and "squawk box" begins right now. good morning welcome to "squawk box" here on cnbc we are live from the nasdaq market site in times square. i'm becky quick and andrew ross sorkin with jon fortt. joe is off today let's look at what is happening with the u.s. equities at this hour you will see red arrows again this morning this follows on yesterday's red arrows dow futures off 62 s&p futures down 10. the nasdaq down 42 stocks pulled back yesterday following the fitch downgrade of the u.s. debt. dow down 348 points. that is 1% s&p down 1.4%. in fact, the worst performance

since april and the first time in 47 sessions where it broke the streak of days where the s&p hadn't dropped by 1% first time we have seen a loss like this in a while nasdaq was down 2.2% that was the worst day since february if you look at treasury yeields, we saw action. the 10-year treasury pushing higher the 10-year is 4.41% 2-year at 4.19%. andrew, we talked about the market blowing off the downgrade from fitch in the morning. yields under pressure which is the opposite through the course of the day, yields did pick up a bit >> i know you have comments from warren buffett in a moment i don't know if this is a number of earnings which were better than expected, but some were

weaker you have the report. >> that brought the expectation to bring more pressure on the fed to raise rates >> that, to me, is a much better rationale than the fitch report. as you know, my view is not that it is silly. it is important to say aloud the world is a relative place. if you downgrade the united states, you have to downgrade all of the other aaa developed countries in the world otherw otherwise, if we get a cold and sneeze, they sneeze. >> i will say listening to one of the guys at fitch responsible for the downgrade, we are looking at this 20 years and this is getting worse. worse than before the pandemic and worse before the financial crisis that may be down from 120% that

we were a year or two ago. you see improvement there. if you look at this over 20 years, governance has gotten worse. you are talking about a worse outlook. those are things worth paying attention to here. >> sometimes the silly things matter it is one thing to talk about the economy and another to talk about the markets. especially in 2023, equities have defied graph vity for a lo time and expectations. sometimes something sparks the ce sentiment shift. i'm not saying this is the thing. there is a fact in fitch's explanation to why they did this. >> i don't disagree with the explanation of the perspective i'm suggesting if you downgrade the united states, you have to downgrade everybody else or it

makes a mockery of the rating. >> is the u.s. not able to payoff the debt? no >> if we can't pay off the debt, canada can't either. all of a sudden, you have a rating system that doesn't make sense. i agree with the commentary around the idea that we're not in a better state than 20 years ago and there are important things we have to look at here, but the timing of it here. if they had done this and i had done reporting and heard that they were going public with the view like this two months ago when the debt ceiling debate was happening. that would have been understandable it seems the timing of it all is odd. not the overall view, but you have to do all the other things at the same time. >> this brings attention to the treasury markets this is not new news we have comments from warren buffett on the downgrade of the rating he says he is not worried about

it it is not changing anything that berkshire is doing in the markets. here is the quote. berkshire bought $10 billion in u.s. treasuries last monday and this monday. the next question is if we buy $10 billion in three-month bills or six-month bills that is the decision berkshire makes every week we spoke with him in japan and he spoke out at the annual meeting in may this is the safest place to be he doesn't think people should be worried he made the comments to ease concerns about the downgrade he said there are things people should worry about let's not to say the concerns raised are not valid, but he doesn't agree with everything the federal government is doing right now. it doesn't change the treasuries or the dollar. the dollar is the reserve currency of the world and everybody knows it something to keep in mind on all of the issues if you look at the

big voinvestors and not changing their perspective on dollars if you look back, he is saying berkshire was fortunate because they were invested in the u.s. treasuries back in 2007 and 2008 with the great financial crisis which hit. if he had been invested in aaa bonds at that time or credit markets, things froze up he would not have been able to do all of the things because berkshire was invested in treasuries it is the default place he wants to be. it shouldn't change perspective on that. >> that is the other thing, becky. this bond p mmarket is one of te most covered by warren buffett people understand. this is the most well understood markets. it is not to dismiss what fitch is saying because they are raising important issues

one issue on treasuries or a smaller company -- some very indebted company and you say i need to pay attention. i don't know >> can i add fitch with the comments i heard from one of the fitch people who made the decision was saying we are still at the second highest rating we have for any of these things we are seeing a steady decline over the last 20 years in things that matter. governance and debt-to-gdp those are important measurements and it is valid. moody's did this years ago and has not reversed and put it back this is the second rating agency to do it. >> it reminds me of the 11th grade english teacher. i turned in the paper and got it back and got a "b" and i was mad because my classmates got better

grades i said why did i get the "b" and the teacher said this is "b" work for you it doesn't make total sense, but for the united states, maybe this is not aaa work we know it is one thing for warren buffett not to be concerned and jamie dimon not to be concerned ordinary investors and citizens thinking about making choices on election day, should they think about the economy or maybe more concerned about the direction? i don't know there may be something here. >> then that comes up with this question how political is this with the timing we are getting other reaction to the fitch downgrade from joe manchin. he has a message for the "squawk box" audience. the downgrade of the credit rating by fitch is historic failure by leaders of both

parties and the executive branch the credit agency specifically cited the decline of governance and ballooning of the national debt to make the determination to lower the credit rating this is the warning that cannot be ignored we must act to fully fund the government and address the national debt before we wake up to a future where america's super power status is in jeopardy and we lost the confidence of allies around the world and every american will suffer if washington politics gets in the way to address the challenges september is the crucial month to address the deadline. now is the time for both leaders of both parties to work together and send a melgs ackssage to ree the credit rating and keep america's economystrong for this generation and the next senator manchin will join us live at 7:00 a.m. eastern time i think we can say amen to that.

he is looking to take a buy partisan approach to just about everything in washington these days that, i think, is hard not to agree with >> it is good to hear washington stepping up and listen to fitch and the concerns saying they will address it. i look forward to hearing from senator manchin in the next hour >> and the dplcomments from mani and buffett come after jamie dimon said yesterday he spoke to leslie picker about the fitch downgrade. >> it doesn't matter that much the markets decide not the rating agencies. number two, they point out issues which we knew about with the debt ceiling crisis. number three, most importantly, the american public. this is the most processed nation on the planet

it is the most secure nation on the planet there are other countries rated higher with aaa, but they live under the american enterprise military system. that is ridiculous >> more on that dimon interview throughout the morning, becky. it is a different tone from what w we are hearing from joe manchin. >> i don't think there is much difference with buffett and jamie dimon and joe manchin. i think if the three were in a room, they would agree on the points dimon and buffett can say the market will continue to operate as normal, but buffett and dimon wants washington to address the issues buffett does an agree with everything washington is doing right now. he made the comment that congress can only screw this up or the administration can screw it up if you push too hard he thinks sounder people will

prevail in all of this because you ccan screw it up along the way. i don't think there is anybody who says you need to address the debt. >> warren buffett is saying i'm doing the same thing this week as i did last week and same thing next week. joe manchin is saying here is a chance to do something different. that is the action. >> i think buffett would applaud what joe manchin is saying here. let's take this seriously. when we come back, it is a busy morning for earnings. central banks and economic data. we get you ready for the trading day ahead. that is next. tomorrow, we have an exclusive interview with steve schwarzman you are watching "squawk box" and this is cnbc

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on today's "planner," we have results from hasbro and conoco phillips before the opening bell we have amazon and apple after the close of the bell. we hear from coinbase and booking holdings the bank of england will report the rate decision today at 7:00 a.m. today in the united states,richmond fed president tom barkin will speak at 8:30 a.m. his speech is "recession revisited. and we get weekly jobless claims and second quarter productivity

claims. and in legal news, former president trump is due in court today and expected to be arraigned on felony charges on the efforts to overturn his loss in the 2020 election billionaire investor bill ackman is betting against the 30-year treasury against the hedge of the long-term rates on stocks he believes this is one of the few macro investments that offers upside gains which is greater than the downside risk he arguing if u.s. inflation is 3% in the long term instead of 2%, then 30-year treasury yields could hit 5.5% and he says it could happen soon. ackman said he will purchase options rather than shorting bonds. let's talk about that and more on the markets with matthew who is the senior portfolio manager.

good morning to you. >> good morning. >> lots of places to go, matt. i'm curious what you think of the fitch downgrade and the reactions we just heard from bill ackman and equities let's start with the fitch downgrade. if you are an investor and watching this, what are you supposed to make of it >> i think you and becky are right. analysis with warren buffett and dimon and joe manchin is not cons consistent we are where we are and we could do better. when all is said and done, t-bills are the valuable form of collateral in the financial system we are still in the position prior to the downgrade i think it is not a good sign. it is a warning shot of sorts. i don't think it is necessarily changing things fundamentally. >> what do you think of the bill

ackman statement of 3% is on the table and 2% is a pipe dream >> i think it is rational. when i think about the way you recapped the way he implements the trade, it makes sense. if you pay option premium, you are at risk of losing premium. you have the payoff. janet yellen has said recently that maybe we should move up the inflation target instead of trying to aim for the lower one. i think it is consistent with the information the market is given. i don't think it is, you know, i don't think it is a bad trade. we have seen the 30-year from 4% to 4.25% in a couple days. so far, he is right. >> does inflation at 3% mean that the fed, therefore, stops

and that's why we live at 3% or do you think jay powell decides it is my job to hammer down to 2% no matter what? we had hot jobs numbers. we get "the" job number tomorrow how much does that impact -- that adp job numbers impacted the equity markets yesterday ending the bull spell we had >> i think earnings tell you a lot. when you look at the performance thus far this season, those which outperformed rallied a bit. the ones which missed have been punished that tells me bullishness is priced in on a number of fronts. the reason we are seeing the most recent pullback is we are priced for perfection in an

an imperfect world you see a dent in the armor as an excuse for the move are you fully valued you don't have to look too far for inconsistencies. if you look at the interest rate prediction screen, it looks like the market is going to cut rates early next year. what would drive cutting rates into early next year it would not be because we hit the inflation target -- job well done it would signal a probability of recession and something between a soft landing and hard landing. i think people are taking stock of where things are right now from the price perspective i think it is a prudent decision to have dry powder have money ready to work. look at investing in public equities. >> matt is more negative than

the rest of the markets. we appreciate your perspective on all of it we look forward to talking again. >> thank you >> jon. coming up, the bank of england set to announce the latest rate decision at 17:00 a.m. and ab-inbev numbers are dropping after the bud light backlash "squawk box" is coming right back so i broke up with bad banking and moved to sofi checking and savings. now i get higher interest, pay no account fees, and get my paycheck two days early. get up to 4.40% apy, pay no account fees, and up to $2m in fdic insurance. download the sofi app and earn up to $250 when you set up direct deposit. sofi get your money right.

