scott called him out at one point. now to the fake image that

rattled the markets. the image yesterday morning showing black smoke. it was shared on twitter by a russian state news agency. for a few minutes, the fake image sparked jitters before no such incident occurred the image was likely created using a.i. the fence and grass and concrete fade into each other shows it was melted into one another. that was a clear tip it was a fake image the market reaction was very brief. it was minor you know, .3% change in the s&p. if this were a better fake image and spread more widely, you can imagine the damage that could be done to of thethe markets. >> i spent this weekend looking

at twitter which is a cess pool at this point. there were fake accounts spoofing me. what is going on it took me time to figure it out. it wasn't me this is part of the problem with getting redid of the checkmarks twitter said it is up to all of us to police this. not them they washed their hands of this and said we will not help you unless you pay big bucks this is goingto lead to significant problems with situations just like this. that was my concern i was pointing out over the weekend. what happens if there is a false tweet that moves market information. >> the list goes on and on in terms of what you can impact with a very good fake. whether a video or an image.

>> posted on social media or twitter or elsewhere and it takes off. i think the social media companies are going to have to take more responsibility for fake stuff pushing pushed on th net network. if it was on cnn or the newspaper, there would be liability. why not here >> at one point in time, misinformation and content moderation was a focus or area of spend for the companies now all they say is we're doing a.i. and they have billions in market cap it is interesting these are two push/pull effects. a.i. is fueling the misinformation and the need to spend to content and police that misinformation >> it is not a good scenario when we come back, nike ceo john donohoe speaking at the ceo summit. and let's look at shares of

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welcome back cnbc's ceo council summit on the west coast this week showing leaders in business and finance and those in culture and sports to tackle the issues facing ceos today. executives gathered last night to kickoff the three days of discussions to exchange ideas with a new generation of leaders. they tackle the finances and

a.i. revolution and dangerous escalation and tension with u.s. and chinea. nike ceo sat down with sarah eisen. >> we believe global trade is a good thing we believe consumers benefit from that and we believe it can promote peace and understanding. the business has to step up when the political institutions are in the state they're in today. so, we're committed to being a global company whether that is in china or other markets. yes, there is risk >> i think decoupling would be disastrous economically with the u.s. and china or china and eu if you look at the trade flows, both ways, they play a mutually valuable role. you know, again, we believe in

global trade and continue to do everything we can to support that >> squawk on the street will inn have interviews today. for more, visit cnbc.com/ceo. and coming up, roger ferguson will join us if he expects the fed to pause or hike at the next meeting. as we head to break, here is a look at the s&p 500 win witwither -- winners and losers >> announcer: winners and losers is sponsored by state street global advisers. ♪ the biggest ideas inspire new ones. 30 years ago, state street created an etf that inspired the world to invest differently.

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good morning welcome back to "squawk box. we are live from the nasdaq market site in times square. check out the futures this morning. not a ton of movement. this reflects yesterday where the markets were flat. the dow indicated off 25 points. s&p down 2 the nasdaq indicated up by 2 you have to think, melissa, a big reason for this standstill

market is waiting to see what happens with the debt ceiling. >> of course everybody is waiting it is interesting that the nasdaq is managing a positive bid this morning flight to safety is the thinking interesting. minneapolis fed president neel kashkari added to the speak of the rate hike is too close to call we have roger ferguson here with us roger, great to have you with us do you think it is too close to call at this point what data are you looking at here >> i do think it is too close to call as i listened to what neel kashkari had to say, he focused on where everyone is in with inflation still sticky with the specific focus on the services sector which is the area where the job market tightness will play through directly the numbers are one where we look and show a toss up which is

a surprise given how much they already moved. >> are you in the camp of neel kashkari who said that there should be a pause, but a signal there could be more tightening ahead or let's say a bullard who said front loading is better the front loading and wait and see separation where would you stand on this? >> i think i would stand close torcloser to the wait and see. they moved at a fast pace. there is a great deal of uncertainty in the banking sector which hasn't shown through everywhere you heard from neel kashkari in his district where he didn't see much impact from banking uncertainty. we are hearing from major companies and expectations of a slowing. i think from my standpoint, perhaps, if they feel necessary to do one more, i would take a pause and take a survey to see exactly where things stand. >> in terms of the banking impact, roger, we already have

seen some evidence there is tightening of credit what further impact would you see? is it beyond the credit? credit tightening? commercial real estate what other impacts are you expecting that would factor into the fed's decision >> i think it is the tightening of credit. the question is how wide spread does that become we know it is an issue for some banks and some location. it doesn't appear to be a national phenomenon yet. when interest rates rise, there is an expectation that credit would tighten somewhat it is not a total surprise the question is exactly how extensive that is likely to be so far, it is a watch out. not a major issue with monetary policy as i can tell.

>> if you were to speak to a market participant who believes to be a rate cut early next year, what would you tell them are they off the reservation >> i think the market is misreading the fed unteintentio. i think the market is not focusing on how sticky this market tends to be the market is thinking a slowdown and modest recession would force the fed to change its thinking i believe the fed expects a modest recession that is part of the plan no one wants recession, but if that were to occur, the fed would feel onbject obliged and right away. >> it is interesting how people are trying to characterize the degree of the recession expected, whether short and

shallow or moderate. in your view, what is moderate is that unemployment peaking at 5.7% next year that is what jpmorgan chase is modelling or is it deeper or less bad >> i certainly think it is less bad than recession that we had two recessions ago in 2008 i think it is unemployment peaking in the mid 5s, perhaps mostly, it is two quarters of slightly negative growth it is the thing the economy can snap out of quickly. it will be exclusive to fed policy tightening and going one too many which exists in the banking sector. >> why do you think the economy would snap out of the recession? what about it?

if we see unemployment go higher, it is not as high as past recessions and it is still a strong employee base out there and wage we have seen good gains of wage growth what makes us more resilient if we are to weather recession? >> you put your finger on it there is a fair amount of forward momentum in the economy that surprises many people we see steady, steady demand across the board, so to speak. secondly, the labor market in balance is historically quite great with 1.5 or 1.6 job openings normally it is one the fed expects a moderate increase in unemployment and still a demand for jobs and consumers that are relatively strong the forward momentust m-- momeni

it occurs, it is relatively shallow. >> it sounds like you just made the case, roger, for inflation remaining stubbornly and pe persistently high. all the reasons why the fed may have to go too far in the end. >> i agree the issue that is driving most people here is inflation seems very stubborn. it is coming from many sources of imbalance that is a big challenge. one of the reasons i have been in the camp of likely to have a recession is to drive inflation out, the fed has to go higher than markets currently expect. do one more and potentially pause and start again. then i think the risks are tilted toward doing a little too much than too little you heard the fed saying in the risk thinking is doing too much

is preferable to doing too little they want to avoid the stop/start of the burns era. that all piles into the argument for probably doing too much and probably force us into a charlotteshort and shallow recession. >> roger ferguson, good to see you. >> thank you. coming up, big changes in the streaming world. we will talk about the launch of max. and zoom's cfo kelly steckelberg will join us and llfoow "squawk pod" on your favorite podcast apps and listen any time we'll be right back. that enable digital innovation and enterprise control, vmware helps you innovate and grow.

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paramount global is combining with showtime app on june 27th. that merger coming with the increase in pricing from $9.99 to $11.99. the stand alone showtime app is discontinued by the end of the year and also max is launched today that is hbo max and discovery plus the pricing action is $9.99 a

month. the discovery plus will remain as a stand alone option. activist invest or capital management has a stake in yelp and looking for alternatives and including a sale tsc owns 4% of shares out standing making it one of the biggest shareholders tcs says this site could be sold to a private equity company for $70 a share. that is double the close yesterday of $32.50. when we come back, we talk about the metaverse and augmented reality with the ceo of the company that makes avatars for the stars. that's next. reminder, you can watch or listen to us live any time on the cnbc app

