it is 5:00 a.m. here at cnbc global headquarters. here is the "five@5. big banks are boosting for earnings finish line in sight for microsoft. some are striking and some talking. and the latest streaming service that says it is raising prices and later with another company looking at diversifying

the supply chain away from china. it is tuesday, july 18th, 2023 you are watching "worldwide exchange" here on cnbc good morning welcome to "worldwide exchange." i'm frank holland. let's kickoff the hour with the stock futures. the dow riding a six-session win streak investors are waiting for the bank results for the opening bell morgan stanley and bank of america. charles schwab as well up over 2% morgan stanley up 1.5% this year 14.5% from the 52-week high that it hit in february bank of america is down 11% this

year a lot to watch when it comes to bank earnings. we are checking the bond market. we start with the 10-year. the yields are dlingecline from yesterday. we are seeing the short end of the curve elevated that is something everybody is watching we are seeing oil tick to the upside as crude levels in the u.s. and supplies appear to be tightening wti crude at $74.35. brent crude up fractionally. time for the check on the corporate stories with silvana henao. >> frank, good morning microsoft is reportedly in talks about extending the deadline for

activision-blizzard which is set to expire today. the extension would not kill the deal, but open the window for either party to walk away. in seeking an extension, it would ensure that activision is not wooed by another suitor. ahead of that, disclosures from warren buffett, he cut his stake to 1.9% in march. state department sources tell reuters that national economic council director was among the attendees to the chips act meeting. it is finalizing plans for investment in china for cutting

edge technology for a.i. and computing. and for the first time since the 2020 debut, nbc universal's peacock is hiking prices on august 17th for existing users and new users. the price of premium with ads will go up by $1 to $5.99 a month. the premium plus plan is rising $2 silvana, thank you very much checking on the markets as the marketsprepare to enter the thick of the earnings season many are looking to put money back in the credit market. survey shows concerns of the economic downturn fell to the lowest level since the fed rehiking cycle last year at the same time, the july cash levels sitting at 26% which is down from 35%.

that is marking lows not seen in two years. we see improvement in credit quality and expectations among high yield investors for more on this, let's bring in david waddel at waddel and associates >> good morning, frank >> we have more money coming into the markets than in the la last two years i know you have high net worth individuals. are you telling them to get more cash off the sidelines and put it back in the market? >> we already have the interest of the goldman recession talk is coming down a bit. it has already happened. we had 6% gdp growth in 2021 we have been at 1% since inflation has come down from 9% to 3%. the fed is not leading inflation. they are following inflation the complex is coming down

wages, et cetera as disinflation takes root, which has happened, on average, markets return three times more than inflationary environment. there are places that may run a little far there are a lot of other places in the market. non s&p where the pes are reason a reas reasonable >> i think everybody agrees the market is expanding. we saw industrials and consumer hit a 52-week high yesterday you are saying there are spots outside of the s&p where the valuations are more attractive and you see more upside. >> the first half of the year was all about hype and return of optimism that accrued to the benefit of the mega stock the magnificent seven they have

been called. there is a 10% spread between the s&p cap and equal weighted it is possible that all those stocks go up another 40% spoiler alert. if you look at the magnificent seven, five of those have earnings growth rates anticipated to be less than the earnings growth right overall for the s&p. there are other ways to play. >> i get what you are saying is there one sector where you are seeing opportunities a lot of people are seeing the valuation and what is attractive with the 20 times forward pe >> financials have been beat up. the xlf has 20% is banks and 75% is other stuff

it is interesting from schwab and morgan stanley if the negative gdp is behind us and positive is in front of us, then that could accrue earnings finance within financials. maybe a trade, not an investment there is an opportunity. >> we're in the middle of earnings season. we have big banks reporting later. the forecast for this quarter is an 8% decline year over year earnings so far, earnings are 11% above estimates. what does that tell you about the market and what does it tell you about the economy? >> i think there is a difference between government, economy and companies. companies have had two years to prepare for a recession that never came they have done a lot to trim payroll and restructure and you will see earnings surprises. we had a big earnings surprise last quarter and big one this quarter. you are right.