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welcome back the bank of england latest interest rate decision is due in a mhalf hour. let's get to arabile gumede in london with more >> it is the decision which is due later on which touched the market red it takes sentiment from fitch with the u.s. government debt, but the picture from the bank of england is significant and key we had tech earnings come out today with infineon here in

europe pointing down infineon saying demand for its chips are said to be weaker. iphone or smartphone market is not necessarily up to scratch. they will get some suffering and huawei with the ban from the united states with their chips which is a downfall. 10% down on infineon overall although there is a bit of a pullback, the ftse 100 in the uk and ftse mib in italy was down 1.5% this is what with the yields picture is looking like ahead of the bank of england decision the 10-year managed to gain 1 basis pointis currently sitting8 on the lower end of the scale,

we are seeing a little bit of pullback five-year is managing to go down four basis points. the 2-year gilt is 4.193 the bank of england is all but certain to deliver the 14th straight hike taking rates to the highest level since 2008 the question is whether it will be 50-basis points or 25-basis points markets are pricing in a 2/3 chance the bank will slow the pace of hikes to 25 points and the implied probability of 50 points standing at 37% that is what we are looking at here over the inflation environment improvimproving it will be interesting to note that decision out in a bit >> yes, indeed 32 minutes away. arabile, thank you when we come back, the ceo

of nerd wallet joins us to talk about earnings that's next. we have more reaction from the fitch downgrade from warren buffett and senator joe manchin. we will hear from manchin in about an hour. as we head to break, here is a look at yesterday's winners and losers my cpa told me i wouldn't qualify for the erc tax refund, so i called innovation refunds. their team of independent tax attorneys will work with your cpa to determine if your company is eligible. [whip sound] take the first step to see if your small business qualifies.

good morning welcome back to "squawk box" on cnbc we have red arrows across the screen dow off 45 points right about now. more comments from warren buffett, becky quick >> these are comments in the last half hour from berkshire h hathaway on the downgrade of the credit rating from fitch he says he is not worried with the markets. he says berkshire bought $10 billion in u.s. treasuries last monday we bought $10 billion this monday the question for next monday is whether we will buy $10 billion in three-month bills or six-month bills. that is what with warren buffett told us. he told us in april when we were

in japan with him. nothing the fitch downgrade does changes what he does with the market he made comments to ease concerns of the downgrade saying there are some things people should not worry about this is one. spre separately, joe manchin is calling this a stark warning to capitol hill and calls it a failure in leadership. senator joe manchin will speak out at 7:00 a.m. eastern time. he doesn't agree with everything the federal government is doing right now, according to warren buffett, but we will see that reined in. over time, cooler heads will prevpare tv prevail. we will hear from senator manchin in a half hour. nerdwallet which matches consumers with financial solutions is seeing a strong

second quarter revenue up 14% year over year. nerdwallet has an inside look of how consumers are reacting to high interest rates and tight lending standards. joining us now is the founder tim chen tim, appreciate you getting up the quarter is better than expected you got headwinds. i'm particularly curious what you are seeing from lenders. how are lending standards tightening up? >> thanks for having me back we grew in a quarter when many in the industry were shrinking to answer your question, you know, banks are remaining conservative you have things like the

cust commercial real estate concerns and the consumers burning through the pandemic earnings. a lot of that is on banks' minds with managing balance sheets we see them shy away from some business that they normally would have jumped at in the second half of last year the transfers of interest rates with credit cards. it becomes profitable for the card industry over time. we think that conservativism is building up capital for the banks. >> even for the prime borrower we have gotten the changes in subprime and prime were just as much business as usual with prime, but invest in the future for the prime borrower is pulled back now >> that's right. interestingly, we are seeing a

bit of difference versus prior cycles credit quality is not the primary driver right now we are seeing things bottom in areas like near prime lending for personal loans banks are incrementally less worried about unemployment than they were three or six months ago. banks are expecting unemployment to be 5% or 6% exiting this year as they were doing their underwriting that is more optimistic. we are seeing a bottom in that pick up there which is a big pick up in the balance sheet over the prime lending which shows conservative with capital. >> how are you modelling what will happen with student loan payments as they return in a few weeks from now i remember talking to max a quarter ago. he is watching that closely with

the impact on the consumer any chatter from the lenders or what you expect to see when that happens? >> the lenders are saying they expect a bit of a pickup in q4 we are more conservative we have seen a lot of different proposals post the supreme court ruling from the biden administration we have seen legal challenges. it is hard to say with certainty what will happen in terms of when people will be forced to refinance and repay student loans. >> what about the insurance business that is newer than the core businesses you have, but impacted by the macro environment. >> things are rough. don't let our 41% year over year growth in insurance trends fool you. insurers are struggling to be profitable in half the states.

what is happening is inflation is making it more expensive to repair a car or replace a car or repair a home or replace a home. that is causing the need to rise premiums dramatically in many areas. regulatory state by state premium increases need to be increased by regulators and states that can cause underwritersnot want to write new policies we think as inflation cools down, that will work through the system and then we will see a pick up. that could take quarters we are muted there in terms of our outlook. >> as inflation cools down, but in a way, these are higher costs which will be passed on to consumers in terms of the premiums being higher where inflation cools down, but costs stay high -- have you seen

something like this before >> inflation has been pretty limited through our history. we have not seen an effect like this before. when people are getting notices that insurance policies are increasing 20% or 25% year over year, that causes people to turn to nerdwallet to shop for new policies ofy policies a lot of insurers are not wanting new policies that is the headwind we are facing right now. >> we look forward to see how it shakes out tim chen, thank you for joining us >> thanks for having me. jon, when we come back, more coming up. new numbers from ab-inbev overnight. reveal of a drop in profit after the backlash with conservatives with bud light. at the top of the hour, senator joe manchin joins us for

the reaction for the fitch downgrade of the american credit rating we are coming right back you are watching cnbc. >> announcer: currency check is sponsored by interactive brokers. the best informed brokers choose interactive brokers.

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welcome back to "squawk box. some earnings for cigna coming in at $6.13. full year company revenue guidance is short of expectations earnings guidance is roughly in line with that stock up marginal basically flat. take a look at robinhood shares under pressure. the company reported higher q2 revenue with the boost of the interest income rates and achieved profitability for the first time since the ipo the investors focusing on 5% transaction. that is 1 million fewer compared to the previous quarter. that stock off 6%. becky. andrew, thanks we are watching shares of ab-inbev after the first quarter

report from the bud light backlash in the united states. net profit for the second quarter fell to 3$339 million compared to the same period a year ago revenue rose slightly to $15 billion. that was driven by pricing actions and focus on the premium products the company faced a difficult few months after the partnership with the transgender infl influencers. the company says the sales have been stable since april. revenue in the u.s. was down 10.5% while ebitda was down 8% of survey of consumers show 80% were fireavorable or neutral toe brand. it is leading into the football and country music ads and said it would buy back cases of beer

past expiration date stock supis up 2.8% > a hangover for qualcomm. $1.87 a share beat estimates revenue fell short of ex expectations and midpoint guidance fell short of the consensus. smartphone chip sales were down 25% year over year the company said it expects the hand set sales to decline in high single digit percentage this year. when we come back, jen will join us to talk about consumer trends and impact of the return to office. he has been doing his informal survey as he gets back on the train and comes back to the office he will tell us what he sees different from pre-pandemic. you can watch us any time on the cnbc app (fan #1) there ya go!

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welcome back to "squawk box. let's talk about nintendo. overnight in japan, a report of 52% surge of profits with the success of "super mario" brothers movie and "zelda" for the switch console the report coming after the close in tokyo we will show you reaction in the stock tomorrow morning the "super mario" movie produced by our parent company comcast. hasbro reporting

49 cents a share adjustdjadjustd revenue $1.21 billion. that was better than the street was expecting. the company is cutting revenue guidance for the full year as it expects the entertainment section to take a hit from the writers and actors strike. becky. our next guest says hybrid return to work schedule should have retailers rethink strategy. joining us to talk about the impact on shopping centers is jan kniffen. ceo of j. rogers kniffen you have your thoughts of commuting back to work now versus then. walk us through that >> sometimes you don't have to talk about consumers you can take the train in every day for three weeks and compare

before covid the observation is tuesdays and thursdays are busy wednesdays not so much mondays and fridays are dead if that is true, and i know it is summer, but i see it in the summer many times. this looks fridays are dead. and if that's true, and i know it's summer, but i commuted in the summer many times, this looks different. and i think any retailer will tell you that's true and i think anybody looking at the urban environment will tell you that's true. my commute was into new york, of course i think new york is relatively typical of big urban environments now as far as going back to work it may be pushing a little harder than others because a lot of the financial firms are pushing pretty hard. so i don't think this is an oddball observation. i think we're seeing a fundamental change, the hybrid workplace is real, and i don't know about everybody else out there watching, but 90% of my

meetings now are either on video or they're a hybrid, and most of the hybrids turn out to be mostly video so, it was unusual that i would have three weeks in a row that i was going into the office every day to work on a project i don't see how that doesn't dramatically affect the city centers. how can we not have a big real estate writedown of commercial property if in fact the offices aren't going to be full, people aren't going to pay for the rent space and how can we not see a big change in where people shop if they're not doing their commute nearly as often? >> shop where they eat, right. it affects everything. >> right the restaurants get affected and where you shop gets affected and we're seeing retailers react to that already so suburban and urban environments are looking better than urban environments. and i don't think that that's just temporary i think we're back to the new

normal >> so what advice would you give retailers in particular, since that's your area of expertise, that's the industry you've been in for decades and decades >> well, i still think we have a big transition coming. i don't think we closed nearly enough stores because the stores have to close that are not sustainable. i think we'll see stores open in environments where people are spending more of their time now and we'll see the stores close, particularly in the urban areas because they're struggling i don't see how that doesn't cause a significant change and, you know, we're already seeing a change in the way people shop. we're up to 22% online now versus the 11% before covid. that's not going back. it has slowed as far as growth rate and we may be 21 or 22 again this year, but it is not going to stop there. it is going to continue to draw off that base. we have to deal with that and deal with the fact that people just aren't traveling in the

