nasdaq's case, 30%-plus in that first half, even off the depressed levels of last year, people start looking at that and wondering, am i going to miss out? >> carol, thank you. happy fourth >> thank you you as well. and we're done we'll look at the futures quickly, and it's always fireworks when you're here, i've netherlandsed. make sure you join us on -- thank you. make sure you join us on wednesday. "squawk on the street" is coming up next. we'll see who's there. ♪ good monday morning, welcome to "squawk on the street," i'm david faber with leslie picker and mike santoli jim and carl have the morning off. we are heading into an abbreviated session ahead of the independence day holiday market closes today at 1:00. 1:00 eastern bond markets, 2:00 eastern that being said, let's give you a look at futures and how we're going to set up for an open that is still at 9:30

we don't open any earlier. we just close earlier. our road map starts with tesla and that massive delivery beat, shares surging deliveries topped 466,000 for the quarter. plus second half expectations, the nasdaq coming off its best first half since 1983, and the s&p logging its best quarter since q42021. and apple, amazon, a.i., and the nvidia boom, tech stocks have been on a tear, but is there more room to run well, we're going to start with tesla, of course, extending that rally into the second half of the year. the shares are up sharply on record second quarter deliveries that totaled more than 466,000 vehicles the number exceeded street forecasts. the stock had a very good first half it seems to be off to a good second half run here, mike santoli, and we're very thankful they gave us some news to discuss as well today. >> yes always nice. always good to have the little

weekend nugget that they throw out there every three months it's fascinating, as a mass psychological experiment, to see how the market treats tesla's fundamentals or just the aura of tesla. so, an absolute beat on the volumes. but i just feel like context has to be brought in here. in the first quarter, they were 5 to 10,000 units light relative to forecast in volumes this quarter, they beat by 20,000 so, net-net, they're up 10 to 15 versus what we thought at the beginning of the year. 1.8 million units, that's been the expectation. >> that still is >> for this year, since october, when it was down from 2 million and that's what they're on the pace for they have added $400 billion in market cap year to date. >> wow >> on that so, either it's a car company when you care about the little, like, you know, gaining of market share by cutting prices and they're doing this for the long game, or it's just a magical kind of feel-good momentum a.i. machine along with

nvidia trading at 40 times cash flow ebitda. so, i find it fascinating that we're going to go up on these numbers, and we'll ask dan ives about that >> they've also gone up on some of the charging news as well, which has been heavily debated as well. ives in the camp of, this is a game changer akin to aws other analysts are like, it's a plus >> not to say it's the wrong price for the stock. it's just funny to integrate the new volume news alongside how the stock has behaved. >> without knowing what the actual price of those cars are well, for more on tesla's quarterly deliveries, let's bring in phil lebeau, who has been digging deep into that one. >> you guys set it up perfectly. this is all, how do you look at this number? do you look at this and say, wow, way better than even the most bullish analysts were expecting a few days ago when you look at the numbers, yes, 466,000 is well above the consensus of 445,000, and we should point out, even the most bullish analysts were at

450,000, and as usual, the model s 3 and y were the bulk of the deliveries they are now about halfway towards their 2023 full-year delivery guidance of 1.8 million vehicles i think first and second quarter, you get 889,000 they're going to increase production and delivery in the second half of the year, so the expectation is they're going to hit 1.8 million. you've heard elon occasionally say, we have an outside shot at 2 million. i've read all the analyst notes. nobody is expecting that at this point. we may hear that from elon musk when they report their q2 results in a couple of weeks, after the bell on july 19th is when we'll get those, and as you guys rightfully pointed out, this is all about automotive gross margins. the consensus right now is that they're going to come in at about 19.5%, but we know there are price cuts that's what spoked sales, especially in china, in the

second quarter, with and we may see more price cuts, so the question becomes, if those margins take a big hit, do you continue to push this stock higher clearly the bulls are right now, and that's why the stock is where it's at, but what's interest, as you guys were talking about where the estimates are right now, go back and take a look at what their earnings estimates for the full year were back at the start of this year. they're now down substantially from where they were at the beginning of the year, and yet the stock has more than doubles, so the momentum is there once again, and i think it's there at least through the earnings report on the 19th >> those are great points that both you and mike have made in terms of that $400 billion accretion in market cap, obviously not just because of deliveries, phil, but that said, i'm curious about the chinese market, because we could be having a bit of a different conversation given a lot of concerns there about increased competition, not to mention a weak chinese consumer. what do we know, specific to these numbers, in terms of what happened in china? >> well, we don't -- they don't

break them out by region, but you can extrapolate when you take a look at all the numbers, and they clearly have been able to hold their own in terms of deliveries relative to the first quarter, but they had to cut the prices, david, in order for that to take place. there's brutal price competition going on in china right now. i mean, i think it was volkswagen who indicated that they're going to be falling short of their initial expectations when it comes to china. that's what we're seeing from a number of automakers, and you just saw these numbers come out from byd in terms of the growth that it's seeing in china. i think that this continues for the second half of this year there are more than a few analysts out, and i know you're going to talk with dan eisen a little bit, who believe we've seen the worst of the price cutting and the price competition in china i've talked with others who believe this is going to continue here for a while. that this is not over. that the chinese, they want their automakers to do well, especially when it comes to electric vehicles. and they will continue to incentivize them, and that ultimately is going to push

prices down in that market >> phil, thank you phil lebeau with everything we need to know or a lot of what we need to know about tesla, which we'll continue to discuss. let's move on to the markets, of course this is the beginning of the second of half 2023. it's the time now when we really start to talk about earnings for 2024 the nasdaq posting its strongest first half in four decades it was up more than 31%. the s&p, not bad either, gain almost 16% they have the dow written here, i'll let you know, but i don't even talk about the dow, as everybody else knows, statistically meaningless index. so, mike, give me your take on the second half, given that first half >> what we know from history is just straight-up pattern recognition when you're up 10, 15% in the first half of the year, there's more often been follow-through to the upside in the second half than there has been at giveback, especially if you look at the last, you know, let's say 30 years of history. now, it doesn't mean that you go up at the same rate.

doesn't mean you don't have corrections along the way. that's just the baksic, if all e know is we were up 10 to 15% at the first of the year, you would say, well, markets tend to continue up. there has been constructive action where the bull market is starting to act more like it you haven't really let a lot of people in at big discounts that being said, you know, you mentioned the attention turns to 2020 forward earnings and they're kind of nudging down again, not much, but they're bumping along. there was this bull case that said, fed is done, economy stronger than expected, getting what's already been done in terms of interest rates, and earnings perhaps have troughed and are going to nudge higher from here. and so, you still have wait and see on all those fronts, i think, because folks out there saying, either, look, we have to have this recognition that the fed is going to look at the economy, nominal growth, wage growth, where they are and do even more. look at treasury yields, they're

starting to get people's attention again. 3.85% on the ten-year, pushing against 5% on the two-year, and we priced out any potential for rate cuts, really, for the rest of this year so, market's taking all that in pretty well. i just wonder if we're at a point now where when, six months ago, people assumed imminent recession. now, i think, sturdy, resilient economy is the base case, so where's the direction of surprise from this >> it's pretty remarkable when you look at the year-to-date performance. this is a first half that saw regional banking crisis. that was very scary at the time. it also saw a pretty narrow leadership with about, what, $5 trillion in tech valuation created thanks just to this overall hype of a.i., and so i guess the question is, mike, is it risky to chase the rally from here, given just the overall uncertainty? liquidity, not as strong as in prior years. >> and i think in the very short-term, if i were just looking at the stuff that's worked the best this year, it seems like it is -- you would have to just be betting on mostly pure home and the fact

that people seem not to own enough of the biggest stocks in the index. so, it's kind of more of a -- kind of a game theory momentum play as opposed to, we know something the market doesn't know on this but as i say, we are not back to where we were a year and a half ago in the overall s&p the economy is bigger. earnings are higher. the fed's got no -- very few hikes ahead of it most likely, and it had five percentage points ahead of it a year and a half ago, so you can kind of spin that and say, we've been through a fair amount or at least we're in this window where, you know, both the economy and the fed are in these kind of digestible spots, and the market can hang in from here >> you know, you mentioned the regional banking crisis, which, of course, at the time, seemed and was quite serious. we seem to have moved on in a way. at the same time, that memory of that $42 billion that left in deposits from svb in four days has got to be longer than that, and i do wonder whether there's

still a thought in the banking industry that we may we visit some of these crisis moments or not. >> well, you bring up a great point, because nothing has necessarily changed that would prevent something like that from happening. it's not like you have lock-ups on deposits that prevent them from flying out. it's not like there are any changes to social media that would prevent some sort of bank run from occurring in the future, and yes, a lot of the regional banks are still sitting on these paper losses, and that's okay until you have a deposit run, essentially depending on the risk profile of each individual bank but if you look at $42 billion of deposits flying out that quickly, it's hard to make a case that any bank could survive that, regardless of what its balance sheet looked like. >> yeah, and we're certain to have that continued conversation about commercial real estate now in the second half of this year. and some of the writedowns that may be associated with certain restructuring that needs to take place here or there, but i guess the question continues to be, will that have an impact on depositor psychology in some way? >> depositor psychology is

actually kind of circular. it can be with the markets so, you saw that take place a little bit in may where you saw some of the regionals, especially the west coast-based ones, their stock prices declining significantly and they suffered deposit withdrawals as a result of that but we also are expecting some interesting regulatory actions to take place. we're waiting on the rules, the finalized rules for basl 3 that's expected in the next three weeks or so, and that could require higher capital levels for banks, which would impact margins we saw the redistribution plans take place on friday some are still trickling out this morning as well and then, we're expecting some rules, potentially, from fed, from the fed, from potentially vice chair michael barr, which would kind of hit at correcting some of the mistakes they found from march in terms of capitalization, in terms of liquidity, and things of that nature so, a lot of uncertainty on the regulatory front, and i think it's really difficult, at least for bank investors, to find a bid with all of that looming

regulatory uncertainty that's out there. >> and feeinally, mike, first half i mean, we talked all about mega cap tech, but the top three winners in the s&p were all cruise lines >> exactly yeah well, of course, the cruise lines are kind of the whip-end of, hey, the services economy is working pretty well and going hot, and relatively small market caps that did have a selloff late last year so, i do think you have had these high-velocity moves in parts of the consumer area that have continued to do very well, so within consumer discretionary, it's travel related and housing related, you know, people couldn't own enough the rest of it is wait and see and i do think that that's the interesting call right now is do banks get briought along or wil they be the problem child for this market? there was a time you wouldn't have thought that was possible,

because of the kind of bellwether status that bank stocks always had and also, of course, they used to be a bigger part of the index itself >> well, there's also the rates too. if someone has said to me as an mba student, when rates go up, housing stocks are going to go up, and people are going to be traveling more >> and banks are going to suffer >> i would have been, like -- >> no, that's exactly right. i do like to point out, though, that banks have not been a bellwether for the stock market in a long time the kbw banks index, which is a very long dated thing, treats it basically the same level as 1998 that was the implosion of value and the global financial crisis but it shows you you didn't need them to take the market higher >> jpm, not an all-time high certainly, but right at a 52-week high that is jpmorgan chase riding the mega cap rally into the second half will be our next subject wedbush's dan ives is going to join us to discuss that. take a look at futures

