names, sure, but fill in with some names that have dividend yeels of 3, 4, 5%. that's not in the tech space typically. >> joanne, we've got to run. appreciate your perspective as always >> you bet. that does it for us today. it's been fun. we'll see you back here tomorrow thanks everybody right now it's time for "squawk on the street. ♪ good tuesday morning welcome to "squawk on the street." i'm carl quintanilla with jim cramer and david faber premarket a little soggy as some of the banks underwhelm. a headline of .2 the dow industrials riding a six-session win streak pnc shares are under pressure as revenue misses. >> plus, we'll talk the macroeconomic picture. retail sales notched a third straight month of gains.

goldman sachs lowering its recession forecast as for stocks, they continue to be near the 15-month highs we're also looking for perhaps signs of a rebound in the telecom group for what's being a significant loss of market cap in the last few trading sessions. >> bank earnings led by b anda and morgan stanley this balance between wealth management revenue trying to make up for deal shortfalls. >> i think it does you've got 100 billion new net money. that beats everyone by a mile. i think it's fantastic 200 billion in six months. it's incredible. the fact it's trading slow m&a is soft. we expect that we hope that changed con costs are high i think it's a very solid quarter, and solid shouldn't

matter we can't just dismiss it because it's only solid, david it doesn't make sense to disnis a quarter that's solid. >> okay. direction for the stock off of this what >> i think what you have to do is say to yourself, okay, it's not a net interest income story. you have a lot of money coming in if you have m&a doing better which i expect it will if you have trading that's lower, it's a great stock to buy. >> okay. >> okay. my mother used to do that, okay, jim. i think there's more to it i think this is the kind of situation where you'd have a great cet 1 of 15.5. you basically have a dividend increase, a dividend that's got 4% is it jpmorgan jpmorgan is a big growth stock now because they've been able to consolidate and do a lot of

nationwide banking i think this is -- i don't want to call this acceptable. i'm not going to call bank of america acceptable i think these banks are doing incredibly well. but they're not nvidia. >> mike mayo, longtime analyst at wells on morgan stanley, mixed bag in the quarter, slightly better-than-expected revenue, helped by institutional securities and wealth but mitigated by worse than expected investment management and expenses. >> expenses because it was severance. i don't buy that one bit severances were good if the bank can do this well -- this is the way i want to posit it if it can do this well without m&a, without any ipos, then what will it do when it gets m&a and ipos >> takes us to what katy huberty of morgan stanley publishes

today, an inflection point for m&a they believe, jim, beginning in 204 equity capital markets starting to show signs of life. increased clarity on the regulatory fronts. >> i think the justice department is going to offer clarity that we don't have currently from the ftc the justice department is run by a zealot i do think a high watermark of nina kahn was the bridge too far. that's activision blizzard. >> we've said it many times, that was a blow to the ftc, not to even get a stay from the ninth circuit for their appeal doesn't mean they won't continue to bring cases. >> in the end it's the courts that rule. that's who you have to follow. this very smart person said to me that you shouldn't just think that nina kahn's word is gospel.

i'm trying to remember who that was it you know who it was? it was you >> i know. >> we've been waiting for the suit to happen and the suit occurred. >> an expectation embraced by katy huberty that you will start to see perhaps more m&a. at the same time still companies faced with the possibility of having to go to court, even with the high likelihood they might win if they feel their deal is not anticompetitive and doesn't check a lot of those potential boxes, still may say we're not going to take -- >> an adult, jonathan can't tore will offer things that explains things i think the word left out by the district court was childish. i think she wanted to do it. i think childish and lack of rigor all would have been good words. if you had submitted that to class -- to my corporate finance class, my antitrust class at harvard, it would have been thrown back at me and said why don't you keep looking at stock prices and stay in the back row.

>> we'll try to update what's going on with activation and microsoft. midnight, of course, is the deadline it appears they'll have to extend beyond that interesting note on the capital markets, though, from her in the sense that it does create confidence when you a higher market, ceo confidence is still the key for m&a activity when you do see strength the likes that we have and if it continues, you can imagine ceo confidence will rise and the dealmaking will follow. >> i think you need to look at the oil patch. way too many oils. a lot of private secity companies want to continue to sell i don't think they'll be routinely challenged as pfizer and genetics that will be appealed to a court because pfizer has got a lot of money. nina kahn is going to leave -- >> first of all, they've only gotten a second request. they're not going to court

amgen-horizon is going to court. >> that's a harder one there are going to be repercussions to the consumer. nina kahn deeply believes that rich people should not benefit >> have you read anything of her law? >> i have. >> her so-called body of work. >> i don't agree with that assessment >> i think the pfizer sale will result in meaningless battle by her and it will be defeated. >> it will raise prices. in the same that kanter blocked airline. remember there were airline companies directly duking it out with each other, florida to new york he looked at that and said no. he took stephen king's pulse when he said the writers would do poorly in the penguin deal. he's got rationale you know what he has horse sense. >> as it pertains to the banks, actually ib revenue up seven

bofa. >> it's easy to talk about how, you know, they're only one of four companies, apple, microsoft, that have made $15 billion a year in four quarters. but i look at it i just say once again it's a juggernaut it's doing quite well. it happens to come after jpmorgan so people will say it's not as good as jpmorgan th then you have pnc doing the opposite of what wells did wells raised the net southwest margin by a crazy amount, 10-14. pnc went from 6-8 to 5-6 that's what i call not good. i think that's suboptimal, david. >> what happened >> they lowered the net interest income >> i know, but why >> when you look at what wells

did, wells was shocked they did as much money off of what they got. the efficiency ratio was not great. the net interest income not great, the margins not great the chargeoffs better than expected they also did it with an effective rate of 15.5 people are looking for 18.2. i'm calling this one suboptimal. >> pnc suboptimal bank of america not, right rotc, return on tangible common equity was 16.8% i think that was above what had been anticipated. >> exactly right >> we're listening to the call, still monitoring probably get some characterization of the consumer and credit cards and all those kinds of things. >> and ai. >> what about ai >> their loan officers are using ai the people at the bank -- an ai system so you don't interact

with a lot of people which makes those people, therefore, more valuable to be able to bring in real business. that's going to be part of the theme. bank of america is the first bank that has talked about the ability to keep expenses down via ai i think that's fantastic. >> reserve builds, generally speaking, carl, have been many modest from many of these banks, perhaps pointing to the fact that they're not seeing signs of a real recession. >> bofa ceo -- they say commercial real estate credit exposure less than 2% of total loans. real estate is owned by somebody when we looked at wells, charlie sharp looked at all the building this is the level -- by the way, did you see the defaults from the mortgage numbers the forbearance is the lowest it's been. the consumer is very good.

