we will take you there live. and 3m shares jumping on the news of settling the lawsuit of useless or faulty earplugs. it is monday, august 28th, 2023 and "squawk box" begins right now. good morning. welcome to "squawk box" here on cnbc. i'm with clark kent. you are not jimmy olson. live from the nasdaq. i'm joe kernen. santoli is here. >> i didn't know those were the two choices. >> i have to be perry. straight from the phone booth. >> last one left. >> what do you do now? you go other places.

times square just helps. >> mild manner. >> you are, clark. great to have you here. becky and andrew will be back. it is the dog days of august. this week after jackson hole and i'm worried again. after jackson hole, some of the numbers and the number on friday will be a big deal. the market is up on friday. in general, it's wobbly. >> 4% off the high. it hasn't been that nasty if you look at it point to point. yields are up. this felt like it priced in whatever powell had to say on friday which is really no if or when with interest rates. that's the point in the cycle you have to wait and see. >> nobody wants to be jimmy olson.

i guess i understand it. everybody wants to be -- >> bruce wayne. >> that's a good one. >> that's a little dark. >> i'm the joker. >> there you go. >> we were already talking about him today. watching treasury yields after joe kernen joker. after the jay powell comments on friday, he says inflation is too high and the central bank is ready to continue to hike rates to tame high prices. i think it takes one or two reports to changing that narrative, don't you think? >> one or twobetter than expected. >> cooler report. >> the disinflation theme. >> crappy economy reports. >> after what he said friday, the market is saying another 25-basis point hike this year is like a coin flip. maybe. honestly, the big picture is how much will it matter? we're up by 525 basis points in less than a year and a half.

the economy is doing what it is doing. it is hanging in there well. is 25-basis points going to be the thing that really changes the picture or not? i think the question is what long-term yeeields. >> the betting game now is the cut next june with the percentage who expect the cut next june actually decline. the long-term expectations krcrept up a bit. long-term yields also went up. >> i had this conversation with liesman. eight months ahead for the fed funds futures. the preseason of college football poll. it is interesting. it is all we have to work with with right now. the fascinating debate is how are the results different? >> given multiples, one of two

things has to happen. the fed has to cut rates or earnings has to out perform. based on the current multiples, one of those two things has to start to change. >> look, the math is not really functioning in real-time. >> why would there be a cut if the fed doesn't engineer a soft landing? >> or recession? >> just an average landing. the other thing that scares me is i'm used to the consensus being wrong and if it was another 25 basis points, we had three straight 75. that is nothing. i'm worried that it could be persistent. i'm worried about two things. it would be a persistent inflation with oil going back up. china might end up helping with us there. thinking the next move is a cut

instead of 6% or 7% or things historically -- you remember mortgages. historically, we have been higher than 4% or 4.25%. are we missing that? >> you mentioned the dot-com bubble with 7% interest rates. >> we were fine with valuations until they weren't. >> it is interesting. >> the rate of change. >> where are you now compared to the last time. >> these are not historically higher rates. we should be able to handle this. >> the answer to the question why they would cut, they laid out the rationale for that which is as inflation comes down to 5% to 5.25%. they the still believe the neutral rate is lower than 5%. >> they don't know where it is. >> it is nice to know if they

could, they like economic activities to be maximized. the way they do business is per perverse. >> one of the last lines is we are navigating the stars in cloudy skies and looking backwards because all of the data is backward looking. >> they have done so far and that's a win. i hope they are not disappointed making the economy weaker. >> i don't think so? >> we're all on the same team. >> we are w. i think they will take the credit. u.s. regulators are suspending the challenge of the amgen's $30 billion deal of horizon until september 18th. this will allow the ftc to continue the effort to block the merger or settle the case. amgen said there is no reason to prohibit the acquisition.

horizon indicated higher 5% this morning. shares of xpeng jumped 10% in hong kong overnight. the company announced it is buying the smart car electric business from didi. the deal involves an exchange of shares worth $744 the million. didi will become a shareholder of xpeng and the companies will cooperate in marketing and insurance services. xpeng plans to develop a brand of ev for a launch next year in the $20,000 price range. shares of china's evergrande group started trading for the first time since march of 2022. the property developer plunged 87% when it itreopened after th loss of $5.4 billion for the first half of the year.

the u.s. assets are protected under bankruptcy law as it works on the restructuring deal overseas. sticking with chinese markets. the ministry of finance is cutting the duty it levies on all stock trades by half in the effort to invigorate capital markets. this is the first time beijing has taken this action since 2008. china's security commission, i didn't know they had one, also says it will with slow the pace of ipos in the effort to keep investors' cash in broader markets as opposed to piling in new ovfferings. the front page piece sums up the discussions the last couple weeks. that is there's no doubt that xi has pulled back on all the pro-market pro-capitalism for some type of ideological

reasons. when you affect 1.5 billion people and they're making $12,000 a year gdp, they are not ready to take the foot off the gas. the journal sums it up. i don't understand how he thinks you make china a dominant, you know, world power when it is all economy based. that is not ideology based. unless you do it militarily. >> autocracy is not good for the economy, it turns out. >> it sums it up that also unlikely are market-oriented changes or reversal of the multi-year shift toward more centralized control which we have in this country a little bit, too. i don't know. we'll talk a lot about china. >> deep suspension of consumer-led spending growth. >> why? >> they believe it is a decedent

western growth. maybe it encourages more income inequality. >> it is just when you are talking to me. i know it is true. our people have a gdp of $12,000 a year. that's enough? let them eat cake? they should be happy with what they have? if they had more and spending it on things, that is bad? i'm sure xi's depriving himself and all of his buddies in the ccp are depriving themselves of the good things in life. >> speculating on housing and borrowing a lot of money with fixed investment. >> it is all about quality growth now. the question is what is quality growth? there is no growth anywhere. not in the capital markets or consumer economy. part of why raimondo is there is to get america to invest in china. every part of the economy is slowing. >> the market did have a little

bounce overnight. that was the stock market -- >> fee getting cut in half which did not have much of an impact. 3m agreeing to pay $5.5 billion to settle the 300,000 lawsuits claiming it sold the u.s. military defective earplugs. this would allow 3m to avoid larger liability. one that 3m hoped to soften the bankruptcy case. analysts estimate it could cost the company $10 billion. one of the big overhangs on the stock for a few years now. coming up, a big week for economic data leading up to the friday jobs report. the squawk planner is up next. we will take you to china where u.s. secretary gina raimondo is meeting with chinese leaders. you are watching "squawk box" on

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on this week's squawk planner, earnings report. best buy reports tomorrow morning and we hear from box and hp. on wednesday, salesforce after the closing bell. on thursday, reports from ubs and campbell's soup and

lululemon. and on wednesday, second quarter gdp and the adp payroll report. on thursday, jobless claims and personal income and spending for july. on friday, we have the august employment report. joining us to talk about the week ahead and jay powell's speech from friday at jackson hole is the chief economist at wilmington trust. >> thanks for having me. >> we were breaking down powell's speech and message. the take is we are trying to preserve flexibility. you have to see the rate moves and what they will do the economy and you cannot take further disinflation for granted. what does it mean for markets? >> i think markets didn't learn a lot from chair powell last week in jackson hole. he re-stated the overall case.

they had an economy slowing. within that assessment of the economy was his most hawkish statement. talking about consumer spending in the recent months having been particularly robust and that sets off alarm bells. they are worried that strong spending is going to keep inflation up. on the other side of it, he wants to be balanced here. he said financial conditions have been tightened a bit. importantly, he said most of the estimates they used say there is a lot of tightening in the pipeline. they are waiting for some of the lag effects to come through and have an impact on inflation. i really think what he set up was to punt the next meeting on september 20th and look for november 1st. they have three more pce readings between now and then, mike. >> there is a bit of breathing room where the markets can sort out each bit of information that comes through.

i guess the emphasis on powell on pce inflation and in services outside of housing. he is focused on the component of inflation. a lot of folks say the leading indicators say they will look friendly for a while here. can we continue to have the so-called immaculate disinflation? >> i think this is encouraging. the fed knows this. they can't speak in the same way about it because they don't want financial conditions to loosen up too quickly. the services outside of housing have done well with the high costs. everybody is worried about the high wages and earnings which is the high part of the cost structure. the wages have stayed high and we have seen in producer prices where firms have been able to handle the high wages and bring the selling prices down. that bodes well for the services side. we expect inflation to keep

coming down, but it could be challenged if it does reverse and go in the other direction. the fed wants to see several more months of data before they take action on it. >> we see longer-term treasury yields trernd higher. below 4.25% on the 10-year treasury at the moment. that has not been because the market expects inflation to pick up. it has been other drivers of this and whether people think treasuries are rates going up because the economy may be in a better growth phase. what is your read on what is driving it and is this an opportunity for bond investors and is it a challenge for risk asset markets? >> at wilmington, we think this is an opportunity. we have an overweight to core fixed income. we think the rates will come back down. as you said, it is not inflation driving higher. if you look at the ten-year

break even, it has come down from last late year. we see the strong economic data. the surprise indices moving up. you have the atlanta fed now tracker tracking at 6% growth in the third quarter. i think that has spooked the markets a lot and sent the long-term rates higher. we think we're still looking at a 1% to 2% growth economy. there is a lot of volatility in that data and we think that should bring long-term rates down. that provides opportunities on the fixed income side. we're advising clients to stay overweight to fixed income and have an overweight to cash and we are looking for opportunities to deploy that depending on how the data breaks. >> in that scenario if, in fact, we trend back to the growth rate and longer-trend yields go l lower, that is not a friendly