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a company called genies creating digital world avatars and drawn attention like paris hilton and justin bieber they are developing augmented reality experiences. joining us to talk about what it means is genies ceo. thank you for being here with us today. the metaverse was so huge for a couple of years and everybody was trying to find a way to play into it. i think genies really blew up in

that environment now everybody is chasing after a.i. a different environment now. what has happened with avatars and engagement especially people have come out from the pandemic and gone back to their lives >> we have been building avatars since 2014 we never considered them to be an nft or video character. we thinking for the augmented world and you think about what the avatar is supposed to accomplish it is supposed to solve for presence in our minds, the metaverse was the least favorite word throughout the hype because it was misconstruing the purpose of the avatar represents and the future of the internet. >> what have you seen in terms of use two things happened. metaverse was a big investment theme people were looking at and people staying at home and doing things like playing video games

more frequently. spending more time on line that happened in the pandemic and we have seen the trends shift. what has happened with the use of avatars >> the at least for genies our revenue rises. companies were that were cut from other companies, and we have always been leveraging avatar as your second identity and in our case we have seen engagement rise, and in our case where they had to cut the metaverse project, it's because of their misuse case and the intention of the project. >> you were able to generate some really big interest from important players, people like bob iger when he was not running disney, and, i think you raised $2 billion, and that gave you a

valuation of a billion at the time when was your last fundraise >> last april. >> april of this last year -- '22 or '23 >> '22 sorry. >> that's what gave you a valu valuation of a billion >> yes >> are you set >> we're set we felt like we could double down on a lot of momentum we already had. the way the overall blue sky emission is that we want to be able to deliver avatars to the masses the three main components to the developer kit. we have a generative game play a.i. bot that is trained to help

developers convert their imaginations and wildest dreams into experiences, and the tech is important because it ensures all of our avatars and experiences will load and perform in an a.i. world the concept of an avatar, i feel like they are going to be a big indication of the times to come. whe >> when you talk about total addressable, what is the market currently? how many people go to the metaverse will need a avatar or need an avatar where is the market right now and where do you see that going

in the next year or two? >> the word avatar has evolved, in 2013, people thought you were talking about the movie. what we are trying to do is take the idea and go from a profile picture and usher into a virtual being, right the addressable market is every single human on earth, and every method of communication is po popularized -- you can see all the avatars by the different creators are all of gen z, and specifically female gen z. for us it's a good indication we feel it's resonating with the kul tkhur and it will be able to

p proliferate this >> you generated artificial intelligence into the workplace. you have done that and how are things going >> it's going really well. i think i feel like any human that is able to leverage technology, so being able to focus on that -- i tell people at work all the time, i don't care if you work 15 to 18 hours if only three of those hours are critical thinking, and i would rather have you work less hours and have a higher critical thinking time. it serves as a strong upbringing partner as well, right of course it can oautomate some of the mundane tasks we trained a bot to understand

the genie's aveatar's network, and you can tell the bot your most personal story from the childhood and that bot can convert that story into a legitimate experience. >> is bob iger still on your board? >> he came and went. he is no longer on the board, and we are still very close to him. he was on for nine months. we are excited that he, of course, chose genie as his only stock during his interim break with disney. we built such a strong relationship, and we get all the advice and wisdom and help we would get if he was on the board and now it's an informal

capacity >> i would think it's hard to do a partnership with disney -- >> it was the other way around a priority right now is making sure that we can continue to deliver avatars in our vision to every single person from the culture possible >> thank you very much the ceo of genies. good to see you. >> you, too. coming up, we will bring you the reaction on wall street, plus senator ted cruz will talk about the concerns about tiktok and much more. "squawk box" will be right back. ? reduces inflammation? thank the gods. don't thank them too soon. kick pain in the aspercreme. what if buildings could tell you how they could be more efficient? i'm listening. well, with ibm, you can use software to help you connect and analyze data—

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the right message at the right time, every time. ( ♪♪ ) constant contact. helping the small stand tall. good morning still no deal on the debt ceiling, but both sides describing the meeting of productive and more talks are planned. we will get an update from washington warner brothers launching its streaming service, and it's titled max we will talk about the streaming wars a fake image of an explosion near the pentagon has some asking questions about

generative a.i. and how it can be used for misinformation we will talk about what it means for technology and the rest of us, too. the second hour of "squawk box" begins right now good morning and welcome to "squawk box" here on cnbc. we are live in times square. i am here with becky quick, and joe and andrew are off who needs them, right? we are waiting with bated breath as to whether mccarthy and biden can reach an agreement for the debt ceiling more meetings and more optimism but no deal as the nation heads towards the

deadline to lift the ceiling or face troubles. kylah, it sounded better yesterday, but this seems to ebb and flow >> it flowed again last night, becky and the conversation lines are open, at least the negotiators on behalf of biden and mccarthy met again last night around 9:00 p.m. to build on the momentum established by the president and the house speaker earlier in the evening, and both said the meeting was productive president biden said there are still areas of disagreement but the two reiterated once again that default is off the table and the only way to move forward is in good faith towards a bipartisan agreement mccarthy speaking to reporters after the meeting said that there is room to keep talking. >> we're not saying, oh, let's bring something new in the discussion and let's not talk about raising taxes, but we

literally talked about where we are having disagreement and ideas, and to me that's not progress but productive. >> sources tell nbc news and cnbc namely unlocking up to $60 billion to unspent covid aid has always been low-hanging fruit. the white house estimates that for one, negotiating more drug prices under medicare alone could save up to $200 billion over 10 years, so it's not the 4 $1/2 -- $4.5 trillion, it's the middle of the diagram and the goal of the negotiators is to widen it out to get closer to a deal or get a deal closer to the june deadline. >> we are waiting for the photo-op when you have mccarthy

and biden sitting in a room. >> negotiations took place at 9:00 p.m. last night i mean, after the meeting broke up between the two principles, they said their staff would get back in the room together in a matter of hours to try and follow-up on what they discussed. there's a lot of rubber meeting the road behind the scenes, and the deputies are negotiating on behalf of the president and the speaker, and the challenges they are coming from much different places and finding that common ground will be difficult until there's real urgency the gop criticized the white house yesterday and said they didn't feel the white house approached yesterday's meeting with urgency, and perhaps what we can read into that is they did not believe the white house is willing to compromise on any of its points, but the reason why we seat deals come together in the 11th hour is because, you know, neither side feels willing

to blink and willing to cave to pressure until they are up tkpwe against the clock? >> do they sit in the room and say, yes, no, yes, no, yes, no, or do they come up with ideas? >> well, before the talks pressed pause and the republicans left the room, they re-entered the conversations that day with a bunch of new policy items supported by the house freedom caucus which is, of course, the republican-base -- the highly conservative republican base in the republican house and the white house said you know those are nonstarters for us there's no sense in sitting down here and talking about those because they won't past the senate, so there has been frustration behind the scenes according to my sources where there have been situations where new items have been brought in

the discussion that simply won't work for both sides. mccarthy said we are adding known entities we have been discussing for sometime, and that, to phame, seems like progress >> libby, what do you think? you are watching this in washington and wondering what is happening. how do you handicap this do you think this is a replay of what we are going to see -- >> yeah, clear as mud. productive but not progress, necessarily. this is the number one issue for our clients. we are all hearing this from our clients. we have been constructive in terms of folks actually reaching a deal before the x date, and we think while kylah is absolute right, there's no political

incentive to compromise before you have to, and it's in nobody's interest to see us breach the x date. we remain constructive, and we think contours of the deal exist and it's just a question of filling in the details and the details are mind-numbing, and it's the depth of the spending caps and how do you slow future growth we remain confident they will be able to get there before the x date, and there's the possibility they have a short term deal for the next two weeks, because the senate is on recess right now and the house is in recess next week, but we remain constructive. we have to be seeing the details fill in because the market will start reacting if they don't >> mccarthy is of the opinion that he is not bringing something to the floor that he can't pass with a majority of his caucus signing off on it, somewhere from half to

two-thirds signing off on that how tricky is that seems like it is going to be hard it's not just getting the white house to agree but also something that two-thirds of the republican caucus would agree to >> yeah, and democrats >> you don't need many but some. >> you need to provide cover to the white house, and they are narrowing the scope of the negotiations and not talking about immigration reform or tax -- they are nonstarters. they are going to be threading the needle, if you will. we remain confident they will be able to do it, and everybody understands that this is something they just can't -- this is the stove that they realize is hot and don't want to touch, so they all realize they need to get this done. >> what is the actionable advice

here if it's the top questioner getting people, doesn't sound like it's a huge equity market >> yeah, the bills market has been dislocated, right you saw the auction yesterday at 545, and broadly speaking the equity market has been pretty sanguine if we don't see something in principle by the next, say, 48 hours, people should also t asaassum there will be a short term deal. i think if you don't see a deal in principle in the next 48 to 72 hours we might see a short term increase. >> is that a reason to sell the market or do you just ignore -- >> well, we have the benefit of

being volunteer investors, and there's no big strategic shifts -- >> would you buy if you saw a selloff? >> we have concerns about the slowing economy and some of the fundamentals, you know, going into the second half of this year, so from our perspective i am not sure it would necessarily be a buy but we are not necessarily shifting any portfolios as it is right now either >> is there anywhere in the scenario where the u.s. gets downgraded if we don't hit the x date, because of the dysfunction in the government? >> what we saw, of course, in 2011, is there was a downgrade and that did spur partly the selloff, and there was the europe debt crisis and big cuts, and in 2013, when we also didn't see a deal until the day before the x date, and we had 2011 and

we had a 2013 episode. the 2013 episode was a repeat of this where there was negotiations and what have you, but no downgrade moody's have come out and said they are not going to downgrade, but if we breach it, everything is on the table. we don't mean to be sanguine about the implications of a breach people view it as catastrophic, and that could seem hyperbolic, but we think it could be >> thank you >> appreciate seeing you come up, the latest development in the streaming wars later, senator ted cruz and the debt ceiling and particular taeuparticularly tiktok "squawk box" will be right back.