same patterns they were and retailers have to change how they approach you. the other thing they have to do, of course, is something to get you to physically come to a store, to make it more entertaining, more of an experience, you're not just going to go shop like we did in the past and that's why you're seeing so many restaurants going to malls, you're seeing so many experiential event things going to malls there is no other way to get foot traffic all retailers are looking at it. i'm preaching to the choir here for anybody in retail that is listening, because they're all looking at this exact same problem. >> you know, jan, the overstoring of america, the overmalling of america, that's not new, that's not necessarily covid-related, that's not necessarily online shopping. i remember writing stories about this 25 years ago and longer about how there was too much retail space in america, and we kept building more and more into that who are the winners and the losers in this entire situation? who has done well to figure this out and say, okay, we're going to do things differently >> you were writing about it, i was causing it

we peaked on 1992 on this. i was right there, involved. and who is doing it well we're watching it already, right? we have seen what a great job walmart has done by making everything available to everybody every place. and that's allowed them to be successfully competing with amazon and target has moved that way really hard too. i still think that walmart sort of has set the pace, but target, you've seen how much of their business is coming out of the store, despite the fact that it is being bought online or being picked up. so, we have seen that happen but we have also seen smaller players determine that they have to be bigger in the eyes of the consumer so either have a presence online or got to be on a third party site and, you know, amazon has done that but walmart has done that as well a lot of other retailers are moving to have third party sites for smaller players and we have got to do that too because the consumer has said to us, here's how i'm going to shop, i'm going

to shop online, i'm going to come to your store occasionally, i want you to have a store so i can drop stuff off, pick stuff up, but i want to be able to do all my shopping online and i want to, and i want to have the full range >> jan, it is jon fortt. how is apple positioned? interesting because they have earnings after the bell. they not only have a presence in particularly high end malls, but also in urban areas that traditionally had high foot traffic. they tended to be sort of a host unto themselves, drawing traffic, but what do you think the impact post covid is on them >> well, i think it is really funny you say that apple is a good example. you can go to a mall where apple is doing $5,000 a square foot and nobody is going there and going some place else, they're just going to the apple store and turning around and leaving that's been a problem when you go to the draw, because the draw hasn't fed the mall. but i contend that had strategy at apple been rent a bunch of trucks, drive around the

country, open the back doors and say come and get the product, they could have sold is just as well what their secret is is they have the best stuff and i think their draw, however they're selling it to you, but do i think they'll stay with stores absolutely do i think best buy will stay with having stores absolutely i think you have to have that offering online where you can buy anything i've got and get it to me in a day or two because you just can't expect them to come to the store for it >> jan, thank you for your time today and your observations. >> thank you >> all right, coming up, senator joe manchin joins us live. he's calling the fitch downgrade a stark warning that can't be ignored. that ierewntvi is straight ahead. plus, we'll dig through warren buffett's comments to cnbc on that downgrade and how berkshire is reacting or not reacting

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good morning stocks tracking for a second day of losses as investors continue to digest the long-term impact of fitch's u.s. downgrade. we have a special interview this morning with senator joe manchin, who has a message for cnbc viewers earnings and the bank of

england rate decision are on deck for investors we're going to bring you the latest market moving news. plus, apple set to report tonight. a preview of the numbers and what investors should be looking for as the second hour of "squawk box" begins right now. good morning welcome back to "squawk box" here on cnbc i'm andrew ross sorkin along with becky quick joe has the day off. but jon fortt is hanging out with us for the full three hours. so thank you, jon, for that. we got a lot going on and we're going to need jon's help on all of it. u.s. equity futures at this hour looking off about 53 points right now on the dow 54 points. treasuries on the back of this fitch downgrade mostly muted i don't think we can say too much has really happened here.

but you're looking right now at the ten-year, 4.14, two-year, just a little -- 4.9 there but we have got some -- lots of folks with lots of reaction, becky. >> that is true, andrew. we have been kind of running through the commentary on this and we do have some new thoughts from berkshire hathaway ceo warren buffett when it comes to the fitch ratings agency downgrade of the u.s. long-term credit rating. basically buffett says he's not worried about it and it is not changing anything that berkshire is doing in the markets right now. here is a quote from him, he says berkshire bought $10 billion in u.s. treasuries last monday we bought $10 billion in treasuries this monday and the only question for next monday is whether we will buy $10 billion in three months or six-month t-bills. he told cnbc that's been the decision that berkshire has been making every week recently, just whether to put it in three months or six months, but they have been buying billions and billions of dollars of these and this downgrade is not changing that

buffett made the comments to try to ease some concerns about fitch's downgrade of the u.s. saying there are some things that people shouldn't worry about, and this is one now, that's not to say that the concerns raised by fitch aren't valid, buffett did say he doesn't agree with everything the federal government is doing now, would like to see a little more restraint, but it doesn't change how he sees u.s. treasuries or the dollar here's another quote from him. he says the dollar is the reserve currency of the world and everybody knows it now, we do watch kind of what's been coming out of this, these comments were very similar to what we heard from jamie dimon yesterday too. we're going to talk more about that in a moment, first of all, let's get you caught up on what is happening with the bank of england, just coming out of the uk, the bank of england raising rates by 25 basis points as expected there had been some thought that maybe it could be as high as 50 basis points coming in with a quarter point hike, that takes the main bank lending rate to 5.25%. we'll get some reaction from steve liesman in just a little bit. some more coming up on what he

hears with this too. back to what we heard from fitch, the commentary coming out around that. senator joe manchin actually reaching out to our very own joe kernen who is on vacation this week he has a message for the "squawk box" audience when it comes to the fitch downgrade. he says it is a stark warning to both political parties and to the white house. joining us now on the "squawk" newsline is west virginia senator joe manchin himself. thanks for calling in today. this downgrade -- >> good morning to all three of you, becky thank you. >> good morning. good to hear from you, senator this warning from fitch, even though a lot of investors have said that it doesn't change their opinion on what happens with this, they do say that fitch raises some valid concerns and one of the things that fitch pointed to was governance that it has gotten much more complicated, much more difficult. what are your thoughts when you hear this downgrade? >> well, i was concerned let me just put it in perspective. i got elected to be governor of west virginia in november of

2004 and we had a low credit rating from all three, fitch's, standard & poor's and moodys the first thing i got elected in november, i didn't take office until the second week of january of 2005, i went to new york and i asked all three, i went to all three offices and i said tell me about my state i just got elected ceo of a company called west virginia tell me what you think about it. they gave an unfiltered truth about where our challenges were and why we were in a downgrade situation. i said, what can i do to improve it my achilles heel was my workers comp, it was killing our state and employment and economy and everything i had to go back and within one week we changed and we privatized workers comp and now we have the lowest rates in the country, just about, on workers comp, great place to do business and people have come and we have grown. i know it means something. so what i did yesterday, i called paul taylor, ceo of fitch's, over in england last

night. and we had a nice talk and he explained to me, he said, listen, it has been 12 years since standard & poor's downgraded he said nothing is going to happen, joe. i don't think anything is going to happen anytime soon, but we can see this for the last 20 years, so when you look at 21 years that we have spent more than we have taken in, you can blame whoever you want to, starting with george w. bush, up to present democrats and republicans are guilty and we have got to fix this. and we're not taking it seriously. so, i welcome the -- basically the news that fitch has given us to get our governance, our financial house in order, if you will, and take it serious. and to put other things in perspective, we just did for the first time in five years, in the senate, we passed all 12 of our approach bills here's what you don't know the rate -- the deal that was made on fiscal responsibility

act that basically president biden and kevin mccarthy came to an agreement on. on what the caps would be. in order to get the 12 bills out, it was raised $13.7 billion. so the only thing that is keeping us working in a bipartisan way is if we can spend more money and i made a comment and i spoke out that this is wrong my goodness, it is not going to be what happens in the house and when people say there could be a government shutdown, that's what they're saying, there is so much difference in how do we spend, why do we have to continue to spend and why can't we curtail it just basically a little bit of responsibility that we have and have the ability to come to agreement that we have a fiscal runaway train that has grown and when you think the last time that we actually passed a budget on time, by september 30th was 1997 and 1997, you're talking about $5.5 trillion of debt, which i thought was horrendous at that

time and now we're at $32.5 trillion so, yes, i do take that serious and i am doing everything i can to make sure that we're responsible. >> do you have other people in the senate, other people in the house who you think agree with you on this? because you're right, the only thing bipartisan, the only thing that keeps things going is when both sides agree to spend more do you have other people there who are of the same mindset you are, who would say, yes, we need to do something about this and we need to get together and do it now who would you point to who are other -- >> i'm not going to point anybody out. i think everyone knows that, first of all, there is not a person in america that is listening to you right now or watching that can go 21 paychecks, just forget about 21 years, and spend more every paycheck than they brought in. they can't go 21 paycheckis. we have gone 21 years.

in the state of -- 46 states, i believe, have a balanced budget amendment. every week i sit down with my budget committee and i had to basically ask governor, make decisions that if we stay on this trend and the following week they come back and i say we have to make some adjustments and we would do that, it was my responsibility, constitutionally we don't have that now i guess we never had a printing press in west virginia, so i guess that was the situation but no one takes seriously we're spending more and we're not doing anything to make sure that we balance that out. neither income, revenue, spending, or things have to change in order to balance that. there is no restrictions on us to live within the means that every citizen in america has to, every business that is successful, small or large, has to and adjustments have to be made. and only adjustment we make is to agree to spend more and there is a lot of people that understand this is a fiscal

cliff and we're getting closer and closer this warning shot, i think, by fitch's, is this i don't think it will take 12 years for moody to step up to the plate. that's awful to say. but if they don't, they're the ones watching and evaluating, we don't even do a risk management, we do nothing at all until we hit the fiscal cliff every year, we raise it, we have to pay more and we spent more and we have to raise to pay our bills we're always going to pay the bills, i agree so, i don't know >> senator, can you just speak to the politics of this, because historically the perception has been the democrats want to spend, spend, spend. and then on the other side, historically, you had republicans who have wanted to lower taxes, which, of course, has created its own, in some cases revenue problems and in some cases it increased revenues or hasn't hurt revenues, but you see where this goes.