enough environment for equities to hold up? >> it could be friendly for equities, but we are aware of the high valuations for large cap which have run up significantly. the valuation ans look better o the small-cap side. we have been underweight for most of the year. looking for that opportunity because there could be volatility as the fed talks hawkish the next couple months. the opportunities could be good for equities, but with the long-term rates as high as they are, it looks attractive and you have all of that carry. you don't have that spread on the fixed income side to beat the 5% cash rate. that's why we're moving to fixed income now although we are not negative on the economy. >> got it. the hurdle is higher for taking on more risk. luke, thank you. i appreciate it. >> thank you. all right. coming up, hacker warning. eamon javers has the new report

on the cyber threat to software that runs key american infrastructure. that's coming up next. right now as we head to break, here is a look at the biggest pre-market winners and losers in the s&p 500. "squawk box" will be right back. good night! hey corporate types. would you stop calling each other rock stars? you're a rock star. you are a rock star. no more calling co-workers rock stars. look, it's great that you use workday to transform your business. but it still doesn't make you a rock star. so unless you work with an actual rock star. hi, i'm ozwald. hello ozwald. pam, you are a rock- i wasn't going to say it. ♪♪ the not-so-secret to our success? earn and keep trust. build and maintain financial strength and stability.

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welcome back. american officials have been warning chinese hackers are engaging in cyber attacks on u.s. infrastructure and potentially against oil and gas pipelines and rail systems. eamon javers has been looking at one overlooked vulnerability in

the software that controls american infrastructure projects and the american eviffort to secure it before it is too late. eamon javers. >> reporter: robert, they are looking to shore up the weaknesses in the infrastructure which have not been penetrated by chinese and hostile actors. they are focusing on the open source software developed by others to put in the public domain. software companies that make systems make large chunks of code in the programs. the fear is hackers could develop the code and release it to the public and seating it with the vulnerables. the agency cisa asked the community to source the code of the cisa plans to release a draft open source for security in the coming months. a new report from the

cybersecurity firm heiighlights the threat. 7, 7, 7,918 had coders from china or russia. and 90% of the software used managed the u.s. power grid with code created from russia or china. it has three times more vulnerabilities. to replace the code would cost $40 billion. that is not likely companies will pay to replace the software. more likely are the solutions raised by cisa including rewriting the critical components of the code. cisa believes the software companies consuming the open source software should trace it

back to the security of the software. back to you. >> eamon, why would so much of the critical code be open in the first place? is the idea they haven't develop it themselves or also why allow contributions from russia and china? >> reporter: open source means anybody can put code out there on central sites to get it. this is a quirk how software has been developed for a generation. big components of the code are open source. if you think of writing software programs, it is not much writing it line-by-line, but assembling chunks. you have this piece with with this function or that function and snap it all together and make a new program. that is where they use the open source code for the routine things which happen in a lot of software programs, they use this code which has been out there

for a while. the question is is it secure and whose job is it to go through the open code and look for the back doors or malware or things lying in wait. that is a big question to answer. it will be a big problem and the question is would microsoft who runs github be responsible for that? would the sellers be responsible for that? if you have a contract, if it doesn't work as advertised, that's not on us. who pays for cleaning it up? >> soon it will be chatgpt writing the software. >> right. >> eamon javers, thank you. >> you bet. coming up, we will take you live to china where u.s. commerce secretary gina raimondo is meeting with business leaders. and as we head to break, we check out the price of crude.

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good morning. welcome back to "squawk box"

live from the nasdaq market site in times square. checking the futures. we're in the green. we were able to add to gains on friday and close higher. today, u.s. commerce secretary gina raimondo is meeting with officials and business leaders in china for the week. we have eunice yoon with more from beijing. >> reporter: joe, i'm outside the ambassador's residence where the ambassador is hosting a represent in reception for the commerce secretary and the who's who of the business community. her message, of course, is the u.s. and china can still have a strong trading relationship despite the tensions and despite her department's export controls. earlier today, on the first of three days of meetings in china, she met with the chinese commerce minister. she told the minister that the $700 billion of trade and stable

ties are quote profoundly important important. before arriving to china, she described narrow and targeted controls impact 1% of trade. areas like chinese tourism could generate $30 billion for the u.s. economy and potentially 50,000 u.s. jobs if tourism turns to the pre-pandemic levels. to highlight the broader ties, the secretary attended an event that was highlighting the small and medium-sized u.s. companies selling into china and to talk about not only the bigger companies benefitting. the commerce minister said his country is ready to work to foster a more favorable policy environment, but despite the pleasantries, it doesn't appear the two sides are moving to address the core policies irritating the other side. for example, the chinese state

press has been pointing out that the china key concern is the restrictions on the investment in i.t. raimondo addressed this issue at the meeting this morning saying in matters of national security, there is no room to compromise or negotiate. joe. >> okay, eunice,complex. let's bring in anna ashton. anna, thank you for joining us. >> thanks for having me. >> former buffalo grad school. are you excited about primetime? where is your allegiance? >> my allegiance is with arkansas because that's the football i grew up with. >> oh, the razorbacks. you're interested in what happens with the buffalo bills? >> of course. >> this is a tough -- i don't

know. she is going over to help increase trade while putting on trade restrictions. it seems contradictory. >> it does, indeed. >> can she walk the line? >> this is what the biden administration seems to be intent on doing all summer. both trying to establish a diplomatic detante and remain an on course in terms of tough enough on china to ensure that u.s. competitiveness is protected and fostered. you know, i think the raimondo meeting is the most important of the ones we have seen because of the fact she is the one who oversees export controls. this is the area that the chinese government is the most upset about and sensitive about. they definitely see u.s. export controls and other measures, including the outbound

investment executive order announced this month as containing the chinese ability to advance technology and minimizing their ability to thrive economically. >> in recent years, both sides were suspicious of the intentions of the other. we think it makes sense. they think it is a way for us to hold them back economically. in this country, there is some bipartisan anxst about china. the biden administration wants to pursue a detante. there are certain republicans that will give up certain things and she is actually going to not be as tough as she talks. the commerce secretary. is there another line she has to walk? the naysayers say we give away too much. will she? >> i don't think the biden

administration is at all poised to give away too much, joe. first of all, as raimondo said in beijing on the ground where eunice reported, national security matters are off limits and not negotiable. she said it before. she has been pretty clear. there are areas where the u.s. and china should be able to trade and trade robustly and there are just a few areas where national security really trumps the ability to engage commercially. those concerns are real. the pushback from members of congress and the other pundits throughout washington who are worried about the extrtrajector china has continued. we are certainly hearing that from mike gallagher, the head of the china select economy and

mike mccall and others. >> we had china hawks on the show who have the u.s. companies should pull back completely from china with the idea that taiwan is not going to be a 2050 event. it could be before. i've heard next year. that may be unlikely. before 2030. if that were to happen, what would we do? what would we be expected to do? what would u.s. businesses do if they re-acquires taiwan? >> if there is an invasion or, you know, use of force like a war to re-take taiwan, i think you can expect the worst-case scenario for commerce. there's very little possibility

that the u.s. and china could trade their way around that. frankly, you know, eurasia group doesn't see that in the near term. precisely because of the chinese economy which is struggling. they need investment. they need to do better courting foreign investment. what most military analysts tell us is that the chinese military doesn't yet have a reliable capability to take and hold taiwan. we don't think that will happen in the near term. is that something that the companies are worried about? yes. >> why is president xi seeming to emphasize ccp ideology over gdp growth and market forces and all of the strides made at 25 times increase in gdp? only as we keep pointing out,

not even to a high-income country yet. it seems they have pulled back on things that were working. why? what does that get him ideologically? >> i think some of this, joe, is xi jinping is steering china through a transition, an economic transition, which has been expected and the leadership knew was coming. no matter what policies in place, there would still be challenging, economically, for china right now because of the demographics and because of the fact they are at that place where they need to try to avoid the middle income trap. a lot of goods that are easier and cheaper to make are not made in china any more. it is not as simple as having the cost advantage. it is a competitive market. there's that.

there is the fact that xi jinping is a different animal than past chinese presidents. he definitely has more of an interest in balancing different priorities against each other. he's interested in a strong role for the state. by the state, he means the party. the party has been encroaching on the state more and more. in his mind, that's because some of the challenges that china has to navigate in the coming years require a strong state hand. that has down sides in the ability to attract and keep foreign investment and ensure the private sector thrives. that has been the driving engine this whole time. it is an quite the experiment. >> no big deal. 2 billion people depending on what happens with what you are doing. anna, thanks.

good to have you on this morning. go buffs. coming up, new comments from microsoft vice chair brad smith on the company's deal to buy acti activision. that is coming up next. later, we talk to mohamed 'lbeig.n wel rht back.

welcome back. u.s. equity futures pointing modestly higher. dow indicated higher by 60 and nasdaq up 29 at this point. comments from microsoft president and vice chairman on the uk decision to reopen the investigation into the acti activision-blizzard. speaking with cnbc asia, smith said he is holding out hope. >> i think hope is on the horizon. we worked very hard recently to address the concerns of the uk and competition market authority which led us to stream out the cloud gaming rights to ubisoft. we prevailed in court in the

united states. we insured that we continue to comply while we spin out the rights to ubisoft with the commitments in the european union. as the cma in the uk said there is no green light, but they will review the proposal and i'm hopeful that by the middle of october we may see this come together. >> okay. coming up, the latest on the strikes in hollywood. we talk to matt bellamy next. reminder, you can watch or listen to us live any time on the cnbc app.