it is not reality that makes markets move it is the difference between reality and expectation. with low expectationsright now as you are saying, reality coming in above that, that is rally fuel some cash is coming back to work there is still $5.5 trillion on the sidelines looking for rates of return. as money market rates come down in the next 12 months, it will make people more interested in the stock market there is rally fuel out there. >> david waddell, thanks for coming on. more to come here on "worldwide exchange," including the one word investors have to know today. first, economist thorsten is here weighing in on the fed's next move. and later, what defliation n the world's second largest

economyhmeans for your money we have a very busy hour when "worldwide exchange" returns stay with us

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and once-in-a-lifetime. well come back to "worldwid exchange." we have the latest on the london trade with arabile gumede in our newsroom >> good morning, frank it is a positive trading day across europe in particular. i want to look at the stocks and

you see the ftse mib is inching into the green so is the cac 40 in france the smi with the gainer of .75%. ibex dipping in negative ta territory. novartis came out with the raising of the full-year guidance they decided to spinoff and list generic medicines division they put in place a $15 billion share buyback program. all that to look out for on the european front today, we expect inflation num numbers. all that could set the tone for the bank of england. another 50-basis point hike is anticipated from them after wage growth was on the up for the three-months from may.

if we lockok at asia, china misd estimates. you see the mixed picture across the board. many concerns about whether china will need to put in more stimulus to boost that economy for now, these markets are lower with the nikkei being the only one hitting higher frank. >> arabile gumede live in the london newsroom. thank you. turning back to the u.s. hollywood is generating headlines, but summer of unrest. members of the teamsters union plan to hold a practice picket today at the u.p.s. facility in michigan the teamsters have until july 31st to reach a deal before a strike talks remain at a standstill the groups that represents the hollywood actors say they offoffer ed $1 billion of greater benefits

sag issued an 11% wage increase to offset inflation. president biden and sanders met with starbucks and minor league baseball yesterday at the white house. they discussed the fight for better pay and benefits. let's talk about this with jimmy pethokoukis. the analyst at the american enterprise institute good morning, jimmy p. >> good morning. >> let's get into this one we are seeing it across the board with different unions looking for higher wages and better benefits. we have seen wages increase with recent jobs report what does it mean for the economy and american companies >> you know, we have seen the unusual spike in labor actions we can set it back to the economic circumstances we have low unemployment tight labor market more worker power. at the same time, the climbing

wages with high inflation. that turned route of late. hope it continues. the notion of the greater worker power and workers who have been unhappy with wages going down. it is no surprise we have seen labor action and lots of it. >> i want to focus on the instances of labor unrest. u.p.s. is in my wheelhouse teamsters are looking for a better contract. u.p.s. saying they have the highest wages and benefit packages for workers in the logistics space of the where do you see that going and what does it tell us about the labor movement in the u.s. it has such a big impact on gdp. what does that do to the economy and maybe other labor issues >> we are at the point where i read things about the sentiment of odds of recession which we have been talking about the past couple years seem to be

improving. you don't want economic shock as sentiment is improving and maybe we can manage a soft landing here i don't think something like that by itself certainly will push us into recession i'll take all of the good news i can get. that's a really good example of the situation where people want higher wages they haven't seen real wage gains. they think they can get it unemployment is super low. it gives them a lot of power. >> let's attornturn to hollywoo. the sticky issue there is the streaming issues and a.i is that a bigger issue when we talk about labor companies and here in the u.s. going forward >> i think we are in for a period of better wage growth that takes the edge off other la labor problems streaming is a new technology and then a.i., which i do not believe is going away, that will