when you speak to bank of america, the funny issue to say, have the rate increases done anything other than make more money for the banks? they've certainly not slowed the economy. >> that's kind of what goldman said last nice saying we worried about stuff, about growth slowing markedly in march. the rebound probably happened anyway it didn't happen i think one of the things that's so interesting about this earnings season is the companies we thought were going to be most hurt when you raise rates didn't. >> you want to do schwab really quick? that's the mover of the morning in terms of financials >> it's interesting because they actually cut numbers there it's better than expected. i think if you interviewed the ceo, i think what he would say is nah, nah, nah, nah. >> we plan on doing that in the 11:00 a.m. hour. >> oh, i can play. >> we'll have gorman, bettinger

and moynihan. >> there was a moment in time where schwab was called into question, david, for whether its minuscule banking arm was going to bring down the edifice. >> also a question on what they're paying cash customers who keep balances there. that's a nice lever of profitability for the bank when you're not really paying -- >> net interest margin expanded. >> yeah, they obviously combatted that somewhat effectively. you can see the stock has not recovered yet from the declines that took place during the dissolution of svb, signature bank and first republic as well. but it's working its way back. obviously today's earnings are helping that as well we'll see what the ceo has to say later in the program. >> what do you think about the fact that there was no panic among the actual customers so much commentary that there could be problems in the bank but they took in more assets

than people expected does that mean that people just don't pay attention to what we have to say, we being the media and the people who are panicked about schwab >> i don't know. i really don't you think about what happened at svb or some of the other banks and it's a different scenario. >> i agree >> i think it's based on the customer's relationship with the institution and a lot of different things. >> i think we all have to accept the fact that when we see the regionals, bank of america and wells fargo are den fis beneficiaries. >> bac is the worst performing of the big banks stock down about 9%. not concerns at all per se, but they have long dated assets on the balance sheet that didn't work to their advantage, right >> that's true they should have made more money given the large deposit base they have. but should it be stalled right

here i don't know the fact is that it's not a growth company like jpmorgan is. but the assets coming in, that didn't come in to pnc. the assets coming into those banks -- >> assets or deposits. >> i mean deposits, into those banks, the regional banks, huh-uh i don't think they're going to have -- i think wells, bank of america and jpmorgan, they've got the money. the other guys lost a lot of deposits that's the way it is that's who got scared. >> we'll see a lot of those names still to come over the next few sessions. as for markets, jim, yesterday's volume maybe a three-week low. bofa points out s&p has 36 sessions without a 1% decline and streaks tend not to last much longer than that. >> the vixx obviously shows you that i think we're now past the most

beautiful kwaur fers that you're going to get i think we've had some really beautiful quarters whether it be pepsico or jpmorgan. >> we've got a lot of earnings >> lockheed martin unh was terrific i'm saying everything is terrific what's been bad after pnc? >> mossimo >> the ceo of mossimo was coming on and trashing apple. i said, wait a second, stop it intimating that the interview was going to be over i i was not going to ask an existential question because david is asking all those. >> that's true my new beat. the data diet continues to today. let's get to industrial production with rick santelli.

>> good morning, carl. june reads on industrial production we're expecting a number near unchanged, not to be minus .5% that's the lightest, the most negative month-over-month change in industrial production going back to the end of last year, december to be specific. on utilization rates also a big miss, expecting 79.5 we end up with 78.9. you have to go back to the end of last year to find a similar number we see that interest rates are down across the yield curve. they're moving back down again we did see some pops even though they remained higher priced in lower yield, retail sales better than expected on the control group which gets inputted in the gdp and there were positive revisions. this was taking some of that away pay close at ten to the ten-year to the psychological level of

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sake a look at s&p gainers we mentioned some of the banks schwab, of course, number one. that gain nearly 8%. fedex up there as well as we continue to take stock of the situation at rival ups which also is up in the premarket, just not by as much. we'll get cramer's "mad dash" as we count down to the opening bell stay with us

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we've got eight minutes before we start trading. >> i could have picked anything. a positive piece about alphabet. another piece about amazon, how the web services has been -- the decline in growth is going to turn around. i'm picking the jefferies piece which talks about how well apple services are doing apple music quietly gaining traction the kind of overall tone that apple is now software as well as hardware if you look at it without looking at the services, then you're going to miss the move. this is, by the way, almost everything involving services.

remember, we're on the 14, 14 pro. what they're adding is catching fire on top of yesterday's morgan stanley brilliant piece about india. >> india. >> how india is going to be the major source of growth it was a fantastic piece it was a little tolstoy-like in terms of "war and peace. it was very long it was just long and rigorous, and i think the combination of india and services is what's pouring this stock higher, not the vision pro which is next that's 2024-25 if you look at this stock, david, this is a rocket ship it's nvidia-like i don't know what to do -- >> about nvidia. >> i can say today there's a

positive nvidia. i don't understand how this can happen, that every day there's a positive analyst on the stocks that we all know are doing well, but that's what's happening. is it justifying the moves up as they did justify the moves down? is there anything in these that is actually game changing? >> no. >> i thought you would like this because you have historicry not liked it -- >> i don't they've got to publish something. there are moments when it's a value. we tend to look at those moments. this may not be one of them. >> thank you >> you're welcome. >> the same thing with the antitrust. you and are are so simpatico today that i think people think we rehearse. >> we never rehearse it's all as it seems you should have seen me five minutes before the show. >> david, you acted like me but in the old days before i became

jimmy chill. >> i missed an important call. i was channeling jim things were flying. >> things were flying. i knew you were very upset and justifiable. you missed the biggest call of the morning. >> i keep missing this guy's call opening bell five minutes from now. you can catch us any time as well by listening to and following the "squawk on the street" opening bell podcast

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let's talk a little verizon, at&t loss of market cap what seems to be over this "wall street journal" story about lead-wrapped cables that have been put in the ground and been there for many, many years loss of market cap, $35 billion over the last few trading sessions $18 billion or so for verizon. more market cap loss there than at&t at $15 billion. you can see it craig most said it yesterday r three years of grinding lower

for these stocks despite what are attractive dividends there are questions at least, perhaps. there are other questions about exactly what the exposure will be for this new risk that we've suddenly been made aware of. at&t has by far the most exposure, it would seem like in terms of locations past given its history as the original ma bell the at&t now is really southwestern bell. they just took the name. anyhow, they include a number of the significant bells from that period we just don't know, jim. we talked about it yesterday, a bit of a rebound today many saying this seems to be over done. the problem is you can't quantify at all what the liability might be >> there's a very specific mention in an article by scott

moritz who worked with me for years at the street which talked about how there are areas, the banks of the passaic river, new jersey, a playground of options fall if you're a plaintiff's attorney, you now know where to go to see groundwater poison, and that's what they'll do they'll advertise and suggest, if you or any of your children had any sort of brain injuries or breast cancer, then we would welcome you to join a class action because we have advertising which allows you to do that. there you go i think the people on the banks of the passaic river or nearby, including me, would want to find out why we have so much breast cancer in our area, and perhaps it's related to that >> when you have your target of where it is, look at the forever chemicals. once they had the target of where there were, there was no

stopping the plaintiffs lawyers. it's just the way it is in our country. that's what's happened until you get rid of that process of plaintiffs who you can round up, then i would not be in verizon. right now i'd be in wap jer's falls and in the passaic area and be sure that they had nothing -- no memos that say -- this is the killer do they have any memos in the discovery which says they knew that this could cause problems that's the old -- hey, man, we know asbestos is bad, but, hey, let's just not mention it. and that's how you got the tremendous asbestos bankruptcies >> one yielding 8.2. some arguing it it is using

dividend yields. son heim saying they were distracted by content and getting into the hollywood game. >> that may be true. that obviously is over and done with a major decision made by john stankey at at&t and now at&t shareholders who hung on still have a significant ownership stake in warners brothers discovery which is those assets. the competition between verizon and at&t is one we talked about a great deal, and not to mention, our parent company comcast and charter which owns the spectrum brand t-mobile is the one name and, of course, is not in any way at risk here in terms of these lead-wrapped cables. >> was ledger right about dumb and dumber >> yeah. he's still having fun with that. he's still having fun with that. i tend to be in touch with him i do think that what's happened

is -- i think people misunderstand. if you go back to when mike roman took over at 3m, you got to pay 64 before you saw anything in his k that there was groundwater problems at that point it was in minnesota and georgia. now if you take a look, the problems are worldwide they've had a $10 billion settlement it's meant very little the combat arms veterans who have been injured in their hearing, several hundred thousand, that's a chart of litigation it's not a chart of their earnings i think that when you take a look at what the plaintiffs bar can do -- >> let's keep in mind it's also the potential remediation that would have to be undertaken by at&t, potentially verizon, a couple of other names here, lumen, frontier. it's the remediation of this potential problem which we still know very little about. >> remember, you need

