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 mean, nasdaq is what matters

>> while our viewers look up the word, atavistic, i think that's a perfect word, let's give them a road map we do have other things we're going to talk about. tesla is under pressure in the premarket, despite what was a beat on the top and bottom lines. >> don't worry i got a whole rap on that. >> i bet you got a rap on it netflix cracks down on password sharing. again, though, that's not also down in fact, it's one of the biggest laggards >> i have a rap on that. >> how about j&j >> i do. >> earnings beat, hikes its full-year guidance as medical technology sales surge jim's been talking about j&j a bit on the litigation front. >> i knew it was going to be down it's down big. >> let's start with tesla. lower in the premarket quarterly results overshadowed by a decrease in gross margins of course, many of our viewers are well aware of the price cuts that took place on last night's earnings call. elon musk said investors shoung about tesla on a long-term

basis. >> the short-term variance in gross margin and profitability really are minor relative to the long-term picture. autonomy will make all of these numbers look silly, so you know, i strongly believe tesla is a big long-term investment, and don't sweat it when things go up and down in fact, if the market panics, buy. if the market's a little too exuberant, sell at the time, but just generally, i can't put it -- we'll deliver over the long-term. we can't control the short-term. and these -- the autonomy is really where it's at >> awe utonomy is where it's at something he indicated to me in our interview on may 16th. some time ago. but this move to full self-driving, when it occurs, and the ultimate accretion of

revenues that will occur as a result of what he believes over many years is a fleet of tesla robo taxis, essentially, and they'll take a piece of that revenue stream give me your overall take here on the quarter, jim. >> okay, so, i think that when you have the best-selling car in europe, when you have an aggressive ramp for the cybertruck, when you talk about how people are going to use your full self-driving next, you know, actually, i don't know, sell it to others, because it's so much better, the same way they did the charge. but you talk about how you're going to have to spend more money on a super computer. people say, you know what? this stock has run enough, so i'm going to take profits. and it tends to be a one or two-day affair if that happens but holy cow, you know, once again, long-termers have to hold on to it a lot of it is in keeping with what you said in your -- what you had with your interview. he's just a visionary. he's not a one-quarter visionary, and there wasn't anything in this that i didn't think made it so that 2025,

2026, 2027 are amazing years for this thing so, if you want to sell it, fine if you feel like the market should be broadening to other areas. david, he is every bit as thoughtful and as inspirational and as forward-looking as indicated in your interview. >> they do talk about full self-driving, and of course, he even acknowledged -- he did during our interviews as well. i know i'm the boy who cried fsd, but i think it will be better than humans >> it's ten to one >> that's what he says will be the case and by the end of this year, he says they'll be better he says he's been wrong in the past, he could be wrong again, jim. but that's a key part of the investment thesis for some is that, again, that new revenue stream that will come, people pay $15,000. right now, they don't book at all immediately for full self-driving when that take that package, so to speak, but that

it will create another revenue stream, which is why he says they can withstand taking their margins down over time in fact, as he said to me at the time, i could sell the cars virtually, making very little profit, but over time, i still will make an enormous amount of profit, but that's a long-term belief >> you have to understand this guy is ahead of everybody else i mean, when a ceo actually comes on and says, it's ridiculous that we even have free cash flow, but we're making so much money, it's like we can't hide it. he doesn't ever -- there's a moment, i think, the finest moment on the call is when he actually praises nvidia and says that he has to build a super computer but because nvidia sopped up all the gpu cards, he has to, like -- he can't get what he needs from nvidia, and he is not -- >> to your point, they're spending a lot of money on a.i. as well. >> yes >> that's why i think you said -- i mean, free cash flow is still there despite that. >> right and that's amazing but he has so much free cash flow, and the solar story is still very good.

there are always going to be people who happened to sell this stock down, and i say, go sell it >> the multiple is still incredibly high. >> right that's why it's easy to take it down but the billions of dollars, $25 billion a quarter, and by the way, he has gap income he has real gap income so, i found the quarter to be excellent. i keep coming back to your interview because i think your interview was basically saying, look, there's everybody, and then there's me, and i do it differently. it's harder to pin him down to the way we look at stocks. but i just felt, once again, it was a great quarter, and if you want to sell it, go sell it, but probably look back -- >> not to put too fine a point on it, but let's take a listen musk did make it clear, that's sort of the same theme when we did talk back a couple months ago. take a listen. >> tesla is the only car company selling cars where we believe the car is capable of achieving

full autonomy with a software update, so the value of a fully autonomous car is, we think, perhaps five times more valuable than a non-autonomous car. >> why >> well, the utility of a car, typically, a passenger car, is going to be maybe 10, 10 hours a week >> yeah. >> we didn't let him fully explain. that's the utility of a current car, and then, of course, with his car, it's going to be a lot more >> the theme of what he is saying is that the way you should look now versus what's going to happen is, first of all, you're not going to be behind the wheel second, we're not going to have -- cars are going to be worth much more because it's going to be used constantly like an uber. >> you don't question, at all, the valuation or the -- >> look, maybe i'm being too -- >> we were nearing a trillion dollar market value, backing off a bit. we'll see how the stock goes >> i think people are going sell

it, but i think when it comes back to longer term stories, i'm not going to be as concerned about the valuation, given the fact that i believe him when he talks about self-driving, which is a huge part i believe him when he talks about solar, and i believe him, the need to build out a super computer because that's what jensen huang told me these are situations that are really very difficult for the viewer at home to understand there will be institutions that will say, listen, i'm not paying that multiple, and then there will be people who said, i heard him say this to faber, i saw those numbers, i can't sell this if i sell it, maybe i miss -- i dodge a 10% decline, but boy, i will be very upset when the stock doubles. >> one other thing just quickly before we move on. he did also say they're engaged in early discussions with a major oem about licensing full self-driving >> that was the most important thing. is it volkswagen i don't know >> i don't know. and again, early discussions it doesn't mean anything is

here >> can you call and find out >> i'll try. >> call him. he wouldn't say who. >> i can try and find out. >> it was -- i loved the conference call. it's so different from when he used to promote himself. it feels a very strong call. >> and some interesting stuff on the macroeconomic environment, which we'll get to in a bit. but let's move on to other movers this morning. netflix is lower in the premarket. quarterly revenue coming in shy of what most analysts had been expecting. that, despite the company adding 5.9 million subscribers, was helped by that crackdown on password sharing, but jim, the key question here is, you added that many subs, why was your revenue essentially flat quarter over quarter >> that was the -- that was really the analysts were mostly focused on that. i think that -- and it's a legitimate question, because they do -- they should be making more money but they didn't really have growth in the americas what people missed on the call that i thought was really

important was they said that a person who is ad tier is worth a great deal more than a person who is just regular. regular user, doesn't take the ads. which means that they can raise price, which would drive people to the ad. they had no money, really, they weren't able to get the ad revenue in this quarter, but if you look at year two of where they are, you're going to see that they are able to put the big price increases now that they've -- this was just a password-sharing quarter and they didn't want to raise prices while they were doing that if you can raise prices for your regular tier, no ad, then people switch to their ad tier, then the leverage -- everything explodes because the person on ad is worth so much more to them >> but let me understand why didn't they see any of that take place during this quarter >> that seemed to me to be -- they're not underpromising,

overdelivering they just didn't have the technology yet >> to deliver the ads or what? >> no, in the password share they're selling to -- they're right now talking to the consumer packaged goods companies. they don't have it yet they don't have the numbers that they need. what they're doing is showing them, look, you want targeted? here's the product that we have to give you. i'm being as random as they were on the call, but i think the major takeaway is, they can raise price, and anyone can raise prices, amazon, costco, and netflix. that's all you need to know. so, again, you can sell your netflix. >> what am i paying for a company that grows 3%, jim you were very positive you continue to be >> i believe that the ad tier, which they down play, is gigantic >> you do? >> yes, i do most important number that came out of that conference call, 37% of all viewings is now streaming. if you can imagine, you can offer procter & gamble a particular series of ads around the world, and now they're showing you exactly where people are watching and why