create the issues throughout the economy and especially for the kind of workers who haven't thought about automation much less a.i. ever what is different now is generative a.i. and chatgpt, those workers, whether or not those threats will play out and there will be mass unemployment is causing concerns. those concerns are not going away this is an ongoing issue >> we mentioned president biden and bernie sanders meeting with labor groups at the white house yesterday. at the same time, the team ster union president doesn't want the president to intervene at all. >> if the reason people are striking because the economy is too good, i'll take that as an investor

my bigger concern is a pushback against automation and a.i. across a broad range of industries if we're right and a.i. is a general purpose technology to affect a variety of sectors, you will see a variety of highly even i educated workers pushing back. we have been in a long-term productivity slump we need to make people more productive this economy needs that. longer term. i'm concerned about the pushback against technology we have seen with trade. >> jimmy pethokoukis, great to see you. thank you for your time. thank you. ahead on "worldwide exchange," a new luxurious club from one high-end department store and lottery hitting historic highs and the man known as machete is talking about the

ongoing actors strike. stay with us

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out inflation. all this despite a cooler than expected june cpi report last week prompting goldman sachs to cut the probability of suu.s. recession from 25% to 20%. let's talk about this with the economist at apollo global management torsten slok, good morning >> good morning, frank >> the chance of recession has lowered and what is leading you to believe the recession odds? >> the important issue here is the fed is in the process of cooling the economy down it is not surprising that since they started raising interest rates in march of 2022, we he st -- we started to see consumer spending slow down that's also what we should see in the data. continuation of the slowing c consumer spending. we had a deterioration for

retail sales which for the last year have gradually been becoming weaker and weaker i do not believe the recession probability is as low as 20% i think it is closer to 60% to 65%. the process still with the fed hiking interest rates and not only consumption and business spending with gdp gradually slowing. we have the lag effect of the monetary policy. there is still risk to the downside that the breaking distance ahead of us for the next several quarters could bring slowdown in the economic data. >> you gave us consensus where do you stand individually? >> i would say the probability is around 60% hard landing of rece recession. the gdp growth is what the fed is trying to achieve to get back to 2%.

core cpi came in at 4.8% the fed wants inflation at 2 it is coming down, but there is still a long way away. >> what is your opinion on the fed? the con kconsensus is a hike in. is that a push too far what happens after that if this is overshooting the fed target >> i think they will hike in july the challenge for them at the moment is they are data dependent. they are backward looking. they also say it takes monetary policy 12 to 18 months it is inn consikon s -- inconsin saying we are not doing enough that will continue to weaken in the next several quarters and that raises the probability of recession here over the coming

quarters. >> torsten, i imagine clients are looking at bank earnings, what is your expectation for the bank earnings and the forward direction of the markets >> this is an important question banks are a critical indicator of where the economy is so far we see bankearnings better tha expected, but it has been on the bigger banks remember the regional banks make up 40% of the assets and 30% of lending. when we get the regional banks and hear from them what is going on with deposits and lending, consumers and corporates and real estate, we get a better idea if we look at the weekly data from the fed, we see a pro pronounced slowing in small banks and large banks. from the macro perspective, the banks are critical into the discussion of how quickly is the

economy slowing and how quickly is the fed fight we will see more negative data on the macro front and data suggests that the economy continues to run down the runway >> we will be watching the earnings today torsten slok of apollo global management thank you. straight ahead on "worldwide exchange," blackrock making big moves as it doubles down on the middle east strategy we will have more on the story stay with us ol hard work meets bold new thinking. ♪♪ partnering to unlock new ideas, to create new legacies, to transform a company, industry, economy, generation. because grit and vision working in lockstep puts you on the path to your full potential.

