the market rally, which is great, and there are lots of areas that we think are attractively valued. >> brenda, thank you great to see you brenda vingiello all right, that wraps things up for us today. andrew, we'll see you tomorrow >> i will see you tomorrow >> looking forward to it maybe we'll see some more, and you can tell us about what you heard at the conference too. folks, that does it for us today. join all three of us right back here tomorrow. right now, it's time for "squawk on the street. ♪ good wednesday morning, and welcome to "squawk on the street," i'm david faber with jim cramer, we're live from most post nine at the new york stock exchange carl has the morning off futures looking like we're going to have a lower open of course, 2:00, fed meeting, can't forget that. and an awful lot of earnings to digest this morning. that's where our road map starts alphabet and microsoft, yep, the two of the biggest giants out there, they have earnings. stocks moving in opposite directions

jim and i will break that down plus we do have boeing shares higher, that on its better-than-expected earnings, and dave calhoun, company ceo, is going to join us a few minutes from now to talk about the quarter. we're also going to look to the fed, expected to hike interest rates this afternoon following what was that pause. all right, let's start with alphabet and microsoft jim, i know you have obviously been working on this ever since they reported those numbers. i got a bunch of stuff here as well just start us off. what are you thinking? >> first of all, alphabet was extraordinary because search was so good. i know people said cloud was good and it was good but it's off a small base what i think that really happened was this was the quarter where youtube, which has no traffic acquisition cost, became the principal method for a lot of companies to be able to reach young people around the globe. i think that's the major takeaway >> a $7.7 billion in revenues,

and it inflected positively, and it's been going the other way. just to put it in perspective, by the way, at a $7.7 billion quarter revenue run rate, it's one of the biggest media companies out there. >> and i think there's a road map that says it's going to be the biggest, and if you talk to a james quincey from coca-cola, this is how people are reaching people, because you can tailor it's a remarkable medium, and this is before they really put in anything about the nfl ticket search was extraordinary yes, we don't want ruth to leave as cfo, but she's going to stay as president and look at investments. ruth porat, extraordinary. >> 14-year ceo, now becoming president and chief investment officer, overseeing things like waymo. >> read the piobituary of her father and you will discover a great man. >> there's also a belief that a new ceo -- i'm talking to shareholders who are hopeful -- more focuses on costs.

>> so there was a decline in cost while there was acceleration in search, but she said that was kind of one-off. but people are not regarding it as one-off they did take out a big head count. >> their operating margin at alphabet was 29% that's a nice margin >> yes, it is. >> and again, sort of they have great leverage with that margin. >> 28% bump in cloud >> great operating leverage. >> it was a great quarter. >> and they didn't lose share in search now, it's early. it's really early, but i guess some of us have been wondering, well, will you start to see some signs of bing, microsoft's product, incursion as a result of chatgpt, essentially. no real sign >> it actually went the other way. what i thought was interesting was they spent more time talking about artificial intelligence than microsoft did now, the one i want to disagree with the market entirely is the direction of microsoft now, the stock was back at $352, which was up nicely, up a couple, up $7 from where it was

yesterday. amy hood, one of my absolute cfos, i've known her since goldman-sachs, so she's someone i regard as maybe the steadiest of cfos. we're talking about 30 years she is not anyone who ever makes you feel better. she took the stock from $352 to $338 simply by making some comments that basically were, look, we have to spend a lot more on generative a.i >> capex is going to go up every quarter sequentially this year and by the way, we are talking about capex that is already, where -- i mean, the numbers are -- >> it's big, but the stock is mispriced. there's many headlines that are wrong. growth accelerated, azure. we don't have the activision-blizzard deal yet linkedin was good. they did call a bottom in personal computers she did only give a -- >> wait, azure -- >> it's good people are misinterpreting azure. >> why i didn't think it went -- >> it went from 24 to 25

it's fine. where the big miss here is that there was a product, this microsoft 365, the copilot product, and she raised -- they raised price for that product dramatically that is your a.i. product, and that price increase was not included in her estimate guide so, people are buying this the wrong way. they have not researched the way amy hood -- i have been a follower of amy hood since, i don't know, '91. this is her style. her style is to use what happened at about 6:05, when they started the call, the forecast, as the fulcrum of why people should do what they do, and it's almost always incorrect, because she's a conservative individual. so, microsoft, down 12, i think, is the best opportunity of the morning. >> yeah. i mean, again, i have had more enthusiasm shared with me about google's quarter than microsoft's. that said, the commentary i've gotten from a couple holders is it's fine and still best positioned is the feeling for

microsoft. >> it is best positioned and they really -- i mean, there's a moment in the conference call where they basically admitted that you could get 45 to 50% increase in productivity from code people, and talking about low code, no code, and how important it is. the number of clients that they brought in off this is so staggering, the idea that amy -- that she could actually say those things about the -- remember, the stock just plummeted when she gave the forecast that forecast was a conservative forecast, and as much as i think that amy's great, amy put the big kibosh on the stock that was climbing >> final -- not final thought, i should say, but i want to go somewhere very quickly, because we got to get to boeing. they're both increasing capex anonymously. the one beneficiary truly is nvidia >> that was the call >> i mean, that's the main takeaway >> it verified the $4 billion revenue forecast that jensen huang gave it and that may prove to be conservative >> we want to talk more about

their a.i. ambitions of both microsoft and alphabet, but we got to get to boeing >> they're as hot -- microsoft is as hot as if i lit a match to that polyester suit jacket you're wearing >> oh my god, again with the polyester. >> i think you should scrap it >> it's g line >> oh my god, that's so flammable. >> it's armani's g line. there's a, b, c, d -- by the way, tighten your tie. let's turn to another big earnings mover phil lebeau has that in arlington, virginia. and he's with dave calhoun of boeing phil >> who's getting a chuckle out of you two today dave calhoun, ceo of boeing, joining us on a day with better than expected earnings, narrower than expected loss, revenue better than expected, but the free cash flow is what i want to talk about

$2.5 billion the street was expecting $114 million what did analysts not appreciate about the quarter that had their estimates so low >> it's a reflection of the strong demand market that we have been talking about more quite some time. everybody will recall, we had a big order with air india that needed to get finalized. riyadh air, the saudi kingdom, and then ryan air, even, are all deals that were fine finalized in the quarter and the advance payments that come with them are what show up we can't time those perfectly, and we can't predict when they'll be, but somewhere between the second and the third, they were going to happen, and it's happened. >> let's talk about the 737 max. you're transitioning it was 31 a month. you're in the process of going up to 38 a month that reflects your confidence in the supply chain how much more stable is it now than, let's say, a year ago? >> yeah, it's settling down. there's no doubt we announced our intention to

get to 38, or actually, a little ahead of our plan to get to 38 the master schedule related to that increase and not only that increase but the increase to 50 later on in our horizon here, that master schedule's been out there, so suppliers have been working diligently to sort of settle down, eliminate the constraints, and slowly and steadily, we're seeing fewer and fewer delivery constraints i'm feeling good about where this is going. >> you mentioned the orders. number of huge ones in the second quarter and that has a number of people saying, well, the demand is played out we've seen the big orders now. it will be a more normal market in terms of orders you don't think that's the case, do you you think there's more big ones out there. >> don't hold your breath. there are big orders out there a lot of sovereign interests i don't talk about it often, but the quality of the backlog has never been better. never. >> explain that. that means these are people who are going to follow through on these orders >> absolutely. think about air india,

underwritten by one of the strongest companies in the world. airport development going at a pace that we've never seen in india. the kingdom of saudi arabia wants to be a destination, and when they want to be a destination, they will be one. they are developing airports, creating new airlines, placing orders, and yes, these advance payments reflect the seriousness with which they're going to approach it. so, it is those, and it is many more to come so, yeah, it is a -- it is a pretty constrained world out there with respect to the demand that we see. >> dave, jim's got a question for you. >> dave, before the big fracas, boeing stock was at about $378, and what i thought happened was that there just became this giant parking lot of planes that were just -- wouldn't be able to be worked off for ages i'm looking at what you're doing, and i'm thinking there's a definitive free cash flow breakout, much bigger than now at 2024, and that you may be one of the biggest free cash flow stories in the world, including tech after 2024.