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after the delay of dune part 2's theatrical debut to next year, studios are evaluating their fall release schedule. the release dates of a number of other films have been delayed including challengers, ghostbusters, after life 2. the latest godzilla king kong movie, and movies like the marvels and wonka and snow white are also at risk of having their dates shifted. joining us for more is matt bellamy, puck founding partner. matt, do you know what's going on? i mean, the studios had an off that we sort of knew what was in, and it was kind of dismissed summarily, but we still don't really know the specifics of what the wga really wants. where are the -- how far apart

is it, and do you have any idea what the specifics are of what -- they want more. that's all i read. they want more. >> yeah, and negotiations right now are in a pretty bad place because as you mentioned, the studios made public their offer last week, and the writers sort of shot it down and said, this is a tactic to try to divide us because the negotiating committee had not wanted it to be made public because then it goes to the entire membership in an effort you get them to put pressure on the negotiating committee, so we're in sort of a bad place. they're kind of -- you know, there's a lot of open issues, but the three main ones are this issue of ai and whether scripts can be used to train ai programs, the minimum staffing issue, which is a writer's room thing in television, they want a minimum number of writers to be required for specific writers rooms, and the other one is

transparency. the writers want to be paid a success metric meaning they want more money if their shows are successful. the studios have agreed to allow the writer's guild to see some data on what shows are doing well, but not to create a success metric based on that. they want that to happen down the road in three years, and the writers are like, well, wait a second, no, we want this now when we have the leverage not to negotiate in the future when we don't. >> just, you know, i'm reading some of the stuff fran drescher has been saying, and it doesn't -- it just doesn't make me very optimistic. i guess she told the "associated press" this moment is about the entire world of work and a larger stand against corporate leaders and those who value shareholders over the people who create their product. i mean, i've seen enough academy

awards. i know how most of the industry thinks about capitalism and people that actually produce real things other than movies. it seems dangerous to me that -- i mean, she can play a role, but if you were going to play the role of a union hero going against all of corporate america, you could sort of get out of hand there in terms of delusions of grandeur. how do you ever -- you think -- how do they settle? will they ever come and talk to each other about the real world instead of, you know, playing erin brockovich or something. >> well, fran drescher is playing a role there and she's trying to get her guild, sag-aftra, she's trying to get the actors in solidarity behind the cause. she's been very effective within her own guild getting them galvanized. whether she's been effective in

the overall negotiations it's less clear and they have sort of back burnered her lately. we haven't seen as much of her as we did in the early days of the actor's strike. keep in mind, the studios aren't even talking to the actors right now. they've chosen to go with the writers first here mostly because the writers have been on strike the longest. but i think in part because the rhetoric coming out of the actors so was vitriolic and trying to bring the entire world of labor into this fight, and you know there is a movement going on right now in organized labor that wech haven't seen in many years. it's happening in hollywood, but it's also happening in many other places afternround the wo. to minimize that is a mistake. the rhetoric from the actors have caused the studios to move to the writers. there's a real chance they could go back to the actors and leave the writers hanging for a little while given that the talks are

not going in the right direction. >> organized labor has a friend in the biden administration, at least that's the rhetoric you hear from the biden administration. but matt, we're still -- what are we, 7% down from 40 or 50% in terms of union membership. we do see yellow or u.p.s. in america, we've seen some things like that. i don't know if i'd say that the entire tide is shifting back to organized labor. you know, we've got labor laws. we've got a love of things that cover -- some of those reasons aren't really around today, are they? >> i think that depends who you talk to. the writers see this as an existential fight. if they don't understand -- >> with ai. >> -- business model in entertainment, they'll be left behind. if you look around los angeles, there have been strikes after strikes after strikes, hotel

workers, teachers. it isn't just confined to certain areas. it dpepends on how you're lookig at this. the only real gains the talent community has made in hollywood over the history of the business has been by strikes. the entire residual system and the fact that actors and writers and directs get paid when their work is reused, that happened because of a strike in 1960 that looks a lot like the strike that's happening today. >> well, we just don't want -- you know, we're finally coming back, the whole industry from the pandemic, and now this. >> it certainly doesn't help. >> and you don't want to cut off your nose to spite your face. yesterday was $4 day, did you know that? >> i did. we're going to see the numbers today on how it did. i wonder if it boosted revenue. we've got "barbie" and oppenheimer at 2 billion.

>> there's nothing in the can, this could be on for who knows. there could be nothing coming to theaters. >> as we go into the fall, the summer of 2024 is really threatened for movies. a lot of movies that were not finished or still have post production, if they don't get those movies finished very soon, there's not going to be a lot of big summer blockbusters next year. >> thanks, matt. we're late, "squawk box" will be right back. help make trading feel effortless. and its customizable scans with social sentiment help you find and unlock opportunities in the market. e*trade from morgan stanley. (fisher investments) it's easy to think that all money managers are pretty much the same, help you find and unlock opportunities in the market. but at fisher investments we're clearly different. (other money manager) different how?

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good morning, futures rising, at least so far this week. it is, by the way, the final week of trading in august, and some of those fresh remarks from jay powell last week, the jobs report and inflation data all in focus for investors. meanwhile, commerce secretary gene raimondo, a look at what's in stake for u.s./china relations. buzz over the weekend that amazon is in talks with disney about working on a new streaming version of espn. a look at how a new partnership

could change the wide world of sports as the second hour of "squawk box" begins right now. ♪ good morning, and welcome back to "squawk box" here on cnbc live from the nasdaq market site in times square, which as you know is in gotham, gotham city. i'm joe kernen along with mike santoli and robert frank it says here. i know insert -- >> mild mannered reporter. >> mild mannered clark kent look alike. >> that's metropolis, though. >> gotham is -- >> is batman. >> i prefer batman. i don't buy into the whole, you know, he does super powers. >> batman does everything just with his -- >> his brain. >> yeah, he doesn't have like x-ray vision. >> he's got a much better car.

>> a cooler car. he needs a car because he can't fly, obviously. andrew and becky are off today. u.s. equity futures up, the dow's up about 80 points. nasdaq up just over 40. s&p up about 7. good day on friday. treasuries we got the two-year back above five, but the ten-year is off its highest levels, although 4.23% still has people -- amazing what a quarter point can do to hold market sentiment because if you go another quarter, you're 4.5, and then you got the duration risk and the banks and everything else. have you introed dom chu before? >> i have not. this is -- maybe i have. >> maybe you have. >> but speaking of superheroes, let's get to dom chu with a look at this morning's premarket movers, super dom. >> the last time you did intro me is in the afternoons with the "power lunch" session. we've got the swap going of the

hours. thank you very much for the glorious introduction. we'll start, gentlemen with a merger monday update which is in bio pharma on horizon they are p therapeutic therapeutics. the federal trade commission is suspending its challenge of am again's purchase -- whether it should continue its campaign to block the merger or settle the case. the ftc had opposed the deal because of concerns amgen could look to use its market position to leverage insurance companies and pharmacy benefits managers into better terms for horizon's key drug franchises. keep an eye on horizon up 5%. we're watching shares of fisker getting some help on news the company is launching retail

sales operations in three new markets in europe, belgium, the netherlands and switzerland. fisker says deliveries are expected to start by the end of next month. and we'll end with a check on the cryptocurrency complex writ large with bitcoin prices down about 2/3 of 1% currently below the 26,000 mark, so the largest cryptocurrency has established a new trading range lower than where it was before. we've been hovering just around that 30,000 mark for a couple of months during the summer. a new trading rate established here. the moves lower are stoking some concern about the sentiment for crypto heading into the final stretch of the year. if you check out prices of eth ethereum, they're also seeing some of those broader declines, medium term. so robert, cryptocurrency, it's still a thing. it's still around 26,000, but it's certainly not 30 to 31,000 like it was back in june to august. >> kind of amazing given what's happened to long-term yields that it's held up so well around

25, 26 for so long. >> not just at the wealth effect, right? a lot of the money that had been kind of in that crypto sphere has been shrinking away from other assets. robert i know you watch the luxury watch market. we've been talking about folks who spend less on used rolexs and luxury watches because of that crypto that's come out of the market. maybe even moves lower given some of the sentiment we've seen so far. >> dom chu, thank you. >> sure. time now for squawk picks, our next guest sold her starbucks position locking in two-year gains and added two new names to the portfolio, alon usa energy inc. -- animal health. a beloved cnbc contributor. stephanie, good morning. >> good morning. >> so tell us about alanko.