and you can target those people. why would you ever put a linear ad in anywhere if you have 37% of the people are streaming, it was an amazing call now, they don't have read anymore, and i think reed's voice needed to be on the call >> well, they have him still he's still involved in the company. >> they have great people. i happen to love ted >> ted sarandos. >> i think he's fantastic, but i think the main people, the undercurrent that people are missing is they're going to drive people to the ad tier and make a ton of money in the ad tier it just didn't happen this quarter. >> let's take a listen, actually, to what peters had to say about password sharing on the call greg peters. >> we anticipate pulling both linear and digital dollars but where we are today, we're much more targeted at that linear brand-focused tv advertising that's a sweet spot that we can speak to right now we're definitely building capabilities and have an aspiration to build capabilities that over time will allow us to expand that envelope, but again, prize number one, first, is to

go after that brand advertising. >> that's it, david. that's good. that was the point i'm trying to make here, which is that they're going to go after procter and coca-cola, and they've got data that now looks like what an abc or cbs would give them they didn't have that. when you're up in front of the advertisers or ad firms, they're going to say, listen, you want korea? we'll give you korea you want germany we'll give you germany >> two of the more important companies that we follow and certainly in terms of the sentiment in the market today are down rather sharply. >> they are. >> and you're positive on both >> i'm taking more than a day view and i'll tell you, i've been struggling to be able to come up with the analog that will make it so our viewers know that i'm not just smoking dope here adobe was at $480, comes in, spikes to $510, then does the

pirouette, goes down adobe is your analog the short-termers say, this stock's running too much i want to get out. but the people who are considerate realize, i'm finally getting my chance to get into tesla and netflix at lower prices these, by the way, these tend to not reverse on a given day goes down today, goes down tomorrow, usually a three-day reaction period. but are they solid stories where everybody raised price target? yes. >> right >> there's no price tearget decline of anything else >> no, generally, i'm looking at jpmorgan notes, strong execution. >> that was a good report. >> yeah. executing in the global paid sharing rollout well >> you correctly nailed what people are going to sell it for. >> i talked to a couple this morning. why were revenues kind of flat if subs are up so much they missed expectations >> but peters is saying, look, these guysare so not -- they'r more interested in talking about what's selling where and who's

doing what by the way, david, strike, came up a little bit because jessica reeve called in, she was the one asking the questions and the strike is, they're trying to get the deal done. but let me just say that if you want international program, i mean, people just have -- >> they make a lot of their stuff internationally, and that potentially seen as a benefit, although, frankly, they are still moving free cash flow ahead this year, potentially, but taking it from next year because they still are going to be hit by it if this goes for a long period of time, the strike. >> if i were a company that is involved with linear tv, i would be very concerned that they were going to be now, that it's 37%, that the discussion is going to be, guys, i would love to advertise my new product with you, but netflix has a deal that they're making with me that's in a hundred countries, and they're offering me that i can sponsor the hottest program in the world, and it's just worth it for me, so i got to take a hundred million out of your budget >> one key is that netflix is making a lot of money on

streaming. nobody else is >> let them sell it. it's fine. don't feel bad for the people who sell now they probably have a nice gain but remember adobe and remember there's a level where you got to come by and buy. >> we got a lot more earnings to get to this morning. taiwan semi, jim says. i'll add a johnson & johnson in there. >> travelers next? some people would say that the key to this market is horton >> horton hears a who. >> couldn't resist >> no, i can't those were such good books we got a lot more "squawk on the street" straight ahead ♪ the biggest ideas inspire new ones. 30 years ago, state street created an etf that inspired the world to invest differently. it still does. what can you do with spy? ♪

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discover financial leading the s&p laggards >> there's real hair on that >> yeah, and you can see netflix, which we spent some time on. a lot more to get to, including jim's "mad dash" as well we got a countdown to the opening bell that's a little bit more than ten minutes from now conventional thinking delivers conventional results. at allspring, we break away with purpose. harnessing data-driven insights and boundless curiosity. we dissect the market from every angle. helping to build portfolios that redefine what's possible. because investing isn't one size fits all. allspring. purposefully divergent.

all right, we're going to do a "mad dash" now we mentioned j&j we'll just do it here. we're standing, so that's always nice >> historically, people trade j&j wrong. they see the numbers, and they

say, well, much better than expected who does this thing? i don't know robo individuals then they get on the call and the call is very cerebral and you get very good numbers and a lot of the things they're doing, especially med tech, very strong, but they have great cancer franchise, and then, david, there are two ethereal issues that people are trying to get their arms around. they brought kenvue public their consumer business, they're doing an exchange offer. people have to understand how that works and whether johnson & johnson is going to buy back stock from you >> they still own a lot of kenvue but they're not going to. >> that's really big the other thing that they have had a very hard time talking about in any way because it's a black box is what's going to happen with talc >> the litigation. >> they lost a big decision the other day. >> right, their production of talc and the claims that it has asbestos in it >> i don't know where we got this this isn't even right. i don't mean to denigrate.

the stock is holding in after jumping up, and what i want people to take away is that if you want to view this as med, as a pharma, it's the fastest grower if you want to view it as med tech, it and abbott, which had a very good quarter -- >> can we go back a little bit longer, five years, maybe? >> it's been a huge underperformer that's where i'm going it's been a huge underperformer even as it has great technology. >> that's not great, jim >> well, this isn't great. >> no. that's not great either. >> no. and this is a plaintiff's bonanza. they're offering $8.9 billion after they just lost this suit in alameda county earlier this week the plaintiffs may not be satisfied, and the judge that they're in front of is a no-go judge. they don't have to appeal if it doesn't work >> why own it? why own it >> because it's -- okay. that's a great question. one, it's one of two aaa balance sheet companies in america, along with jpmorgan. and two, it's got the strongest

drug portfolio other than eli lilly. >> yeah, other than eli lilly, which trumps it in market value, by the way >> eli lilly, people are putting out a $42 billion number in sales in ten years the largest drug in history. that's a diabetes and weight loss drug. >> and it most likely would be covered by insurance >> they're going to take it. >> and by medicare >> yes they will pay for it right now, it's very controversial. >> if you take people's weight down, there's so many other things -- beneficial things that happen >> blood pressures drop dramatically >> you save the health care system money that's a five-year that i like, jim. >> david ricks is fabulous he's so nonpromotional he's fabulous. >> where was the person to tell me, get rid of j&j and buy this five years ago >> we own both j&j and lilly for the trust, so i feel it's me let me see one other thing about

lilly. there's a sote voce people of lilly that people aren't talking about. heavy drinkers don't like the taste of alcohol after they take this drug. if you can't get off alcohol -- >> is it really so bad for you really not even a glass of wine or two? so bad >> it's tobacco and then alcohol. >> have you cut it out now suddenly >> i own a mezcal company now. i'm mr. mezcal come on. i got a product to sell here >> i wouldn't say that it's so bad for you then that's not good sales. >> well, i mean, it's like diet coke it's not as heavy. no, i'm just saying if you're a heavy drinker, that's a very bad thing for you. that's all i'm saying. >> there's a possibility of yet another indication so, this thing not only will -- will solve obesity but also potentially alcoholism >> i'm just telling you what the doctors are working on in terms of big drivers heavy drinker trial and blood

pressure trial >> that's a stock you want to own. >> have you ever met david >> we got to go. >> you can't get him to be promotional no matter what >> david ricks yeah opening bell about four minutes from now you can catch us any time, anywhere we have a podcast called the "squawk on the street: opening bell" podcast.