so my question, which really goes back to becky's question and you don't need to name names, but what has to change in the political system and within our country to create incentives among your colleagues to try to create balanced budgets? and how do you tell an american public that wants, wants, wants. this is the ultimate me generation, right? everybody wants something. and how do you tell them you're either not getting it or you're getting less of it >> well, let me just -- the toughest one to talk about, nobody wants to talk about it because it is so toxic, is social security. we're scared to death to talk about social security. i can tell you there are so many people in my state, high, high percentage that social security and medicare is their lifeline that's it. so why do we keep jeopardizing it we have a cap of 167,000 i think is where it is today guess what, there is not that many people in west virginia

that make more than $167,000 in their pay. they're paying 100% of the tax everyone above that does not because it stops maybe we should take the cap off, okay to give us some cash flow we're not facing the cliff in six, seven, eight years to where there is going to be an automatic 20% cut. we have been warned about that nobody wants to talk about it. and i say for the high income earners, and i had so many of them tell me, hey, joe, i can do away with my social security check, don't even send it to me. i guarantee you one thing, what you could do and not create any backlash at all is people over a certain income level or high earners take the cola away they never receive the cola, because they don't need it there is some things we can do that does not jeopardize a person's quality of life or how they live their life and it makes a big difference to the people that depend on it we can't have those conversations, andrew. that's what's a shame. >> senator, i know people are telling me that you and warren

buffett and jamie dimon agree here, but you sound different to me than they do because it sounds like you're saying that this fitch ratings cut, whether you agree with it specifically or not, you understand it and that this is a moment for action, the way you're calling it out am i reading that wrong? >> this is jon, right? >> it is >> hey, jon, thank you i think that what you have evaluated, if you put me and warren buffett and jamie dimon in the same room, we would agree. i think they would agree also. but this is not normal how the toxic atmosphere and what is being accepted as the normal and political arena today is not normal in america it is not how you run the superpower of the world, with the greatest economy you don't run it this way. and that's what we're saying so this is a warning shot, hey, guys, those of you who have the ability to put a vote toward a piece of legislation and have a

road map of how you get yourself out of this, only thing i would say, you say, joe what about the fiscal cliff, why do we go down, why do we make people feel like we may default and not pay our bills? that's crazy want to get rid of that, you better replace it with something that -- holds our feet to the fire replace it with a balanced budget amendment, like most states have. you can have exceptions because of war and extreme disasters and things of this sort. but also there has to be a reason why b from any changes you make, it should be dedicated debt reduction. >> yeah. >> no one is doing that, jon so, i think that basically the, you know, it is just a chance for us to say you got two of the three main credit rating agencies in the country and in the world, two of them have said now, guys, get your act together we have less confidence in how you're governing yourself because it is always extremes. it has to come down to basically

a crisis before you can come together and the last 21 years, the only way it brought you together is to spend more money. >> the other issue, senator, the u.s. debt is a share of the economy. according to the cbo, it is on track to surpass even world war ii levels by 2029. and you've got higher interest rates that we're dealing with now as well, which means that what we are paying every month just to service the debt is going to be a much bigger and bigger number to the tune of like a trillion dollars in the not too distant future. >> when we spend -- thank you for that when we spend, i think the things you can put into comparison, when the debt we're servicing, the debt we're servicing and the interest on that debt exceeds what we spend to defend our great country and help our allies around the world, don't you think that should be a wake-up call don't you think we should be concerned about that

that's all i'm saying. maybe we should put a bipartisan fiscal committee together. maybe we should have a risk evaluation of what we're facing if we continue down this risky path we have been talking about that also i think that makes sense give it some clout to where, hey, if we come to an agreement and a bipartisan fiscal commission, with both senate and house working together, republicans and democrats, and we have a majority of the vote that is bipartisan, it has to go to the floor for a vote to make changes in our -- how we govern ourselves. something has to be done because we don't have the will to do anything because it is so abnormal what is happening in washington we're not -- we never governed this way it is not always somebody else's fault. governing going on today is basically can i blame somebody else for a problem that maybe we're all responsible, but i can make you believe it is their fault more than mine that's not how i operate and that's not what i believe in

>> senator, what kind of reaction have you gotten or in your own conversations with this administration about the fitch downgrade or the need, just more broadly, for fiscal responsibility i ask because, of course, the immediate reaction yesterday was all about maybe tactical issues, the timing of this, did it make sense? i raised issues about, you know, if you look at the model, it looks like it is getting better, why did fitch do it now, should they have done it three years ago, and we can look at that as a political issue, but i am curious whether you think emotionally president biden and this administration see this the same way you do or not >> andrew, i'm not blaming this administration, okay i think that everybody is going -- they're working in way they think is responsible. i think there is a better way that we can do it by looking at how we interpret pieces of legislation. and how much cost it is to that

legislation. the biggest thing that got us to this point here is legislation that is well intended, and if you don't put caps on it, if you don't put absolute spending parameters on it and if you just deal in good faith, i can tell you a liberal interpretation sometimes will bust that budget. if you think you're going to have a trillion dollar bill and you show us how you pay for it and the bill comes into $1.6 trillion after a ten-year period, that's $600 billion, it is basically debt financed that's how we have grown this debt so quickly over a period of time so, to blame one administration is wrong the trump administration is guilty as is any other, the obama administration and then the bush administration, they're all guilty we were in a downward trajectory after 1997 and that became under clinton's administration and that was because you had -- you had erskine bowles and john kasich, as i'm understanding, working out the details of a new

tax proposal back then that spun off balanced budgets, that spun off profits that we had as far as surpluses, and we would have been, as i'm told, we would have been basically on the trajectory to be debt free by 2006. and then we had 9/11 happen, we had two wars that we didn't pay for, we declared, and then we had two major tax cuts and those could have been -- we could have basically just revoked those after a ten-year period but, no, we started basically carving out who we protect and this and that. we're all in this. everyone has to pay their fair share. but the bottom line is the thing right now, when you try to pick and choose makes it pretty hard to have any type of continuity to how we pay our bills and that's why i'm saying balanced budget, fiscal responsibility committee, things of that sort, has to look at exactly where we are and how we're going to be in the next five or ten years, and i agree with what they're saying and paul taylor confirmed that

from fitch's, this is not going to change anything, anytime soon it is going to happen. and it is going to be closer and closer and happen quicker than what we anticipated. won't be another 12 years before we hear any of this concern again. going to be quicker than that. shouldn't we heed the warnings we have received and do something? i think that's what we're talking about. and that's what we should do so i welcome the news that someone at that level said, guys, get your act together. this is not normal and it is not right, and it is not a good fiscal policy for the future generations. >> senator manchin, want to thank you for calling in today and explaining your thought process on this and just how you reached out to fitch as well we hope you will continue to update us on whatever progress you can make in kind of taking this as a clarion call joe manchin from west virginia, senator, thank you for calling in. >> thank you, appreciate very much. >> great conversation. thank you so very, very much. as we head to a break, let's

take a quick look at the futures. dow off about 42 points now. nasdaq off about 44 points s&p 500 off just about nine points we also have an earnings alert for you. con conocophillips reporting earnings, revenue of $12.99 billion, lighter than the $13.68 billion the street had been expecting. you're looking at that stock up a little bit this morning. we're coming back with more on "squawk box. the looks you want, the backpacks you need, all under one roof. when you can't make it to the store, dicks.com is always an option. and with our best price guarantee, if you find a lower price, we'll match it. with looks this good, it's never been easier to sport your style.

it doesn't really matter that much. you know, the markets decide number two, they point out some issues which we all knew were bad about the debt ceiling crisis and things like that. number three, most important, the american public this is the most prosperous nation on the planet it is still the most prosperous nation on the planet, the most secure nation on the planet. there are a bunch of countries rated higher than us, like aaa, but they live under the american enterprise military system to have them be aaa and not in america is kind of ridiculous. >> that was jamie dimon yesterday on power lunch with reaction to that fitch yun downgrade. it is one of the items in the basket of negatives that has kept him bearish i want to bring in cnbc contributor greg branch. you've been negative the whole

time, though let's be honest. you've been on a negative streak the markets moved in the opposite direction, they may be moving back a little bit in the past 48 hours. but what is your sense here? >> so, look, you're exactly right, andrew. and just to recap, you know, it started with what the fed should do in 2021, in terms of raising rates in 2021 to kind of cut off some of the demand that was going to be unleashed into the economy. when they didn't do that, stage two was this is what the fed is going to do in january of 2020 and that was about going into a hybrid environment rates aggressively which seemed alarmist at the time this is stage three. this is what is going to happen because of what the fed has done we look at what the fed has done, they raised 500 basis

points, maybe more, i don't know if that's relevant anymore at this point because at the end of the day, bull or bear, what you have to agree with is that if we are going to continue to combat inflation, that means further demand destruction and when you put further demand destruction in the context of an earnings quarter that is down 7%, that likely means that we're going to have more down -- it is very difficult for me to reconcile how we get to a flat third quarter or an 8% fourth quarter with this quarter down 7%, with the impact of the 500 basis points still ahead of us, much of that still has not been -- >> greg, how much of your thesis or bear thesis has to do with interest rates and inflation are you in the bill ackman camp who overnight said he thinks this is going to be consistent at 3%. are you of the view it is not going to be 3% because jay powell is going to come in with higher interest rates? >> i believe he's going higher,

andrew i've been at 6.25% i think this downgrade, which should have been expected, it is one of the things i expected, given this debt ceiling is more pernicious and we proved ourselves a lesser risk. i was surprised by jamie's comments we assess risk for a living. we're not the same risk we were ten years ago. but to answer your question, i do think they'll come in a little more. but i think, again, the thing -- the main driver is that, you know, the main impact of these rates won't be felt until 12, 18 months after so we're in the beginning innings, feeling the impact. i'm at 2.25 for next year. >> greg branch, it is always good to get your perspective on all this, especially as the news headlines are flying i'm sure we'll talk to you again very, very soon. appreciate it. >> thank you, andrew. we have another news headline that is flying right now. that's the bank of england

raising rates by 25 basis points itself that was as expected, taking the main bank rate now to 5.25%. steve liesman, the professor, joins us with more on that what are you thinking, steve >> good morning, andrew. well, you know, there was a hawkish whisper on the number out there, 50 basis point hike and so a little bit more on the dovish side that they raised only a quarter but the market almost immediately beginning to price in another quarter in september. and they voted differently over there in england the vote was 8 to 1 to hike rates. but two on the board voted to hike it by 51, don't want to confuse you, there is a hawkish signal in there. the current monetary policy stance is restrictive and they see inflation below 2% of rates peaking above 6% here is the deal, all of these central banks, main central banks are in some form of an endgame here maybe a little bit more tweaking at the boe, less here in the fed

perhaps. ecb may be reaching an end point. they lowered their gdp forecast of england to half, but they see the uk avoiding a recession, even though growth is slowing down they're seeing further rate hikes will be needed if there are signs of more persistent price pressures and some concern that those price pressures may be chrystallizing there is upside risk to inflation. let's look at the three main central banks out there. 5.37 at the fed. 5.25 at the boe and 4.25 at the ecb. we're kind of getting close to an endgame this was the 14th in a row for the boe. the fed has begun skipping ecb could go either way. some talk they may do it very quickly here at the fed, probability is 18% for a quarter in september, 33% in november. the market not, andrew as you see there or jon, embracing the idea of another rate hike here at the fed, but up a quarter in

england. >> all right, steve, thank you now coming up, your premarket movers > meowor >>ti n f today's aflac trivia question. what four colleges are tied for the most heisman trophy winners? the answer when cnbc's "squawk box" continues talking about the expenses health insurance doesn't cover. so who's talking about the money aflac pays to help close that gap? gaaaaaaaaaaaap!!! aflac! aflac! gaaaaaaaaaaaap!!! it's about to go down, baby! aflac! aflac! stop that goat! get help with expenses health insurance doesn't cover at aflac.com

