thursday, july 20th, 2023. "squawk box" begins right now. good morning welcome to "squawk box" here on cnbc we are live from the nasdaq market site in times square. i'm becky quick with joe kernen and andrew ross sorkin you will see a mixed picture dow up 43 points you have the s&p off and nasdaq down a bit because of netflix and tesla. the dow at this point is on an eight-session winning streak the longest since 2018

now back over 35,000 all three of the major indices closed at the highest level yesterday since april of 2022. let's check out the treasury market the yields are a little bit higher this morning. 10-year treasury below 3.8%. 2-year treasury above 4.8%. netflix shares under pressure this morning after the second quarter results and topping expectations at $3.29 a share against $2.8$2.86. revenue was mixed. subscribers blowing past estimates adding 5.9 million thanks to the crackdown on pas passwords. i was part of the crackdown. i wasn't cheating. i went to a different location and they asked if i wanted to upgrade my plan. >> it wouldn't let you >> who knew? i didn't do it

i was trying to transfer it to apple tv through my ipad anyway, i was not one of the 5.9 million. not a -- this is not like my uncle or nephew. it was me. >> that's what i wonder. does that mean if you have a second house or something happens and you automatically have to? >> that is where it is headed. >> there is no otherway to do it >> the company is saying -- >> you have to do it with cable. >> $8.5 billion for the third quarter. up 7% year over year more on the netflix results later this hour. >> they lost a year ago 1 million subscribers. that happens once? >> growth in subscribers if you get new subs >> no. the password you change it and get the bump

the company hasn't done it in the rest of the world. that could be another corner where you have the bump. it is not something that is recurring. >> i thought about it. there's not a lot of risk to them doing this. it is not like people paying for it will shut it off. you may not get the password or number of people say we will add it as well we have been cheating. it is not like you lose your original subscribers >> the ones cheating are calling their nephew saying knock it off. >> from here on out, it is actors and writers strike. >> of all companies out there on that front, these guys would be in better shape. one thing we learned yesterday is how international netflix is with the subscriber base and where they do the production and ability to do dubbing, it is not

impacted by the strike. >> i learned that yesterday. i didn't realize they would have more content i don't know how interested i'm in watching dubbed series. >> the most popular series was dubbed >> the games one >> "squid games. there was one. the spanish. right up our alley "heist." "money heist." spanish drama that was dubbed. the dubbing was so good, though. >> i didn't get past the first episode. i did see a couple with a guy -- it was denmark or somewhere. i actually watched the whole series you have to get used to it >> you might get used to it in the next month or two. >> the guy from "game of

thrones. that wasn't dubbed he played a cia agent. i forget the name of that one. that was a good one. that was uk. tsmc reporting the first dip in four years as the demand for electronics slumps the second quarter income and net revenue topped expectations, but earnings were down from a year ago that was less than feared. taiwan semi cut the full-year revenue outlook. it expect investment spending for this year at the lower end of the estimate. it expects third quarter revenue to pick up and flag robust demand for the 3nm technology. i'll take your word for it it is new. i want to talk about

"barbieheimer. "oppenheimer." >> "barbiheimer. >> it is getting a lot of hype people think it is amazing. >> that one i want to see. "oppenheimer." >> that's not pink it's a pretty color, but not pink >> this is not in honor of "barbie. >> it is not pastel enough is it open tomorrow? does it open tomorrow? i don't think she's nice >> really? >> she is mad. mad about ken. the world being easy for ken to ha maneuver and she has to deal with it in a different pec perspective. it is barbie's world >> and barbie runs everything and just ken >> i don't know. in my life, barbie is doing just

fine in terms of -- >> in your house >> both of them. mother and daughter. tesla posting record revenue of -- revenue. go ahead, becky. >> phil lebeau joins us with more on that hi, phil >> becky, this is a case where it was a sensational quarter where the numbers that tesla put up, but the call left people saying is that it? we want more let's give you the numbers tesla beat on the top and bottom line with the growth coming in at 18.2% that is important because that's the metric everybody was focused on the estimate yesterday was 16.9%. remember, tesla's margins were squeezed the last year especially as they cut prices in

china in particular. the company on the conference call reiterated a 2023 delivery guide of 1.8 million vehicles. that is disappointing for investors given the strength of deliveries in the first half, many thought they would raise guidance they will retool plants over the third quarter so that will limit capacity output. elon musk on the conference call was asked about the valuation of tesla and where it is right now and where he sees it going listen to this in terms of how he sees tesla getting to valuation ten times greater than where it is right now. >> 5 x increase in the value of the company and maybe 10 x where things go along the way with the trials and tribulations and the mood of the markets, you

cannot predict >> it is not a straight line we heard this before from elon musk as you look at the shares the last three years the company spent a good portion of the conference call talking about investment in the dojo super computer speaking on a.i. and how that will make the companyefficientle they will spend $1 billion on artificial intelligence technology this is the case where you had numbers if were you a tesla investor and say wow they are delivering. they are doing what we want them to do. you wanted to hear more on the conference call. you didn't get it. that is why the stock is selling off a bit. >> phil, you look at that stock chart and there has been a run in tesla shares. pullback of 2% or 3% is not a huge issue, especially when you are not saying anything about future margins pulling on those points do you get a sense the investor base is okay with the

longer-termplans to build everything from infrastructure to the full self driving that other car manufacturing could potentially use? it seems like a lot of things they are doing now that look for a much longer roadway. maybe there is investor belief at some point. >> i think investors 100% buy into it. it has been a key stock, if you will if you buy into the future that elon musk has been telling us the last 15 years, you like the stock and investments they are making there was nothing on the call that was a red flag. nothing on the call where you said that is something we have to watch in the future here. this is tesla continuing to say we believe that there is a path to 20 million vehicles in annual sales. we believe the full self driving will make the value of the vehicles five times greater than what we are selling them for

none of that has changed at the same time, becky, there is nothing that came out yesterday that made you say, really do we really think that will happen overall, i'm not surprised with the shares pullback 2% after the run they had. >> all right phil, thank you. >> you bet we have more coming up on "squawk box. we will talk more about netflix's second quarter and the jump in subscribers and how the hollywood strikes will impact the content. and as we head to break, look at the pre-market winners and losers in the s&p this morning. you are watching "squawk box" and this is cnbc >> announcer: this cnbc program is sponsored by ibm. ibm. let's create no big d go on... well, what if you partner with ibm and red hat, use a hybrid cloud solution to connect data across clouds, then analyze all that data with watson.

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than expected profits, but revenue missed expectations. it added 5.9million subscribers in the second quarter. our next guest einterviewed greg peters during the earnings call last night joining us now is jessica. if you don't know where we're going, unless you know where we've been they lost 1 million subscribers. now it is a big difference >> a 65% move this year. great stuff. >> you could explain any weakness on the news >> i think part of it is that. had a great run the revenue disappointment is what everybody will point to today. i think it is logical

explanation. they grew 5.9 million subs that is over 230 million base of t the -- base. that is not enough to change arpo a lot in the u.s. and canada where the revenue per sub is lower. we expect revenue to grow and accelerate in q3 and q4. the key is all of the drivers are the obvious drivers which are super high margin. >> that's good the 5.9 was a one-off, but they have more crackdowns for the rest of the world of >> the crackdown is just starting college kids are home. mobile hasn't been touched i know a lot of people who haven't been cut off they switched and realize they were being cut off, they went right back >> you have a friend cut off

>> a lot of people we think there are waves coming. >> they have nothing in the can? when will we see the lag effect of the strike? >> i don't know exactly how much how long the original content will take them i include myself, but we know a lot of people have long lists of recommendations of friends of things they have not watched this is going to hurt broadcast and cable lineal this is where the writers and actors get paid more, not less it will hurt lineal and obviously will filter to streaming. >> that is an interesting point. you are shooting yourself in the foot by doing this if you build up the competition by not getting paid as much. >> it is crazy especially the timing. right into the upfront market and all of the uncertainty

>> amazing we still have a way to go before the old highs. that was a pandemic fever? >> think of the drivers. drivers is password sharing which rolls through the next year they dropped the basic plan in the u.s. and uk and did it in canada a few weeks ago they are forcing people in the advertising tier that is a higher arpo immediately. then you have advertising overall. what do advertisers want reach and scale and premium video. you know, who has more of that in streaming than netflix? legacy business and no lineal business they are not losing subs and not losing advertising the move from lineal to streaming is, obviously, to the benefit of netflix

a growing ad base and offering different products than we have seen in lineal they are operating from the position of strength >> i want to get to disney you want -- >> i have one strike-related question we talked about this yesterday if you were to look at a c calendar when the strike becomes a meaningful problem for netflix or extrapolate to disney and others, for netflix specifically since they are in a better position, what is the date that gets you nervous labor day? ing this -- thanksgiving >> all of the streaming companies are sourcing globally. if there was a global strike, that would be problematic.

i heard you talking earlier about "squid games" and all of the shows we never thought we would watch. we have now been open to other genres and foreign language tv shows. >> does that make you say okay, let it roll? how long can this last for the industry before there is genuine hurt >> i honestly don't have an answer this is not good for anybody how would you like to not have a paycheck >> it is terrible. i'm looking at the battle with management saying maybe cash flow is good right now and i can hold out and, obviously, folks need to pay their rent i have great sympathy with the writers and actors at some point, there is a tipping point for management to

actually say -- i can't pay the rent and i theyneed to do the d and the management is saying i can't make the numbers and need to do the deal the question is where does it come with the numbers and deal >> i don't know the answer. >> you have no idea? >> i don't know how much they have done. we are hearing several movies are being delayed. you don't have the talent to promote it it will impact television and film and theaters. it affects so many in the industry i think different companies are impacted differently it vis really hard to say. if this is still going on by christmas, everybody is impacted some impacted more than others of the. >> -- others

>> we'll get to disney another time i wanted to watch "squid games" and didn't like it. >> did you watch "beef"? >> it is a unique edge. >> it is strange once you get into it, it is really interesting. >> all of the shows. you have to watch the first four they are terrible and the fifth -- i'm joking. >> "stranger things. i never thought i would watch. >> there is a new one and things are still strange. stranger than the last. >> a ton of documentaries i'm dying to see >> i didn't know about the railroad killer. he scared me thanks, jessica. folks, we have breaking news

johnson & johnson just out with earnings came in at adjusted $2.80 a share. that is better than the street expecting. street looking for $2.62 revenue was up 6.4% to $25.53 billion for the quarter. that topped expectations the company is boosting guidance for the full year. johnson & johnson also said it plans to split kenvue shares as the next step in the separation. you can see the stock up 1.6%. cfo joe wolk will join us to talk about the quarter and what wit he is seeing. coming up, one of kim kard kardashian's businesses is hitting a major milestone. we will talk about that when we come back on cnbc.