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>> announcer: the opening bell is brought to you by nuveen, a leader in income, alternatives, and responsible investing. welcome back we got an opening bell a minute from now quick turn to you and ask you, what is the key to today's trading? what we like to call the key to this market. >> i kind of get away from the netflix, tesla stuff that's all really important, but dr horton is the largest home builder in this country and they reported a number that was so much better than what i thought you could do that what it shows you is this is still the segment that the fed has to worry about. >> we're going to end this run in the home builders >> because they're not immune to mortgage increases like we thought. >> usa, usa, usa

>> percent of sales right now, new home sales, are so much higher than they have been >> these -- the main thing they need to know, that's really important, is that home prices are up 40% since 2019, and that's the magic number that the fed is upset about 40% increase, and this says, listen, we are going to have more homes, but you're not going to get that price cut to come down >> usa, usa, usa >> you heard the opening bell. there's a spac this morning. over at the nasdaq, the nerve drug company ani pharmaceuticals. all right. >> i was going to give a different key because of taiwan semi >> let's stay on dr horton we'll come back to tesla and netflix. we've hit j&j. dr horton. give me a little more here as to

why you're very happy with it. >> first of all, this is, at this point in the cycle, the tightening cycle, this stock should be the worst. it's the largest home builder in america and when you have a tightening cycle that's really aimed typically at housing >> right >> instead, if you take a look, it's up 50% for the year they have almost no cancellations. they have raised revenue guidance dramatically, raised estimates dramatically the cancellations are down to 18% from down 24%, which is really remarkable. what i'm saying is that when you get a 1,400 basis point over consensus, this is one of the largest beats i've ever seen, and what it says is -- >> at what point do we finally start to see a turn in these home builders, jim again, it has been unexpected, i think, to some extent, given all the factors you just mentioned they had been the best-performing group or one of them for some period of time as i said during all that noise just now, percent of all homes,

new home sales, are higher than they've ever been, i think 30%, but that goes to, there's no inventory. >> there's no inventory. they talked about how there's a make good provision they can do if you have a high mortgage rate and you want to switch to them we have a fed meeting coming up, and there will be a lot of people saying, there's so much, woe is me, how can the fed raise? i'll tell you how. dr horton. because powell, chairman powell, is determined to make it so the working person can have the american dream of owning a house. up against that is the fact that they can't build enough houses and there's not enough inventory, so yes, you can make a strong case that you got to raise twice because of dr horton i'm just saying what the other side of the trade, of why the market is somewhat subdued is people worried about the fed don't read horton, then, because you're going to realize why they're afraid >> speaking of the fed, it might be a good time to listen to john gray do we have that?

blackstone did report earnings and as john typically does, he joined "squawk box" this morning, and he had some comments in terms of his expectations for the fed do we have those all right, let's listen. >> i think we're going to continue to see better than expected inflation numbers, but i think the fed, given what they experienced in the 1970s, is going to stay vigilant, and i think what that will lead to is a slowdown in the u.s. and the global economy so, i think we've got to anticipate that. >> thoughts? >> yeah, i think that's the problem. the fed wants to continue to try to slow things down, but i think they're going to have a hard time they have done it well in some regional banks where the regional banks actually have not done that well that's where the emphasis is in terms of the decline, but david, you were on the jpmorgan quarter. you were on the wells fargo quarter. you were on the bank of america quarter. >> yes >> they were all incredibly good >> they were, and the commentary around macro was good. around the consumer. >> really good >> didn't get a lot bad.

you know, goldman-sachs was not a great quarter yesterday, but even there, the stock sort of rebounded. >> there was verbiage by the ceo that says, listen, this is the worst it's ever been, can it get worse? >> and james gorman on the call or the interview he did with leslie picker, always quite positive you generally had a positive tone from the big banks, whether it's on the consumer and what they're seeing or whether it even is on the capital markets and what they hope certainly is a bottoming there in terms of both activity and m&a and things of that nature that can help them on the fee-based side >> and then we still have the tremendous travel and leisure story. now, people didn't like america as much, but delta was really good united was really good there's enough to make it so that the fed has to continue to do what it does, which is make things a little more difficult for the economy. not a lot, but a little. >> i did want to point out, you heard jon gray, president of blackstone, they passed a

trillion dollars under his management >> congratulations >> the size of these alternative asset managers and the growth that they have had in assets under management over the last, let's call it five years, truly astounding and they are such major players in our capital markets in every way across so many different asset classes just worth saying. you can see stock not doing much, down a bit after the earnings >> it's been worse david, china >> it's got a bigger market cap than goldman-sachs, just to put it in perspective. >> because it's doing better, you know babe ruth had a better year than calvin coolidge. china is doing one of these stimulus, a quarter of their gdp is housing they want it to be retail. they can't stimulate retail, so they have been stimulating housing, and housing's overstimulated >> also, they have a property bubble that's been bursting in china, and that's a real concern, particularly for many of the local governments that have used it to raise revenue by selling property to developers

>> right >> so, you do want to go there, jim, but you're right. they have not had the consumer ebul ebulliance that was expected after covid >> taiwan semi directly talks about weakness in china. remember, the chinese cell phone market was the market. now, apple's trying to frantically pivot toward india, but taiwan semi was a down beat call and the thing that was really a challenge for all of us americans is they said it cost 50% more to build a fab in this country than -- a factory in this country >> and they're doing that in arizona. >> and they just delayed it until 2025 why? we don't have enough people who are qualified to build a fab in this country they have to fly them in from taiwan >> i just want you to say that

again. or i will say it we do not have enough qualified people to build the facility needed by taiwan semi in arizona. >> that little country >> so, they have to actually be brought in from other places >> they're flying them in. >> how are we going to build all these other fabs that the chips act is subsidizing, helping to subsidize? >> well, madam secretary, it's going to be very hard, gina raimondo she's been the chips person. >> can we give out more of these h1b h1b visas? >> they have to. i was so discourage bid the call to find out we were so much more expensive and we don't have the people in this country to build. we fell behind in this country gina raimondo is an american hero but we don't have enough engineers in this country. a little country like taiwan has so many engineers. >> these are enormously expensive facilities with obviously incredibly complex array of technology inside them

in order to make chips that have -- that are literally atomic level in terms of their -- >> it's the end of moore's law, and chips get more and more powerful, get smaller. that law is dead if people read through this to nvidia, they're wrong, because the problem is that taiwan semi also makes cell phone chips and those are doing quite badly, and they make chips for pcs. >> taiwan semi makes chips for everybody from the highest end, nvidia, down >> they make graphics cards for nvidia and we know from musk that they're sold out of those. >> those graphics cards, those gpus, are what fuel large language models and this new advent of generative a.i >> right oh, man, it's unbelievable generative a.i. -- at one point, they called it a frenzy, which therefore made it seem like it was a bubble the problem is, there's only one company that had the vision to

be able to see that it was important to be able to do with gpus and that was nvidia they knew that why, david? because they were a gaming company, and the gamers always like gpus. think never liked the cpu. cpu, by the way, being the chip that's in your pc. i don't want to get too -- >> right but the gpu is what is fueling the calculations that need to take place >> yes why people like salesforce it's why there's alphabet, some good things to say david, i don't want to -- we can't lose sight of the fact that the market's up and broadening out, which is what everybody seems to want. >> even with netflix down 8% now. >> it's broadening out >> losses in netflix have accelerated, at least in this first ten minutes of trading >> they did not tell the story the way i thought they should have, which is that every single person on the ad tier is worth a lot more, but they weren't ready, and they too are just not -- they're just not hype guards these are wonderful companies. >> i did want to hit a stock