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welcome back to "squawk on the street." tech stocks closing out what was if best first half they have had in 40 years, at least broadly speaking, talking about the nasdaq here. this morning, tesla shares up yet again, this on second quarter deliveries our next quote says, "this will send the bears into hibernation mode." as for $3 trillion apple, he says the company's playing chess

while others are playing checkers let's bring in dan ives of wedbush securities a frequent guest for that seat right there. love the green pants >> thank you >> sorry we can't get those fully on camera. but let's start off with what you have been talking about. you've been very bullish on tesla. you've been right, dan what do you make of the deliveries >> i think this was really a jaw-dropper relative to many expecting softness i think those price cuts, that was the poker move that they really needed to make to put an iron fence around. china, i think that's ultimately the catalyst, and this, for the bulls, i think this is really an inflection point it feels like right now, they're just getting stronger, and in terms of the electric vehicles, it's tesla's world, everyone else is paying rent. >> but you know, the point mike and phil both made is, we're still really at 1.8 million for the year, which is where we started. estimates for the company have come down. so, has this actually been the reason the stock has added $400 billion in market cap

if not, what is justified? >> obviously, great points that they make, but what i think this has really been, it's about the aws moment, the super charger. that's really what changed everything in terms of, i think, investors now starting to realize the sum of the parts of this story is starting to get realized, and even though the next quarter or two, margins will trough out in terms of ultimately expanding q4 into next year, but the super charger, batteries, and of course a.i i think right now, not giving credit from an a.i. perspective, which is why now you can start to rationalize, is this a $1.5 t $1.5 trillion or higher? as this plays out in terms of the tesla story. >> i guess we should mention, it did trade at $1.2 trillion once. it went to $400 billion, so lost $800 billion it's regained half of it, essentially, over the last couple yeerars, but i keep comi back to this if it's this huge open-ended

a.i., and they're a mobility, utility for the world, great why should i care about $10,000 upside for units in a quarter? if that's the context, why are we trading 6% higher on a roughly as expected number you say bears should be going into hibernation i don't think they are bernstein, $150 price target "we struggle to justify the rally in fundamental terms the clearest perception was a.i. and tesla's charging standard become the de facto standard in america. neither appear financially material to tesla. >> for the bears, they hate it at $20 billion, at $50 billion, and where it is today. they're always going to have that view. my view is this is just a transformational growth company that went through issues in terms of the price war, but now ultimately, that's -- they're playing chess, others are playing checkers, it's paid off. margins are troughing, and investors are starting to realize that dream scenario, as they get through, to 2 million

units, to 3, cybertruck comes out later this year, and then that sum of the parts, that's -- right now, this is just another flex the muscles moment for the bulls, but the bears, they'll continue to yell "fire" in a crowded theater. >> to mike's point, when does that trickle down the to fundamentals if you use that aws example, perhaps when you can really monetize the super charger, the a.i. and all of that, you can keep the prices low and keep volume turning is that ultimately what your calculus is? if so, when do they get there? >> it's a great question i think the other thing is, from a battery perspective, they now can potentially lower costs over the coming years 30 to 50% you start to factor that through, that's where ultimately -- and then there's the drum roll to a sub-$30,000 vehicle. that's where demand really starts to expand, and this green tidal wave, this $5 trillion green tidal wave that's playing out is not a zero sum game gm, ford, others, rivian, 313

area code is going to be successful because transformation is in the auto industry since 1950. this is the quarter, the bears were saying, they're going to miss the quarter, and ultimately, they go into jeuly 4th with fireworks as i believe this was an inflection quarter >> that said, when it comes to a.i. and full self-driving, they promised for years it was coming, coming, coming, and we're always still waiting i do wonder whether there's going to be a fakeout yet again for investors that may be disappointing. >> i think ever since the interview heard round the world, the faber-musk interview, i think that really changed a lot of people's perception in terms of musk showing what the strategy was, where this is all heading, and from an a.i. perspective, when it comes to fsd, i think that's really the holy grail but for now, in terms of the valuation, that's not really reflected in terms of what we see. and i think, ultimately, these drum rolls just show we are in a drum roll to what i view as the

next stage of the tesla story. >> well done, dan. >> that was great. >> in the moment you got a real future in broadcasting we got to take a break of course, you hear the drumming going on here. >> continental army has invaded. >> we'll be right back we've got an opening bell about seven nus ay ayitusmiteaw (christina) with verizon business unlimited, i get 5g, truly unlimited data, and unlimited hotspot data. so, no matter what, i'm running this kitchen. (vo) make the switch. it's your business. it's your verizon. meet gold bond healing. a powerhouse lotion that moisturizes, heals, and smooths dry skin. with 7 moisturizers and 3 vitamins, you can pay more but you can't get more. gold bond. champion your skin.

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♪ take a look at the gainers on the nasdaq, led by rivian i don't think we got delivery numbers. >> nope. >> but we'll just guess. i saw rivian this weekend. >> this is a stay-at-home trade day, and evs are en vogue. >> inside and out. we'll get more on the markets. remember, we close at 1:00 p.m., so you're not going to want to

miss any minute of the action beginning at 9:30, about four minutes from now stay with us

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>> announcer: the opening bell is brought to you by nuveen, a leader in income, alternatives, and responsible investing. welcome back a moment ago, we showed you rivian leading the nasdaq leaders for this morning, and i wondered, was there some vehicle numbers out? there are. let's give them to you the company produced 13,992 vehicles in normal, illinois, delivered 12,640 during the period, and believes it's on track to deliver on the 50,000 annual production guidance that it previously provided that is why you see the stock up nicely this morning. we won't have earnings the same way with tesla tesla's later in july. we won't have earnings from this company until august 8th >> we've got a bit of a lag there. clearly, to your point, mike, a lot of interest in these stocks today. >> and byd also beat on volumes as well. so, it seemed it was a good

quarter in general for ev sales globally everybody riding that and the stock's reflecting it so far >> yeah. well, various goals that are out there in terms of decarbonizing. we're going to get to the overall auto market being evs very quickly we are seeing most of the final product. >> there's the opening bell. realtime exchange, our headquarters, of course, as well maybe a little more red on that board. over at the big board, we've got the museum of the american revolution celebrating independence day >> usa, usa, usa >> over at the nasdaq, vets index, companies deemed as the best employers for veterans. when we were in commercial break, they were quiet, but now it's the fife, i guess, whatever we call that very nice. ♪ >> as we see how things are getting together here. again, the leaders, mike, are all the ev players

>> yeah. >> it does appear to the point you just made that there seems to be some sales growth. >> we got the incentives out in the market people are focused on it people have been waiting for that moment where it becomes, you know, that much more mainstream to the point of being a default choice for folks, and you know, still kind of riding that trend of course, nvidia is also participating to the upside because it seems to be the kind of all-purpose, up 0.75% after going up nearly 200% in the first half of the year would make all kinds of sense for the market to take a breather in general here after the sprint we got into the close of the second quarter, although july has been strong in recent years, especially the first half, so if we care about the sort of seasonal effects around the holiday and into the middle of the month, usually there are more tailwinds than not. >> it's like -- it feels like that friday after thanksgiving where you have one day of action

and then back into be hibernation. >> we should be clear. the exchange doesn't typically really resist the idea of closing four days in a row it is a global liquidity venue you have to have that outlet as a just in case people need to do things >> even with needed volumes. also looking at fidelity national today that one is higher currently up about 5%. it was about double that in premarket, just on some reports from the "ft" that it's world pay division could be up for sale with private equity interest, about $15 billion for that one, which is representative of about half of their market cap >> yeah, that would be a big number for private equity. big equity check, you would have to imagine, maybe requiring a number of them to come play together some of the lps still grown on those club deals because, of course, you've got investors in a number of private equity funds, and then they get together to buy one company. well, it's concentrating your risk in that company ass as lp >> especially if the firms are

doing the debt financing as well >> yeah. tha that said, it's not unusual to see a company announce options that might have included a spin and at least checking the market to see whether there's a sale process that might result in a better outcome, leslie >> i guess, mike, is that an attractive area for -- >> as a general matter, it has been very attractive to the point where into the top of the market, in the beginning of 2022, it was -- there was some hedge funds i know of that were mostly concentrated in big payment players. a lot of that is visa, mastercard, long-term secular growth stocks, but yes, it was this idea that it's this massive addressable market, you're competing against cash and checks and the network effects are great. i think there's appetite for those types of business. still, it's kind of getting revived, but i'm not sure we're going to get to those valuations we had at the peak, but i think there is a tailwind there. by the way, in terms of the buyout stuff, did you guys see "the journal" piece about banks kind of freeing up some of the

pipeline for leveraged loans by selling into the secondary market some of the buyout debt >> this is the hung debt, which was a huge issue of course, there is one buyout that's still providing somewhat of an issue, which is twitter. i think about $13 billion still on the books for morgan stanley and others with that one >> many other banks. of course, morgan stanley will quickly tell you, many other banks, not just us >> they just led it. but -- >> but that $13 billion has not been old down, i don't think >> i don't believe it has. but others, like citrix was sold down, which is important for them on the flip side of that, just on the flip side of the private equity conversations, did you see the statistic this morning that about $360 billion is essentially, i mean, trapped -- i don't want to use that word -- but stuck inside private equity firms because the ipo market pretty much remains shut, no willing buyers, so they're sitting on $360 billion worth of portfolio companies that they can't -- >> can't monetize. you want to return capital that's the whole idea of having the fund within five, seven, maybe

longer, you want to -- years -- you want to return that. this just had some success lately in getting some deals done >> they have >> doing that large deal last week with, what, ibm but you're right, others, if you're looking for particularly at the public markets, for your exit, it's been very difficult although we did have some ipos last week, and we did start to see at least some nudging of that window higher >> they just performed kind of mixed. >> yeah. >> you had savers value, which performed higher, but the other two, they priced below the range and then traded down so, if you're a mutual fund looking to get in this space and you invested in one of those that didn't perform so well, kind of under water, unclear what your appetite will be to buy more ipos. if you invested in cava, you're probably still sitting very much in the black, so you may have more appetite to do more deals >> cava is up from its opening trade, i believe, still, mike. just around. that's right around where it was. >> yeah.