plaintiffs >> you need plaintiffs or maybe -- >> they're hard to come by the remediation can be expensive. >> very expensive. >> this isn't exxon remediating after a lot of fish were dead. i found out after reading next door. >> you like next door. >> it's usually like "my dog is lost." i do want to say yesterday we had to put marley down five years old he had an esophagus problem and our lives are torn asunder i'm trying to get past it. i salute lisa for having to do -- >> always so difficult >> whenyou take that decision, it's not done idly you're not going to snap back tomorrow marley was my buddy. >> we hope you'll find a new

companion, jim. >> by the way, saved from a kill center in tennessee. he's a mutt. >> we'll be thinking of you. >> thank you >> david mentions warner brothers discovery goldman today remains our topic. even with the environment in hollywood right now, they think a lot of the factors are within their control, merger milestones, the rebranding of max. they still think that the deleveraging process can continue here. i think that target is 20. >> that's a pretty significant move from here. >> didn't you think that piece was fanciful >> which piece >> that warners brothers is in the best shape because of the changes with the max after all the things you told me about sports -- >> sports is a question. they will fight back hard against the idea that without the nba, it makes the networks such as at&t not particularly viable they will say that's absurd.

we have a lot -- the ncaas they've got a lot of other things, not to mention the digital rights and things of that nature. second half of the year is going to be very important for this company in terms of providing or i should say producing the free cash flow that is anticipated to, as carl said, to live up to the investment thesis that is out there from those very positive on the company. they do that and solve a lot of -- answer a lot of the naysayers, i think that will be the question. we'll see. it's a tough environment as we've said bob iger made it very clear. linear cable networks and the advertising market is not particularly strong in this area either so that's hard they are, though, already break-even, moving into potential profitability on their streaming service which is obviously different from disney plus. >> comcast snuck in a couple buck increase in peacock.

>> peacock, for our parent company, yeah. i had an email not long ago offering me peacock for $19.99. >> is that friends and family? >> no. maybe it was i don't know i'll show it to you. >> per month, per year, per quarter. >> a whole year for $19.99 >> i didn't get that that was in june. >> i binge on it and i didn't get it that's unbelievable! >> it makes you wonder about discounting, i guess there's a list price for a lot of these streamers, but they'll throw offers at you -- >> the gap dynamic remember back in the day you'd have a book full of gap coupons in your drawer. >> kohl's cash, my friend. i get the max -- i get a max bulletin every night i'm like my friend max i'm going to try to block max.

you didn't block that? >> i don't know what you're talking about. >> the comcast, the peacock, i didn't get a discount. >> i did what can i tell you? i guess i'm special. aren't we supposed to get it free anyway as employees >> don't look at me. i binge on it. >> yeah, $20 is a year is a good deal. >> we got a price hike on that front. also the headlines regarding ralph lauren's ceo arguing they're going to continue to increase prices. >> he had the best quarter >> all these different industries are trying to price in a changing environment. >> ford was really caught yesterday. people are questioning whether they've really got a waiting list they said, look, we have a lot of people that want it but we have to be competitive gm about to come out with a silverado. it reminds me very much of the internal combustion dukeout between the f-150 and the

others ralph lauren had the best apparel quarter. patrice is so non-promotional, it drives me crazy i'm always calling him, can you give me ammo no almost every ceo wants to give me some ammo. >> they didn't want to >> no. >> what do you take from that? >> they must be doing incredibly well they do a lot of tiktok. they wanted to be in the meta mall -- if there was ever going to be a meta mall. it seems like that's no longer the focus for meta >> can i talk about mossimo for a second >> did mossimo win the recent thing? >> not that large a market cap getting smaller all the time losing about a fifth of its market value masi is the symbol

again, in the health care industry here is a quick note from wolf research, inconceivably bad second quarter pre announcement. just about every possible excuse in health care let's be very clear. this update strains credulity which doesn't jive with most of what we're hearing from the rest of the space sure, mossimo's business is different than the rest of the space. there are hints there are masi-specific things to hear managed care complain and see an unprecedented 20% revenue whiff from this company makes you wonder that's all i've got for you. you can see investors are taking it out on the company right now. >> when he was the ceo came on, he directly said he was better than apple and all this stuff in health care. i questioned whether that was a

good idea to tackle -- really to attack apple in terms of the things you can do wrong. now, can i talk about somebody who did something right? novartis novartis did something right, buying back stock. really a tremendous quarter. i have to say that this may be the breakout quarter for novartis. >> we had david rex lilly on >> i come back and say it's verification of all the things he's done. david rex is the star of health care right now let's just understand that he's got a very good alzheimer's -- the company he bought, by the way, which actually allows you to lose weight without losing lean muscle, if that can come true, that would supplant both wah

gove i have and moderna. david ricks, when he comes on the show, he comes to play that's a great interview. >> a clear explanation of what happened ecom, jim, bin interest. >> trying to reach the younger consumer where they are. it's there david, the younger consumer is not watching -- i don't know, what do they have, these shows >> none of us are going to be watching much other than reality programs. >> well, 90 minutes. have you seen that show? >> no. >> 60 minutes is going to be 90 minutes. they're adding 30 minutes. that's where maybe the younger consumer unlikely. but pinterest is a place to put

ads. it's a really good company it's a way to get hold of young people, particularly people who bake at home and want to take travel -- i think it's still junked up with ads personally. but i do think that's where they've decided, the general advertising public has decided let's go back to google, back to amazon, to pinterest even snap. >> by the way, tiktok, you somehow leave that out that's the juggernaut. >> i like reelz. >> i know. but tiktok issing the juggernaut. >> how about diller's point regarding the strike the new marginal players, apple, amazon, for them -- >> secondary, tertiary. >> it is amazing to think about how the world has changed. they don't care. >> think about what amazon spends what they spend on content, sports rights, everything else,

would be perhaps better spent -- again, some say, in terms of putting it back to grow the core business but, yeah, it's a distraction. it's nothing for apple it means nothing >> idris alba is in this high tech you look and think, well, i'm actually discussing where the quality of hijack is good. apple could buy the whole thing. okay, i'll buy every writer. all right. let me own every writer. if you're a writer, i'll own it. apple has the money to do that. >> yes apple has the money to do anything it wants. $100 billion a year. >> it's a nation state, more powerful than the u.s. government able to leap tall buildings in a single bound >> jefferies today goes to 225 >> unbelievable. we're getting headlines regarding former president donald trump and a post he made today on truth social.

>> the former president saying he has received a target letter from the special counsel jack smith. that would indicate that the investigation into the events to january 6th are at a very late stage. not clear what would happen next typically when someone receives a target letter, that's one of the last steps in an investigation before an indictment or potential arrest the former president says here on his social media platform that he received the target letter on sunday evening he says this target letter, this entire investigation is, of course, without merit according to the former president. he also says the letter gave him four days, which he says a very short four days to report to the grand jury which the former president says which almost -- some typos here, almost always means an arrest and an indictment the former president in a very long and somewhat rambling post here, very, very critical of this process

we'll have to wait and see if there's any official response here from the special counsel's office or from the department of justice. that's what we know as of right now, carl. back over to you. >> appreciate that we'll watch that, obviously, given some of the parallels we have going in various parts of investigation. meantime, dow up 129, shooting for seven straight days higher we have not had a seven-day win streak on the dow since march of 2021. >> how about the transports up over 2%. a little confirmation from the transports that's something that there are people that we know that have missed that. i'm not going to mention their names. what's the point of bringing that up? >> the dow theorists enjoying today. the s&p back to 4,526. a quick reminder, you can get in on the cnbc investing club with jim. use your phone, the qr code on your screen and it takes you

right there. as we go to break, most of the data of the morning is out of the way with retail sales. we'll get inventories and nahb in about 15 minutes. this is american infrastructure. megawatts of power, rails and open road, and essential services of every kind. all running on countless invisible networks, making it a prime target for cyberattacks. but the same ai-powered security that protects all of google also defends the systems running america's infrastructure. for these services. for the 336 million of us living here. ♪

the run of the cruise lines continues this morning carnival up almost 5%. it's ar gus this time, go to buy, target of 21 and say more marketing spend, better liquidity, less of a chance of new shares being issued, although nclh does get cut by trui ostn the out performance lately we'll get stop trading with jim after the break.