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what four colleges are tied for the most heisman trophy winners? the answer, ohio state, oklahoma, notre dame, and usc. they each have seven winners all right, welcome back to "squawk box. i'm dominic chu with a couple of morning movers for you we'll start with the late breaking news in oil and gas and that's conocophillips. shares down roughly 1.5% now, just around 2,000 shares of volume the exploration production company reporting profits and revenues at both missed analyst consensus estimates driven in large part by the drop in energy prices between last year and now. that was partially offset by an increase in volumes, though. conocophillips raised its production guidance. one of the bigger earnings movers from earnings after last night's close, paypal, down around 7.5%, 250,000 shares of volume, the fintech and payments network company reporting

profits in line with estimates with higher than expected revenues but a good amount of the negativity in the stock has to do with lower operating margins on a quarter over quarter basis and credit losses tied to the business lending portfolio paypal is setting aside more money to cover future potential credit-related losses. paypal and conoco, two early movers i'll send things back over to you. >> dom, thanks. also out in the last half hour, shares of warner bros. discovery up over 6% the media conglomerate reported a bigger expected loss there is a lot of positivity about this the stock is up by 4.75% now part of this is because of free cash flow trends free cash flow was up better than expected. they also revised their guidance for more cost-cutting over the next couple of years their revenue per user was up sequentially and they have a smaller loss, much smaller loss than they did a year earlier because of cost cutting that has

taken place. the company announcing a commencement of a cash-tender offer for any and all of their notes out there. this runs through a lot of the notes. i think it is something like $2.6 billion in debt this is part of the company's previously announced plan to try and reduce debt. you see that stock rhtig now up by about 4.3%. when we come back, we're going to preview apple's quarterly results. massmutual. partnering with financial professionals, benefits brokers, and institutions. at pnc bank, partnering with you can find us in big cities and small towns across the us, where our focus is to always support the people who live and work there. because you call these communities home, and we do too. pnc bank.

apple, the big one, set to report quarterly results after market closes to we call that overtime. our next guest recently downgraded that stock to neutral from a buy and joining us now to preview earnings is david vote, ubs enterprise hardware networking analyst so, big question is this as good as it gets for apple right here? they're in a premium position, but i'm not sure the carriers will be subsidizing phones in the next cycle, no matter how good they are. >> thanks for having me this morning. you bring up a really good point. if you look at the sell through data in the u.s. and the upgrade rates in the united states, they

have been relatively weak the last couple of quarters. so we're a little bit concerned about the demand trends of the june quarter and the september quarter and potentially spilling over to the december quarter from a unit demand perspective, we think right now we're seeing peak iphone demand in most developed markets, with upside in some emerging markets around the world. >> the big question i guess is whether apple's loyalty holds and whether that premium consumer both in the u.s., well, around the world, but maybe particularly in china, which has been pretty weak overall, which we saw in qualcomm's results yesterday, at that premium luxury consumer continues to buy high end iphones and keep margins as high as they could possibly be. >> yeah, you know, it is interesting, if you look at china, that market peaked at 50 million iphones in 2021, post the launch of the iphone 12, which was their first 5g enabled phone. china has been weak for some time, actually in the june quarter we think iphone demand in china was up 4%, which is a

little bit below our expectations given the festival that happened from an e-commerce perspective last month we think about the december quarter, though, you should see better year over year comps because of the lockdowns last year, covid related in china, so i don't think that gives you a full picture of demand that's an easy comp going forward. we would agree with you, i think you saw peak demand, particularly at the high end, for iphones in china, back in 2021 50 million units is a big bar. if you think about fiscal 19, they sold 34, 35 million units in china you've seen a deep penetration at the high end by china -- in china by apple at this point. >> let me put a finer point on this, with apple retail, do they have to do major renovations to their existing spaces or relocate certain stores based on post covid traffic trends? are there different opportunities they want to take advantage of over the next five to ten years versus maybe how they were designed before?

>> yeah, but i think it is going to be interesting. you're seeing that with the new product categories, vision pro or pro vision. they're talking about making this more of a spoke instore experience it is a high price point i think on the remaining part of the products, whether it is max, iphones, or even ipads, the existing layout and the existing sort of structure from a distribution perspective works well but that said, when we look at the vision pro going forward, remember, it is a $3500 price point. that's a really high bar for consumers to spend on the device where there is no killer app at this point we're thinking about it from a supply chain perspective we're hearing 100,000 units being built this year. that's really small, less than $2 billion of revenue. at some point, if they take the price points down and increase distribution from the apple store perspective, even if it is a $1500 device, remember, very high end iphones with the most capacity, one terabyte of storage, only sell a couple million units per year i think the consumer has some

difficulty absorbing that high price point without really a killer app right now. >> yeah. keep it on cnbc all day and overtime 4:00 p.m. eastern, we'll break the numbers. thank you. >> thank you for having me >> coming up, reaction to our interview with senator joe manchin and the fitch downgrade from two former senators and you can check out the futures here as well you can see the dow set to open down more than 40 points

welcome back to "squawk box. check out shares of wayfair, jumping 13%. earnings coming in at adjusted 21 cents a share street was expecting a loss of 74 cents a share revenue also topping estimates at $3.17 billion gross margin, active customers also topping estimates so, big rise this morning. almost 14% really now if you look at that stock. still to come, a lot more on "squawk. we'll talk about the erosion of governance, fitch ratings citing instability. we heard from senator joe manchin. up next, reaction to that

interview from two former senators about the political blame game and wall street's unease with d.c. dysfunction "squawk box" returns after this. what if you could make analyzing a big bank's data... no big deal? go on... well, what if you partner with ibm and red hat, use a hybrid cloud solution to connect data across clouds, then analyze all that data with watson. okay, but this needs to meet our...

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the fitch downgrade of the u.s. long-term credit rating drawing sharp reaction from west virginia senator joe manchin he spoke with us earlier this morning on "squawk." >> we can see this for the last 20 years, so when you look at 21

years that we have spent more than we have taken in, you can blame whoever you want to, starting with george w. bush, up to present, democrats and republicans are guilty and we have got to fix this. and we're not taking it seriously. so i welcome the -- basically the news that fitch has given us to get our governance, our financial house in order >> and joining us right now is former u.s. senator pat toomey and former u.s. senator heidi heitkamp, a cnbc contributor good morning to you both senator toomey, i'm so curious about your reaction to the fitch downgrade. i'm sure you, like so many others, you've been ringing the bell on this for a long time the question is do you think the downgrade was right? >> well, andrew, thank you for having me. from a technical point of view,

no, right. there is no increase in the likelihood that the u.s. government is going to miss a debt payment we borrow money in our own native currency, that's not going to happen. but the bigger picture fitch has exactly right. we are on an unsustainable fiscal path. the ultimate consequence probably isn't a missed treasury payment, but it is probably a disastrous run of inflation when we try to monetize the debt we can't afford so i'm grateful that fitch has put a spotlight and is forcing the discussion about this runaway debt that we have been accumulating and i'll tell you, it is going to take two things to deal with this it is going to take presidential leadership and it is going to take divided government. and that's why it has been particularly just tragic and disastrous that with recent administrations we have had divided government, but had no presidential leadership and we haven't had a consensus to deal with this. but this is a reminder that we are on an unsustainable path

>> so, heidi, what do you think you do about this? the question that i asked joe manchin earlier, which is you have a public that wants to keep spending we can talk about this we can have these conversations on tv. people can wring their hands but the truth is in this add society that everybody wants something now, that ultimately is the problem >> well, if you look at where our debt and deficit ranks in voting issues, it's not there. you can talk about divided government, you can talk about a president, but until voters start punishing politicians who aren't paying attention, we are not going to get results we can talk about leadership no one has a plan for fixing this because no one wants to stick their neck out the last time we had a politician with a plan was paul ryan and he's no longer in politics you think about this, the democrats don't want to admit that we have an entitlement

problem that's going to lead to busting the budget as we get older, we baby boomers the republicans have signed pledges never to raise taxes you have this impasse that's political and you have voters who say give me more, like you said said, andrew, give me more and i don't want to pay something because someone else is getting something and i should get some, too there's no sense of sacrifice when you look at the budget and budget controls. >> senator, toomey, rather than throw up our hands, which is what we've been doing for a long time, what do do yoyou do about? >> i think the voting public is beginning to focus on this let's not suggest this is all equal on both sides of the aisle or both sides of this equation the fact is spending has surged massively. revenue to the federal government has grown but it hasn't kept up way back in the barack obama

administration, spending was about 21% of gdp for most of those years. it's at 25% now. under obama revenue was more like 17 1/2% of gdp. it's at 19 now, it's gone up you can't sustain the 6 percentage point of gdp worth of deficits because of the way it adds to this here's what i think is very encouraging. increasing numbers of republicans have made a big issue of getting spending under control, finally doing something. you saw this challenge that speaker mccarthy had much of the issues were focused on fiscal discipline, taking discretionary spending back to last year, for instance. that's a beginning sign that maybe there is some interest on the part of at least some voters and it's manifesting itself in congress that is, i agree with heidi, we will need that pressure from voters >> it does seem whenever somebody wants to limit spending, they want to limit

spending on things the other party likes more than they do. isn't what's really called for here some innovation in politics it seems like in the age of data and the internet, politicians have gotten better at reacting but what about shaping a narrative and how to get voters to care about this in a way that builds political capital that can be expended to actually fix the situation. it's hard but it seems like maybe there are narrow times when you get a politician that's able to figure that out. >> well, let me tell you, all of the groups, the inside are groups, the committee for responsible budget, which i am part of, you know, the peterson institute, they all talk in washington we've got to take this message out to the people and really explain. and one of the big problems that we have is governors will pat themselves on the back saying we have a balanced budget, why doesn't the federal government