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welcome back, everybody. dick's sporting goods out with quarterly results. let's get those results from courtney reagan. >> thank you, and good to see you, becky dick's sporting goods are beating the markets, and it's tkr driven by a tax revenue. comparable sales up 3.4%, and

that's a bit below consensus estimates. and the athletic retailer is reaffirming its full year earnings and sales forecast. and there's some delusion in the earnings in the acquisition from walmart and the tax benefit i mentioned is why dick's sporting goods is only affirming the forecast and not beating it. he is cautiously optimistic for the remainder of the year. under armour said it had merchandise to sale, and in fact stack said dick's sporting goods didn't have to promote to drive

sales and all of its customer segments have done, quote, pretty well for us we have not seen people trading down as of yet but we know it's possible it was flat compared to last year but came in better than expected a different story for dick's than what we had coming out of footlocker >> the sports craze has not ended? >> it has not ended. stack did say he did see pull forward from some of the core outdoor activity kind of items like kayaks. once you buy one kayak, you are not going back next quarter for another one, and he said he thought there were some pull forward from those by and large the quarter came in as planned, and btig does note the footlocker skews some of the

lower income -- >> yeah, with dick's you have kids going on to the next year of sports and you got to get the next bat size and next basketball -- >> that's what ed stack says, he says if you are an athlete, a big runner, you buy running shoes because they wear out and it's not good for your feet. >> it sold off along with footlocker, and with the earnings report it's not enough, it seems, at this point, to alleviate this concern >> probably not. the nuances we mentioned with the earnings is interesting, too. there was a tax benefit and the delusion from the acquisition, and only affirming their guidance is not quite a blockbuster signal for the rest of the year. again, he used the phrase cautiously optimistic for what

he's seeing. >> thanks. let's get to dom chu >> let's stick with the retail theme because it continues to drive some of the premarket action, melissa and becky. and then today lowe's, those shares are north of 10,000 shares of volume in premarket. sales growth at established store locations, the same-store sales, fell. what also appears to be slowing demand from do it yourself customers. now on the positive side, lowe's did report growth in key sales numbers, the professional contractors helped to power some of the results but the stock is down 1.5% and then shares of yelp, it's

the target of activist investor, tc capital management, and they are pushing for the board to sell itself. that's according to a report from the "wall street journal. we will cap things off with oil and gas, and shares of chevron up a percent or so the energy giant and dow component is getting upgraded to a buy. it was a hold based on the under performance of the stock creating an active entry point, and then the share buyback program is attractive as well. chevron and the oil and gas side, and retail with lowe's and yelp on activism >> with a lot of activist, they push for change but the tcs letter according to the journal

was specific, it said they could do a tax free merger with angie, or they would buy it themselves. it does seem like there's a backstop or floor in terms of this gain in shares, because they are saying we would buy you, right >> and not just that, and first of all, we know finance is always about assumptions, so when they come up with the target numbers and valuations, they are looking at comparable sales or transactions in the past, and things they are also looking at with regard to the company's operations and what they fine tune what is curious about this is whether or not you can see any kind of this move happening with a company like yelp. online tadvertising is dicey these days coming up, paramount plus

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paramount plus will merge with showtime, and show-time customers will get to watch paramount. meantime warner brothers discovery launching its max streaming service today combining hbo max with discovery plus and joining us is the co founder. good to have you with us you got all the combinations and a multitude of streaming services now does it show you that netflix is the leader, is out in front, has the lead >> look, i think what you are seeing is everyone is recognizing that they need more time spent

that is the challenge of all of these services, right? you need time spent and for two main reasons one, if you are not watching something on a regular basis, you are far more likely to turn off, meaning cancel and re-sign up later on. if you want to raise prices and make money, and all of these services were priced inexpensively. you need people so engaged they can't live without the services, and a lot of the companies and media companies are struggling to spend the type of money netflix has spent. they are aggregating services. disney is trying to combine with hulu discovery plus is being pushed into hbo max more and more of the services are aggregating because they are trying to drive and solve for time spent, which is especially important as all of these services are now pushing their advertising tiers, so a little

cheaper comes with ads, but ads only make money for you if you spend a lot of time watching ads. you need to center on watch time that's what netflix have been focused on for many, many years. i think now you are seeing from all of the major media companies out there why netflix has been so successful, is they dominate with two, two and a half hours every single day of watch time >> they dominate -- they are solving for money not spent because they want the growth in hours on their platforms but they don't want to spend the money for the content. is that going to work out? >> that's -- melissa, i could not have said it better. it's hard to see that. disney is kicking content off of its platform and warner brothers already did that and are trying to fix that by putting in the discovery content.

i think what you are seeing 1 all of the legacy media companies are scaling back their envisions. two years ago everybody was chasing netflix and wanted to be netflix. what you are seeing now, and david at warner brothers discovery and now the max service, they are really scaling back their ambitions they want to have a streaming service, but their north star is no longer netflix. they will sell content to netflix. just over in the uk i saw yesterday morning, all the "harry potter" series, and they are dominating netflix in the uk it's not just about licensing to yourself, which was really the story of the last few years, but they are taking a balanced approach i don't want to say giving up, but certainly they are no longer chasing netflix. i think that's whether you are talking warner brothers discovery or whether you are talking disney or paramount. none of these companies are

chasing netflix the way they were two to three years ago. it's clearly helping their overall financial story at wbd, and it's improving dramatically in 2023, and it's giving a big boost to netflix investors, because we believe they won. >> if you are a legacy meeting company and you are streaming because that was going to be your new growth going forward and that's no longer the case, then what is >> all of the legacy meeting companies have had a long history of selling content to third parties. that's how they made tons of money for decades. they all got sort of excited by the early -- if you look at the early momentum of disney plus, which came out of the gate with 10 million subs on day one, and you look at the incredible success of netflix over the last decade, and i think they all got excited they could do that, too, and it was -- i don't want to say it was easy but it could be

replicated i think now you are seeing that this is much, much harder and it's not as easy as it looks we will take a more balanced hybrid approach of we will have a streaming service but not the world's largest streaming service, and we will be okay to have a smaller but profitable streaming service. now in the last couple of weeks, you heard it pretty clearly from disney's bob iger. they are just not going to chase they way they were they are going to have smaller ambitions. it's impacting the stocks. that growth engine you sort of referenced melissa is not going to be the same growth engine but the profitability will be far better i don't think they have the balance sheets to attack netflix knowing their broadcast tv businesses do not have the sort of stability that they hoped for. those businesses with the shift of ad dollars, those businesses are challenged

i think they are making the appropriate sort of adult decision to focus on their financial outlook and not really risk -- you know, stretching the balance sheet beyond what is possible >> rich, just really quickly is there a future? that's pretty grim when you talk about it what is the third party they get to sell to down the road if it's not going to be netflix or the cable carriage companies, what does the future hold >> look, i think there are going to be a lot of players -- look, i mean, i don't think -- netflix is not going anywhere and they will buy content from third parties and you are seeing apple buy more content from third parties. apple service is spending billions of dollars a year on content that is hbo-like i do think between amazon and apple and netflix, there's going to be places to sell content i think your fear, though,

beckys becky, which is a good one, if all these services cut back do you have fewer places ultimately to sell content to that fear has been out there for a long time. there always seems to be somebody that wants to buy great content. so if you make really good stuff, i think you always end up finding buyers, and that's what history has shown us throughout the entire time of television, whether it's broadcast, cable, streaming. if you make good content you find buyers. i don't think that will be any different. and there's something where you may put something on your service for its first run and then may sell back episodes to netflix. that's what has happened time and time again is that you window content versus this focus on everything has to be exclusive. i know why netflix does it, and even amazon started to shift their policy it's something we never would have fathomed 12 or 18 months

ago. >> great to see you. thanks >> thank you still to come this morning, the debt limit negotiations. china, tiktok, and national security concerns all on the table for senator ted cruz he joins us. plus, will the next fed decision be too close to call. by the way, cnbc is celebrating asian and pacific islander month throughout the month of may. here's sarah nguyen. >> our mission is to celebrate diversity and culture in the coffee industry. as the first generation and knowing vietnam is the second largest coffee producer in the world is my position to preserve my heritage while also sharing culture with the world as you can share asian stories,