>> well, jim, that is a very important point, a very important message. we start the post-max world with 450 airplanes that needed to be returned to service. a lot of work goes into every one of those airplanes we deliver them one at a time. the reliability of those airplanes has they've entered service has been fantastic so, we're on a pretty good run there, and yes, by the end of '24, we're almost completely out of the 737 max inventory overhang, and we're almost completely out, if not totally out, of the 787 join verification work that we have going on in that program so, yeah, that '24 moment is a big one. we get to eliminate shadow factories and, yes, i think the model that enjoyed covid and before the max issue, that will become very apparent to everybody. >> obviously, you know planes much better than i do. i know stocks, and i think that

2019 number is going to be behind you when i think about the fact that your supply chain issues seem to be resolved i know from what happened with raytheon yesterday, you can never just declare, and that's not you, by the way, but it seems like all the supply issues that had dodged you, including the number of engineers that you need yourself, are also now behind you, and that therefore, again, earnings per share can increase dramatically. >> yeah, without a doubt it's -- everything is just settling down. that's the word i would like to use. there's no big dearth of engineering talent the training of the new talent that has been recruited to the supply chain side of our house, as well as our own, that's been moving along at a steady pace. as i said, it's just starting to settle down, and i'm -- i feel more and more comfortable that we're going to get ahead of it we can't rush it we've got to be disciplined every step of the way, and we are. >> dave, when you look at -- you mentioned these large orders war out there and the quality of the

backlog. you don't have a lot of's leasig companies placing large orders at what point do you expect them to say, whoa, we got to get in line here or we're going to be boxed out further in the decade than we need to be >> the short answer to your own question, they will ultimately have to get in line, and they will want to place orders because their growth is dependent on more airplanes. they will feed a little bit on residual markets and the older airplanes that get retired or almost retired they'll feed on that a bit but eventually, they will want to buy new airplanes they're smart about their timing, so if there ever is a precipice, and i don't see one -- i don't see one for quite a long time, but if there ever is, that's when they'll probably want to flood in and rebuild their fleets >> and with the dreamliner, you're at four a month right now, going to five by the end of the year, on track for that 10 by '25, '26? >> we are. it will not be a demand issue. it will simply be, can this

steady improvement in our supply chain continue to get us there and i think it will. >> i have to ask you it's fed day and we know that the expectation is they may raise an interest a quarter point. when you look at this market right now, we were talking beforehand, are you to the point now where you're like, i wasn't sure this was going to continue, but what do you think now >> the resiliency of this recovery and the growth and the prices that consumers pay to fly on airplanes, particularly across the oceans, it's pretty remarkable, and there is no sign of it going away so, my own view is that quarter-point moves probably aren't going to slow things down much the consumers have a lot deeper pockets than most people think i also think travel has been reprioritized on the list of things that are -- where they have discrimination, they are definitely prioritizing travel in that list of things they want

to do. >> dave calhoun, ceo of boeing, on a day with better-than-expected results we're going to watch popcorn and watch you as you talk about each other's wardrobes all day. >> phil, we do that every day. it's not flammable, by the way >> today seems to be a particularly big day >> it does it's not like we don't have news to get to, of course, including what you guys just shared. >> i thought that was the fabulous interview this reminded me of the old days when phil would interview boeing when the stock was going to the 300s, because it's now just a story of meeting the incredible demand work off that inventory that had been on the parking lots and wide bodies. very, very good for them so, i think that we either -- at one point, i thought that boeing would have to do an equity offering because they have so much debt. that had been the overhang i don't know if they need to do it this was just a straight-up good quarter. >> generating that free cash flow >> the stock is going to head much higher than $8. >> it does take me back to that

period in the spring of 2020 where they managed to do that enormous debt deal that did change the psychology a lot. suddenly, we're like, okay, everybody's going to be okay >> he worked very closely with greg smith what i do love, and let's go back over this this is a free cash flow generator like no other, including an alphabet, including -- yes, including microsoft. stock goes much higher still to come, we're going to look ahead to the fed phil was asking about that at the end of the interview as investors are preparing for another 25 basis points. let's look at futures. we get started with trading at the new york stock exchange 14 minutes from now lot more earnings to cover on "squawk on the street" right after this ing. look! what's up my trade dogs? you should be listening to me. you want to be rich like me? you want to trust me on this one. [inaudible] wow! yeah! it's time to take control of your investing education.

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still to come, the atlanta braves splitting off from liberty media, becoming the only publicly traded franchise in baseball yesterday, are you watching this there it is. team completed the first 8-3-5 since 1884 watch it again one, two, three. >> is that why the stock is trading high >> no. >> okay. >> we're going to talk to the ceo of the braves later this hour let's get another check on some of today's big earnings movers as well. watch that i'm looking forward to your supplies earnings mover. alphabet, obviously, the

standout in the positive territory. we haven't talked snap yet, but we will. surprised at&t is unchanged. >> why it was all about free cash flow, trying to keep the dividend. >> they came through with $4.2 billion in free cash flow >> it's cut, c, t.utcu >> we're back after this

>> announcer: union pacific ceo lance fritz, reaction to quarterly results, plus an update on the company's succession plans "squawk on the street," 11:00 eastern. let's turn to the broader markets. investors bracing for another likely rate hike in fact, quite a surprise if we didn't get 25 basis points, wouldn't it? >> oh, yeah. >> of course, we could get 50. that would be a surprise too >> look, jay powell's a telegrapher. it's very interesting, we had some numbers on the collins show which says that actually very little movement after he speaks. that's exactly what you aim for if you're a fed reserve chairman

>> you talk about the press conference you actually have encouraged him to stop doing it that's where we get a lot more commentary that could move the market, jim. >> but having been a former reporter who only tried to make people look bad, because that was my job, i would find a question that would make it so that he would stumble and make him look bad because that was my role in life, and i've graduated. >> i don't think people would call you a hatchet man any longer >> the dalai lama has very interesting comments, and also a guy named jack cornfield he talks about buddhism and that's something i'm trying to adopt. >> lvmh caught my eye. >> u.s., bad, china, good. >> thank you lvmh, the giant luxury retailer that has helped make bernard arnault very close to the richest man in the world -- >> depends on how x is doing >> not today, given a 5% decline in his ownership stake there

what's funny, jim, is that a reflection of a top end of the u.s. consumer? they're not buying cognac anymore, apparently, and it was the u.s., not china, where we would have expected things would have been weaker, that contributed to a number that was not as good as expected. >> people are shying away from premiumization the other day, robert frank had a really fantastic piece, very, about the decline in high-end auctions really staggering. there is a high-end strike, which i have not been able to figure out why are the people who are really wealthy in this country not spending as they used to we don't have an analysis, but it's worth looking because what's keeping up spending is the lower end. our younger consumers. >> they also talk about, in the quarter, you know, it's the entry level buyer for a luxury item that may not be there right now. >> why aren't we talking about

how china's coming back? any that was surprising. >> don't forget alibaba. ever since they decided to spin off their web business, it's fantastic. we have to stay close to the idea that china may actually have a bottom here it's hard to believe >> all right get ready. you got a "mad dash" coming up >> my adas i"m dh"s allout >> it's a blowout. we're back in two.