. it's time for jim and stop trading. >> one of the themes of the magnificent seven, jpmorgan, an interesting piece about the internet, amazon is the best idea and they're saying amazon is being conservative and amazon web service, which has been going down, its growth rate, is going to go back up in the fourth quarter the pressure here is that if it doesn't happen, this stock will

get clobbered. and i've got nonconfirmation it might happen so i think a lot of this is just conjecture, generative a.i. will generate a huge amount of business if it doesn't, then this stock is vulnerable. my travel test owns it, i don't want it to be vulnerable, but i hear the drumbeat about how well, they're doing and reflect in the fourth quarter is not necessarily based on fact and might as well be based on fiction which worries me. >> people were asking in the wake of prime day whether that was a bit of a pull forward or a reflective of q3 revenue trends? >> again, i think that to know that, is to be ahead of their own cfo, which i don't want to be ahead of. i think that amazon is a great company, but is -- the amazon web services growth rate has slowed and the idea that generative a.i. is going to turn around in the fourth quarter may turn out to be fanciful.

i'm warning people every analyst that i know says it's time to buy amazon it's been a very important call. but it requires the fourth quarter to inflect and i have no evidence whatsoever that that will happen. my travel test owns it >> is it the worst performing mag 7 name >> it hasn't done anything for a very long time you know david - >> no. that's not - the aws growth rate is the key you said that inflektsz then the stock -- >> i think people at home have to know analysts are saying hey, the company is being conservative, and i have said and i deal with the company, that they have been accurate not conservative, and so i don't want to encourage people to come in and start buying it i said it. i broke the ortho ddoxy and i smashed the ten commandantments. >> 15. >> there's 10 left.

>> i have to go watch 90 minutes. >> what's tonight? >> i have a company called splunk that is on, and it has been a very controversial company. gary steele runs it. a lot of people think gary could make it for sale, he sold his last company it's been, let's say, a controversial stock. >> yep that name always comes up as a potential acquisition target. >> i know. >> always. >> always surprise mess. >> yeah. >> i want to caution people that when companies say things that are not -- that are negative, a lot of times they are not playing under the promise of a deal they're not playing -- they're telling it as it is. if amazon came out and said any of the things that the analyst would say, i would feel more comfortable. but as it is, all that's saying, i prefer schwab. >> yep schwab is a mover. we'll see you tonight. morgan stanley on the move as well. >> see, that's good. that was a great quarter

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good tuesday morning welcome it another hour of "squawk on the street. i'm sara eisen with carl quintanilla and david faber, live as always from post nine of the new york stock exchange. coming up this hour, morgan stanley's ceo james gorman joins us first on cnbc breaking down his latest quarter, succession talk and much more take a look at stocks here in the early action s&p continues to gain traction building on recent gains energy is in the lead, financials doing well, after a slew of bank results that sector up 0.8%. what's lagging real estate, technology, consumer discretionary and staples. 30 minutes into the trading session and we'll get to the banks. other big movers we are watching this morning starting with pinterest, getting a boost following an upgrade to outperform at evercore the firm sees ad spending stabilizing pointing to a

recovery in the second half of the year chipotle signing a franchise partner toopen locations in th middle east. initial plans calling for two locations each in dubai and evacuate and watch novartis moving higher after raising its full year outlook on strong pharmaceutical sales. skefl walk to the ceo of novartis in the next hour of "squawk on the street." let's get eco data rick santelli has it for us. hey, rick. >> yes, hi, carl business inventories for the month of may expected to be up 0.2% we all know that inventories make a big difference in gdp and we're watching second quarter gdp very closely up 0.2 exactly as expected. in the rearview mirror, last month gets downgraded. now stands up only 0.1%. for the national association of home builders market index out for july and for that, we head east to diana olick. d

diana. >> sentiment rose one point to 56 on the nahb index the street was looking for better at 57, but this is the seventh straight month of gains and the highest level since june of last year anything above 50 is considered positive builders say low supply in the resale market is driving demand to new construction, but higher mortgage rates and higher costs for materials as well as supply side issues continue to put pressure on the market over 7% and has only come down slightly in the last week. of the index's three components current sales conditions in july rose 1 point to 62, sales expectations in the next six months fell 2 points to 60 where interest rates and affordability are having their effect. buyer traffic increased 3 points to 40, that's the highest reading since june of last year. despite higher mortgage rates builders are using fewer incentives, just 22% of builders report cutting prices in july, this is down from 25% in june

and 27% in may. >> thank you. we have a lot of economic signals and talk retail sales and some of the data, but also, the chatter we're getting from the big banks, whose conference calls have been going on in the last hour or so, and what the ceos are saying about the economy. here's broin moynihan from bank of america >> we know we're in a privileged position to our client base. i just think it's interesting, you look at the global banking results over the course of the last year and a half in particular, that's extraordinary resilience look, q2 is tax season, so look at the wealth management business, for example, deposits were down $9 billion, but they paid tax payments of 14, 15, $16 billion last quarter there's beginning to be more stability. >> pretty good that was the cfo, my bad not brian moynihan heard similar messages from the

other banks as well this morning. we're going to talk to james gorman leslie picker has an interview with him this hour here's what he's saying about the overall environment. >> we are and have been dealing with a number of uncertainties including but not limited to the results, business environment, bassle incoming proposals and other pending matters. i committed to the board that our lead on those issues and when i do transition out of the ceo role i will remain as executive chairman for a period of time. we are fortunate indeed to have three very strong internal candidates that board continues to evaluate along the processes, for their readiness to step up as the next ceo of morgan stanley. >> so a lot more going on there. >> yeah. he's talking more there about succession, which we know, and they've set it up they have three candidates internally. you wonder how that impacts the organization when you have three vying camps for the top job

knowing that potentially two o those people will ultimately leave if they don't get it he also had only, you know, more or less positive things to say to the extent they commented on it in terms of their expectations. >> sapper stein had the good performance this quarter, 16% revenue growth i don't know if you can judge it by the quarter alone but that was the saving grace and has been for morgan stanley >> it has. and it's differentiated it for so many years its key competitor goldman sachs which is not as -- at least not judged as much on its -- on that part of the business as a percentage it's not as large. again, gorman will be joining us in about 25 minutes or so from now. what about that sales number today? >> retail sales? >> yeah. >> so on the surface it looks like a miss, it was 0.2% spending on the month. if you dig beneath the headline, it was actually pretty good. and, you know, one place where

the economist goes first is the control group, strips out things like autos and restaurants and this is what feeds directly into gdp and that was a strong number that was 0.6%. twice the month before gains so carl, you're going to see that in the second quarter gdp numbers which before this report were already looking good according to the atlanta fed tracking 2.3% growth. >> that's why goldman last night said maybe growth really is rebounding consumer spending is solid manufacturing activity, rail volumes, steel production, export containers are all kind of on the mend, despite the weakness in the bank stress in march led people to believe. look at the transports 52-week high going back to april of '22 best day for regional banks since june th and schwab guiding higher on net interest margin for the coming quarter going to be your financial mover today. >> everybody was wondering for schwab if the cash sorting