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their results, and they missed the estimates of 4.8 billion comp club sales excludeing gas missing estimates of 6.1%. the company also reaffirming its outlook for the full year, and trading slightly off by 0.8 of a percent. let's get to our next guest. sylvia, great to have you with us >> thanks for having me. >> we have been talking about the jitters surrounding the debt ceiling and coming toa deal, and the s&p 500 is holding on to around 4,200 i am wondering if you think, you know, getting to a deal is actually a sell the news sort of event? >> you know, i think that the deal feels a little bit like a saga at the moment

i think most investors believe there will be a deal, whether it's short term or a longer term permanent solution i don't think most investors believe the u.s. will default on its debt, but in terms of your question specifically about a deal getting done, we saw what happened a few days ago where there was evidence that it sounded like a deal was going to get done and the market popped on that news i would not be surprised if you get a short-term pop on an agreement here, but i don't think that's a start to a new bull market or anything like that i think there will be short-term momentum that will be positive >> you have gotten a lot of fed speak, and we will get more today, sylvia, but in terms of thinking about what kashkari said, which is maybe a pause but an indication that tightening could still come, in terms of possibly two more -- he would be in the camp of two more right now, and does that make a difference in terms of your view

of the markets in the next six to 12 months >> it doesn't at this stage. i think at the point where we are closer to the end of fed tightening in tumerms of rates, and in terms of markets themselves we see where this is all going, right at some point rates are going to be held higher for longer and then reversed. if you think about equities and positioning in equities, a lot of factors are leading to the pmi and consumer spending and listing in the consumer data, where if you are looking to buy on the days we have pull backs, there's an average because stocks are probably lower today. >> in thinking of microsoft, for example, and the price just

raised, and these are stocks that have led the markets. do you think we will be higher in those names and big cap tech six months from now? >> i do think we will. there's a great argument they have run up too much if you look back, last year i think was very much a bear market for technology. and tech was under valued and it was a great opportunity to jump in and there's a catalyst why tech is rallying, and it's artificial intelligence and machine learning these are technological advancements being deployed and used in the economy, so i think it can sustain in the sector >> thank you >> thank you coming up, what looks to be a fake a.i. generated image of an explosion near the pentagon sparked a quick dip in the markets before officials said no suches in department had occurred wl lkweilta about it right after the break. "squawk box" will be right back.

when it comes to the consumer, we are getting a lot of mixed signals right now, pressured but still spending what are you seeing? >> you are right, consumers are spend spe spending albeit on credit. we're saying to our clients, really take advantage of a.i.-driven scenario planning and build a set of no-regret priorities >> what are some of those

priorities >> the top three that come to mind, continue to focus on growth and innovation, and then cost and containment, and then third, this is the time to look at workforce resiliency. robotics and a.i. have come a long way >> how are you seeing this play out in our industry? >> i work with our retail and gcp clients every day, and this is the time to look at the competitive advantage, and that's around emerging technologies, generative a.i., and web three and social commerce it's clear in a capital-constraint environment, those placing their no-regret strategies versus those that have not >> thank you for sharing your expertise. >> thanks.

focussing on air -- a.i., and he went on to say while some have tried to reduce the moment to the competitive a.i. rates, it's so much more than that. making them available to our users, and we care deeply about this, and what matters even more is the race to build a.i. responsibly and make sure as a society we get it right. well, a fake image, speaking of a.i., of an explosion near the pentagon went viral yesterday on social media the picture which may have been generated using a.i. caused the market to fluctuate for a brief time, and we're sorting this

out. on twitter, it was generated by blue check accounts. >> yeah, the reason why there was able to propagate so quickly yesterday was because of the way musk has changed twitter you pay, what, 8 bucks a month to get the blue check mark and you get prime real estate in the app when people open it up anybody with 8 bucks a month can do this. yes, musk may be right that it helps to weed out fake people, and it gives people an heir of authority. i don't know if twitter is ready for this >> i was looking at that this weekend, fake accounts that are mimicking my account, and it fooled me when somebody pointed it out to me >> was it verified >> no, but i am not verified

i should verify myself -- >> what is the point they can verify themselves >> it used to be a cesspool, and now it's a cesspool plus from what we were seeing yesterday. >> how do you do the verification who is responsible for this if somebody fakes it and goes on with this? >> it's not ready for what is coming >> this weekend, just what you could potentially do with that the fcc will have to up their game and see who is doing what >> exactly >> one of the accounts that retweeted the image was a fake bloomberg account with a fake blue check >> yeah, for 8 bucks you can defraud anybody you want >> yeah, and send the market lower, whatever you want to do, and there's no check on that >> the market was down 3%, and that's kind of small, and you

have see the biotech stocks move in double digit percentages. imagine the power you could have if you impersonated the right person and spread misinformation -- >> it's like a pfizer account. >> yeah, that happened a couple months ago >> yes, they said they would offer discounts from one of their drugs, but it moved pfizer shares >> part of the other thing is, we have to inoculate ourselves to treat what we read on social media, like we read a supermarket tabloid, right even journalist are still missing it take an extra beat just because it has a blue tick now doesn't mean anything anymore, it just means somebody paid $8 a month to make sure that tweet got in front of you >> what is scarier, all of these companies are working so hard to make a.i. and generative a.i. so good, and the further down the road we go the more convincing

the next fake tweet and fake video gets, and the power they have >> yeah, and they are talking about the regulation, and there's an a.i. law being worked through, and it's how do we combat this? it's happening so quickly. they are not equipped to handle it let's have a marker on images to prove they are a.i., but they can edit that out. >> if this is a terrorists or -- this is going to be a minor barrier. >> yeah, what we saw in the 2016 election, people were able to create thousands of accounts that pumped a certain conspiracy theory, and this will stop it, and sure, what he doesn't account for is that the authority a blue check mark

gets -- >> there are serious problems erupting >> yeah, we are not ready, becky. this is one incident of many to come >> steve, thank you. >> thanks. up next, senator ted cruz will join us on set for a wide ranging interview. everything from the debt ceiling to china by the way, we will get him to weigh in on all of the technology issues we were just talking about. futures this morning at this point, you are going to be looking down across the board. nasdaq down by 18. the s&p down by just over 7. "squawk box" will be right back. , they can add up to something incredible. because when you tap or order online with your mastercard at restaurants and grocery stores, mastercard will donate one more cent, up to $5 million to stand up to cancer. as individuals, we are powerful. but never as powerful as we are when we come together. the strength of us: priceless. ♪♪

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♪ president biden's meeting with house speaker with kevin mccarthy on monday didn't yield a deal on the debt ceiling just yet, and speaker mccarthy pledged to speak with the president daily until a deal is done for more on this we want to bring in senator ted cruz from texas, and he's a member of the foreign relations and joint economic committees. thank you for being on set >> good morning, becky good to be with you. >> i am so sick of the debt ceiling talks, and nobody knows what is going to happen except kevin mccarthy and joe biden do you think something happens do you think a deal gets done? >> i hope so and it probably

does, and right now it's a game of chicken and the question is who will swerve. i think the house passed a good bill they passed a bill several weeks ago that raised the debt ceiling and it takes real steps in the out-of-control spending. what has happened on the spending and debt side is crushing, is unprecedented and i think the house bill has reasonable and modest steps, it's designed to cut $4.8 trillion over ten years. and i think it's a very reasonable piece of legislation. obviously, the white house is not going to agree to it exactly. but i think it lays out a good road map of where they should go the question is, you know, joe biden started off with the position that he wouldn't talk at all, he wouldn't compromise, he was unwilling to consider anything that was obviously unreasonable. and he would to fold for that, because that didn't withstand scrutiny where we are now, i don't know if the white house is willing to be reasonable.

i'll tell you what i've encouraged president joe biden to do, which is listen to vice president joe biden. in 2011, the last big debt ceiling showdown we had, where republicans held the line and said, we need to rein in spending, it was vice president joe biden negotiate d the budget control act, designed to cut $2.3 trillion in spending. and he sat down with mitch mcconnell and with the house speaker and they negotiated that deal i hope joe biden as president has at least some modicum of the same willingness to do that. i'm worried that he doesn't have the ability to do it anymore >> look, i will say, onestly, this is going to be a negotiation that plays out kevin mccarthy definitely has a stronger hand because he passed the bill in the house. that gives him a stronger negotiating power. he is not going to take something to the floor that he can't get at least a majority of his caucus to sign off on. hopefully, the two of them can work some sort of a deal out

look, i think we both agree that it's not a good deal in any way, shape, or form if we default on our debt >> we should absolutely not default on the debt. and i will tell you, i am more worried now that we might default than i ever have been. >> really? >> the reason is, i don't think biden is up to the task. i don't think he's engaged in the negotiations personally and directly >> they're talking and sitting and meeting every day? >> here's -- >> it may be later than we -- >> his mental capacities are markedly diminished from -- >> oh, no. >> -- from even a few years ago. >> don't make me go through this and i think the decision making in the white house is being done by a bunch of 20-something and 30-something little marxists, who don't have an appreciation for reality. >> i told you i didn't want to dig into this, we're going to get stuck digging into this. you can make the same argument -- there have been people who questioned the last president's ability to have

rational conversations and do these things there were people who were talking about having him removed with the 25th amendment. but, look, it's true he's making the talks. >> i can tell you the reality. when the senate is in session, every republican senator, we have lunch together. we sit around and talk about how virtually none of us have spoken to the president even once he doesn't talk to republican senators and that's weird we all know joe. i was sworn into office by vice president joe biden, he was a man of the senate. this white house hides him and it's unfortunate -- >> didn't mcconnell just meet with him >> mcconnell had met with him briefly. i used to talk with trump every week, every day -- i spoke with obama regularly. it is weird -- lindsey graham has flown all over the world with joe biden for 20 years. lindsey hasn't talked with joe they keep him hidden that's not disputed. nobody denies -- >> he's not doing media, but he did just sit down with mcconnell