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>> announcer: the opening bell is brought to you by nuveen, a leader in income, alternatives, and responsible investing. welcome back let's get to a "mad dash." we got an opening bell in two minutes. what do you got? >> i speak to a lot of young people who are trying to get interested in the stock market they tend to be fixated on stocks under ten or single-digit stocks, and my favorite one right now, by far, is santander, spanish company, delivered earnings per share of 13%, delivering on strategic goals. nine million customers added in the past 12 months double-digit growth in revenue, particularly strong revenue in our global business. this is rivaling jpmorgan. >> you've been a fan for some time not a bad chart. >> and the decline there, by the

way, was really i felt because there was kind of a problem with spain and a left-wing coalition. if you look at the vote we just had, it's a right center coalition coming in, so you've got politics going her way you've got cash dividend going her way. you've got strong growth this is the $4 stock that younger people should get invested in. she's a terrific bank. really one of the best in the world. scratch golfer, by the way >> no kidding. you've been enthusiastic about her leadership of the bank for quite some time. >> look at that. >> people give you a hard time about your calls, but on that one, you have had a good run >> you know how to spot a reverse head and shoulder better than anyone. >> i do. >> younger people, ba banco santander is the stock for you. it's the largest bank in europe. spain is also probably the best growth market because it's not -- >> i'll go to madrid any day of the week that's all i'll tell you i love that city >> taught english there and said

it was the best place ever >> love that place what a great place spain is beautiful opening bell you heard the applause we'll give you a look at the realtime exchange because it is going to show more red on the board, most likely, when it's all said and done. start-up from new york >> we never talk about two stocks -- >> hold on i got to talk about my buddy, greg, ceo of atlanta braves holdings, derek schiller, and we're going to talk to them in a few minutes, talk to them about the splitoff of the braves, and i'm going to talk to maffei separately >> we did a piece on it because we like the stock so much. the research director, part of our "mad money" plus campaign that we're starting to have about memos that we think people would pay for. david, we're forgetting two irrelevant stocks. two stocks went into irrelevance

last night, and they did it during their dream world one because they've had it with analysts you read these and you say, i'm not going to spend as much time on these as i normally would because frankly, the delusional snap was quite -- it was -- >> well, all right you mentioned it, and you say they're irrelevant, but you got to give me more here by the way, monetizing messaging is just not that easy, i guess >> what's happened is that you can't -- >> that's what snap largely is >> the linear tv people can't compete with google. they can't you want to -- look at hershey hershey's roi with google was so big that any consumer packaged goods company that doesn't use it is crazy. >> if you had shorted snap at the arrival of tiktok, one of the few things i told you that you didn't already know, i remember years ago, you would be in a good place. >> you just said everything's great, but isn't it terrible

every single call was that texas instruments was basically, hey, guys, are you guys just irrelevant and then the ceo just saying, who the hell cares what you have to say you don't know anything. so, that was kind of like, wow, let's just cease and desist that conversation >> $160 billion market value >> they don't -- >> it's not irrelevant >> no, the call's irrelevant companies are not irrelevant >> okay. >> the calls are irrelevant because texas instruments has no patience with what they regard as being analysts who are suboptimal >> meanwhile, the stock is down over 5%, jim >> the only end that was any good was auto, and then some personal electronics amy hood set up personal electronics. i believe there's a bottom in pcs, but texas instruments was deeply disappointing, because they said, there's an inventory problem everywhere, so stop bothering us they are building some plants. but i went to get on that conference call because i think there's a way to make that tone

better >> snap shares down 19% as well. two of the larger losers, snap, a lot more percentage-wise although its 52-week low was $7.33. evan spiegel is going to speak to julia boorstin later this morning. you do wonder whether it's time to -- if you can get somebody to bid you something for the company, sell it >> you got lina khan from the ftc saying you can't do that she allegedly is after amazon. >> allegedly there's a report in politico that the ftc has amazon in its sights for trying to break it up >> please, please. >> by the way, i think shareholders, many shareholders, would say, thank you, lina, for creating all that shareholder value. >> you don't want jonathan kanter from the -- the assistant attorney general from justice to go after alphabet because the strongest part is search, which is what he wants to disable. you do want lina khan to win, because right now, we don't see the turn the big thing with amazon is, are they going to guide the low single-digit growth in amazon web services and can you turn it around >> what did you take from the

azure corridor at microsoft in terms of a tell for the aws corridor, if anything? >> i am going to say that there is beginning to be a -- too many decisions that have to be made before you go aggressively in the cloud. >> what does that mean >> there's elongated decision making >> by companies? >> by companies. and i just -- snowflake flagged that to me i think that if you go to the oracle conference call, you realize, hey, maybe oracle's making a difference. we know google is making a difference, google cloud but amazon cleared a lot by just saying, you know what? we see a bottom in q4 because generative a.i. is going to kick in for us, but right now, david, generative a.i. is something that is talked about, but we are not seeing >> it's not clear the a.i. tailwinds are there as yet for aws. they may be. and by the way, microsoft and azure did go, what, from 4,500 a.i. customers to 11,000, something like that. >> i mean, the number of customers -- now, let's see. the stock was down 12. what i want people to do, and this is what i'm recommending for club members, let all the

sellers clear out. plus, there will be some sellers related to the federal reserve, and then pounce. it's what i call a long day, but amy hood kiboshed it, the fair and impartial lefabulous ceo >> even, by the way, we can't confirm these reports. many people know lina khan's history. she did write that seminal piece about amazon when she was at yale law school. we had her on last week talking about, of course, the new merger guidelines but jim, again, there are -- i know any number of amazon shareholders who think that thing would be a rocket ship if they ever said, you know what? we're splitting amazon web services off from retail or maybe even logistics >> we know they have to start -- there's great leverage that they can cut costs a little bit on amazon prime they have really not emphasized that amazon web services, if you had any sort of delta back-up, is

worth not the price of the company but worth a great deal so, lina khan, really, on the side of the bulls. jonathan kanter, on the side of the bears. let's keep track that the government is very much involved with both companies. >> it still comes up a lot we got plenty of other things to get to this morning. you know, at&t, was it verizon who did you say was irrelevant recently >> no, i just think that what you're -- if you're just going to try to manage everything for your cash flow, to pay your dividend, i mean, i think at&t was all about cost cuts. >> at&t did hit the $6 billion in cost cuts earlier than they said, achieved run rates targets six months ahead of schedule remember, last quarter, they put up a free cash flow number that was far off -- far below what had been anticipated, making this the unlikely they would make the year target this quarter, $4.2 billion gets them back on track, jim. >> where does it get to? what's the strategy? david, yesterday, the verizon call, which was good because

they put through a price increase, the analysts seemed more focused on lead and copper wire >> they put through a price increase on fixed wireless, too. that's what i was talking about at verizon >> that was very important >> but stankey is -- the ceo of at&t -- he's talking about a softer fiber being -- because they're deploying a lot of overbuilding and deploying a lot of fiber, saying that it's -- you know, it's going to be a bit softer in the market because i don't expect we're going to see movement >> that's all i'm saying >> necessarily recover that's a key question for broadband as well. when people move, they tend to make decisions about broadband >> well, there are people who are calling for the heads of both companies, because they believe that this has been a kind of a tragic decline versus t-mobile i just think that if he can pay the dividends, stankey pays the dividends -- >> it may be these comments, i'm not sure, that have turned stock a bit. take a listen to what stankey

