could react to the prospect of higher rates. plus jamie dimon speaking in china as the bank looks to increase its footprint there it's wednesday, may 31st, 2023, and "squawk box" begins right now. ♪ good morning, everybody. welcome to "squawk box" right here on cnbc we are live from the nasdaq market site in time square i'm becky quick along with joe kernen andrew is out today. why don't we see how u.s. equity futures are shaping up at this how. you'll see right now there are some red arrows. dow futures off by about 50

points it is the last day of may. why don't we take a look at how stocks have performed so far the s&p is up by 0.9%. and the nasdaq is the huge winner it's about by nearly 6.5%. this is the trend that continued yesterday. ice the trend we saw last week and, again, it's the trend we've seen for the entire month. treasury yield has been a bit of a different story. a little more volatility there if you're taking a look at what's happening, the yield is 6.35% and the two-year at 4.434. short-term yields, of course, we continue to watch that until the debt deal gets passed and ratified by congress the one-month bill is at 5.4%. that's well off the highs when it was above 5.8%. >> down pretty sharply yesterday. we're going to talk to patrick mchenry who's almost like a whip for the speaker.

he was very out front. >> for the vote for his speakership. >> i saw him yesterday on one of the competing networks saying that perfect shouldn't be the enemy of the good. i'm trying to figure out like a lot of the same characters and on both sides. that should tell you something you know, i'm trying to figure out. i'm going to ask him because he's going to be on at 6 k34r07b. these guys were elected in their districts with a certain type of voter. i understand why they're doing it i hope they're not doing it for themselves, bus that happens too. >> it happens frequently. >> but if you don't want this kind of stuff, then get more republicans elected so that the democrats aren't able to pass all this stuff, because it's already been passed.

so you had your chance to elect more so this would not have happened. >> by the way, the democrats had a chance to take away their leverage if they would have in december -- they could have taken it away when -- >> we do got to pay this stuff now, next time if you want to try and reverse some of this stuff, get more republicans elected, not just -- >> the problem becomes, though, with gerrymandering to try to make republican or democrats have more control on either side of these things and the other problem is the primaries have a particular voter who's going to vote in every one of the primaries. that's why you get more and more extreme characters who come through this they'll point to these two reasons. >> the answer to electing more guys or gals from your party isn't to be responsible for default -- for a default. >> correct, correct. >> so -- >> correct. >> -- you can push it, push it, push it, but we know mccarthy had to push it pretty far to get

to where we are here and the "journal's" got another piece today trying to bring back some impetus to work. >> you mean getting a bill passed to begin with >> what do you mean? >> mccarthy had to push it. >> he had to push it to come to the table. you know that is correct ire calling him a terrorist and we don't negotiate with terrorists and this is ransom money, all the posturing we had for 90 days we finally come to it, and there there are real things that were extracted, not as much as some of these guys want. >> it's not the house bill that was passed, but anybody who thought that that was going to be the opening or the finished product was mistaken it's a negotiation. >> we can start arguing again. there's an election coming and everything else. we'll settle it there. at this point -- i can't believe i'm saying it -- i do say we do

pay our bills. i don't like the bills that were run up, but get a majority in the senate then and make sure it doesn't happen. all right, that debt ceiling bill passed its first hurdle last night passing the house rules committee, 7 f 46. a very close vote, as we knew it would be kayla tausche joins us with the latest on this that was the first hurdle. now what comes next? >> well, becky, it was a first hurdle and a narrow vote all democrats and two republicans voted against the bill, but it did have the necessary seven republican votes to advance it including the unlikely report of thomas m massey, massey tweeting, this is the first real bill that cuts spending and highlighting the automatic 1% cap that kicks in if the appropriations process does not work. last night the noncongressional

budget office also released its score of the bill, estimating capping the spending will reduce the deficit by $1.33 trillion over the next decade with another roughly $200 billion saved on interest payments expanding snap eligibility even with some of those new work requirements will cost the country 2$2.1 billion next year i asked shalanda how close they are at this point to securing the votes. >> hakeem jeffries said the republicans had pledged 150 votes. is that still the case, and can democrats provide 70 >> i'll let them figure that part out all i know is you don't negotiate to see a bill posted you negotiate to get to the president's desk and we'll fill fulfill our part when it gets to the president's desk.

>> the house is expected to vote this afternoon it will be a lengthy vote, and we'll see how close it is when it happens becky and joe. >> kayla, we have somebody coming up. we're going to be speaking with representative mccountry to talk more about what happened he was somebody largely involved with some of those negotiations. you just showed us shalanda young who was also very heavily involved in those negotiations what questions would you have at this point for what happens next an where they see things coming up is this just a whip count at this point >> there is a whip count, but ultimately, becky, i think the real question is what happens during the prosch united nations process because even though this bill introduced caps to spending, it's up to the writers of the budget to implement them over the next three to four months it's still a critical portion of this and then what happens in early

2025 yesterday director young was asked whether there would be a renewed push to abolish the debt ceiling now that they have gone through the sustained fight once again. she did not take the bait on that question, suggested that it's more about this current fight they're trying to get through. and finally, just about the negotiations there were so many fits and starts throughout the process. what does it tell us about the white house priorities and what they could try to muscle through in other processes on capitol hill, granted now they don't have a majority in the house, even slim one, but it could tell us a lot about where the white house goes from here. >> three to four months is too long, kayla, for that appropriations i've got a solution. chatgpt. couldn't that be of help her it is just boiler pplate. could we try it? >> that could be a starting point. i don't think chatgpt can make

decisions for congress they can write text. >> kay lark it's a little weird, isn't it, to watch the president working his holdouts and mccarthy working his holdouts for the same thing it's like what world am i in it's really happening. i would think it's a good thing, but there are people thinking if both of these guys are for it, i don't want part of it. that's the cynicism, i don't know, the swam, whatever you want to call it it is kind of interesting go president biden, go speaker mccarthy. >> joe, that's why i think the -- that's why i think the snap portion of the cpo score is going to be really instruction active it was the raising of the food stamps to able-bodied recipients to find work in order to qualify for those benefits

it was that portion of this deal that led to the biggest outcry from democrats yes, they don't like spending caps there's a lot they don't look but it was the progressives who were calling the snap work requirements bad policy and suggesting it was antithetical to anything the democrats would do they also expanded eligibility for snap and removed some of those work requirements for people who are homeless and people who are veterans. it was some of those tweaks at the margins where the ceo found it's going to raise costs. the program is going to expand how does 'do they sit with that and how does that change their view if. >> for people who have gone through foster care or gone through any of those situations, too, once they're an adult, they have a longer grace period too ka kayla, very quickly, though, what would lead us to a government shutdown in september? this is if they can't agree on how things would be written in terms of the appropriations

bills? >> correct there are 12 bills that essentially set the bunt for the upcoming fiscal year that begins october 31st even what negotiators did in this process is, okay, when we set that bunt, we're going to be keeping spending to these levels we're going to be pursuing no more than a 3% increase in defense spending, for instance it's still up to the people who are writing those bills to decide exactly what programs get allocated, what funds. and if there are any disagreements where they're really at odds, that is when you could see government shutdown talk come into play. the white house was asked yesterday, how can we -- how can we ensure that this does not happen, that there's not talk of a government shutdown in the next three to four months, and the responsibility was pushed onto the appropriators so that's the next process to watch here. >> talking about devil is in the

details. there's a lot more to come we'll check in with you late jeer when we come back, cleveland's fed president saying she does not see a compelling reason to pause rate hikes we have the details on that next by the way, barkin's president zwjoining in on that. you're watching "squawk box", and this is cnbc ♪ the biggest ideas inspire new ones. 30 years ago, state street created an etf that inspired the world to invest differently. it still does. what can you do with spy? ♪ ♪ he snores like an angry rhino you've never heard an angry rhino baby i hear one every night... every night.

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ahead of next month's fed meeting, cleveland fed president loretta mester is making her message clear. she's bushing back on a rate hike pause, instead saying, i don't really see a compelling reason to pause, meaning, wait until you get more evidence to decide what do she sees a more compelling case to bringing rates up rather than holding then depending on the direction of the economy i should ask thomas barkin from the richmond fed t president there, added he thinks it will very likely take a drop in demand before you can really bring inflation down >> i still -- you know, they don't have a crystal ball, and they're not any good at it you could go back to when they stayed at zero for too long and she could have been saying, i really don't see any reason for

why we should be raising rates here nothing is happening to indicate we should be raising rates i really don't think -- >> the reason is because they get to vote and decide what to do. >> was there a reason to raise rates? yeah you could see that it was c coming, that there's a reason. is there a reason to pause can't you see that something is coming >> if you're data dependent, you're going to wait -- >> it's come down every month. >> but it's like trying to turn the titanic. they know there's a lag effect. >> there's not the systemic that it was. >> once it gets -- >> the fed balance sheet blew out and we blew out spending >> correct the fiscal side of things too. joining us right now to talk more about this and what it means for the markets is stephanie link she's hightower's chief investment strategist and cnbc contributor.