and mccarthy has talked to him every day. >> he also just went to the g-7. it's not like this guy is hiding i don't want to be in the corner of defending anybody >> intellectually acute on things, great, if he is, he ought to do what he did in 2011. i don't think he is. and i'm worried because the young extreme staffers in the white house have no appreciation for just how damaging a default would be so i think they're quite willing to force a default because they'll blame it on republicans. and that would be wildly irresponsible. >> the talking points i hear all the time is that this would be much worse for the president who would go into a default, because he's the president that would get blamed in the next election cycle, which is why donald trump is urging anyone in the house to say, no, vote against this >> i don't think the white house believes i think the white house believes, whatever happens, the media blame it on republicans. whether that's true or not, that's what the white house believes and one thing to be clear. joe biden today could take the

chances of a default to zero here's what i think a responsible president would say. he would stand up and say, under no circumstances will we ever, ever, ever default on the debt, no matter what the united states honors our commitments. how could he do that >> he could that by invoking the 14th amendment >> except that would be patently unconstitutional he could do it in a very simple way, which is clear to me. which is every month federal tax revenues coming into the federal government significantly exceed interest on the debt and he could say, we're going to pay interest on the debt we're not going to default >> we're not going to pay everything else. >> that's called prioritization. >> and they may get to that situation. >> but the reason that he hasn't said that, which he could say. he could take the chances of default to zero. the reason he hasn't is i think the white house is trying to scaremonger on this. they're trying to threaten default -- >> well, not paying the rest of our built would not be great either you stop paying the veterans, the defense department, the salaries of people in congress >> okay, not paying the salaries

of people in congress would actually be a pretty good step >> that would be the first bill to pass, actually. >> everyone agrees that the debt ceiling needs to be passed >> it's a negotiating tool >> it's the only thing that works. given "squawk box" gets into the numbers, i think it's worth pausing for a second and reflecting at how different this is from the past so 2017, total federal spending was about $4 trillion. total federal tax revenue was about $3.3 trillion. now, quick math, that means we had about a $700 million deficit. that was 2017. fast forward to today. total spending has gone from $4 trillion up to $6.5 trillion $6.4 trillion. tax revenues have exploded tax revenues have gone from $3.3 trillion to $4.8 trillion. now, quick pause to note, when we signed the 2017 tax cuts that i fought very hard to pass,

every democrat went on tv and said, 'tis going to slash federal revenues and blow up the deficits turns out they were entirely wrong on that. every year, federal tax revenues have gone up, they have gone up from $3.3 trillion to $4.8 trillion the problem isn't tax revenues the problem is, we had a spending binge from the democrats that has caused the national debt to go from $20 billion to -- $20 trillion to $32 trillion >> we did pass an infrastructure bill, a ships bill, the ridiculously named inflation reduction act -- >> look, i voted against those bills. those were mistakes. >> you voted against the infrastructure bill, too >> yes >> so there are people who say, even once you get through that, you've got to cut the spending back those are long-term projects, that even if they were in need -- >> by the way, if the infrastructure bill had focused on actual roads and bridges and infrastructure that we need, i would happily have voted it.

but it was filled with special interests that had nothing to do with infrastructure. >> so, you said it, "squawk box" is all about the numbers there seems to be a firm belief in the markets that a deal will be reached it sounds like you're saying to market participants, brace yourself, because we could actually go to default that's a scenario that we are not pricing into the markets right now. >> i agree and i think a deal will be reached. >> you do? >> even though you're saying joe biden is not going to be the vice president of 2011, you think a deal will be reached >> i think a deal will be reached, but i worry that the chances of a default are greater than they ever have been i worry that this white house is reckless enough to force a default. i don't think that will happen i think that's less likely than not, but the odds are higher than we should be happy with >> let's switch to technology, we were just having a -- >> well, the discussion about what happened yesterday. the fake picture of the pentagon being bombed what else can you imagine under

this scenario? how do you stop it >> it's frightening. between technology, the technology of deep fakes, between where ai is going, it's just going to be a very dangerous environment for the foreseeable future and we're going to have to have real skepticism to almost anything you see to make sure it is real and accurate it's not going to be that hard to suddenly have video of some politician saying something they never said or people doing things that never happened it's going to be incumbent on -- it's actually why i'm a big believer in free speech, that if you have lots of people engaged, you can have realtime fact checking you remember one of the first big instances of this was dan rather, back in 2004, where he had "60 minutes," this big expose on george with bush with these documents.

and it was a bunch of bloggers in their pajamas who noticed the documents that he claimed to have appeared to be fraudulent and it ended up within a couple of days revealing that they were fake and fraudulent documents. that was one of the first illustrations to me of power of the community of focus online being able to point to facts and correct them and with new technology, we're going to need to do that >> it's easier to do that when you have a limited number of news source and a bunch of people fact checking when everybody is a news service, which is essentially what you have on a lot of these social media apps, that becomes -- you know, it's how something can get faked and spread instantaneously and before you have the time to factcheck it the stock drops significantly, there's questions about security, something along those lines. >> and i would say yes and no. i worry about what has happened to much of the media there's a reason i like coming on "squawk box," because y'all actually talk about substance and you get into it and you guys

are much, much less partisan than most of the other media outlets out there. one of the really unfortunate consequences, i think, of the age of trump is that much of the media, trump broke the media that stations like cnn, msnbc, they hate trump so much that they've stopped practicing journalism and i don't think that's good for america when, when people who are supposed to be journalists view their role as advocates pushing a point of view, particularly in that context. i think it's important to have lots and lots of people, where everybody can be a publisher, and can press back >> so the media is broken, but back to the question, is there anything congress can do about ai because misinformation can spread and it's like shouting "fire" in a crowded movie theater. in this case, it could be billions of dollars in market cap shaved off the stock market, a single stock, so many

different republicanifiramifica. >> it's not like congress will be able to wave a magic wand and make ai go away. it's not like congress will be able to stop criminal activity and make criminals go away either >> you signed up on an amicus brief against section 230, which is a good start. >> section 230 was passed at a time when the internet barely existed. and it was designed to protect a nascent industry and to enable it to grow we now have big tech, these massive bhoehemoths, in particua 230, when it was passed, congress assumed that big tech would be a neutral public square it wouldn't be putting its thumb on the scale and the comment i make or you

make, it's not facebook's fault. what's happened is that big thing is that they've been able to sensor speech. >> that should be even more of a concern when it comes to ai. ai are the ones that have accrued billions of dollars in market cap because of notion that they are in the lead on ai. is that a much bigger concern? and how does it factor in also, there is a thinking that if you constrain the development of ai in this country, you're going to actually allow other countries, particularly china, to take the lead in this technology. >> i think you make a very good point, and i'm quite nervous about constraining the development of ai. are there very really dangers coming from ai across the board?

yes. i chaired the very first congressional hearing ever on artificial intelligence. the problem is, and is there a need for congressional action on some point almost surely, there is. but the problem is, most people in congress don't understand this at all. look, we don't do intelligence very well, much less artificial intelligence and the senate, the median age is about 142 one of my colleagues on judiciary referred to the internet as a system of twos we should be careful asking folks who don't really understand it to regulate it i think congress needs to get smarter. i think we need to have hearings, consider the, but i think we should proceed slowly, so that we don't go in and break things the last thing i want is for china to get way, way ahead of us on ai, because government regulators have gotten in the way. so it is reasonable to be worried about where ai is taking us, but i don't think congress is going to fix the problem overnight. >> senator cruz, i want to thank

you for coming in today. >> always a pleasure >> good to see you >> it is just after 8:00 a.m. on the east coast and you're watching "squawk box" here on cnbc taking a check on how we're going to open up, 9:30, s&p looking to lose about 12 points. nasdaq looking to be down by about 38 we've lost a little bit of ground pre-market as we are waiting any news on a debt ceiling deal let's bring in mohammad el aryan, president of queens college at cambridge university. mohammad, always great to see you. >> thank you for having me, melissa. >> with the s&p close to 4,200, it seems like the stakes are even higher for there to be a deal on the debt ceiling and before this "x" date just because of the valuations that we are at right now. >> i totally agree first, the only people who benefit from this debt ceiling saga are the adversaries of the united states. we are sending a very negative signal about our ability to run our economy, let alone be an

anchor for the rest of the world. and the markets so far has actually dealt with it very well there's three big uncertainties. the debt saga, whether the fed has got to hike, pause, or skip at its next meeting. and of course, what's happening to credit. so i look at this market and actually i'm very impressed by how stable it has been over the last month >> you know, it's interesting that you mentioned, you know, the beneficiaries or adversaries, and i sort of heard the same commentary from lori of rbc yesterday, who said that u.s. investors are pretty sanguine when it comes to the debt ceiling, the belief that there will be a deal in place. but international investors are much more worried. is this going to be a permanent harm in terms of the perception of the u.s. markets or just, you know, oh, it happened in 2011, it happened in 2017, and this is just another time. >> it was happening on its own, i would say it would be very transitory, to use that awful word but it's not happening on its