had to say about sort of fiber being a bit softer in the second quarter. >> i expect that things are probably going to continue to be a bit softer in the market, because i don't expect that we're going to see housing movement necessarily recover i think it's an artifact of mortgage rates and people's ability to make those discretionary moves, but look, i feel really comfortable about our ability to continue to add along the clip that we're adding right now. >> right so there's at&t. as you pointed out, it may be this concern about lead-wrapped cables that just continues to be an overhang, even though they did give us a lot more detail last week, made some changes in terms of fight ing a lawsuit in nevada, and deciding to keep some fiber in the ground there to see how it -- what happens. i should say, the cables >> once you get your teeth into that story, "the wall street journal," it will be like the

reuters story for talc and j&j you know what people aren't talking about in chubb they had a combined ratio. they didn't -- they avoided the big catastrophes the stock is up very big evan greenberg knows how to write insurance better than anybody in this country. >> my god, my rates wednesday up so much. >> are you a chubb >> not anymore >> you switched? >> i had to switch it was ridiculous. >> i chose chubb because they pay. >> but you can still go to a couple others that are somewhat competitive. i mean, 20% increase on your premium every year is crazy. >> because of my housing portfolio that you mentioned, my insurance is on the upper left-hand corner of the desk >> you must pay them -- i can't imagine. >> certainly more than my mortgage >> for your 27 homes >> certainly more than my homes. that's a little bit of an exaggeration how about the way the u.p.s. stock went up on the deal and maybe people see the teamsters got the best of them >> it's a good thing for the

u.s. economy that there's not going to be a u.p.s. strike. >> that was very important for the u.s. i do want to know whether ford is going to talk about whether there's a more of an issue with the uaw than cal talked about being an issue with teamsters. very important to watch that, because when you look at the way gm traded, it started going down when mary barra, the ceo, glossed over the union issue that's a big mistake reminds me of the 1930s uaw, which we don't want. we also didn't mention what charlie scharf did at wells fargo, the ceo with the best capitalized bank has added a $30 billion buyback. people just basically say, you know what we should be focused on is bank west. >> you mean that deal? >> the deal. >> it's a little deal. >> well, but it was center bridge i thought you would have followed that a little >> warberg and center bridge, talking about bank of california and pacwest getting together,

which is helpful to both of them they brought in new capital, which is more helpful overall with private equities stepping up to buy shares of bank of california 21.8 million shares of common at $12.30, 10.8 million shares of a new class of nonvoting common equivalent at $12.30 and that includes warberg center bridge stepping up. you've got consolidation, pacwest responding positively. it was a stock for stock deal. let me give you the terms, actually 0.6569 of a share of banc of california >> you always remind me, jim, it is a $500 billion company but i'm talking about visa >> yes, visa >> held back by still not getting the cross-border traffic. i think that's to come i do like mastercard more than visa pointing that out but there's a lot to like there. >> all right let's come back to the biggest of the big alphabet shares are up 5.7%.

microsoft is down 3.3% >> let them sell you've got to let the people who don't know anything bolt from microsoft, and then you come in. there are sizable people who don't know amy hood from robinhood. >> what's been interesting on google is worry about funds due to its a.i. strategy does that change as a result of this quarter >> i was very impressed with how -- that youtube, which is not involved with a.i. strategy, is doing very well, but the search had an acceleration >> i would point out, alphabet share price is now up more this year than is microsoft's >> which is maybe because going into the quarter -- >> neither one too shabby. one up 42%, the other up 46% for the year >> we get notes every day about apple and how apple may be doing so well and those of us who watch hijack know it drops tonight on web services. i do think, david, when i look at the magnificent seven, so far, so good >> so far, so good, you feel

like >> we need to see amazon say, we are bottoming at high single-digit growth. if they go negative, then you need lina khan to step in. >> any takeaways at all for meta from what we've seen from alphabet >> meta's up six my travel trust owns every one of these look, meta is only up three now. coming in so hot to a quarter, i think that the spend is down dramatically i think instagram's doing very well i think reels might be the star of the show. but what you have to hope is that he doesn't talk about -- that zuckerberg doesn't talk about economic weakness. remember when he gave you that forecast >> yeah, although it is still the year of efficiency >> i like that >> people like that cfo at meta who has been very focused on cost and they're hoping the same for the new cfo, whoever takes ruth porat's place at alphabet. >> we don't know who that's going to be. >> we don't. >> meta's really well run, and they moved first when it came to

capex cut. they had -- they're draconian. >> all right let's take a look at meta. after the bell today before we head to break, let's look at the bond market. check out how treasurys are faring so far this morning we got a fed meeting, if you haven't heard, by the way. 2:00 is when we'll get the word on rates 4.887% is where we stand right now on the two-year. the ten-year is 3.883% we're back after this.

oppenheimer is magnificent. the new york times calls it staggering. it's utterly enthralling and one of the best movies of the century.

after the break, we're going to have the ceos of liberty media, greg miffei, of course, and the atlanta braves' ceo as well it's the first publicly traded team in major league baseball, and as a long-time mets fan, sadly, it is also a very good

team we'll talk to them first, though, let's check out the top gainers in the s&p led by union pacific >> yeah, we got a new ceo in there. >> new ceo, lance fritz stepping aside. he will be joining us on the 11:00. i'll be anchor, but morgan brennan will be kuconducting th interview. don't miss it, 11:00 a.m. eastern, lance fritz we planned well for retirement, but i wish we had more cash. you think those two have any idea? that they can

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the atlanta braves ringing the opening bell at the nasdaq this morning after the team completed the split from liberty media last week. jo joining me is derrick schiller and greg mafai greg is going to stick around and we'll have a conversation about a lot of other things. but i do want to start with you now greg and get to derrick in a moment what's the benefit to have the braves split off from liberty, so to speak? why do it? >> well, i think it gives shareholders an opportunity to feel like they're direct owners

of the braves, greater transparency, information flows and focus on the performance of the team and real estate opportunities at the battery >> derrick, what do you think is going to move the stock price? you're a profitable team, that's not insignificant in baseball but you're not necessarily in a growth business. the asset value may only found in a sale. what's the stock moving here based on wins and losses >> i give a little perspective to that. we've been in existence for 150 years, first of all. and for the better part of 50 years we've been inside of public companies first turner, then liberty media, and a tracking stock and now a full asset-backed equity. in all of those times we're understanding more and more about what it takes to operate a business in the public sector. and, you know, we are comfortable with it is one way

to say it. and i think the way in which our team both on the field as well as off the field, our organization is approaching this is try to do all the things we do already really well and kyee doing them and doing them better this is a team that's operated strong, best in class in business all the ways we conduct our business we built a terrific mixed use development, 2 million square feet led my by client that's doing unbelievable having everything leased out there, expanding upon that a lot of room for growth but we can also be proud of what we accomplished already. >> everybody -- >> can i add something >> no. i get to ask the questions, greg no >> i was going to try to answer your question. >> i always need help from you, greg