that we saw was at the top of the laggards list on the s&p, and that's discover financial. i had a quick look here, jim, we obviously a lot of this is done in realtime here they're talking about -- i mean, best i can tell, let's see net chargeoffs were 3.22%. that was 142 basis points higher >> it's the misclassification. >> right >> vision for credit losses was $1.3 billion that was up $756 million from the prior year but again, there is this -- getting around mid-2007, discover incorrectly classified certain credit card accounts into our highest merchant and merchant acquire pricing tier. that's since mid-2007. that said, the cumulative impact to beginning retained earnings as of april 1, 2023, was a decrease of only $255 million. that's over a 16-year period impacting that income as well, hardly at all. >> reputation risk >> you do also stop the buyback. >> that's what made me think,

this is far more serious >> they do stop the buyback. companies decided to pause while they have internal review. risk management, corporate governance >> that was discouraging on the flipside, zion, which a lot of people thought was going to be bad, actually bested that was a regional that people were concerned they vested. and i think that's important you know -- >> can i -- >> the banks are -- >> i want to come to a name that you follow closely estee lauder 4% today at barclay's, there is a downgrade. they talk about reinvestment ultimately pressuring median term margins they're also wary of a more muted recovery in china and on the heels, they say, yesterday's disclosure of a cybersecurity incident, which we didn't get to

yesterday, they said pause and is expected to continue to cause disruptions to parts of the company. they can't help but worry these issues are broader and more systematic than originally described. >> the ceo thinks it's a hard time one of them is that he did make a big bet on china china's not coming back. it's important he told all the analysts, two-quarter issue, they continue because he's so great. my trust has owned this forever. a lot of money, we sold it high and bought it back is this a j&j situation where a -- well, j&j's going to come back estee lauder comes back but it's going to be two quarters because china is not spending like we thought. and that is vital. i don't want people to give up on fabrizio. i think he's one of the greatest ceos of all time, but if you decided to be involved with china, you got caught up in covid, you got caught up in the heinan, which is their riviera you got caught up in a business

they had of going to korea and then sending cosmetics back and selling them in china. if you give up on fabrizio here, you're making a mistake, but it's not going to be this quarter. >> you're not concerned about this cybersecurity issue they disclosed yesterday? i mean, so many companies, obviously, it's almost every day we get one disclosure or another. >> absolutely. if you're going to sell it, what you're saying is he's lost his way, and i got to tell you, fabrizio freda is still one of the great ceos of our time i totally understand why you want to sell it because this quarter is bad this quarter's bad next quarter will be bad but not as bad that's the way it's going to be. remember, it's like people say, oh, tesla, quarter's been good that's different from this tesla's quarter is great estee's quarter will be bad. numbers will come down if you can't handle that, you can't take the pain. i'm going to take the pain and buy the stock maybe $175, buy more >> to the point we made during the "mad dash," jim, j&j shares are having a very good day in

contrast to much of the year, up over 4% now, j&j >> they handled the stock dipped down when they started talking about some of the litigation if they get past the litigation, goes to 180. >> it goes where >> 108 if they can just get the plaintiffs to agree to the $8.9 billion offer and you get rid of the talc issue, $180. they have the fastest growing pharmaceutical business in the world, and they've got the fastest-growing med tech business in the world. i don't mean to bend over like this >> that's okay >> i do my best to hear you. >> we apologize to all of our viewers sometimes for just how loud it can be here at the new york stock exchange. >> so that we can't hear each other. i can't hear david, i'm not a valuable person. >> the bell is ringing everywhere jim, before we go to a quick break, anything else that you want to hit this morning that we haven't referenced yet obviously, tesla shares hanging in where we thought they would be, down about 4.5%.

>> i think we should hit ibm >> oh, yeah. >> okay, so, ibm, i like the quarter very much, because there's -- their hybrid cloud plan is working. the analysts don't even seem to focus on it anymore. and then other people say, listen, it's all done with mirrors, by ibm had good cash flow people were willing to talk about -- tolerate that this quarter wasn't perfect i like that. i want to go over -- these are different things i mention horton because of the fed. i mention ibm because people have given up on ibm and maybe that's not -- give up on 4.7% yield that actually kept the free cash flow number. >> they did. they stuck with that free cash flow number because there had been questions about that. free cash flow was $3.4 billion year-to-date net cash from operating activities is $6.4 billion, but they got a long way to go for the rest of the year that said, they're sticking with it >> i know, i know, but i think to sell it here may not make all the sense in the world

you know, david, i'm looking at tesla down 13%, and i'm saying, people want to sell tesla. they should go back and listen to the conference call, which was quite subdued, musk was subdued, but he's really not he's just really thoughtful. it's not like the old musk >> he's going to always surprise you. he is thoughtful, but he can be both he can be thoughtful and also, frankly, obnoxious right? >> no doubt about it he's been obnoxious to me. it's all right i'm jimmy chill. >> yeah. >> but didn't you feel that his -- talking about self-driving, and there is a company that may have to use his technology just like all the charging companies >> yes, yes, yes >> people are going to say, i can't believe it buy the tock >> we have fleets of robo taxis made up of teslas, this will hit that market cap number >> if i buy a car -- >> that cathie wood sees if you get the fleets of robo taxis. >> and if netflix drives people toward the ad tier, stock goes

up >> man, you are bullish. >> i'm just -- i happen to like great american companies and we don't celebrate it. and i'm determined to change that >> you do. every day, you try to change that >> executives. they're brilliant. >> we're not cheerleaders, man we're here to tell it like it is >> i recognize greatness when i see it whether it's in football or this we got guys like jefferson look, aaron rodgers, okay? there. i got guys better than aaron rodgers. >> can't wait for hard knocks, by the way, focusing on my new york jets. let's look at the bond market, check out how treasurys are faring this morning. we talked about the fed. there's the yield. you can see the ten is 3 .82% we're back right after this.

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up yet again check that market value. >> miracle story. >> very close to a $3.1 trillion - >> interested in a.i they've been doing a.i. for years. >> that he been doing a.i. >> they were a.i. before a.i. >> we'll get stop trading and if we have time we'll talk apple. back after this.

all right. let's get to stop trading. if we have time maybe we can get to ken view a bit from j&j stop trading. >> yes. >> the stock jumped, j&j stock jumped when -- because it was a great quarter -- when they announced that this exchange offer with kenview will happen in a couple days, not months overhang, and they're going to be able to dot biggest buyback the history i think. they can buyback all they want. >> explain what's going on >> j&j d. >> what's happening -- remember kenview was a large ipo went public sold those over the counter -- we're going to talk to the ceo in the next hour. j&j owns 89.6% of kenview. a splitoff or spinoff. they've got the split off route, exchange offers as you explained, jim, and so if you're

a j&j shareholder you have an opportunity to exchange some of your j&j shares for kenvue shares in a tax-free manner. >> they have to do it the right ratio. iff and dupont were able to do it right if they do it right j&j will be buying back an incredible number of shares so to speak and this stock is up big. just when they announced that this is going to happen. you have to ask kenvue what's happening, there are people who don't want to own kenvue - >> the tender could happen in the next coming days. >> coming days. >> that turned the stock around, not the pharma pipeline -- >> they usually give you some sort of discount to make it worth your while to do it. it creates a shareholder base for shareholders who want to be shareholders as opposed to you get shares an don't want them really and then sell them. >> i think you have to ask the kenvue ceo about the ratio

this is very -- for j&j. >> it is >> they can do a buyback and it's fabulous and j&j talks about that potential opportunity to acquire a large number of outstanding shares of j&j common stock at one time in a tax-freeh manner for u.s. federal income tax. >> it's a giant repurchase. >> that was a great -- joe is terrific, the cfo. >> what do you got coming up on mad tonight? >> sap a company, what happens, the stock goes down and then higher and then do a very good job. very good job. >> jim. >> medical devices >> if i don't see you enjoy the weekend. >> is tomorrow friday? >> abbott labs medtronic, ew. j&j and medical device that's what people are talking about. watch abbott labs. first really great quarter.