steph, what do you think if the fed is thinking of raising rates again, what kind of impact will will that have have on the economy and the markets? >> i look at the economic data, becky, and it's actually pretty good you look at the initial claims, the job figures, the may consumer confidence yesterday was way better than expected and higher visions you have consumer spending that's double the expectation, so the data has been pretty good it's not all perfect i know manufacturing is certainly slowing down and in a pretty big way and hughesing is going to be down year over year, but i do think there's enough there -- enough momentum in the economy that the fed probably should go another 25 or so but i think i step back -- i step back and say, well, maybe it's one or two more rate hikes and then i think they will pause. and so i think we're in like the ninth inning of higher interest rates. not to say they're going to pivot and reverse.

they're probably going to keep rates high for longer. but i think we're probably close to tend to actually them raising the interest rates. and if that's the case, if we're closer to the end, does that mean it doesn't really matter at this point you're okay with whatever happens? >> well, i think we're in this trading range, right because, a, we don't know what all of these higher interest rates are going to do to the economy, how much we're going to slow down. is it going to be a recession or not? and that's a really big deal, right? i think the second point -- and it's probably a bigger picture -- is that there are alternatives now certainly in the fixed income arena but internationally. europe is up double digits this year japan is up double digits thisser yoo. i kind of think as a result we're in a hire trading range.

i do hope we're in a broader market and i hope once we get through the debt uncertainties, the fed and what they're going to do, hopefully we'll see a much broader market. because right now it's been so incredibly narrowing and that's been one of the biggest surprises to me. >> let's talk about that you talk about how narrow it is because of the number of stocks that are responsible for so much of the gain and the s&p 500. the nasdaq stocks, it's all because of the ai. >> 25% of technology, they're at 52-week highs, and the nasdaq has massively outperformed the s&p. in fact, if you take out the top seven stocks in the s&p 500, the s&p would be up only 1% year to date versus up 9%. yeah, we've had the top five stocks now 25% of the s&p 500. apple and microsoft, we haven't seen them at 7.5% each in over 40 years, so you are seeing this very big narrow kind of a

market it's certainly frustrating because i see opportunities elsewhere. but i think it's because we have all of these unknowns. yeah, ai has been driving the story for now, but, again, i hope that changes as we progress through the rest of the year. >> you think they can actually perform to the levels that are now baked into the market? >> i do think ai is real it's going to be $2 trillion to $3 trillion by 2030 about and it's growing at about 40% per year and only 20% of companies in the united states are actually using ai. so there are a lot of tail winds. but that being said, i own broadcom yesterday it opened up at 111% and it closed down on 2% the swings are just incredible i think there are places you want to have exposure to certainly, but i don't think you want an entire portfolio of ai,

and i do think it's getting a bit hyped and some of the stock moves have become incredible i dictate some profits yesterday in broadcom. >> that's interesting. you start hearing moves like that, swings like that, you can't help but feel we're still in a little bit of that casino-style mentality stephanie, when you say you see opportunities wrrk are they? >> yeah, so, i mean health care has been kind of frustrating this year. it's -- the group as a whole is down about 7%. i like hca i think they've got very strong fundamentals th their ebitda is growing at 17% they're doing interesting m & a, expanding urgent care, i think that's a great idea. i'll give you a technology name i certainly like i certainly won't buy 1 un%. that's fortinet.

i think it could be double that easily we all hear easily every day what's happening in the cybersecurity world, and these guys are growing revenues at 30%, and orders are in double digits, also expanding i'll give you a boring one, proctor & gamble, stong down 8%. they, too, are seeing market expansion. oh, by the way, they still have headwinds from higher input causes, which i think are going to ease throughout the year. i'll give you three names a little bit after the beaten path. >> steph, thanks we'll see you again soon. coming up, this morning's biggest movers in stocks to watch. that's next. later former s.e.c. chair jay clayton and former white house adviser gary cohen will join us on step. "squawk box" will be right back.

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shares of hewlett-packard enterprise are lower, earnings, 52 cents a share expectations at 48 looking for $7 37b9 billion and the company reported $6.97 billion. revenues from the company's high-performance computing and artificial intelligence segment, that was up 18%. it includes some ai models, systems used to train ai models. but revenues from the compute segment was down 8%. storage revenue down 3%. looking at the other part of

this, hp p inc. -- that was hp enterprise -- also falling shares above expectations but revenue was below. the company said it weathered a slump in pc and printer sales in part due to cost-cutting efforts, but you can expect weathered is all relative because pc sales are down 34% in the quarter. printer sales, which you also think about with hh, down 5%. >> that's the stuff that got pulled forward working from home. >> comps are hard to come. >> comps are hard to come up expect. >> do you talk tech, nasdaq, we're really not talking about hp, enterprise or inc. >> or shares of chipmaker ambarella. this morning shares are tumbling it did say current quarter revenue guidance came above expectations check that out that's a decline of 18% for

ambarella. shares of box higher it beat expectations of 27 cents. revenue also beating and the company slightly reduced its full year guidance citing higher than expected headwinds currency, especially with the japanese yen. warren buffett's berkshire hathaway is close to breaking the 25% threshold of occidental petroleum. it boosted its stakes roughly $275 million berkshire now owns 24.9% of oxi. it shares, $58.21. coming up, what we've been talking about six 6:00 a.m., house financial chair patrick mchenry after the break. as we head to break heerk's a look at s&p 500's winners and losers

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good morning welcome back to "squawk box. we are live from the nasdaq market site in time square take a look at what's been happening with futures red arrows across the board. yesterday the dow was down, but the s&p and nasdaq did go up this morning dow futures are off by 55. the nasdaq off by 30, and s&p futures off by 11. and advancing from a key rules committee, passing a hurdle toward a vote tonight if the bill passes in the husband, it will go to the senate where it will need 60 votes to pass. joining us now, patrick mchenleyry he was a chief debt ceiling negotiator for the house republicans. congressman, i saw you yesterday, i don't know, on one

of the competing networks, and you said some things that made a lot of sense basically the perfect, don't let it be the enemy of the good and, you know, some incremental progress here. you know, if you go to a negotiation and you don't have the white house or the senate -- i mean you're lucky to get anything really, i guess, unless you threaten default, which no one wants to do. but we don't have 15 vote this time do you want me to call you chairman i think the chairman ruined it i think i'll call you congressman is that better? >> why don't you call me patrick. >> the market won't sit around for 15 votes on this. >> no, i think we have the votes to pass this today, and i think that will project a confidence to americans that we'll get things done. we didn't get everything we wanted

the house republicans don't have the majority in the senate and joe biden is certainly not a republican so we had a really tough negotiation, but we had good conservative wins. fiscal rerestraint this is the largest spending cuts package that congress has voted on this is substantial reforms per mitting process. not just energy projects, but everything we build will go faster as a result of this bill, taking the permitting time from seven or eight or nine years and one or two with just a single federal agency getting a stamp of approval so you can move on and do your project. you get a thumbs-up and thumbs-down quickly. that's going to help america move faster and help the gdp grow more. you have work requirements to help folks on social welfare programs or able bodied without kids who say they need to get

back into the work force we stopped student loan debt repayment pause that joe biden's extended nine times, and we put it in law. so there's sub stall chan wins here on the conservative side of the ledger attached to this debt ceiling that raises the debt for the next 18 months. >> senator cornyn tweeted the provisions on work and welfare and the debt ceiling deal are inkre men tl process the gop can vote on. it's a step. you're getting some positives. what happened in the rules committee. all six democrats, they didn't take the president's call, they hate the republicans that much what was that all about? >> look, i think they're further to the left than the average democrat, but the fact is that

shows -- in my view it shows that they're not happy with the package that the president's team negotiated. i get that >> you can use that. >> i hope so look, no one should be quite pleased with the nature of this package. it's a negotiated package in a divided washington, but we need to pass it and get some fiscal restraint out of it and policy wins, bag those, an move on to the next fight the next fight becomes, really, the political one in the election year for the presidency, control of the house and senate. >> the damage is done. they were able to pass it because they were able to. elect more republicans right? that's why i don't understand

the real hard liners sorry. >> go ahead. >> it's not a way to elect more republicans is to force a default. >> well, and, look, going past that date, secretary yelin updated the numbers to june fifth at the in fact day -- as the next date she speaks the truth on when we have to raise the debt ceiling by having to update the numbers in the midst of the negotiations, she says this is a really challenging time for cash management and the government. so i don't think we -- we don't want to play ftfootsie with thi. >> congressman, you were involved in the negotiations 're someone who understands your caucus very well is this going to be a done deal? what's the whip count look like at this point? how many republicans will vote

for it >> look, it's the house of representatives. nothing's a done deal until the vote's closed, and the vote will be this evening. so it will be a long grind day nice to start with you and joe this morning >> that's the best place the important people are watching. >> well, exactly i want to be in the right place to start my day. but it's going to be a long day. but i think the votes are there on both sides. democrats will approve some votes. and in a nature of a deal like this, both parties have to reach goals, but republicans will hear the lion's share of the votes in the house of representatives as we should. then lit go to the senate. >> he was big because he's a standard bear. you've got congresswoman nancy mace on face value, she's right

but we're not get bag tock where we were before the ridiculous spending -- it was necessary, obviously, some of it -- on the pandemic at face value, that's a good point she makes. we can't d x tract that to get back to where we go on this. finally, would she be a thumbs-up on this? >> who knows i'm not going to speak to any individual member. they have their own opinions on this. >> let me convey to you about the money we spend year over year that congress passes bills to enact what we did there is outside of veteran spending and defense spending, we cut our spending back to 2022 still too high, i admit that we weren't able to go further, but that is going to mean outside of veterans and defense, we're going to have substantial cuts to government that's a huge win, and joe biden and his team are far more progressive than they