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kim kardashian's apparel brand is raising $270 billion. ckardashian founded the brand four years ago and will open in los angeles and new york next year. coming up, johnson & johnson cfo's joseph wolk will talk to us as we head to break, a look at the s&p 500 winners and losers

let me try one more time you point to me. >> you the man >> we weren't ready. >> go. >> apple shares popping

yesterday after reports the company is quietly working on a.i. tools to challenge open a.i. bloomberg reporting they built the framework for a large language model ajax. a record high after the report and the stock, as you can see, is down fractionally >> can anybody remember all of these a.i. things at this point? dojo with tesla. apple gpt chatgpt. inflection >> you have bard >> from google >> what else inflection. >> i need a list sdp. >> we are missing one other one with the large language. let's look at the markets. we have been on a nice run

jay woods is the chief global strategist this run, does it continue do you jump off the train now we have gone a couple miles >> i think the train is just leaving the station. we are streaking right now that has happened 15 times since 19 1987 we have been up three months higher and 12 months higher. if you look at it from the technical point of view as a technician, that's what i do, we just broke out old dow theory kicking in. it is the story of magnificent seven. that story is changchanging. >> is the idea to rotate out of

the magnificent seven. are you supposed to sell your magnificent seven and go to the russell 2000 is that the move do you need to keep riding the magnificent seven? >> i would hold those long term. look at microsoft, apple and nvidia, those are the three names to hold on to. these stocks have had a tremendous run it doesn't mean it is over what has been lagging is the russell 2000 and midcaps of the they are catching a bid. it is starting to breakout what investors are doing, they are rotating money into stocks which are beaten down and lagging. we see it in the price action with the financials that missed with goldman and pnc that gap lower filled the gap and now trading higher goldman above the 200-day average. >> this is a melt-up for

everybody? >> melt-up is a strong word. on the eight day winning streak, dow support 4.2% on the average, it is 5% i don't think it is euphoric or anything like that, but the beginning of the continued rotation in the market >> what is the one thing to keep you up at night? >> one thing to keep me up at night to think it is not real? the fed. let's see what they say next week the pause, i think, was done at the right time numbers are cooling. yes, we still have the resilient labor market which is fine if they are hawkish in tone, that would catch us by surprise. i think this quarter point will be it for the end of the year. i am curious how they narrate the tone >> what if they had two? >> i think the market telegraphed that >> you said you think there is one and nobody is believing the

se second that's my point. >> we have come to the point where we broken out. we are making the run. we are looking back. >> do you think the run unto itself says to jay powell maybe i need to calm things down a bit? >> we will see at jackson hole it was august 13th where he comes out to the setting he was in the bunker last year the market had a tremendous run. he threw water on that let's see what they say at jackson hole that could be the tell going forward for the end of the year. we have seasonal headwinds not propels us higher. there will be a chop here. the price action is positive now with the breakouts we are seeing, watch materials, they could be next. this is good, healthy rotation. >> what do technicals tell you about the bond >> the 2/10 and we watched the 4% and 5%. they failed. i like to see the pullback more

dramatic i'm watching the dollar. the dollar is breaking down. the dollar was the story in 2022 as the dollar rose, we got hurt. tech names now the dollar is weakening and breaking down. tech, staples and communications and materials could benefitbene. >> technicals on crypto? >> i'm not a big crypto guy. >> what about bitcoin? >> 30,000. i dabble a little bit. learn by doing i'm in it. we don't focus on crypto. >> jay, thank you. >> thank you >> becky, my tv series "belgium dutch." "undercover. i watched a couple seasons a guy who goes under cover the drug dealer has his own show

know ruthless guy spinoff. >> you do have something to watch. >> i could watch it. i didn't think about it. when we come back, ron desantis holding a fund-raiser dinner in the hamptons today the latest on the gop money race next. and don't miss our interview with united airlines ceo scott kirby to talk about the company's record quarter and summer travel and much more. you can get the best of "squawk box" on "squawk pod" and listen any time we'll be right back. >> announcer: currency check is sponsored by interactive br brokers. the best informed investors choose interactive brokers

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welcome back to "squawk box. look at equity futures dow up 75 points nasdaq up 91 points. look at the s&p. that is off 4 points look at ibm. shares are falling despite the better than expected earnings. revenue falling short. the cfo contributes the ex-panting margins including nearly 4,000 job cuts which

helps productivity. presidential hopeful ron desantis heading to the hamptons for a donor dinner robert frank is joining us with latest robert, what's going on? >> joe, the price tag to get into the ron desantis dinner is $3,300 per person. why that number? the maximum any individual can give to the official campaign for any election cycle desantis needs a lot more big donors to fund his campaign. he took in $20 million in the second quarter, but spent over $8 million in six weeks. more than 2/3 of donors have reached their individual campaign limit he has to find a lot more new donors his current billionaire doners including ken langone and harold hamm and kelcy warren and david

sacks and norman braman. two of the biggest gop donors, ken griffin and diane hendricks, have yet to pick a candidate trump has twice as much cash on hand as desantis erhe raised $35 million in the quarter. those numbers will be made public at the end of the month so we will get a clearer picture by then. joe. >> you saw this other hamptons event in the coming weeks. this was wilber ross' house. he is hosting glenn youngkin just in case -- i'm reading about it i saw it was happening wilber ross to host for an an

emerging hopeful glenn youngkin as a just in case candidate. you read about the desantis stuff and things stalled and that stuff, robert people, big doneors are getting nervous. i saw this yesterday it is supposed to be in the coming weeks you are not out there, but you are just covering it >> i'm not you know, given the traffic and if desantis leaves manhattan right now, he might make it by the 5:30 start time. he is probably taking his private jet. desantis announced in may and raised $20 million in a short period of time i know it is fun for the press to take a look at his failings and some of the craziness with the campaign, but he raised a lot of money and burning through a lot of money he has done well in the money

front. especially if you compare him to the rest of the field. he is far and away next to trump the best money raising candidate. >> robert, we were talking to somebody yesterday who said this is late in the game. if you are down at 1% or 2%, forget it. you will not make it any where i heard chris christie say at this point when you were looking at trump's original election, you had jeb bush still in th lead at this point in the race that suggests anything could happen do you think that is not the case this time >> he is absolutely right. i was looking back at july of 2015 this exact point in the 2016 race all the headlines were how jeb bush broken the $100 million mark there were no mention of trump a lot could change what is interesting about christie is a lot of his funding is very small donors what is more important, perhaps,

than the overall amount raised is how it is raised and particularly for trump and christie, it shows broad support among people giving $50 or $60 which is a better sign for a campaign than maybe a few billionaire donors giving the max. >> i remember jimmy carter came out of nowhere i remember that happening. i know not many people can or old enough to remember you know who else? bubba. bill clinton he came out in arkansas. no one knew who he was ofand he got the nomination i don't know how it works. stay with us of stay on it, robert. >> thanks, guys. when we come back, johnson & johnson reporting results this morning. better than expected and the stock is up by 2% right now. we'll get behind the numbers with the johnson & johnson cfo joseph wolk next

you can watch us any time on the cnbc app

what happened that the street wasn't expecting in the quarter? >> good morning, becky pleasure to be with you. we started the year beating expect taugsations with the guie

we started being kcautious we are hurricanemming across the business line. 7.5% in the quarter. earnings growth of 8%. it is broad based in pharmaceuticals where we see tremendous progress and continued results from products. i'm really encouraged by the newer contributors as well as a neuro science drug. we know how important mental health is. we have a product which is doing extremely well in med tech, 10% growth. broadly based and surgical procedures one technology is for heart arrhythmia is performing at 25% in the quarter surgical procedures and

instruments up 8%. it continues to do well with the contact lens our consumer health business a lot of news in the quarter with that. they continued to keep their eye on the ball performing better than 7% growth we had the successful ipo in may and we announced on the next step with the separation all in all, it gave us the opportunity to raise guidance by 10 cents there is more than meets the eye as the beat or guiding raise is 28 cents when you consider 18 cents for two discreet strategic eit items. one is kenvue and we made an investment to secure our future for ma ligegmalignancy

most guidance is down for those, but our business was strong and we were able to absorb it. >> you are raising 10 cents, but you beat by 18 cents that takes the other things into account. i you are taking the qualifiers off. >> things look very good what i like about the quarter is what we did which was really well with performance, we have data to solidify the second half of the decade. we are in a strong position as we see the second half of the year. >> you just joined with other pharmaceutical companies in suing the federal government for medicare being able to negotiate drug prices for the drug companies. what is the outlook with that lawsuit? >> we are so broadly based, it would have an impact the basis of the suit is what we object to with the chamber of commerce and other industry peers. that is the assault on

innovation that is the u.s. leading in advance life sigh -- sciences. the guise of new is price setting. 85% of americans have access to new medicines when they come out. that number should be 100% you compare that to other countries like france and canada, that same percentage drops to 43% and 21% this is bad for patients and the financial side of me actually has to question the inflation reduction that is part of it law. if i think about last year whether we were filling up our gas tanks or goesing to the grocery store, we had 10% increases. we issued our six th annual transparency report. that is emblematic of the industry that is six consecutive years

where we had price decreases we think the discussion is misplaced. i argue given the ada adedeji adv -- advances in the life sciences, it adds cost to the system. >> joe, no argument americans want access and innovation americans people they are paying innovation for the rest of the world. if you look at it, no citizens pay more than americans pay for drugs. an average of $1,200 a for the average american i get the point. we have access to better things, but that is what the other side will tell you. they need to find a way to address that and not feel they are paying for innovation for the world. >> i appreciate that pushback, becky. i appreciate you brought it up over the last six years since we issued the transparency report, the average industry discount and rebate was 25%

today, it is north of 55%. patients are going on the annual basis to the pharmacy and paying $75 to $100 for co-pay when they used to pay $20. it is the middlemen raising prices >> who is it the insurance companies saying no or companies raising the coway? -- copay >> it is more the providers. >> joe, we appreciate you joining us on this busy morning. congratulations on the numbers >> thank you, becky. have a great day when we come back on the break, we are waiting for american airlines to release the quarterly results. plus, interview with ceo robert isom at 7:30 eiastern time "squawk box" is coming right back