>> i think it's a defensive pick in this kind of economy. the total addressable market for animal health is about $59 billion with a cagr of about 10% per year between now and 2030. and these guys, if you remember, they were a spinout from eli lilly back in 2018, and the spinout price was $24. the stock today is 11.85. it's not been a good one post the spin. i do think spins work. a lot of that is because you can focus 100% on the spin -- after the spun company, right, and you have 100% attention in terms of the operations, in terms of growth, in terms of cost cutting and that sort of thing. they have a very strong pipeline. they've got five products that are coming out in the first half of 2024, and that's going to yield $500 million in

incremental total revenue by 2027. so you have a company that's growing at about 8% in total revenues, 3 to 4% pricing power, and ebit growth of about 20%, and they do also have synergies from the acquisition of buyer. so i think at 14 times for a company that's really underperformed but is about to see a product cycle, i think that's attractive. >> is this effectively a bet on the pet market? we've seen some weak results from petco and basically that boom we saw in pet care, pet spending during the pandemic has normalized. is that -- will that be a problem for this stock? >> well, i think we've seen over the last couple of years that pets are living longer, and actually, pets are under nourished. i think there is this total addressable market, this tailwind from that, and i think

the industry leaders really, i love sa wet tis, trades of 34 times earnings versus ylan coe at 14. i kind of look at the product pipeline. that's the most important, and they have some blockbuster drugs, both companies do. >> let's talk about your next pick, cdw. what do you like? >> yeah, so it's a value-added reseller with a total addressable market of about a trillion dollars. they've got a very diversified customer base, enterprises and small medium businesses, government and that sort of thing. they are also changing their mix to more software and services, which should help on the margin side, but 30% of their business is about pcs, and that has really been in the doldrums. if you listen to what amd and intel said last quarter they saw sequential improvement in pcs,

so we get rid of the kbglut, th extra inventory. when you kind of step back, it's a high, and roic of 20% with strong free cash flow. i like the story. it's sort of off the beaten path if you will, and i like that within technology. >> just quickly back to starbucks, i know you sold it because you had a big gain there. are you concerned about their strength given this economy? or what is it that makes you think there's not a lot of upside going through the rest of this year or next? >> and i love the story and i will totally buy it back if it were to pull back, but i am up about 57% since i bought it. i thought it was prudent to take ga gains. i do worry a little bit about the price point and traffic as a result. so it's a great company, size and scale. i love their international opportunities. i still believe very much in the consumer piece of china

reopening. that will help them, but i do think at this valuation, it's really expensive and so i'm just going to take the gains and wait for a better opportunity. and by the way, i've been taking -- i took some of those gains and i continue to add to energy. i mean, in the last month, energy has outperformed technology by 770 basis points, and i've been owning chevron, schlumberger and fang and diamondback north america. chevron is the one i've been adding to. it trades at 11 times forward estimates. i think there's more opportunity elsewhere as the market broadens out. >> thank you. >> thank you. good to see you. coming up, commerce secretary gina raimondo is in china as part of an effort to deepen communication between the two superpowers. we're going to talk about the high stakes meeting again next. and before we head to break, let's get a check on the markets. we're in the green, a little bit

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between washington and beijing. joining us now for more on what's at stake, former u.s. trade representative ambassador michael froman, he is the president of the council of foreign relations. good to have you this morning. what would the biden administration view as success coming out of the commerce secretary's visit? >> i don't think we should expect major agreements coming out of this business. it's much more about creating an opportunity for secretary raimondo to reassure the chinese that the new restrictions that have been put in place on export controls, also on foreign investment are narrowly tailored towards national security purposes and key technologies and to underscore that there's still a big part of the relationship, the economic relationship that can continue and that can continue to grow. >> you make the point that over the years as china's economy has opened up and developed that the assumption among the u.s. officials was that china would become more like the u.s. in many respects, and in fact, in

some ways the united states has become more like china in terms of trade policy and other areas. talk about that a bit. >> well, for years, for decades, we've been criticizing them for putting up tariffs to prevent our exports from entering their country, on restricting the exports of critical minerals and engaging in widespread industrial policy, and now we have engamged in many of the sae practices. we're screening their investment into the united states and investment now is being proposed to be screened out of the united states into china, and of course we have export controls on critical technologies. i think for years we were trying to warn the chinese that if they didn't adopt more progressive reform oriented economic policies, it would undermine the u.s./china economic relationship. people would lose faith in it and that you'd see a reaction here in the united states, and that's exactly what's happened. you've seen over the last

several years people becoming impatient with the nature of the relationship and insisting on these kinds of new policies to ensure that we are maintaining our national security and our competitiveness, even as we develop a broader, more benign economic relationship. >> and given that the u.s. has pursued some of those policies, it'd seek pm a little bit more clearly competitive and protectionist as you said. how do you -- does commerce secretary raimondo reassure china that, in fact, our objective is not to disadvantage china, to keep it down in the world stage? >> well i think, she has said that a growing china is in our interest. it's not in our interests for china to be on its back, but that does not mean that we need to enable it to compete with us on the most critical technologies or give it the tools to build its mill sitary

intelligence capabilities at our expense. i think it's that line that she is walking. i think the fact that the u.s. has to adopted some of these policies for years trying to get china to back away from them just demonstrates how serious we take the matter, and that if we can't get them to change their policies, we're not going to stand by on the sidelines. we're going take action ourselves. >> going back to that the point of the u.s. being more prot protectionist, more like china rather than china becoming more like the u.s., do you think u.s. policy is at the right level sprks and what sort of changes would you advise the biden administration if you were there right now in terms of their policy or the communication? >> the administration has talked about building a high fence around a small yard. meaning that most trade and investment can go on between the two countries, but there will be some critical technologies that will be prevented from being exported in critical sectors where investment will be

restricted. i think that as long as that yard remains small and focused on the critical national security technologies, i think we're on very firm ground. the risk always is that once you've created this process for screening outward investment, does it become a broadened tool just to prevent companies from investing in other sectors where there might be pressures back here at home, and i think that's what secretary raimondo needs to assure them. i think in all of these cases, it's just a matter of tradeoffs. over the last several years we've seen companies for very good reasons look at their supply chains, risk manage, decide to diversify, not rely just on china as a manufacturing foundation, move to other countries, move some back to the u.s. move some closer. that is all good policy, and i think the question is it may also be more expensive. it may contribute to inflation. we just have to be frank about what the tradeoffs are and ensure that our policymakers are making an informed and balanced

decision. >> ambassa ambassador, thank yo later, espn and disney's streaming pivot. cowl amazon be the answer bob iger is looking for. we're going to speak to bruin capital's george pine about the future of orspts streaming and more. "squawk box" is coming right back.

if the uaw goes on strike starting friday september 15th, assembly lines in mexico will keep running but innot for long >> i get this question tr a number of people who say if the big three are building vehicles in mexico and it's about 20% of their north american production, can't they get to continue running because they're not represented by the united autoworkers? that is true to an extent. we'll explain why it's not going to last for long. this represents between 4 to 13% of north american production to gm at 28% of its north america

production. it has quietly grown over the years. why won't these lines continue running, it's an extended four, five, six-week strike. that's because the uaw has the ability to limit, if not completely stop production in mexico because so many key components, transmissions, engines that go into building vehicles like the ram 1,500 or the chevy equinox, the ford bronco. those components come from the u.s., and if the uaw were to strike, you can bet that they would make sure that they would probably hit one of those production facilities so that the ability to manufacture vehicles in mexico and then bring them back here to the united states would be severely limited. as you take a look at where the uaw stands with the big three in terms of their hourly labor versus foreign automakers in the u.s. versus tesla, this is at the heart of the negotiations. remember, the uaw is pressing

for a 40% pay increase along with other guarantees such as plants not closing, cost of living inflation adjustments and a 32-hour workweek, a lot of things that they would like, not sure they're going to get -- how much they're going to get of any of those remains to be seen as you take a look at shares of the big three. they have about 56 days worth of inventory. that is according to cox automotive. that is below where they were in 2019. they do have enough inventory to continue selling at dealerships at least for a period of time if this becomes an extended strike, guys, it's a far different story. >> yeah, obviously, so there's a little bit of a cushion there perhaps for the companies, phil. what's the current thinking on prospects for a strike and also duration? is there any way to characterize that? >> well, first of all, almost everybody in the auto industry believes we will see a strike at one, if not all three of the automakers, and once a strike is called, the expectation is that it's going to be a lengthy one. this is not going to be like we've seen in the last couple of

negotiations, at least it's not expected that we will see what we saw in the last couple of negotiations where it was limited in terms of its impact. obviously gm had the 40-day strike in 2019. but with ford, they came to agreements fairly quickly after the negotiations ended, and then they extended the contracts. so that's the expectation at this point, mike, that we -- if we see a strike, it is likely to be one that goes on four, five, six, seven weeks. >> it's always so tricky if you're a company in this situation, phil, when you're telling wall street, look, we have the wherewithal to manage this transition to a new mode of production. >> yes. >> a whole new product area. we're fine, and yet when you're negotiating with your work force, you kind of have to say, look, the world has changed here a little bit, and the economics are not going to fly if you get these raises. >> and you can be right on both counts. i mean, you do -- they do have the wherewithal, mike, in order to withstand a strike. let's say it goes into, i don't

know, mid-november, end of november. is that going to kill the big three? it's not going to kill them. it will be costly. look, in 2019, it cost gm about $3.6 billion, and that's going to be a similar type of impact. it's about $780 million every week is what it would cost general motors, at least that's the estimate from bank of america. so it can be true that you can withstand it, and at the same time the world is changing. it takes fewer people to build an electric vehicle, and that's where the big three are going. so for the uaw, they're looking at this saying, wait a second, we've got to get some guarantees in here. well, okay, i understand that. i think everybody understands you want guarantees. the world is changing for the big three. they will have to adjust their manufacturing. phil, talk to you soon. >> summer of strikes. still to come -- >> just like the movie business. >> the future of sports streaming. we're going to talk about to bruin capitals george pine on why he thinks big tech company

could be espn's best bet for survival. plus, the biden administration set to announce the first ten drugs selected for medicare price negotiations. we're going to talk to former fda commissioner dr. scott gottlieb on what it would mean for consumers. stay tuned, and you're watching "squawk box," and this of course is cnbc. 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! anyone can become an agent of innovation with invesco qqq, a fund that gives you access to nasdaq-100 innovations. i go through a lot of pants. before investing carefully read and consider fund investment objectives, risks, charges, expenses