understand they want to spend more money. they don't think our debt is of serious consequence and they want to continue to spend money at a rapid clip. our limitations here were by leadering of both parties saying we should not touch medicare and we shouldn't even approach social security reform for the next generation. so our negotiations were limbed before i even stepped into the room, and we're really dealing at some point so we can balance our books for the long-term. >> kayla tausche, i don't know if you heard us talking with her this morning, but she pointed out, the next issue, even if the gets passed tonight and by the senate and signed into law, the next issue is going to be whether those 12 appropriations bills can actually be written, signed off of in time torsion meet all the requirements that

have just been laid out. otherwise we could be facing a government shutdown in september. what are the odds? how difficult and how complex is that part of the next process going to be in. >> well, it's going to be less complex because we have an intentative for both parties to come to the table. we rachet down the caps on defense spending and nondefense actioning. if kong fails to act by january 1st and we would have spending cuts put in place both on defense spending and non-defense spending defense spending smoiltd vat republicans and nondefense spending should motivate democrats to the process. >> the other complaint i hear is, okay, instead of 80,000 irs agents, they're going to hire 79,800

i just make this up is this another stay tuned? we're going to revisit this? we're still going to work on that, or did you kind of throw in the towel on that >> no, we -- we kept fighting for more irs cuts. they really plussed it up. they want to ramp up the hiring of agents and the purchasing of technology what we did in this agreement is took their endporsment dollars for this year they added, $1.4 billion, and we banked that. we took it away from the irs that means the irs won't be able to hire new agents for the rest of the fiscal year. and we have an agreement we'll take out more this fiscal year and the following year, $10 billion more we didn't take it all. it a is going to hinge on the president. we've got joe biden as a down payment and we're going to

restrict the growth of the irs not completely, but a good down payment. >> winning elections will help all of chip roy's concerns all of those things will be answered if republicans -- >> do you own a tie like this? one that goes down. >> i do. >> you do. >> if i -- >> if i ever learned how to tie a real bow tie, i'd be so proud, i'd probably do that every day, but i don't know how to do it. >> the only time i have to see myself in a bow tie is a picture. i don't mind a bow tie because when i look down, i don't see a tie. but unfortunately my audience has to see a bow tie, which is offensive to most. >> you do war it well, but i do start creching popcorn whenever i interview you. >> what -- or ville red

enbalker. >> or ville redden balker. vial to put on my seersucker suit for you next time. >> thank you for coming on 6:30 you've got to be here. you just set the tone for the day. you did. thank you. >> becky, joe, thank you both. great to be with you. >> thank you, congressman. when we come back, fidelity riding down its twitter stake, now valuing the company at a fraction of what elon musk paid forrist. we have the details next. later, don't miss our interview with peter orszag. thisis his first interview since becoming ceo of lassad we'll be right back.

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time now for the executive edge twitter valuated down 3% of elon musk's purchase price. he acknowledged he overpaid for it, tweeting it's worth less than half of what he paid for it. coming up, elon musk and jamie dimon visiting china this week we're going to talk about their goals in that region of the world and what officials in beijing want to hear from the ceos and a reminder you can watch or listen tuso any time live on the cnbc app

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tesla's ceo elon musk is in china this week, his first trip in three years to meet with government officials and jamie dimon takes the stage at his bank's china's summit today. he's calling for real engagement between policymakers in washington and beijing, instead of just sitting across, in his words, sitting across the pacific and yelling at each other. for more on what officials want from each other, let's bring in jim mcgregor

i don't know when the last time is that we saw you i think it was pre-balloon gate. we've got lots of concerns you know, the country, china, is obviously front and center in terms of trying to further its own interest, like we do too but whether buying farmland around our defense facilities, some of this is troubling. but i don't see how disengagement, they're going to do it either way we need to be over there, don't we at least in terms of, for example, tesla or apple or jpmorgan >> yeah. let's start out with elon musk i think this is his -- if you look at him coming to china now, it's kind of his, somebody likes me tour. he's not the most popular guy around the world, be new china, he's reveered. he's looked at as kind of a fun

version of einstein by people. when he met with the foreign minister on tuesday, the foreign ministry came out and said that elon musk described u.s. and china as co-joined twins and did not want them decoupled. he's made no public statements during his time in china, but he wants to expand there, and china loves him, because he brought in the advanced supply chain for electric vehicles that their companies are now benefitting from so he's been very helpful to china. we'll see how long his market share will last, or if this is his best time. we don't know yet. for jamie dimon and jpmorgan, this is kind of their redemption tour you'll remember, in 2021, jamie dimon said that his bank would outlast the communist party. you can imagine that was not well taken by the party. this conference is a big deal, because it's the first one in three years. but it's also not the most high

profile. there's only a couple of american ceos there. a lot of the people there are regional heads and analysts and lawyers, et cetera so you don't have a big turnout. kissinger, of course, will be speaking virtually, and some others but this is not a whole lot of ceos returning to china, even though they are starting to come in but let's look at the tone of the conference this is thursday's agenda. these are some of the events, ready for renewal, china macro outlook. building resilience in china's health care system vast, quantitative opportunities in the china/asian markets so he's working to put a positive spin on china at the same time, this is what all ceost rst doing, you're walking a fine line between russells, beijing, and washington, d.c., trying to get through this minefield and jamie dimon has been very adept. he said, we're here for the

citizens of the country, in the good times and bad >> but i listened to an interview he gave to bloomberg he also was outspoken, i think more so than any of the other ceos you point to, whether that's elon musk, tim cook or beyond he said, these were his words on this, i am an american patriot he said, i am a red-blooded, full-throated capitalist he also said that he would always choose national defense first, being an american patriot. if his country tells him to do abc, he said he will so that's more outspoken than i've heard from anybody else >> yeah. you know, they're all trying to figure out how to walk this line you say -- you're looking back at washington the whole time you're in beijing on what you say, but you're also looking at the chinese leadership and trying to say positive things about both and maintain your integrity and your positioning in both countries. it's not easy. but everybody's doing this right now.

>> he makes a point, yeah. we want to, for our own self-interest, sell into that market we want to help it but some of the stuff the ccp continues to do is inexcusable we've got disney in florida that doesn't like a duley passed law. it says nothing about uighers. so there's a lot of hypocrisy. plenty to go around in terms of china. >> the big issue is business has gone being the bridge between china and the u.s. to being the battleground ceos are trying to get their head around it you're right, it's scared a -- there's a number of ceos that told me they're afraid to go to china. members of congress were saying the same thing

so you have this china courting people who are also scaring them >> jim mcgregor, thanks. when we come back, ken rogoff will weigh in on the debt ceiling bill we'll be right back. help make trading feel effortless. and its customizable scans with social sentiment help you find and unlock opportunities in the market. e*trade from morgan stanley. with powerful, easy-to-use tools, power e*trade makes complex trading easier. react to fast-moving markets with dynamic charting and a futures ladder that lets you place, flatten, or reverse orders so you won't miss an opportunity. e*trade from morgan stanley ♪ (upbeat music) ♪ ( ♪♪ ) woah. ( ♪♪ ) ( ♪♪ ) ( ♪♪ )

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♪ ♪ good morning welcome back to "squawk box" on cnbc andrew is off today. u.s. equity futures, not a lot happening, but it's all red, down 37 points or so on the dow. on the s&p, the nasdaq, they both managed to have up mays, and the dow is down now about 3% >> yesterday -- >> no, for the month treasuries this morning, not a lot of action there, but we'll talk about this in a econd

3.65 now and 4.42 on the two-year and an interview with the financial times, mister is pushing back against the idea of a pause in rate hikes saying in her words -- >> house and senate leadership are out in full support of the bipartisan debt agreement reached between joe biden and speaker mccarthy in an op-ed, harvard professor ken rogoff says the deal does not solve the underlying political problem, and that a truce is probably short-lived. joining us right now is ken

rogoff, chief economist at the imf. let's talk this through. i think you thought if there was not a deal that would be a very bad thing. do you feel confident this deal will get passed? >> i don't feel confident about anything i'm reasonably optimistic it will get passed, but no, i don't know what will happen last minute here. >> in terms of your concern, even if this does get passed, do you think a truce is going to be temporary. in what way is that? >> the country is so divided, congress is so divided you know, in normal times, having the possibility of the u.s. not paying its bills i think technically we won't default on our debt, at least unless many months pass. but the idea we would be doing that randomly for a long time is pretty unsettling and shows our institutions are pretty vulnerable

but, you know, we have a likely presidential candidate on the republican side, or quite possible, that denies having lost the 2020 election he'll probably appoint a vice presidential candidate that agrees with that and the divisions are just huge. you talked about the major primaries push extremists in both part i whyiys, and the ceni hollowed out why is it so hard to pass the budget why don't some democrats in the house vote with the republicans and push it through? why don't some republicans in the senate vote and push along a compromise and push it through they don't even seem to be able to think about that. >> just the idea of compromise being a dirty word at this point? >> yeah, absolutely. >> ken, let's talk about what you see happening with the economy. we'll go with your optimism and