>> that's right around where it was. >> priced at $22 >> almost a double on the open >> pretty typical ipo pattern when you get a pop you got to have that digest a little bit and refresh the demand, so to speak, with slightly lower prices. was going to mention, eejal banks among the leaders of the s&p this morning, so getting a little bit of a lift you have zions, comerica, truist, keycorp in the top ten of performers. people kind of, i guess, trying to sort through some of the announcements in terms of buyback and dividends and also in general this idea of reaching for some of the laggard areas of the market that had not participated so, i know there's so much focus on that kredf and whether it's going to break certain levels and what does it mean for the broader market, so a little bit of relief as we get the market rotating out of tech into the laggards >> it is interesting to see somewhat of a lift for the truists of the world and citizen this morning, because they didn't make any material changes to their capital return plans

when they announced the results of the fed stress tests on friday after the close, but the market probably just deciding that it wasn't going to, no matter what, just given all the regulatory answers that we're talking about earlier in the hour >> sure. did want to mention something we haven't gotten to yet, which is treasury secretary yellen is going to be traveling to beijing on thursday. it's going to be a four-day visit. she will be seeing senior government officials, including people she doesn't or has not known, so new relationships to sort of make there discussions are going to be about global, economic, and financial issues and of course, you'd imagine as well, focus on trying to relieve tensions between the top economies in the world so they can "responsibly manage their relationship, communicate directly." i would note shares of baba, jd are both up, sort of a -- kind of a go-to trade, i guess, if you think there's a chance that relations are going to thaw a

bit, mike. >> yeah, and this signaling is pretty clear, that you send this kind of succession of cabinet secretaries to china to try to make sure that it doesn't sort of devolve into further outright hostilities. it seems much more in the way of atmospherics than anything that they're negotiating necessarily, but i guess on the general notion of let's not, you know, kind of retreat into our corners and let the deglobalization story get more momentum than it already has. >> of course, the u.s. government has prevented the use of high-end chips or trying to prevent their exports to china, mainly nvidia's chips. china has responded by preventing micron from doing certain things in the country as well, although micron has continued to make investments, but of course, it's a significant percentage of micron sales. we did hear from the company last week in terms of its earnings you can see, though, that stock has had a decent run of late, along with, you can see, many of

the others that are also in positive territory of course, nvidia shares, also up, now 192.3% for the year, well above the trillion dollar level, mike. >> yeah. it's almost -- it's really benefitting from what's otherwise the scarcity of obvious pure seemingly reliable, you know, plays on the a.i. investment binge we'll see how long that lasts. i do see some of the winners having a little bit of a retreat, such as apple it's only down about 0.33%, coming off a 52-week high. reports out of the "ft" about some maybe slowdown in orders for the vision pro headset based on some manufacturing complexity or issues. hard to think that those orders and the revenues associated with them were a big part of anybody's investment thesis for this year for apple, but it is just one little item out there to suggest that maybe not smooth

sailing on the new product >> it was seen as a growth engine way down the road, i think. >> absolutely. >> but you know -- >> and probably will be. >> current present value may be less important but kind of as we look at what's going on with tesla is a barometer for just the current psychology of the market right now, we're back to that mindset of, do we care as much about margins as we do about just, you know, churning product and pure growth does it matter what the bottom lines look like, as long as we are moving product and don't have this build-up in inventory and there's the demand out there and we're getting all of that, you know, excitement and momentum in the market it seems like that's limited to a very select group of these mega cap tech stocks it's not true on the small cap side >> it's -- buy the rumor, buy the news, and then buy more after the news is already out there. you're right, though it is those big kind of story stocks with the perceived open-ended, we're going to change the world retail

following. so, yeah, it's working as i mentioned, tesla is only halfway back from the low reached at the end of last year from its all-time high so, who knows? there's a lot of room to play in here, and we've already been on this ground before >> you know, speaking of tesla, of course, which we spent a lot of the morning discussing, you can see the stock up almost 7% this fight, this cage match between mark zuckerberg and elon musk is progressing. as hard as it seems to imagine the two of them getting in the cage and fighting each other, here's a "new york times" story from this morning. i can confirm much of what's in there, although from what i understand, this could take place -- originally, they were thinking the fall, but i've heard it could be as soon as late august. wouldn't give mr. musk that much time to prepare or train in contrast, osf course, to mr. zuckerberg, who has been training for years and becoming

expert in jiujitsu >> brazilian jiujitsu, yes >> so, a lot of grappling. >> so, when you say progressing, you mean, they're, like, it's going to happen? >> it feels like it's going to happen as hard as it is to imagine, and as much as you might imagine, i think, that their boards and others, mr. musk's mother, are saying, don't do this. please don't do this and you can see why they shouldn't do it. >> i can't see why they would. >> i guess they really don't like each other. there may be a charity component for it it conceivably will be one of the biggest pay-per-view events of all time if it actually happens in the coliseum, which is where elon wants it to take place and i believe made calls to the prime minister to make sure that could happen >> really? >> yeah. this thing could actually happen as much as you may think it's not a good idea for either one of them, if they're doing it, i want to be there >> i was going to say, i hope

for our sake it's not pay-per-view >> i think it's going to be pay-per-view i think that's the idea. it could be a billion dollar pay-per-view who knows? >> but i had the same thought, though meta's board, in particular, you might say, you know, what are the risk-award here? remember, there were those reports, and he has denied them, in a bout that he engaged in that he may have been unconscious briefly. >> that's musk >> no, zuckerberg. >> because musk hurt his back with a sumo wrusestler >> he's denied that he was briefly unconscious, but the point is, you're taking pretty significant physical risk. >> and you're not insignificant people in terms of the leadership of your companies in fact, you're two of the most important leaders in technology. obviously, as i say, many times, musk is the most consequential businessman on the planet. is he really going to get in

there and, like, and he's not in great shape and he hasn't trained. i know he's a lot bigger than mark >> he's bigger, that is true and what are the rules is it going to be a particular discipline just a free-for-all? >> put the gloves on >> ufc rules >> it's not sanctioned but it's ufc rules. >> feels like there's a lot of downside there, but zuckerberg, i mean, you mentioned the board. he has a majority voting power here >> as a board, i'm doing this -- and elon tells his board, the same nobody's going to stop elon from doing what he wants, ever. >> exactly >> all right if they're doing it, i'm going to italy, man. i want to be there to watch that finally, a quick pivot here, quickly, we'll do it in 40 seconds or so because we have data astrazeneca, i did want to mention that the stock had been down, i don't know if we have it right now high-level results for a lung cancer drug that did show that

it slowed progression in late stage trial, but here's the language from the company. statistically significant improvement for the dual primary end point of progression-free survival compared to the standard care of chemotherapy. that said, for the dual primary end point of overall survival, the data were not mature, and an early trend was observed that did not meet the prespecified threshold for statistical significance at the interim analysis so, that means, didn't quite go as well as they had homeland security hoped and that's why the stock is down. we have had something of a revolution of late in the treatment of cancer, and it continues. and we've seen it. and of course, mike and leslie, we've seen a lot of the big companies acquire the smaller biotech -- so-called smaller -- that get through that phase two as they approach phase three in part because of the advances the

smaller companies are able to make, but when it gets to the actual ability to sell and market the product, you will see big pharma willing to pay huge premiums to their marketplace. >> i think a $15 billion drop in market cap on this >> yeah. >> these are huge companies, as we should point as well. >> absolutely. s&p is up 0.0% there it is. >> i like your optimism, that it's up 0.0% >> yeah. it's not flat. >> i'm hoping. there? see. i got it right >> you've got to go out three decimal places >> we're going to take a quick break here and also get to u.s. manufacturing data as well

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rivian shares continue to dwayne this morning, had been up as much as 16%, got delivery numbers as well from that company, 13,982 vehicles produced and 12,640 delivered, on track to meet that annual th company has put out there. that's helping those shares significantly. we're right back

welcome back to "squawk on the street," oil erasing earlier gains, despite saudi arabia and russia announcing supply cuts for august energy is poised for a second half comeback after being the worst performing s&p sector in the first half joining us, senior portfolio manager, rob themel joins us now. thank you for being here just want to get you on the news, do you think these efforts to boost prices will be successful here? >> yeah, leslie, i think if you look at what saudi arabia is trying to do, and opec in general, they're trying to create an under supply to the oil market that's what's going to happen the second half of the year. that led to oil prices, an under supply in the second half year,

declines in inventory. and when you see inventory decline, that means oil prices typically rise that will be a catalyst for the energy sector over the next six months. the market doesn't seem to think so we're showing a picture now, down half a percent today. you know, what's the lag for something like this actually working its way through to the market >> yeah, i think the market is is the oil price signaling a looming recession? basically will demand not be there. the supply part of the equation, i think, is pretty clear you're going to see less supply, and also see less supply in the u.s., by the way, not a lot of people are paying attention to the lower rig count. that's going to reduce the supply in the u.s. as well demand, that's the question. what will happen there it really looks like, you know, the u.s. economy, the consumer seems to still be strong travel seems to be pretty robust chinese mobility seems to be returning. industrial activity is likely to

come back. all of that really needs more energy, probably less energy, and more low cost energy i think this has to play out the market has to see that demand come, that under supplied oil market really exists inventories falling, and there will be a price response. >> rob, there's been a line out there that i think makes some sense. the oil industry in general can make its peace with prices at current levels i mean, what parts of the sector do you think are well positioned even if we stay range bound in terms of the commodity prices. >> that's a good question. we like inventory infrastructure, $70, $80, for this reason. the energy infrastructure, the sub sector performs well when oil prices are steady. they're not volatile consumer demand remains high, and frankly, lower oil prices typically boost consumer demand and so that's good for energy

infrastructure companies like pipelines. they generate a lot of excess free cash flow, returning to the shareholders in terms of high dividends. in addition, they have excess cash flow to buy back stock as well from an energy sub sector perspective, we think that's a great place to be. if you look back at the first half of the year, energy infrastructure was up about 6 or 7% for the first half of the year, almost every other sector or sub sector in the interview sector would generate negative returns for the first half of 2023. >> i see sheneer is your top holding, why do you like it, and do you add or sell that position >> yeah, so we've owned it for a decade it's an outstanding company. what it does is export u.s. lick fi -- liquified natural gas around

the year it offers a critical service we know how important liquified natural gas is globally as well, made clear in the last year with the russian invasion but cheniere plays an important role with liquified natural gas, but the financial side, how the management team has managed the company has been outstanding as well they have reduced debt significantly, but they have generated a lot of free cash flow they started to pay back a little dividend, holding on to cash flow divided by stock, and we and they think the stock is cheap. as a result, they're buying back their stock. we continue to like them, and you'll continue to see us add to that security for a long time. the contract length is a couple of decades, and it's going to generate free cash flow for a long time. >> all right

we'll see. thank you so much for being here, and sharing your perspective on the energy sector worst performing sector year to date, appreciate it. >> coming up, we're going to have more onhow to capitalize on the mkearts in the second half keep it here lily! welcome to our third bark-ery. oh, i can tell business is going through the “woof”. but seriously we need a reliable way to help keep everyone connected from wherever we go. well at at&t we'll help you find the right wireless plan for you. so, you can stay connected to all your drivers and stores on america's most reliable 5g network. that sounds just paw-fect. terrier-iffic i labra-dore you round of a-paws at&t 5g is fast, reliable and secure for your business. (man) what if my type 2 diabetes takes over? (woman) what if all i do isn't enough? at&t 5g is fast, or what if i can do diabetes differently? (avo) now you can with once-weekly mounjaro.

