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

yields definitely elevated the long bond back to 4 force the first time since march d.c.'s race for the debt deal. speaker mccarthy says talks were, quote, productive, as wall street watches for any signs of negotiation progress. >> inflation headwinds lowe's warning about waning demand for home improvement goods has consumers cutting back on discretionary spending. the ce of of e y will join us. we'll bring you exclusive interviews and insight from some of the country's biggest executives they'll tackle the debate over the nation's finances, ai, the revolution there, the dangerous escalation in u.s.-china tensions a nice set here. gorgeous view of the ocean. >> i'll just tell you, i don't want to be a buzzkill, but everybody keeps saying we're waiting for when the consumer is going to get weaker. other than when it comes to

airplane traffic, the consumer is weaker everywhere they're spending less on cars, spending less at home depot, spending less at lowe's. yes, they spend equal amount at dick's bj's they spent a lot less david, i'm not getting a picture of the consumer buying anything. heb they were buying hard and soft yes, it's true we had kirby on united air, the planes are full. if that's it, what kind of economy are we going toward? >> i would go back to you, jim and say what kind of economy are we going to? >> even though we're out in santa barbara, he hasn't changed higgs ability -- >> except that we're even closer than usual literally rubbing elbows here. >> i'm very uncomfortable. >> we may move to our other set that was set up, but the ocean mist is quite heavy. >> the people at home really care. >> i like to inform the viewers

to everything that's going on. continue what's the economy going to look like for the consumer only spending on air travel. >> you look at the lowe's quarter, i think marvin ellis is doing a great job. you go to home depot, the do it yourselfers not doing well we know they're not buying clothes, not fixing up their houses i think they're tapped out except for the fact this is that long on money, short on time they're still going places one of the things we do know is airplane tickets are up, and the fed hates that, right in the cpi. it's such a sore point, that and rent which is very hard to break down because you can't build any more homes there's only so many -- they're building them only if you want one. the old days they put them up everywhere i just come up with that the fed is waiting for the consumer to get weak stop waiting. >> one of the issues we'll try to tackle at the ceo council

summit al loong with ai, along t tech, along with china john donohoe at nicky talked with our sara eisen about the progress, the thinking in corporate america behind trying to decouple or derisk from china. here is what he said. >> i think decoupling would be disastrous if you look at the trade flows both ways, they play a mutually valuable role. again, we believe in global trade and we'll continue to try to do everything we can to support that. >> here argued that global trade is a force for stability he argued they're not a national security concern they're highly regarded among the chinese consumer >> look, they've always had a great relationship, ministry of sport likes nike

nike stands for exercise worldwide, and that's terrific what we're doing with china has much more to do with the military we don't want to give them the chips. why? because the military it's not like we don't want them to have high fidelity at home. the chips are all about, david, the goal to be able to sink a naval vehicle, be able to stop us while we try to defend taiwan you can sell a lot of sneaks that would be great. it would be terrific if the sneaker economy were to -- >> buy as many nikes as you want but you don't go any h100s from nvidia. >> which would they prefer, jordans or h100s nike versus nvidia, which do they really want >> it's a great, important question i think they want both there's no doubt they're

continuing to build up their military in a significant way in china and obviously want access to the best technology they can. they do not have a home grown chip sector that is anywhere near the level that ours is on the designing front or on the manufacturing front which, of course, then takes you to tsmc and taiwan and the conversation we have often, whether it's this desk or our desk back at the new york stock exchange and one, also, i had with musk a little less than a week ago during our interview in which he discussed that decoupling, carl, and called it supp rating conjoined twins was his line you can imagine what that can look like as well. so not good. it is top of mind for every ceo i think, the relationship with china, even if you don't necessarily have important business in that country, it's still something you're monitoring closely, and for boards of directors. it's right there ai is right there. these handful of issues that everybody has to think about all the time

>> look, we don't want war we don't want taiwan to be taken over we don't want a hong kong version of taiwan. it's one thing to be able to talk about world trade it's another thing to be able to say, look, we're continuing to have them from having hypersonic weapons that can hurt us this is a cold war anyone who thinks this is not cold war is kind of off the reservation. you can't have on the one hand worried about whether we have a naval presence to stop them from taking over taiwan, and on the other hand say, it's really great to have a lot of trade we had a lot of trade with russia, then russia invades ukraine. >> nothing like what we have with china not even remotely the same. >> no. i'm saying taiwan, they want those chips, right they want -- the chinese want what taiwan is sending us. >> again, in the scenario that you imagine, it's unclear

exactly what would happen. >> it would help if -- there was supposed to be talks. >> it would help if they deescalated. >> russia is a rogue nation. china isn't a rogue nation china just doesn't want to come to the table. there's peace in the ft saying china is more worried about japan's chip curbs than our own. we're not doing this by ourself. >> micron was ticked out of china, so to speak this very morning, ms. zullo says china needs the micron chip so badly, they're going to come back sanjay is terrific, great ceo. but they don't need the micron chips as much as they need the nvidia or, by the way, amd which has a new version of the

roadmap. david, we haven't mentioned ai. >> we've mentioned musk already. we got that in. >> i wanted the clip of him just staring at you, not saying anything, just -- >> just put that on a loop, a 30-minute stare. >> you see he's going to rip his mic off, didn't like david it turned out he liked david. >> he wasn't going to do that. it was fascinating i hope we get to do something more endless things to talk about that man about. >> we talk about the volume of cars he's making in china -- if you want to know who can make it so there's a softening, it's musk saying, look, these markets are terrific -- >> you think he's being to play diplomat >> honestly, yes, not with this president though. >> listen, don't forget star link and the importance it's had

in the ukraine war so he is involved in things. we didn't get to that during our conversation last week he's involved in things far beyond what you might expect met with macron a week ago as well. >> it was the balloon that set things off. >> that took politics -- actually, we'll get tothe debt ceiling at all, carl >> you've been arguing, jim, it's something to watch. mccarthy did say last night best meeting so far. >> one of those things, if it doesn't go to the deadline, it's like a claw, cutting the show short at like 9:32 eastern time. they can't do that they have to go to the latest and last hour so they can each attack each other. >> i heard senator cruz this morning. mccarthy and biden didn't seem at each other's throats. >> no, they're not you ever talk to the speaker >> yeah, i think i have at some point.