always >> but i don't understand. growth is fine you can win the world series, you have a good team, sad to say as a long-time mets fan. kudos to terry for running this thing so well all these years. but i think many shareholders expect this is going to lead to a sale of the braves, to somebody who wants to pay an enormous amount of money for the team, some rich guy. is that true >> i think we have created a path where that can happen but that certainly we have no plan or intent as to how we can make money. if you look what's gone on, the financial results of the company have continued to improve. not only with increased fan attendance, better mon at theization of the fans i think you can look and say increasing profits driven by operations on field and the operations of the real estate, i think it's telling that bleacher

report reports that we have both the best team management in terms of business operations and the best management in terms of baseball operations. i think it's a kudos to this management team. >> it is see it on the field. derrick. i do want to come back to you, on the economics of the business overall. i can understand how player salaries continue to rise significantly in the nba and nfl given their tv contracts have gone up by multiples not so much for baseball you know, explain how you manage player salaries and expectations given the revenues are not necessarily increasing in terms of the contracts you sign for the broadcast of your games. >> well, obviously you sign a deal with your players, a collective bargaining agreement and you operate under that we're in the midst of the middle of operating under one of those cbas a number of teams have spent more during that period of time,

some spent less and in our situation we tried to improve our team with what we think to be very smart contracts, where we can, we take younger players and try to lock them up over a period of years. that's one way we believe we can be effective and suffefficient inside of that type of economic system at the same time i think the league at points in time will continue to look at whether this is the best system for players and for teams. you know, i think one of the things that fans and investors are going to get a snapshot of here is you get a team operated extremely well so it may not be a reflection of what all 30 teams are doing, it's just what's happening with this one team. as greg said we have a terrific management team in place and we're doing exceptional work here we're focussed on that, on trying to drive revenues, make them the best they can be.

>> certainly on the field they are right there as one of the best, if not the best. guys, appreciate it. derrick thank you. greg i know you're sticking around we're going to talk serious, formula one and charter. that's our conversation on the atlanta braves jim to you quickly. >> people understand that craig has been at the center of all the great communications -- >> you talk about cfos he was cfo of microsoft a long time ago. >> i have respect. 30 years >> what do you got today >> kroger, they're in the cross hairs of the ftc there's a challenge from the clubs, walmart and costco putting tremendous price disagreement between them. and then brian niccol, chipotle, he's crushing it i find him to be so knowledgeable. jack hartung so smart and incredible >> good job today. >> it's a tie.

it's worth the price of your apartment. get your hands off it. >> we're back right after this

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rick santelli live with breaking news. our june read on new home sales. we're expecting a number a bit over 700,000 not meant to be 697,000 seasonally adjusted units. we had three in a row. this is a lower level. we had seven of eight higher, this is not eight of nine. so we retrenched just a bit but keep in mind 697,000 still pretty good number considering last month which hasn't been revised yet, 763 was the best since february of last year and up over 12%. so not a big reversal here we see yields have moved a smidge lower and for a deeper dig on this number let's head east and talk to diana olick >> the street was obviously expecting better on this but we had a huge jump we saw in may.

that was revicsed down to 715,00 we're lower than that again. these are folks out shopping in june because these are based on signed contracts not closings. and mortgage rates ended may after a sharp rise, just below 7% and the 30 year fixed went over 7% at one point so affordability got hit when we talk about what the home builders are doing to get buyers into the market, they're working to buy down the mortgage rates and in some places lower prices but they're seeing so much demand, looking at the number of homes under construction, it had literally doubled from april to may. so we're seeing so much demand the builders feel they don't need to do any of these incentives they had done before. and in their sentiment survey they had said they were stopping some of the intennives we saw prices down 4% year over

year in june so an ease off on that but again things were going so gang busters in may, you couldn't expect it togo that much when mortgage rates went as high as they did in june >> good wednesday morning. welcome to another hour of "squawk on the street. i'm david faber and releslie picker 30 minutes into trading we are down across the board. the market digesting, particularly that nasdaq numbers from the megacap tech companies such as alphabet, up over 6% and microsoft down about 3%. >> we're about 30 minutes into the trading session. three movers we're watching. union pacific one of the top gainers this morning, reporting results and naming a new ceo, former coo jim venna after activist pressure there. you can see the stock up more than 11% this morning.

and pacwest shares surging, after agreeing to be bought by banc of california for about 1 billion. we'll bring you details later this hour. and google and microsoft kicking off another quarter of big tech results both names beating estimates on the top and bottom lines but cloud growth the focus for investors this morning let's bring in deirdre bosa to break it down for us >> let me take google first because they're with some good and not so good. but net very good because you see the stock popping some 7%, which is a massive amount for a stock of this size 6.5%. the good was accelerating revenue growth, add market showing resilience they talked about that in the face of this chatgpt generative a.i. shift so that was one. the focus on the cfo, who has been a major figure on wall

street for a long time, at morgan stanley before being at google, known for being hard hitting and financially disciplined. moving into the president and cio, chief investment officer, role, she said it was time for a challenge and working with policy makers on the role. on the flip side, there wasn't a lot of tangibles in terms of monetizing a.i i know that was the case with microsoft as well. but investors a little more forgiving in the case of alphabet another theme among not just google but microsoft and even snap is this rising cost rising cap x due to this generative a.i. shift. we knew it was going to require a lot of compute power, high end chips, particularly from nvidia. so that is going to be a theme going forward both microsoft and google, and snap for that matter talking about that >> was there anything in terms of competition, deirdre,

especially with google, competition, a.i., chat bots sb that creeping? >> it's early but they said a number of times this business is resilient and you had the ceo talking about how they had been happy with early results i don't know if you noticed but if you type a query into google search you get the answer at the top as well. of course there is that big overhanging question, does it ultimately kill search and a bigger question how do you monetize that? i'm not sure we got a lot of that yet they talked about things like monetizing it within google work sheets but obviously that is a smaller base than say office 365 at microsoft >> it appears that too early for competition to have emerged. i'm curious to go to microsoft

and cloud get a sense of azure's growth rate. what we saw, whether there's a read to amazon's aws unit as well. >> cloud is an important indicator of i.t. spending across corporate america and otherwise. so positive results here, especially when you look at azure, that should bode well for aws, the big number one player in terms of alphabet which is distant number three i asked ruth as well are you ready to say this is bottomed the they said they're still -- still some pressures here, customers trying to save money which raises the question how much are they going to spend on generative a.i. products everyone is looking for a bottom not sure we got that yet. >> thank you we'll watch the stocks throughout the day. let's go to liberty media

and ceo greg continuing a conversation with had in the last hour we were talking about the atlanta braves but so many other things to talk to you about happy you found time to come back can we start off -- >> thank you, david. >> you're welcome. there was a move last week that was extraordinary and the tracker of sirius versus the actual stock is quite different. what does that say as to why the two don't trade closer to parity >> i think we saw unusual movementle in the stock last week driven by a couple of factors, a number of shorts we werecovering as the stock entered into another index and pressured buying by index funds. you've now seen some of that come off and i expect you'll see a more normalized pattern of

trading. we are making moves, creating a new tracking stock that is purely lsxm, purely siriusxm stocks so we are working to make that as transparent and crisp as possible and i think the trading is likely to normalize. >> i wonder and you're referring to liberty live. you'll have a tracker for live nation >> yes. >> it doesn't seem to work that well in the case of sirius we've been talking about the discount for years so i wonder why you think that's going to change when live is out there and that's going to change close to parity to live nation and sirius is go to make up some of the difference between the tracker and the stake. >> i think we made it a clearer story. this is lsxm is only sxm stock it allows more flexibility to deal with the issues

we have had the discount range from 2% to over 40 i think it's going to normalize into a tighter range and allow us more opportunities to do things to further tighten it with a purer lsxm. >> what are the things that allow you to further tighten it? >> you can imagine transactions certainly not one we're announcing today but you can imagine transactions that combine the two that are easier to achieve with a pure lsxm, sxm compensation. >> formula one will also become a pure play, won't it? >> formula one is almost entirely -- the stock is almost entirely formula 1 there are some minor assets in there as well, but yes. >> let's talk about it the sport is seeing enormous interest and growth, in part based on the netflix series i want to come to tv i was asking earlier when we were talking about the braves.