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welcome back, the $10,000 cap on state and local tax deductions known as the salt tax was supposed to raise around $100 billion in annual revenue. a new study from the tax policy center found that loopholes are now costing the federal government $20 billion a year, meaning the cap generates only 80 to 85% of its expected revenue. that's because 36 states now allow owners of pass-throughs and partnerships to avoid the cap on their state taxes. the pass-through or firm pays an elective tax, gets the full deduction, passing that deduction on to the owner. as a result the wealthiest business owners are now avoiding the cap while wage earners and property owners like you and me, joe, are footing the bill. joining us to discuss is erica york, senior economist at the

tax foundation, and jason furman, former chairman of the council of economic advisers under president obama. he is currently a professor of government at harvard's kennedy school. jason, let's start with you. do you think this is fair? i mean, the democratic governors that are passing a lot of this legislation that creates this loophole have always talked about tax fairness, getting the wealthy to pay more of their fair share. yet they've allowed a loophole that is really benefitting the top 1% of the 1%. >> yeah, look, the salt deduction is like the trickle down economics for the democrats. they argue that if they do this tax cut, they'll be able to sustain a better revenue base, be able to sustain better schools, and the evidence for that is really quite limited. i don't love that they're opening up these loopholes. i think when policymakers passed these to begin with i think they knew some of those loopholes

were there and weren't preemptive in getting rid of them. >> the treasury department under president trump and secretary mnuchin blessed this saying all the oh work-arounds are not okay, these work-arounds are okay. the biden administration said they were going to propose legislation or regulations clarifying it, and they haven't yesterday. what do you think is the best ultimate solution? this is going to expire, the salt cap, at the end of 2025 along with all the provision of the tax act pass insteed in 201. should it be extended? should it be killed? >> look, i would lovell to see the salt cap -- >> oh, are you asking me or -- >> jason, you first. >> i'd love to see the salt capex tc cap extended as it is. i think the bigger set of debates is that taxes as a whole

will be set to go up by nearly 1% of gdp. i think that's our best shot we have in the next couple of years, a very significant debt reduction, and so policymakers i think ideally will have to thread a needle where they let tax revenue go up but maybe they do it by some type of permanent tax reform, rather than the type of temporary catches that were passed in 2017. >> so erica, do you agree with that that we should let most of these other provisions expire thereby raising more revenue? do we have a revenue problem or do we have a spending problem? >> yeah, if you look at the cbos bu budget outlook it's obviously that spending is growing our deficit and debt. spending is going to be above trend, while revenues are roughly at trend. i do agree with jason we should extend this all cap. we should go further. the classic recipe for tax reform is to broaden batethe ba

and lower the rate. i think in 2025 lawmakers need to follow that recipe a bit more closely and go further. get rid of salt, explicitly disallow these work-arounds and use that revenue to pay for on a revenue neutral basis improvements in the tax system. we want a tax system that incentivizes work, incentivizes investment. that's going to help us grow. you can do it on a revenue neutral basis through these base broa broadeners. >> you think we should not only keep the cap but actually get rid of the 10,000 be and be zeroed out so none of your state and local tax deductions could be applied to your taxes including property taxes? >> i do. i think that is a good policy trade. politically that's a tough sell, but it goes in the direction of tax reform. you broaden the base and you use that to pay for rate reductions for everyone. at the end of the day, that

results in a more simple tax code, a more efficient tax code. it lets state and local tax policy be decided at the state and local level and lets federal tax policy be decided at the federal level. >> and jason, if we let all these provisions expire as scheduled at the end of '25, you're talking about basically the standard deduction being cut in half. you're talking about raising all of the marginal rates including on middle class income taxpayers, and you know, changing the estate tax where that exemption would be cut in half. do you think that's going to be palatable for either party to have a tax increase for everyone across the board? especially given that the economy in 2025, at least as w we're seeing it now, is likely not going to be very strong? >> look, i don't think the tax code should go back to where it was in 2016. what i think should go back to that is the revenue level that we have. >> how do you get there, though? so where does that come from?

>> look, ideally you'd sit down and say here's the revenue level we need to hit. what's the best way to hit that level? hitting that level with broader base, with lower rates, with a larger standard deduction would be exactly the way to do it. we may have divided government when all of this happens, and then it will be a little bit like a game of chicken, and the question will be will the democrats be willing to say, you kn know, our first best is to reform the tax code together. if you don't reform the tax code together we will ensure all of this expires, revenue goes back up and then we can come back a year or two later and have a debate. this is the law that the republicans passed. they picked this revenue level. i'm just saying meet the republican revenue level, but to it ideally in a better way. if you can't, just do it because we do have a real deficit problem and, no, tax cuts won't

help our debt to gdp ratio. >> that line that jason just used reform the tax code together. the democrats can't agree within themselves on the salt deduction. the republicans are split as well, especially now that you're turning out the revenue from it is not as large as expected. they have to find some other source of revenue. what do you think if the government is indeed divided in 2025, which likely it will be, how is this going to play out? this is sort of a ticking time bomb of a tax increase that's going to happen in 2025. >> if i put my optimist hat on, i'd agree with jason. can we get to a bipartisan compromise. that's what would be sustainable over time. if we can't, then we're going to see, you know, probably something from the bush tax cuts play book where we extend a few of the tax cuts. we can't extend all of them just because the math is harder because of rising debts and deficits. so i think at the end of the day, we see some form of extension, not wholesale,

tension and not wholesale expiration. something in the middle, but every provision is going to be fraught with negotiation. if we can get to a revenue neutral improvement in the tax code, that is what would help us improve the debt to gdp ratio because we would be raising revenues and we would see increased economic growth. >> all right, jason, erica, thank you so much. >> yeah. >> thank you. coming up, some of this morning's corporate headlines and then we'll talk to bruin capital's george pine about the future of espn and the possibility of a big tech streaming deal. "squawk box" will be right back. ♪

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3m is reportedly agreeing to pay more than $5 billion to settle the more than 300,000 lawsuits claiming it sold to the u.s. military defective ear plugs. according to multiple reports, the resolution would allow 3m to avoid a potentially much larger liability, one 3m hope would soften through a failed and controversial bankruptcy case. analysts estimate the case could have cost the company roughly $10 billion. and apple is working on the first major overhaul to the ipad

pro since way back in 2018. it's expected to be rolled out next year. and bloomberg reports the new models will be the first tablets with oled displays, the same type of screen used on the iphone, brighter and reproduce colors moreaccurately. the ipad pro will also have an updated magic keyboard which makes it look more like a laptop and it has a larger crack pad. meanwhile, the shares of apple are up 37% so far this year. in case you were wondering. a little deal news this morning, da na her is buying abcam, that's a value of $5.7 billion. not very far from the preannouncement price for abcam. rumors are heating up about a possible streaming deal for espn. we'll talk about the wide world of sports and possible dance

partners, that is next. at the top of the hour, jobs, inflation, key market takeaways from mohamed el-erian. check out the futures. before we go to break, about 30 points of that 82 point premarket gain in the dow premarket gain in the dow attributing to that $5 ♪ p p pream on that potential settlement news. "squawk box" will be weight back. thing about the sport. i didn't like it at first either. i remember it was the banquet night. coaches said “most improved player goes to najee harris.” i was just like and i looked up, like,“what?” that award changed the trajectory of how i looked at life. you know, football, people see it as a sport. but i see it as tools for life. ♪

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on this week's squawk planner, retailer best buy rrts tomorrow morning. we will also hear from box, pbh, hp and hp enterprise. on wednesday we get salesforce reporting after the closing bell. on thursday reports from ubs, campbell's soup, lululemon, broadcom and dell. on wednesday second quarter gdp, and the adp private payroll report. on thursday jobless claims as well as personal income and spending data for july, and then friday the beg august employment report. new comments from microsoft president and chairman brad smith on the decision to reopen its investigation into the acquisition of blizzard. smith says he is still holding out hope. >> i think hope is on the horizon. we have worked very hard most recently to address the concerns of the uk, the competition in

markets authority. that's what led us to make a big decision a week ago to spin out the cloud game streaming rights to ubi soft an important french games publisher. we've prevailed in court in the united states. we've ensured that we continue to comply, even while we spin out these rights with our commitments in the european union. as the cma and the uk has said, there's no green light, but they will review our proposal. and i'm hopeful that by the middle of october we may just see this come together. >> okay. and another big story that we've been following, let's look a lot closer at it, the rumor mill has been churning over the future of disney's espn. with profits down and growth opportunities fading, a tech partnership could be the only -- or the network's only hope of a vibrant survival. here to explain bruin capital

founder and ceo george pine. just hard to -- it's hard to watch, i guess, number one, just the crown jewel of just about every media asset, the bloom is off the rose. can you go over three or four things to explain what happened, george? >> yeah, sure, joe, good morning. look, espn, the subscriber has gone from 100 million to 74 million, and they're headed to 50 million in three or four years. and with the loss of the unit sales on top of that, you have enormous pricing power that has been eroded significantly, and you're heading into a business streaming that's a lower margin business, and your core business is b to b to c, and you're going into the b to c channel. for all of those reasons use point out, someone transformative has to happen, because espn while it's a great brand and a quality program we are a valuable set of rights is facing headwinds in terms of