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good morning shares of netflix and tesla under pressure a look at what else is moving markets is coming up. american airlines set to report results we'll have the numbers and we'll speak to the company's ceo and china warning of retaliation to the united states if it curves chip investments. the latest on the trade war. the second hour of "squawk box" begins right now. welcome back to "squawk box" this morning we're right here on cnbc live with the nasdaq market in times square becky quick and joe kernen a lot going on u.s. equity futures at this hour, every which way as well. dow, we'll call it up, up 50

points the s&p off about 5.5 points let's show you treasury yields right about now in terms of what people are expecting the ten hoof year note, 3.797% we'll hear from jay powell in a little less than a month from now out west meantime, what else we got >> we're watching a lot of these earnings numbers that have come in we want to get you quickly up to speed on numbers out after the bell and putting pressure on the markets this morning we'll start with netflix earnings are topping expectations at $3.29 a share compared to the $2.86 analysts forecasted revenue missing the mark subscribers blowing past estimates. they added 5.9 million subscribers, thanks in part to the streaming giant's password crackdown. that stock now down about 6.4% tesla also falling despite an all-time high quarrel early revenue and lower margins thanks to price cuts and incentives the stock price remained flat after the initial report but began dropping during the

earnings call as elon musk and other executives failed to deliver precise specifics and the start of delivery dates for the cyber truck and robo taxi ready vehicle. the stock down 3.3%. then ibm shares falling after the company reported better than expected second quarter earnings and expanded its gross margin, but missed consensus revenue that stock down only by 0.6% meantime, american airlines releasing quarterly results. let's get over to phil lebeau who has those numbers as we speak. phil >> andrew, this is a beat on top and bottom line by american airlines and beat on bottom line earning $1.92 a share versus the estimate of a buck 59. the revenue coming in at $14.06 billion above the estimate of $13.74 billion a couple of notes about the second quarter free cash flow of $1.2 billion that has been steadily growing over the last several quarters now you have an operating margin for second quarter of 15.4%. passenger revenue per seat mile,

up fractionsally 0.8% versus the second quarter of 2022 and the cost per seat mile, excluding fuel, coming in as an increase of 3.7% compared to the same quarter of last year. the guidance is what's going to get a lot of attention third quarter, american expects to earn between 85 and 95 cents a share. the revenue is expected to be up 4.5% to 6.5% with a capacity of an increase of 5% to 7%. the company, the airline is raising its full-year earnings guidance it was 250 to 350 a share and now they expect to earn 3 to 3.75 now expect an operating margin of 7% to 8%. lots to discuss with ceo robert isom, including the improved performance when it comes to their operations we'll be talking with robert in

about 15, 20 minutes, guys you do not want to miss that interview. really some perspective in terms of where the airlines are right now as we head into the fall season and then into the holiday season guys, back to you. >> phil, looking forward to everything you got coming up for the rest of the show joining us to talk about the markets earnings and what's ahead, victoria green, g squared private wealth and cnbc contributor. we'll talk about tesla, the airlines, everything else. but eight straight days in the dow. when you're watching that happen, how were you feeling is there any fomo? we talk about it with you every time >> it feels actually pretty good this is something we looked at now we're seeing the value stock report, like johnson & johnson report strong. the dow is doing well while the nasdaq is taking a breather. that's kind of a good thing

because we wanted this breadth, we wanted value to participate when you look at where we ended q2, we didn't have a lot of return in the dow and russell, both up 2%, 3% on the year now you're seeing industrials, value components work better great to see johnson & johnson perform well we might see health and medical devices do better. a sector that's lagged it's a positive for the markets and that this rally can continue and continue if the breadth continues to spread. >> i think the breadth was one of the reasons keeping you cautious on the market but now that the breadth is improving, isn't it too late for you to get bullish now >> i'm not as bullish when i talk about taking profits from the mega caps that have run up that's the risk you have with netflix and tesla. i still like netflix but you want profits on those that can't have any blemish look around the markets for areas a little more undervalued.

so, the equal weight the value, the small caps, some areas that haven't run up quite as much are a little more attractive and they haven't -- if you look at price performance for the nasdaq and s&p, we're up double digits. the value sector and the small caps were not. small caps have been on a tear here in july, but i think there are opportunities in the health sector that's been beaten down, the real estate sector, typically once we get to a pause, does tend to do better in a pause or rate cut environment. some of these areas that have been unloved are areas investors are starting to consider >> i guess i'm asking -- i mean, you were kind of looking for a retest of the lows, right, at 3800 were you looking -- now we're at risk of breaking out the all-time highs >> yeah, that looks like a pretty bad call. >> when you say sell into this rally, you really don't have anything to sell, do you did you ever get bullish to put your clients into a -- >> oh, absolutely. >> you had something, but

just -- we're cautious on the market overall for that rally? >> yeah. and we were bullish coming into this year. we wrote it up we just started trimming back and maybe called trimming back a little too early and started saying, hey, i'm getting worried on valuation, getting worried on the breadth and concentration and certainly we were saying let's sell this rip. we were worried this was not a sustainable rally. we have a lot of support now between where we're trading and 3800 i don't think we'll get back down there, but my concern is if you were let up by the mega cap and the mega cap stumble like a netflix, it's harder for the market to rally in the second half you want to be pulling profits off those. when i was there a month ago, i was talking about how much i love netflix still love that stock. any time you have these run-ups, you want to make sure you're buy low, sell high some of these places you may want to be taking profits from and looking for better parts of the market, cheaper parts of the market and higher quality, more defensive parts of the market.

i don't think we'll see a retest of the lows at this point. we have good support the technicals are strong right now on this rally. i do think investors have to be cautious, number one, buying mega cap at these valuations and, number two, throwing all in at this point. you just have to stay balanced you still have a risk-free investment at 5% plus. you know, equity risk premium does get a little squeezed. >> i don't know where you'd go if you want for -- if you go into 5% for a year or two, what's a reinvestment profile going to look like i think that's why the longer dated bonds are so much lower. no one really expects that and then you'd have to hope the stock market came down because maybe you could go then. if the stock market keeps going up, you're going to end up a year later with 5% and nowhere to go for reinvestment i think that's why the long end is down. that's why it's so inverted. >> yeah. you haven't seen the ten-year move much. you've been stuck in this range

of 3.70 to 4 on the ten-year because the expectations have stayed mutd and it's still for rate cuts next year. the question is, why would the fed be cutting rates why do you think there's reinvestment risk? the reason the fed cuts rates isn't because they're being nice to the stock market. the reason the fed would cut rates is because the economy is stumbling and they need to stimulate the economy. that typically is bad for the stock market and bad for long duration stocks if you're seeing a lot of these pressures come on and you are seeing the consumer squeezed a little bit. that's why we're advising a little moderation. i think investors at this point in the rally is typically where investors get the fomo itch. suddenly they throw all in because they feel like it will never go down again. eventually the market does hit a wall and go down i think people need to take some results with caution it does seem like the banks are telling us consumers are a little stressed but you are seeing decent results.

i'm saying, don't get stuck in the everything is rallying, never going down again that fever we felt in the early 2000s or 1970s where it felt like it couldn't fail. that's a dangerous part of the market to be investing in. >> very good, victoria we appreciate it time will tell. >> thanks, joe. when we come back, a "wall street journal" investigation charged that at&t and other wireless companies are -- or wire companies abandoned thousands of toxic cables on poles, under water and soil across the united states we'll speak to a senior director of the environmental defense fund, one of the groups involved with the investigation. a quick earnings alert for you. listen up. this is a biggy. travelers just out with quarterly results. the company reporting earnings of an adjusted 6 cents a share well below what the street was looking for. the street was looking for $2.08.

that's because of the catastrophic losses were double what analysts had been anticipating $1.48 billion during the quarter. that's not only double what the street was looking for, nearly twice the losses compared to the same quarter a year ago. second quarter is historically the highest catastrophic losses. you might not expect that because people think hurricane season is that unless you get a big hurricane or two, it's usually the second quarter. this was all wind and hail in numerous states. a lot of wind, hailstorms. that adds up when you look at damage to cars, to houses, to everything else that comes through. take a look right now. that stock off by 1% by the way, this is not different than what we've heard from some other insurers already about much higher than anticipated catastrophic losses. we'll talk more about a ttle later "squawk box" will be right back. that's what you get from the morgan stanley client experience. you get listening more than talking, and a personalized plan