assume this gets passed, that the debt s.e.a.ceiling and defas off the table as an issue. let's talk about where we are as an economy and what the fed will do next, the latest rounds of commentary we have heard point to them raising rates at this meeting in the next couple of weeks, next month. what should we think about that, and what do you think about that >> historically, past presidents have taken stronger positions, usually more hawkish than the board, who said in washington, so that's not unusual. i guess they're going to pause, because they can raise rates later. i personally think real interest rates are going to stay high i don't think interest rates are going to come down as fast as if market thinks. but i don't think there was a rush to get there. they raised interest rates quite a bit. i think they're more likely to

go up, the fed funds rate, over the year, than to come down next but i think right now, a pause makes sense. it's been very hard to read the economy the last year. >> what signs do you look to when trying to figure out what's happening in the economy >> well, particularly the unemployment and looking at the employment figures i think is really the most important thing. figuring out what output is, how do we recalibrate what happened after covid? there's quite a possibility that we had a one-time down shift in our potential, and it might be growing back from that it's hard to say but the employment figures that they have been getting weaker. i think we see -- i'm looking at sort of microeconomic evidence that jobs openings relative to

people looking for jobs has been declining. it's very weak in some sectors like the tax sector. so we see some signs of weakening, but goodness, the underlying cpi, the underlying core inflation, it's still pretty strong around the world it doesn't feel like we're anywhere near this i must say i think the fed is going to be facing harder challenges next decade, not just now, because we're in an era of pushing up prices, and with a lot of pressures to raise spending so i think the next decade we may see the fed lean toward allowing inflation more than it has the preceding decade >> that's the argument where people think they'll stop and cut rates later this year, that they'll abandon the idea of getting back to 2% inflation you don't think that's the case

immediately? >> they're not going to say that they're abandoning getting back to 2% inflation. i think what they'll do over time is say yes, that's the long-term goal, but i don't think they will abandon it but there are a lot of pressures upward on real interest rates that have happened since covid start with debt is much higher even whatever this deal, the defense pressure for defense spending being higher around the world everywhere whatever happens with the green transition, that's going to cost money. populism, if the republicans are in power, they'll cut taxes. if democrats are in power, they'll raise spending there are a lot of pressures on real interest rates. i don't think they're going to go away any time soon. i think we saw extraordinarily low real interest rates from 2012 to 2021, and i think the

next decade, they're going to be maybe a percent and a half, percent and a quarter higher >> the main argument that people have for not waiting, for not pausing right now to see what's happening for the fed's next meeting is that the fed would lose credibility with the markets. what would you say to that >> well, there's a lot to that i mean, it's kind of incredible that inflation hasn't gone up more people have been burned badly. if you are a u.s. debt holder and asked how much cumulative inflation was compared to what you were expect it is last couple of years, you've lost a good 10%, 12% or more of your investment that's true across the board and yet, you know, they have spread out and not exactly been stable, they have weakened, but they haven't moved as much as you would expect the fed is concerned if we lose

that argument, then it can be really painful to bring it down. but on if other hand, we're facing a very uncertain economy. you can raise interest rates later. so i sort of say what i'm expecting here is a pause, but with a strong advice that we may not be done raising rates. >> ken rogoff, thank you, ken. >> thank you coming up, a look at shareholder activism in 2023 according to lazar, the first quarter of the year saw 69 new activism campaigns globally, the second highest quarter of activity since 2019. what they call global swarming, by multiple activists, often with competing agendas, pursue the same target. today, two major companies will hold shareholder meetings and both targeted by activists but check out this, shares of

advanced auto parts after the company reported a big miss for profits. revenue was basically in line, but store sales fell the street was looking for a gain of 4 to 5%. also cutting its guidance for the full year. we'll have more in just a bit. "squawk box" will be right back. ♪ i'm here with these low handicap golfers to put new maxfli tour balls to the test. how does it feel compared to the ball you've been hitting? it's definitely softer. good ball flight it doesn't wanna... flight was amazing. it just goes. sat down like an old dog in front of the fire. errrt. stopped on a dime. you need to be on tour, and you need to take that ball with you. that's the sound of a good ball. let's go!

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now that we can do. with the advanced connectivity and intelligence of global secure networking from comcast business. it's not just possible. it's happening. exxonmobil, chevron holding shareholder meetings today it's almost two years now since activist investor engine number one took on the shareholder meetings joining us with more on activist shareholder campaigns, michael flaherty, editor at axios. it's, i guess, increasing, the most since 2019. but i would think it's about what -- the activism we're seeing is about what you would expect, is it not? kind of in line with what we have seen in recent years.

>> in terms of energy activism, i think it's probably peaked when you look at where we were two years ago, engine number one, exxon, that was the heat of that kind of activism movement two years on, the pendulum has kind of swung back and it's definitely leveled off >> a lot of that is just because energy prices came back. you looked at energy prices collapsing, it's really easy to go after companies when the fundamentals for the business look pretty different. >> it's a big part of it again, when you look at where we have come over the last two years, you know, that type of activist, the case that they had two years ago versus now, when you look at what the energy sector has done, is diminished the esg topic itself has been politicized to the point where a lot of this has calmed down. and i think you look at today, though, it's leveled off, but it hasn't gone away exxon has 13 shareholder

proposals on the ballot. chevron has eight proposals on the ballot, six of them have to do with climate risk and esg >> you don't think following the russian invasion, front and center, the possibility that europe was going to have people without energy that's still front and center. in your view, we have all these initiatives, when are we off fossil fuels completely, what year in your view? >> one of the things is the climate tech sector. even climate tech founders, who are trying to initiate real energy, you know, tools and products, they will say that the energy transition is going to take a lot longer. i'm not going to give you a year, but it's very clear that you talk about the actual transition time. i think even the most green

climate tech folk also tell you it will take a long time >> you have to power the grid to power the electric vehicles. i mean, it's just -- they talk about climate change what about the physics of a global economy and moving things and goods from a to b globally, how are you going to do that without fossil fuels >> well, look, it will clearly play a role -- >> play a role what are you going to use? what are you going to replace it with >> if you're talking climate tech specifically, you have, you know, battery operated, you have electric -- >> how are you powering the grid >> well, right now, fossil fuels is what's happening -- >> in the future, how would you power the grid >> a variety of different options. let's talk about europe for a second, though you talk about bp, you had a ton of activists, you know,

protesting the meetings. there's a lot of energy when it comes to what's happening in europe compare that to the u.s., exxon, ch chevron, the activist fervor around those two companies is a heck of a lot more muted in europe >> the most extreme activists in europe basically think that it can't co-exist with the capitalist system and we need to change everything we do, to get to net zero. >> that's right. i think also one of the things that's whipped up the activists in europe right now is the fact that the biggest shareholder in all of these companies has supported the companies in europe, and that's -- if you are an energy activist in europe, that's what you're reacting to right now. nordis bank has gone against exxon and chevron when it comes to their policies. >> other than esg, and i can see the s and the g part prompting

activism, but what else is going on we're talking about activism, what else is fertile ground? >> beyond that, a lot of change in the u.s. activism space, and becky and i talked about this, campaigns are down 30% overall globally, shareholder activism has grown, but in the u.s. it's down significantly we started the year with a couple of large-cap campaigns, it looked like the environment was kind of perfect for activists, and then svb happened, march happened, the volatility picked up, and you have seen campaigns really plunge in a big way. >> yeah. >> uh-huh. so who are the most potent activists that companies should worry about at this point? >> yeah, elliott clearly is. quarter by quarter, year on year, elliott initiates the most amount of campaigns.

you look at the salesforce campaign that started the year you know, they are the biggest, they are over $55 billion now in terms of aum they're also the most aggressive when you look at this particularly proxy season, you've had a lot less u.s. campaigns, but you also have universal proxy cards. so universal proxy card is a single ballot, where under the old system, you had the dissident card and the management team card as a shareholder, you had to make a choice whether or not you were going to support a particular side. now it's a single ballot, all about the individual quality of the director >> how much of activism is just trying to enhance shareholder value in situations where there is mismanagement or this long-term hasn't returned what it's capable of, and how much is about ending the bad weather

that has been plaguing us? >> it's all about shareholder value. if you're an activist -- there's two things there are different type of activists. there's the emergency activist -- >> that's not shareholder value. that's all we have talked about the first half of this interview. >> there's the energy activist and everybody else when you talk about the "everybody else," you know, for year in and year out, the biggest -- the most demand that they will make is for m&a. they want to put the company up for sale, but when there's no m&a market to speak of, q1 volume is under 50%, you have to change your tack, right? so activists now, when you look at the start of the year, they were going after profits and costs, because there was no m&a

market to fuel those market -- those shareholder value enhancing type campaigns now, as soon as the m&a market comes back in the second half of the year, i think you'll see those types of campaigns >> is that when it's coming back >> i'm not making any predictions. but like the financing markets are back you're starting to see leverage buyouts and banks syndicate loans. so those are early signs that m&a will be making a return. ♪ ♪ >> any way, thank you. when we come back, former s.e.c. chairman jay clayton and former nec director gary cohn with reaction to the debt ceiling deal and then at the bottom of the

hour, former house majority leader eric cantor will be our guest. we'll talk about deal making, the inflation picture, and the debt ceiling "squawk box" will be right back. i'm telling you, coach staley, i could really get used to this retirement thing. ahhh! coach k, there's a goat here. the story of my life. no coach, there is a goat here! whaaa! what's this? a thousand dollar hospital bill? but i have good health insurance! gaaaaaap! did you say 'gap'? he's talking about the expenses health insurance doesn't cover. but with aflac, you can get money to help close that gap. aflac, huh? gaaaap! aflac! gaaaap! get help with expenses health insurance doesn't cover at aflac.com ♪ (upbeat music) ♪ ( ♪♪ )