the whole while the 30% to 40% of their spending is federal spending we've got to be honest about this budget, honest as politician about the long-term consequences to our kids mccarthy was held hostage because not in my back yard, you're not going to cut a program in my back yard. so there has to be an agreement of mutual sacrifice. when you get to that, it runs against political reality where you want to say you're cutting medicare and medicaid and on the other side they're saying you're raising taxes, then we get the political unwillingness to address this on a bipartisan basis. and i want to respond to pat's point. 25% of this debt was run up during the so-called greatest economy ever in the trump years. so let's not be too quick to point the finger at democrats. this is an equal opportunity problem. >> i seem to remember there was

a bit of a pandemic that occurred during several of those years. >> and there was -- >> it's dramatically expanded the size of government and it's meant to stay that i will say at least republican voters are raising this issue consistently the amount of spending, the amount of debt and they're seeing the manifestation of the problem, inflation, higher interest rate -- >> who in the republican primary has forwarded a plan to balance the budget so that we can actually see a debt reduction eventually >> you will hear this in the debate coming up in august you will hear a significant discussion about this from republican candidates. but i would can you what democrat in congress is willing to cut spending on any welfare program? it doesn't happen. so we've got work to do. >> senators, we need to thank both of you for this hopefully we'll get there one of these days

i don't know when but we'll try. appreciate it. thank you again. >> thank you >> thank you >> coming up warren buffett's reaction to the fitch downgrade and much more with walter isaacson a quick check on futures you can see the dow actually now looking to perhaps open lower, about 60 points. a were in the mid 40s aboutn hour ago you're watching "squawk box" on cnbc we'll be right back. ch the game today? (hero fan) uh, yea. i have to watch my neighbors' nfl sunday ticket. (josh allen) it's not your best plan. but you know what is? myplan from verizon. switch now and they'll give you nfl sunday ticket from youtubetv, on them. (hero fan) this plan is amazing! (josh allen) another amazing plan, backing away from here very slowly. (fan #1) that was josh allen. (fan #2) mmhm. (vo) for a limited time get nfl sunday ticket from youtubetv on us. a $449 value. plus, get a free samsung galaxy s23. only on verizon.

good morning futures point to more losses for stocks a slump brought on after the downgrade. and jamie dimon and west virginia senator joe manchin weighing in. >> we've got to fix this we're not taking it seriously so i welcome basically the news that fitch has given us. >> and it's the final two fangs, apple and amazon reporting tonight. we'll of course get you ready for the numbers as the final

hour of "squawk box" begins right now. good morning, everybody. welcome back to "squawk box" here on cnbc i'm becky quick along with andrew ross sorkin and john forte. yesterday you did see a down day with the markets the s&p was down by 1.4% that's the first time in 47 or 48 sessions it broke a 47-session winning streak of never being below 1%, losses of more than 1% we saw that changed yesterday. nasdaq was off by even more, down about 2.2%, and this was all around what happened with fitch's downgrade of the u.s. debt you can see this morning there are some red arrows once again dow futures by 57, nasdaq off 56, the s&p down by close to 12.

we've been watching yields and you didn't see much reaction in treasury yields. they were actually a little higher -- a little lower which meant that people were buying treasuries at that point we have seen treasuries higher this morning they closed higher yesterday, the 10-year 4.183%, the 2-year 4.89 probably worth pointing out yesterday we got the adp jobs reports and it showed jobs were much stronger than anticipated and that leaves questions about what we'll hear tomorrow from the fed and whether they'll raise rates once again and we did hear from warren buffett about the fitch credit ratings. he says he's not worried about it and not changing anything that berkshire is doing as a

result he said berkshire bought $10 billion in u.s. treasuries last money and the only question for next monday is whether we will buy 10 billion in 3-month or 6-month t-bills. he said that's the decision they make every week and have been doing for quite a while. though he did say fitch brought up some good points and has concerns about what's going on in washington. he said there are some things people shouldn't worry about and this is one. not to say that the concerns raised by fitch aren't valid he said he doesn't agree with everything the federal government is doing right now but it doesn't change how he sees u.s. treasuries and the dollar and the dollar is the reserve currency of the world and everybody knows it this is very similar to what we heard from jamie dimon yesterday. tomorrow we'll hear from steve schwarzman, blackstone's ceo

and west virginia senator joe manchin, here's what he had to say >> there's a lot of people that understand this is a fiscal cliff and we're getting closer and closer this warning shot by fitch is this -- i don't think it will take 12 years for moody to step up to the plate. that's awful to say. they don't they're the ones watching and evaluating we don't even do risk management we do nothing at all until we hit the fiscal cliff every year. >> manchin saying there's plenty of blame to go around for democrats and republicans for the out of control spending. so the che said the country is t taking its spending problem seriously, andrew. >> another wall street heavyweight sounding off on the downgrade. leslie picker joins us with highlights from her interview with jamie dimon good morning >> good morning. dimon saying the fitch decision

to downgrade the u.s. rating, quote, doesn't matter that much. i questioned him on his core reaction behind the move and he told me washington should get rid of the debt veceiling completely he believes businesses need certainty and he thinks there' been a lack of it on the regulatory front >> we need certainty, policy the stress test clear liver didn't work. we do a 100 week and they do one. i'm far more worried about the name of that stress test we should be having conversations about what we're worried about. there's almost none of that. there's lack of transparency a lot of pop in ivory towers with a lot of opinions they've never been in the real world. i'd like to see them get if the boxing ring one day.

>> he was also critical of regulators' handling of silicon valley banks' collapse >> i also think we made huge mistakes on silicon valley bank. we created a crisis that maybe didn't have to happen. they should be asking a lot of questions like themselves. whenever we make a mistake we spend a lot of time on what i call the after action report, the postmortem what did we do wrong we know we're going to make mistake. i don't think we should treat everybody mistake about a violation are morality but i think we should be doing a little soul searching. >> and he was here in montana, guys >> it a beautiful shot there, we should say what was your sense of the political elements in all of this did you get any sense from jamie dimon how sort of how he thinks

about that piece of it because as we've been talking to all sorts of folks, there is unfortunately, i wish it was apolitical >> yeah, he seemed to think it was also apolitical, this idea that fitch was downgrading he didn't think it mattered that much he said the markets weren't essentially reacting too much to this as well and that's indicative of something that may have been, as many people have said on air, kind of too late or kind of questioning the timing but i don't think he had any kind of political, you know, theory behind the move at all. >> no, more of a theory of how do you actually get your fiscal house in order when the politics are so difficult maybe that's where i was going with that. >> oh, i see well, he was very, very, very passionate about the regulatory environment and what's that doing for growth and he believes the economic growth in this country, both for large and small businesses would be much, much stronger if there weren't

such an overlay for bureaucracy, red tape, things of that nature. he felt very strongly about that >> leslie picker in bozeman, montana this morning, beautiful shot again thank you so very, very much john >> coming up, as wall street contemplates the possibility of a soft landing, how are ceos feeling about this economy wellyou ve, ha new data from the conference board next. "squawk box" will be right back. help you find and unlock opportunities in the market. e*trade from morgan stanley. with powerful, easy-to-use tools, power e*trade makes complex trading easier. react to fast-moving markets with dynamic charting and a futures ladder that lets you place, flatten, or reverse orders so you won't miss an opportunity. e*trade from morgan stanley the two most important things in golf are your swing and your style. dick's sporting goods has everything you need to upgrade both.

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get started for just $49.99 a month. plus, ask how to get one free line of unlimited mobile. comcast business, powering possibilities. welcome back to squawk a new survey that executives are still cautious about the state of the economy i want to bring in dana peterson, chief economist with the conference board good morning to you. >> good morning. >> so what do you think of that? tell us about the survey and tell us about how you think the ceos are really thinking >> sure, this is a survey of over 100, close to 150 executives from fortune 500 companies, and they are less pessimistic than they were the gauge moved from 42 to 48. 48 is just below 50 and 50 is a threshold where they're neutral on the outlook

fewer expect there's going to be a recession going forward but they still think that something bad is happening around the corner and notably they are positioning to prepare for that when it comes to capex >> and so when you think about that confidence in terms of recession, non-recession, where do they land >> well, they're still landing in the recession category but they still think it's going to be short, it's going to being shallow. the interesting thing is they're still really hyped up about the labor market they're still saying they're having difficulty finding qualified workers. they're still planning to raise wages and still planning to hire roughly 40% said they're going to continue to hire and 40% said they're holding on to workers. >> explain the recession piece when we talk to ceos on our broadcast, most of them say they don't feel a recession, they don't really see it but they think maybe. i don't know if you think it's like a group think because they

just think it's possible or because they actually see something in their business that suggests to them there could be a problem. >> i think it's going to be very industry specific. some industries are already in recession. the tech sector has been dialing back on workers. not all of them are necessarily collapsing in terms of earnings but they're still looking a the at a very dim outlook with respect to demands you're seeing strains in the residential construction sectors. i think it really depends on who you are as the ceo >> going back to the labor issue, though, they see no signs of wage growth slowing >> exactly most of them are still anticipating they're going to need to raise wages by more than 3% the good news is that fewer think it's going to be more than 5%, but still in all, rising wages is not the direction the

fed wants to see wage inflation going because it feeds through to consumer inflation and makes their job harder >> are you surprised at how strong things have held up just look at that adp report yesterday. you'd think we're going to have a hot number tomorrow. >> well, i think -- well, adp and the payrolls report are very different subsets of surveys and in terms of how they're measured so i wouldn't compare one to the other. but i still think we're going to see healthy gains in payrolls because businesses are still hiring, especially those businesses that need workers to come in in person, such as manufacturing and construction, especially on industrial construction and infrastructure construction and we also see that there are businesses that are trying to catch up in terms of finding labor such as health care and leisure and hospitality. so we're probably going to continue to see gains. you're not going to see the labor market slow materially

until gdp starts to slow. >> that was going to be my last question blackman with a fascinating twitter thread saying he thinks inflation is going to hold at 3%, no way it will go down to 2% and it's a great hedge in terms of what thee thinks about treasuries where do you think inflation is two months from now? >> i athink 2 1/2% the big issue is rents rents are going to come off soon that's going to be what causes inflation to come down even more slowly, as well as potential for continued consumer demand being healthy. >> dana, i want to thank you for joining us this morning. appreciate it. >> thank you >> becky >> andrew, thanks. when we come back, walter isaacson will sit down with us to talk media earnings and a.i stay tuned you're watching "squawk box" and