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at&t says that less than 10% of its network has lead-covered cables and the telecom company actually halted plans to remove two lead-clad cables from lake tahoe after a "wall street journal" investigation charged at&t and other telephone companies abandoned toxic cables on water, on soil across the united states. tom meltner was involved in developing the lead testing protocols in "the wall street journal's" investigation of abandoned telecom cables

tom, you've been studying lead for how many years >> becky, good morning i've been working on this for over a quarter century mostly in indiana, but nationally as well >> talk a little bit about lead. in talking to you yesterday, i learned a lot of things that i didn't understand before lead is pretty pervasive, naturally occurring. it's not like pcbs that were manmade so it's everywhere were you surprised by the results of this journal investigation? >> i was as i said, i've been working on this for a quarter century about a year and a half ago when i first learned of it, i was shocked. i had no idea there were so many lead pipes out there so shocked that we decided to invest in getting a contractor who knew how to go out in the field and do dives and investigations, to go out and take samples to figure out, are these pipes really there, lease lead cables really there if they are, are they releading

lead into the environment? we found in the affirmative. "the wall street journal" did a good job looking at that issue and went much further confirming that the lead in the soil was the same lead that was up on the cables from between telephone poles or was in the pipe that's running under the water right near it. >> this has caused a lot of consternation in the stock market as analysts try to figure out -- analysts and investors try to figure out what the potential exposure is for all of these companies. at&t stock hit a 30-year low earlier this week. verizon shares hit a 13-year low earlier this week. you know, the company's pushed back at&t has said, look, thisis no our entire network part of the reason at&t got hit so hard is people said it's got the most of the leftover cables from ma bell and those older cables, you said some going back to the 1800s, are of the biggest concern. at&t says it's less than 10% of its cables that are out there,

if you're looking at it. not only -- but of those 10%, they're talking about only a third of them, i think, that aren't buried in sediment where you would not bring these things up anyway, that are encased. a lot of people trying to figure out, get their arms around this. there have been questions raised from the journal's reporting being an independent investigation, not knowing you and other environmental groups were involved. what would you say to all those concerns and questions >> well, first, we didn't -- we had no concept of how broad the problem was until at&t did a court filing out in california that said that they have 66,000 miles that will go around the earth two and a half times of cables running between telephone poles or running under water that is much farther than i ever imagined i thought it was a very localized issue. as regarding what "wall street journal" said, you're best off asking them. i'm not privy to their

decision-making. when we sent a letter to epa on monday asking them to investigate this issue, to really do a real risk assessment and figure out what the long-term solutions are, that's the first time we released our report that explained our relationship and our role in it. >> in that letter that you sent to the epa, you asked that the company stop plans to remove the cables from lake tahoe why is that? >> we didn't ask them to stop plans to remove from lake tahoe. we said from underwater cable, disturbing the cable, moving it around in area with a lot of sediment and silt, for example, along the hudson, you can release and make a bigger problem. you have to do it thoughtfully and carefully. and at&t took that to say that means we should stop work in tahoe. that's their decision. we're not involved in that litigation we are saying you have to be thoughtful about the underwater. but the ones -- the thousands of miles run between telephone

poles that have been abandoned those are pretty easy to remove without any problems those are kids standing at the bus stops below those lines not realizing that overhead is a lead pipe, a lead cable that may be dripping lead accumulating in the soil they just don't know that. it's best just to remove those lines. >> what does lead do i think a lot of people realize it can lead to mental deficiencies, not developing at the same rate. you've studied this for a long time. >> good question over the past 15 years we've really realized there is no safe level of exposure to lead. that's come through a lot of studies that every time they looked at lower levels in the blood, it caused heart for children, where we're really concerned, it reduces the iq so, there's a correlation between lower iq it's not a lot for an individual child. with a child with a low blood

lead level, you can't see a loss in iq. when you look at it across the nation, it's significant for adults, it's kidney and heart damage so, cardiovascular diseases associated with it as well as kidney disease. >> people look at remediation as one cost they look at any potential effects on humans as another potential cost but it's pretty hard to say when and where you might get lead poisoning. it used to be in paint we've tried to remove it from most fuels, but it exists. it's naturally occurring and exists in a lot of places. >> it's naturally occurring but much of the lead we're typically exposed to is manmade activities, but we still have it in our homes with lead-based paint. we need to address that. when the paint comes off the walls, when it deteriorates and forms dust, we can get children exposed playing on the floor, with the stuffed animal and blanket, that kind of exposure

for those in flint and across the nation, the federal government has invested $15 billion in getting the lead service lines replaced these are the drinking water lines that connect the main under the street to homes. that lead in the pipes gets into the water and exposes children and families we need to prevent that exposure wherever because the water at low -- the lead still leeches into that water and can expose us, whether it's in a lake, whether it's in a stream or in our drinking water. the water utilities do a lot to reduce that leeching into the water. but we still have this problem of drinking water through what's essentially a lead straw >> tom, i want to thank you for your time on this today. tom neltner from the environmental defense fund. >> thanks, becky. meantime, want to get a check onamerican airlines. shares now lower despite better than expected quarterly results. you can take a look at the screen

we're off 1% the company's ceo will join us in a couple minutes to talk all about it and his outlook "squawk box" coming right back time now for today's aflac trivia question. which painter of the spanish which painter of the spanish renaissance offered tole in your defense; over michelangelo's last judgment in the sistine capel? h! you talkin' about me? gaaaaaaaaaaaap!!! i think this goat is saying “gap.” must be talking about the expenses health insurance doesn't cover. so who's talking about the money aflac pays to help close that gap? gaaaaaaaaaaaap!!! aflac! aflac! gaaaaaaaaaaaap!!! it's about to go down, baby! aflac! aflac! stop that goat! get help with expenses health insurance doesn't cover at aflac.com

which painter of the spanish renaissance offered to paint over michelangelo's "the last judgment" in the sistine chapel? the answer, domenikos, commonly known as el greco. gee, i wonder why he needed a name like el greco instead of that other name, dom you want to try that out - >> no, no. >> me neither. let's get to dom chu with a look at this morning's premarket movers you got two syllables in your entire name. there are about 14 in that one

patrick reed is the highest american, isn't he >> i've been keeping one eye on it, one eye on the market because there's stuff going on on the earnings front, so i have to do my day job. >> yeah, yeah. >> we'll talk about it afterwards let's start with the earnings. you recapped a lot of them i'll give you a couple you haven't hit so far yet we'll start with dr horton, up 4% right now you can see here, over 10,000 shares of volume at this point in premarket it reported quarterly profits and revenues it was helped along by, yes, continued strength for demand in new home construction. it offset the drags of higher mortgage rates and input costs by the way, new orders for new homes grew by 37% over the same period last year it also gave a more upbeat full-year revenue forecast on estimate on balance, dr horton continuing that massive surge in home builders already up 49% year to date. private equity giant blackstone,

that stock is down 3%, over 5,000 shares of volume at this point. a mixed report, profits, income better than expected blackstone did see over $30 billion of new client inflows during the quarter which helped it become the first ever private equity firm to cross the vaulted $1 trillion mark in terms of assets under management. a big move for blackstone. nonetheless, down 3% a check on the friendly skies. would he saw the american airlines results earlier this hour after last night's close it was united airlines, those shares are flying higher by 3%. over 75,000 shares of volume after it posted profits of revenues that both beat estimates and quarterly profits reached record levels. it gave a strong forecast driven by, yes, the continued boom in travel with international flight demand helping to lead the way by the way, we'll get much more on that story later on this morning when united ceo scott

kirby joins "squawk box" to talk about those results. another move there the skies continue to be friendly for these airline companies. i'll send things back over to you. >> all right, dom. stewart cink, he's old he won the british remember that? that was a heartbreaker, that last shot, tom watson, he went over the green you remember that? unbelievable. >> everybody has memories because it's royal liverpool, what happened last the time. rory mcilroy is a favorite he has the momentum. >> thanks, dom chu i haven't bet on this one. it's really hard right? >> it's a tough -- golf is a tough thing to bet you have to take the portfolio approach sped them out over five or six. >> you do that >> i -- again, i don't have a fanduel or draftkings account because i think it would be a huge productivity killer for me. >> as opposed to all the golf you play >> exactly >> touche, becky i'll give you that

you're right. >> all right, dom, see you later. hope your wife is watching. netflix's crusade against password sharing is paying off for now. with new subscriber growth but are customers opting into cheaper plans? it doesn't matter if they're supported by advertising. the labor movement sweeping the nation why american airlines pilot union could be in jeopardy you're watching "squawk box" and this is cnbc there are some things that go better... together. hey! like your workplace benefits... and retirement savings. with voya, considering all your financial choices together... can help you be better prepared for unexpected events. for a brighter financial future. thanks.

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welcome back to "squawk box" on cnbc. take a look at the futures dow up 50 points. s&p looking to open down 6.5 points. news this morning, china's envoy to washington says his country does not want a trade or tech war with the united states, but will retaliate if the biden administration imposes more curbs on its chip sector speaking at a conference, china's ambassador to washington

said the way competition between the u.s. and china is defined by washington isn't fair. meanwhile, a house panel on china is looking at a crackdown on u.s. venture capital firms over their investment -- or investments in chinese a.i the house select committee on the chinese communist party sent letters to four firms including qualcomm ventures and walden international. let's get to phil lebeau he joins us with a special guest. phil, good morning again >> good morning, becky robert isom, ceo of american airlines on a day where you beat the street on the top and bottom line sensational numbers within the numbers for the third quarter. fitch gives you a double upgrade on your credit rating. it's working right now for you, isn't it >> it is look, we set out to be reliable and profitable, strengthen our balance sheet and it's all coming together. you don't have too many quarters where you have this big beat and record revenues, record operating profit and double upgrade from fitch on top of that, record operating

profitability. our reliability as well. our team is delivering day in and day out and they're out in the heat, humidity and really taking care of our customers. >> we'll talk about that but why are the operations as successful as they have been this year given all the problems you had last year? let's be honest t was not a good year last year if you look in the new york city area or elsewhere, your reliability numbers are among the best in the industry what's changed >> credit to the team, first off. we've been strong for the last year and i think that's really important to note. we didn't have the problems or thanksgiving or christmas, even over the memorial day weekend, we didn't cancel a single flight it all starts with having a great plan, executing every day. when things don't go right, to be able to recover quickly we've invested in our team with training and put the right tools for them to use as well. >> today is the last day you have joint ticket sales with jetblue as part of the northeast alliance and you are appealing the fact