>> will do. >> since robert took over. no more covid hangover lots of good stuff to talk about today. >> okay. all right. jim kaymer, everybody. coming up, more reaction to results from tesla and netflix ept reke ihe

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. good thursday morning. welcome to another hour of "squawk on the street. i'm sara eisen with david faber, live for you as always from post nine of the new york stock exchange carl has the morning off take a look at stocks here in the early action mixed picture as the dow pushes forward up 220 points. s&p 500 unchanged and that's the story the nasdaq lags down, down 0.5% after high-profile names like netflix and tesla sell off. hard to call them misses i would call them blemishes. we are 30 minutes into the trading session. three big movers we're watching, start with tesla and netflix, both stocks are down despite posting beats on the quarter more in a moment on the bright side, johnson & johnson biggest dow gainer

delivering an earnings beat, hiking guidance on strong med tech sales and viro biotech down after the company's phase two trial for flu treatment failed to meet its main goals you can see what happens there with some of these biotechs when that happens. >> that can be a bad bad day as we're seeing we have economic data. let's goat rick santelli rick >> thanks, david our june read on leading economic indicators, down 0.7% and that means it's down 15 consecutive months, meaning, negative month over month change, 15 consecutive months in a row. this morning we had philly fed, 11 consecutive month over month changes in a row, and down 0.7, only since march down 1.2. we haven't had a positive number since february of '22. now for existing home sales for the month of june, let's head

east to diana olick. >> rick, existing home sales fell 3.3% in june from may to a seasonally adjusted annualized rate of 4.16 million unit, a deeper dive than the street expected, sales down 19% year over year the slowest june sales pace in 14 years it is about lack of supply 1.08 million homes for sale at the end of june, down 13.6%. at the current sales pace, 3.1 month supply six months considered a balance market between buyer and seller. that's keeping pressure on prices the median price of a hold sold in june, $410,200 the second highest price of all time, off less than 1% from last june. remember, this is a median so part of that is skewed towards what selling and higher mortgage rates keeping sales stronger on the lower end. real home prices measured by repeat sales of similar homes have been rising now for several months first-time buyers dropped 27%

from 30% a year ago usually 40% of the market. all cash sales rose to 26% because as the market heats up buyers need cash to be competitive. back to you. >> with rates so high. thank you very much. add in a few economic data points to the mix in the conversation today that we got, and, you know, rick mentioned philly fed it's worth diving in we knew the regional manufacturing numbers are weak this was down 13.5, 11 straight down months. something interesting is happening in philadelphia, david, look at the end of the chart. >> okay. >> so the current activity is the orange below, which is weak. the black is the future activity, which is really perking up in a surprisingly nice way what we're talking about, and this is a survey, is that 40% now of the firms surveyed in philadelphia manufacturing expect increases in productivity

over the next six months future new orders climbed, future shipments climbed firms expect to hire more in the next six months. it's commentary. can't read too much into one survey, but i thought it was notable because, you know, we're in this debate now of whether the economy is accelerating and seeing some strength, which is just odd and unpredicted because of all the tightening that's happened at the same time starting to see demand for labor cool off, jobless claims today came down came down by 9,000. >> has that philly fed number indicative of the future in the way it's predicted >> it can be it can also not be they're surveys so they're not -- it's not necessarily hard data, but you always look to the future and you look to the future of what firms are expecting and especially if manufacturing firms, which are

weak right now and feeling the heat, that is one part of the economy that has suffered under the weight of rising it interests, feeling better about the future is telling. the jobs market remains strong. >> it does we talk about the home builders and housing. interestingly, sara, love you to listen to two pieces of sound. one from elon musk on his call when he talked about the macro economic environment and then from my interview with bobby kotick, ceo of activision, both talking about a hard economic environment, as sara indicated, to predict take a listen. >> one day it seems like the world economy is falling apart and the next day everything is fine i don't know what the hell is going on to be totally frank. i wish i did. >> we think there's a lot of economic uncertainty and i think you've heard the fed say that they are focused on a 2% inflation rate next year i think that we haven't seen the last of interest rate increases and, you know, i think we have a

lot of concern about the economy, whether or not people have the ability to pay for software. >> it depends where you sit. if you're a video game maker and your sales boomed during the pandemic, they saw people at home playing video games, demand like they've never seen before and it's coming off and there's a give back. you're in recession and your industry is different and musk is right it's hard to tell what hell is going on because one indicator is good an the next shows that things are weakening just to show you how relevant right now it is of where you sit, las vegas sands reported last night, commentary from the ceo couldn't have been more bullish as far as what they're seeing in demand here's robert goldstein the powerful recovery taking place in macao in singapore is evident in our days and we believe there's still room to run in both of those markets an that was a china related business and asia related business, which people have been negative on. >> they've been concerned about

the willingness of the chinese consumer to spend. >> d.r. horton had pretty strong things to say about the health of the housing market. d.r. horton's chairman, despite continued higher mortgage rates and inflationary pressures, our net sales orders increased 37% as the supply of new and existing homes at affordable price points remains limited and demographics supporting housing demand remain favorable. whatthat shows there's supply issues in the housing market that has helped them. >> that's been the story all along. that stock has turned around and it was up in the very early going. up as much as 3% so d.r. horton shares have turned around here not certain as to why, but as we pointed out, the home builders overall, you can see it, have had an incredible move for some period of time, but because of the lack of inventory and new homes sales are a larger percentage of overall home sales. >> there's the weird covid

things happening and supply issues happening and pent up demand for travel and prioritization, all of that is making the macro economic data hard to read another one i was looking at, and i dug into this, ibm because that's always a gauge on enterprise spending, you get a good read from arvin who i spoke to about the results the results were inline. some say it's a miss it's a $100 million in the infrastructure business which is not the key. they matched in software and consulting that was important when he talk to crishna about the demand situation what he's seeing from corporate customers it was bullish, i see gdp, globally and the u.s., staying positive for this year and tech spending is 3 to 4% higher than gdp. he said asia is remarkably strong with the exception of china and japan and india and the middle east it's almost boom times right now. none of this stuff we're seeing. europe is remarkably resilient north america he said i think will be a slower roll in terms

of the negatives he's not in the consulting business seeing some of what the competitors are seeing in terms of cancellation of projects or reduced signings they see customers pivoting to bigger projects on cloud and a.i. and my take there is that's not reegsry because you see enterprise spending drop when companies are bracing for recession. >> right and what does all this mean for what jay powell is thinking? i listen to john gray earlier on "squawk box," who runs blackstone, president of blackstone, saying again, very positive things, but also saying expectations he has are that fed will keep moving. >> so the fed is going to move next week, we know that. near 100% chance the question, is the market going to be right it's one and done the market thinks they're done after this and they're going to be cutting by march. is that really what's going to happen if we start to see more acceleration, the fed is paying attention to other signals, could that mean inflation remains stickier it's a risk people need to be aware of and investors should be

thinking about it's not something that market is factoring in right now but it could mean more rate hikes and higher for longer into next year just a risk. we'll continue to watch the inflation data to see if that drop we got last week was a one off. an shaung for ten-year tips, an interesting gauge for how investors are thinking about and demand for inflation protection. >> yep. >> since the disinflationary report or whether they think it will bubble back up given the strong data. >> so much. >> so much including netflix and tesla, which is -- which are both down sharply. >> let's hit tesla because our next guest says, quote, the multiple price cuts for tesla is a game changer and the strategic poker move comes from a position of strength. that is, of course, dan ives only he would write like that, raising his price target on tesla to 350 you raised even though the stock is down and the market is