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good monday morning. welcome to another hour of "squawk on the street. on david faber with leslie picker and mike santoli. sarah and carl have the morning off. the s&p is up .01% the nasdaq continuing on that strength it had in the first half of the year up yet again another third of a percent. >> must be the money before a holiday. we are 30 minutes into the trading session. we have some movers today that we're watching tesla higher after delivering numbers there. beat street estimates. more on what it means for the stock later this hour, but currently up about 8%. plus, astrazeneca under pressure, announcing preliminary results from a phrase 3 trial of lung cancer treatment. it compared well on one end

point. data for overall survival was not mature and not statistically significant. while we're watching chinese internet stocks, some of the top gainers amid news secretary, janet yellen plans to meet with officials later in beijing you talked about how that impacts the alibabas of the world, this overall potential, though skeptics would say maybe not so much. >> just trying to at least stop things from getting worse, i guess, would be the first step that would be viewed potentially with positively by the markets let's turn back to the broader markets. we did get fresh data. that came in at 46, versus 47.3 that had been expected made construction spending, we also got that. 0.9 it was up, versus 0.5%

a bit better than had been anticipated, and, mike, we've started off the second half much the same way we saw with the first. but the nasdaq leading >> nasdaq leading, that's a lot of tesla and a few other names with news driven moves that's a miss on ism manufacturing. that comes with better than expected economic numbers, the things like the city economic index have been very strong coming in. we did see a quick reflection reaction in the bond yields coming down to some degree the two-year losing a few points, down under 490 it complicates the idea to a degree that we got this position of kind of soft landing becomes more likely. manufacturing had a downturn, maybe it's on the upswing again. and of course, housing also had a retrenchment rebounding off of that we'll see how this plays over. love to see inside the ism numbers, whether it's the orders component or the expectations

component. the soft economic numbers have been much weaker than the so called hard data people being asked, how is business, how do you expect business to be, whereas the hard numbers are spending and jobs and orders. >> so far in the first half of the year, it's the hard data her helping to propel the market higher we're seeing evidence of that this morning as well it was bloomberg that described the first half of the year it was the most telegraphed recession that hasn't happened yet. >> late december, i remember making headlines that the economist consensus was more certain of an imminent recession in terms of the percentage of people saying it was going to happen than it ever had been before whether we're in this just kind of relief window where it didn't happen yet and it's still to come, that's the big question. >> a specific leader in the market this morning of course has been ev companies.

we got the delivery numbers from tesla. they were better than anticipated this morning as well from rivian, also keeping that company on track for 50,000 annual dleliveries, which is where the guidance has been. that has powered names higher. tesla approaching a $900 billion. >> manufacturing construction has had this huge upswing and it has supported the aggregate numbers. a lot of that is the infrastructure act >> and the chips act, and everything it's all that money is kind of flowing in, and ev infrastructure, a big part of t that. >> let's talk more about the markets and the economy as we kick off the second half for that we'll bring many moody's analytics chief economist, mark zandi. if i was going back late last year, people would have said,

we're going to be in a recession. you heard those manufacturing numbers, no recession in sight is it ever coming? >> no, david, i don't think so i don't want to be polly anna-ish, when you're in a world of high inflation in a federal reserve that's raising interest rates aggressively, you tend to land in a recession. but i think we have a fighting chance to get through without an economic downturn. these are the four dreaded words, this time is different. but it feels like this time is different for a bunch of reasons. i'll we'll make our way through without a downtown. >> what are the reasons it's different this time? >> it's a long list. i give you number one. i think consumers are going to hang tough the consumer's fire wall between recession and continued growth, and things are going pretty well, you know, lots of jobs unemployment is low. leverage is low. i'm painting with a broad brush. people are less wealthy than

they were a year ago here's the this time is different. excess saving. consumers did save a lot during the pandemic they have been drawing that down over the past year, year and a half, given the high inflation there's a lot left among high income, middle income householdings. consumers are doing an amazing job calibrating their spending they're spending with abandon and keeping the economy moving and out of recession. >> we were just talking about the different picture between the hard data and soft data. the journal this morning had an interesting piece about this payroll data quirk, and just the type of environment we're in, and they say it could be counting more jobs than are actually being created more likely to overstate jobs when labor jobs are changing jumping to 3.7, the sharpest increase since 2010 outside the

pandemic do you believe that there could be some blind spots here from the data that we're counting on? >> yeah, i do. i think the payroll employment gains. they have been gang busters. last month was well over 300k, the average monthly growth has to be over 300k. that's rapid growth. the data is based on a survey of businesses, and that will ultimately be revised to actual counts of employment based on employment insurance records, and there's evidence that if you look at that ui, under line ui data, we're not creating 300kf you told me we were creating hatch that, 150 d, that sounds more like what's going on. this was in the journal piece. two surveys, payroll survey i just mentioned and the survey of households they also count employment

that's been weak compared to the payroll survey you know, that gap between the two is very unusual, and when it has happened historically, generally it means the payroll survey data is revised bottom line, recruiting a lot of jobs i think, you know, we're doing just fine, not creating nearly as many jobs as we think about looking at the data today. >> your general view that the economy can be more resilient than we thought six months ago, that does take hold, gets confirmed over the next couple of months, what does it mean for interest rates you have this other line of arguments that markets have gotten ahead of themselves, which fed will toll erate high nominal growth at this level with inflation still well above their target. >> i think, mike, interest rates are where they need to be. 10-year treasury yield is close to 4%. consistent with a well functioning economy.

funds rate at 5%, plus, could probably get another rate increase here by the fed, you know, in a few weeks puts it closer to 5 1/2% i think that's enough to slow the economy's growth rate down to get inflation i do a lot of forecasting. in some things, i'm very confident in some things, not so much i'm increasingly confident in the thought that at current interest rates, the economy is going to slow sufficiently, and inflation is going to come in adequately for further rate increases and allow the economy to come in without experiencing recession. a lot of risk around that, and it's not going to feel comfortable at tiles at times it's going to feel lik a recession. >> well, why why is their confidence higher than it had been previously? >> i have been confident, but i'm just even more confident in the inflation jooutlook.

i mean, look, we know vehicles prices are coming in we've seen auction prices. it's 10% of the cpi, consumer price index. we know the growth of housing services is going to come in we have seen rents, down flat to down, that's going to translate down it takes time for that to occur. we know labor costs are slowing. they are definitively lslowing, and that's going to translate into the cost of services. i can get you from a 4% cpi inflation rate today to 2% by mid next year. maybe it's a tad north of what the federal reserves wants to f get in the long run. if you ask them and had an honest target, the right target is probably closer to 3. >> mark, appreciate it thank you. >> yep, anytime. bank of america and goldman

out with top stocks to watch in qu q3, dominic chu is here to break it down. >> the research team putting out the top ten stock picks for the current quarter. goldman sachs is updating their director's cut there's a little bit of overlap. we'll start with the b of a call first. not enough time to go through all of them, nor real estate here are a few of the notables you have netflix, a buy rated stock, $4,890 price target a more successful campaign on p pas password sharing knelt netflix, down on the day. it's the best risk reward proposition among large cap bankswith the ability to retur capital to shareholders and good positioning to deal with changing requirements dealing

with the stress test on the consumer front, they like bath and body works, buy rated with a $50 target, growth potential with new products getting released a strong customer loyalty program, and by the way, we'll get into goldman's update from the top picks in early june. bath and body works makes their directorer's cut list. they like the new management team and the turn around story there. if you take a look at the possible doubling of value, given where the target price is pr right now, they think it's a $13 target price, and a new addition to the list is southern company on the utilities side. buy rated $80 target price, growth energy at southern with below average regulatory risk,

so those southern shares up about one-third of 1%. year to date, up about 1% as well head over to cnbc.com/pro, where pro subscribers can get more details on the bigger story behind the top picks like goldman and b of a, i'll send things back over to you. >> that's certainly a diversified batch of stocks there. appreciate it. tesla on a tear on the backs of the latest delivery numbers the road ahead for the stock the other magnificent seven names in the rest of tech in the second half. plus, carnival was among the top three best performing stocks so far this year the question is, of course, can it continue to be smooth sailing in the months ahead, we'll discu discuss. what's ahead for bank stocks, after five of the biggest names boosted dividends. more straight ahead, don't go away

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(chainsaw revs) (tree crashes) (chainsaw continues) (daughter screams) let's pretend for a second that you didn't let down your entire family. what would that reality look like? well i guess i would've gotten us xfinity... and we'd have a better view. do you need mulch? what, we have a ton of mulch. ♪ well, shares of tesla up about 7 1/2% on the back of the latest delivery numbers. the question continues to be about margins and that is being raised by a number of analysts who follow the company closely let's get over to phil lebeau who has a break down for us. phil. >> david, i want to show you where tesla is in terms of hitting its annual target, the guidance they put out earlier in

year to deliver 1.8 million vehicles after exceeding expectations for the second quarter, 466,000 versus the estimate of 445,000. they're now basically halfway towards 1.8 million and almost everybody agrees, unless something dramatically changes, they will hit that target because they're expected to increase production and increase deliveries in the second half of this year. what are the take aways from the q2 delivery results. first of all, how much of price cuts hurt margin there's no doubt price cuts did stoke sales, especially? china. at what cost jpmorgan saying we're going to raise our q2 estimates, not by a lot, but they are raising them, and the question is the share price growth limited take a look at what the stock has done year to date. it's up over 100%. at the same time, earnings estimates have come down since the beginning of the year, so you've got a stock that is appreciated at an incredible

pace while the earnings estimates have come down, and it has more than a few people saying, even with this pop today of 7%, this stock is unlikely to go much higher so i'm not sure if we're going to see shares of rivian, if they pop up here. that's the question that's out there for investors right now. i also want to point out shares of rivian. you guys talked about it about a half hour ago. it reported its q2 delivery and production results two pieces of news, first of all, deliveries of just over 12,000 vehicles, up 60% compared to the first quarter you're seeing the acceleration in deliveries, and in terms of production, the production number is over 13,000. the company reiterated its target of producing at least 50,000 vehicles this year, and that's why shares of rivian, moving higher. and by the way, almost all of the ev stocks moving higher on the numbers from tesla, and now also from rivian clearly you see an acceleration

in the delivery cadence and the demand that's out there for electric vehicles. >> i'm curious what the competitive map looks like at this stage you've got record numbers from tesla, byd, rivian are any of thoem taking share from the other or at this point, the tide is lifting with all the boats? >> depends on where you look at it if you're looking at it on a global scale it's a case where they're not necessarily taking it from each other. but they're increasing their sales at the expense of everyone else, and byd, by the way, was nipping at the heels of tesla in terms of global ev sales it may, in fact, overtake tesla because of the strength of what is seen in china if you're looking at the u.s. market right now, about 64% of the evs that are sold are tesla models and the expectation is that that market share is going to drop as you see more models come out from gm, ford, through jeep and through ram are going

to be ramping up their ev production we're not seeing that. and that's part of the bull argument out there, which is, okay, where is everybody else? the party has started. there's demand there and yet you really only see the growth and you're also seeing some rivian here, but you really see it from tesla. >> being fashionably late to a party doesn't work so well when you're a publicly traded stock, phil. >> very true. apple reportedly planning to cut production of the vr headset due to production issues more on what it means for the stock and other tech names you should be watching as we head into the second half, after the break, don't go away ♪ the biggest ideas inspire new ones. 30 years ago, state street created an etf that inspired the world to invest differently.