own. there's other things happening you know, people still remember that the global financial crisis originated in the u.s. people still remember that the trade tariffs that went against international law originated in the u.s., in 2017. people still remember that we have a banking tremor, not a few weeks ago. so it's starting to add up and this is important, because already, certain countries are embarked on building little pipes around the dollar as the reserve currency, trying to be the lead example of that so we've got to be careful we must not give what the riest of the world, one excuse after the other, to try to derisk from the u.s. >> there are a couple of ways of looking at the s&p and how far it's come and how well it's held up one way is to say, it's stronger and more resilient than we think. or another way to look at it is, we are much more vulnerable, because of the heights we are at right now, because of the concentration of the gains in the large caps at this point

what's your view of where we are? >> it gets even more so, because the s&p has been anchored by what i call all-weather names. tech in particular is seen as doing well that is seen to benefit from the ai theme and that is seem to be able to generate revenues almost regardless of what's happening in the world economy so you have a situation where you've had a few names, and then people are waiting so this is what i call an unstable equilibrium it's going to go one way or the other. hopefully the s&p will go higher, because these things are going to resolve to the positive side but it's uncertain we are fairly priced to what we don't know, and we need to figure, when are we going to find out, including the fed. the fed will play a critical role here. >> fairly priced i actually thought you were going to say we were overpriced.

it's surprising to me that you said fairly priced why do you think we are fairly priced on the s&p? >> so i've saids for last six weeks on this show, we are fairly priced. and i have been consistent in that view. because a lot of good things are happening in the u.s. economy. the labor market remains strong, there's a lot of entrepreneurial activities going on. there is reason to be positive about productivity gains if we can just stop shooting ourselves in the foot, there is a run way for a bumpy journey to a better destination we just have to stop shooting ourselves in the foot. >> so good news is good news, moh mohamad, finally, in the markets. when it comes to fed rate hikes, are we going to be fairly priced if two more hikes come down the pike, as james bullard is saying, or are we going to be fairly priced if it's one hike, but also the indication that there could be more to come? or do we need to see a pause, a

full-stop pause in order to say that we are fairly priced? >> so of the three things i mentioned that i'm certain, the debt ceiling, what the fed is going to do next, and what's going to happen to credit, to the economy. it is the fed that's the most difficult to resolve this is a fed that has been inconsistent it has made mistakes in its analysis, in its forecast, in its communication, and its supervision. and it's very hard to predict. so melissa, i don't know what the answer is to that question, because i don't think the fed itself knows what it is. >> fair enough mohamed, thanks. coming up, zoom cfo, kelly stekelberg first off first quarter earnings "squawk box" will be right back.

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let's get to some earnings movers loes lumber prices fell. comp store sales fell 3.4% in the first quarter. the stock is down by 1.25% in the green is dick's sporting goods. that company topping wall street sales and profit estimates same-store sales missed, but dick's affirmed its full-year earnings guidance and its expectations for comps the stock is up 2 1/3 percent.

coming up, the ceo of zoom phil lebeau is live at denver's international airport. phil, how's it going so far. what's the traffic look like >> it's a mess, in terms of getting through security not in terms of flights. and that's part of what we're going to talk with scott kirby, ceo of united airlines about the growth here in denver, it is close to becoming united's largest hub. is the airport ready for it? we'll talk about that when "squawk box" returns salute to veterans memorial day terry bradshaw: hi, i'm terry bradshaw rocky bleier: and i'm rocky bleier. col. greg gadson: and i'm col. greg gadson. terry bradshaw: on this memorial day, our heartfelt thanks, to all of our military veterans for their service. col. greg gadson: we honor our veterans, and those who no longer are with us.

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united airlines betting on its fastest-growing hub to help handle what is likely to be a record-breaking memorial day weekend more travel. >> good morning, becky >> scott kirby, ceo of united airlines we got through security. >> we did! a lot of people down there, aren't there >> yes, a lot of my friends for about a half hour. let's talk about memorial day weekend. 2.9 million passengers is what you're expecting busiest ever for united airlines there's no slowdown in demand, is there >> demand is really strong the consumer is strong we've had this month six of our ten biggest booking days in history, the other four record

days were in march before silicon valley bank. demand is really good. bookings are strong. it's going to be a busy summer >> part of the story out here today is the fact that you're adding 12 new gates. you're adding more flights, especially to some smaller markets. as you were doing this, is there a concern that you know the demand is there. you want to add the flights. this is an example of an airport where there's some physical constraints here and it makes the flying experience, maybe not with united, but getting through security, a real mess. >> most of the time the security situation is working okay around the country. it is a growing problem. we've had it -- i called it a skunks works team. plenty of challenges, but we're going to double the amount of passengers we had versus pre-pandemic within a few years. just airport constraints and checkpoints are a perfect example. the lesson from that, we're working with airports to improve it, but we've got to build

efficient, functional -- it's nice to have a lot of shops on the ground floor when you're standing at security, but a lot better to have lines that don't go out the door. >> that will take years to run it a lot of work -- >> newark is a perfect example where we started working with the port authority at newark and there's huge improvements. that situation is 20% more seats than we've ever had before this summer, but the security situation is significantly improved, even with 20% more seats. >> let me ask you about the d.o.t. now saying that it wants to propose -- it's proposed a rule where there are going to be fines and there's going to be payments to passengers who are delayed, excessive delays. similar system to what you see in europe. when you look at that, do you look at it and say, good for the pa passenger, obviously, no airline wants to pay if there's excessive delays but you will and do you look at this and say, this is part of the problem, the faa also needs to step up to the plate here >> we already take care of our passengers on things that are

within our control, and united is running the best operation we've ever run in our history. 10% more pilots, you know, double the amount of spare investment this year, 25% more spare aircraft the other thing is air traffic control. every day we wake up to air traffic control delays that flow across the system. the issue on this is about safety we've built the safest system in the world. we shouldn't chip away at that foundation we have a culture where we just won't do that. >> look, we've hired air traffic controllers, we've gotten more who are coming on, we've got the staffing >> but you're saying, they don't have the staffing. >> transportation of secretary said a week or two ago, they're 2,000 or 3,000 air traffic controllers short. there's fewer today than there were 30 years ago. we have to fix that. that's the issue, we all know that's the issue, we all need to get that fixed, if we're going to really have an impact on

this -- on delays. >> scott, becky has a question for you. >> scott, your prediction that you are going to, i think you said, double passenger miles or travel miles from 300 in the next couple of years, i don't see how that's possible, because things are bursting at the seams right now. none of these are fixes that can be corrected anytime soon. i'm talking about getting through security, you're talking about getting your bag back from these places, you're talking about being transported once you are back in the airport, trying to get from one place to the next you used newark as an example. i flew through the new "b" terminal there, and it took forever to get the luggage, and there's no connection, because the monorail system has not been connected there and is not going to be for years. you're talking about some major hurdles to getting to that goal. what makes you think that you can possibly get there >> well, there are you should be flying out of the "a" and "c" terminals at united, becky, and it goes a lot smoother >> it was on united, i'm atalkin

about the new terminal >> oh, new terminal "a." in any event, terminal "a" is a good example -- there is a lot of progress being made terminal "a" is a good example of, it's open, but everything about terminal "a" is not open yet. it's not up to 100%. but that's investments that started years ago that are beginning to pay off and so i think that's the point. and when i say we're going to double the traffic by the time we get to 2027 versus 2019. and so, we have time to work on all of these things. and there are projects underway really around the country. some of the growth, a lot of the growth takes a market like dulles is going to occur during the offpeak, instead of having four banks a day, it will have seven. so there are ways to grow, but it does -- it is going to require investments at airports. and that's where we spend a lot of time on our team, working with airports to make investments, to have more ability for passengers >> what about the faa, though.

they have already said that you're going to have to fly fewer flights into the new york metropolitan area. even if you fix the airport. what's going to fix the faa to allow more flights to take off >> we need to get an faa reauthorization bill that gives them money for technology and staffing this is the one i'm the most worried about. united, we have the advantage of, we can fly and the system by updating we carry more passengers by flying bigger airplanes. but this is by far the biggest structural issue that i'm worried -- we see it this summer, it affects united, it affects every airline. this is going to be the ultimate limiter on growth here in the united states. because the air traffic control system is best there's ideas like, let's limit private jets why do private jets fly into newark, it's crazy that's going to be the limiting factor >> they're playing the music they're playing our song scott kirby, guys, we'll send it back you from a very busy denver

international airport. >> dpgood luck, phil, thank you when we come back, former white house chief of staff bl il daley weighs in on the state of negotiations over the debate over raising the debt ceiling. we will be right back. our retirement tools and advice can help you leave a legacy for the ones you love. that's the value of ownership. salute to veterans memorial day can terry bradshaw: hi,gacy fi'm terry bradshawve. rocky bleier: and i'm rocky bleier. col. greg gadson: and i'm col. greg gadson. terry bradshaw: on this memorial day, our heartfelt thanks, to all of our military veterans for their service. col. greg gadson: we honor our veterans, and those who no longer are with us. rocky bleier: to all of our military serving around the world, thank you for defending the many freedoms we enjoy.