worried about more price cuts. why? >> i think investors are seeing the forest through the trees what's happening, we're seeing a stabilization from margin perspective beshgs than expected in terms of margins, units right now on the trajectory toward 2 million. this is the drum roll, super bowl, to now monetization of super charger and battery and charger, and fsd talking another oem because from an a.i. perspective is how i see tesla getting to 1.5 to 2 trillion. >> he said early days it's never clear he got no clarity on who it is or how far along or whether it may come to fruition. >> ultimately this is for musk i think ultimately this is really the first step of what's going to be a broader strategy because they've built it if you look at fsd - >> full self-driving. >> and i'll argue, that's a.i. i mean, it's basically a.i. for automakers you look at full self-driving,

super chargers and ultimately now batteries, i think the story stabilize for margin perspective. the poker move played off from a unit perspective and i think that's why this year this is just a start. >> being lower in prices >> lower prices, sacrificing prices for demand. it paid off. not just in china, in the u.s. and i think a you're seeing right now with the ev play out the green tidal wave we viewed as the biggest transmission to the auto industry since 1950, tesla's world everyone else is paying rent and last night was another chess move while other automakers sit there playing checkers. >> what about the factory potential delay of shipments that was something that was flagged on the call? >> he yeah. >> is that a big deal? >> to your point a downtick production off-line. i view that as what's going to be the cyber refresh for model

3s i think that's a smart move because you're going to have refresher model 3s, model ys and then ultimately the cybertruck in production around halloween we will see cybertrucks on the road in the month of december. >> do you think people are going to buy them? >> i think right now, if i look at where price points are and whatdemand looks like from preorders this could be something where ultimately it's 200, 300 k per year in terms of cybertruck and why austin if you look at what tesla has done, austin, berlin, china, what we see now what will be coming out of india and others, they got the scale and scope where no one else has and i think that's what's starting to play out here i view tesla, it's apple 2008-2009 in terms of the story playing out. >> you know, some of our viewers, you've been right, by the way, i want to make that clear and people say -- is there anything this company could do

to change your opinion >> to that point if we see massive demand issues in china, more price cuts, where margins get cut and you start to get to 213, 14, 15% margins that changes changes the thesis we are in the first, second i think of just a massive transformation in this fourth industrial revolution not just in terms of electric vehicles but when it comes to tesla the a.i. story the sum of the parts story, i view this as an aws moment what we saw at amazon -- >> you said it. >> super charger, battery, a.i. >> and fleets rof row bow taxis >> i think that eventually will happen but down the road that's not factored into the stock. you look at right now, what i believe is a 1.5 to $2 trillion market cap, $10 potential earnings power and investors are

starting to recognize the sum of the parts. in terms of the actual quarter, i just view it as margins not actually putting a line in the sand. >> i get it. the margins matter so the automotive gross margins go to 18% this quarter a year over 26%. you think this is the bottom >> we are troughing. next quarter flatish, and then rebound 20%, scale increases across the board and where i think you get the popcorn out going into next year. >> they're still significantly higher than the other automakers, those margins? >> they are miles ahead and that's why i think right now they are in a position of strength, but more and more, they get the calls from farley, mary and gm and others super charger battery. >> thank you dan i have of wedbush. he is a bull on tesla. >> our road map for the rest of the hour dow trying for the longest daily win streak since 2019.

charles schwab's liz ann saunders joining us next. >> netflix theirs are down more on the numbers with one analyst who raised his price target on the name. >> and finally from airlines to semis, breaking down the biggest earnings movers and what investors need to know big show still ahead with the dow up 200 and the s&p negative. we'll be right back this is american infrastructure, a prime target for cyberattacks. but the same ai-powered security that protects all of google also defends these services for everyone who lives here. ♪ you got this. let's go. gobble gobble. i've seen bigger legs on a turkey! rude. who are you? i'm an investor in a fund that helps advance innovative sports tech like this smart fitness mirror.

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some fresh news from the federal reserve when it comes to banks.

let's get to steve liesman with the details. good morning, steve. >> good morning. banks in your bank account, the federal reserve announcing it has gone live with the fed now instant payment system, a system that should allow households and businesses to send payments and receive money immediately without those troubling three-day holds on checks and waiting for payments to clear in the sender's account and waiting for the bank to open the fed now system is available 24/7, 365 days a year. to begin with 35 banks, 16 service providers have signed up, like jpmorgan and wells fargo. smaller credit unions and other banks. unclear if the banks will charge for the insta payment. they may or may not pass that to consumers. jay powell saying in a press relief over time as more banks choose to use this tool the benefits to individuals and businesses will include enabling a person to receive a paycheck immediately or access funds when an invoice is paid

this doesn't eliminate the paypals and venmos of the world or zelle they could use the fed now system, a bank to bank system to send payments, but unclear if those services face a new challenge from banks of all sizes that can offer similar services sara >> the bottom line, faster payments, good for consumer, right, steve >> inn think so. you get there and don't have the holds on the checks. if you have money in your account and send money to someone with an account, they can take the money out but there's a hold on a account. a small business guy doing a project, gets a payment has to wait until the payment clears it could help them out. >> with moves like to this are we inching closer to -- this is a leap -- a central bank digital currency a real system where it all goes digital? is this a precursor

>> it's a good thing sara, you're smart enough not to do it immediately but this could be the backbone of a central bank digital currency. this is there is a long way to go including a congressional approval. >> they won't commit to what and when also, steve, you're standing in front of the all america survey. big graphic. tell us, what you're seeing from americans right now. >> we are seeing, sara, the cnbc all economic survey, a modest blip up in optimism. attitudes are still pretty dismal take a look here on what we have when we ask people how is the economy? the prior survey, 14% said it was excellent or good. that's up 6 points to 20%. then those who are saying it's coming down 6 points don't get too excited. this number, long run average, probably double and this number long run average about half. so we still have a long way to go to get back to normal

feelings will the economy get better, the outlook here, a blip up in optimism here, but this is below long run averages. stay the same, a little bit more, and then a decline in those, 10 points think it will get worse. pretty across the board. democrats, independents as well, some movement in republicans, and then one other good thing, oh, it's over here, those who say their home value would increase, 44%. that's about normal now. that kind of goes along with this data that we've seen on the bottoming of the housing still inflation is a big concern out there and it's a place where america is actually united in being concerned about inflation. we asked what the top issue is and 30% of americans say it's the cost of living an then you can see here, it's 30% of democrats and republicans and 31% of independents. the next issues are all half in terms of how much concern there is threats to democracy a big one for democrats. immigration, border security big for republicans. independents, hear about health care an then kind of this

grouping down here, 7, 9, 10% say crime is the biggest issue in the current all of this optimism into the stock market views here. you can see that there has been a blip up in whether or not people think it's a good time to invest come over here, 33% up from 24% of the prior quarter say it's a good time to invest. down in bad time again, come over here before the pandemic, and you have to find these are more normal averages people generally are upbeat or even back the other way here, you can see, we're still net negative on views on the stock market. mr. faber. >> wow steve, you're working that chart like a master choreography thank you, steve interesting numbers as well. our next guest says near certainty of a rate hike next week and low probability of another one in september charles schwab chief investment strategist liz ansn sonders join

us now your take on earnings season and see if it impacted your view we're early in but starting to get enough of a survey sample. >> we are. and i think there was, obviously, hope coming into second quarter reporting season that we would have a quarter similar to the first quarter in terms of significant beat relative to what was quite a low bar, and i'm not sure we can repeat that in the second quarter. some of the glbloom may be comi office earnings rose which is high profile disappointments this week. what happened in the first quarter, it was either record or near record negative guidance and that just set the bar so low. when you look at things like yields, pmis, lending conditions, all of the factors that are highly correlated to earnings, it shows that path of least resistance is still down and that we're not hitting the trough point i don't see an implosion in

earnings by any means, but i think that hope that first quarter was the trough may be dashed in the second quarter. >> what about this little burst of optimism? it might be kind of this people are feeling better about the economic situation because of the stock market and people are feeling better about the stock market because of the economic situation, but there are some interesting signs. i pointed to philly fed this morning. steve's all america survey, that consumers and businesses are feeling better about future activity. >> yeah. so that was interesting with the pmi like philly fed with weakness at the headline level but improved outlook that is appropriate to think about the current environment. i think there are a lot of uncertainties right now. yes, we're in disinflation, but we know that june numbers were flatter by the year over year base effects versus june of last year the economic data for the most part has been good i think claims being lower is to benefit.