>> he's not an idea loideologue. i think they're going to portray biden as being the reason we have high inflation and we don't have a budget deal and you're not getting your social security checks. >> what i read of the meetings yesterday seemed to be more positive than not. >> mchenry, too, coming out and saying we'll see what we get i think we do have a market flash here on apple. if i'm not mistaken, we'll turn to steve kovach on that. is that right? >> carl, you're correct. shares of broad come up 3.5% apple announcing a multibillion dollar agreement with broadcom to make chips for the iphone this is a continuation of a current deal a couple months ago there was a report that apple was going to get rid of broadcom and make their own chips. that's not happening any time soon after seeing the

announcement of this deal. apple is about flat right now. >> steve, thank you for that >> i had an interview yesterday with griffin from skyworks solutions. that stock is trading down for a belief that perhaps they could get some of broadcom's business. i like broadcom. they're regarded as being a company that's very, very tough, not qualcomm which is being viewed as a company that's almost rogue by some people. i think people felt there was probably going to be a chance that broadcom is ripped out. boy, were they wrong david, hoc tan has a reputation of being ruthless, ruthless. >> yet he still got the apple deal. >> he did. the deal on my radar still is the m ware deal. the regulator in the uk, perhaps

the viewers are aware of due to microsoft's acquisition of activation that's the next one on the docket under pressure from the prime minister to be more pro business very much unclear what the positions are going to be on that deal. an important deal for hoc tan. >> if he doesn't do his deals, he can't make his numbers. that's the way he does his numbers. i know that sounds ruthless. he does deal after deal and then fires a lot of people. you remember symantec. >> i do. he's on that cycle. >> i don't think that he'd disagree with us. >> he would say no i've asked that question before, do you have to corporate to do deals -- >> no, i mean he fires people. >> that's the rap, hasn't it always been? the next deal has to be bigger we know any number of those roll-up kind of companies, it

was always about the next deal broadcom, the ceo kept the symbol i think apple is secretive so it's interesting they even announced this when you speak with liam griffin, and i love liam from skyworks he says, you know, in the big company, because apple doesn't like you to mention -- qualcomm was on everything. it's a great deal. broadcom is a lot, but it's going to break very good deal. >> between this and amet this week so much news in the chip space. >> don't forget we still haven't heard from nvidia. jansen has stuff for you you know how he's worried about, ooh, what's going to happen. >> just replicate him rather than replace him >> yeah, i'm worried i'm still here >> you should be worried

>> i am worried, much more than you are. >> who threw out the first pitch? >> some guy that doesn't know how to throw a baseball. >> that was davis faber. >> lowe's, dks, autozone, bj's take a look at futures as the market once again on tinder hooks looking for deadlines on the dead ceiling don't go away. the people who live and work there. because you call these communities home, and we do too. pnc bank.

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shares of lowe's moving lower. comps do miss. they cut the guide once again, jim, lumber deflation, bad weather lower do-it-yourself. >> we are done fixing up our homes, people are not moving in part because they don't want to lose their low mortgage. i think marvin ellison is doing a very good job. a pullback on discretionary large ticket purchases this is important because when you go back to the deere quarter, deere makes the finest lawn equipment it was just bad for them there is inventory in the system david, what we're seeing again garden is good, paint is good, appliances were good that's different from home depot. i would say this --

>> did lowe's suffer at all on the day home depot reduced its guidance >> yes i'm used to the do it your severe doing it well people like their homes as they are. i can't find anyone who says i want to do a big job on my home. that's where the professional is this is all part of what i'm saying if the fed is listening, they should be saying, okay, everything is getting weaker by the month. the cadence is bad the quarters have been cut for the next quarter. >> yes >> so many fed people come on and say, the economy is so strong -- >> except they go back to what you discussed, unemployment is at a historic low and wages are still strong. >> i know they need more legs.

>> you're kind of both sides. >> they don't have a lot of lay-offs we'll speak to carmine from ui people are graduating from college and not getting job. that's where the employment is going to be, graduates. >> you made the point that corporates are in a sweet spot, inputs coming down but they can still charge isn't the consumer in the same place, where wage growth is outlasting goods inflation >> we know credit cards are charging more. we know higher rates have at some point after the impact, they're still doing well i don't know, carl look, as long as wages hang in, people hang in. >> higher rates. yesterday jamie dimon was talking -- he said this before, but it's still rather stark. i'm not talking about 425, 5, 6, maybe even 7%. >> 7 is new. he did 6 for a while

>> he's at 7 now as a possibility. 7% >> he has 13% of the country. >> should we take a listen >> this is what dimon said about being prepped for higher rates. >> you're already seeing credit tightening up. the easiest way for a bank to retain capital is not to make the next loan. i think you are going to see that i think everyone should be prepared for rates going higher from here, if 5% is not enough in fed funds, and i've been advising declines an banks you should be prepared for 6, 7, prepared for on the ten-year bond, and i also feel this way, the fed doesn't control the 5 or 10-year rate they control the overnight rate. while they've been raising the overnight rate, that's why stocks are high, bond spreads -- you talk about recession i think there's a chance to have rates ticking up, not to 3.78, i'm talking about 4.25, 4.5, 5,

6, hell, maybe even 7. >> the coo later said -- just got back from argentina, trust me, you'll take a recession over entrenched inflation over many years. >> we don't want -- federal reserve chairman burns, every time things got better in the '70s he let off on the gas pedal and it got worse jay powell knows that. he's a historian on what the fed has done they can't lay off. >> now you're talking the other side >> i'm saying that wages are the last bastian of inflation. >> so when do they go? when do they start to turn >> june 17th what do you -- >> of course. >> when people start getting fired other than working at meta >> other than.

>> yeah. this is the year of efficiency, david, also the year of living dangerously. when we come back, cramer's "mad dash" west coast style and a look at futures. back in a moment

plenty of news on this tuesday. the fed's logan on the tape. pmi coming in all around the world. we'll get ours at 9:45 a.m. eastern. opening bell is a few minutes away don't forget you can catch us any time anywhere, listen to and follow the "squawk on the street" opening podcast.

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santa barbara style, whatever that might be. microsoft. >> jefferies talks about taking a price target from microsoft from 350 to 400. you're talking about one of the biggest companies in the world >> 2.388 trillion. >> what this piece is about is how everybody knew about ai. but then after chatgpt it's in your face and it's going to matter i think, david, one of the things that jensen huang from nvidia has talked about, he labored in the vineyards with ai for five or six years. suddenly with chatgpt it just exploded it's only been three months. i know ai seems like it's almost old hand to our viewers. it's just now starting to impact numbers. that's very good for microsoft. >> that's very, very, very early days every 48 hours there's something, an advancement. this is moving at a pace that is

unequalled i think, at least what i'm told by any number of people leading various organizations or at least involved in the development of ai. >> we'll be talking to ey. i think what you're seeing -- maybe you can confirm this -- it's dangerous to hire someone maybe because the person isn't needed -- [ cheers and applause ]. >> logan is on the tape saying we're already seeing the effect of technology. let's get opening bell on the big board laser manufacturer coherent and at the nasdaq great transportation company csx. a lot of discussion this morning, to your point about microsoft, the spread in valuation between tech and the broader market. >> it's become back to what happened after 2011. that was the beginning of faang.

at that point it was facebook, amazon, google we're beginning to see the banks. i regard the companies as banks. i think we should almost see them nation stets. when you look at balance sheets and look at their earnings, you can just say i like their paper more than i like, yes, treasuries we're not concerned about the coupon paying off at microsoft for heaven's sake. i do think this is going to continue these companies have an edge the alternative is to go by clorox or pepsico. you can't buy banks. industrials could be on the hot seat if the fed keeps going. what jamie dimon says, let's say it goes to seven you would think the valuations of the stocks on the screen would be hurt. but no, they seem almost immune to rates which is an extraordinary thing, but it's what happened in 2011. >> should apple borrow at a rate above that of the u.s. government or perhaps below it >> i think below it. >> who is a better credit?