issues were over, all the money shifting into lower margin business for them as people chase higher interest rates. we'll talk to walt bettinger in the next hour of "squawk on the street," because that's been their problem. so far, a lot of analysts are publishing this morning it looks like that's behind them and look at the move in the stock price today. as it relates to the macro, david, the question is, is the regional bank crisis over? >> i was just looking in terms of pnc the larger regionals started down, but it's in positive territory as well a positive response now to all the big earnings we've gotten this morning, whether schwab, bank of america, morgan stanley shares up over 5%, and pnc, despite a miss as you say. >> lower net interest income there. that was a little bit of a miss. again, nothing -- no major problems that we might have been anticipating as a result of the fed continuing to raise rates. which is still going on, right which is part of the problem here where people are taking

money, deposits out of the banks and putting them into money market funds and higher yielding instruments and assets there was a survey from the federal reserve that was interesting about lending conditions and i think it's still something to watch cans call it all clear because lending conditions have tightened but the new survey from the fed showed that the rejection rate for loan applications for americans jumps to almost 22%, 21.8% through june and here's the auto loans in particular, big increase there in terms of the rejection rate for people trying to get loans. 14.2% from the 9% in february. that was before svb failed and increased for credit cards, credit card limit, mortgage refinance applications across the board. we're watching it and the demand for credit has been down as well as rates have risen. it's not setting off alarm bells. >> the survey is a decade old. not a huge amount of data to go

by. >> sure. everyone is trying to figure out whether we were going to have a severe credit crunch and no question, credit conditions are tightening and lending standards are tightening and that's what's supposed to happen with higher rates. >> it is we did want know what impact would be and we still are of the failure of those three banks and how other banks dealing with a deposit base, how much -- how willing they are to actually extend loans and to your point, just, you know, in terms of the risk premium they're willing to take which makes it almost unlikely the borrower is willing to commercial real estate continues to be a key concern and something we're going to be talking about for the next two to three years. >> sure. >> as this sort of rolls on. sara, we did spend time over a month ago talking about treasury issuance and the worry there's so much issuance coming out they finally got the deal done. where are we on that >> and coming and a lot of auctions >> it's not having an impact >> it's coming out of the money markets. and not bank deposits which was

the concern which would have been more of a liquidity stock it doesn't mean it's not still a risk all these are risks. commercial real estate, credit conditions, the fact that treasury has to issue more debt. how about the fact that interest rates remain high and we'll have a lot of financing of our debt to do for the u.s. government. these are all things that mattered. >> we talked with larry fink about that last week interest cost percent of the budget may eclipse everything we spend money on including military in the not distant future we haven't talked about china. does that figure into the conversations you're having on the macro level in terms of what has been a significant and unexpected slowdown in that second -- the world's second largest economy? >> everybody just assumes they're going to try to stimulate their way out of it and the question is how much and are the stimulus measures targeted to the problems that they have and when are their deflationary reads going to start impacting here the big unnoknown on china, how

does it affect them everybody is taking the supply chains out of china and how much is coming out of china and going to india or mexico what's that impact long term on their economy at a time where they're not showing a big recovery that we've -- >> no. the data this week, private fixed asset investment is negative actually going down. if it weren't for the government they would have investment strength, outflows happening in that country and there was a point made about this 11-point plan from like 13 chinese government agencies, but the general read is that it's very incremental. not the bazooka a lot of macro strategists are on the lookout for. >> when i talk to the consumer ceos like nike or marriott they think china is rebounding nicely. >> i know. >> we get mixed signals. >> you do. >> the consumer seems to be in okay shape the industrial part of the economy, investment part of the economy. >> they're blaming the consumer

not spending and stepping up because they thought the real growth would come from. >> they didn't get as much stimulus as we did. >> that youth unemployment number is shocking >> let's dig into the banks more and get the street's take. piper sandler's senior analyst joins us now overall, scott, how would you characterize the quarter for the banks? >> thanks for having me. the bank earnings season has gotten off to a better than expected start with the biggest banks reporting. some of the panic fears which you alluded a couple moments ago seem to have dissipated i think investors are reflecting that in valuations so realistically the strong start we've had from the biggest banks, that could lose some momentum as more regionals and smaller banks start to report and might see more pronounced pressure on their deposit costs. overall a pretty good start to the season. >> david was mentioning pnc and the regions. even the regionals appear to be in better shape than what was

expected so is there an opportunity here for these stocks >> you know, to a degree we've got historically low valuation. i think today what you're seeing is probably some of the regionals. you alluded to pnc had a weaker than expected guidance, but i think it's still being pulled up by the stronger results like bank of america, for example, and even there they guided to perhaps a better than expected net interest income outlook for the replapdser of the year i think that's buoying investor hopes for what the outlook will be like in coming periods. you mentioned it a couple moments ago, plenty of wild cards out here from my standpoint, the question of sustainability, of the recovery is still an open question in my mind. >> you've got a sell on bank of america. right? >> yeah. we've got an under weight on it. it's a great company and done well over time we tend to look at it in the

vain of its peers, probably the closest one jpmorgan, for instance, and we just see better reward in jpmorgan, which is our favorite universal bank name if you listen to jamie dimon's comments, jpmorgan just blue nii out of the water a couple days ago which was great. he's quite candid about the likelihood their net interest income will likely fall and has overstated at this point bank of america is talking about more stability, that's great and certainly helping the stock today, but, you know, in our view, even if that's the case, for bofa, that probably means even better things for jpmorgan because the expectations are more rationale there and would have more room to move up. >> you alluded to the fact that you seem to be looking for more signs to get more positive what would they be >> yeah. if you mean on bofa or generally -- >> more generally. >> yeah. i'll address that. a couple things. we've got supply and demand

issues in terms of loan growth it's really at this point only credit card which is sort of a scale business you have jpmorgan, bofa to a degree citigroup but most regional banks don't have that twinds so there's really a diminishing share of the pie driving most of the growth there additionally we've got a lot of open-ended questions on where capital and liquidity requirements are going to go. we need to resolve some of those. there's, of course, some of the dot, dot, dot of eventually we'll have a credit cycle. commercial real estate, you were right in your conclusion, we could be talking about that for up to a couple years unfortunately. it's not going to have sort of an uh-huh moment where we can sound the all clear there. just a lot of unanswered questions we would like to get better clarity on. >> is it a big enough headwind that would change your thesis on some of these names? >> hopefully you mean -- >> for commercial real estate. >> yeah. hopefully not. especially for the biggest banks. as i look at office portfolios

of the largest regionals and universe, probably a couple percent of loans it's not going to be enough to do real damage to certainly not to capital it would be an earnings issue, as opposed to a capital one. nonetheless it's the headline and you have some large bank ceos say look, this might be great, but we're not going to introduce ourselves to that space because it's not worth the headline risk. i think particularly for generalist investors who don't want to deal with the question of how bad things can get, it's going to represent a reason to not involve themselves in the space until we get better clarity. look further down the market cap spectrum that tends to be where the commercial real estate exposure sits. >> thank you very much for your quick take. >> thanks again. >> from piper sandler. as we head to break our road map for the hour don't police our first on cnbc interview with morgan stanley's ceo james gorman we continue to keep a close

eye on the telecom stocks, particularly at&t and verizon. this is a day after at&t shares touched the lowest level they had seen in 30 years. and the dow aiming for seven straight days of gains, the longest win streak since march of 2021. we'll discuss that with goldman's david kostin after the break.