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now the answer to today's aflac trivia question. the answer -- the atari jaguar let's get to frank holland with a look at the premarket movers what are you seeing? >> good morning, becky we're going to start off with earnings movers. hewlett packard and hp inc a beat on eps and a guidance raise. important to note, ai focused

segment beat expectations. i boat with the ceo. he expects demand for scaleable ai to be a big tailwind in coming quarters. hp inc, shares down more than 5% also a revenue miss. pc sales were below estimates. i spoke with the ceo who expects a second half sales boost and he adds that hp is working with other tech companies to create ai enabled pcs, something he believes will be a refresh of the industry you were talking oil earlier. chevron shares, down about 1.5% after jpmorgan upgrade ahead of its shareholder meeting, as wti falls below $70 a barrel today opec plus could support crude prices in a downturn the valuation is attractive at 11 times forward earnings. shares are down 1.5% and we have another stock reversing course this morning.

c 3.ai down 5% it was up big yesterday after that announcement that c3 generative ai is available on the web services marketplace it will allow organizations to quickly and easily to use chatgbt. shares rising about 270%, but up over 100% in the last year back over to you >> frank, thank you. you want to say anything else about advanced auto parts? >> i was just looking at what a complete mess it really is it was a $212 stock not long ago. so it was already cut in half. i don't understand exactly what they're talking about here, but obviously, the revenue wasn't that bad, so it was a margin you are shoe that they're citing

but for the year, we didn't mention how much they had -- i mean, they missed expectations by a mile for the quarter. the reason i looked into it more closely is like did we miss a special item because they were supposed to earn $226. and that sounds bad. but then you look at -- >> i'm sorry, $226 a year ago. they were looking for $250 >> and then for the year, it looks like it's not going to get any better you know, if you had it because of the dividend, it was $1.50. now it's 25 cents, so an 83% cut. it's an interesting market it just said that margins were hurt by moves to narrow the competitive price caps so obviously, they were getting

undercut, and the professional sales channel in an unfavorable product mix. >> it is a situation where people are keeping their cars longer because new and used cars have been so expensive >> it was -- i mean, it was a high flyer it went from $80 to almost $220. painful, obviously, for the shareholders >> dropping more than 27%. stilt to come, economic growth the fed's next move, the state of regulation, and much more with former s.e.c. chairman jay clayton and former nec director g gary cohn.

breaking news from american aurals let's get to phil lebeau with the news >> take a look at shares of american airlines, moving higher as the company released q2, where they are raising expectations for the quart e let's start with the metric that will get the most attention, an increase in earnings share

expectation. they are expecting it to be up 15%, with the margin also increasing to a range of 12.5% to 14.5% previously it was 11% to 13% the revenue per seat mile, the range there has narrowed still negative is the expectation, but negative 1% to 3%, versus 2 to 4% and fuel cost, one of the factors behind the higher guidance, they are expecting that to come in lower to $2.65 gallon we are seeing it man vest in terms of the guidance with lower fuel cost has american raising guidance for the second quarter. back to you. >> okay, great thank you, phil. moving to the story of the day or the week, the month the fiscal responsibility act is heading to a key vote in the house later today. joining us now to discuss the latest on the debt ceiling negotiations, former s.e.c.

chairman jay clayton, a cnbc contributor and american express board member and senior policy adviser. that's it for this interview we're out of time. wow! are you busy gary cohn is here, too [ laughter ] he's vice chairman of ibm, former national economic council director you've made sausage realtime things were really easy then >> oh, yeah, really easy >> anything that is just earth shattering in this latest debt ceiling vote for you or have we seen this movie before who wants to start >> i think what's earth shattering is they got it done how many days, weeks, and months have you sat here on this network and in this room and talked about the catastrophic effect of not getting a debt ceiling deal done?

that's all we talked about for the last, i don't know, three months everyone talked about how bad it would be, and people questioned the ability of the white house and the speaker to be able to sit down and get a deal done so i think what is the most important thing to start out with, is we have a deal. we got through the rules committee last night, going to the full house floor tonight look, you never know what can happen on the house floor. but it feels to me that we will get a bipartisan vote tonight, as all of the leaders have said, we need to have a bipartisan bill >> if you listened to hakim jefferies, or actually the president himself, he was reallre reallreally adamant -- what do you think happened behind the scenes, the reality that he would be the first president to be the only one to default

he was the deal maker biden, right? >> i think it's simple until the republicans could come up with their own proposal that they could get through the house, there was no reason for the white house to negotiate the white house was taking the posture was as i would have advised them to. look, you have to pass a debt ceiling increase, because all you're doing is passing legislation to pay for things that you have agreed to in the past so if you can't legislate for that, it's not my problem as the white house, it's your problem as congress. once mccarthy got together with his caucus and they passed a bill that would raise the debt ceiling, all of a sudden the tables turned. the republicans had a solution to the problem the republican -- the democrats did not like the solution. it sort of forced them to come to the realization that, okay, the republicans have put a solution on the table. the ball went from their court

to our court >> and the solution had a bunch of things that we all recognize as true, which is, we have a spending problem we have a labor problem. that's one of the things that's driving inflation. and mccarthy was very smart to put those things front and center i think the american people, particularly the people in the middle, said these are reasonable asks. >> i would -- what i would say to the part of the democratic party that doesn't want to do this is, look, it's not going to kill you for covid funds to do that that's not a bad thing some of these things, you shouldn't just dismiss them to the republicans to say it's not enough, i would say, win some elections. you didn't have the presidency or the house, and all of this was already passed while you were there twinlddling or whater you're doing let's move forward >> the second order of this is,

one of the things -- what are the things that will drive growth in america? we need growth >> government spending and bigger government. [ laughter ] >> to your point, if you told the two of us you were going to spend $9 trillion in early 2020, we would say that you have 5%, 6% growth. now you have an inflation problem. one of the questions we have to ask, with all that fiscal stimulus, how come growth is pretty aneem snik -- anemic >> what's your guess >> we have the same problems from 2019, 2020. it's simple. energy independence, we can deal with that. immigration and labor go together and housing. you know, we have subsidized the heck out of housing at the federal level but restrict the heck out of it at the local level. you guys did a lot of work on this we have 5 million too few homes. >> at least 5 million too few homes.

we're encouraging people to create homes we're one of the very few countries in the world that would even think about allowing financial institutions to create a 30-year fixed mortgage, but we still don't have enough homes, even with allowing the financial engineering to make homes more affordable >> how do you fix that because the home builders themselves didn't want to be caught in the position they were in 2008. >> it's a little bit of what is in this bill to some issue home builders are happy to build homes. the whole permitting process and the environmental review and the cost to get a building permit today is extraordinary so the amount of time and effort it takes for you to build a house before you can even go to the piece of land and take down the trees or put a basement or put a foundation is, is an extraordinary amount of time if we had more surety of execution where you owned land

and said in six months i can have a house built, you would see a lot more houses built. the problem is, if i say i'm going to build a house or multifamily on that land and your building window is a year, but your regulatory window would be five, six, seven years and you're carrying the land, it's not that great of a return on investment >> look, we have very nimble capital markets. we have a regulatory state that is getting less and less nimble. whether it's mergers, permitting for energy, what it's housing. those two don't match up, that's part of the problem. >> we're going to -- just going back to our problem that is staring us in the face, we're 120%, 130% debt-to-gdp never been here before interest rate is going up. mester said they're going more and they probably are. so how much will that cost for debt service and what that leads us to spend

for the growth that you both say we need. it doesn't leave a lot for us. so we still have problems and no one will touch entitlements. and the political picture isn't improving in terms to have two sides that much or the divisions in the country is anyone ever going to touch entitlements >> and it gets worse i'm not trying to be dramatic here >> if you were at goldman and this was a company, you would be like, oh, my god get out of the stock >> and the last piece of the puzzle that we have to start recognizing is the social security trust fund. the social security trust fund is in its last ten years or less of being funded, which means we're going to have automatic decline in funding, in payments to social security recipients. >> president trump has not helped with entitlements then he gives cover to democrats -- >> we've had no president that

has really helped with entitlements in the modern era at the end of the day, your job as a -- as president or as a congressional leader is to get re-elected it's difficult to take things away from the general population and then say please support me and vote for me. that said, the calculus to get re-elected and the calcuhlus to running a financially responsible country -- >> you know how we still hear that socialism is the way to go, we just haven't done it right? next time it might not kill 100 million people, it might work. >> i'll take the other side of that >> but also mmt. people are telling me that the dollar is the reserve currency of the world, and no other currency comes close so we have the ability to print as much as we want, and we're going -- it's never -- we can print prosperity we still have that -- and

stephanie, whatever, i've seen this positive at mmt will work we just haven't done it right. >> like i said, i'll take the other side of that but going back to the credit point, it's not just the refinancing but the provision of new credit when people are pulling back on credit, it goes to both maces, which, again, is going to have an impact on growth. if banks are pulling back, how are you going to generate growth >> well, that's an issue, too. so are you optimistic about the american dream >> look, i'm optimistic that we had this debate. hike gary said, for the last three months, we've been talking about what's going to happen here we had a real conversation around these issues. >> is mccarthy stronger or weaker after all this? >> i think he's stronger >> i agree we've had this debate. the american public is coming out the winner