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join us july 25th. >> and get in on the game plan. >> cnbc teams up with kevin durant for game plan register for cnbc events.com. some headlines this morning on apple and its new $3,500 vision pro headset steve ckovach joins us with the latest. >> following issues with mass production, financial times.

apple plans to make 400,000 headsets it was never expected to be a big seller in the first year apple is selling it in the united states at first and only at apple stores or apple.com apple sells about 200 million iphones a year, resulting in more than $200 billion in revenue. even if apple reaches its initial target of a million pro sales, that's not even 4 billion in revenue for apple that's a drop in the bucket. apple has given itself time to work through production problems it's experiencing now. vision pro won't launch until early 2024 it could be as far away as nine or ten months from now before you can actually buy one guys, i'll send things back over to you. >> steve, thank you so much. steve kovach breaking down what's going on with apple for us next i want to bring in our next guest who's very keen on what's going to happen in the second

half of the year with regard to tech the nasdaq of course closing out the best first half of the year in 40 years, since 1983. the question, though, is there more room to run, and how much our next guest believes that big is better in tech, especially when it comes to ai. rosenblatt security joins us now. barton, thank you so much for being here where do you see opportunity tech has had a monstrous first half of the year is it risky to still play this >> certainly it's riskier than it was the stocks have done remarkably well better than i think i would have anticipated. you know, we have in our minds starting this year, that there would be macroeconomic risks that really haven't materialized, which has meant that the ad driven names in particular have been surprisingly strong. you know, so from here i think you have to be, you know, careful. we do still see opportunity in a name like an alphabet in the

belief that if the economy remains durable, that you can see improvement in the trajectory there that is not yet fully priced into the stock. apple, we have been constructive on the stock is nearing our price target but we still remain, you know, with a buy rating on apple, and i do believe that a lot of the concerns that have been aired in terms of the conversation around apple can be rebutted in the back half. i do think that they've got a very easy compare on iphones from the supply construction last year, and vision pro can be a slow burn. nobody has anything material near term but over the next few years, this could become an interesting category,and gets people thinking opportunistically about the long-term future of the apple. >> is the preference for alphabet relative to meta which has had a ripping run so far this year?

>> you would have asked me this k question a few months ago, and we would have said meta. they're both great companies, and they're both well positioned in an ad recovery. >> when it comes to alphabet, is there a sense it's righting things in terms of strategy for generative ai, that bart is going to be enough of an answer or a sense that it lost a long held lead and is threatened by microsoft when it comes to search overall. >> i think the jury is out on the service impact of ai certainly, i think there's no debate there's going to be substantial investment, which would have been great for the semistocks like nvidia in terms of the services impact, you know, i think what we're seeing with search is that google share is strong, not fading i think that we're seeing chatgpt at microsoft has been more incremental than taking

shares, expanding the market than stealing from alphabet. in terms of what is exciting longer term is the potential for there to be new generative ai kind of outcomes, so we wonder about things like music, like spotify and what that could mean for that the jury is still out on what the impact is going to be of the incredible technology that burst on to the scene. >> what are you talking about when it comes to spotify and music given that you mentioned that >> i think the idea of music being generated by ai and does this create an expansion of the supply funnel for music that enables someone like a spotify to, you know, do better things with the cost of music, which is the number one kind of head wind for that equity. we have a neutral on spotify, that there's a performative position right now the stock has done great this

year on expectations of price hikes, generative ai, if you're looking for the next shoe to fall, that's the area you could see fruitful things to examine over time. >> you cover other kind of mid caps, pinterest, roku, s.n.a.p., do you see a reversion to the mean for the mid caps in the second half of the year, or still with where the rates are currently that these, you know, less profitable or unprofitable companies just still don't have room to run in this environment? >> i favor companies with an e for the valuation. the ad market has not been beat up by the macro like we expected i still think it's not clear sailing to growth in advertising. we have easier comparers i think the stocks that are ad driven like a snap, roku, pinterest, we don't have great earnings support right now you need to see a real reset and

estimates, which i'm not ready to do at this juncture i look at stocks that have been beaten up on sentiment that can recover, like a live nation. there's been a lot of concern around the regulatory that's not going to amount to much. and a special, you know, situation, value play in the small cap land like a stag well. digital first kind of marketing services kind of company and a lion's gate, an entertainment company splitting up into pieces, into what i think could be an interesting consolidation theme in the media part of it. in large cap tech, a quality name, like alphabet with earnings underneath it is where we're more interested at this point. >> thank you so much for being here >> thank you. well, after a quick break, piper sandler's top stocks to buy and avoid in the quarter ahead. we're going to bring tnghis down with the firm's chief investment strategist that's next.

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welcome back to "squawk on the street." i'm centrsilvana henao with youc news update. baltimore's mayor will not stop until they find someone responsible for a block party shooting, that killed two people he told nbc news this morning that police are still investigating whether the shooting was targeted. however, police say they have no suspect or motive yet. israeli forces hit the west bank city with drones today killing at least eight people. that's according to palestinian authorities. an israeli spokesperson said the operation targeted a building believed to be used by militants to plan attacks.

a palestinian spokesperson called the operation a new war crime. and the gates opened this morning for the wimbledon tennis championship in london fans camped out overnight for a spot at the front of the q, and see the world's best players complete for a grand slam trophy no novack jdjokovic is favored for the men, and iga for the women just past an hour into the trading day. let's get to dom chu with more on what's trading. >> we have a holiday shortened trading session. the s&p 500 shifting between modest gains and losses after a 52-week high on friday consumer discretionary is the best performing sector thanks to tesla. meanwhile, health care, one of the laggards down 3/4 of 1% so far, the worst performer in the

session. it continues that string of under performance. among the big laggards, hch health care, and medical products device, and dental company align technologies, and edwards life sciences as well. also, by the way, keep an eye on shares of as trazeneca, not in the s&p 500, the pharmaceuticals giants are talking about disappointing trials for an experimental lung cancer treatment. that might be what's holding sentiment back on large cap pharma stocks as well. keep an eye on astrazeneca, and big stocks i'll send things back to mike at the new york stock exchange. >> our next guest says investor should look to quality when building their portfolio, and has a new names to watch piper sandler chief marketing strategist we'll get to your definition of quality stocks and which ones might qualify, but curious about, you know, reiterating

your macro view. i know you have been resolute in feeling like we have saturday macro cycle underway script is written. we're going to slow down we have lag effects that have not brought us into recession. where do we stand to that process in your mind >> hi and good morning, in terms of where we see the cycle going, we just continue to see a slow down in certainly the leading indicators today we've got the ism manufacturing index, which all components are in contraction territory, and you know, ultimately, our focus this year, and increasingly in the second half is all about employment employment slt mark or break var s -- employment is a make or break variable versus a market that rolls right back over, and we still see enough convincing evidence that we're on the path of something that looks like a harder landing down the road, rather than a

cyclical pickup in the near term market leadership year to date is a very clear reflection of that a narrow market. a narrow macro back drop of data recovering. >> you have pointed out, there is a type of window, people celebrate a fed pause and maybe it's a harder landing than the optimist thing i want to get to how you think folks should be positioned in terms of quality screens there's simplistic ways of looking at the quality factor. microsoft's in there looks like the nasdaq. how do you interpret it? >> it's pretty much looked like the nasdaq for the last 15 years. quality is one of the phrases investors like to talk about but always have different definitions. it depends on where we are in

the profit cycle kuwai quality last year is different than quality this year because the broad earnings growth is different this year, less broad basis basted when we look at scarcity, earnings growth, near term earnings revisions companies with high profitability with not a lot of variance or cyclical exposure. it's flavors of avoiding the cycle or cyclicality and maintaining exposure to companies that can hold up the best and what we see sa a continued challenging earnings backdrop. >> i'm looking at the screen of types of companies that have entered it you have lennar, and is this just about the factors you mentioned seem to be lining up and they're not overpriced yet how do they get in there

>> one of the successes of our models that have journd performed the growth and value index, it's sector neutral we're trying to help our clients that have took more or less fully invested or look for areas to put their money we are looking within sectors, it's not just go by tech or go by profitable tech, but go by profitable industrials, go by growthy real estate stocks a sector that's been under pressure for a while we look for companies that kind of rise to the top within their peer group, and that's, i think, ultimately how most institutional investors can't by one sector and avoid the other ten. they have to find a broader exposure, and those aims that pop up look for the best of read within their peer group. >> i guess in the first half of the year, you could have bought one sector or at least seven

stocks do you think the leadership will continue in the second half of the year and be the same kind of big tech ai exposure, excitement type names that drive the market higher in the second half of the year >> i'd argue and push back on that idea, neighmaybe retail investors. some of that can't own in the s&p index. there are not too many active managers that can have a size that large they are in a sense running up stream in the competition of this benchmark will those factors continue to work i believe so, yeah, and, you know, there's a big debate about whether recession is coming and whether it's coming, if it's coming we're thinking of things in a spectrum will data continue to slow, and when will that stop, when will

that story change? a broad-based market recovery requires a broad-based macro recovery with the fed still tightening, developing economy at the central bank still tightening. oil having eased over the last year, there's not many pockets of stimulus that can reaccelerate the company we expect growth in earnings to continue to decline alongside other lagging data we believe you want to be in the same areas of the market, names that are profitable, have great balance sheets, good free cash now. this is not the asylum to buy highly deep value cyclical names, thhoping we're going to e a broad-based macro recovery we don't think that's in the o cards today. >> happy 4th >> you too. let's take a look at last week's big ipos.