>> you think eddie q argues with tim cook about whether to pay? >> no, i don't think there's an argument about whether to pay. i'd say they're pretty money good, not to mention they have how much in cash >> right now the president is talking with the speaker about whether basically to pay off the debt -- >> pay the interest on the debt. >> pay the interest. the apple board sits around and says i hate you, you hate me, we're not paying. >> that never comes up. >> it's more about how are we going to derisk our supply chain out of china. >> yes when i look at apple, i think to myself, somehow it's not caught up in the ai conversation. that's ridiculous. they are every bit as interested as everybody else. the one that is just shocking is the mark zuckerberg tie-up with jensen huang at nvidia they don't necessarily share the same values. there's something going on at meta that shows you, it's almost like they've decided you need

very few people to make a lot of money. you see no degradation of product even though they just laid off a lot of people >> potentially we'll continue to lay off even more, jim i had some reporting yesterday, you were doing some work on it as well. many of these -- announced, broadly speaking, but the era of efficiency is not over, i think is fair to say, based on at least what i'm hearing there's an expectation there's going to be another round yet to come, whether that was part of what was announced or clear, but another round. >> when you go to the company, they say, listen, we have an efficiency roadmap, basically like stop it, jim, this is what we're doing in 2023. it's never, ever mentioned that it's metaverse it's almost like there's a secret plan to shut down metaverse, but it ain't happening. >> this find out of europe on meta got eyebrows raised

yesterday. it has implications for companies that transfer data from europe to the u.s you have tiktok pushing back on monday donohoe from nike talking about the metaverse being very much alive in their view and capturing the attention of phil knight. >> why don't people do what mark zuckerberg really wants, be part of the virtual mall. ralph lauren wanted to be part of it. the virtual mall could be well -- >> meta which changed its name from facebook, is still spending a lot of money on the metaverse. >> when you don't have to wear something on your head is when we'll get the big breakthrough. >> he doesn't want avatars, he being mark, looking exactly like you. i would prefer an avatar which is me, which you can do. he wants funny ones, cartoonish. i don't want anything cartoonish

i almost wish we had a video of what the metaverse would look like, the three of us. >> we do have that i forget we made our meta -- we have our meta graphic somewhere. ai, though, and the ability to actually create these deep takes is what i'm thinking about when you say that obviously given the news from yesterday, carl, and what we see with things that are completely fake but ran on twitter and at least a moment may have, a, scared people and brought market reaction >> amplified by people with the blue check, the appearance of legitimacy on social platforms as steve kovach pointed out on "squawk" this morning, this is just the beginning >> i did ask musk about it in our interview last week specific to the election. he seemed to rely a lot on the community notes function that he believes will be able to police in some way.

he agreed that somebody -- at this very moment he said, could imitate both of us in an effective way. you just do wonder where and how are people going to be able to truly discern what is reality and what is not. >> you couldn't. when jensen huang presented, i walk in a room and a guy says, hey, i'm cramer. no, i'm cramer jensen said he spent all weekend developing the philadelphia accent which he said was hard. by the way, remember how she felt >> the hbo show. >> kate winslet. she did a great job. >> i have to tell you, he was not concerned. he was more concerned about using the product for good and eliminating waste because that's what nvidia cares tremendously about. you couldn't detect whether it was me or not. >> how about the op-ed from

pichai, pushing back on the idea that people want to make this about a competitive race, google versus microsoft that's not the most important thing going on. >> the google numbers are good, bing numbers are okay. i can argue that -- alphabet stock fully reflects the idea that it's not a two-horse, three-horse, four-horse. david, it's anybody who has the technology the going to find ways to make it so it's exciting >> don't forget, meta has released it in an open source fashion so there are people who can build on what has already been the computing power that has already taken place to create the weights, i think is what they call them, so it can be open to more than just the big guys who have -- obviously have access to enormous amounts of computing power that you need which is incredibly expensive. that said, that will still be a key defining characteristic.

>> the defining moment will be when you look at a call center call center, f 9 stock went up yesterday was a rebellion against the ai movement. a lot of the companies have been taken down because people feel they're superfluous. whoa, we're still going to need humans somewhere we haven't had mcdonald's embrace what wendy's is doing, the test of whether we need -- for drive-through. starbucks isn't doing it starbucks in china, remember the great ambassador to china? >> yes. >> where is that >> they open stores every day, lots of them. >>every nine hours what do they have to say they've been silent. that's where they are. they've been silent. >> sometimes that's a good policy because you don't want to be put in a position where you're going to have to say something. >> you don't want to talk about the fact that they say plus

three minus three, what's going on >> you've been asking that question yeah, because there's nothing going on >> youth unemployment is at a 20-year high >> how could tiffany be doing incredibly well there? david, the chinese, they're doing remonstration classes, like under mau >> i know. he died. nixon went and visited with him and he died. >> you hit it out of the park with that one, threw it right over home plate. >> i'm sorry. >> you stood in front of the mound just to be clear i got on the mound, all right? i got on the mound i went for it. i had my son crouching down 60 feet away and i went for it. >> the day before he was king, the day before he was interviewing musk and he was

king >> it was moments before, i was the greatest thing ever, having a catch in the field then it was the low point of my life thank you for bringing it up. >> i had no other choice that's it. that's the last time i'm done with it >> yes, i do know who mao was. i listen to you talk about him all the time. >> on the starbucks call there was a great conundrum. i said no! not minus 3, they don't have enough money -- >> meantime, guys, relative softness, except for energy. two upgrades, zoom and chevron today. and these comments from the saudi energy minister basically telling the shorts to, quote, watch out. >> that's a dangerous thing. when you start having major people when it comes to oil talking about the shorts, no it's going to be real demand versus not a lot of demand and

real supply versus not a lot it's not the shorts. it's not the future. trying to get -- the shorts are pressing it to 68. a worldwide market that made me concerned because those who worry about shorts are people who are actually worried about demand >> the meeting is next week. 73 would be the highest close in a couple weeks, at least on texas. >> i think the oil market, this is summer driving season it's memorial day. if it's not up right now, it ain't ever going higher. i don't know whether the fed is really in there, whether the federal government is refilling or not i know this country, we keep discovering more oil, despite moments where people said we haven't. you go back to the chevron deal in colorado. if they could do 350,000 more barrels, that's meaningful so they can worry about the shorts i'm worried about mike worth, ceo of chevron putting his

finger on the scale. >> what scale? >> supply. >> they did that deal yesterday. >> they did. 350,000 barrels, it wasn't really there that was not an area -- >> the dj basin -- >> the dj sol basin is not what we think it is >> i'm not sure we're supposed to say who is here or not? >> really? >> not even supposed to say where we are. >> how about my wife my wife is here. >> that's good i was much happier to see her. >> we addressed lows we didn't get to dks with a beat revenue ahead. he didn't talk about trade down. ed stack, executive chairman, he told a good story. he was distinguished from mary dillon from foot locker who i think kitchen synced, bathroom synced, attic, basement synced, because what i'm concerned

about, it can't be good on that good on the dick's side of the street and that bad on the foot locker's side. dick's has a panoply of sporting goods. sporting goods we were supposed to be very weak. they were weak in the cpi. cpi referred to sporting goods being weak i struggle over how that index is calculated because the dick's numbers were quite good. that's the only one i think is really front and center good >> bj in line, comps missed a bit? >> i take that one down. i expect costco to miss, only because this is when costco decides we're going from club membership remember their value -- they want value and they want transactions everyone thinks they really want price. they don't want price. they want cardholders. they want -- you should trade up -- he should trade up from the white card to the black card. >> that chart right there, that's bj and costco

is that what you would expect going into recession >> well, costco is driving prices down in order to be able to capture from everybody else we need to see kroger. i thought walmart was tepid. i thought target was tepid we can't just decide -- if the fet gets together and said, dick's had a good quarter, we're fine that would be wrong. if they went over the vast panoply of retailers, they'd struggle i think brian cornell is sensational. he did not say this quarter was good he said each month was worse i don't know why the fed doesn't -- someone from the fed should be saying we really have to pause here because each month is worse, but they don't because of wages >> right although there's still an expectation they are going to pause in the june meeting. >> they don't have -- maybe they say i took a very expensive plane to get to washington you should an neck doeltly.