that the doj wants to unwind this and a judge says, yeah, it has to be unwind why go forward with an appeal when jetblue said we're not going to appeal? >> we think the decision is wrong, first off it's important for us to make sure there's not a precedent out there that inhibits us from doing things that are creative, that really help competition and deliver benefits to our customers. everything that we think the nea did. look, jetblue has other things they're occupied with. for us, we want to make sure we have the ability to actually do these things in the future who knows, maybe at some point in the future we'll talk to jetblue again. >> you have a tentative agreement with your pilots but united reached an agreement with their pilots your pilot union has come back and said, we like what they've got at united. maybe we have to go back and amend this tentative agreement is that possible >> well, look, we have a ta out there and we've been working with the pilots' union

we're going to take tear of our pilots yes, in regards to wages, we'll match those. and i want our pilots to know that, but we're going to get down to business to make sure we can get something done quickly look, if there's more to talk about, we'll get it done over time my primary interest is making sure our pilots are taken care of they deserve these increases and we can't wait to deliver them to them. >> let's talk about operations with regard to the weather, extreme heat you have a lot of operations in phoenix, the southwest or the storms that have been popping up in the new york city area do you spend more time now focused as a management team on these extreme weather events and how to deal with them? >> there's a lot out there first off at america we have a lot of experience. whether it's phoenix, miami or in dfw, we've experienced heat before but there is a lot more out there. machinery breaks more often and it's hard on our team members, too. that experience that we have is really coming to play.

so, whether it's apus or conditioned air on jet bridges, we're doing the work in advance to make sure we're ready whatever comes our way with technology and our team, we'll take care of our customers. >> do you spend -- are you allocating more resources saying, look, we know this extreme heat is going to be here and we know we have to make greater investments in the southwest? >> absolutely. from a technology perspective, we have a new program, things that help us recover very well when things go out of whack. from our team member perspective, we have people right now, larger teams than we've ever had, looking at the operation and making sure we're ready to address it. >> last question, soft landing for the economy. i know you watch the gdp, you watch what's happening what's your perspective? >> demand for our business is really strong. as i take a look out into the third quarter, we're booked 3% higher than we had been at this same time last year. it was a pretty good quarter

last year. i see demand remaining strong. so, i'll speak from the airline industry i think that there's clear skies ahead. >> robert isom, ceo of american airlines on a day they beat on the top and bottom line. guys, we'll send it back to you. >> phil, thank you so much for that interview news out just this morning coming up, netflix shares under pressure this morning, after its second quarter results. we'll dive into the numbers and the password crackdown taking place. from the one and only tom rogers at the top of the hour, we'll talk crypto with michael novogratz.

welcome back to "squawk box. a big thing happening next week. cnbc and boardroom getting ready for the game plan conference it's happening next week in los angeles. we'll be talking to some of the most influential leaders across the sports landscape first, some news this morning on the pickleball front all of this is -- that's the segue. we'll talk about all of this because it's become such a hot sport, now that i'm playing it no, no the brooklyn aces have some new investors, including grammy-award winning artist

drake. that's pretty cool actor, entrepreneur michael b. jordan joining us to talk about that and what's happening in l.a. next we're, rick kline, also co-owner of the brooklyn aces. good morning. >> good morning. >> do you want to talk about pickleball or everything that's on tap next week >> let's start pickleball. >> how did you get drake involved in this >> drake and kevin are very close friends. his whole team are very close with us. i think this is a fun journey with this sport. i'm excited about building the brand in new york. i'm obviously, as i told you guys last time, excited about being part of this league. and i think this was just a fun venture for us to dive into. obviously, being able to - >> who are the best pickleball players in the country right now? >> ben johns. >> ben johns >> he's the number one player in the world? >> does he make like $125,000 or something? my son wanted to know how much he would make if he was a professional pickleball player i looked it up >> by the time your son plays,

there will probably be way more money. you make money from sponsorships, from appearing at events. >> is your sense there will be people who are just killer pickleball players or do you think there's going to be this sort of crossover situation between folks in tennis, perhaps, maybe even in ping pong, or just athletes in general and you're going to be getting folks from all sorts of different sports to play >> it's a combo of both. i've seen -- we had two women on our team last year -- this last season, it split up in two seasons that were both ex-tennis players. i've seen friends of mine that weren't natural tennis players pick up the game you can see the difference, though i hit with the natural tennis flick of the wrist, but people that didn't play tennis sometimes have a more flat shot to start but ultimately i think the instincts of playing tennis will be helpful for you. >> do you think -- one of the -- that match with agassi and -

>> zhang. >> and mcenroe do you think you need that celebrity oomph to get this to this next place? >> you're offering yourself up >> no, i'm not >> oh, i thought that's what - >> good idea. >> we'll take him. we'll take him. >> d list. >> do i think we need it long term no is it a nice wind in our sails to have that type of attention to the sport for sure the experience i went to my first tournament in san clemente a month or two ago. the experience over four days is incredible i suggest you go it's like being at a major tennis open. the sport is competitive you find yourself even without knowing every player getting into it and having a team in the league it's been fun to see true fans early adapters to our brand. it's kind of exciting. >> it's such a sport that feels adjacent to tennis and tennis has been a challenge sport do you think long term pickleball becomes bigger than tennis do you try to do things adjacent to it? meaning u.s. open will happen in late august. do you try to do pickleball

stuff in and around it or do you try not to because you think you want to have it as a separate -- >> no, listen, there's a lot of opportunity to create ancillary momentum for the sport there's another new york team owned by my friend jason and lebron james and maverick and creating attention to the brand and both of our brands, obviously. when you're there, you realize you can't compare it to tennis i think all these sports that are trying to break through now, it's not about comparing the wnba to the nba or pickleball to tennis these are individual sports with opportunities and opportunities to make money. >> can i just ask real quickly, this is a disruptive sport just from the idea it's disrupting tennis, disrupting all kinds of things there was a big fight at our club when they turned tennis ball courts to pickleball courts there have been local police called out to the beach because there's so much demand and fighting for people to get on courts there's pushback from neighbors because they don't like the

noise. is that good for the sport >> it's new -- >> any news is good news >> no. it's new it's disruptive for some people. the sport of tennis is booming watching alcarez and some of these young stars. once again, there's room for both of them i think the flywheel of tennis versus pickleball versus paddle ball is bringing more attention to them. >> let me ask you about the tv rights one thing we heard bob iger on our air last week say, we may want to take a partner on, for example, espn. i think there's a lot of folks who are trying to rethink what the valuations of teams are, regional sports networks, big sports how does this all play out how does it play out in the concept of pickleball but even more largely given your association and affiliation with the nba and so many more sports situations how do you see this? >> it's obviously more complicated and also more lucrative for the nba to think about the changes in the media

landscape. for pickleball i think it becomes an opportunity right now we're approaching it and we don't have to look at how sports have historically approached media we can break it up, we can create more of an experience, we can get different rights to different people i think in the case of what espn is trying to do, and i think that sports media landscape in the last ten years, media in general, has been flipped on its head but there's going to be exciting, new kind of opportunities created. >> you still think it's a state run up it has been a straight line up in terms of just the valuations for everything the question is, is there every a plateau in all this? does the direct-to-consumer piece of it make it harder you used to be able to leverage all the cable, anybody watching cable, even if they didn't watch espn you won't have that. will people pay on the other end of it? how does that all work then you have the people -- linear network even doing it as a loss leader in some ways because they want to promote all their other programs. >> listen, i think in the traditional sense if you were to

guess, i would say that there's going to be a cap for some of these valuations at some point will an mls team be $10 billion? probably not but there's still way -- there's a lot of room in front of them to grow. an nfl team getting sold for six-something billion dollars. you have to assume, how much bigger could this get? i think there's new ways of looking at monetizing this if there are new and creative ways to bring revenue into some of these leagues, you will see the valuations going up. there's such a premium on owning a sports team. people will pay to own my pickleball team is trading at a higher price a year later. what's really happened it's just the excitement and the desire to be around the sport. >> you talked about victor last time you were on. >> victor wembayana? >> where is he going >> i can't believe watching him at the plate. >> or the mound. >> mound, too. that's the hardest thing to do

in sports, i think could be 100 miles an hour or 70 miles an hour and you have to be ready for it. >> he's incredible he may be one of the greatest baseball players that's ever played in our generation. >> how much he can make, and i want to know where he goes. >> i want -- >> atlanta maybe >> i don't see atlanta spending $700 to get ohtani. >> not the yankees the yankees ruin people when they get people. >> don't say that. i'm a mets fan >> you were nodding. >> we'll see you next week in l.a. and we'll bring - >> game plan. >> -- everybody a lot of stuff from this event. on july 25th called game plan hosted by cnbc and boardroom. we'll have a livestreaming option for remote attendees. you can scan the qr code on your screen you can visit cnbcevents.com/gameplan. kevin durant will be there, travis scott will be there, espn will be there.

>> david blitzer. >> i'm not -- i'm impressed -- >> this is going to be very, very cool. >> thank you for doing this with us. >> we'll see you next week in l.a. "squawk box" coming right back we earn your trust. maintain our financial strength and stability. and deliver solutions that meet complex needs. massmutual. partnering with financial professionals, benefits brokers, and institutions.