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welcome back to "squawk on the street," the largest banks, after the stress test green lit the level of capital these firms needed to hold on to before returning to shareholders. the biggest hike came from wells fargo with a 17% jump from $0.30 to $0.35 per share

goldman sacks and morgan stanley increased their dividends, and bank of america said in a statement this morning that it's going back to the fed over a discrepancy within a certain category of the test, and it hasn't made any announcements about changing its dividend or buy back plans just yet, but overall, banks are being pretty conservative with capital this year because there are still several more looming regulatory actions expected to come down the pike that could require them to hold on to more so they're not quite in this position, and you can see that with the lack of buy back changes that they are not quite ra ready to get that to shareholders yet. >> wells, that significant increase was that making up for lost time in their case? >> they were under certain restraints as a result of some of the practices that got them in hot water with the if he would, and so making up for lost time there >> gets them toward a 3% dividend yield justi about

that's where jpm and bank of america sit currently. they're migrating to that comfortable level. i guess you know what commitment on the dividend is you declare it every quarter so you have that quantified amount as opposed to tens of billions you might spend on share buy back, which to a regulator looks a little bit like you could overspend, i suppose. >> it's hard to rein that in, as opposed to the minor tweak. >> you mentioned bank of america, the stock is down 12% this year, in contrast to most of the group, there is concern, you know, again, too big perhaps to be overly concerned about, but their assets to where they're dated? >> there was that ft article last week. >> it's been around for a while. all you have to do is look they did some things that were similar to some of the smaller banks and suffered as a result, in terms of going out long when they shouldn't have. >> they have twice the exposure to potential mark downs and some

of their peers do. and part of that, we saw this with the regionals as well is stretching for the yield in a lower environment. that was a decent way to make money for a long time. the big difference, and it's important for people to realize this is, you know, bank of america in going through these stress tests for years, and being subject to the most stringent regulatory oversight, being too big to fail and so forth, they come with the implicit guarantee that the u.s. government would back a deposit run there. that's where the mismatch is, and it doesn't come to light unless there's a deposit. >> it probably seemed like we're not going to take credit risks, not going to give somebody a 30-year mortgage, we would stow it in the treasury. the valuation discount of b of a versus jpm has never been bigger still ahead, the travel

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welcome back to ""squawk on the street." the cruise stocks outperforming in the first half. let's bring in ubs analyst robin farly to discuss we were chatting last hour just about the leadership of cruise stocks and how surprised we were to see them kind of up there with the big tech and the ai players and so forth were you surprised by the leadership of these names this year >> you know, i think there was so much investor skepticism at the start of the year with how demand would be for the cruise lines after reopening because this is really -- last year 2022, we think of it as the summer of revenge travel for broader travel names for hotel companies. but the cruise lines are here opening 18 months later than everything else. that's why we are seeing such strong demand for the cruise lines here it is catching up to the revenge travel that we have seen broadly. >> so there is clearly this pull

forward in the post-pandemic era. how enduring is that is this the new normal for cruises? can capacity handle this for a longer period of time? >> if you compare it to demand for land-based travel, hotel rates in the u.s. are up about 17% since 2019 since the start of the pandemic. yet, cruise prices are only up a single digit this year so there is still a significant gap in price between cruise and hotels so we do think we will continue to see cruise demand until that historical gap closes. we're seeing strong demand into 2024 for cruise, especially with this environment with rates up so high because cruises are at such a significant discount. >> given this strong demand they're experiencing, are they able to engage in pricing power here what does the price level look

like for your average seven-day cruise these days? >> so if you are looking at total volume demand, so cardinal, for example, they only have 45% more capacity in 2023 than they did in 2019. but their booking volumes this year are up 17%. so a lot more demand pricing is up single digit compared to 2019, but that's less than the inflation we're seeing broadly when we look to 2024, they're trying to get a base of bookings established so they can raise price later. but at the moment, price in 2024 is down year over year, which is typical. you start in advance and kind of build up that price. so the key is booking early because i think we are seeing the last-minute demand for cruise pushing prices up, still well below where the hotels are, though. >> where are we on just what the balance sheet of these companies looks like, given all the debt

that some of them were forced to take on during the height of the pandemic >> so that is still an issue for the cruise lines i think there is a path here, particularly carnival, if you look at the three-year path, we can see them getting back to close to investment grade by the end of 2026. it is certainly a much more, you know -- much heavier debt, much more leveraged company than what we have seen in prior recessions or before the pandemic, absolutely it will take time to dig that hole out but because of the strong demand, we are seeing a return to generating free cash flow there is also cash on the balance sheet they were holding on to during the pandemic just to have that liquidity, and now they can use some of that for paying down debt there is a path here that will take them a little while to get here but we can see it, right we can see where they will get back to that now, that's for cardinal and royal in particular. i think that path or balance sheet getting back

>> and perhaps with stock prices where they are the equity capital markets could be an ultimate venue for them as well. robin, thanks so much. appreciate it. >> we started the second half on a very slight down note with the nasdaq and the s&p down. let's call it flat the big winners this morning and sure to be discussed in the next hour on "squawk on the street" include the ev makers. both with delivery numbers that did exceed expectations, leading to significant increases in their stock presic a lot more "squawk on the street" straight ahead

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good monday morning. live from the floor on the new york stock exchange. we are setting the agenda today, warning more pain ahead as the market waits for the other shoe to drop. >> and analyst brent thill with us on his second half play book for tech as large companies drive the gains. >> and bill simon with his outlook on retail in the second half. >> markets on the quiet side, hanging around the flat line slightly negative on the s&p 500, down just five

one-hundredths of a percent. and, of course, the story of the first half was big and someone unexpectedly large gains in the overall s&p 500 up 6% year to date history says when you have a strong first half like that, more often than not, you get further upside in the second half but, really, the story is the recession that didn't really hit consumers or companies earnings estimates at least not falling off a clip. >> absolutely. we don't know for sure if we've had that soft landing or not. >> absolutely. and a lot of folks will say, look, we always get one of these phases before the recession hits when it seems like we are in a good spot because the fed is not yet finished, but they will keep pointing to these typical lag effects. >> and you have the vigs below 14. >> yes markets have been calm investors have had lots of walls of worry to jump over over the

course of the year but as we get to the mid-point, people have given in, to a fair degree, to the upbeats in area. >> there is an early close for the 4th of july holiday, which you made a point to mention it is important for the markets to be open today. >> typically you don't want to go four straight days without markets being opened at all. it is just in case you need global liquidity, and the rest of the world is trading today. >> got it. our next guest says he's still waiting for that earnings recession shoe to drop joining us now, the director of macro. thank you so much for joining us speaking a little bit about where we are right now as we finished the first half, as we look towards the next half, the rest of 2023, what are your expectations for equities, knowing we're not exactly sure what the fed is going to do next as we're sitting in this pause for interest rate policy. >> yes, of course. good morning i just wanted to clarify i'm not waiting for the other

shoe to drop the market has been waiting for that shoe to drop. it hasn't dropped yet, at least. and, so, the pain train has continued to move higher so the way i think about it, if the market -- if a bull market has three legs to stand on or three pillars, right, you have earnings, you have the lek didty environment, the fed monetary policy, interest rates and you have sentiment clearly the sentiment pillar has been very -- a very big tailwind because, like i just said, the whole world was waiting for that other shoe to drop you know, myself included. 36 months ago. because you have that very, very inverted yield curve and we know what history says when that happens. but the earnings side has really come through much better than expected q1 was expected to be pretty bad. and it ended up being pretty good of course, starting next weekend or the week after, we will enter earnings season for the next quarter, and we will see if

that's a repeat of q1. the third pillar is liquidity. we know the third pillar is not done yet and the market has been satling the fed saying you are down and you are going to pivot and the fed says not so fast so we have obviously the next fosc meeting coming up as well expectations are that the fed will raise rates and the expected terminal right now is at 5.4% and the fed is saying higher for longer when you look at those three pillars, the liquidity pillar still isn't in place yet although, the market, i think, would like it to be -- the sentiment pillar is supportive of more gains for the market because nobody was prepared for this and then that earnings gain, i think, is going to play the tie breaker. so far it has been better than fear, let's put it that way. >> sure. without a doubt, better than fear forward estimates look like they're flattening out for the s&p 500. we'll see how that does break.

but i know you have taken a look at trying to characterize this market up until recently, it seemed like either an underperforming bull market or the longest and most benign bear market rally we've had forever. where does that take us from here we have broadened out in terms of stock performance and a lot of folks, i feel, are most bullish right now are looking at the technical clues of supply and demand for stock. >> that's a great question so the market peaked in january of 2022. so a year and a half ago almost exactly. it went down for ten months. the october was presumably the low. but it made an initial low in june and since that momentum low in june, the market really hasn't gone anywhere, if you look at the broader market obviously the s&p has moved up quite a bit because of the leadership of the mega cap growers and the whole ai theme if you look at the s&p equal

weighted index, it remains in a range where it has been for a year so, you know, there is an old saying, this is a market of stocks and not a stock market. and it really has been a market of stocks. what you typically would find after a bear market and in an early cycle bull market is you see a lot of economically sensitive stocks get bombed out at the bottom. you get that big capitulation. investors sell everything. then you get this v-shaped recovery and we haven't really gotten any of that. and the stocks that are leading on the way up are the stocks that were kind of leading on the way down in terms of outperforming. so you are not getting that turnover in leadership so it is an unusual cycle, but it's also unusual for the market for now for a year and a half to basically not be going up because historically the market goes up 67% of the time by about 10%. so this has been a very long period of purgatory for the

market and it's not that surprising that the market is getting impatient and starting to declare itself that s&p 500 equal weight, that's a very long trading range. and my sense is that it's ultimately going to be a base on the way to a resumption of the normal rising trend. >> you use the word "unusual." what i find unusual is, of course, what's going on in the bond market and has been for some time with this inverted curve flashing warning signs we still haven't been in the technically termed recession what does it tell you? and should we brush this off as a worry sign this time around because of the mes of the macro economist environment? >> that's a good question. it is extremely inverted and has been for a very, very long time. ignore that signal at your peril. but the yield curve is a

notoriously difficult indicator. not because it is not ultimately proven right because historically it has been, so it has led to a recession at some point. but the lead times are very variable you know, the stock market can stay up for months afterwards. i think the yield curve inverted in '06 and we didn't get a peak until '07 as an example. although i don't want to ever say this time is different, i do think there are some mitigating circumstances during the current economic cycle we saw the pmi this morning. that made a new low. clearly parts of the economy are in contraction but the consumer clearly is not. and when you think about whether the economy is as sensitive to rate hikes as it has been in the past, i think you can make an argument that it isn't because we had this period of very low rates in 2020, 2021 in response to the pandemic. and, you know, you can see when you look at the mortgage-backed