>> incrementally >> we are not having a default we're going to see the normal distribution of political views tonight, i think you're going to see the two extremes vote against the bill you'll see the fat middle vote for the bill you'll see it come from both sides, democrats and republicans will support the bill in the middle and this total norm after distribution of political views in this country. i think everyone will realize we can probably get things done -- >> are the ends of the bell curve getting wideer >> they're getting a little fatter they're definitely noisier it's a lot noisier at the ends than in the middle >> what you really like is that those people in the middle all agree that we're spending too much money >> which is -- >> that's a good thing >> that is pretty good you got something? >> i just want to say harvey

pitt, good friend of mine, wonderful man, passed away really cared about investors put investors first. understood how important -- i don't want to get ahead of the family, but i thought given his public profile, it was appropriate just -- he was a dear friend and a great public servant. >> and a frequent guest here somebody we went to often. >> ask him a question, he would give you an answer >> very sorry to hear that >> thank youaranja "squawk box" will be right back. i can't, you know, thank my parents enough for making sure that this connection is here. one of the things that my mother told me

when she was in the hospital, she didn't tell me, actually, she couldn't speak at the time, but she wrote it down... "go see alicia." oh, my goodness. you know, and there was never a time that you were too busy. there was never a time you said i'll call you back, you know. i needed to be there to carry you through, just like, you know, some of my friends carried me through.

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all right. time right now for our squawk picks. our next guest has three top picks, meta, uber and amazon joining us to explain why we should buy these stocks is mark mehenny. good to see you, mark. >> good to see you, too, becky >> let's talk about what your favorite stocks are and why? >> meta first, 14 time gap earnings and it's got three product cycles it's going through. first is this reels mo monetization and they've just been able to recapture a lot of the advertising signal they lost when apple went through its privacy changes. so you're going to have a nice recovery in the revenue growth as you go through the year, it's already started to accelerate

faster than the other app platforms -- >> was changing their name to meta the wrong move? >> yes, i think it was and i think it's one of those things they're going to regret. i think they already do regret it and investors kind of told them that, too a lot of people sold the stock last year for good reasons, one was this excess focus on the metaverse. investors would love to see them cut back on that if they announce that at the shareholder meeting today, that would be a positive. >> invest and change their name back >> yes, but i don't think that's going to happen. what's number two in. >> uber. we like the $75 price target they're going to reach finally gap earnings status and generate positive gap earnings and we think they'll start buying back stock and meet the metrics

needed to be included it in the s&p. sometime in 2024 you'll have a new addition, that will be uber. >> and number three? >> amazon. triple stock thesis >> let me ask you something about your book, "nothing but net. you are positive on net stocks most of the times when we talked to you paid off if you're an early adopter of amazon. you look at these stocks differently, though. there's a reason you have to look and value internet stocks differently. i think it has to come from optimism butch you also talk about what some of your biggest mistakes were. how do you maintain optimism but still not get trapped in stories that are never going to pay off? >> i've made plenty of mistakes

along the way. i had buys on things like blue apron that blew up i was a bull on ebay for too many years in probably in 2007 i became cautious on it, i should have become cautious a couple years before that. so these companies when they act their age and start focusing more on costs and giving back stock cash to shareholders and wea wealth to shareholders it's one of the reasons you went through this massive shift in facebook last year they dbegan acting as if it's growth, growth, growth investors started selling. when they acted their age, investors came back. they've gone from young go, go growth companies and priced like it but when their reality

changed, they needed to change the way they acted and they did. some did google and facebook i think did. >> does that mean you would not invest in toddler or teen-age companies? >> no, but you have to realize what the company is. that's a very hard thing to figure out it's all right to run without profits and you've got super premium growth if you're not growing your revenue rel knot of 10 or 20%, you better be showing that the lower the revenue growth, the higher the margins, that's relevant to most technology companies. when your growth shows, you better give something back to investors. >> there are times when the market completely disavows that and they pay no attention to that we've been through recently another round of that i think maybe because there was so much liquidity. >> we went to super easy monday

and then the market changed and the companies needed to change theirs accordingly they're not returning cash to shareholders they better show material relative growth acceleration and start returning much more cash to shareholders. >> the book is called "nothing but net. thank you. >> and coming up, eric cantor will join us to tell us what's at stake in washington and on wall street. and don't miss our conversation with peter orszag. "squawk box" will be right back.

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good morning it's the final day of may. that's breaking news in case you were wondering the nasdaq way out in front of the other major averages in month thanks in large part to

nvidia congress inching closer to passing a debt limit increase. we'll bring you the latest and talk about what it means for the markets with former house majority leader eric cantor and peter orszag and nevada tries betting is it on the dealt ceiling can you bet on a successful debt ceiling? there's nothing there. it wasn't working there yesterday. final hour of "squawk box" begins right now. good morning, everybody. and welcome back to "squawk box" right here on cnbc we're live from the nasdaq market site in times square. i'm becky quick. >> yes, you are.

>> along with joe kernen hair-do. >> hair-do >> andrew is off today >> maybe i'm pam maybe you can see the white, can you see the gray not a new hair-do. >> s&p down by 15, the nasdaq off by 43 and treasury yields i think have come down a little bit. let's take a look at where things stand you'll see the 10-year yielding, and if you look at the very short end yield, i saw that a little earlier and it dropped even more, the one month all the way down to 5.22%. you were talking about 5.8% but it does look like this deal is going to get done. >> wow, with each successful whipping of a member of congress, it's like a basis point for every person that says

i'll go with it. two stocks we're watching closely. first is american airlines, the company increasing its second quarter earnings, guidance from $1.45 to $1.65 up from $1.20 to $1.40. american also upped guidance, narrowed negative receipt mile estimate and said it plans to spend less per gallon on fuel and advanced auto parts now down 27% after first quarter earnings per share missed expectations badly. 72 cents is what the company posted those savvy analysts that are right on top of the situation were at $2.57. don't see any issues revenue only slightly missed you know what that means that means it was margins and the company did say that's what it was they had almost the expected amount of revenue but didn't make any money on that revenue

or very little forecasting, this was the first quarter, rest of the year not much better. forecasting $6 and 6.50, the previous guidance was 10.20 to 11.20 per share. if you bought the stock because of the yield, you'll be also shocked because the company slashed its dividend 83% this morning. >> let's get a look a the what mike santoli is watching ahead of the opening bell. we've seen a couple of really interesting stories and taking a look at those short-term yields, those are coming down pretty precipitously. >> they are, becky seems like a little fatigue in the overall index's week economic numbers, oil trades very sloppily to the down side and yields coming in, too. there's hesitation about growth but also pricing in that debt deal, last day of the month. you've seen this grinding up trend in the s&p 500 that has

gotten us just barely above the s&p 500 marks. the average not performing that well, which raises the question if those really hot performing stocks, like nvidia and apple making a new high yesterday, what would be a normal area to pull back to 40 or 50 or so is where we closed two months ago. we remained before that lovely the entire period here, entire quarter. now, look at some of the economically sensitive area, as well as industrials. on a one-your chart they're still holding above barely the s&p 500. you still have outperformance by the score, economically sensitive areas of the market and they've paled in comparison

to growth stocks that people are flocking into. in financials, the regionals being up off the matt a little bit but more importantly, in terms of gauging whether we're talking about capital finance success. it's not exactly to the up side but way outperforming the regional banks as opposed to real problems in terms of growing financial right now, becky. >> mike, nip explanation for the weakness in oil prices is that just the weakness in the chinese manufacturing numbers overnight? >> it does seemlike that a general sense of global growth coming in lower than anticipated. the dollar has been strong i don't place a lot of weight in the dollars number and also bigger picture, it does

seem like the way the world is going, we have a less fuel intense per unit of gdp, it just not as much. i haven't seen a better explanation than all those things working together at this point. >> okay. mike, thank you. we'll see you a little later >> and the bill on the debt ceiling, a vote is expected sometime today joining us is eric cantor, vice chairman and imagining director at moelis and company. and we had congressman mchenry on a little while ago. it looked like he was facing a tooth extraction without any anesthesia or know cane.

>> why and both sides of guilty of it but is there a middle, a group of people that don't agree this isn't the end >> the polls you would expect diametrically and you think you are right, there a's a big swath in the middle that finally rise to the occasion and get and how it sort plays out for you politically and then for the country. >> i did see sop absolutists and it the only thing that changes and you just said it they're running for office every two years. the real ideologues on the right

or on the left, do their constituents expect them to represent them that way? is that why they do it or do they like making a name for themselves does chip like being on camera does matt gates like people fawning over him what's aoc want? >> the same. however -- >> she says there's a parity account out there. how would you know >> the way you win reelection is not getting primaried. >> let's just talk reality i'm not taking away from people that don't have real commitments. when you put yourself into the public lime light and run for office, you actually believe in certainly and want to deliver that to your constituents. >> but perfect -- >> it comes down to the incentives in the primary system

what we've seen today is we've got a situation sort of writ large in our country where we're evenly divided and almost a parody evenly divided and the unity within, you'd have a hardening parties within and because of that and then you add on to this the sort of partisan redistricting goes on. and that's why so on the right you think of it one way and on the other is the mirror opposite so -- >> normally you get the extreme on one side totally upset and the extreme on the other side just as upset, you're on to something, are you not you confident this works so this will get done.