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netflix shares under pressure this morning.

revenues fell a little short of estimates. it expanded its password crackdown and is poised to perform well while writers and actors are on strike in the united states because of extensive international productions, at least relative to the other studios joining us to discuss more is tom rogers, former tivo ceo and a cnbc contributor tom, what do you think the conventional wisdom is that netflix will do okay, at least for a while compared to the others is that your take on it, too >> yeah, that's absolutely my take let's step back a minute contrast that earnings call with the iger interview with david faber last week and it's night and day. you're talking about a company with netflix that just doesn't have to deal with the burden of decline and what happens when your current business model is

thrown up in the air and you have to recreate a new one this was all forward looking, it was about accelerating revenue, it was about increasing margin, increasing cash flow it was all about growth. and you can really contrast that with the very difficult situation of the legacy media companies, made worse by the strike as you say. >> if you look at a longer term stock chart for netflix, there were some serious questions about netflix's model, look at 2022, when it went from $700 down to 450. how much of this is sentiment and how much of this is for real, real numbers i understand not having the declining legacy assets but stock market can do things to these companies, too

>> well, i didn't have any question about the netflix model. obviously, as you know on this show i pointed out the problems on the legacy side for a long time, even as those stocks were doing much better. i think the view here on netflix was that they had let a problem grow well beyond what they should have with 100 million viewers around the globe taking the product for free they finally decided to crack down and i think the headline coming out of that is the crackdown had a lot less noise to it than many people expected. meaning it's implemented, there isn't a huge amount of push back, they obviously got a lot more subs out of that than people thought they would at first. with that, to joe's point, hey, is this a one-time phenomena or is this something occurring? what you have to remember about

streaming services is they vaul all have a lot of churn. still on an annual basis close to 25% of subscribers come off but they do come back when they want to watch something. now when they come back that low cost ad-free tier isn't going to be there for them. the thinking is they'll come into the ad tier and because of the additional ad revenue that comes with it has a lot more revenue behind it. so there's something going here that looks like they can really grow revenue substantially and that's something that the other guys can't easily point to >> we've got like 30 seconds, what you said, 25% of all the streaming services come off and newe annually, people come back when they want to see anything, that's a big deal when you're involved in a strike >> that's more or less a net

flick turn number. and if you took just netflix viewing of acquired programming, not the original productions but acquired, it would still be the most viewed streaming services, just on their acquired license programming. all the other guys are looking to license more of their programming to others and not hold it for themselves as they deal with their own cash flow issues so netflix will have even more product to acquire and to be able to do it a t a cheaper price and i don't think netflix will have that much difficulty compared to the other services >> good to see you >> and that's for having me. >> when we come back, we'll find out where an iesr kenvtoli mike novogratz is putting his money to work. "squawk box" will be right back.

congratulations good morning coming up, we'll bring you all the highlights and speak with blackstone's president and

united airlines' ceo and the dow's mike novogratz will join us and top takeaways as another big earnings reports good morning welcome back to "squawk box" here on cnbc live from the nasdaq market site in times squares. the equity futures are mixed the dow is up again. that will be nine days s&p down by 5 or 6 points this

morning. 10-year and 2-year are right in the range that we've seen. we had that outlier adp report which got them both above significant levels and they weren't able to hold them. they almost march in lock step, 4.8 and 3.8. >> we pay no attention to the inversion and it's been over a year it would signal a recession. still waiting. >> someone thinks the fed is going to cut i don't know why we couldn't stay right where we are. >> i would think the more the market runs he would say i have to tamp this thing down, right >> i hope not. i like the user effect when they stay at zero i don't know if they care about when it goes higher. >> depends on what happens with

inflation. >> johnson & johnson beating analyst revenue and profit estimates for second quarter numbers and lifted its full-year guidance as sales jumped the cfo joined us earlier on the show >> what i like about the quarter is what we did really well from a financial perspective and strong performance, we had a lot of good clinical and regulatory data that will solidify the next few years and the second half of this decade. >> and fellow dow component travelers was down, then up and now down again it missed expectations by quite a bit. there were catastrophic losses double what the street was expecting. wind and hail damage were two of the big culprits, down by 0.9% and american airlines raising

full-year guidance we spoke with american's ceo earlier this morning >> we set out to be reliable and profitable, strengthen our balance sheet and it's all coming together. you don't have too many quarters where you have this big beat and record revenue, record operating profit and then double upgrade from fitch and on top of that record operating profitability and reliability as well. our team is delivering day in and day out. >> that was robert isom speaking to us and by "us" i mean phil lebeau of course united up by 2 opinion 9%, the rest all trading a little bit lower this morning >> and we told you about the dow's current eight-day winning streak, the longest since september of 2019. joining us to talk more about the markets, a little touch on bitcoin as well, mike novogratz.

what do you think? >> i think it's an a.i. bubble the a.i. story is so fascinating. it's quick adoption. you look at the driving, four, five, six stocks picking this thing up, they all have an a.i. component to them. these are usually 12, 18-month phenomenons and that's what's giving it juice. t 2-year rates are close to the high yield we're not getting a lot of relief from stocks or bitcoin or any risk assets. the market does think we're going to roll at one point we've been wrong the economists have been wrong

on how fast it would take for the economy to slow down i actually think when i look back why was everyone wrong? our entire careers, all of yours and mine, every response from governments to crises was always monetary cut interest rates and inject lots of liquidity. with this covid response, it was giant fiscal we never lived through an experience where we did ubi for the entire country we've normalized 5% budget deficits, which is a dangerous thing. but one of the reasons i think models aren't working is we're just not used to this and none of us have kind of lived through an experiment where you just gave away so much money. my instinct is at one point that runs out and the economy does slow but every time you think it's slow and you get another strong number, it wouldn't surprise me if today's claims are lower. it's a tough market to trade in that respect >> so you think just the

excitement about a.i., that's spilling over into all risk assets you think that's why the s&p is up 20% you think that's why bitcoin -- >> bitcoin's got it's own story and i think, listen, this normalization of 5% budget deficits, right, trump started it, governments love to spend money. in the long run someone's got to pay for that, and that's why bitcoin literally -- bitcoin, gold, silver, i put them all in the same bucket. silver and gold trade great. bitcoin has the additional adoption cycle what drove bitcoin is retail and they continue to buy, continue to buy now we have an etf on the way. i'm more comfortable going long bitcoin than i was six months

ago. six months ago it was scary. now we see the future kind of spilling out >> well, you know, kind of tongue in cheek when kelly evans says she wants a 2-year at 5%, i say i'd put it in bitcoin. i'm kidding around i put it in with the charles schwab of the world. big name people want these etfs but then you have agaigentzler the other side do you think he'd like to take bitcoin off the table as a financial asset or does he just want to regulate the way that it's traded? >> i think if this ripple lawsuit taught us anything,

they've been saying come in, the rules are clear. the rules are absolutely not clear. the judge just basically said to the sec you're wrong richie torres, the congressman from the bronx put a letter out saying, guys, it ti's time to c to the table and sit down with republicans and give us some damn points. i do think elizabeth warren and the progressive side for reasons i can't understand have been anti-crypto. and i think any central bank governor gets nervous -- larry fink went on tv and said this is going to be the first global currency and that's her job to defend the dollar as a global currency. and so there is a tension. i like to think of bitcoin as

digital gold, the store of value and that keeps the tempers, the nerves of central bankers down a little bit but there is that tension there. but i think, listen, the cat's out of the bag, bitcoin is not going away you threw everything you could at it and it's up 80% on the year with interest rates higher. the adoption cycle continues big ideas are almost impossible to kill and this is a really big idea >> you said that it was a lot scarier six months ago to really remain positive on bitcoin did you sell at that point did you hedge things or did you hold on? >> you know, we held on. i'm in it so deep, i'm in it and because of my vantage point, i see the commitment of the people that work at our firm, i see the commitment of the people in this industry

we prepared for a longer winter than we're hoping we're going to get. we're certainly not out of the woods in general in the overall industry, but we -- it feels a whole lot better we added risk. we bought a giant mining facility in texas flirting close to the lows, we bought gka, a business out of israel flirting with the lows. hopefully that turns out to be great investments. >> michael, i'm sure since so many folks in crypto land were following decisions related to ripple, i wanted your thought and comments and whether it has anyone demonstrable impact on how the sec and congress and others think about these things. >> it has to force the democrats, the white house and

gentzler to the table. >> maybe we should explain to the audience what the decision was. some looked at it as a win for ripple and others said maybe it wasn't >> it was a big, big win for ripple and a big, big win for the crypto community let's not let larry gentzler put lipstick on a pig. they lost and they know it at best the judge said if the sec wants to litigate, they'll have to litigate every token separately and every use of that token separately so the current status quo isn't going to work for the sec. they could appeal. appeals take a long time we can stay in court for years, but i think the message that i want to give that is really clear was what gary's been saying that the rules are clear just isn't true. it's not true at all and that judge said that exactly. this is really complicated we need regulation that makes things clear

and it not that complicated. >> when is the first -- what's your time frame for the spot bitcoin etf? this year in. >> i'm going to look at my crystal ball i'm not positive i would say the next six months but that's intuition our partners at invesco feel much better about the prospect than they did four months ago and four weeks ago even. larry fink is not a flippant guy. he's not going to come out so positive unless he thinks he's got a win coming that's my guess. i haven't spoken to him about this when the ceo of the largest asset management company in the world comes out and starts talking positive about bitcoin where before he's been negative, that's a big, big deal it might be the biggest thing in

12 months. he's got relationships with every investor and he's saying bitcoin should be part of your portfolio. that's a big deal. >> mike -- >> we're going higher. >> we'll see thanks >> coming up, inside quarterly releases from blackstone and jon gray and news that could affect areas of the city, broadway stagehands, make-up artists voting on whether to authorize a strike and if that happens, it could happen as soon as tomorrow stay tuned you're watching "squawk box" and this is cnbc like nike, jordan, on, carhartt, hoka and more.