you saw some weak housing data today and that's coming in the aftermath of what has been very strong housing data and a hope that that prior beleaguered area with what has been a rolling recession thesis might be an offset to anywhere like services or labor market that starts to get hit. the economy is still fairly mixed, but, yeah, we've seen a pick-up in confidence. consumer sentiment has picked up that relative to consumer confidence, consumer sentiment based on what questions are asked, tends to be a biased a little bit more based on what inflation is doing consumer confidence has more of a labor market bias to it. it's important to keep that in mind when you to the comparison between those numbers as to what's driving either lower optimism or positive optimism. there's certainly a pick-up, at least in longer term hopes, that we're coming through this. >> liz ann, thanks for the update appreciate it. >> thanks.

when we come back, j&j spinoff, kenvue, reporting first e sults since going public. thceo joins us to break down the numbers next we're back in two minutes.

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j&j spinoff kenvue moving lower despite reporting top and bottom line beats this morning the company's first full quarterly results since it went public in may. thibaut mongon kenvue's ceo joins us for a first on cnbc interview. thibaut, it's good to have you here for the first earnings report the fundamentals look strong you saw revenue growth across the categories talk about what you're seeing from the consumer? >> yeah. good morning, sara good morning, david. good to see you. thank you having me. a strong debut for kenvue. $4 billion in revenue, 7.7% organic growth, probably one of the strongest quarters in our 135-year history we saw strong growth across our portfolio, across geographies, strong demand for brands like neutrogena and so many others.

very strong quarters all credit goes to the team that shows the resilience the consumer has space, the power of our portfolio and brands, so very pleased with our results and confidence dent in our future we announced our first dividend as kenvue, initiating a dividend program with a 20 cent dividend for the third quarter. so a big day for kenvue, yes. >> thibaut, then, you know, some people may be surprised to see the chart on the screen next to you which shows the stock is down is that a result of the announcement from j&j that it will be pursuing an exchange offer for the 89.6% that it owns of the company in what might be as soon as they say, i guess, the coming days? >> yeah. you saw j&j's announcement this morning so the stock price is affected by many factors, as you know j&j's announcement this morning is part of it.

we should expect some shorter movements between the j&j stock and the kenvue stock during this period what we are focused on is fundamentals of the business, and what we demonstrated once again this quarter is that the business is strong, healthy, and we are confident of the future of kenvue. >> right although, listen, it's not an insignificant thing, whether a splitoff or spinoff, it's a split, you are going to end up with shareholders who want to own your shares, which is, i would assume, you view positively instead 1/2 a spinoff, them being forced on shareholders who sell. can you comment on what your expectations are for your shareholder base after the exchange offer >> yeah. we're pleased with the way that it has been received by shareholders we see a lot of arraignment among potential offer of kenvue. i can tell you that we are fully ready to leave as a fully independent company. you see it in second quarter

results and we are confident about the future. >> on the fundamentals some might quibble with the gross margins which were lower than last year's number of 57.5%. you point to the stronger dollar and the higher material costs. both of things should help you going forward, shouldn't they? >> yeah. we see continued heightened inflation. we also see some volatility in effects. we also see specifically for this quarter new company costs impacting our margins. so we continue to be focused on mitigating these headwinds with efficiencies in our operations, with valuization across our portfolio and that's what we have been doing for many years now and we keep -- we intend to keep moving forward. >> you had a significant decrease in organic health of

skin, health and beauty, driven by volumes down 3.2% what happened there? >> yeah. we had broad growth across the portfolio of self-care segment did well, both in volume as well in skin health we grew organically and reported a slight decrease in volume, however, when you exclude some discontinuation of products that we decided mostly last year, our volumes were up single digits, which shows the brand and the continued underlying strong demand for skin, health and beauty products. happy about the segment this quarter. >> what do you see in recessionary periods and how big of a risk is it that consumers will trade down to generic private label away from the neutrogena and brands you carry?

>> you may have seen consumers down trading in more categories. our consumer space, our kenvue portfolio, we don't see these dynamics happening i talked about the healthy volume growth in skin, health, and beauty this quarter. we see consumers continuing to focus on looking for products that they can relate to, that they trust, that have been in their medicine cabinet for years, decades, sometimes generations, and we see that reflected in the health of our portfolio. i think it's a tribute to the specificity and unique nature of the health space but the power of the brands that are so strong with consumers we see that this summer. it's the summer season and neutrogena is the market leader in the u.s. in skin care we launched premium innovation, very well received, and continue

to gain share and see strong demand by u.s. consumers for new tree geena products. >> thibaut, appreciate the color and you joining us on earnings to talk through it time to get a news update. to sylvan na with that >> hey, sara, good morning a grand jury deciding whether to indict former president trump over efforts to overturn the 2020 election will meet again today. they're expected to hear testimony from an aide who was with the former president on january 6th. south korean officials say the u.s. soldier who crossed the border to north korea earlier this week was in prison for nearly 50 days before he bolted. authorities say army private travis king was there because he failed to pay a $4,000 fine on charges that included damaging a police car and there's a lioness on the loose in berlin. police warning people in several neighbors to stay inside as they search for the big cat

authorities say someone called police after spotting the lioness eating a wild boar around midnight. they've reached out to zoos and circuses but none are missing a lion they're looking whether it escaped from someone's house back to you. >> thank you. >> still ahead, netflix one of the laggards on the s&p that follows the company's reported results after the close yesterday. we'll talk to one analyst who raised his price target on the name "squawk on the street" will be ghback