>> i think that pat fick and i think it right that if you look at what happened, you know, this administration was caught flat footed it's unbelievable. they made the shum sun every actor in d.c. would rally and people said we have 31 trillion of debt. >> i didn't hear too many bus ladders you aing compared to 2011, you didn't hear them commonwealth down and and then administration relied on the democrats to actually sign up for that, it, and so think tote

will miss played there and every bit of this deal, it may not be enough for some on the far right but every bit of the deal is predicated on republican priorities -- cutting spending, putting in work requirement, streamlining permitting. the kind so yesterday six democrats all moved fwps ruling it the they're mat mad at familiar, that biden should have never negotiated with these crists and i'm.

>> it's the vote no. >> right >> the majority and minority is vote no, hop less. they don't want to see this calamity as becky said in the primary process, bd be sincerely want to do a lot of good they think government can do a lot of good in people's lives and i think they're sincere about that if you are spending every dime the government takes in to service the debt i don't know if they connect the dots there are did this this people are actually saying you can do that

of and i guess everyone could be a millionaire if we decided. >> interest costs have gone up 35% since a year ago, it will will go rng. >> in ten years we'll spend more on interest rate than we will on our country. i bloof and saying, hey, we can't keep doing this. >> was biden really there ou biden, as you saw, question quickly lou. >> that's what i mean. >> what? >> he assad, look, he shouldn't frng actually puts a bill up and

prases it. >> the problem is, becky, is what happened when thisbecame an issue in 2011 the baum administration had a plan they knew what they. >> frchl stood back, didn't believe that the republicans would pass a plan paw f tell me what's in this bill that they wanted >> he wanted to. the stud ent loans, they talked about increasing, you know, whatever spending they want but they didn't have a plan. so i think it was missed opportunity for them and i think the victory. you just got a shot out at joe

squawk peacekeepers becomes pb, sfrrks how can you tell that from a parity john jt frm. >> it's the pair dpourm. >> i mean, no one would say that, print oo men sfn elon musk has been promoting it for a while. >> risk the millions that she's got. correct. >> already sfchlt. eric, thank you. do you tell the difference

that wasnch and this is first if you were he knows wall street and want well. he served as the o m b frps veor, keep concerns among meta insts. it had you're watching "squawk box" on cnbc

t"the wall street journal" out with a piece this morning involving epstein and that jamie dimon discussed epstein and discussed whether to have him as a client a spokesperson says dimon doesn't believe such conversations with staley ever happened he was deposed last week as part of two law

jpmorgan for its part has tried to push down and say no sthrk anz there's no evidence that any such communications occurred, nothing in the voluminous arguments and no cluck had contessa brewer is live in the silver state and will join us. whaeng bo can be took applause there is rng. >> and there is a big push to coax the movie business and all the jobs it brings here come ahead on "squawk box."

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>> how do you know customers get what they want to get? >> ancht i. can't have the experiences that brings life to bigger and better ideas. las vegas keeps setting records, highest room rates, highest ever customer spend and last your close of half of nevada's gdp came from the tourist industry what happens if the tourist actually stops spending? more on the state's plan to diversify away from gaming and leisure. in the necessarily something they need now but for the

future >> reporter: absolutely. it silicon valley 2.0 here in the southern valley, they're aiming for the desert, a training school where people learn the job. howard hughes as sony promises it would spend a billion dollars on film production in southern data over ten years but only if the state passes one of the biggest packages for film pro dukes, $190 or 20 times the current incentives opponents have balked at the massive price tag and argued the state fund should go and for a

to tern a $190 million tax credit, they would have to spend $633 million filming and create an kpuk being of about $2.5 billion >> and he says 16,000 jobs but nevada policy research argues in states where these film are offered, they've fell short of a net gain for the state. mark wahlberg lives outside vegas and he'll head to the state capitol for a meeting with the governor he has production deals with sony he would rather work closer to hope, rather than already you a. really interesting story

contessa, yesterday there was a story on the front page of "the wall street journal" that talked about how the casinos are seeing so many people coming through that they're doing all koord of thing that about good ideas but if there is a down trm were it's really interesting because some of those tweaking the odd ale will bit many, you might see a table with triple zeros we saw social distancing required more space between players, fewer tables so it was really important for the casinos that the people sitting

at those tables were and you saw the minimums going way, way up and there the 20, instead of maying out 3-2, it may be paying off close to 65 for reed tom reed got a lot of attention saying that tends to lead oto - we're seeing that people are coming for the entertainment and it just doesn't matter what the odd are in the casino. that lull bit doesn't seem to phase them >> not in a strong economy corn spaez. >> >> so he would not have

frrm on the real one no, it gray. that's an easy one and that's important, i think. and were coming up, peter orgag joins us for a wide range of conversations on the market. stay tuned, you're watching "squawk box" on cnbc ♪

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perhaps the two biggest issues for investors right now, the the debt ceiling fight and we are likely to see a vote in the house today. we have new comments from cleveland fed president loretta mester joining us is peter orzack, the ceo of financial advisory firm la zard. he'll take over at the ce office

once that is made. peter, first of all, welcome >> thank you great to be with you >> congratulations it's the first time woe got a lot at that you about when let's talk first about the debt krelg and what you think happened here do you think this is something we can count as done for the moment in. >> i think eslk. you can't grade debt ceilings failed, it's pass-mayor. but nour in is a pass. you don't think sfshlgs would you have rather had a clean debt

race in this final product we're in now >> again, this one and the clean one both in the past categories. >> nothing is in it, the covid fund or none of it is positive >> i think as you start to dig into the detail for at lease two years plus in trm being pop have not you'll will you tookd ef frchlt it may have had more complicated effects -- >> you're talking about the work requirements >> as one example. the big takeaway here -- >> they actually scored higher opinion this frnl the big take area here is they it frjs and

the latest we've heard from a lot of other regional fed presidents is that they're going to have to raise interest rates given it,s did that create problems let say if, if prm i actually think inflation is coming down, maybe a little more slowly than we would have hoped but the pandemic was a mass hif if f so i think it would be a mistake to raise rates, especially in the context of, looking we've got sfl it canning

it going to be a teg ffrm the fej frerjts and i zwrus dent see the imand inflationary expecks over the long term remain very wellor hmm you've gone to get the inflation prb ffrm and i hear you about the regional banks and liquidities out there. aa lot ffrmt, they're sitting out there, deposits are draining to the larger banks, maybe not as rapidly as during the peak of the crisis but it's still

happening, and they're having a lot of trouble raising capital so they're sort of stuck in this i don't want to call it a zombie state but they're stuck in this interneed raise ap company and, frankly, what needs to happen here is the peg. there still is hetation, another 25, another 50 basis points could make a difference? >> it doesn't tng, whether it's mornl, it becomes less attractive to keep the checking deposits in the regional banks >> if you're stuck as a fed official only using rear view mirror data to make decisions by definition it g's going to be

hard like nestor said, i don't see anything to change my view back when they stayed at zero, they forecast the future very well and didn't see any reason why to use to use this there were abundant reasons. we're stuck with forecasts no one has a crystal ball. don't you think these lag effects are yet to be seen can't you take that into account that most likely you go up 500 basis points there will be an eventual effect? therefore let's wait and see they were terrible in their first looking back when they were at zero >> every time joe and i agree i want to pause and just try to -- >> and make sure that you still have that opinion? >> yes but there we are so two things on this. one, look, there's sort of metric models.

statistical mod els are very difficult. and the second thing is i think there is good reason to expect that there are some addition an effects feeding through. i'll give you one example. people talk about supply change normalizing. the evidence shows even as the supply chain normalizes, it takes a while for that to feed through fully into prices. yes, supply chains have normalized that doesn't mean all the impact on inflation is over yet >> so when you seem so right about so many things, don't you ever question some of your other opinions that we've argued about, that perhaps -- perhaps i could be right about isn't it possible? isn't it possible i could be right about all these other things is this. >> everything's possible >> let's talk about lazar. m & a down 50%

that hurts for a firm that specializes in m & a like lazar. there are some major revisions and big issues you have to deal with first of all, when do you think the m & a drought end? what do you do in the meantime >> there are some underlying drivers that are very positive, ongoing technology, energy transition, life sciences. and then there's the financing markets, the debt limit, which hopefully will be off the table and the regulatory environment on the regulatory environment, i think what you're going to see oaf the next year or two is a bunch of these cases actually go to court remember, the laws haven't changed. basically the regulators are reinterpreting existing law. they may lose some big cases and there have been a bunch of losses already >> do you think that's the case

in. >> i don't want to speak -- the fundamental problem is they are reinterpreting existing law, which is fine. they can go try to do that but that's not what the courts do. the courts take the existing law and say does it meet those standards? there's at least some risk and that may change the regulatory environment. >> you've been described as a technocrat do you think that's a fair description? >> there's always a little truth. lazard, the brand is remarkable and i don't think there's that much interference required we have really high lie skilled professionals. >> and those highly skilled professionals will still be

allowed to manage themselves like adults? >> of course one of the attractive features of a place like lazard, there's much less bureaucracy, much less cookie cutter let me be more direct to the extent that the description suggests a cookie cutter is the approach we're taking >> we want to thank you for being with us, congratulate you on your role >> and i look forward to agreeing with joe. >> the gray hair and you're getting older and you're getting more and more like joe >> coming up, getting past the idea stage when "squawk box" returns. one for you, one for you. oh, you're a messy one.