>> if they raise rates in june that would be unexpected. >> that would be unexpected. jamie dimon, the first thing that happens, people don't make loans. >> the first thing out of his mouth was not about higher rates, but much more about -- as you say. >> why aren't we talking about that >> we did kind of talk about it because we listened to him. let's get pmis, turn to rick santelli this morning. hey, rick. >> yes, global pmis coming out from s&p philly non-manufacturing was a minus number even though it improved regarding service sector here we go, on the manufacturing side, wow, under 50 again, 48.5. we popped over 50 last month it was the first time since october. we're back below at 48.5 is the lowest level since january -- excuse me -- yeah, when it was 46.9 if we look at the services, by far the most important aspect of this, 55.1

it's improved. so yields are going to firm up a built on that. 55.1 is the highest level since april of last year when it was 55.6 finally, when we put them together, the composite reading, 54.5 also a bit better than expected. 54.5 is the best, also, since april of last year rates have moved up not to the highs yet, but definitely the service sector is what many are concentrating on because that's the focus of some of the best strength in the economy, especially when one considers the path of the federal reserve. "squawk on the street" will return after a short break

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let's bring in a strong company, e everywhere ey chairman carmine di sibio joining us now great to have you here on the show. >> great to be here. great to be here. >> you know, you talk to everybody. i mean, even talks to the king, the king of england, showed up there in the coronation. >> yeah. >> are people going to stop hiring for now because of the economy and also because maybe you can hire people, chatgpt is cheaper >> we have been seeing a slowdown in hiring across the board, in particular professional services which is what we're in, but any kind of more professional jobs so that has been slowing down. that's something if you look at a lot of consulting firms,

including ourselves, they've moved their start dates for their new hires. supposed to start in september, or even august, and they've all been pushed back to january. there is, you know, the job market is actually a lot tougher than it was six months ago so we are seeing that, you know, as we move along here. it really has nothing to do with chatgpt yet. it has to do with the fact that many companies were hiring based on attrition rates that were much higher. a year ago, year and a half ago, post-covid, people are leaving, great resignation. those attrition rates for ourselves went from over 20% down to 12 pretty suddenly therefore, you know, a lot of companies, including ourselves, have found ourselves with more people than we need at this point in time. >> do you think there will be a round of layoffs the way we've seen previously going into recessions right now we really don't have any big such and such a company lays off 5,000

>> well, in the tech sector we've seen some of that. we've seen announcements on that of course, it's a small percentage of the workforce because there's been so many jobs that have been created. but i think you will see more of that as we move into it. that does not count the service sector, hotels, restaurants, there, the job market is still pretty tough there we still need more people. we need more services people that's -- when i talk to our clients in those businesses that's still an issue. >> aren't you surprised that wages remain so strong, away from that industry i say that because you would think that somehow, the fed would be able to say, we see wages peaking. but they're not. >> yeah. i'm actually surprised at that i think that's a good point. they're not really peaking, and, you know, i think maybe that's a little bit of a laggard. you'll see more of that in the next few months for sure but, you know, if you get into the chatgpt thing, that will,

you know, that is everyone is talking about it it's number one item, a.i. generative a.i we're doing a lot of work in this area with our clients and with ourselves we've created, for example, we do work with hr functions of companies. we've created basically a chat bot that answers all the questions employees have around their pay stub and everything else this chatgpt with openai, azure, ingesting 500 questions a day and learning really, really fast this is something that we'll utilize ourselves but we'll also license out to sdplclients. >> are you seeing the number of use cases? jpmorgan said their number is up 34 year on year active use cases? >> the number of use cases is going through the roof and all different sectors. some are more set on efficiency, it will replace some jobs, some are more set on, you know, generating revenue and how do you generate more revenue.

so the use cases, we really look at it by sector. each sector. we're working with different companies and sector have different types of xasz cases. we're working with our clients. >> what about productivity it's early every 48 hours there seems to be some sort of step function here. what are your expectations when it comes to productivity in terms of the use of generative a.i. over the next three to five years? >> yeah. that's a good point. like everything else, people start saying it's going to replace all these jobs and so forth. this is really an evolution. like everything else in technology, it will evolve it will definitely replace jobs, and it will make things more productive, but it's going to take time and jobs will change like any other piece of technology. >> you're not in the belief it will wholesale replace a lot of jobs across the board? >> over the long term it will replace a lot of jobs, but those jobs will also change. that's been true with almost

every piece of technology that's been around. >> you also got europe is europe stronger than the united states? >> i will say, jim, europe is incredibly resilient that's the word that i use with europe every time we think things are going on, there's a war in europe, europe just kind of moves through. moves through. people are resilient, the consumers are resilient, and for us, europe has done incredibly well we have very good growth in europe double-digit growth. a lot more transformations going on than people realize some of those are more exemplified in the u.s there's a lot going on in europe different companies. >> i am curious about the split or plan to split, you were supportive of that spent a good amount of money on it how disappointed were you when you had to shelf the split of audit and consulting. >> i was very disappointed it's something the strategic rationale behind the split made

the sense in the world it still makes sensep in the execution and complication, remember we're a partnership and a series of partnerships we're not a corporate. a lot of ceos you talk to, they say go that way and everyone goes that way. with us it's much more consensus driven in terms of the partners. it didn't happen this time we have a lot of learning that we're incorporating into our strategy going forward one of our advisors told me early on we'll learn more about the organization i've been there 38 years, so i know a lot of the organization but it's amazing how much you learn and we're incorporating that into going forward. >> i have to ask you, coronation, what was it like >> it was great. you know, as you think you know, i'm involved in the organization, sustainable markets initiative, with brian moynihan and with now king charles and our whole mission is to really get the private sector much more involved in sustainability and working with

the public sector. that's one of the reasons i was there. king charles is very passionate about this, and he makes it known. >> i've done great things. just great things. >> thanks for having me. >> mad tonight. >> yeah. what's up. >> we'll have a little bit of eddy cue from apple, carrier, and then anthony noto from sofi. it's exciting i have to tell you. one of the great things is you in this, thank you. >> thank you. >> we'll see you tonight still ahead an exclusive with michael dell, talking everything from a.i. to the tech rally and a lot more a big show still ahead don't go anywhere. is is.