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welcome back to "squawk box. blackstone beat estimates by a penny but revenue missed analyst expectations we want to go inside the numbers and bring in john gray, chief

operating officer of the blackstone group you've amassed an enormous amount of money, a trillion dollars. this should be a time of celebration but at the same time there haven't been the kind of asset sales that have created those distributable assets when you go back thinking about creating this firm in 1985 with $400,000, it has been a remarkable journey we've gotten here because we've delivered performance to clients over a long period of time in good times, in bad times and also because we've really had a spirit of innovation we're constantly pushing into new areas, new places. this is something steve has always pushed for. and when we look forward, yes,

we're in a challenging time today but as you look out over the horizon, things will get better what gives us a ton of confidence is alternatives are really coming of age if you think about investors today they're saying to themselves i can trade some liquidity off for higher returns. that's true with insurance companies, pension funds and individual investors so we feel huge optimism about the future >> let me ask you this i think even warren buffett has reflected this idea that size ultimately can be the enemy of performance. >> yeah. we actually see it as the opposite if you look at our firm and you look at our performance over time, it's actually gotten better over time in most of our areas. and i attribute that to the fact that in private markets being able to write a big check is a competitive advantage. in a market like this being able to do a $14 billion deal with

emerson in their climate technology business made a ton of sense when i think about the resources we have, our portfolio operations, the ability to intervene in companies, again, the resources make a huge difference and when you think about what i think is most important from scale, it's data and insight so we see inflation coming we see risks on the horizon earlier than others and we see some of the big trends out there, be it india or green energy transition, i think all of that is hugely important. so we really value the scale when we think about delivering returns for our customers. >> john, help us with some of those insights where do you see inflation right now and what is your expectation around what the fed may or may not do for the remainder of this year >> well, i think the good news is the fed is winning the war on inflation. they're not ready to declare victory. but from our portfolio, what we

see is shipping costs coming down, input costs now less than 2% growth at our companies, wages have gone from 7 plus percent last year to less than 5% and the forward indicators when you look at vacancies and hiring, all of that shows to us a softening labor market that's still very strong. if you look at cpi, people tend to focus on the core it was up 5% in this last number that came out. but if you strip out shelter, something we know a lot about, core cpi shelter up. i think we'll see better-than-expected inflation numbers but i think the fed will stay vigilant and that will lead to a slowdown in the u.s. and global economy so i think we've got to anticipate that. the good news is we've gotten

through this inflation shock, we got through the interest rate shock and now i think we have to deal with a bit of an economic slowdown but we'll get through that as well >> let's talk about that slowdown that doesn't seem to be priced into the market right now really there's been a sense even over the last couple weeks, i don't know if you want to call it melt up or eight non-straight days here of what been a straight line up is that a function of the fact that people think actually there's a soft landing, that maybe the fed doesn't go up two quarter points, maybe just goes up once >> i think it reflects the market is beginning to digest this inflation scare is moving behind us. in the short term it looks like the fed will go one time, maybe they go a second time but i think the data they will get is positive and i think it reflects investors having more confidence about the future if inflation is behind us, that's a positive. if rates aren't going up, that's

a positive and so, yeah, there will be a slowdown it may be a soft landing it may be a little tougher than that but i think the certainty about the environment is giving investors confidence and i think that's why they're moving forward and investing more >> can we talk about real estate it's where you first started your career and obviously you have this big flagship fund. there had been a gate on it. i believe the gate's still on. can you speak to sort of what's happening with real estate and what's happening with that fund in particular? >> sure. what i'd say on commercial real estate is it really a tale of two cities when you look at older commercial office buildings, that is a very tough market. vacancies are high, rents are falling, values are declining. but if you look in other sectors, if you look in student housing or data centers or logistics, in the second quarter

for us globally rent grew more than 10% and u.s. commercial office buildings are less than 2% of our holdings, the sectors that are growing quickly are 50% of our holdings. i like to say where you invest matters. we've been focused like student housing, logistics, indata centers and in the sunbelt in the u.s. and in terms flows because i know there's been a lot of focus on that, we have seen a material decline in share repurchases since the beginning of the year and we think it performance that matter and it's delivered 12% over six and a half year and nenually

that's what's driven every piece of what we do. >> what's the state on the redemption situation on that fund in particular >> the state is i noticed it's come down materially since the beginning of the year. as we think about it going forward, the key is to continue to deliver good performance. what's also important to note is if you started redeeming at the end of november when the redemption limits which were clearly stated six and a half years ago when we created the product, today you would have more than 90% of your money back i think we've learned when you have a mismatch of assets and liabilities that's a problem the restructure is working exactly as intended. >> and i want to ask you about a unique feature of the private equity markets, which is continuation funds where effectively one fund is buying out a former fund and what you think of that. there's a number of pension funds that are in these funds that i think have some real

questions about what it will mean in terms of the management fees associated with them and also the mark-ups that happen as a result of them because in some cases it looks like one pocket is basically transferring an asset at a higher valuation to another pocket >> i think the key thing when you're doing a continuation fund is make sure you put your fiduciary duty first we've always involved a market check to make sure the pricing is fair. we want to make sure you have your limited partner advisory committee vote on this and bring in outside visors. doing right by your investors is always the key i think if fund managers do that, it can be done but it's definitely an area that needs to be handled with care >> john gray, it's always good to see you we appreciate you joining us on this big day for you and look forward to seeing you again

very, very soon. >> thank you, andrew >> coming up, the 30,000 foot view of travel demand in the otonomy from united airlines ceo sct kirby. stay tuned you're watching "squawk box" and this is cnbc

welcome back to "squawk box. we've been watching the futures this morning once again you see the dow indicated higher this morning. it's up about 33 points after seven, eight days in a row of gains in the dow s&p giving back this morning, down close to 10, the nasdaq off by 94. rick santelli is standing by rick, take it away >> not only are we looking at continuing claims but philly fed, i'm looking at that particularly close today because we've had ten negative month-over-month changes in a row. will it be 11? yes, it is 11. the 11th consecutive negative month-over-month change in philly fed, 228,000 jobless claims, a very, very tame continuing initial claims. you have to go back to midmay of this year to find lower

numbers. and on continuing claims, it popped a little bit with respect to expectations. we're expecting a little bit over 1.7 million we end up with $1,754,000. and that's benchmarked against a subtle revision last week from 1, 1,729,000. interest rates were already firmed up coming in. now a 2-year note would be up 6 on the day and up 6 on the week. 4 opi 4.77 is where we settled yesterday. and we've seen interest rates move off a bit and i remember of course the failed test to close above 507, which is the high yield close thus far for a

2-year note and that was on july 6th. it had an intra day at 5.11. that failure has changed the complexion of the market even though inflation is sticky in many respects, they still seem to have a hard time jumping over levels that have been benchmarked at key cycle high yield closes for quite some time now. becky, back to you >> rick, your control of every movement is amazing. you remember it was on a thursday when they touched that point. it was back to july 6th before that when we saw these high points you are the man. thank you, rick. >> steve liesman is here he's got more on this right now as well. steve, what are you thinking >> well, waiting for some kind of pop in the jobless claims, becky, but we're just not getting it 228. it was on the way up i was like we're finally getting

weakening in the jobs market not happening. i was trying to see if there was extenuating circumstances. the summer can be a little squirrely when it comes to this data you used to have the auto shut downs but now the autos seem to be on their own rhythm because of the increase of production, trying to catch up you do have the strikes. 228 is low we finally got a little bit -- it's not like i want this to happen but it makes sense for it to happen, some increase in continuing claims but still at a modest level suggesting to us that those let out of the workforce or lose their jobs are finding jobs elsewhere because of the tight job market. i didn't like the prices paid and received numbers in the philly fed, you had a decline in the sub index but an increase in prices received. >> which one do you think is right? >> i think you have a little bounce around from oil prices, a bump up in june so it could be

very sensitive to that right there. >> let's talk a little bit more about a new data point you've got for us, the latest installment of your all america survey >> yes did we want joe to make a joke or -- >> um, i don't care what athletes think how's that >> 20 years, 20 years. americans giving president biden ever so slightly higher marks on the economy and giving the economy somewhat better marks also but republicans holding double-digit leads when we asked which party is better to handle economic issues. cnbc all-american economic survey president biden's overall approval rating is unchanged but the economic approvalrating rose 3 points, disapproval declining by 4 points. the result, biden is a little less under water on the economy from a minus 34 a years ago to minus 28 last quarter, now he's minus 21

one of the biggest improvements came with democrats coming home. their plus 16 points in the year, you can see from those in the wests are menwest, men and retirees they were minus ten on his economic stewardship the problem is republicans are seen as better to handle key issues than democrats. who is best to responding personal financial situations? democrats leading on making housing and health care more affordable a majority of americans believe that government spending is the top reason for inflation, only about a third blaming corporate profits and less than one in ten finger wages maybe some success here to sell

bidenomics all we know at the moment is that the public feels a little less bad than they had before. a couple of interesting tidbits here the reason why republicans lead on those issues is because republicans are ver confy confi in their own party's to handle it democrats are not as confident in their own party republicans, 81%, something like that, think they're best to handle handle inflation only 57 of democrats ask republicans about the economy, they think it's terrible democrats think it's better than the raeshepublicans do but they don't think it as good as republicans thought it was untrump. >> maybe that ties into a quinnipiac poll that said 47% of americans said they would consider voting for a third party in 2024. >> that's the two candidates you're dissatisfied with >> there's a lot of sense of that in here

when we asked which party is better, what i didn't report is the percent that say that neither, neither is good there's a substantial chunk of each party that says my party's not good, their party's not good >> given the stock market and what happens with inflation, it makes sense he should have gotten a little bit better >> a little bit better >> i think, you know, i don't want to get started on anything but i think democrats are kind of in on the joke. you might be a democrat for a lot of reasons that might not be economy related. there's a lot of cultural reasons. some are so strong that you might do it because those things are much more important than other things where as -- >> right what we're doing at cnbc with our poll is focus on people's economic views we don't know where the cultural view is. it is true that if democrats want to implement their social programs, they'd better get

their economic programs right because they're not going to have the power to do so. >> it's the old argument i don't believe that trickle down is even a word but if you grow the pie, you do have to try to split it up better. it's not good to split up a smaller pie. that doesn't help anyone >> that is true. at least that's what the athletes think >> well, the really good ones. the second string all americans -- >> no, only first string a poll of a thousand people around the country >> all america >> there may be some athletes in there. >> when they talk to athletes about the fed, that is funny >> that's next week, joe >> oh. coming up, much more on the markets and a big move for a biotech company that we're seeing caalysater, you n wa wch or luisten to us on the cnbc ap

but stay tuned on your tv. please don't cut the cord.