cord cutting that are just too powerful. so you are going to have to pivot to somebody who can give you distribution and marketing i think will be the most impactful result for disney. >> just wondering if they knew what they know now or if management knew what it knows now, and you went back five

get a once in lifetime asset, you have great content, they have great rights, they're well run. they have relationships in the industry, i think they'd be very

valuable. >> it's weird, the content is just like everything. it's exploded. it's even better. >> 100%. >> towards betting and wagering realtime and it's just weird, so we're talking about pipes, we're talking about getting it right for how it's distributed. i think the same is true for all content, and streaming's supposed to be so great. it's just squeezing everyone. >> correct, and i think you're right, with the gambling it's sticky. you're 19 times nor likely to watch a program if you gamble. the one to one relationship, the value, lifetime value of a consumer in sports will over index. sports is made perfect for streamers skand you see it with drive to survive and other programs and non-live content have done quite well. imagine someone embracing live and non-live with a platform like espn. >> i understand why espn needs

amazon. what amazon meets espn. if they can just buy the rights to formula one or baseball or tennis or whatever else, why do they need to? >> that's a fair objection. what they need is a brand. there's only one espn, before they had very good rights. yes, you can make the case we can build it ourselves. we don't need to buy something else. they themselves, whether they like it or not, they're in a race. there are going to be fewer streamers and options in the future for the right price and the right value, you can get a point of difference with your competitor and accelerate your growth. in the nfl there are 200 million loyal fans, college football is 180 loyal fans. i want to own those consumers. espn is a way to do that with consumers. >> it's the best. i guess a couple years ago i don't think i had seen an mlb

game in a while except for reds. when is the last time they won a playoff game. now people in my house, they just say oh my god, baseball again. and if you watch it, they play the same music every time they go to the break and people in my house are ready to kill me because there's so much. i'll watch anything if i have $5 on a game, george. and it's a new world. >> in baseball with 162 games and all kinds of bets, it's interesting. >> the new rules are great. i notice it almost every day that the picture's not f'ing around with that rosalyn bag and looking around with the -- it was brutal. now they're so nervous, i think there's more hitting, more

offense. >> it's a constant ef volution get better. college football you're going to see a lot quicker. the game is going to be quicker and more exciting. same thing on baseball. >> it's like notre dame -- it's like bringing aaron rogers into notre dame. you see who is back, who showed up. hasn't been there in like 20 years. joe montana. showed up on the sidelines. didn't like brian kelly, i don't think. >> exciting times for notre dame and exciting times for college football. it go it's going to be a great season. >> i think it is. and they covered easily. i had on the inkling about 20 points. did you? >> notre dame is a very talented football game. no surprise they had a good victory. >> george, thank you. i get nasty mail that says

you're not espn so stop. i'm not sure what that means now that we're talking about it. if we're talking about a segment about espn, can i be espn just for a second? >> you have to wear a brightly colored suit, like purple and green. >> you know where i go there. >> not me. >> what are you talking about? jacketless george. thanks for playing along, george. some of us understand "squawk box" and play along but others. george, it's good to have you on. thank you. and you, thank you. >> so on closing bell you -- >> that's right, yes. >> and boston sicientific, shars of the device making moving higher after the heart disease treatment showed positive

results. the post field ablation system, which you may not be familiar with offers treatment for people w with atrial fibrillation. and targets for medicare price negotiations and the latest on updated covid vaccine boosters. "squawk box" will be right back.

good morning. we do begin the week this monday with futures in the green helped by fed chair powell, maybe, the s&p and the nasdaq man aged to start higher last week, mostly due to the big gains we saw on friday. meanwhile, 3m is reportedly near a multi-billion dollar settlement. and the government prepares to bargain over prescription drugs

for medicare patients. huge sums of money could be on the line. we'll talk about that. and those new covid variants with dr. scott gottlieb. the final hour of "squawk box" begins right now. i guess we're going to do a three box, though there's four of us now. it's two and two with the jackets. el-e el-eran el-erian is here.

that's mike santoli. i'm not a weatherman. that's robert frank and that is -- you need no introduce, mohamed el-erian. hanging out with us for the entire hour. it's going to seem like three or four -- no, i'm kidding. it's going to fly, it's going to fly. mohamed el-erian. because you're spseudo guest hosting, you can weigh in, ask questions. >> not even pseudo. >> not even pseudo. >> i'm kind of guest hosting. >> so i don't know what you're -- yeah, you're kind of a pseudo, quasi. >> joe, i'm here to make you look good. >> you have some heavy lifting there, mohamed. u.s. equity futures, think

they'll hold up? only friday did we sustain the gains and add to them. 4.25 on the 10-year, 4.23. you can see the 2-year a little bit more of an inversion than we saw recently. >> well, it had narrowed. >> now it's coming back. >> that's because, let's get to it with mohamed, talk about the markets, big week of economic data coming up and the feeling of -- a year after powell was briefed and relatively blunt and harsh and trying to persuade the markets, he seemed to not want to make news. inflation is down a lot but not enough. we may hike more but we're going to be data dependent. not talking about cuts just yet.

where does that leave us. >> so first what powell did and it actually came as good news to the markets is he didn't say anything new. he maintained maximum policy optionality. the market looked that there was some thought he might talk about longer term issues which are uncertain for markets. >> it's this theoretical rate of interest. >> correct. >> what's interesting, we have played it on the air, inflation the target is and will remain 2%. very controversial. and second, that we are operating under the stars but it's a cloudy sky. these two things are really meaningful because away from him and unfortunately there isn't enough coverage, there was a lot of discussion of how the global economy is changing, supply side issues are becoming more important.

so the good news for the market is they heard what they want to hear, which is nothing new but the bigger news is there are real puzzling outstanding issues out there. >> i guess we can describe those in several ways. we have a full employment economy in the u.s. where inflation has been coming down, not to target. but it's been coming down. it seems late in the cycle based on a lot of metrics and we're reaction se re-accelerating. i get it would make sense for a central banker to say i want to preserve as much flexibility as possible. >> and look at the market base. polls hike, polls cut. independent neff seen that sequence before. it shows you that we are uncertain. we think inflation will remain low, we think the fed will have a green light to cut but that sequence is a really

interesting -- >> the structural changes you think going on in the economy are what? there's talk it will be a higher for longer world in terms of right but what ultimately is the -- >> mike, it's all about the supply side. we've come from a world where it was all about the demand side. there was insufficient demand in the system so what do you do? qe, zero rates, fiscal expansion. we're now in a world where it's about the supply side and unfortunately not enough policy tools are being used. so look at everything we talk about. the rewiring of supply chains, the transition in the economy, the labor market, like i just mentioned, labor becoming more forceful. we have the possibility of more strikes. you saw what happened at american airlines, at ups. it is about the supply side and

we got to get our head there. >> he said the only way to get to 2% is to have below-trend economic growth or have a softer labor market, probably both, yet it feels like the stock market in the first half of this year believed that we were going to have this sort of immaculate disinflation and/or that the economy was going to strengthen. if fact, it does seem like we're not experiencing subpar economic growth right now. the atlanta fed talking about a 5% plus third quarter. do you think the market's not getting that message about below trend economic growth? >> i think the market has changed its mind so many times. if i remember correctly, we went from soft landing to hard landing to no landing to crash landing in march and soft landing in march and some people are talking again about no landing so we've been all over the place. the key issue is 2% the right

target? that's the key issue. >> he's got to say it is. >> he's got to say it is it and there was a lovely line that we're going to tiptoe to a higher inflation market. we were not going to announce it. woor just going to end up living with inflation above 2%, it's going to prove to be stable and -- >> do you think in an election year he can get away with cutting rates as long as it has a 2 handle? >> i think it going to be hard if he continues to say 2% is -- >> do you ultimately think they will wait till 2 or do you think it's going to be -- >> well, powell said we'll probably be cutting before we get to 2. just because of the math of what's restrictive, what's not. >> but what we're looking at is the possibility that headline

inflation will head back up and core inflation may not come back quickly enough and it all comes back to services and wages. that's where the battle is being fought right now. >> and housing is or is not a part of core? >> there's a real issue of whether we've broken into the housing market. >> prices are going up, rents are going up. when you go from record low mortgage rates to levels we haven't seen for almost 20 years you destroy both the demand and supply. that's the irony is that supply has come down and demand has come down as well. that is the way you destroy a housing market. we've got to be really careful because the housing market is central to the economy. >> and to most people as well. >> so we're not headed for permanently higher rates that we're not expecting. the rate of -- because we've gone up 400, 500 basis points,

that's enough. they still seem low to me. just in terms of the cost of money historically, i don't know why people are talking about cuts. i don't know why we would ever need to cut again. you can get to 6%, back to 7. is that not happening? is something structurally different now in the economy that makes it different from my entire history in financial markets, the 80s, the 90s, the 2000s? >> you and me feel we're going back to normal. however, there's a whole system that believes interest rates were zero, normal where the fed -- >> but we know that's ridiculous. >> you and i know that but it lasted for ten years. >> how about the fed balance sheet. isn't that way too big? >> it is it way too big. it should come down. the fed has distorted markets to a huge, tent, to artificially low interest rates and expanding