i believe your contract with espn is up in 2025 is that correct? >> yes we cut a short term deal last year, it begins this season, three years with espn? >> why did you go so short term? the nba is negotiating for a deal that doesn't end for a while. do you enter renegotiations as a result >> we took a short-term deal because we're bullish on the prospects for formula 1 we did a short-term deal on our last deal and positive effect because we were able to get a big increase in what we are paid for our broadcasting rights. and we're optimistic with another short deal we have an opportunity to increase what we're paid again in three years. >> when it comes to formula 1, you know, there have been plenty of speculation that you conceivably might want to hit a

bid from the saudis, who seem to be paying enormous prices for any sport. how do you view the asset at this point given the growth that you've been able to have and the success that you've had, is there a possibility for a sale or is that something really not on the table right now >> look. we're always looking to build shareholder value, particularly in the case of the braves and formula 1, very bullish on the prospects, bullish on where they go on sports in general. the numbers that were discussed and only speculated about never discussed in public never had any discussions with the saudis. frankly were not that interesting. we're bullish on the prospects for f 1 so we want to ride the horse for as long as possible. >> i think you said it at a conference recently. you're not going to -- you know, is there any chance we're going to sell this thing and incur a corporate tax?

those that know the history of your company know that you guys look for opportunities to -- for tax advantage opportunities. so i get -- what does that mean? you're never going to sell it unless you get a deal that would be tax advantaged? >> look, we're trying to build long term shareholder value. that's an after tax number we think there's an opportunity to grow the asset for the long term but if we ever dodo something we'll do it in the most tax efficient manner to the benefit of our shareholders. >> brings me back to the braves. you said it makes it easier if there was a sale but the likely buyer of something like the braves is a rich guy or lady who wants to spend an enormous amount of money, not a tax advantage deal because it would be all cash is that an impediment to selling the braves perhaps >> by creating a separate company rather than a tracking stock, we would have the

opportunity, again no plan or intent today but if we were approached we would have the opportunity to avoid corporate level tax. so yes, even though we might be paid -- i agree it's most likely the buyer would be cash we would avoid a level of tax that happened at the liberty level now it's only a shareholder tax so that's attractive. >> i wanted to get back to formula 1. las vegas is obviously very important. are these reports you're sort of charging or looking to charge hotels for their -- the right to have really excellent views,, correct? can you explain what's going on there? >> yeah. we're investing over half a billion dollars in creating great experience, las vegas convention authority and clark county are investing and many of our partners, including mgm, wynn, cesars, leading partners are all investing to create a great fan experience i think there was an article in

the post about somebody complaining that they weren't -- they didn't get a free ride. i don't think it's fair that someone who -- many people, including ourselves, including many in las vegas are investing in creating great fan experience and somebody is saying why can't i have it for free i'm not sympathetic. >> are you going to get paid for it are they going to be there to pay the fee? >> since it was an anonymous article, i'm not sure who it is. but i think many people are paying and paying happily because we believe it's going to be a wonderful fan experience and that's our goal. >> i want to come to charter we haven't talked about that in a bit of time. you know, again, given the significant stake that liberty has in that company. greg, as we head into reporting season for my parent company, charter, there's a hope that broad band is going to inflect up are you getting a sense that's a possibility? although i just heard things on

the call that might indicate otherwise? >> we remain bullish on charter's prospects to grow in broadband and more quickly in mobile we will continue to see, particularly as there's some diminution over time of fwa, fixed wireless access competition and as the economy gets stronger and people move more again we're likely to sell and gain share but i think our broadband will continue to grow. >> i think verizon had a 384,000 fixed wireless reported yesterday. charter and spectrum are eating up market share in terms of wireless there was a time when verizon and charter talked about a deal. i know it because john indicated it to me in previous interviews. is there a world you can see cable and wireless come together again? >> i think you're already seeing some of that convergence and we have an mv&o deal

a mobile virtual operator deal with verizon which allows us to offer their mobile services across the nation. i think frankly our opportunity in mobile to penetrate more quickly and completely is much better than mobile's opportunity to compete either by building fixed lines or providing fwa, which ultimately they're going to have capacity issues. i'm quite bullish on the prospects for charter. >> why do you think they'll have capacity issues with fwa >> i think you've seen many of the smart mobile operators offer fwa to customers who want a lower end experience but they're getting paid like 1/40th of a per bit revenue than they would get if they were charging a mobile phone experience. so where they have excess capacity, they utilized fwa, i don't think that's the long term plan for them. franklinly i think it's a less

attractive opportunity for them. i think most customers, many customers are certainly going to want more capacity than are going to be offered on fwa. >> there was a time you and i might have spent time talking about cable networks and the like we don't need to because other than cure rate you don't have a lot of exposure to that. i assume you're happy given the acceleration of cord cutting although i'm curious to know your thoughts about the path that's following now. >> liberty has gotten out of most of its cable networks with the expectation that business would get tougher going forward. you're seeing them molt their businesses to being partly linear and partly streaming, most of them and the cable companies in terms of being a broadband and mobile operator because the reality is you're down probably 30% in linear viewing and i'm not sure we've hit the bottom

>> do you want to partner on espn with disney >> we look at everything espn is a great business we certainly don't have a -- we haven't looked at it yet. >> greg, always great to get your take on things. appreciate you taking time thank you. >> thank you, david. great, wide ranging interview. no free ride according to greg maffei more on the fed ahead of a big rate decision this afternoon what investors need to know and what it means for yourlet. >> the at&t breakdown. shares are actually down we'll talk about the quarter and why that stock is down about 1.57%. >> finally a share decline in snap, ceo evan spiegel joins us this hour to discuss in an exclusive you do not want to miss a big show still ahead don't go anywhere

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take a look at shares of at&t, a bit puzzling there was an expectation the quarter wasn't bad, remember last quarter they reported a number below expectations a lot of concern about the full year number and whether they would hit it flee cash flow this quarter 3.2 billion up a billion in the first half of '23, over the first half now of '22. they also delivered 326,000 post

net phone ads. so leslie, you start to, well, what's the issue here again because they seem to answer at least some of the questions on free cash flow the initiatives are running ahead of schedule in terms of hitting the run rate on the 6 billion. but stock not really responding. obviously got that concern about led wrapped cables. >> right which they didn't say too much other than we're going to follow the science here and let the science dictate what we do with the cables and cost cutting ahead of schedule, announced another $2 billion, so maybe it's a little bit of sell the news, not too much to really bit on here >> as you can see, the stock hasn't done much lately except go down. as for a reflection on the consumer, at&t is usually good forgetting a pulse on that, given your wireless bills probably the more important ones you pay every month. listen to john's thoughts on the

call. >> i think the consumer continues to show signs they're healthy right now. i don't see anything that appears to me near-term concern about demand, i don't know what happens down the road, it's anybody's guess what the economy does, i have a conservative bent on that. i think it served us well. i'll keep that conservative bent as we manage the business going through the balance of the year. but i think the market is supporting healthy growth and the industry is, i think better news, responding well to that growth so again, kind of positive commentary from him on the consumer, obviously, ahead of our fed meeting that we're going to start counting down to at 2:00 today, in terms of any pressure and then look at the lvmh numbers at the highest end which seem to be in the u.s. pulling back a bit from making some purchases. particularly those who make first-time purchases

apparently cognac isn't selling as well i don't know about you. >> you have to restock the bar. >> i go to port me. >> me too. >> fan after portugal. >> maybe that's it, that's why to your point, you have this barbell consumer situation going on we heard it from the banks last week as well. coming up, snap shares plunging as sales come in lower year over year and guidance disappointments. we'll break down the numbers and where theit goes after the brea.