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coming up, breaking economic data from the philadelphia federal reserve and the cfo of zoom will join us on first quarter earnings stay tuned you're watching "squawk box" on cnbc

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welcome back to "squawk box" on cnbc.

we're just seconds away from some business survey data from the philadelphia fed, taking check on how we are set to open right now. s&p looking to lose about 8 at the open the nasdaq maybe down by about 25 and the dow looking to be off by about 54 points. checking on the ten-year, we've got the ten-year at 3.755. the two-year at 4.391% rick santelli is standing by at the cme in chicago rick, the numbers, please. >> philly fed, non-manufacturing. this is the service sector, what most are paying closest attention to, especially the federal reserve and the federal reserve is watching closely, we all need to watch. minus 16 is the may read, minus 16 that compares to minus 22.8 in the rearview mirror. and still unrevised. and what's notable about minus 22.8 is that it was the lowest since dec of 2020. so these levels are not good minus 16 is a pit of an improvement, but do keep in mind, we've only had one positive number going all the

way back to july of '22, and that was for the month of february of this year. and that was 3.2 so you can see, the numbers are weak and small, but it is ates, hovering at 375 for a ten-year mostly, that means we're up 31 basis points month-to-date from the closing levels of the last day of last month. on a two-year, it's up 38 basis points month-to-date so we have seen some very, very large moves and, of course, they've pushed mortgage rates higher we're going to be having some housing numbers yet to come out at 10:00 eastern in the form of new home sales and i want to point out one more thing. and of course, that would be that as interest rates continue to move up, we see the curve inversions continue, because two-year notes and short maturities have once again grabbed the lead on what has proven to be a very stubborn federal reserve when it comes to

flagging anything on the pause side, which we're all speculating, of course, but yet, still two-year note yields leading the charge for higher rates and lower prices melissa lee, back to you >> rick santelli, thank you. let's go now to a call by the former chairman of the federal reserve, ben bernanke, and a new paper thauthored with the irs' chief economist bernanke argues that a soft landing is still possible for the u.s. economy steve liesman has more on this steve? >> two of the world's top economists in a paper that looks at the sources of the pandemic-era inflation argue it's possible to escape it without a massive rise in unemployment it's going to be difficult, but that would be a key part of a soft landing former fed chair ben bernanke and former imf chief economist, olivia olivia balancechard, they argued that a consumer preference for goods is what caused the inflation outbreak it was not at least driven by tight labor markets, but that's changing, according to the two the paper says from as early as

2020, tight labor market conditions still accounted for a minority share of excess inflation. but according to our analysis, that share is likely to grow and will not subside on its own. the portion has traced its origins to overheeating of labor markets can only be reversed by policy action. policy action means tighter fed policy the two economists are backing what the fed is doing right now implicitly the more interesting idea, how much unemployment will have to rise to conquer inflation? the two have at least one optimistic scenario, and i'll give you that one. for reasons not fully understood, the shop worker matching process becomes less efficient. if that ship were to be fully reversed, it could bring down inflation overtime without a significant increase in unemployment an immaculate disinflation alternatively, if we don't get back to a place where you have this normal relationship between openings and unemployment, unemployment will have to rise further from the current level

of 3.42 as high as 4.3, maybe stay there for some time fundamentally, that would be reducing job openings, but not jobs that's a key idea of fed chair jay powell it's out there as a possibility, though just one of three >> so one of -- so what is the worst-case scenario, according to the research? >> you rise -- the unemployment rate goes up by a percentage point or more and has to stay there for a while to wring inflation or the labor market portion of inflation out of the inflation problem. >> how much of this, though, steve -- it sounds like, you know, they're trying to predict something about a situation that is still fluid we still don't know if the fed will continue to hike, if they will continue to hike and then pause, or hike two times, or whatever it is so, saying that this wants -- it just seems kind of premature it seems sort of like a moving target >> to be fair to the office, melissa, they acknowledge the situation is fluid and say a lot of things have to fall in place.

i'm reading the paper. i'm getting it down into a 90-second version of a 50-page paper. just to be fair, what's happened is a very strange relationship usually, when job openings fall, the unemployment rate comes down or goes up, because there's fewer job openings we have this incredible ratio of high job openings to unemployment and they talk about an inefficiency in matching workers and jobs before the pandemic, we were much more efficient, so what they're saying -- and it's not a crazy idea, melissa, is we get back to being as efficient as we were of matching workers to job openings and that's not a crazy idea. if that can happen, perhaps we can get back to a lower inflation rate, not driven by higher wages and, of course, low unemployment >> sorry if i'm being obtuse about this, steve, but it sounds like the unemployment rate is -- it's not a valid number, almost. that there are things that are making it look even lower.

>> i'm not sure that's accurate, melissa. i think the unemployment rate seems to be what it is in fact, some people over the years, and i've been doing this for a couple of decades now, say, you can crunch and look at all the jobs numbers you want, the thing that tells you the most that you need to know about the job market is the unemployment rate. and it is low and i think it's real it's the only thing we have to really gauge what it is. it's a survey of people around the country and it keeps coming back low and lower so i don't know what alternative data would suggest that it's not real >> all right steve, thanks. >> a pleasure. >> steve liesman all right. no deal on the debt ceiling between president biden and house speaker kevin mccarthy, but mccarthy called the latest meeting between the two men productive meanwhile, the treasury secretary janet yellen affirming a week from thursday as the earliest date that the u.s. could be at serious risk of default. joining us right now with lessons from the debt crisis of 2011, former obama white house chief of staff, bill daley of course, also, the former

commerce secretary he's now a wells fargo vice chairman but bill, let's put on your hat of chief of staff and try to look at this from just a practicality matter. what needs to happen what do you think is the most likely scenario and what's playing out behind the scenes? >> what you're seeing play out yesterday, with the speaker and the president, it is in both of their interests that this get resolved they've both said it senator mcconnell has said it. schumer has said it. we're not going to default a week from thursday there is a little fudge after that, quite frankly. it's not as though on june 1st, we go off the cliff. there usually is some play but i think there is a desire on both sides, both for politics and economically, listening to steve and listening to rick, with the numbers the thought of us causing an economic crisis because the politicians can't get together, in this serious time for the economy and for the world, would

be absolutely crazy. so i'm optimistic, but with our politics being so decisive lately, we could stumble into a situation, at least a week of uncertainty, running up to this, or a few days beyond june 1st, which could have serious consequences for the u.s. economy. >> is the problem with mccarthy and biden, that they don't want to do this or is this a problem that either of them can't control their base they're not strong enough to get the -- their base in line? >> look, no one's going to get everything they want and when there is a deal at the end and we've seen deals in 11, we've seen them in 13, 15, 17, 19, '21. it's not as though this never happens. that there will have to be a lot of people disappointed on both sides. speaker mccarthy will not be able to deliver every one of his house members and the democrats will not deliver all of them in either the house or the senate,

and there'll have to be a compromise and the extremes on both ends will be probably sorely disappointed but that's moving the system forward. if everyone has to be happy, then you won't see it and you'll see the american people, and our economy seriously impacted and a lot of unhappy americans >> that's what i mean. if they are not strong enough to be able to say, this is what we're going to do, and if the rest of my party doesn't like it, suck it up how come they haven't done that to this point? >> it's a negotiation. so you can't do that to -- you get to the -- one thing we know about congress, they can never act until they're at the edge of the cliff. and that probably will be, if not next thursday, shortly thereafter so you need a deadline in congress to get anything done. and the crisis has to build. we've seen this movie too often, quite frankly. it's not exactly the way one should run a government, but it's the way it's been for the last number of years with this divided government, which we have and the decisiveness of our

politics but i'm confident that it is both in the speaker's interest, as he looks to rye to get more house republicans elected in 2024, he needs to go to those districts that he thought they were going to win last fall, and they didn't win. and he only got a majority of four or five or six or whatever it is. and on the democratic side, in order to expand and try to do better, they're going to have to show that they can govern in this divided government. so i think it's in their self-interest. but we've seen in the past the ability of the system to stumble at times and cause a crisis. but both the president and the speaker, i think, fact that the president came back from his asian trip, the speaker was willing to meet with him right away, is an extremely good sign. but they still have to get a deal that they can sell, to a majority of the house and the senate not an easy task in today's politics >> so let's put on your hat now, as a wells fargo vice chairman

equity markets haven't really budged on any of this. i think the expectation for most watchers is that something will get done where you have seen some activity is in the short-term treasuries and the t-bills here. yields have been evaluated, especially one, two, three months that's where you've seen the real pressure. what are you telling investors what would you say in terms of whistling through this >> no, i don't think so. i think there has to be serious concern and charlie scharf and the entire team at wells fargo, he has directed all of us to be obviously sensitive. watch and make sure that we're engaged with our customers to make them ware of what we feel is going on. and be ready for, and we're very strong, obviously, financially, if there was to be a stumble in this thing next week, end of next week or early the following week but i think you're going to continue to see a ratcheting up of concern next week i think there's right now sort of a sense of, oh, they'll get this done.