good tuesday morning welcome to another hour of "squawk on the street. i'm sara eisen here with carl quintanilla and david faber live for you from cnbc's inaugural ceo council summit in santa barbara, california. good morning we are about half hour into trading and looks like stocks are under pressure

s&p down 0.2%. nasdaq down about 25%. energy, utilities, real estate and consumer discretionary positive andeverybody else is falling in the early going here. >> decent diet of ecodata with pmi. more krogsz the tape let's get to rick santelli hey, rick. >> let's look at richmond fed for may on the manufacturing side minus 15 weakest since february if you look at the services side, richmond fed business index, minus 17. which is exactly equal to march and, of course, it follows minus 27 which was the weakest level since may of 2020. still unrevised, which continues to demonstrate that there are lots of reasons that many are looking for a recession down the road new home sales for the month of april, expected to be up 665,000 seasonally adjusted annualized units, bested that, 683,000.

which would have been exactly the same as last month but it was revised. last month stands at 656,000 683 stands out as the best level going back to march of last year when we crossed the threshold over 700,000 and to get a little bit more color on why single-family homes seems seem to be improving here let's go east to diana olick >> rick, i'm out west but say it's all about the inventory there's nothing for sale out on the existing home market that's why we saw,is existing he sales drop people out shopping looking at their mortgage rates around 6.5% kind of in the middle of where we've been skewing between 6 and 7%, up closer to 7% today, but it's all about incentives. the builders are dropping prices too.

we had a median price of $420,800 that's down 8% year over year. so the builders are doing incentives and buying down mortgage rates and lowering prices and seeing traffic come in they said it in the builder sentiment survey they're getting so much more traffic because of the lack of homes for sale on the existing side. builder sentiment popped up into the positive zone since last summer the builders are really benefitting from it. the question is, can they build more we're not seeing as much new construction as we would like to see on the single family side. still a lot of multifamily we need to see more of that in order to get this throughout there is a 7.6 month supply, up changed month to month, which is much better, of course, than the two-month supply you're seeing on the existing side the builders still are only building what they're selling. they haven't gotten that much. we're starting to hear rumbles about getting into the spec market, but we need to see more of that. sara >> all right diana, thank you

diana olick. guys just to take a pause on the market, we're pulling back a little, but the story has been strength especially we know the tech heavy nasdaq highest level now since august 2022 which is just interesting because it continues to occur, first of all, as a surprise and above it is that the positioning has been bearish the speculative hedge funds and other speculators, net shorts s&p futures, near record levels. we've taken out the 2011 levels and now back to 2007 levels. that tells you the pain trade continues to be higher it's interesting that it's coming in the face of rising treasury yield and higher rates. >> the long bond above 4, first time since march 10-year 3.75 crazy numbers on the six-month we have to go back to 2001 and we know the reason for that. >> near 5.4 or something along those lines on the six month how is that figuring into things in terms of the debt ceiling and/or market reaction, which

doesn't seem to be particularly strong at this point one way or the other? >> i feel like it's been a sense of optimism around the debt ceiling. certainly last week the market rallied because of all this constructive commentary. yesterday as talk broke down the tone was good. i mean, house speaker mccarthy has been more of the bad cop in terms of rhetoric, said that it was the most fruitful of negotiations after 90 minutes, again, there's no deal. deal remains elusive treasury secretary yellen continues to come out almost every day saying look, june is still the date early june you know, by june 15th, we're out of money to pay our bills. and so she's continuing to beat the drum on the urgency. we're hearing from the politicians there won't be default. the two big things, if things going constructively in tone does that mean that we'll get more than just a very short term debt ceiling bill? we don't want to be here again in a few months trying to raise the debt ceiling. >> they want to extend it beyond the '24 elections ideally. you don't want this to be an issue again. >> we don't want that to be an

issue. what does the fiscal trajectory look like? are we talking about cuts? do we talk about cuts that will impact the economy we don't know too much about the details of the debt ceiling beyond other things they can agree on. >> some sort of caps or work requirement for certain programs as well. on to the other side of things, the interest rate picture, sara, we heard from lowe's once again, sort of indicates a dip in discretionary spending we were talking about this, obviously, in the last hour in terms of it seems as though consumer demand is weakening except for air travel, but nuntsless, wages continue to be strong any new data points? >> we have a few retailers this morning. it's hard to tell because they predict the beat on earnings was because of a tax benefit and comp store sales growing, wasn't a foot locker disaster we're weaker than expected commentary out of bj's wholesale.

bj's with good numbers tend to benefit like this. the ceo says the perspective is clear and there is pressure out there and as you would expect the folks in the lower economic strata are feeling more pressure than those at the high end so basically what we've learned from earnings season on retail, the trends that were developing in the previous quarters, pressure on the low income, pressure on big ticket items, especially do it yourself home items, we saw that in lowe's and home depot, those are accelerating and worsening and more pressure on the consumer and we're starting to pick up threads about weakness in the luxury space walmart told us there was trade down from higher income consumer not hearing recessionary talk, but definitely things have worsened and i think that jives with the fact that we've seen higher interest rates. will we have the rate shock, the regional bank shock, and the stimulus is fading it's not fully faded i think the estimates are for the end of the year.

it is coming down. that's going to have an impact as expected. >> fresh reuters poll about where the market will end the year in february, consensus was right at 4200. now 4150, moving in the wrong direction. on the other hand, third best retail flows of the year, so we're chopping around as we navigate the high end of the range. kashkari seeming to endorse a pause in june and blackrock saying that's pretty much what they're expecting a pause in june and not necessarily a given that you end up in a deep recession, echoing dimon yesterday. >> the fed is considering a pause and is leaning in that direction. the problem is that core inflation is at 5.5% we don't know how fast it's going to come down half the people i talk to will tell you nonissue. look everywhere, it's coming down it's going to. the fed should not be worried at all. the other half say there's some sticky elements here to this

inflation. look what jamie dimon said, get used to 6 or 7% rates. if he would have said that last year the market would have taken that negatively. but this market is choosing to ignore the hawkier side of the arguments and price in a 50 basis points of cuts by january of next year that's not a 6 or 7% rate. >> no. it is far from a 6 or 7% rate. obviously, there has not been any talk of any of these fed governors we've heard from about cuts during the course of this year. >> they won't go there they explicitly say we're not thinking about cutting, including fed chair powell who says that and the market continues to go the other way. the other factor, of course, is china and it's a huge topic of conversation here at our ceo summit yesterday, last night, i had the chance to speak on stage with john donahoe the ceo of nike and talked about a lot of things consumer, a.i., politics, but his views on china in particular, were what stood out to me.

here's a company that employs 250,000 people in china. they rely on it for the consumer market and, of course, we know a lot of sneakers are produced there. here's what he said about the recent tensions which have escalated between the u.s. and china. >> if you're going to be a global company you have to play by both a global set of rules, but also local sets of rules and that's just the reality. and the local sets of rules differ so in china, we have a very strong local business. we play by the local set of rules. we don't violate global rules, including human rights ones, but we very much understand ourselves to be a local citizen with our china consumers and our china team >> how important is china for you right now? >> china has been -- as you know, china is a very important market to us phil knight entered china 40 years ago, and he took a very long-term view he was early it took years for the business to build up. we've always taken a long-term view in china and as you and i

talked several times during the last several years we're trying to maintain a long-term view during this period there have been ups and downs over history, and we're blessed where we have strong leadership position -- and it is supply chain and user market. it's part of our supply chain, but even more important, it's an are important end user market where chinese consumers, the jordan, nike and converse brands are the leading brands with really strong connections with consumers in china. >> isn't it risky, though, to go so deep into china, especially on technology? >> the good news is, we're not a strategic industry right. you know. >> but you're a major american brand. >> but we are one that the chinese consumer wants so we want to continue to make it that way delivering the most innovative product, a brand they identify with. in fact, that's expanding. our leadership position.