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shares of snap falling at double digits post results for the fifth consecutive quarter in a row, down about 19% sales decline and softer guidance than the street expected. let's get to julia boorstin with a special guest. >> that's right. i'm joined by evan spiegel the ceo of snap. evan, thanks so much for talking to us today on the heels of these results. evan, the stock is down nearly 19% and as leslie just pointed out, this is the fifth quarter in a row where we've seen your

earnings followed by a double digit percentage decline what's your message to investors? >> hi, julia thanks so much for having me it has been a challenging period of time for our business coming after five years of 50% year over year revenue growth on average, the ukraine war and rising inflation some of the app privacy changes have had a real impact on our business and as a result we've taken our business through a transition to try to reaccelerate our top line revenue growth and we've done it by focussing in this three core areas. one on our lower funnel direct response advertising business and seeing real progress there lower funnel spend has grown year over year, a record number of active advertisers up 20% year over year we've seen purchase related convergence grow 30% quarter over quarter. so really promising results there in terms of improvements

we've made to the platform to drive results. we've focused on deepening engagement with our community which is 397 million daily active users and growing time spent with spotlight, our short form video platform. time spent tripled year over year strong improvements to the ad platform, content engagement and time spent and lastly working to diversify revenue, snapchat plus reached 4 million, that added four points of year over year revenue growth to the business we're focused on accelerating and improving top line growth which is important to free cash flow generation which is what we're managing the business to. >> while you're focused on that revenue growth the thing that seems to be concerning investors right now is the guidance between negative 5% of flat growth in the third quarter. we eave seen other companies

such as youtube show 4% revenue growth i'm curious why you're expecting this potential revenue decline in the third quarter while you have been growing your user base >> as i mentioned, we've been taking the business through a transition with the focus on lower funnel performance advertising. as we look at the business by region we are seeing moment in europe with positive year over year growth, seeing moment in the rest of world region, including apec with positive year over year growth. it's really the americas where we had a small number of large advertisers who have yet to transition to adopt the new tools that we're providing that are driving strong results for advertisers. the good news is out of that small group, half of the group most impacted returned to spending levels that were the same or greater than their levels in prior quarters so i think we are making progress there but there is a drag in the americas due to that historical

focus on growing deep with a smaller set of larger customers. >> just to dig into that potential third quarter revenue decline, which is so concerning. is this because of a contraction in the market or is this more about the business transition you're making? if you're growing your user base and you're growing engagement as well, you should be seeing revenue grow along with it >> the challenge has been as we grow user base and invenn tory,p has come downper pertaining to guidance, it's the first time we offered formal guidance since the begin of the ukraine war we view it as a constructive sign that the business is stableizing. >> in terms of these other categories, you've also been rolling out a subscription service and this a.i. chat bot

tool how are those doing and impacting your top and bottom lines? >> i mentioned we're excited about the adoption of snapchat plus reaching 4 million customers. and now with my eye, 150 million people using it sending over 10 billion messages my eye is an interesting opportunity for us because our community interacts with our a.i. chat bot and tells it what they want, ha they're interested in and typically we had to infer it, guess what they're interested in based on the content they're watching or the ads they engage in we can use that data in a first party privacy safe way to inform our advertising process and make augmented reality more relevant to our community. >> at what point do you think that's a growth driver in terms of the top line? >> that for us is really a longer term investment

right now we see a lot of head room in the lower funnel performance advertising business which is where we're spending our time and where we can build a more diversified business over the long term. no question my eye will contribute to our performance there as we integrate it and use those signals in our machine learning models to help better optimizing. >> your rival meta talked about how it's using a.i. to improve ad targeting, and meta rolled out threads to great fanfare curious if you've seen threads impact your business, engagement, and how much you see it as a threat >> threads is a different product experience than snap snap is a way to communicate with friends and family. it's not, you know, a text, blogging platform like x or threads. so i don't think there's a lot of overlap in terms of engagement and not something

we've seen in the numbers thus far. >> what about twitter now rebranded as x as x becomes an everything app, wants to engage in everything from communication to payments, could that become a bigger threat to snap >> again it's early to say we're excited to see where elon and linda take things there. but we're going to stay focused on serving our community and delivering them product experiences that are delightful and drive engagement it's exciting to see momentum there with things like my eye. so i think we'll stay focused on our community and innovating to serve them >> evan, i want to take it back to the outlook and the guidance. i think those third quarter revenue numbers that warning that things might not be making progress there is i think really what's weighing on the stock now down to about 19%. give us insight as to when you see your revenue really turning

around and whether you feel like these challenges are about the market because i think that if youtube is showing different things, are your challenges more market driven or particular to what's going on at snap and are you competing with different players than with youtube for ad dollars? had what's really going on here? >> well, it's not surprising at all to see youtube or google or meta accelerate ahead of us. i think that's a good thing. i'd be more concerned if they weren't. they represent the vast majority of the advertising business. and advertisers have been focused on working through this challenging period of time, restoring their lower performance with meta and google i take it as a good sign there's acceleration there in the case of meta, their growth went negative a few quarters ahead of us i think it took three quarters to recover to positive growth these transitions are feignful no question but we're working

hard and i think what we're seeing in terms of advertising performance is really promising. we're going to stay focused there. we're issuing formal guidance, trying to be thoughtful about the risks we see and the business has become more volatile and harder to forecast in recent quarters but we're glad we can share with investors where we think we could end up in q3. >> we appreciate the formal guidance and the interview evan. thanks so much for joining us to give us insight into the quarter and also what's ahead. evan spiegel, ceo of snap. thank you so much. leslie back to you. >> thank you both so much for that wide ranging interview. appreciate it. still ahead, it's fed decision day with markets widely expecting a quarter point hike later this afternoon jeffrey lacquer joins us with his take and why he sees rates headed as high as 7% tethe break. don't go away. we're back in two.