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meta investors getting ready for the company's annual shareholder's meeting today. julia boorstin joins us. hey, julia >> meta is unique because mark zuckerberg controls over 61% of the voting shares. so the proposals are recommendations and can't force change but it does raise key issues and

they are advocating for assessment of human rights impact, content management in india, study over impact on child safety and reports on preprop reproductive rights and data privacy. and they say they are making them a better technology company and improving financial performance in a difficult environment. the company is references meta shares are up 118% year to date. piper sandler is saying it is its top pick in digital advertising because it can use a.i. to drive higher user engagement and create an open

source a.i. ecosystem. now, despite the stock's massive gains to date, analysts are still bullish, 64% have a buy or overweight rating on the stock, 32% have a hold and just one analyst has a sell on meta joe? >> all right thanks, julia. you think they should change it to a.i., inc. or stick with meta >> i don't think they're going to change the name again they're not going to change the game again so soon >> new coke -- >> new coke didn't matter. >> do you remember aleejis >> but that was a product. >> allegis >> people do crazy stuff and this was crazy, i think.

>> what mark zuckerberg and his team have said is all of this a.i. stuff they're doing now is going to support their long-term vision of making it a metaverse company. but what is a metaverse. >> you tell me the whole world is about being out, interacting and doing things, not about being in a pandemic shell, looking at your remote work. >> and facebook and instagram. >> joining us is gene munster. gene, what do you think? let's just start with meta you don't think they're very likely to change their name either >> unlikely, becky i think some of the shareholder proposals do speak to an important fact about meta's

products and i caution we are a shareholder of meta but their products are addictive i think when it comes to teens and some of the guarding around the access to these products, i think that's something that won't get resolved with this shareholder meeting but it is something that the company needs to address >> you're saying addicting is a bad thing, right, not a good thing because it keeps people engaged, a bad thing because it could be detrimental to teens' health >> as shareholders, we want them to make a boat load of money on advertising, but when it comes to some of the younger demographic, they tend not to monetize as well but there is i think just the mental wellness of some teens, some younger users as negatively impacted by that addictive factor. this is one of the reasons why the users continue to grow, grew 2% on a 4 billion number last

quarter. that speaks to how engaging/addictive these products are >> so wait, it's a good thing or a bad thing? i think you got to pick sides on that >> i think it's a good thing that these products are addictive if you're older than 18 i think younger people should be limited the amount of time they get with meta, with their products like instagram, because when you're getting two, three hours a day of usage on some of these products, i just find it hard to believe it's mentally good for them. the surgeon general recently came out saying that social media is -- can be harmful to teens' health, and i think that's something we've known for a long time. so, to answer your question, it's a good thing for the business model for people who, i think, can -- have just their brains are more developed, just in order to kind of handle some of the things that are in that social vortex. and i'm just simply pointing out, i think that meta needs to

do a better job of policing how younger people get on. they have rules around this, but they're pretty easy to get around >> i agree, and i hope they hear you as a shareholder they're playing us out we will have you back soon to 'soi icha d out elon musk, what he dngn inanbeyond thank you for your time. >> can't wait. >> "squawk box" will be right back ng each other rock stars? you're a rock star. you are a rock star. no more calling co-workers rock stars. look, it's great that you use workday to transform your business. but it still doesn't make you a rock star. so unless you work with an actual rock star. hi, i'm ozwald. hello ozwald. pam, you are a rock- i wasn't going to say it. ♪♪ father's day is almost here, and dick's sporting goods has gifts for every dad. like golf clubs from taylormade, callaway, titleist, and ping. and coolers and drinkware from yeti. find the perfect gift for every dad at dick's and dicks.com

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the opening bell on the final trading day of the month just a little bit more than half an hour away joining us now, global market strategist at jpmorgan asset management the dow is down a little bit today, but the s&p, right at that 4,200 level what's the next stop, 3,800? 4,600? what do you think? >> we've got to -- we've had a very strong month, of course, for equities, up nearly 1% bad month for bonds, down 1.5% so, i think the last couple of days, it's less about the macro picture. it's more about some rebalancing at the end of the month. in terms of where we go from here, so far, it's been, of course, very led by the a.i. bump, of course, with the f.a.n.g.s up nearly 20% just month to date. we think from here, we need a little bit more clarity on the

macro picture in order to get other parts of the market participating. we think short-term, actually, the odds of a soft landing have increased over the next couple of quarters, so we might actually see the next leg of the market in the short-term benefitted more by cyclicals, a little bit more enthusiasm coming back. we started to see that in the financial sector this month, up 1% perhaps we get other areas of the market participating in the short-term our perforeference, though, is o look at the direction of travel a few quarters out, and there, we think it's really odds of a soft landing this year until we see the cumulative impacts of rate hikes and credit tightening next year, meaning the odds of recession later on are still elevated, and we would prefer defensives over cyclicals at this point >> historically, when the generals lead, do the troops eventually catch up with the generals or the generals turn

tail and run back to be with the troops what dictates who wins >> in what sense, joe? who are the generals in the metaphor >> what did you -- what was your whole point just now weren't there certain stocks that have led -- >> so far, we have had a lot of tech, a.i. bump leadership we think that theme can continue strategically. >> does the breadth expand, or are those out over their skis? do they come down and meet the rest of the market, or does the market come back meet them at higher levels >> sure, and we think that in the short-term, that cyclicals can join the rally, given that there's more optimism about higher odds of a soft landing for this year. but we would not follow those generals into the front line we would stick more with the defensive sectors as eventually we do see the data rolling over later on, and we do still see odds of a hard landing next year >> i haven't heard anyone say we

have a two-stage landing the 500 basis points that we've gotten, we get a soft landing initially, and then next year, the same 500 basis points causes a hard landing or do rates go up even more? why would we have a two-stage landing? >> i think it's not -- it's just a matter of timing when exactly do you get that hard landing, drichven by the cumulative impacts of the 500 basis points we have already had in addition to the slow burn of the credit tightening we'll continue to have it's a matter of timing, and so this idea of a soft landing -- >> we'll kind of muddle along -- so we don't really have a soft landing. we muddle along until we have the hard landing >> if you think of a calendar year, then a soft landing for this year, but we don't think that's a steady state. >> so the hard landing is coming eventually >> here we're talking about soft landing, growth of middling along, 1, 1.5% gdp, which seems

to be what we have had in the first half and then we get a shallow, a small hard landing later >> so, the -- >> over the next few quarters. >> any rally above 4,200 is destined to fail people say you don't get a real bottom in stocks until you actually hit the actual recession. so, there's no reason to -- i mean, we won't see the ultimate lows until next year then? >> no. if we think about the october lows that we had back then, we're 17% above them, and it seems very unlikely that we'll retest those lows. i think we're speaking more about market leadership from here on out. >> even with a hard landing, we would not -- we wouldn't go back to those october lows? >> we seem -- we find it unlikely, because we have adjusted earnings expectations lower. that was one of the main things we've talked about ad nauseam for the next year, and those have reflected a slower economy,

margin pressure. we're now only looking for earnings growth of 1%. we have also had substantial multiple contractions, so we're not arguing for being too bearish if you just think about a 60/40, but we're also arguing for not getting too bullish on the other extreme, so being pretty neutral stocks and bonds, but more the focus is thinking about the market of stocks, not the stock market so, thinking about the quality factor and the defensive sectors. >> so, the s&p was kind of flat for 2023 in terms of not the averages but the earnings of the s&p, basically flat. we saw, as you said -- >> 1%. flat sure >> everybody's banking on 2024 being another 10% year, 15% earnings growth. >> yeah. >> that's not going to happen if we have a hard landing, so that's a fake -- that's -- those hopes will be dashed in your view >> we're very close to starting to focus much more on 2024 as it's always about the next thing, the next thing, and those do still look a bit elevated at

11%, so would be natural to start that process of bringing that lower >> coming down >> not just about hard landing, soft landing, but about margin pressure >> okay. >> but you can have multiple expansion before that. >> all right, gabriela, thank you. i'm ready for the recession. i want to get it over with >> waiting >> exactly >> thank you we're done make sure you join us. "squawk on the street" coming up right now. ♪ good wednesday morning, welcome to "squawk on the street," i'm carl quintanilla with jim cramer and david faber. we'll watch for a month in rebalancing. futures in the red china data was quite weak. we are expecting a debt ceiling vote tonight republican leaders say it's likely to pass our road map begins with stocks, though, eyeing a lower open on this last trading day of may as we await progress on the debt deal plus a.i. mania lp