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it is 5:30 a.m. here in the new york city area still a lot ahead here on "worldwide exchange. here's what's on deck. stocks seeking momentum this morning after kicking the trading week off in the green. futures in a holding pattern ahead of the open. latest bank results are likely to be the main driver today. goldman sachs and morgan stan leestanle tee it up. and another company pivoting away from china. it is tuesday, july 18th you are watching "worldwide exchange" here on cnbc welcome back to "worldwide

exchange." i'm frank holland. let's pick up with the check on the u.s. stock futures after the dow notched the sixth straight day of gains right now, stuck the dow fractionally higher. s&p and nasdaq fractionally lower. we will continue to watch this morning. we are looking at the bond market we start with the 10-year treasury at 3.766. well off the highs of 4.09 a week ago similar with the short end of the curve. 2-year above 5% a week ago and now 4.7% something we continue to watch time for the check of the top corporate stories with silvana henao. >> frank, hp is working to shift production of the pcs away from china. nikkei reporting the company is looking to make the move to thailand and mexico as soon as this year. the report adds hp is planning to ship laptop production to

vietnam starting next year hp released the statement revealing it is expanding its existing operations in southeast asia and elsewhere coinbase ceo brian armstrong is heading to capitol hill armstrong is set to meet with house democrats tomorrow morning to discuss crypto. he has been asking for clearer rules around digital assets. this comes as coinbase, the largest crypto exchange, faces a lawsuit by the s.e.c. and blackrock naming saudi aramco ceo amin nasser to the board of directors it is part of the long-term strategy nasser has held the top position since 2015 >> silvana, thank you very much. to our other top story this morning. investors bracing for another

batch of bank earnings before the opening bell it includes bank of america, morgan stanley and charles schwab morgan is expected to get hit hard by the slow making in the deal and forecasting a slide in revenue. and on the flip side, bank of america profits are expected to rise 11% from a year ago with the particular attention to the bond portfolio with a $99 billion loss in the first quarter this year. joining me now is the directser of financial technology -- director of financial technology devin ryan >> good morning, frank >> let's look ahead to morgan stanley and bank of america. do the reports look to be as bad as people fear >> there have not been big surprises. net interest income stories is

something we will see going forward. credit has not been an issue yet. you still have macro uncertainty moving forward for the banks moving forward today, the capital story is the key piece here we have been in the duduldrums r 18 months. especially morgan stanley reporting. it is one p stat for you you see a recover any in the normal tread line. for ma&a, it needs to increase which gives you the sense of how bad it has been. >> we have a bit of resurgence with ipos.

i want to talk about something people are focused on. the impact of rising rates small and regional banks is there any more danger with the big banks with the hike expected in july and maybe another one later in career? -- later this year? >> there is accuse stress. we have not completely resolved that uncertainty our view is we are getting in the late innings of the cash fees they will never move all of their cash they need banks for operational use. they need brokerages where they have money in the account like schwab and some level of cash to buy stocks we are getting to the tail end of that cash that is yield seeking. if rates go up another 25 or 50 basis points, we are not concerned. rates have been high for a sufficient period of time where people would have moved their money if it was yield seeking.

i think we are getting into the late innings that is the piece as you look out for the back half of the year. >> of the companies reporting today, morgan stanley and bank of america and charles schwab which is your top snik which will see tz -- which is your top pick which will see the best result >> the top pick is schwab. they guided down a few weeks ago for the second quarter our concern was that the negative guidance wasn't in the numbers. now it is out there. that is a big deal that will help them today. the theme of cash shorting which we just talked about for schwab is starting to abate that is the overhang we get on the other side of that and schwab is investable you will see that evidence

today. we think schwab can generate north of $5.50 that means stock is trading ten times of that. that implies a lot of upside from here. that is the one i would highlight today. >> schwab shares up over 2%. devin ryan, great to see you thank you. >> thank you, frank. good seeing you. on the back of the bank results, tune in for interviews on cnbc including conversations with james gorman at 10:30 a.m. and brian monihan. a member of congress -- members of congress set to meet with the key voices as they craft new regulations with hot

tech emily wid emily wilkins joins us now >> reporter: frank, d.c. trying to regulate a.i., but law mmakes are paying attention to a 26-year-old who has a message for the government the head of scale a.i. will speak before the first joint meeting of the group of lawmakers. his company hires people to ensure the data a.i. models used is accurate. wayne told me if the u.s. doesn't hurry are regulation and boost investment in a.i., other countries will take the lead >> there are other countries who are pushing forward a.i. regulation and framework and pushing forward on investment on artificial intelligence aggressively china is on track to spend more than three times the united states over the next year in artificial intelligence.