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major averages took a dive yesterday at fitch cut the u.s. credit rating. so is this the sign of a sentiment shift and a market top approaching? john f

jon, do you have an opinion on this >> fitch makes a sobering argument for the rating cut. the government is putting too much spending on the credit card and with interest rates higher, payments have shot higher, too democrats and republicans would rather snipe at each other than solve the problem as senator manchin mentioned. with the economy slowing, that could drive the u.s. into an economic rut here's why equities could get in a rut. we're talking politics stocks dropped a bit and higher for a decade with one of the most impressive bull markets on record american companies had an innovation advantage, access to global markets and a resilient economy here at home we can figure out the politics there's a reason why jamie dimon called the rating cut ridiculous

yesterday and warren buffett said it doesn't matter, stocks will be fine >> the ratings cut isn't the only sign of trouble for the markets. what else is happening >> that is true. on the other hand, the fitch rating cut is a signaling of a market top ahead and it's not the only one exactly two years ago my debate was whether robinhood was worth 70 bucks a share we were at meme stock mania. a few weeks after that, the rally fell apart and now robin hood is around $12 a share monday tupperware was up 20% and yesterday it was down over 30. stocks have been moving along with a.i. and a positive consumer credit and student loan payments will drag on the consumers and suddenly it doesn't pay for consumers to gamble.

the difference between the s&p's yield and the yield on government bonds is now at a 20-year low. whether you're the government or a consumer, the enough mandate is risk less, spend less and that's why the market top is imminent, becky. >> you're not calling the whole stock market a peoplememe markee you? >> no, i'm saying in that market, everything else has run about as far as it can that's part of that argument anyway >> go ahead. >> this is not a function of the fitch credit rating downgrade that you have these views. this is a sort of broader market perspective around other credit crunches that i think have very little to do with the u.s. treasury itself. am i wrong >> the argument on that side is that risk less, spend less is the ethos that fitch is coming from and that isn't just a government issue, it's an issue

for consumers, it's an issue for businesses, so it's just time for this feeling to kind of flow through the market and so it makes sense. it does signal a market top. that's the one hand anyway >> which one do you have more faith in >> ah, i started out on the side of the fitch rating cut matters and does signal a market top, but the more i wrote the other side, i went back to the middle. if you are unsure, the other hand newsletter can help you you can weigh in on linked in. last week's question was elon musk's rebrand twitter to x, is it a master stroke or mistake?

70% said mistake and 30% said masterstroke >> it's almost like a benjamin franklin, write down both sides of the argument every time you do it. >> every side. my feelings tend to shift as a right it >> jon thank you >> yes >> and jon is staying here >> yes >> take a look at what is going on with warner brothers this morning. we're going to get out to julia bore boorstin >> the stock getting a boost from the announcement of a tender offer to pay down up to $2.7 billion in debt the ceo kicking off the call with this news, noting that they have already paid off $9 billion in debt since that company's

merger the strength in the quarter was in its free cash flow, which came in at $1.7 billion. that's nearly a billion dollars more than the year earlier quarter. it's also ahead of analyst projections of 886 million they expect to have that same free cash flow in the third quarter and it's adjusted ebidta did beat expectations. the company's revenues 10.36 billion fell short of expectations the direct to consumer subscriber number missed estimates and also fell nearly 2 million from the end of the first quarter amid the rebrand in combination with the streaming service into the new max streaming offer. on the up side, the loss to the streaming division were less than expected, 3 million nearly flat compared to expectations of nearly 300 million loss.

the transition to max is reported to have gone exceedingly well and he noted early signs of stronger engagement and he also said they have the capability to deliver live programming and they see opportunity in the streaming space for sports so maybe some competition there for espn plus. and he mentioned the potential around their video game business saying that's a real differentiator >> julia, it's nice to see you in new york. i was going to say free cash flow, that's the holy grail in the media business at the moment there's very few other companies having that right now. my question on the sports piece was is your sense when it comes to the nba contract, for example, and some of the other deals that they're making that they would then put that on to this platform and that's how they would make the economics of it work and would that work? >> well, look, turner obviously

and the warner brothers discovery assets obviously have a lot of these sports rights and turner has the relationship with the nba. those are the next big rounds of rights negotiations that are on the table. i think what he's noting is if they wanted to bring streaming rights, if they had the capability to bring some of those streaming games over to their new max platform, they could. the question now is what's going to make these streaming platforms really competitive, right? so if everyone is rebundling, what's going to make it even more compelling? everyone obviously really cares about sports maybe he's hinting when they're doing their next round of negotiations, they're going to have the flexibility in there to stream sport as well as offering it on tv, which seems to be what

espn is looking at as well >> julia boorstin, thank you when we come back, we'll talk jobless claims and the latest fed decision as we get ready for tomorrow's latest employment number and you can follow us on your favorite app and listen any time we'll be right back. you're watching cnbc powering innovation with access to capital. powering critical decisions with precise data and insights. powering seamless execution in evolving markets. we deliver our entire global bank to power new possibilities for you. barclays corporate and investment bank. powering possible. (vo) verizon small business days are coming. from august 7th to the 13th.

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welfar. welcome back to "squawk box. s&p 500 off about 17 our good friend rick santelli is standing by at the cme in chicago ahead of those numbers what are you thinking about, rick, this morning, maybe that downgrade and all the reaction we've been getting so far? >> well, we learn a lot today. billionaires definitely aren't worried about it i personally think that anybody who has any kids or grandkids ought to be much more concerned.

i'm more in the manchin camp i don't disagree with some of the notions what they did, fitch in particular, is going to have any lasting impact potentially in the markets considering all the other large economies have the same problem we do, houston. the globe is just knee deep in debt it's going to rust all the economies, growth will be stuck at 2%. listen, we have an issue here. whether you agree or not with fitch, i am thumbs up to anybody who brings out the problem that we have a spending problem, a big one. and now the data's hitting the wires. initial jobless claims of course is expected to be fairly close to last week its productivity that seems to be bothering many with stay-at-home workers that is a stellar jump from the expectations of 2.2% and in the

rear view mirror minus 2.1%. 3.7 is the best number going all the way back to pre -- well, right around covid, september of 20 a few months after covid hit, we jumped up to 6.5 it was right around covid we had productivity at 17.3 because of distortions of course. and if we look at unit labor costs and that's benchmarked against productivity, unit labor costs at 1.6% is also very good news, very good news 1.6% would be the smallest month-over-month gain since the last quarter of last year. if you look at interest rates of course we see that interest rates are up everywhere across the curve. but truly almost near unchanged in short maturities. it's the long maturities going wild, 227,000, by the way, on initial claims very close to expectations no significant revisions

221,000, that will make that officially up 6,000, still very well behaved under the psychological level of 2.5%. we haven't been above 2.5% since mid june continuing claims darn close to expectation, right smack dab 1,700,000 is the first time we had that handle since july after losing the handle we had after benchmark revisions. those numbers were all in april. basically these are well behaved, which explains why interest rates aren't going down is potentially going to continue to pressure indices like the nasdaq andrew, what did you think about the downgrade, especially as a father we have to look our kids in the eye. what a great legacy. what are we going to do? basically empty the kitchen,

empty the fridge, empty the freezer. what are we going to give thieves kids, an empty ice box >> look, i'm with you in that regard i've always wanted to have our budget balanced. >> there's finger pointing that's the only thing that matters. >> it's a conundrum in this country as we got to figure out how do we do it and figure out a political system where there's incentives for both sides to actually do it and do it right that's the great conundrum the truth is that most americans -- >> it's about what we think. it's about the fact that the country cannot prosper when we're rusting with the corrosion of debt. >> i don't disagree with you, but i think the truth is that you and i may be in a different position than a lot of other people who want more than they give >> what's the difference we have i want to know the difference. >> i don't think that you and i have a difference. i'm suggesting there's a larger

problem in america, which is that we have a lot of people who effectively want, want, want and they don't want to pay that's what we've had. that's what it is. >> you know what, that's a great place to stop. i totally agree. >> meantime, let's get oaf to steve liesman who joins us with his take on maybe the fitch downd downgrade. steve. >> yeah, i have a different view i don't know where that point is where we start to worryabout the debt maybe we're there now. i will point out that every person that's complained about the debt being too high, you can go back five or ten years and they were talking about the prior levels of debt creating some huge issue that has not yet materialized i would just be a little humble. we did spend a lot during the pandemic, probably too much, created some inflation that inflation is coming off now.

there was a lot of spending by the government, some of that government spending is supposed to come off. you remember we had robert kaplan on not too long ago, talked about there is a decline in government spending happening. we'll see. i'm a little less alarmist about this because we have no actual knowledge at all about where that limit is, especially for the country that is the reserve currency of the world. and you're right, let me just get to some comments by the richmond federal president who says that it's plausible that inflation normalizes soon and the economy dodges a downturn. he does say further slowing is almost certainly or surely on the horizon. he is somewhat optimistic on outlook saying recession hasn't happened yet and it would be mild if it comes he says businesses still see healthy demand from customers. that's one part.

manufacturers and construction workers are seeing a boost from coming government investments. they're also the first ones to be fired usually but they've been pretty much in demand and consumers are continuing spend funded by excess pandemic savings. you've had higher stock and housing prices he said most recessions come suddenly brought on by unexpected shocks. that shock may have been the fed rate increases or maybe not. efforts to fight inflation, croat quote, have pushed many industries into recession. he think if recession occurs if will be less severe than recent downturns. the market has been thoughtful but he's looking at how businesses have reacted.