securities market that most current mortgages were financed or refinanced back in 2020 or 2021 people went from variable rate to fixed rate. and corporates did more or less the same thing and then on top of that, you know, you have the average bank deposit rate is still only about half a percent, even though the feds fund rate is at over 5% so if banks fund themselves through deposits, which they don't do exclusively, you can make a number of arguments why the economy has been so resilient. maybe we will get that recession. but maybe it comes later maybe the markets have new all-time highs before it hits and we're doing this all over again. >> exactly the signal expires and we have to dial it back and figure it out from there thanks a lot always good to talk to you. >> thank you. >> banks, let's turn there beginning to return cash to shareholders after the fed

stress test last week. leslie, happy early birthday, by the way. >> thank you the market is closed on my birthday. >> exactly, independence day but to your point, the largest banks giving a little birthday present to perhaps the market, sharing plans to bump up their dividends. the flurry of headlines comes after the fed stress test green lit before returning more to shareholders the biggest dividend hikes came from wells fargo with a 17% jump from 30 cents to 35 cents per share. goldman sacks and morgan sanly boosted by 10% increasing their dividends by 5% and 4% bank of america sent a statement this morning that it is going back to the fed with a discrepancy. they haven't made any announcements about changing their dividend or buy back plans at this time

overall, the plans were complimented by buyback plans already in place banks were being extra conservative because there are several more regulatory actions coming down the pipe that could require they hold on to more that's why some of the smaller firms subjected to the stress tests made no changes to their capital return plans each shared the results from the fed without announcing changes to their plans so very interesting kind of turn of events here with regard to just the economic uncertainty, the regulatory uncertainty even though all the banks technically passed the test, it didn't mean we were willing to dip their toes full speed ahead >> reassuring that the general condition of these institutions is relatively secure and they have the capital they could continue to allow it to build up. but then it is also going to

moderate the returns available for them to do new stuff and to lend things out. in the absence of a capital markets environment, that really starts to get exciting you wonder if they seem like they're kind of stuck. >> and if you are looking at an additional 20% capital requirement, which is what's been rumored to be the case with some of these regulatory actions, what does that mean for margin what does that mean for the prospect of capital return in the future that's a big change for a lot of these banks, especially on the regional side or super regional side so the whole picture is just really having a difficult time catching a bid at this -- at this juncture because of all the uncertainty there. >> thank you so much. after the break, tech's second half play book. will nvidia, meta and tesla lead that's next. >> continuing to keep an eye on the market as well you see the dow just moderately positive the nasdaq really sitting right

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welcome back mega caps like nvidia and meta led tech higher. steve kjoins us with a look. >> tech the big winner in the first half of the year driven by ai optimism and a bounceback

from last year's dismal rise apple is up 49% this year, hitting that $3 trillion market cap last week. meta is up 138%. and nvidia up 189% but those incredible runs also made the stocks much more expensive relative to earnings going into the back half of the year take a look at the increase in forward ratios from these names from the beginning of the year to friday's close. amazon going from 59 to 74 alphabet 17 to 22 and so on. now earnings season is starting in a couple weeks, putting more pressure on these names to deliver. some other things to look for for each name through the end of the year, apple is facing a fall in demand. and the iphone 15 in the fall will really have to wow people microsoft is having to close that $69 billion deal to buy

activision expect to see more product announcements. alphabet, look out for its plans to make money out of ai tools. still behind microsoft on that front. as for meta, appeasing investors so far, but still needs to show better monte sigs of reels we have seen some selling off in the last couple of weeks we're waiting to hear from the commerce department about more restrictions on ai chip exports to china and amazon trying to stay in the ai conversation, especially with its market leadership in cloud though, not much tangible there yet. prime day, though, coming this summer a good test of consumer demand ahead of the holidays. mike >> steve, you know, in going down the roster of the big winners, apple in particular is fascinating for many reasons one of which, though, is it doesn't seem to fit that neatly

into the ai enthusiasm bucket. is it just a sense of, oh, i have been trying to do this for many years, figuring out why apple is as popular and does what it does it doesn't seem like it's levered to the ai trend. >> and not ai in the sense we have been talking about it with the chatgpt stuff. they say we do ai in everything from the cameras to the way images are processed on there and just the way siri bubbles up so there is ai happening under the hood with a lot of these companies, but are they -- you know, are they making chat bots necessarily? no. >> got it. thank you very much, steve appreciate it. i'm sure we will talk to you very soon. let's bring in jeffrey for the second half play book. i guess, as we're talking about ai, there has to be, i assume, part of the catalyst going forward into the second half of the year from the names in your coverage,

who stands to benefit the most and what do we need to hear about ai to push that conversation forward >> yeah. ai is already embedded in a lot of these stocks. up 40%, 50%. we continue to believe that microsoft on the enterprise side and then google on the consumer side will be the biggest beneficiaries in the short-term with the ai move microsoft still has not yet launched the majority of their products on ai and pricing that will roll out in the back half of '23, into '24. and that will then create another upside on numbers as that rolls out a lot of ai hype is in the stocks, but we would caution investors that a lot of these products are still not monetizable. they're still figuring out pricing. enterprises are slow to adopt ai it will be a phased adoption it won't be an overnight success. so there is the risk that ai is already embedded in a lot of

these stocks, given the magnitude of the move. we continue to believe microsoft is in a great position it is our number one ai pick, $400 price target for microsoft. we continue to think their overall execution, their leadership in the ai movement combined with these products are going to be unveiled with ai everywhere will generate the next leg for microsoft. >> i'm interested in amazon. in terms of your take on what the state of play is and what investors are seizing on, obviously it is a comeback play. it was a big underperformer for years, but it is up big right now. whether it is with regard to ai or not, what might now seems to be, i guess, the big swing factor in the amazon story >> the two swings for amazon right now are the recovery of the aws in the back half of the year as we have seen the cloud consolidation move in the front half, companies have brought their investment to the public

cloud. that will resume, we believe, in the back half of the year into '24. aws is the number one cash cow at amazon. the second driver is their cost savings that they've put in throughout their logistics network. like they talked about the build out of the pandemic that they built out infrastructure to support our needs. they've had access capacity. they have been pulling back the throttle on these investments. it is a combination of recovery of aws and the better cost discipline yielding better margins for the story. what i think everyone is still concerned about with amazon is, while they're getting their costs under control, the ceo has hinted they might move into grocery, which has concerned everyone they have said, hey, we're not jumping into the pool yet. we have to find out the right recipe the biggest concern now is can

they deliver on ai, which everyone in the industry believes that amazon is built behind google and microsoft and ai and then ultimately what happens with grocery, which is a very low margin business. >> thank you very much for joining us with the second half play book for tech all right. later this hour, tesla with a big move higher after a beat on second quarter deliveries. $293 a share we're almost there we will talk to our analyst in a few minutes. many investors continue to be bullish on japan. a new way to gain exposure to that market is nt.ex stick with us. we'll be right back. and now she's got myplan, the game-changing new plan that lets her pick exactly what she wants and save on every perk. sadie is getting her plan ready for a big trip. travel pass, on. nice iphone. cute couple. trips don't last forever, neither does summer love. so, sadie is moving on. apple music, check!

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- today, 9 million kids in america are considered food insecure, meaning there may not be a lot of dinner at the dinner table. help change a kid's life. support your local food bank. the more you know. a full trading day in europe set to come to a close in just a moment ahead of today's early close here in the states choppy, mostly lower session overseas with mining stocks

leading the game while health care names lag behind. but the story abroad is in japan, launching a new index called the prime 150 half of the japan stock market and of similar value to the s&p 500 domestically constituents include nintendo, sony and nissan. japan one of the strongest markets in the world this year the nikkei 225 tracked the nasdaq this year almost to the dollar it basically warren buffet loves the companies there. they still have an easy monetary policy and the global inflation move has gotten their economy better. >> that is interesting and the prime 150 now, a new index for us to pay attention to thanks. time for a news update. >> here's what's happening at this hour. d.c. police are searching for the people that detonated or threw explosive devices at three

closed businesses on sunday. they hit a nike store and safeway grocery store in northwest washington all in a 15-minute time span. an officer arrested 150 people overnight, seeming lie slowing down at the right of the riots, police arrested more than 1,300 people throughout the six days of protests, demonstrators destroyed 5,000 vehicles, burned and looted 1,000 buildings and injured more than 750 officers. carowinds shutting down one of its roll er coasters after a man spotted a crack. it will undergo a thorough inspection and will be closed until the issue is fixed. >> that is scary i usually like to think about

roller coasters, but not if there is a crack in the beam. after the break, tesla beating on second quarter deliveries the stock on pace to be up more than 15%. plus, watch astrazeneca. tu tumbling to its worst day in three years.

welcome back

tesla higher after q2 deliveries beat analysts expectations phil has more on those numbers. >> these were much better numbers than wall street was expecting. look, the most bullish analyst out there was about 450, 451 the analyst consensus was 445,000. no doubts it did stoke demand. the models s and x don't get a lot of attention because they're 5% of the sales. but they did outpace estimates tesla is halfway towards its target of hitting 1.8 million vehicles delivered this year adam jonas just out with a note within the last hour saying he is raising his expectation he believes he will deliver 1.9 million vehicles for the year. keep in mind, we get the q2 results in a couple of weeks, july 19th. that's when we will find out what the margins were for the second quarter that's really the question right

now. are they hurting their margins because they have been stoking demand with these price cuts all of the ev stocks moving higher today we have rivian delivery numbers. they're producing 50,000 vehicles this year you see the chinese ev auto makers in there as well. they're in there because they came up with a strong june so what you have right now, guys, is a little bit of a rally when it comes to any ev-related names relative to their competitors. they're doing much better today. a bump from the traditional auto makers but not what we're seeing from the ev companies. they're doing much better, mike. >> phil, thanks a lot. following that delivery data, our next guest hiked his stock on tesla he believes the stock is more attractive relative to its tech peers and its ai value may be underappreciated over the long term the analyst joins us now

george, good to have you here. you heard phil kind of break down the delivery numbers. we got whatever you want to call it a 10 or 15 or 20,000 unit beat and the stock is almost at your target of 293. so how should we be thinking about the -- what's already implied in tesla's market value and where do you think it could go >> look, tesla for us is an incredibly long-term powerful story as we talked about over the last six months. they did something that was pretty smart, in our opinion they cut prices to stoke unit demand in the hopes of over time increasing the penetration of their fsd software that right now that costs $15,000. and we estimate that globally it has a high single digit penetration rate over time, we expect that to get a lot higher and we think they should probably lower that price from 15,000 to probably something like ten when you think about what that