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the longest streak in a couple years. our next guest is also looking ahead to the nasdaq 100 rebound. joining us at post nine goldman sachs strategist david kostin. did a lot of work on the rebalancing and what it means for the largest names in your note this week. >> one of the things that is interesting, it's only the second time in 25 years that the nasdaq 100 index is being rebalanced last time was 2011, and it took apple from 20% to 11%. this time what they will be doing is taking the largest stocks in the index and reducing their weight because it doesn't really reflect at some point the top seven stocks about 56% of the index and now they're going to be around mid-40s, about 44%. so that's going to take place next monday morning and one of the issues that we think about is, what does it mean for a passive investor and one of the challenges as an index, only 20% of active mutual fund managers

are beating the benchmark and the reason these large stocks have been lifting the market and that's challenging it's difficult for an active manager to own an index weight in the stocks. they're going to be reducing the benchmark and i think make it slightly not lower, make it easier, be more representative of broader markets i think that has major implications for the broadening of a rally it's not just a few stocks that are going to be leading and going forward. we need to have -- if one has a breadth expansion you have more companies that participate in a rally then you can see the index move generally higher. >> it's not pushing you to move targets for this year or next? >> this is a challenge right now the s&p 500 around 4,500 is at our year-end target, and it reflects in our assessment the idea of the economy continuing to grow the idea of a 2% gdp growth is consistent with our economics forecast, but more importantly,

we look at cyclical stocks relative to defensive stocks that's trading roughly 2% gdp growth in our estimation based on the market, it's fairly valued and that's kind of how we think about it which makes it challenging to choose individual stocks we're coming in on earnings season you've been talking about that this morning and you're in a situation where expectations have really diminished we're expecting to be down 6% year over year and now expected to be down 9% on earnings. we think that's likely to be better than feared and that's one positive development, if you will, if you look out. >> what do you do then you take some stuff off the table? >> some value. the market trades at elevated multiples and therefore in order for the market to move higher fundamentally you would require earnings to kind of lift that. that's one approach. the other is to think about valuations there's not that much opportunity and the valuation of the overall market where inside do we find it? health care stocks particularly,

energy, energy cheapest stocks relative to the market in 30 years. that's some value. think about value cyclicals. another way to think about that, capital goods companies, the economy continuing to improve. the economic data that we look at at goldman would suggest the economy is getting better and continuing to grow likely to avoid a recession in the next 12 months if that's the case, cyclical, nonbank financials likely be too better and semiconductors. >> if you strip out the magnificent seven the multiple looks different. is there a way that investors should be thinking about that, david, in terms of the impact that this magnificent seven has had on not just the multiple overall but the market weight? >> so you are entirely correct it has been a difficult market this year and you chronicled this on your show and others as well the market trades at around 19 times forward multiple those big stocks that you referenced, the magnificent seven, trade at 31, 32 times forward earnings

the rest of the market excluding those around 17 times. a little bit of a catch-up that's why value suggests you add some expansion in multiple for the nonleading stocks. you could see the market move a little bit higher and look out 12 months from now, market valuation around 4,700, so a couple hundred points higher than today that's kind of how i think about the intersection between the magnificent seven and the other 493 stocks. >> do all these active managers significantly trailing the benchmark buy the magnificent seven to catch up? >> they are precluded in many ways from doing that because of the sec guidelines and what institutes a diversified mutual fund in order to be marketed as a diversified fund there are limitations on concentration no position greater than 5% weight, they add up more than 25%. that puts a ceiling on that. companies are laying to do two things, either, a, withdraw the diversification classification,

and how they market the fund or they have to be underweight those stocks and the stocks power the rally that's been a challenge. >> you made a call a mog about the russell how it was likely to outperform on the second month of out performance >> partly in response to sara's question on where else do we find opportunities in the market the small cap stocks, that index has lagged the benchmark, lagged the larger cap stocks and that's an area that is relatively attractive if you look out over the next year or so. >> it does feel like there's a lot of good news and a lot of hoping that this soft landing scenario plays out with growth, with low unemployment, and with lower inflation. aren't the risks tilted to the downside if that's already in the market >> interesting assessing what's priced into the market. >> you tell me. >> it's interesting to think about that from an economics perspective most of the economists on wall street are anticipating a

recession. jan hatzius. that's not our view. our view is the economy is likely to avoid a recession. >> 20% chance. >> unconditional probability is like 15% pretty close to the normal outcome. what does that suggest yeah, a lot of stuff is priced in the market. that's why 4,500 is our target and where the market is trading. it's largely priced in today what we anticipate is perhaps better earnings than are feared. other than that if you have the idea of the market rising a lot higher than this, then you would say the market is over its skis, july over the water skis. >> nice. >> seasonaleny that right there. >> it's great to see you and get a good update. >> thank you. >> david kostin. after the break it is deadline day for microsoft's activision at least the agreement they currently have expires at midnight. what may be ahead for those companies and don't miss, we have a big interview coming. morgan stanley's ceo james

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. ♪ welcome back to "squawk on the street." i'm ken tessa brewer with your newest update. former president donald trump says he's the target of special council jack smith's investigation into the january 6th riot at the capitol. in a truth social post trump says he'll face arrest and indictment soon. smith already criminally charged trump in the mishandling of classified documents post-presidency. trump has pleaded not guilty in that case. a u.s. soldier is believed to be in north korean custody after crossing the border without authorization. the american led u.n. command says the crossing took place during an orientation tour at the demarcation line which separates north korea from the south. the command says it's working with north korean officials to resolve that situation.

and thousands of demonstrators participated in a day of disruption in israel today. they are protesting legislators are moving forward with prime minister netanyahu's planned judicial overhaul and would weaken the country's supreme court and give more power to elected officials. david? >> thank you, contessa quick check in on microsoft and activision the deal we've been talking about for well a very long time. remember it was signed in january of '22 it has gone through all sorts of different iterations here. the latest, of course, is that the merger agreement expires tonight at midnight. you would need someone to initiate a termination, which seems highly unlikely but what also seems more unlikely now is the idea that microsoft would be able to close the transaction, different the commentary we've seen from the cma, yesterday's hearing in front of the tribunal it would appear it may be a few more weeks, we're guessing, and

frankly the people that i've -- some people you rely on to give you an interpretation of the goings on have gotten a lot of things wrong along the way so it's difficult to know calls i made to people who may be in position to know, for example, is activision going to receive an additional consideration for extending the merger agreement for some period of time, well, either haven't gotten calls back or missed them as soon as i get them i would be happy to add anything we can to help the market understand them. not just the likelihood of an extension, which seems quite likely, but whether or not microsoft is going have to pay for the privilege through of a higher breakup fee and as i've said in the past allowing activision to perhaps pay some sort of special dividend to its shareholders and maybe if a deal doesn't go through, you get a higher break fee to make up for that we will wait and we will see again, what does still appear highly likely the deal is going close, although again, closing

before the current merger agreement's expiration at midnight seems less likely more updates to come as we get them. >> did you see the filing that berkshire hathaway, warren buffet >> yeah. >> i'm wondering if they were still in that arbitrage. >> they made money yesterday the stock hit 93 it's a $95 cash deal and so they did it as a risk play and it was a good return. he doesn't do it too often, but when they do they seem to hit it pretty well at berkshire in terms of choosing to participate. there is the risk in risk arbitrage but they did well. >> we're paying attention to their views on energy in particular, given some of the underweights we're seeing right now in the survey regarding energy in the markets. after the break, do not miss morgan stanley's chief james gorman first on cnbc, following the company's latest earnings beat the stock accelerated as the morning has continued. dow up 250 now back in a couple