>> john donahoe. it came out of a discussion about how nike has been unafraid to speak up for its values and the values it sees of its consumers. we talked about colin kaepernick and we talked about when they cut kyrie irving and how they can't do that in china. right. for china, they operate increasingly local, innovation centers in china, the chinese market they think differently about what the chinese consumer wants. and, you know, they cannot get involved in the politics it's just a different way of operating and they face questions. what happens if china invades taiwan >> i mean it came up last week again in the musk interview. he said it's, you know, you don't have to read between the lines the quotes from musk and called it, you know, taking the two economies apart, taking apart conjoined twins. it would be bad, sara no doubt about it, across the board for

every company period including nike. >> he said i would not sleep if i had to worry about all these geopolitical risks but there's contingency plans. didn't go into it. it would be a headache he says we're not a strategic industry you talked about with jim. it's not knot chips and micron so doesn't feel like they're in the direct firing line when it comes to some of these issues and these tensions on trade. they pay a lot of tariffs though. >> he did say that they pay a lot of tariffs and happy to do so. >> yes because they're happy to have a business because it's a huge and growing market, a profitable one for them. >> china continues to be top of mind for so many executives, those who lead companies that have business there's and even those who don't have businesses, perhaps that are centered on the country as nike does let's move to another issue that's also top of mind right now and that's the latest talks around the debt ceiling. that's a day after president biden and speaker mccarthy failed to reach a deal kayla tausche is live from the white house and she's got the

latest for us. things keep changing. >> they do keep changing, but a lot staying the same at this hour negotiators set to meet again on capitol. they met at 9:00 p.m. after the meeting between president biden and speaker mccarthy and trying to move the ball forward on what was a positive meeting between the two principals even if it failed to break a ton of new ground on the tape are the deputies to speaker mccarthy leading negotiations for him they said that they are trying to plug forward to get a deal, but they say that white house still is trying to push to spend more money in the two fiscal years going forward and they want the white house to understand the urgency of meeting to spend less. what happens from here here's what still needs to happen before june 1st they have to reach a deal. second, there has to be legislative text written to accompany this deal that would be robust, including some changes to programs in everything that's been negotiated speaker mccarthy told his conference that he would give

them no shorter than 72 hours to read what's in it after criticizing the robust government spending bill from last december that was jammed through before the holidays. and then, of course, they need to vote on it. the house of representatives is set to break for the memorial day recess on thursday afternoon. the senate is already out and returns on tuesday but the house is out next week so it's already looking from that timeline, like you're going to have the house of representatives potentially working through the weekend if mccarthy holds to the 72 hour woe window to allow members to read through the deal he seemed optimistic and seemed to have been a better meeting he's shooed far in this process. here he is in his own words. >> we're not saying oh, let's bring something new into discussion let's not talk about raising taxes. that's been off for a long time. we talked about where we are having disagreements and ideas so to me, that's productive. not progress, but productive >> reporter: is some incremental

progress being made? we've learned from sources that a couple areas of agreement is, rescind something of the covid aid that hasn't been spent it's not a lot of money. between 20 and $60 billion depending on how you count it. there's the potential for some health care savings. the white house at least is optimistic about that according to my sources because the gop appeared open to it as well. what that looks like we don't know, but we know that discussion is around potentially reforming some of the areas of medicare part b, part d, advantage plans, drug price negotiations, where the white house feels that the government is over paying drug companies and insurers and physicians and hospitals and they feel like that's low hanging fruit where they could unlock potentially hundreds of billions of dollars. we'll see what ends up being on the table here and a potential deal they're moving forward but david, the clock is ticking and june 1st is approaching quickly. >> certainly is, kayla

june 1st and/or perhaps a few days after that as secretary yellen has made clear. thank you. as we head to break right here, let's give you a road map for the hour that includes former treasury secretary jack lew will be joining us breaking down the latest from the ongoing debt ceiling talks. >> apple announcing the chip deal with broadcom we'll talk about what that means for both companies. plus a rare

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shares of broadcom movingxd■ higher as the deal news with apple and we'll turn to steve. >> hey there, carl.uf■ apple and broadcom announcing what they're calling a multiyear and e■multibillion dollar grant for radio chips. this is a continuation previous agreement from about three years ago. there are no specifics on how long it will last or how much apple has committed to pay broadcom this time, but the last agreement apple agreed to pay broadcom $15 billion, so you can use that as a guide. broadcom shares rising 1%. it was up as much as 4% before the bell rang. that's not going to happen

apple may be able to -- its own 5g modems which it buys. apple will have a 5g modem ready as soon as next year apple highlighting some of the components like fort collins saying previous commitment to invest $340 billion in the economy over five years. david, i'll send things over to you. >> okay. thank you, steve. >> still to come here, you're not going to want to miss our interview with michael dell, live from delltechnologies world 2023 talking everything from new products to a.i. and a lot more we'll be right back.

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the street." i'm seema moody with your news update a 19-year-old intentionally crashed a u-haul truck into the barrier year the white house last night he's been arrested threatening to harm or kill a president, vice president, or family member no one was hurt. former president donald trump is scheduled to make a virtual appearance in a new york court today. last month he pleaded not guilty to 34 felony counts related to a 2016 hush money payment. during today's hearing the manhattan's district attorney office will hand over their evidence in the case to trump's lawyers and the judge will spell out a protective order that prohibits trump from publicly disclosing that evidence. and u.s. surgeon general vivek murthy is calling for tech companies and lawmakers to protect teenagers' mental health on social media. he also says we need more research on its impact he made the comments after the lease of a new report that warns

social media platforms are a major contributor to mental health problems affecting teens. sara, back to you. >> thank you seema moody. dell world kicking off in las vegas with some big announcements for investors. dell technologies chairman and ceo michael dell joins us now in a cnbc exclusive michael, great to see you, thanks for making the time lot of big new partnerships you're out with today. microsoft, red hat i think i'm interested in nvidia because you're going to work with nvidia on a.i. for enterprise talk to us about what this looks like. >> yeah. absolutely great to be with you, sara you know, at the center of the a.i. boom is data. you can't have a.i. without data and you also need an incredible amount of processing power to deal with this data. so, we've been creating servers and infrastructure specifically

for this a.i. boom and we announced a number of new innovations here at dell technologies world we've got more coming later on today. and look,i think this is an enormous unlock of the power of this data and, you know, i think it's the next big wave we're excited about it and certainly it requires enormous amounts of storage and infrastructure and all the things that dell technologies provides. >> yeah. i was eager to hear from you, michael, on a.i. in particular, because we haven't really heard from you since we've seen this wave sweep across the market and corporate america a. h how are you positioning dell around generative a.i. and how big do you think it's going to be >> well, i think with generative a.i. you're going to see a proliferation of both open and closed source models, and companies will likely have a

large number of these models at play to deal with their data in some cases the public models will be appropriate, but in many cases they'll want to make sure their private data is secured and protected and the problem they're trying to solve is a simpler problem. if you think about a bank, right, it wants to improve fraud detection and improve customer service and, you know, be able to work with its customers in a more effective way, cross-sell different offerings. it doesn't need data to generate beautiful artistic images or write poems or know all sorts of other random things that are not relative to the bank's business. it's a simpler problem i think you're going to see a proliferation of these models and, of course, that's going to require lots of new infrastructure you'll also have at the same time this intelligent physical world that's emerging.