does to the margin profile over a long-term period, it's huge. right now, as phil eluded to, the company broke its promise and its margins. its auto gross margins were below 20%. now those margin expectations are subdued for the rest of the year we think there are tail winds because those price cuts stopped over the last couple of months but over a long-term period, if they can increase that penetration rate, which is real word ai, the margins should go a lot higher over the next three to ten years. >> when it comes to tesla, the ai component of the story is full self-driving. it is autonomous vehicles. it is something that we have known about and has been in the market for a really long time. why should we all of a sudden be applying that much more value to it in the last eight months when everybody has consumed with large language models? >> that's a great question

we have known about it and we seem to be closer to this hitting the penetration rate that will stoke demand even further. but importantly, the stock got to $100 not because people were concerned about ai, but they were concerned about vehicle demand, right? right now what we have seen is expectations came down quite a bit in the winter of last year since that time, tesla cut prices they gained unit share they got their footing back. what we have seen is a pendulum swing way too far into the negative camp. and right now, not only has demand stabilized, right, margins could get better over the next one, two quarters like we just talked about over the long time, we have the cyber truck being released at the end of this year in small volumes. if you look out a few years, there is a lot of earnings power here a lot of stocks we talk about don't really have earnings power. we cover sustainability. but tesla has real earnings. if you compare it to that group

of stuff we call the man group, the six large cap tech companies, it is incredibly attractive for the growth, and it also hauz been. when we initiated last year, the discount was even more and today it's narrowed a little bit. but it underperformed on a one to two-year basis and we think it has more room to run. >> you mentioned the margins several times and they did underperform to their own target at what point does that become a concern if they don't begin to improve it sometimes margins can be overlooked but at some point, you want to have to see that build. >> i think you have a really good point so so far so good on tesla's strategy of cutting prices and improving unit volume. but the razor blade models we talked about selling units and eventually selling the software, we don't know that if it doesn't take off, this ai software, the fsd software over

the next two, three years and they don't get that margin boost, then it wouldn't have been as successful we think it will we think it has a lot of value to consumers and to the world in terms of sustainability, but the jury is still out. we're making the bet that the company has incredibly powerful software suite and that penetration rates will get higher over time. >> thanks a lot. up next, the impact of the supreme court's student loan decision on retail will the consumer have to rethink discretionary spending "squawk on the street" returns in just a moment

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to make them real. old school grit. new world ideas. morgan stanley. student loans are on the mind of many retailers the borrower is expected to pay $400 per month on average. some are bracing for that impact while others are expecting downs. bill, it is great to see you and talk to you again. as you look towards the second half of the year, a lot of cross currents going on. of course, the student loan program repayment restarting is certainly a big one. who do you think stands to be beneficiary and who could be hurt by this >> yeah. good to be with you. there is a lot going on. it is an interesting time. and it all seems to be focused on the middle third of the economy. you know, as interest rates keep

going up, that's where most of the pressure is put from a consumer perspective i think student loans will do the same thing, pressure that middle sector of the economy i like walmart by old company is positioned well to take advantage of that they noted in their last report they were getting trade down business from the upper third of the consumer group into their business and i think that will continue i think food is a big catalyst for them and it will draw traffic as people try to deal with brutal food inflation on a two-year stacked basis those without as much food will struggle to keep up. you know, where costco, i think, will do well because of their food target will struggle and probably be under the most pressure. >> we talk a lot, of course, about the rate of inflation moderating but prices themselves are not necessarily falling particularly for those consumers, but are focused on prices of every day

essentials what do you make about how consumers will react going forward with prices remaining elevated, perhaps not going up further but staying where they are. will you see that continue to trade down or will you see status quo where shoppers are shopping now is where it will continue through the rest of the year. >> you know, i never cease to be amazed by the ingenuity and the resilience of the consumer they have to eat, so they figure out the best thing to do to make their money go the furthest. as they battle with like vicious food inflation, your point is a good one even though it is expected to moderate, it started to, in certain parts and sectors of the food business, it is not expected to come down any time soon so people have to get used to that you often see the habits that they develop in a difficult time stick until something else

changes. it could get worse or better if the markets continue to take off and interest rates subside, they may move back in the other direction. but as long as the macro issues and the economy stay the same, it is expected that a lot of this will be sticky. >> yeah, bill. it is worth remembering, i guess, that in wage growth, we talked about the student loan effect and obviously prices are higher than they were a couple years ago, but wage growth remains at 4% to 5%, depending on how you want to measure it. it seems like the wherewithal will be there. what will give you a sense that maybe there could be a hiccup. was it use of credit even just, i guess, wallet share shifts towards services might be an issue long-term as well >> yeah. it's a great point for me, it is the employment rate you know, when wages are up 5% and were at near full employment, we don't have a lot of people looking for work there is more jobs than there

are people looking you are going to continue to see that fuel to upward pressure on prices more people working, higher wage rate, which is generally good, which jumps prices up. until you start to see either a slip in the wage rate or a slip in the employment rate that things will change. >> bill, if you were running one of these retailers that sells less food and more discretionary items like a target, macy's or kohl's, what would you do to incentivize customers to come into your stores knowing inflation is at higher levels than historical, knowing you are selling an item that's not a staple how do you spur that consumer to come into your store when discretionary spending is getting pinched in other ways. >> it is one of the most difficult things that you can do you have to differentiate yourself and have an offering of product or a service that is in demand and it's very difficult

to do. and target, for many, many years, was really good at differentiating themselves from walmart. you know, while on the surface there might not be a lot of difference, they built a brand that was distinctly different from walmart for all the pluses of that, they're having to deal with, you know, how they overcome that right now. they can do it, in my view, by providing a better level of service, a cleaner environment, a smoother transaction that's probably where they're going to have to go. >> and, obviously, back to school is a really important time of year usually second to the holiday time for most retailers. how would you try to capture more of that demand? it's a need. you have to buy new shoes for your children as they grew and new clothing perhaps you have to relace the crayons from a year before if you are target, how do you get them to come into that store and pick up those more discretionary items? >> i think you will see sharp

pricing. so they will have to price aggressively, probably more so than they would like again, it's very difficult you will see thinner margins in the back to school period, hyper aggressive pricing and, you know, again, it is going to be difficult to differentiate themselves because it is really about the trip if you have got to go and buy groceries anyway, you might be more inclined to buy your back to school goods from the place that you are already in rather than making a separate trip. so i think that's the challenge for target they will have to differentiate on product and be aggressive on price. >> bill simon, thank you very much. >> you bet see you. all right. after the break, could a swarm of ai start-ups lead to a surge lf m and a volume in the second ha of the year that story after this break.

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it was a challenging first half of the year for deal making volume falling 8% in the second quarter and 50% year over year according to kpmg. ai start-ups proved to be a bright spot. that's the bright spot. >> good morning, guys. as you heard earlier, tech came roaring back this year, but it wasn't just public markets and the nasdaq's huge outperformance early staged start-ups, the next

generation of tech companies found renewed financing landscape for the right kind of company. overall, the venture capital investing was slower and more cautious instacart and strike took haircuts over the last year or over the last year, but according to pitch book there are now more than 20 generative a.i. unicorns valued at a billion or more, and the biggest rounds went to an -- so i asked what is next for the biggest generative a.i. companies, and is it inevitable they get gobbled up by one of the mega caps have a listen.

>> almost for sure they will have to be using one of the cloud providers. while microsoft has taken an early lead, and google is strong and amazon is working on and oracle is working on it, and there's a whole stack. and i think we're seven large tech companies heading to ten, and not to three so that gives you the competitive space for startups supply, and even if they go i have to go and rent a large computer from company x, they have a number of options and that means it's out there and priced well, and all the benefits you get in competition. >> big checks for generative a.i. startups has not only been for vcs, and it's mna is trickier question, and that's a deal if it was a straight up

acquisition, it would likely not be approved, and they are actively making these sort of big deals. >> when it comes to the mna question, what specifically would the big companies mostly be buying? >> is strictly engineering know how? >> probably, and we don't even know of some there's more than 20 generative a.i. startups valued at a billion or more. this is only less than eight months fresh, and it's being developed, the apps on top of of this and the infrastructure for the new platform shift they are getting in early to see if they have the option or idea of the talent, as you said, to continue to develop in the space. >> you mentioned a little more

friendly environment for these types of unicorns or types of companies, and they are not rvcs and the other funders are not looking as stringent -- >> great question. we have seen this shift. we are looking towards profitability, but i would say no rules in the earliest steupblgs, right there was a company involved at a billion with zero revenue, and so forget profitability. this is really sort of this gold rush and if you have -- i have to say, too, there's a lot of folks talking about a bubble because you will see a lot of companies getting a lot of investments that essentially do the same thing we have this question similar to 2021, is it a product, a feature or a platform? everybody obviously wants to be a platform, but that's not clear

in these cases >> it's interesting. coming up next, janet yellen traveling to china this week, and big implications at stake. ahhh! icy hot pro starts working instantly. with two max-strength pain relievers, so you can rise from pain like a pro. icy hot pro. you got this. let's go. gobble gobble. i've seen bigger legs on a turkey!

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> janet yellen is traveling to china. >> she will head to china this thursday for a four-day trip into increasing communication between the world's two largest economies. she will talk about a number of topics, and they are not expecting significant breakthroughs during the trip, and yellen will focus on goals including protecting national security and human rights and securing supply chains and fostering motivation in both

areas. and china pyellen's trip is para bigger push by the biden administration to stabilize the u.s./china relationship, and the trip comes at a crucial time for china as the country struggled to rebound from covid, and the spy balloon weakened the ties between the two companies. several administration officials have travelled to china recently including blinken who travelled to china last month, and other ceos have gone yellen is not expected to meet with president xi but will meet with senior government officials as america is doing business in china. we are expecting additional details on yellen's meetings

>> after antony blinken went over there, president biden made comments that soured that trip with some of the comments. >> they need to have an open communication with china yellen said that was one of her goals going there, and whether or not they discuss that specific slip, it's not quite clear but it's not like everything will be flowers and sunshine, and yellen said it's important to make sure they are both clear on communication. >> thank you very much for joining us >> thank you we do have the indexes clicking into positive territory. the s&p 500 is up barely, just

about 0.03 of 1% banks getting a little relief on this abbreviated trading day >> we will switch over to closing "closing bell. thank you very much. welcome to "closing bell." i am scott wapner. this make or break hour begins with the question of the moment. can stock keep up their momentum and extend the rally into the second half. tom lee will be here in just a second, and your scorecard with 60 minutes to go on the fourth of july eve. and then tesla, one of the