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united and american airlines stocks heading in different directions this morning. phil lebeau has been tracking the action and joins us with more off those interviews. what can you tell us >> sara, let's start with american airlines. this sell-off is a little greater than i think the company expected when they put out their

q2 earnings better than expected and it's the guidance that the company gave for the third quarter and the rest of the year raising its full year earnings guidance when we talked to the ceo he said this is an environment where they expect good times as are bookings and revenue to continue. >> 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 the same time last year and that was a pretty good quarter last year. i see demand remaining strong. >> he sees demand remaining strong and so do all the ceos including scott kirby at united, reporting its earnings after the bell yesterday better than expected look at the revenue increase they're expecting for the third quarter. from scott kirby's perspective the international growth is where he believes the company can make real headway. >> i wish we had more airlines

the only large airline in the world that didn't retire wide body and that's port of the reason we're outperforming as you see a strong international environment. i wish we had even more. >> as you look at the airline index keep in mind that global number of flights is still below 2019 levels by about 8%. that's one of the reasons why the airlines have pricing power right now. they don't have the capacity that they had prepandemic, guys. >> so do they have enough pilots and enough crew? flying has been brutal lately, phil, because in part of all the demand and the capacity issues and the weather, too, but it has felt like they have these big problems. >> they still have a shortage of pilots industry wide, not just here in the united states. you had that in with the fact that they would love more airlines if they could and the fact that you need to increase staffing with things like mechanics and crews at airports. all combines to a tighter capacity environment if you

will. >> phil, thank you phil lebeau. >> you bet. we haven't mentioned this morning netflix. take a look. the stock getting hit hard, down almost 9%. it was a mixed quarter missed on revenue but added 5.9 million subscribers in the quarter. joining us at post nine is oppenheimer's jason hanson he has a $515 price target. the question i've been getting, why didn't revenues move substantially if they added so many subs? >> i think they're slow rolling the pay sharing rollout in the u.s., particularly for premium subs i don't know about you, but i have got two people on my account that don't live with me and the premier plan and i have not been asked to pay more yet they didn't tell wall street that they alluded in the call back last night that there's a lot of factors on what trigger the kind of pay sharing that has to be do with usage, is it mobile

think about all the college kids home right now and they're the additional users, you're going to hit them in september they probably should have told wall street that don't expect arm as they call it to go up sequentially it's more later in the year. >> right the 5.9 million is a decent number. >> that was a beat few million better than they expected and telling us it's going to be the same in the third quarter, plus or minus 1 or 2 million 6 million subs, another 6 million, we have 7 million in the fourth quarter that puts you at 21 million subs this year and 25 million subs is next year. the big question is when does revenue go up? >> i don't know what you're going to pay for a company growing revenues 3%, which what is they put up this quarter. >> sure. >> that's not going to work. >> we think the ag is close to 10% and do 18% next year next year revenue subs up 8%,

potentially, you know, call it a 30% earnings because they said content costs in 2024 will be flat than 22 with the strike, they're saying content costs will be down in the back half of this year, it will be down, margins better, but they'll go back to normal -- >> what's that number these days >> you know, around $10 billion. it's a big number. >> yeah. >> the content spend. >> is that a good or bad thing for investors? it increases free cash flow and helps profitability but netflix needs to keep the hits coming to keep the subdescribers engaged >> netflix is probably the most unique position among the streaming companies. streaming does produce earlier because of binge watching. they finish the show, it's not produced in real-time like linear network television is, but the international content isn't all impact pdsed we're trained on netflix to watch international shows with subtitles and dubbing, which we

don't -- >> danish tv have you -- it's - >> really? >> it's the wrestling of denmark, highly recommend it even more likable central characters >> that's probably another reason why they're waiting to push on the paid sharing think about it, back to school happens, people turn on tvs mid-september. to no new shows, abc, nbc, fox, consumers saying why am i paying for cable when going to netflix and talk about the advising. >> i want to talk about the advertising. the subscribers who are either new or pushed to subscribe beyond their current plan, seem to be going to the ad tier have they monetized on that front yet? >> no. they said there's a few percentage points right now of land subscribers the television advertising season runs from september to p may. even if they had more ad-based users you're not going to get

the money from advertisers typically you negotiate now and get a handshake typically early august how much money you can get. that money wouldn't really be available in september so typically in internet, you're being forced to kind of guess, i have to pay a high multiple an guess what happens around the corner netflix is laid out for you 18 months of how revenue accelerates. the pushing paid sharing to the premium subscribers not paying yet. then we see advertising in the fourth quarter, first quarter, and then you start to see they're canceling -- right now, you can't get the basic plan in the u.s. or canada, only for new subscribers, not existing subscribers. that will take time to flow through. you have three or four catalysts that play out whereas as an investor you're not taking a ton of risk over the next two years. >> felt like they were managing the advertising expectations cautiously talking about it was the long term and a long way to

go and the ad market is not that hot right now. >> correct. >> where is wall street expectations an the company's relative to what you think could be here? >> yeah. no one expected advertising this quarter but you would see more revenue based on the paid sharing. wall street will be looking for some more add revenue in the fourth quarter if they don't have some more ad revenue in the fourth quarter it's like well, is there features that advertisers want that you can't offer measurement. do you not knot have the scale in this macro environment it's not like there's extra dollars if there's extra dollars, i'm pretty sure the cfo is letting it flow down to earnings not to go try this new experimental media. >> do we think that concerns of netflix, weathering the increased competition from the streamers, have played out already? >> i think so. two factor, in the beginning of covid they had more content than

everybody else and the other streamers caught up. there was a period of time where, you know, peacock and, you know, just -- you probably saw it yourself, like amazing amount of content and then normalized now you're seeing a profit focus by all the big media companies for a host of reasons, and you had basically bob iger in your interview talk about how they need to restructure the company for the future of streaming. >> yeah. it's an interesting time and will continue to be. what's the multiple you're using to get to 515. >> we're at 25 times apple and microsoft 30 times, nasdaq depending on the day kind of like high 20s again, we are looking out, but given the visibility to the numbers, we think the market will pay that. >> jason, appreciate it. >> thank you. >> and it ran 8% yesterday it's kind of just a give back. as we head to break, check out the gainers right now in the s&p. they're earnings related zion, regional banks a boost

today and this week, that one up 9% this is the top performing sector of the week, the financials up 3% and having another up day today johnson & johnson is there as well and some tofhe other earnings movers. "squawk on the street" will be right back there are currently more than 750,000 unfilled cybersecurity jobs in the u.s. the google cybersecurity certificate was made to fill that gap and help grow the workforce that's keeping us all safe.

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welcome back to "squawk on the street." i'm dominic chu. stocks are hovering near the worst levels of the session. we are tracking weakness in consumer discretionary stocks overall. among them dr horton some of the biggest laggards in home builders giving us hefty gains in the premarket that despite an upbeat report from the home builder which benefitted for demand for new homes, reiterated by the tight supply of existing home sales. those trends helped offset pressures from higher interest rates and input costs but shares of dr horton and its peers sliding in the early action. sara, many of them hit record

highs earlier on they've lost momentum. back down to you at the stock exchange. >> we are watching that, thank you. coming up in the next hour of "squawk on the street," philip morris warning volume declines ahead shares have been underperforming. we'll break things down with the ceo of that company and talk to the ceo of regional banks. all over the earnings in ten minutes. don't go anywhere.

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welcome back wanted to check on a feature of the market during this busy earnings day discover shares were down as much as 15%. let's take a look right now. just about that as well. sara, doesn't appear to be as much about the fundamentals of the business, although they did obviously have a higher net chargeoff rate, things are normalizing in their credit portfolio and they did increase provision for credit losses by $756 million that said, it seems to be this card product misclassification that began around mid-2007 it doesn't seem to have had that much of an impact on overall

earnings during a very long period of time but it does seem to be concerning shareholders. >> yeah, the macro commentary i thought was pretty interesting and upbeat they had this really good nugget from the cfo that i pulled out on jobs and what's happening to people that either lose their jobs or are able to gain their jobs because, of course, this is a company tied to the consumer the cohort of folks that we typically target, what we've seen -- went a little fast there -- is basically the fact that many people who lose their jobs are able to quickly get new jobs and that has allowed them to have better confidence and incomes and spending power it was interesting color, i thought, from a consumer company. as we look at a softening labor market and what that might mean for some of these companies. as you say, sounds like the bad news came from elsewhere. >> and maybe the suspension of the company's buyback. that does it for this hour of "squawk on the street. a lot more of sara eisen coming your way right after this.

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♪ to help you see untapped possibilities and relentlessly work with you to make them real. ♪ good thursday morning, i'm sara eisen with mike santoli live from the floor of the new york stock exchange. earnings are driving the market with netflix, the big laggard.