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welcome back to "squawk on the street." i'm bertha coombs with your cnbc news update. h hunter biden walked into a federal courthouse this morning where he is expected to pay guilty to two misdemeanor counts of failing to pay taxes. he allegedly owed $100,000 in taxes in 2017 and 2018 also faced a separate gun charge that will most likely be wiped from his record. a london jury acquitted actor kevin spacey on nine sexual assault charges spacey cried as the judge read the verdict after two days of

deliberations. four men accused him of sexual offenses between 2004 and 2013 at least five people including a firefighter were injured this morning when a burning crane collapsed more than 40 stories above ground in manhattan. new york officials say three of those people were rushed to the hospital the crane was on top of the building that is under construction and is just a few blocks from times square and the nasdaq crazy traffic issues now, leslie. >> oh my gosh. that is a harrowing video. so much construction over there. i guess -- >> near hudson yards. >> hopefully nobody is too seriously hurt there thank you, bertha. it's fed day with many expecting a quarter rate point hike later this afternoon. the next guest thinks the fed is going to have to go above 6%, perhaps above 7% before all is said and done. former richmond fed president jeff lacquer joins us now.

explain your rational there. 7%, what would require that and when do you see that happening >> the real funds rate, adjusted for inflation is the measure that gauges the stance of monetary policy, the extent which it's straining demand and spending growth. that's really only half a percent, maybe one and a quarter percent depending on how you measure it and for inflation as high as it is now, you would need two to four percent real federal funds rate to get inflation back down to 2%. so on that basis, they're going to have to -- they're probably going to have to go up, unless inflation comes down significantly and pretty rapidly. and by that mechanism increases the real federal funds rate where it is in the nominal terms. so that's the basis by which i say that >> it appears that there's some

kind of theme or thread of d disinflation out there we had the softer than expected cpi print but you expect we need to see more on that front to give any kind of pause or potential cut in the future? >> the june cpi print was better than expected, softer, the core number 1.9% month over month at an annual rate that was really good news. but it's just one number before that, going back like six or eight months, every number had been on a month over month basis over 4.75% as an annual rate so it could be a hedge rate. we've seen hedge fakes before we need to wait and see having said that, there's hope for a housing disinflation that's in the pipeline because of lags in the way rents are figured into the cpi but if you look at housing,

housing markets firmed a lot in the last few months. it looks like that housing disinflation in the pipeline could be just transitory, could see firming shelter costs later in the year and early next year. it's not clear how far the trend is going, how fast it's going and whether it's going to get down to 3% and you have a hot labor market and wage growth that's still very inconsistent with 2% inflation. needs to come down a bunch >> all that said, between now and the next meeting we'll get, what, a couple of cpi reports, a couple of employment reports and jackson hole so there's a good amount of data perhaps coming in many between now and the next meeting, right, jeff >> yeah. a lot of data. it'll be, as you said, two big inflation reports you get the pce for june and at the end of the week and then two months worth for the next cycle at jackson hole they admit the

data, they don't collect any but they will have a lot to go on i think we'll know better whether this is an emerging trend or not. >> do you think they need to engineer a recession to stop hiking is recession a prerequisite to change the trajectory here >> i don't think so. but the historical record makes it look like it's likely if they raise real rates enough to slow down demand growth, enough to slow down inflation, that it's going to be repercussions for the labor market that are kind of nonlinear, that just kind of spiral the labor market into a hole and that's been the historical experience i'd be surprised if it doesn't play out that way this time, too. >> what about the balance sheet, what about tightening? what about the reluctance perhaps of some banks to lend. do you think that's having any contraction or impact?

>> no. you know, the historical record i talked about has the same thing happening, whenever the fed tightens, there's a pullback in lending, there's a tightening of credit standards. you see that every time. so that data sort of bakes in that effect, if you know what i'm saying. >> the balance sheet too you don't see that much of an impact >> i don't see the balance sheet of being the big player in this. they're reducing it 65 billion a month. that's not a lot it's going to take a while to have an effect they're not going to vary the timing of that it's predictable markets are baked in, the implications for supply, mbs and treasury >> there's a lot of debate about the lag effect and what's to materialize. whether it's the fiscal stimulus out there, still floating around whether it's the pulling back on lending. whether it's wage growth whether that's fully materialized at this point in

time, how do you see those pressures working through say in the next six months to come. >> i don't see lags as a factor here, at least not compared to the past i think governor chris waller made good points about lag effects. so the moves that began last march were telegraphed six months in the advance. you saw one year, two year yields pop up well before the hiking actually began. so there's sort of less of lag really than usual. i would expect, you know, all the lag effects to kind of really have played out for the most part at this point in time. given historical data we have on this point in time given how the lags work. >> interesting we really appreciate your insight, thank you jeff. >> thank you, leslie. >> we'll look forward to 2:00 p.m. this afternoon. as we head to a break, let's give you a look at the bigger gainers in the s&p 500 this

morning, let by union pacific. when you're a long-time ceo and you leave and the stock goes up 10%, i'm not sure what that says about investors' view of your tenures. you can see the other leaders as well including banks which leslie and i will probably talk about before this hour is up "squawk on the street" is right back (bobby) my store and my design business? we're exploding. but my old internet, was not letting me run the show. so, we switched to verizon business internet. they have business grade internet, nationwide. (vo) make the switch. it's your business. it's your verizon.

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still ahead, you heard it earlier, but bit gains over union pacific for the past three months, and fresh results today sending shares even higher outgoing c lceeoan fritz joins us to break down the numbers and succession plans next hour it all kicks off at 11:00. don't go away. what do you know about rock stars? billy idol? i mean where's the skin-tight leather? my shoes are leather. where's the unnecessary zippers? that thing! billy, rock star is just how doug feels when he uses workday. thanks, rory. i'll show you rock star!

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welcome back shares of pacwest caught up in the fallout of silicon valley bank's failure the bank reaching a deal to be bought by banc of california, at $1.1 billion at today's levels if the deal goes through, the combination will result in a $36 billion lender with over 70 branches serving mostly community banking markets in california currently, the market's trading like they think the deal will go

through. they made some comment on the call yesterday, that they believe that they can get regulatory approval as soon as the -- by the end of this year, early next year, which i know has been a big kind of question mark in the regional banking space, whether regulators will approve. >> you would expect that they would. to the extent that this is creating a safer bank and one that is less likely to have to deal with problems that the fdic might have to come to deal with, why wouldn't you want to approve a deal >> and they don't have as much overlap in the core competencies that is something under consideration, as well but it's the concern, the fear surrounding horizontal mergers in the banking space has prevented a lt of announcements so far this year >> a lot of people would say, especially given what we went through in the spring, leslie, that we need a lot more consolidation in order to sort of secure the balance sheets of many of these banks, if, in fact, they enabled them to withstand a deposit flight that can happen, as we saw, very quickly. and that was the case with pac

west if we go back to the history of a few months ago, that is what happened they had a huge deposit flight they had to go and borrow in the wholesale funding market, which was extremely expensive. so what this deal accomplishing with the two private equity investors, about $400 million, is it helps them kind of fill that capital hole, allowing that repayment of the expensive funding that they have received, kind of to shore up their balance sheet a bit more, and as a combined bank, the idea is that hopefully, you can prevent some of the issues that a lot of these banks face >> as you point out, the inclusion of private equity not insignificant, in terms of providing that capital both through common and getting warrants, $12.30 a share is where they're getting into bank of california. they're already up and they have warrants seven-year term, exercise price, 24.60. so that does give you a sense as to the premium that they're willing to accept. but significantly to help

bolster capital, to your point >> and i think yesterday, when it was first announced in the "wall street journal," or first reported, citing sources familiar with the matter some of the details about the balance sheet restructuring, not quite in that first take the market really sold off p pacwest shares they were concerned about delusion, the overhang with those funding sources and so forth. but now, obviously, once they know the full detail, the full extent of the deal, shares are up 28%, more than recouping the losses from yesterday. >> speaking of shares, though, the nasdaq's down about half a percent, led perhaps by the likes of microsoft, which is down 4.5% after earnings we'll get to aot m lore about big cap tech in the next hour of "squawk on the street. don't go anywhere.

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indeed you do. indeed instant match instantly delivers quality candidates matching your job description. visit indeed.com/hire good wednesday morning i'm leslie pick we are david faber, live from post nine of the new york stock exchange. union pacific ceo lance fritz joins us this hour on earnings, the activist challenge of ump and an update on his successor >> the ceo of pfizer also with us during the hour that stock is at an all-time high after strong quarterly results. >> and later, former kansas citi fed president, thoma