what we in the industry call edge computing and this is also generating huge amounts of data. there will be new servers required for inferencing at the edge to process all this data and turn it into something useful and, you know, we're quite excited about all those opportunities. >> how do you think about the impact much a.i. on labor and productivity >> many estimates on this, my net view is, this is going to dramatically enhance human productivity, and certainly there will be new jobs that are created. you know, with any new technology you're going to have, you know, jobs that are less needed as well but look, i continue to be an optimist about the world technology plays in our world.

when i meet with our customers, who are, for example, working in cancer, right, the advances in gene therapies, in the development of r and a vaccines and gene editing, all these are driven by computing power and a.i. and, you know, there are wonderful advances while we could sort of doomsday about the horrible things that could happen, let's not forget all the amazing things that could happen in the next decade and beyond with all this technology and power that's being unleashed. >> still the doomsday scenarios are out there, and there are concerns and it's getting attention certainly of regulators and g-7 this weekend. they said they need to start working on a.i. guardrails. do you any sense of what that should look like, do you have an opinion there? >> i think we do have to be

careful and, you know, think about this in a thoughtful, ethical way, and a responsible way. it has to reflect our humanity there should be some guardrails and probably some controls about who has access to, you know, what types of computing power and that sort of thing and we'll certainly weigh in with the regulators on that to help develop those in a thoughtful way. >> i'm looking at your stock it's down a percent. not getting the a.i. boost that some of the other companies get from these announcements you've been weighed down a bit by the pc cycle, right, and what's happened post-covid and the continued decline there. i'm curious, first of all, whether you think the stock is under valued and under playing what you're seeing in enterprise technology on the other side of your business, infrastructure. >> well, you know, sara, we've

been buying back our stock and that's been going on for some time we also have initiated a dividend little over a year ago. we just upped the dividend by another 12% recently dell is well positioned, $1.4 trillion market, $102 billion in revenues last year yes, there's some ups and downs. we had a big boom in buying, as everyone was working from home now everyone is returning to the office we have a.i. we have the edge we have multicloud security. so while customers are focused on controlling costs, they're also very focused on continuing their digital transformation you know, here at dell technologies world we're talking about that and helping our customers prepare for that future >> michael, it's david you know, i can remember you

many times saying you're not crazy about being a public company ceo and then you weren't, you took the company private. given what you said, i wonder whether you would ever consider doing it again if you don't feel as though you're getting the appropriate valuation in the public market? >> well, you know, that was 2012, david, and this is 2023. many, many things are different. the interest rate environment is different. dell is a very different company than it was then, and we have absolutely no plans to go private. >> on the deal front, you have an important transaction involving vm ware, getting sold to broadcom. in front of the cma, which has been a tough folae lately when t comes to deal making any confidence that deal will get the regulatory okay it needs? >> i don't have any updates

beyond what you've been hearing beyond the companies and, you know, the regulators are, obviously, doing their reviews, but we continue to be confident this sort of action will close as planned. >> michael, it's carl. we've been trying to watch the line between the regional banking crisis, 11 weeks old now, and any degradation in demand from financials for technology we know they're a huge buy are, if not the largest have you noticed any on the margin >> you know, i've been looking for that myself, but i haven't seen it. i think the big financials, if anything, are leaning more into accelerating their digital transformation while we heard from customers that they're controlling costs, the one area that they're not slowing down is how they forge

ahead digitally. they can't really fall behind there. with what's going on with a.i., this enormous unlock of the power of data, nobody wants to be left behind there >> the other thing that we talked about with regards to dell in recent weeks has been your comment about customers demanding components that are more free of china supply, and i wonder if there's been any movement on that is that rolling forward? accelerating would you -- if so, would you attribute it to the tensions that, obviously, have had trouble getting any better >> we have built one most of the resilient and strongest global supply chains and certainly a part of that has been not really being dependent on any particular region. so that continues.

we have businesses in all the regions of the world but resiliency is a major theme and important for customers. they depend on our technology. our technology runs the world. we have 98% of the fortune 500 as our customers and they want to know they can depend on our supply chain and they can. >> what happens in a scenario where china invades taiwan or arms russia? you have to be as i was talking to john donahoe of nike, you have to be making contingency plans of what that looks like, don't you? >> that's right. and, you know, we think about those unexpected scenarios all the time and prepare for, you know, whatever events might occur. i'm not going to speculate on that

but look, we have a reresilient supply chain that is built to last i think a complete decoupling with china is not practical and not likely as well and, you know, look, hopefully these issues get resolved, but in the meantime we'll continue to build the strongest, most resilient supply chain in the world that can withstand whatever shocks are thrown at it look, i think during the covid period, we redeemed ourselves extremely well, showing the strength of our supply chain with customers and we'll continue to do so. >> michael, our viewers may not focus on it as much, but, obviously, you also, your family office is very busy making investments. you've recently did an important deal with byron's firm and you merged i'm curious to get an update on what you're seeing there and whether it's meeting the

expectations you had when you did make that deal with bdt? >> yeah, that's right, david we combined bdt and msd and have created an amazing firm. the reception activity has been far greater than any of us expected, and we continue to advance all the areas where we're active certainly, you know, helping founder led companies and, you know, family-owned companies in private equity and helping them plan out their futures, we have a fantastic private credit business that we established at msd over two decades ago, a great real estate investment business, as well as a growth and venture equity business. so the new firm bdt-msd is doing

extremely well happy to have byron and greg combined together leading this firm and, you know, tons of opportunity ahead for all of us. >> greg lambco at our ceo summit in santa barbara michael, you mentioned -- carl asked about the financials -- but overall on enterprise spend right now, every economic cycle when there's a downshift we see companies cut. is this time going to be different just because of these secular opportunities we're facing around a.i. and fiber where companies can't afford to cut those budgets? >> you know, sara, i think there's some overhang from the incredible spending that occurred during the covid period but generally speaking, you know, the i.t. sector, the technology sector, is a growth sector long term

again, you know, we're in a $1.4 trillion tam space think about the growth in data in the world it's not slowing down at all you have 5g networks and, you know, anything that you want to do that's interesting in the world, has data at the center of it that will continue to be a long-term growth driver, notwithstanding, you know, the sort of interim fluctuation. >> michael dell, thank you so much for spending the time with us this morning from dell world conference appreciate it. >> thank you great to be with you all. coming up after the break, we'll talk about the latest around the debt ceiling talks and former treasury secretary jack loo, when we're back in two minutes.