its balance sheet way too much. >> as a result we're headed to 180 debt to gdp in the next 20 years. >> it has enabled the type of leveraging and debt that shouldn't have been enabled. now we've got to somehow grow the economy fast enough to be able to live with that. if not, there's going to be a real question. you guys talked about china earlier today. that is what china is facing right now. it can no longer maintain high economic growth. what used to be pockets is now becoming endemic. >> they're at 13 gdp. how are other people supposed to feel about that? >> that's going to be the big question. and you see the household sector not responding to government policies. they've tried piecemeal stimulus and the household sector says i

don't believe it. we opened up 5% higher and ended up just 1% higher. >> when did you first guest host on "squawk box"? >> decades ago. >> how many times have you worp a jacket when you tested? >> i've normally worn half and half. >> you have a blue shirt on -- >> bliepding! >> blue if -- non-white is probably better because it gets too hot. well, you're hot. you are. i always say that when you come on. he is too hot. thank you! >> part two. >> my fellow jacket will help you out. coming up, why the death of the mall may have been greatly

exaggerated. and scott gottlieb joins us to talk about reining in the cost of prescription drugs. stay tuned. "squawk box" will be right back. so you can improve your business however you see fit. rosie used part of her refund to build an outdoor patio. clink! dr. marshall used part of his refund to give his practice a facelift. emily used part of her refund to buy... i run a wax museum. let innovation refunds help you get started on your erc tax refund. stop waiting. go to innovationrefunds.com you really got the brows.

welcome back to "squawk box." u.s. commerce secretary gina raimondo is in china lookening strengthen business ties. this morning she met with the chinese congress minister and called a stable economic relationship between the u.s. and china profoundly important. shares of that country's ever. >> the evergrande group. the company defaulted in 2021 and last month filed for bankruptcy protection in the u.s. >> and gran turismo edged out "barbie" at the box office this weekend. it took in 17.3 million and "barbie" earned 17.1 million.

it has earned close to $600 million domestically in total. >> this week the biden administration is expected to release a list of ten drugs for which medicare will negotiate prices. the effort stems from the inflation reduction act. it's the first time the government will be able to bargain for medicare drugs. those the efforts are facing legal challenges from the pharmaceutical industry. and joining me is dr. scott gottlieb, serves on the board of illumina and is a cnbc contributor. if you were on a high school debate team, could you argue both sides of this, from the government or could you do it also from the pharmaceutical side? i can do either side i think. is this going to be a good thing for society as a whole? >> well, look, i certainly can't argue for the instrucstructure

savings in the medicare program. it's going to cap out of pocket by consumers, 2,000 from $3,100 and gets rid of the co-pay on the catastrophic part d program. so consumers will see savings, especially those that use high-cost drugs. really what congress wanted to do was create an earlier loss of exclusiv exclusivity on these drugs. they came up with a convoluted price negotiation scheme. the price negotiation or the price regulation kicks in after nine years on the market for a molecule drug but 13 years for a large molecule drugs. so you're seeing the speculation move over to large molecule

drugs and that's ultimately going to drive up costs. and there's also certain diseases you just can't reach with a large molecule. if you want to hit something intra cellular, you need a small vehicle. that's going to have a deleterious public health outcome. >> i'm put ug ting you on the oe side in my debate. i'm shocked. there's going to be unintended consequences to the government being able to do this. >> they should have just been honest about what they were trying to do, which was to create a loss of exclusivity on this drug. the scheme is very convoluted. there will be other unintended consequences here as this thing rolls out. that's the shame of it. you're going to see certain

investment not get made because of these really odd incongruities they made between large and small molecules in particular. it also reduces generic incentives. if you price regulated drug and take out the margin on the drug, generic manufacturers will have less incentive to bust patents to get the 180 days of exclusiveness they're entitled to. they're going to be hurting as well. they're going to lose some of the margin they used to recognize on higher cost drugs when they would bust pharmaceutical patents. >> part of the ira, this is why we're going to hold inflation down but it gets complicated, scott. and we're seeing done right prescription drugs are the best bargain in town compared to hospital stays or chronic illnesses or even, you know,

infusion, outpatient. it's the cheapest way to do it. if you stifle innovation and it costs a lot of money and we say that again and and again, and i'm on a so box and we can -- we're messing with the goose that lays golden eggs in many cases. >> this is going to -- go ahead. please. >> this is going to take out $286 million over ten years out of. sector. i think the biggest impact is probably going to be how the investment gets allocated, how companies try to work around some of the provisions in this law. for example, they could look to launch first in europe and build bigger data packages there. when they come back to the u.s., given they only have niechb years of exclusivity, they can get a faster ramp in the u.s. markets.

you're also likely -- if you have a drug, for example, that can traech diabetes and weight loss, you might launch first or only in weight loss so you stay out of the medicare market. so i there is going to be less money overall but i think you'll see a lot of compensatory behavior. so the savings won'ting fully realized and a lot of the assets will shift. and capital. certainly venture capitalists have an easier time because they can is it inherent that we simply cannot make consistent, which is innovation versus lower cost or can you think of a better way to meet both

objectives? >> hey, look, i think there are ways to bring more competition into these markets still. there's still pockets of the market where there's competition. medicare b is a price taker. we also don't see as much from biosimulators as we should be seeing. i think there are ways to fda to implement regulatory and to be fully interso when you get a small molecule drug this generic, you're probably getting a branded formulation. that doesn't exist with biodrim and there are places where there's a a lot of spending in the medicare program where we don't have as much competition from low-cost alternatives.

>> and what stops that from happening? you increase competition and control costs. what's stopping that from happening? >> some regulatory -- i think originally companies were against it, especially moving medicare b under administrative pricing. now they went these things are more possible now because the alternative which is the price control, just direct impact but creating very per again, but did if very indirectly and incentivized -- so you're paying institutions or doctors for

making the high-priced drugs. it will allow higher priced drugs and that's having a lot of bad incentives in the medicare program. >> open up the can of worms. we need about an hour to talk about it. would people rush to get those at this point? >> i'm sort of actionined out. am i go going to get another booster, scott? bly bost and i think some people are at higher risks than other individuals. >> maybe that's house of representatives we should have done it the first time in behindsight, right? >>. >> and we talked about it but we were both against the mandate.

>> or the military one door to drew. good have have you back speaking about something other than that. >> coming up, why some of merrick's malls are thriving and what a successful mall looks likeod tay. that story is next. "squawk box" will be right back.

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can do for your business.

your local mall may have suffered through the pandemic but these days many malls are thriving. really? >> there are some. >> the short hills mall. >> it all depends on the grade. >> it does. who are you? you're courtney -- no, i didn't introduce you. i started talking to you without introducing you. good morning. welcome. >> good to see everybody. >> thank you for being here. >> you're welcome. >> can you stay? >> you're so lucky i'm here. >> i know. tell me about it. . >> not all mall rats have gone underground. teens still like to shop in stores. it does vary based on geography. traffic increasingly grew at updated indoor malls, open air outlet centers in may, june and

july including to placer.a.i. sales for square footer up 5% according to green street and conversion is up meaning more shoppers are coming with the intention to buy. and while its main abercrombie brand is up, it is still teens' favorite. >> they still want to go to the mall and socialize with their friends. even if they start their purchase online, they will still come to the store. >> green street advisers revised 250 mall grades and it's giving more upgrades this year than downgrades. that's a rarity. malls rated b-plus to b got the most upgrades. they've proven more resilient

following the pandemic. and may search revisions were neutral. green street points out bankruptcies in mall stars are actually lower, think about bed, bath & beyond and that was more of of the strip centers. >> when you talk about anchor back filling? is it no longer the same old department stores? >> it's not longer the same store necessarily. dick's sporting goods are filling up this anchor space. it might be more than one retailor. jim's, that's a big one but they are filling them and that's very heldful because there's often co

ten antsy and if he have more get out of jail free cards. >> courtney, that's it. got to go. needed other places. >> you're needed here. >> thanks. i'll come back. >> thanks. >> coming up, we'll talk housing and the impact of sky high hort rates. plus, takeaways from that sector and jay powell's coming up on "squawk box" after the break.

welcome back to "squawk box" on cnbc. the equities futures, the dow industrials up by 155. a decent chunk of that is 3m, up $6. nasdaq coming off its first positive week in four. the dow had its best day on friday since august 7th, but the index still closed negative for the week. treasuries, take a look.

longer term yields easing back just slightly. you see the 10-year, 4.21. >> a lot of angst. we're 20 days at this point. reports say 3 dlfrt will players join us. >> hey, good morning. gm is working towards settling the largest torte who failed 3m's ear plugs were defective and designed to protect soldiers' hearing in combat. it is at the low end of the 5 to

$20 balanced wall street estimate. we are watching shares of 3m set to open hyper today, news of a potential does follow a series of leadership last week which believes it mutts the president to potentially succeed to -- due in part to the large legal overhangs. there's a tentative $10.3 billion settlement that has been reached with water providers but that has yet to be approved and it does not cover personal injury claims. that's why many wall street analysts say there's still a long road ahead for this company. guys? >> okay, thanks. stocks taking this news positively it had. >> all right.