we going to go for an update on a biotech stock getting crushed this morning >> andrew, we're watching a huge

move lower in vir biotechnology, which just resumed trading after being halted for pending news. the stock is now down 41% premarket, just around 450,000 shares of volume the immunology company reported trial results for experiment an treatments for seasonal influenza prevention which did not meet benchmarks for efficacy at the primary or secondary level. it was a roughly $3 billion market cap company and you can see now definitively lower we'll keep an eye on this. trial results talked to seasonal flew enz a treatments did not yield out. >> thank you, dom. breaking news on that. and shares of netflix under pressure this morning. the streaming giant posting a mixed second quarter revenue and subscriptions rose as efforts to curb password sharing took hold but sales

missed what the street was expecting and third quarter revenue guidance below consensus all. overall, netflix seeing declining revenue. it says it expects to see a boost in the second half of the year that stock is off by 6 1/3%. >> the business impacts of that product experience will roll in over several quarters. so it's not an overnight kind of thing because in part the interventions are applied gradually and in part because some borrowers won't immediately sign up for an account but will do so next month, three months, six months or maybe even longer down the line as we launch a title they're particularly interested in. >> according to the information netflix has recently told advertisers that 1.5 million people in the united states have

chosen the option so far we'll talk more about this throughout the day i'm sure. >> when we come back, united airline ceo scott kirby will join "squawk box" exclusively to talk second quarter earnings right after this at 87 years old, we still see the world with the wonder of new eyes, helping you discover untapped possibilities and relentlessly working with you to make them real. old school grit. new world ideas. morgan stanley. ♪ the thought of getting screened ♪ ♪ for colon cancer made me queasy. ♪ ♪ but now i've found a way that's right for me. ♪ ♪ feels more easy. ♪ ♪ my doc and i agreed. ♪ ♪ i pick the time. ♪ ♪ today's a good day. ♪ ♪ i screened with cologuard and did it my way! ♪ cologuard is a one-of-a kind way

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welcome back i want to get over to phil lebeau who joins us with a very special guest this morning >> andrew, thank you very much let's bring in scott kirby, ceo of united airlines joins us from

the company's headquarters far better numbers than you reported yesterday you raised your guidance for all of 2023. we talked about how you've seen no slowdown in demand. do you look at this setup for united airlines, do you expect this to continue all through 2024 or at some point do you expect things may return to a more normal pattern? >> look, i think this is the new normal and really our strong results are a surprise to the street but they're not a surprise to us it's really a validation of the united next strategy that we've been talking about for a couple of years and the strategies internationally have reset the industry to a different level. we expect to grow margins next year, exceeded our guidance this year it really is about the structural changes coming out of covid. >> you talk about the structural changes but at the end of the

second quarter particularly with your hub in newark, you guys basically had a schedule meltdown and i bring this up because i know it was in your results and you factored it into the final results, but a lot of people looked at that and said wait a second, scott kirby made it last year we're going to be ahead of the game, not let these types of meltdowns, schedule problems happen what happened? how do you avoid that from repeating in the future? >> well, we had really bad weather in newark at the end of june we had a four-day stretch where the airport departure rate was reduced by 58% airlines just aren't built to have your largest hub at a 58 reduced departure rate for four days but the important thing for to us do is we are going to have worse weather in newark and other challenges is figure out how to operate for our customers. the level of communication with the faa is better than it's ever

been last weekend we had worse whether in newark and we were able to plan for it and rekof qui recover quickly and the level. cancellations is 77% down than what it was in june. >> is this the reality in the airline business that you have these massive storms that pop up or extreme heat and does that mean you have to change how you plan and be more pro active a little quicker >> the short answer is there are infrastructure constraints in the country and in the aviation system, and i think in a lot of parts in the country we're at the maximum of what we can fly effectively. take newark as an example. there's one set of parallel runways scheduled for 40 departures and arrivals. that's a flight every minute and a half that's the most you can handle there. the only way to grow is to grow with gauge

there's going to be a constraint for the whole country in terms of it's an infrastructure constraint on how much growth can happen in the aviation system >> i have to ask you about the new pilot contract you have a tentative 35 to 40% cumulatively over the life of the contract this wage increase here, i know a lot of union members will say, look, it's long overdue, but do you look at the wage inflation that is out there right now not just for united but for the airline industry and say, okay, we've seen this before, then we expect things to come back to a more normal basis in the future? what's your perspective there? >> look, this is a win-win, and i'm really excited to deliver industry-leading contract for our pilots i committed to them from day one that we were going to give that to them, and i'm glad to see it across the industry. what airline employees did for the country, for the world,

going through covid, and to see on the other side that we've made it through that crisis, and we're able to deliver for our employees and still produce record margins and deliver for investors, for our customers, is really encouraging and this sets the stage for united next, and united next is the most growth any airline in the world has done in history in absolute growth and making sure we've knocked down a bunch of those barriers to make sure we can grow and execute effectively and implement united next, which all of our employees are excited about. >> and united next is part of the expansion for your trans-pacific routes would you add even more if you had more aircraft, scott >> i wish we had more airplanes. we're the only large airline in the world that didn't retire wide bodies. that's part of the reason we're outperforming as we see a strong international environment, which we expect to continue at least through the decade i wish we had even more. we didn't retire any in fact, we have about 30 more wide body aircraft than we had when covid started we're the only airline in that position, but the international

environment is just so, so strong and the supply constraints are so big and so long-lasting for our competitors that we'd be flying every airplane we could. we're excited to at four new routes across the pacific. >> scott kirby, ceo of united airlines, scott, thank you very much for joining us today from the company's headquarters joe, i will send it back to you on a day where united, coming off of yesterday, where they reported better than expected earnings, more bullish commentary about the outlook >> yep i remember that weather that scott was talking about. 58% fewer departures i remember it. scary. my dogs remember it. coming up, what to watch ahead of the opening bell on wall street. well, duh. "squawk box. but first as we head to break, check out the shares of carvana. investors cheered a debt restructuring agreement. ceo ernie garcia joined jim cramer on "mad money."

>> i'll get some credit to our lenders that we worked with. i think they came in looking to work with us to find a solution. they recognized the progress was happening in the business, and they saw there was an opportunity to do something positive for both of us, and i think we were able to find that togetherani inth w, d thk atas the key that i think made this a bid easier

just a little measore than a half hour from the opening bell. the recent rally has our next guest saying that markets are in a melt-up mode we want to bring in chief investment officer from verdon's capital advisors meagan, you think we're in a melt-up. you think we're in the middle of this you think it continues >> i think that it could continue a little bit until we get some more clarity out of the federal reservation but this is a concerning rally that we have seen it's been very concentrated. it's basically pricing in perfection from the earnings standpoint you can see that today with the decline after some disappointments yesterday. we're not buying into this rally. we're more concerned that the economic outlook isn't being reflected in the current prices and we're a little bit more cautious here. >> what concerns you what's the downside risk scenario that you're thinking

about? >> so, we still think that a recession is likely and we think investors got a little too optimistic that we can have this perfect soft landing scenario. so, we're concerned from the economic standpoint in the second half of this year remember, the tightening lending conditions and then the tight -- i mean, monetary policy, that always acts on a lag, and typically, you see recessions do occur after that we're looking for recession in the second half of this year going into 2024. we don't think the market's reflecting that economic downside we also don't think the market's reflecting what the fed may do i think what you're seeing is actually going to scare the federal reserve next week and i think the market's not pricing in the chance that they can come in with a pretty hawkish hike next week. >> meaning they hike and say a lot of things that lead people to think there's another hike behind that? >> and i think they're walking a very fine line where they've done a lot of work on inflation, it's starting to do what they want it to do, but again, this

rally in risk assets, that can cause some of the work they've done to be unwound in the second half of this year, so they have to be careful with how they articulate that next fed hike. >> you are still very heavily overweighted in cash at this point. is that true >> yeah, we do have a nice positioning with dry powder so that we can put to work because we think there's a decent correction headed our way in the second half of this year in the market, and we think there will be better opportunities to get into this market we're not buying into this momentum-driven rally that we've seen >> if that's the case, if there is a serious pullback coming, how big of a pullback? you think this gets you back to what you could have bought at the beginning of may, the beginning of march, the beginning of january how big of a pullback are you looking for? >> we think we could get between a 10 and 15% correction from here and that's taking into consideration that we think the p.e. multiples have gotten way too stretched here the earnings expectations for

2024, we think, are too stretched, given our expectation for what the economy's going to look like so we think we could get 10, 15% correction from here >> okay. megan, thank you for your time today. >> thank you we got quite a bit of time left to talk over a few things, get a final check on the markets, look at the futures, which even the dow has moderated its gains and now the nasdaq has worsened it's down triple digits with some weakness that we're going to see in tesla and netflix. the s&p now down about 11. the dow, that would be the ninth straight day of gains ifit wer to close in the positive, in the green. ten-year is now 3.8% two-year, 4.8% they're kind of moving like a point away from each other with that inversion take a look at oil it is above $70 easily now above $75 right now. so, i have been thinking -- i almost said at the top of the show, well, it's humpday and we only got a couple, and then it

finally dawned on me, is today thursday >> you missed a day. that's what happens when you have a day off in the middle of the week >> i'm not sure i like that because i still got two left, and it didn't feel like a day off. like two mondays >> like taking a nap in the middle of the day. >> oh my god two fridays too. >> i like that >> make sure you join us tomorrow "squawk on the street" is next see you tomorrow it's thursday. ♪ good thursday morning, everybody, welcome to "squawk on the street," i'm david faber with jim cramer. we're live from post nine at the new york stock exchange. carl has the morning off let's give you a look at futures this morning as we get ready to trade one half an hour from now. i don't know i guess that means we're going to be down just cross the dow off why do we bother >> well, because atavistic i meanna