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one hour into trading. s&p is a little higher, nasdaq sitting out because information technology and consumer discretionary sectors are weaker the dow is out performing again. the strength is in places like energy and materials and financials overall responding to results on that note, james gorman, ceo of morgan stanley will be joining us in just a few moments from their headquarters in new york city coming off those results. in the meantime let's bring in bob pisani with more on what's moving on this see busy day of earnings. >> another day another new high and earnings are moving the market forward look at the movers today we had bank of america, we had morgan stanley, we had pnc, we had charles schwab look at the move up in charles schwab today the numbers are coming in ahead

of expectations, so just take a look at earnings season. it's very early. only 38 companies reporting. that's less than 10% of the s&p 500. but of that, there's your numbers. 87% are beating the estimates. typical average, depends on how you break it down by years, but say 78, 80, 82% is typical beat rates in the earnings season this is above average so far and the important thing we're getting new highs. the market is move up on the data a new high on the s&p 500. it was higher than it was last thursday before earnings season starts not like we're selling into earnings season. more important than the s&p, the kbe, the bank etf, normally you see the kbe dropping going into the week of and the week after earnings season starts this is actually the opposite happening. it's been going up since earnings season started. this is the highest level since march for the bank etf and

remember, march was the banking crisis so we are expanding. earnings, the prices are moving up on bank stocks going into earnings season here if you want the good news and the bad news, here's the good news 2023 estimates are still falling and coming down, but not as fast as they were early in the year the rate of change is improving and that's what you want in earnings rate of change that matters. it's still down, but not as much here's the bad news. valuations have been expanding we've been talking about this for several weeks. we're trading at 19 to 20 times forward earnings depending on what quarters, but the forward four quarters 19 to 20 times earnings the bottom line what's been happening, the s&p is up because there's multiple expansion not because earnings are going up dramatically, because the multiple is going up here. the good news is, it's not killing the markets right now. sara, look, we have transports at a new high. dow industrials at a new high. you have the dow theorists start writing about this tonight,

there's a classic confirmation of an up market that we've got so despite these concerns about valuation, they're present, there's bullishness levels rising, that's another concern it's not stopping the market from rising right now. >> i think you have two names earnings are better, sounding better, and growth also is better it's interesting because we talk about the interplay between bonds and stocks the 10-year yield at 3.75 is not particularly responding to the hotter data including retail sales leading the second quarter tracking estimates to move up. bank of america set up to 1.7. we're waiting for the atlanta fed over 2%. growth is in okay shape. >> we talked about this before, the fact that we have yields stable, is a major help for the stock market right now below. we were at 4%, 3.75, now that's a major boost for the stock market the pain trade now, what would derail this whole thing? the pain trade would be rates rise and we see earnings drop,

but so far, none of that is actually happening so remember, the market is now very positioned for the soft landing hypothesis you saw the bank of america survey today something on the order of 60%. 68% are expecting a soft landing now. that's a really large number that wasn't like that a few months ago most were expecting a hard landing. now it's flip flopped around and as long as that holds we're fine it's starting to position like bullishness is very, very high, starting to move up, and bearishness moving down. at this point, we just got to be careful about the prices you saw kostin on a few minutes ago, he's hard pressed to say the market moved up. he said fairly valued right there. that's kostin speak for this is tough to move market forward based on what we think is going to happen. >> and target reach in july. >> that's a little awkward, isn't it >> bob, thank you. >> pleasure. always good to see you.

>> still ahead, we have that interview coming up with morgan stanley's ceo james gorman. as you've seen the stock is up rather sharply after reporting earnings continuing to monitor shares of verizon and at&t they've lost a combined $35 billion or so almost in market value over the last couple days. but today, a bit on the rebound. at&t by the way hit a 30-year low yesterday. we'll be right back. with purpose.y harnessing data-driven insights and boundless curiosity. we dissect the market from every angle. helping to build portfolios that redefine what's possible. because investing isn't one size fits all. allspring. purposefully divergent. the first time you connected your godaddy website and your store was also the first time you realized... well, we can do anything. cheesecake cookies? the chookie!

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morgan stanley shares accelerating up 6% let's get to leslie picker sitting down first on cnbc with the ceo. hey, leslie. >> hey, carl thanks so much james gorman, thank you so much for being here i believe it's your first interview on tv since announcing plans to step down as ceo. i would love to first kick things off, why now? >> i thought we were going to talk about earnings. >> we'll get there we'll getthere. >> you know, it's -- for several years i've said i'll step down five years ago in about five

years, three years ago in three years. nobody believes me they just assume you will stay in these jobs as long as you can. and i -- you know, i'm really into having plans and being intentional about stuff, whether it's strategic planning or succession planning, it's the same stuff these are the processes. so we felt, the board and i, by announcing it at the annual meeting and say i won't be in the job by the next annual meeting, that's clear. that's like 12 months. we're two months into it i thought it was great way to set it up, an elegant way, build it around the annual meeting not a great quarter, bad quarter, but build it around the annual meeting and do it at some point in the 12 months when we feel like there are a few things i want to get through and help just manage through, like the bassle stuff that i'm sure you talked about, this quarter's earnings which we felt were really strong. a couple of other things so i want to help the new ceo

get off to a good start by cleaning the decks present a clean plate for them. >> how close is the board to narrowing in on a candidate? >> they have a process and, you know, they're following their process really well. i'm staying away from it because it's ultimately the board's decision and at some point, i'm sure they'll ask for my recommendation, but they're doing their job. it's what boards should do they have a systemic process that's run by the comp development succession chair and then i got to the full board where tom is the lead director, but it's great this is the way it's supposed to work it's not supposed to be some shock and drama. it's a process, and what matters is, they pick somebody who has the skill set to lead this type of company, which is a global regulated complex bank, and fortunately, we have three phenomenal candidates. it's set up really well. >> well, we've got ten more months to figure out who that

will be. let's talk about earnings. >> up to ten more months. >> up to ten more months within the ten months. >> yeah. >> so stock rallying today on these earnings, which were mixed results, but a big piece of the market reaction, i think, has to do with the outlook on capital markets. you mentioned that, especially towards the end of the quarter, that the tone has really changed. do you think that investment banking and trading some of the weakness there has bottomed at this point >> i don't think the stock has rallied on that. you never know i thought the stock would be up today. in fact, we have a little pool with my team, and i was definitely positive on it for three things one, the capital ratio was great. 15.5%. some would say we're too conservative but i don't mind being a little more conservative, particularly when you have new capital rules coming that was huge. remember our requirement is 12.9% so we're carrying 260 basis points that's a positive.

number two, cycles go, we've doubled the dividend and last year 7.5 cents, this year took it up 7.5 cents per quarter, yielding about 4% dividend so for shareholders that's preet neat investment banks typically did not pay 4% dividends the reason we're paying that, half is a wealth asset business. the net new money is extraordinary, between wealth asset management to bring in $100 billion, we're at $200 billion year to date give you a sense of context, a lot of people thought we should have bid for first republic. first republic's total assets were about $290 billion. we've brought in two-thirds of first republic in six months without having to buy the company and go through all the drama of integration and taking us off our core strategy i think they were the key numbers.

when you step back from that, the weakness, were things where you go, of course, they're weak. who is bringing companies public right now. very few who's doing m&a deals. >> very few. trading is muted at the end of the rate hiking cycle, but that will change. you can see through that what you need to know is the bones, capital policy as evidenced by dividend and growth evidenced by net new money is strong the rest is stuff. this is what we do for business. that will improve, and that was the tone we expressed. >> want to talk about capital in a second, but in terms of your outlook on activity improving from here, you said things did get more constructive for the end of the quarter, is that an upward trend in trading and banking? what are clients telling you >> i've been everywhere in the last few weeks, amsterdam, london, paris, saudi, evacuate, everywhere around the world and all over the u.s., it's the same story, boards are getting ready, right, and that's my message to ceos you have to have a plan.