after hootshooting up and then coming down, nvidia says it started pretty close to where it was last week and joining us to talk that stock and other mega caps, gene munster. i guess the inact of a big stock to go up on fundamental news from nvidia maybe was a sign of either the market had run up ahead of it or that the bar is higher if. >> i think it leaves us in a point where we're going to be to a flattish, potentially down zone for two and the video rultsd are impressive. i've never seen two quarters in a row like that. the whisper numbers were high

and they crushed the whisper numbers, including the guidance and that obviously begs the question, what's it going to take for the rest of tech to move higher on the september print. i think that will it and i'm just going to mention, we certainly are microsoft, down 10, 11, 12% from its highs and apple has had a gut check as well. it's not as if we came into the nvidia print with expectations brimming to the top. i guess the other question when it comes to nvidia, though, is there a kurnd building that that he front loading so much demand and cannot be sustained for the coming years. >> it's true, it's a fact. they've been trading lower more

recently but the up side surprise and the upward revisions to guidance still pale has done about investor expectations. secondly, it's clear that there has been some stockpiling of inand i think that others, there is this sense of missing out from big tech as they've been trying to build these hypeio scaler centers and i think the technical and still par exceeding expeck. it said debate will be strong into 2024.

that o could be q1 or q4. nvidia is unchallenged in their position ps and i think the combination of those two will put video in the fwra. gene, let's spend a minute on the technical calls. the move up to this handful of stocks attracted a lot of technical invest or or you don't go anywhere over the next couple of months, what happens with technicals? do they rotate it to other stocks, which is what everybody is hoping for or do they just go back to the sideline? >> i think that i'm not the person to talk about it it and i mentioned is that this is in and

going into the september print. if you look at the fundamentals ofs big, which is really the pressure tount of how these companies change, the revenue groh hud and meta is going from 11% -- excuse me, 11 in june to 21 in september 2rks 1 in december. you look at apple minus 1 in september to plus 6 in december. you go across the board you see that trend. so ultimately i think that the fundamental u.s. and it's important to focus on here. yes, we're going to be in a period of some anxiety for investors going into september. if i'm right and revenue growth accelerates against all big technical, i think the stocks are going higher.

>> woof we go, is there one you feel is particularly underappreciated at this point? >> i think it's probably apple. as i mentioned, those growth rates are small. apple hasn't grown since september of 2022. there will be four quarters in a row of decline. you have the benefit of what's going on with the iphone event, which will probably get announced this week and then i still think that spatial computing is underappreciated and as we anticipate that problem coming out next year, it should indicate. >> gene, thanks a lot-good to talk to you. >> coming up, a look at the housing market with mortgage rate at multi decade today they'd have to be like a three-hour i think -- it's the

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. welcome back to "squawk box." futures indicated at some of the best levels we see, up 151

points. 3m still on the dow? maybe that was not creating earlier because it's open and up 6 bucks now. >> so suddenly we have moved to some of the best levels -- >> yes. nasdaq is up 80s. >> i kind have a problem with 3m. >> it's not a it's not a must. >>. >> i know. >> mining and manufacturing. >> i still get a rel laugs with. >> and in his jackson hole speech, fed chair powell said the housing sector is showing signs of pim being be and

joining us is the macro economic founder and chief economist. ian, i have to disagree with you a little bit here. it interesting when you look at housing, i wonder whether housing and shelter costs could be achilles heel of britogetherd so many people are locked into low rates. two-thirds of mortgages are below 4%. no one in their right mind wants to sell their house and trade at 3% with a 7% mortgage. that has brought houses up from last year. why do you think. we. >> well, we got a lot of data on rents from people like zillow, which leads to cpi messages

which anything over the, the rent increases are only going to go down. now after that, who knows, it could go back up again but i would be surprised because as inflation overall comes down and treasury yields come down over the course of the next year, mortgage rates are going to come down as well. you mitt the hale and so they refied during the pandemic. so that but those rates are going to come buon. over the next year they come down a lot. that reduces that gas and allows people to start moving again and that means we get more supply as well more demanding the number of transactions has absolutely lumeted in the existing home market. prices haven't fallen.

the reason they haven't fallen is because nobody wants to sell. none. >> and that's what i really wonder whether the fed really understood what it was doing and, you know, normally housing as a transmission mechanism for mortgage rates go up, prices come down. that didn't happen right now because as you say so many people are locked into low rates. there wno supply. in joe's neighborhood in new jersey, a house goes on the market, it sells for 10% above asking price. people are pouring into the rental market. manhattan rents hit an all-time high in july, probably again in august. do you think the felt or anyone really foresaw this, and what makes you think that mortgage rates are going to start coming down because we're not looking until next june for any kind of interest rate cut? >> yeah, well, you're right.

nobody saw this coming. this has been a housing market which we have never seen before. like i said, when volumes drop by 30%, 40%, immediate reaction is to say okay, prices are going to fall. but they didn't. nobody saw that coming. nobody saw the extreme weirdness in the rental market we had over the last couple years triggered initially by the pandemic, but the echoes of that are still rumbling through the market. i'm pretty convinced inflation more generally is going to come down faster than the fed thinks and the market thinks. what that does is bring down ten t ten-year and longer treasury yields. even if the fed holds, we'll see if that lasts. even if they do, the longer add which matters to the housing market, is going to come down. the curve will invert substantially further, and the mortgage rate reduction is going to trigger freeing up the supply and bringing supply and demand back into some sort of balance.

you have to remember the home prices are still ridiculously elevated. prices in relation to incomes are the peaks. so there has to be some mechanism to correct them. i think it's going to be when rates come down rather than when rates went up. >> we have been hearing this since last spring. coming up, we'll get you ready for the final monday opening bell in august. futures right now still up across the board. stay tuned. you're watching "squawk box" on cnbc. ♪ the biggest ideas inspire new ones. 30 years ago, state street created an etf that inspired the world to invest differently. it still does. what can you do with spy? ♪

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a little more than half an hour until the opening bell. .com chu joins us. >> let's get a look at the merger new of the morning. horizon therapeutics, a 40,000 shares of trading so far. also amgen. the federal trade commission is suspending its challenge of amgen's purchase of horizon for around $30 billion until september 18th at least. the move is allowing the

regulator to look into a campaign to block the merger or settle the case. the fdc had opposed the deal due to concerns competition wise from amgen that it could use its market position to kind of leverage insurance companies and pharmacy benefits manages into better terms for horizon's key drugs if it were to buy it. we're also watching shares of boston scientifics. the medical device maker is catching a bit of help after it received positive trial results. boston scientific shares up 5% there. and we'll end with an analyst call on amazon, higher by .5% or so. the e-commerce and cloud computing giant getting rated as a buy, citing amazon's position to benefit from back-to-school shopping trends. i'll send things back over to you. >> let's head back to the

markets and mohamed el erian is hanging out with us. we covered most of the mike row stuff. i want to ask you macro stuff. you watch curb your enthusiasm? ever seen it? >> i have not. >> okay, there was an episode where he orders a cobb salad and the guy says higrandfather invented the cobb salad. did you invent the new normal? were you the first to coin the new normal after the financial crisis? >> i came up with the term. >> did you come up with -- i think you did, didn't you? >> i did, and i wrote about it in detail. >> that new normal is the old normal now. >> correct. the old normal. and we're going back to the old, old normal. >> or is there a new, new normal? i'm thinking of hybrid work, post pandemic, i'm thinking about all the things we're dealing with now that seem different than anything you ever thought of in your wildest -- dreamt of in your philosophy. isn't it? it's an old -- we have gone back

to old, it's not new, and factor in a.i. what's the world going to look like? >> what the world is going to look like is two elements. one, the relative, u.s. exceptionalism. the u.s. economy is going to continue to outperform the rest of the world. it's the only economy growing well. that's critical for market because we have navigating interest rate risk. now we have to navigate credit risk. the second one is the importance of the supply side. everything you just talked about is supply side. we are seeing major changes on the supply side. a.i., biotech, we are, i think, on the verge of an important productivity surge if we can handle this well. and that's going to be critical for the ability to grow, for the ability to deal with all of the legacy of overindebtedness we have right now. >> so like previous displacements of we think that agriculture, 1% of what it used to be in terms of employment. things change. we're going to be able to handle

this? we're not all going to be sipting around collecting universal basic income when a.i. becomes pervasive? >> i don't think so. i think that's going to open up a whole host of new activities. that's the history of innovation. >> right. this time might be different. >> but what we have found out is every innovation, yes, it disrupts, but it opens up new opportunities. i think we're, and compared to other countries, we're the only ones thinking about this. whether you like it or not, the government is trying to smooth the way to this new economy. and that's really important. i spend a lot of time, as you know, in the uk and europe. they look at the u.s. and envy the u.s. for the ability to do things that they cannot do because of their circumstances. >> paper is gone. there's an article about the whole world saying what happens if trump were to become president again. it's on the cover of the journal. i'm wondering, that's a different subject that we don't have time for.

thanks for being here. they're envious of us right now. >> good. >> we have to maintain that. >> because it's the best place for everything. except maybe rich, creamy sauces. that might be france. >> thank you for having me. >> make sure -- thank you guys. >> thank you. >> let's do it again some time. not tomorrow. make sure you join us, "squawk on the street" is next. good monday morning. welcome to "squawk on the street." i'll carl quintanilla with david faber. cramer has the morning off. futures steady as the bulls put together a winning week on the s&p. eco data is going to dominate this week. jobs number on friday. two-year does hit 5.1, almost a two-month high. our road map begins with the congress secretary telling thegyne ease it is profoundly importan