appreciate the time it's been quite a 24 hours where the speaker said that the meeting yesterday was maybe the best so far. i was looking at mchenry who asked whether he believes june 1st is the date and i want to trust the treasury's math but they have to show their work do you think the timing of the x date is under question at this point? >> carl, truth of the matter is no one knows with perfect accuracy when the final deadline is the money has moved in and out changes from day to day. there are events you know are coming their are estimated tax revenues june 15th. can they get to june 15th? as to which day, june 1st through june 15th, you actually go over the cliff it's a mistake to gamble. having been briefed daily when i was in that role you have a sense of where you're going and a range and estimate, but you don't know with precision.

i think congress needs to get its work done or there's a risk of an accidental default even if they're getting close. >> what's your characterization right now of at least the words, the tone, that are coming out on the meeting updates? >> look, it's better when you hear reports they're having serious conversations, exchanging ideas in a constructive way i don't think we can tell from these reports exactly what's going on in the room right now it's certainly difficult for me to tell you i know exactly what's going on in the room right now. i do know there are a bunch of moving pieces which still difficult and they need to make progress they need to decide on what spending levels will be and for how long they need to decide what they're going to do in terms of addressing some of the recession of some -- resissen of covid

funds. i think they should agree to take things off the table and not do them. on the democratic side work requirements for people on food stamps, they're terribly difficult issues it's terrible policy and doesn't belong in a negotiation like this putting people in poverty shouldn't be the price you pay to fund our national obligations. >> it's sara, i asked secretary yellen this a few weeks ago and she couldn't answer because she's current secretary. i will ask you if you can, since you're in the in office, what happens if they cannot secure a deal who gets prioritized in terms of payments is it the bond holders the pensioners what does the prioritization look like and what does that actual default mean? >> sara, there are no good

options and the reason that question can't be answered, it should never have to be answered we should be able to meet all of our obligations. it's unthinkable to put the united states in a position where it would have to figure out, does it have authority and ability to pick and choose one of the things about our federal payment system that people need to understand is, it's not a modern interactive computer system. you basically can turn a check writing center on or off you can't pick or choose what to pay what's in it it was not designed to pick and choose what to pay it was designed to pay everything which is why you've heard the secretary say it's not something that can be done easily even if it were needed to happen i always said when i was treasury secretary i can't answer that question only the president can, because the secretary of treasury doesn't have the authority to pick and choose what to pay.

>> sure. though i have to think there are contingency plans drawn up. >> the contin again plan -- the contingency plan, importantly, don't include any field experiments. using systems for a purpose other than what they were designed for one has to assume enormous risk things won't go smoothly even if they were to cross that ru bricon it's a mistake to test the system obviously, you're asked what can you do if, and those kinds of scenarios are thought through. i don't think you should assume that there's a nice clean plan what's going to happen if we actually default congress needs to raise the debt ceiling. >> agree so let's say they do and then what? there are some concerns on wall street about the enormous amount of money that has to be issued in terms of debt to raise money,

600 there be to a trillion and the liquidity that would drain from the system. whether it would come from bank reserves or elsewhere. is that a valid concern? >> are you saying in the event of a default, sara >> no. after they raise the debt ceiling. >> after the debt ceiling is raised, i think, you know, we probably will see some lingering effect of the stress in terms of higher rates, but i don't think you'll see a fundamental loss of interest in u.s. treasuries. if we default that i worry deeply about what that does to the depth and liquidity in the treasury market. not that it would ever go away, but we have tremendous value in having the deepest and most liquid market in the world and anything you do that creates risk around that, is negative and something to be avoided. i think that question of what happens if we default is very

different than what happens if they solve this at the 11th hour my own view is that observers from the outside are a little bit sanquine about everything working out. i think the odds still are high that they reach an agreement i don't think it's 100%. i think that risk of having something very bad happen is something that people have to be focused on avoiding. >> you know, back to 2011, the downgrade by s&p that roiled the markets as much as anything. despite the fact that we didn't have a default any concern on your part about the rating agencies this time around >> the experience with the s&p downgrade was a terrible one they did not reach the conclusion that there was a solvency problem in the united states government. they reached the conclusion there was a political problem and you couldn't count on the political system working smoothly without interruption.

i think that as we go through yet another round of threats of default, if one side or another doesn't get its way, that raises those concerns again i can't speak to what the rating agencies will do, but you're seeing all of the conditions that of the conditions set for that question to be asked it's a bad thing if the rating agencies downgrade u.s. debt it triggers some questions as to who can and can't invest in treasuries just in terms of the role of the united states and the u.s. economy and the world, it is an unforced error it's something we could have done to ourselves that our adversaries couldn't do to us. i think it's in the interest of our strength in the world to avoid that which is why i think it's good that the sides are talking, but they have to be careful and not go across the line republicans can't think because this is so important that that will all of a sudden mean that democrats can concede on issues

that are just matters of real principle. likewise, i think democrats are going to have to accept levels of spending reduction that might be challenging the numbers that are in circulation are going to be much smaller than the house bill. they can't have their eye on saving $3.5 or $4 trillion i think the question is what can they agree to in the next couple of years so we don't end up with a crisis >> finally, mr. secretary, the republicans have tried to take a victory lap, at least on the process. the argument that the president after taking his time trying to separate budget and the debt ceiling engaged in negotiations, finally, which they see as a political win. do you think there was lost valuable time in the president making that pivot? >> i don't think there's any political wins in setting up a drama like this which hurts the country. and that's something that the republicans did by saying we're going to demand things we know we can't get

i think that a discussion over the budget, over fiscal policy is entirely appropriate. that means setting spending limits for next year should they be at the levels of the country year we're in? should they be held at that level for a year or two? that's a normal budget negotiation. threatening to repeal, you know, the climate change initiative, threatening to make massive changes in our poverty programs, that's not what you do when you're trying to work out a budget deal with a divided government where the challenge is find an agreement in the center where there can be agreement. i don't think there are any wins in this. i think the administration was right to say you cannot be held hostage. i think it's important that negotiation over the budget is going on i just wish they would complete it and get to work once they have an agreement, extending the debt ceiling is going to be attached to whatever they do. >> mr. secretary, thanks so

much on behalf of viewers who are still trying to get their arms around this one. jack lew, thank you. >> good to be with you. in the meantime, let's get a sector sort from dom chu. >> the energy sector is an outperformer apa, marathon oil, exxon firmly in positive territory as oil prices tick higher, driven in part by a saudi arabian oil minister, warning traders, speculating about a drop in oil prices there could be pain ahead for those looking to profit on short oil position opec and its partner countries meet on june 4th to discuss those policies chevron one of the bigger gains as upgraded to a buy, saying that stock represents a valuation opportunity given its recent underperformance. keep an eye on chevron more "squawk on the street" coming up from santa barbara we're back after this break.

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welcome back to "squawk on the street." we are live at cnbc's inaugural ceo council summit on the west coast in santa barbara, talking to leaders across business, finance, culture, and academia a lot of big topics will be covered the next couple of days, including the nation's debt, obviously, ai revolution, relations with china and we'll give you sound we got with john lonahue of nike. a t more "squawk on the street" continues after this stay with us

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shape tomorrow today. good tuesday morning i'm sara eisen with carl quintanilla live from santa barbara california at the ceo inaugural council summit coming up, indicate i can koch will weigh in on the debt ceiling, the state of private credit and her outlook for the second half. and john stoltzfus will join us with