we thought that in '11, too, but we had to go to the final hour to get a deal. and then we still got a downgrade after the fact that a deal was done, because of the turmoil and the crisis since that was going on. and that was -- there were negotiations going on for months in '11 here you seem to have put this all together in the last ten days, two weeks. with the president and the speaker getting together and having an asian trip by the president, which took time out but his negotiators have been engaged and so has the speaker so i think, i think we -- there is reason to be concerned as to the potential short-term impact, if we do stumble into a crisis at the end of next week or early the following week as i said at the beginning, i think the secretary can get a little wiggle room past june 1st, but not probably more than 5 or 6 -- a full week after

that i think you really get into a situation where it will be harder to get a deal then, because you have people, you know, getting more firm in their positions, and more public about what's going on. one thing that i admire about the president and the speaker, so far, is, you really haven't had many leaks about what the positions are. there's a lot of speculation by people who have no idea what they're talking about. but the actual details, they've kept very tight. and that's a good way for negotiators to handle these sort of things. >> bill, thank you good to see you. >> great okay, becky. nice to see you. >> bill daley. coming up, the cfo of zoom joins us live in her company's outlook for the second half of 2023 investments in ai and much more. "squawk box" will be right back.

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welcome back, everybody. shares of zoom are lower in the pre-market they jumped in the extended session yesterday after the company beat first quarter top and bottom-line estimates, but the shares later gave back some of those gains investors may not have been completely impressed by the amount that the company raised stock right now is down by about 2% joining us right now, first on cnbc is zoom cfo, kelly steckelberg. kelly, welcome had strong numbers, but i guess this is maybe a situation where people are always asking what have you done for me lately? >> thank you good morning we're very pleased with our q1 results, as you just mentioned,

we beat on both topline and the bottom line and we raised our full fy '24 outlook for both ou revenue as well as our profit targets. and this was largely due to very strong performance in the online segment of our business. that business we've been very focused on getting it stabilized and that occurred earlier than we expected. we were also very pleased with the performance of zoom phone, which is our cloud pbx solution, which we announced is now 10% of our revenue. and we're just very pleased with the outlook, and we're going to continue to execute through the rest of the year >> what is the situation just in terms of controlling your margins? i know you had announced some layoffs earlier in the year. how is that playing out,right

now, just overall, in terms of whether or not you think additional cuts need to come >> we announced that we had our own target of gross margin of over 80% in q1 we did indicate that we're going to continue to make some investments in the ai throughout the year, but still guided to 79.5%. and then from an operating margin perspective, as you indicated, we made some very difficult decisions earlier this year to reduce, but we're very pleased. we overachieved our operating margins, we came in at 38% and we are continuing to invest in areas that we see we can drive growth this includes our teams as well as our sales and marketing teams. focusing on expanding our zoom contact center teams, as well as, of course, continuing to invest in the topic of ai, that everyone is talking about. we see that is really important to the future of the company and we made some collaboration investments this last quarter with both open ai as well as entl entlopic and we announced an acquisition

of ve vo we are thrilled to have them join our team. we feel great about where we're situated for the future and will have strong margins for the rest of the year. >> what are you seeing in enterprise, average per user was down some analysts are saying that they will see the forecast that this will continue in the current quarter and going forward. what are you seeing right now? >> well, we had not only a reorganization in our sales team in q1. and understandably, that caused some distraction but we are now really focused, as i just mentioned, on continuing to invest in this area and we continue to see strength in zoom phone, in zoom contact center we are thrilled that in march, we launched the beta futures of zoom iq, which launches generative ai now to support our customers in their productivity

around things like meeting summary, chat and email compose. and these are all the products that are going to drive the future growth in our enterprise is segment >> you're not seeing any of the enterprise users migrant to the new yuuniverse of saw very stro performance in q1 in our renewal segments we have a seasonal trend that q1 is our large of the renewals quarters even though some of our customers have been impacted through their own reductions, we were able to work with them, and even if they wanted to reduce to repurpose the spend towards areas where we can help them save like zoom phone and zoom contact center we're thrilled with the position we have in terms of ai zoom iq is going to be a smart companion everybody will have to make them more productive. we have that ai already build into our dna we've been using it for things

like virtual background, as youm the very beginning we're excited about the future of continuing to apply it to our entire product suite. >> we had an interesting conversation with take 2 interactive. is ai going to make companies more efficient, make ift cheape or easier to do these things or just increase the expectations, the product at the end of the day? he thinks this is just a situation where all this technology in the past has been used to make the product better. it's not going to be cheaper or increase margins, but it will make the product better. what do you think? >> i think it's absolutely going to make the product better we're focused on how do we make all of our customers more productive if you think about you can spend less time on tasks like meeting summaries and more time with

your team, that makes us all better and that improve human connection that's really what we're focused on i think in the near term what you're going to see are significant investments across all companies as we're looking to leverage our approaches, take a sfed rated approach to ai. you're going to benefit from the earnings from our language models as well as some of these key collaborations we put in place and, of course, our customers' models as well. in the future i think we're going to see a very different time where we don't have to spend time on doing things like meeting agendas, but, again, connecting with our teams in much more meaningful ways. >> kelly, thank you. bye. when we come back, we'll tell you what to watch ahead of the opening bell on wall street. stay tuned "squawk box" will be right back.

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welcome back to "squawk box" everybody. yelp is the target of activist investor tcs capital management, trying to send a message to the board pushing for the company to sell itself. that's according to a report from the "wall street journal.

take a look at shares right now. up about 10.9%. we're just over 30 minutes from the opening bell. let's bring in cameron daw some, chief investment officer at new edge wealth. great to have you with us. are you surprised the s&p 500 has been able to hold on to the 4,200 range with vix remaining pretty tame, about 17. >> it's incredible how calm marks have been in the face of headline risk. one of the reasons we think markets have been so resilient is because there's actually been a big liquidity boost to markets all year long. one of the dynamics around the debt ceiling is as the treasury hit the debt ceiling, it started spending cash instead of issuing new bonds. this effectively added liquidity into this market and explains why the entirety of the market rally this year in the s&p 500 is driven by valuations, nothing to do with earnings. usually valuations are very

sensitive to things like liquidity. so we can see why we've had this rally and resilience it really all comes back to liquidity. >> i would imagine this is a huge reason we're seeing in particular the rally to focus on big cap technology do you think that continues? >> i think it could be challenged once we get on the other side of the debt ceiling, once we start seeing liquidity become a headwind where we start to see the treasury issuing bonds and draining liquidity if we look at those growth stocks, they're trading with the russell 1000 index at back to valuation bubble levels that we saw during the pandemic at about 26 times so that would be at risk in an environment where liquidity is draining we shouldn't also forget that yields are rising. better economic data is causing yields to rise usually that is bad for those big tech valuations. so we think that this rally in

those names, though it has momentum today, could stall or struggle as we get past the debt ceiling. >> is there an opportunity, cameron, that in the other parts of the market -- there's a real disparate between the performance of the s&p 500 market cap weighted versus the equal weight is there an opportunity in the equal weight side of the s&p 500 where we're going to see sort of a catchup to the gains we've seen in the bigger cap peers >> 100%, yes that's where we think investors should be looking to add to new capital into the equity market instead of focusing on the cap weighted index and chasing the big growth rally, look at equal weight it's only trading at about 15.5% earnings, that's not stretched versus history it has a much more balanced sector exposure than things like the value index, which is good to remember. that has a 20% weight into financials investors may not be as comfortable stepping interval

you which was cheap as well, but has big financials weight. we are looking at the equal weight index giving that valuations have stretched, and it really has lagged year-to-date. >> it sounds like when we get a debt ceiling deal, not to just sell the news but sell tech specifically on this news? >> i think for very long-term investors it likely presents an opportunity more to hold pat you probably have pretty big capital gains if you've ridden tech for the last few years. we're always very conscious of that that's why we're not wanting to chase at this point because we're at the high end of those valuation ranges for tactical investors, yes, it likely does make sense to remove a little bit of an overweight of tech into growth into things that are more equally weighted for long-term investors with tax sensitivity, that's important to keep in mind. >> cameron, great to talk to you, thank you let's take a final check on the markets before we hand

things over. you'll see the dow is off by about 58 points. s&p down by 11, the nasdaq off by about 53. ten-year -- the treasury market has been the thing to watch. 30 year at 2%. two-year at 4.393. melissa, thank you for being here today stayed a little later today. >> yep, and i'll be back tomorrow. >> right now it's time for "squawk on the street. ♪ ♪ good tuesday morning welcome to "squawk on the street." i'm carl quintanilla with jim cramer and david faber we're live at the ceo council summit in santa barbara, california the market juggling a bunch of pieces of news debt ceiling talks, a little more optimism, not a lot of news