you know, obviously, circumstances may change, but you can't just wander down the road you have to be moving with intent you need to understand what are the kinds of businesses if deals became available you pull the trigger on that tonality has shifted. will it happen this year probably not much. just given time psych of getting things done. >> you mean the bottom won't happen this year >> no, i think we bottomed. >> have we >> yeah, i think we bottomed in this business four or six weeks ago. how much is improves from that, unknown. next year, definitely a pickup and i'm seeing with the conversations i'm having with other ceos, we just felt like april was weak first half of may also weak. then it started picking up second half in june. it's not gang busters, but we're off the bottom now, how long does it take to kick into high gear. on the wealth side it's already done it. on the trading side and banking side, still to come. >> so, part of that has to do with where you see the economy

headed we saw a pretty soft cpi print last week. several reports saying, mission accomplished there will be no hard landing. are you still in that camp, is that what you're discussing? >> well, i've said, i think i'm on the record for probably, with you maybe, certainly with cnbc, for every year i think the odds of a recession were low and if it happened, i felt likely to be relatively shallow and short. so, i was in the it's not that big of a deal whether technically we have a recession. what matters is if you have a deep recession that changesthe unemployment outlook that's not happening so, no, i think the fed -- you know, i'm sure they're going to raise this week. will they do another one based on the recent numbers? it's hard to argue for more rate increases, but a counter number could push that. you could get one more after this i think the odds are definitely against that

those who are calling for a rate cut this year, it won't happen. >> are you sure? >> next year it will happen. not this year. so, you know, we're right at the tail end where are we, 5.25, 5.3% you know, i think we're in -- we're clearly in the last throes of it. if the last throes our interest rates have peaked at this level, it's not so bad. with unemployment well under 4%, i mean, it takes a lot of guts to bet against the u.s. economy when the bank balance sheets are strong, the personal balance sheets are strong, we're near the end of the rate increase period earnings have generally been a little more positive than people thought. yeah, i'm -- listen, i'm not, you know, super positive, but i'm definitely a recession is less likely than the other side. >> let's talk about those bank balance sheets because there's a bunch of regulatory actions out there. there are the vice chair barr

comments about an additional two percentage points of capital, the basel endgame. what does that mean for morgan stanley? you're one of the most highly capitalized banks out there, as we just discussed. what would an additional capital requirement mean for the strategic future of the firm >> well, we've got 260 basis points of buffer, so i think we're going to be just fine. but if you step back from it, the way it worked, leslie, and you probably know all this, but about 12 years ago the basel -- we've had basel 1, basel 2, basel 3. they got sick of changing the numbers it's basel endga im. a lot of the european banking sector isn't with basel endgame. we've had ccar 12 years in a row. morgan stanley's performance under these stress tests have

increasingly got better as we've got stronger so, you've got these two competing systems. they want to harmonize them. vice chair barr's speech, i think, was a wholistic capital review they're going to look at the total things and put them together the actual proposal, my guess comes out -- my guess is it will come out in a couple of weeks. it will be tough there is no doubt about that where that ends up, they've called for and he's called for specifically extensive comment period followed by extensive transition he said we won't get there for, in his language in the speech, some years so, we're talking about something that's going to be real, i think, probably the start of 2027. so, this is moving slowly. the comment period will be appropriately forceful, because there are things that certainly i find in the -- what is suggested will be the proposal that i don't think makes sense. >> like what this is. >> like the way they're treating

operating risk rwas. not to get too weedy wediosyncratic we'll just take a standardized approach the question is, how do you calculate that the current proposal under basel is to base it upon the fees you have in your business. >> you're a big fee-based business. >> and that gives us stability that shouldn't be something that draws more capital, it should draw less capital. i'm sure during the comment period as we point out what i call intellectual inconsistencies with what the whole ranked capital stability is, i think there will be adjustments. listen, we're a big company. we have massive buffer now it will be at least three years before this is done. i'm not concerned about it but we're going to be forceful advocates for what we think -- this is about making the u.s. economy strong and the u.s. banking system to support it this is not about what some

other country is telling us what to do. by the way, some aren't even complying with their own rules let's focus on what's right for the u.s. economy. >> i want to know what the james gorman endgame is. we talked about basel 3 endgame. what's your endgame, what do you see for the next 13 years of this firm? >> i thought you were talking about me personally, and i was going to say, it's not going to be like logan roy. >> i hope not. >> this firm is in -- this firm's in unbelievable shape it starts with culture and shared values, which, you know, we care deeply about we have 80,000 people. we have people who do stupid things from time to time, people who break the law from time to time i often joked if you put 80,000 people together in a town, you'd have a jail and a police force, right? you're dealing with human nature the overall riding views of the firm are great i think we have the firm back to where it was, frankly, revered for so much of its history the leadership team is really

stable and strong. the board is terrific. works very well, but very independently with management. so, all of those kind of pieces are there. the strategy has served us incredibly well. how that evolves over the next decade, i suspect we become -- we will do more deals. they're more likely to be non-u.s. than u.s. i think there's just -- there are a lot of markets in this world that we could take our stock plan business to, would just be phenomenal the e-trade platform, our asset management business, a much more domestic platform, now as part of morgan stanley could go more global we'll certainly keep growing i think we created a category one in wealth management around the world, and i think we'll be bigger internationally >> what about artificial intelligence i know you've got some chatbots you're working on here how do you see technology working its way into the firm? >> yeah, give the wealth

management team, andy and his team, great credit they saw this early and they actually had sam come and talk to our board a year ago. they're working with, you know, how to employ all of the a.i. technology the interesting question is, will it lead to more efficiency, which means you need fewer people, because work is being done by a.i. or more effectiveness, which means you have the same people but they're able to do much more because part of the basics of their job are now done for them. and i think it will lead to the latter i don't think it's going to involve a great change in our structure, but i think it will involve a great change in our productivity >> let's talk about client behavior and wealth management for the first time in a long time you can earn money sitting in cash. treasuries, 5.5% at this time. you saw those $100 billion in net new capital during the quarter, those inflows there, in wealth and investment management

do you think we've reached the peak yet of people moving into higher yield alternatives like money market funds >> we have 23% of our client's money is cash or cash equivalent now. i don't know if it's an historic high, but i'd be surprised if it's not pretty extraordinary now, part of it is driven by, obviously, rates, but part is driven by general uncertainty given the change in inflation, economic growth, geopolitical tensions coming out of covid people were quite happy having their money in cash. by the way, they had cash at much lower rates, too. i think that will provide some explosive growth for the market as people recognize, once we get through the end of this year, if we haven't gone into recession, you know, then it's all things pushing forward. >> your cfo mentioned in june she started to see evidence of that activity. >> yes >> james gorman, ceo of morgan stanley, at least for the next ten months we appreciate you being here thanks so much.

>> thanks, leslie. great to be with you. >> david, i'll send it back to you. >> leslie, great interview of course, seeing mr. gorman again, his view of the firm for the next 13 years. interesting to hear in terms of where he thinks it's been and where it will be going it will also be interesting to see it play out over the next ten months, that competition between the three top executives shares are up, despite what was a drop overall in securities trading revenue. again, mr. gorman did speak positively in terms of a bottom in advisory, for example, where he did say and kind of tell ceos, hey, be ready with a plan. you're going to need one in terms of sort of a re-emergence of more activity in an area i follow closely, of course, m&a that will do it for this hour of "squawk on the street. let's send it over to sara and carl on the floor. >> not going out like logan roy, that was a good line good tuesday morning, i'm sara eisen with carl quintanilla, live from the florida of the new york stock exchange. a