we need to be moving quickly >> reporter: one thing wayne says congress can do in the near term is pass a major security bill to further adopt a.i. >> we need to ensure the agreement and move forward in being able to drive innovation rather than watching our adversaries move forward ahead of us. >> reporter: the bill fee's feae was thrown into jeopardy last week now the senate could vote on their version of the bill as soon as this week. frank. >> emily, how much progress has congress made with a.i.? >> everything is pretty much in early stages we have seen framework from senate majority leader chuck schumer. we are seeing house leader kevin mccarthy trying to take up a bipartisan effort. at the same time, you are seeing

the white house come out with an a.i. bill of rights. wayne wang mentioned that urgency that is needed at this time for the u.s. to make sure they are getting into the space and putting out regulations and they are making their mark on the international stage as to what the standards need to be with a.i. >> interesting by the way, 26 years old what perspective and a billionaire, i believe have any members of the congress talked to him about his testimony or concerns? >> he has been on the hill a number of times. he will be testifying today. taking a lot of questions in public from lawmakers. he sat down with the republican and democratic heads of the senate intelligence committee and talked to mike gallagher he is heading today's committee and the select committee on china. influential figures

the great thing about alex wang, he can merge the a.i. world with the national security world. >> emily wilkins, thank you. coming up here on "worldwide exchange," the issues bubbling up around china and the risk of deflation taking shape we have the top trending stories. no winners in the powerball jackpot and tomorrow's jackpot is soaring to $1 billion the jackpot was last hit of april 19th luxury department store harrods will open the first private member club in shanghai. the facility will have a gordon ramsay restaurant and terrace

for members. back in hollywood, julia boorstin caught up with danny trejo to get his take on a.i. and streaming. melissa lee described it as one of the most colorful interviews to grace the cnbc air waves. we are back after this >> i'm worried about regular intelligence now that means they can use our image or our for whatever. you know what i mean now residuals have gone down wait a minute. give us a piece of that pie, too. i was told my small business wouldn't qualify for an erc tax refund. you should get a second opinion from innovation refunds at no upfront cost. sometimes you need a second opinion. [coughs] good to go. yeah, i think i'll get a second opinion.

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welcome back to "worldwide exchange." time for the morning call sheet. shopify shares this morning down almost 1.5% with the downgrade from evercore. pinterest is up to $41 a share it sites ad spend and operational improvements under the new ceo. shares of pinterest are up 3%. and ab bernstein raises united healthcare guidance. looking at shares of unh which are down in the pre-market

time for the "global briefing." conversations focused on trading desks around the world noif nov novartis with a $15 billion share buyback on strong second quarter sales. china's evergrande reveals $80 billion in losses since 2021 and last year. and sticking with china. the rising risk of deflation in the country. the chief economists say now is the time to act to ease inflation pressure after the strength of bad reports. the people's bank of china is pushing back on the deflation risk.

ahead on "worldwide exchange," one word that every investor needs to know with jenny h je jenny harrington and if you haven't already, check us out on apple or spotify on your podcast apps much more after this break

3... 2... 1...

welcome back to "worldwide exchange." looking at live shots from around the world london and hong kong new york and washington, d.c a lot of action in d.c. when it comes to unions and also chips ceo. let's introduce you to the wex wrap-up. microsoft in talks to close the deal with activision-blizzard.