it's been pretty good to listen to barkin about his outlook here he's mildly optimistic or cautiously optimistic i think is the best way to put it i think he's worth listening to. >> thank you and joining us now is the founder and president of macro policy perspectives. welcome. so your reaction, first of all, julia, to these numbers? >> yeah, i'm going to go with steve's a little bit more optimistic take. we've got a surge in productivity and this is something that we thought would be a theme this year yes, we have higher rates from the fed, yes, we have a slowing economy, but meanwhile we have this offset from better functioning. the economy is functioning better better supply change fixtures and dividends for companies. that's the secret sauce for

non-inflationary growth. at least for the near term i think we're set for a pretty positive economy and it's less inflationary and that allows the fed to not keep ratcheting higher and we can have the possibility of a soft landing looks more tangible than it did four months ago. >> for people who are looking at the numbers right now and maybe at the economy in general, this fitch rating downgrade on u.s. long term, it doesn't matter i guess you agree but from the broader perspective, at what point does this load of debt start to matter? >> yeah, it's a great question and the unfortunate answer is it doesn't have to do with numbers like debt to gdp you can look at japan, their numbers are much higher. but then you can look at countries, emerging market

countries that have much lower debt to gdp and much more inflation and currency problems. so there's no specific number that we can point to and say that's where the problem lies. it more about trust and confidence in the economy, in the institutions that manage money, the fed, the treasury, the u.s. government. that was something that fitch cited for governance, our sort of dancing around the debt ceiling problem is one reason for the downgrade. i'm very sympathetic to that as a risk we just don't know when that accumulates into, you know, an erosion of confidence in the dollar as rick pointed out, what's the alternative? >> julia, when you say japan, i don't feel better though i mean, is that our future >> i mean, japan has a very high debt to gdp, but they've grown in per capita terms. they have very high standards of living not fantastic but okay

productivity growth. you know, it's not the worst case scenario. i think when we talk about high debt to gdp -- >> julia, isn't part of it debt to gdp as just compared to ourselves? by the year 2029, the cdo says we're going to be at debt to gdp levels that are higher than we were at world war ii i think it's about trajectories and comparing the united states to itself over time. >> i hear you and it is a risk i certainly would not downplay taking on ever increasing amounts of debts doesn't pose some risk to the stability of the dollar, to the trust in the u.s. dollar and, therefore, the fiscal trade-off and inflationary pressures it absolutely does all i'm sapying is there's not one magic number it's abroader story about the functioning of our economy, the productivity of our economy, the stability of our governance and

our institutions that's what i worry about. >> all right julia, thanks. >> up next, we have author, media watch erer and professor walter isaacson. plus meta's digital news battle in canada and elon musk's rocky relationship with the city of san francisco. teiee morrow an exclusiv inrvw with blackstone ceo steve schwarzman stay tuned you are watching "squawk box" and this is cnbc

welcome back, everybody. the big media mover of morning, warner brothers discovery, the company reported a bigger than expected loss and a bigger drop in subscribers that some had forecast, but there was a lot of positive -- actually the stock was up by 6% now it's relatively flat free cash flow was up better than expected and subscriber revenue did grow sequentially. maybe they're making comments in the conference call now. stock is flat at the moment. pu but we have with us walter isaacson, a tulane university professor, a cnbc contributor, an author and his latest

biography is on elon musk. a lot of anticipation ahead of that release >> great to see you. >> let's talk about warner brothers discovery, what's happened at cnn, cutting costs to get things back in order. what do you see? >> david is a great executive and he's clearly created free cash flow, which is good i think you've got a few things happening, one of which is his move into streaming, whether it's espn plus, whether it's zaslav saying we're going to bible to stream live sports. >> and doing this at a time when the entire industry is under siege. >> it is a mess, the industry, and then you add the strike and a.i. and these are huge forces these are tidal waves hitting. and so it's really going to be interesting to see how disney,

warner brothers, discovery and others can navigate. >> bob iger saying anything's up for sale potentially >> you know, it was in the old days, you figure i have the content, i have the distribution platform, we're going to make the pieces fit now none of the pieces fit >> are you glad you're not at cnn right now trying to navigate this >> yeah, i am actually it's the broader issue we talked about, whether it's the fitch downgrade or what was said about both sides is we've become more po polarized in the media it's do the gdp to debt ratio, it's that we have a dysfunction in our politics. that's the underlying problem. well, that starts even with cable news, social media, whether it's from what used to be twitter to the throw cable news networks. it tends to fracture us and make

us have different sets of facts, not just opinions. >> i don't know what the cure is for that how do you put things back together >> you know, we americans always think, okay, here's a problem so let's figure out what the solution is. some problems don't have a solution right away and one of them is the growing partisanship there's about 20 things you can do, everything from worrying about gerrymandering to trying to create media that is, to get back to jon, both sides now we're going to look. you said benjamin franklin did that ledger. that was a great thing he did and he did it in his journalism. i wrote about ben franklin once. throughout his life, it was like here's one side, here's the other, let's do the calculation. >> i city still think most americans come down on the side of not necessarily being far right or far left. they look at issues and decide based on issue by issue.

>> absolutely. and most of us try to have open minds. i've changed my mind on so many different things over the course of political debate, but the technology of a fractured media where you want to grab a hard core, whether it's on your corner of the bloggosphere tend to drive people in echo chambers and those of us like most americans and trying to see all sides, we don't have a natural base now if you go back to cnn, it's hard right now because it's all trump all the time it's hard for them to get off of that it would be useful to see if you could try to do a very high value information, nonpartisan, nonideological news and that would appeal to 60% of us. >> i think that's what they started off trying to do

>> there's an addiction to trump. i hate to say it when i first went to cnn, first day i was there, christiane amanpour was doing a great series about women in the muslim world and they say we have to cut to a car chase i said no. two other networks did and they showed me the numbers, there's an addiction there's no better car race than trump. >> you think most americans are living in some kind of middle and that, you know, we're all very close i'd like to think that i tell myself that but then i look at the polls and i see it's not just the addiction that we have to the ratings or trump or this or that, it's -- it really is dem

on when you have somebody like trump polling better than the current president. even if you think the something. it can't be that we're all in the middle, because we're not. >> well, yeah, and i'm going to give becky and me credit both for having said that the majority of people are open-minded and good-hearted i think what you're seeing is that we have become more polarized, and it's happening fast, and that's what the fitch rating agency said that's what you're seeing in polls. and everything is pushing us into our corner of our, you know, tribal thoughts, our ideological thoughts, and so it is getting worse i still -- maybe i'm very optimistic -- feel that you have at least -- i'm sure you could get 60% of the people in this country, if you sat them down

calmly, to agree on 60% of the things about 60% of the issues >> i agree with that just because when i talk to people, i can talk to people of all persuasions, and i find that we agree on a lot of things. >> maybe we're in an echo chamber, though. maybe we're talking to people and saying, we could fix spending if we just -- sorry, john >> no, let's talk a.i. for a minute back to the media point. it seems to me that part of what's happening here is the powers that be are trying to use a.i. to flood the space with content, and that's lowering the value of some human-created content, including that from creators who -- many of whom are on strike right now, whether you're an actor or a writer. is that perhaps what's happening? in a way, it happened with the internet with the long tail and all the trash content that went out and killed the advertising model for so many print publications >> you make two good points. one is that a.i. will scrape information from all over the place. let me take the elon musk book

i'm writing. comes out in september what happens if the very day it comes out, you know, various a.i. scrapes up the whole book, is able to tell people they can ask whatever they want, and all of that information i've spent three years reporting can just be used -- and by the way, may be based on different a.i.s in the future, different algorithms for those who love koelon musk, those who hate elon musk, left, right. first of all, i don't get -- i'll be fine, but content creators do not get compensated if a.i. companies take all the movies they ever did, all the books they ever wrote, and serve it up that way and then secondly, to get to your point, if you got an algorithm that's going to try to engage, that means it will try to enrage, and it means that it will add to the polarization >> there's the problem with the

polarization these algorithms are all designed to go after our basest emotions and get people riled up on those levels. how is that not going to get worse under a.i. >> you said, how do we solve this problem that's why sometimes i'm saying, problems aren't always easily solvable if you can have both a.i. and then algorithms that existed before a.i. that just know how to enrage you and get you to repost something, that is going to add to the polarization what do you do i don't think government regulation is going to fix it. i think maybe, you know, doing good business, having advertisers, having valuable subscribers that will pay for your content will push some incentive for high-value content, but that's the only hope i would have. >> that's a longer discussion. not sure i agree with it, because i don't know that the advertisers or the companies -- >> you asked me for some solution

>> they're playing us out right now. let's come back and have a longer discussion. thanks, walter >> jon, good to see you. still to come, an amazon earnings preview you don't want to miss. stay tuned you're watching "squawk box. that's what you get from the morgan stanley client experience. you get listening more than talking, and a personalized plan built on insights and innovative technology. you get grit, vision, and the creativity to guide you through a changing world. ♪ 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. i'm also mr. leg day...1989!

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welcome back to "squawk box. the final two f.a.n.g. stocks report quarterly earnings tonight. we're going to be hearing from apple and amazon nick jones, good morning to you. there's a lot to talk about when it comes to amazon we can break the company into a multitude of pieces. what are you looking for, specifically >> i think at the end of the quarter, we're really looking for aws to go around 9 to 11% and then the q3 guidance details be around 8 or 9%. that's the focus after microsoft got softer growth than expected. aws is kind of front and center. secondary, we're really looking at e-commerce sales. the consumer has been resilient. will that continue to be resilient? the third focus is profit margins. can they utilize their capacity, and can aws start expanding

margins again? those are the three items we're squarely focused on heading into the print later. >> do you want to own this stock into the print at $128 >> i do. i do i think amazon's got a long runway we saw their summit last week. they're putting a lot of integrations into large language models, a.i., machine learning we think amazon's a long-term winner we like it here. >> you just mentioned a.i. you talked about aws the big concern, of course, has been how much market share is captured by microsoft in this battle between aws and i don't know where you want to put google or alphabet in that game. but how do you see it? and given some of the things that we have heard from amazon, how far along do you think they really are >> so, it's -- i think they've been working on this for quite a while. i think kind of the, you know, the hype we're seeing now is because consumers or average people have really been able to utilize generative a.i

we think they're squarely in competition for budget for this type of solution we're still incredibly early in kind of the cloud life cycle, so we think it will be very competitive for years to come, and amazon will continue making investments like we saw at the summit last week >> and then lastly, advertising, which has been a growing part of their business, but there's been real questions about advertising, just the weakness of advertising broadly across the media, how do you think that shakes out >> advertising for amazon has been a bright spot we like that business ask with advertisers increasingly focused on retail media, amazon is really well positioned to capture that budget going forward. we think investors are not paying enough attention to how big the numbers could be it's the higher margin than aws. if this grows, it could deliver strong profits >> nick, i want to thank you for joining us this morning. we will be watching amazon's number later this afternoon, and of course, we'll be watching apple as well. i imagine both of those topics

will be the hot ones for us tomorrow morning a quick final check on the markets. take a look at where things stand right now. we're in the red dow off about 65 points, nasdaq off about 82 points, the s&p 500 off about 15 points, and i don't know if we're going to say that's a function of fitch or that's a function of a lot of other things we got the jobs number tomorrow, becky. >> that will be a biggie >> we got a lot to do. join us tomorrow for that number "squawk on the street" begins right now. ♪ good thursday morning, welcome to "squawk on the street," i'm carl quintanilla with jim cramer at post nine of the mark stock exchange. david faber has the morning off. bond yields still elevated even after reassuring productivity and labor cost data. our road map begins with warren buffett telling cnbc he's not worried about the fitc