shir shares are down in the pre-market and berkshire cut its stake in activision by 2%. and chip ceo met with top white house officials. for the first time since the 2020 debut, nbc's peacock is hiking monthly prices. changes take effect august 17th for existing users and immediately for new users. shares of at&t is bare boung back in the pre-market after closing at the lowest level since 1993 and california ruling that uber will face a lawsuit the company is weighing the appeal options on the matter. we are getting you ready for the trading day ahead with results expected from bank of

america, morgan stanley and pnc and lockheed martin and jp hunt. retail sales and home builder confidence index we will hear from fed vice chair michael barr at 10:00 a.m. futures are seeking a bit of direction with the earnings and economic data points futures are relatively flat. we have seen the dow spike up a bit now in the pre-market o despite the russell 2000 with the biggest sector off the fresh record high, investors are seeing love with sectors around the 52-week highs. some are seeing the technical signs of slowing the trend is looking to be nearing an area of possible

resistance this week expect a rally up to 4,545 to 4,575. let's bring in jenny harrington at gilman hill jenny, great to see you. >> thank you, frank. >> what do you make of that? do you see that same potential when you look at the technicals? >> that's what i was looking at here we are at the s&p. i think we have a pretty rich valuation that is totally in line with the inflation and market valuations are related. right now, we are 19 or 20 times multiple which is appropriate. if we think it is hard for the s&p earnings to be above 240, you don't have much room on the

upside that sounds accurate to me. >> with that in mind, jenny, i have to ask the wex word of day. >> i came up with mercurial. i didn't want to disappoint. mercurial. subject to changes of mood or mind as we enter earnings season, that's what we will see. >> we are about investable moves for today, jenny i want to touch on tech for a second xlk hitting an all-time high yesterday. do you believe big tech has more room to run? get into your picks after that >> i don't think so. you had a guest earlier talking about the number of the faang stocks that actually have earnings growth rates. that will come into play the reason i chose mercurial is

meta that falls into the big tech group and up 250%. let's flash back to nine months ago. not even november stock trading $88. let's think about what changed in that time period. meta is not a company that's changed and improved 250%. it is not suddenly earnings for the company are that much better what has changed is investor perception investors missed the market as ben graham said. that's how investors are they might start to see earnings and say well, ge egee, trading that change? >> you are saying meh. give us a sense of your stocks. >> you know me i like to hide out

what i want is i want stocks that are not subject to the markets mood i have crown castle the which is down 5% yesterday on the downgrade from citi. they lease out fiber they earn in the high single digit range with the t-mobile merger i think the trading or short-term oriented thought process. they will return in a couple of years to high single digits earnings growth. they deserve a premium you have the stock with a 5.76% yield and they will chunk along. >> that's a dividend play. one of the stocks which is a

reit why are you excited with this one? >> because i'm hiding out a small real estate trust i investment that owns post offices. they lease to the government this is really outside of that if you want to say post offices are really not relevant, but the entire infrastructure of package shipping and amazon shipping is reliant on the back of the post office network they are essential you get a 6.3% yield >> a very timely pick with the possibility of the u.p.s. strike amazon uses the post office in addition to u.p.s. we have "squawk box" coming up next. thanks for watching.

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good morning futures againingain moving highr after the dow hits six sessions. now awaiting bank earnings and other earnings we will get you up to speed with the trading day ahead. and summer of strikes. actors, writers and now hotel employees all pushing back against employers and u.p.s. team -- teamsters could be next.

and surging despite the shutdown what this means for results. it is tuesday, july 18th, 2023 "squawk box" begins right now. good morning welcome to "squawk box" here on cnbc we are live from the nasdaq market in times square i'm becky quick along with joe kernen and andrew ross sorkin. here we go again the gang is all here >> until tomorrow. >> you will would be back on thursday >> thursday and friday. >> four of five days not bad for july >> 80% reminds me of college. >> barely a b? look at u.s. equities.