Transcripts For CNBC Squawk 20240704

Fivemonth wing strning streak o far. Its the busiest week of earnings season with more than 160 s p 500 constituents reporting. Merck, pfizer, uber, jetblue, marriott, caterpillar. Weve got a lot of different earnings reports to get to this morning. I mentioned caterpillar. It did top estimates also lower sales and potentially tighter margins in the Third Quarter. The companys ceo will join us later. That is just the bearish they had a great number. Well talk about the fact that they dont even have enough product. The bears like to get to it very early. This is routine. They did it before they took the stock down from 230 all the way down to 206. Jim, what we spoke listen, the bears didnt know what they were doing then the stock went straight up to 265 im absolutely happy to deal right at the front. 2 top line revenue growth, 22 . Thats called good. I didnt mean to get right into im not disputing its good it is good the only question is whether or not the stock has already accounted for that as we all know. You want that . Who doesnt see further weakness in china . Im not sure its an oftasked question young china i read last night i think we started off on the wrong food, david good morning, how are you . Im fine, thank you how is tupperware doing tupperware is doing great how are your sales going my sales are good because ive got a huge garage i think you started up with something really interesting you said it could be up, it could be down. I do not know at the quote, 23 anyway, here is what i think, david. I think good riddance to the month of july. I think in the second half we had a recapturing of what happened in 2022 just the memes took over i dont care for them memes took over they started buying the first ive heard about it. People are buying like crazy. Amc and gme were not necessarily paragons of the Balance Sheet of stability. In the last three weeks that were heavily shorted. And that was one month from the of 2022 is when this happened i think its our job, and we do have a job, to try to get people to focus again on Real Companies and not on the companies is the fact that some of the companies are once again being buffeted by short selling Short Covering that group of investors. Enthusiasm around these names. Is that a bad sign yeah. Oh, no, no, no with ben, my research director, we did a huge amount of work on the fact that when you get this particular action, tupperware, of course, cant file its a tiny Company Tupperware cant file, and people i know at the company who have worked at the company believe it cant file. Therefore, because it has insufficient liquidity to make july Interest Payments, its not going to make it the top 15 stocks that finished in the month of july were almost all meme stocks or stocks that were heavily shorted and that has led historically to a decline in the market. Im trying to warn people that our job as people who file stocks is to say look out. Okay. Thats what im saying. Look out. Thats based on one small supp set of the market were moving through earnings i mentioned at the introduction of the show 160 companies in the s p reporting in the thekt 24 hours, lets call it. It doesnt feel like earnings season has been bad, but it doesnt feel particularly good in tense of the p multiple for the market continues to move higher because the earnings have not appreciably moved beyond what many had anticipated. Weirdly its day by day for instance, norwegian cruise comes out today. The travel and Leisure Business has been the bright it light norwegian reports a good quarter and they say business in the future is not that good. Jetblue reports a good quarter, business in the future is not that good. Marriott reports business in the future better than expected. You have what i regard at this moment as mixed. Mixed is not great mixed is not great we started offer high. We started with wells being good, jpmorgan being good, bank of america good. Top 10 . Top 10 for russell 1000. Many are up because expectations have been far worse because of what happened in march which was isolated. We hope it was. You take a look at a company like eaton, up 30 . Theyve pivoted to become a company thats very much charging, ev, grid, stock reports an unbelievable number it goes up again and it goes up again. Versus pfizer. What im doing is saying case by case pfizer reports a quarter if they dont get the deal which the ftc is reporting, its weird growth then merck comes back. Bob davis on this morning, and hes developing, developing, developing its company by company the reason you and i Work Together so well, the fact i had that shirt on yesterday. You and i understand im giving you information its not a great earnings season. Lets spend a little time on a couple of these names. You mentioned pfizer they dont have much commentary on that. Its an important transaction, one we follow closely. Theyve gotten a second request from the ftc my understanding is its quite a voluminous request in fact, it was enormous the press release simply says we continue to work closely with regulators concerning the ftc and ec, working diligently to fulfill request for further information. There is that question which is very aggressive, particularly on these kinds of transactions as to whether they will still after that second request is fulfilled, choose to try to block the deal we will see. Pfizer used cash to buy a lot of things including c gen most prominently. You go back 20 years its depressing look at that. Up 16 its depressing 16 they bought this nurtec, the American Migraine foundation, the most important drug of our lifetime for a billion people that have migraines look at that thing. Thats not where you want to be. You want to be in the smaller biotechs that get sold for the lower premiums there aint much going on when it comes to actual shareholder value being created. Why is merck creating great value . Pfizer is returning capital in the form of dividends. Obviously theyll reinvest in capital in the business, buy other companies. But no Share Repurchases have been completed to date for pfizer in 23. The world moved on to obesity and diabetes those are epidemics. The companies that moved on to that are crushing it. They are crushing it. You pick your diseases. If you stuck with just cancer which is a terrible disease, you did not have the growth although back to merck which you mentioned a number of times. Up 19 thats a big number. Its a better drug. Its an amazing drug. Its an amazing drug. Saving lives every day. Bob davis say again bob davis does not come on and say this is the greatest drug ever because anyone who has lost someone to cancer doesnt want to hear this drug is the greatest ever because it may not save them. No doubt. Remarkable quarter. Im looking at what he had to say. Were not going to use it because he didnt really say anything he was great, but its nothing lets go to uber. You want to go to uber . Its not excitement that matters. Who saved more lives this quarter, uber or merck no doubt we know the answer there you go. I want to stop on Something Else you talked about, ma der know, november nordisk drug, many say theyre a gamechanger for the Health Care System the biggest drug of all time. Lillys stock top j j at market value i want to come back with i think the one thats going to be breakout sleep apnea, the one no one wants to talk about, one for heavy drinkers. Apparently it also stems your desire for alcohol the way they work, food sits longer in your stomach. Not necessarily a good thing a third of your weight loss is muscle mass which can be problematic. The question becomes once you do go off do you gain back the weight thats a real problem potentially. Joey brown at the end of some like it hot. Nobody is perfect theres a trial going on right now on the impact on overall health, whether theyre going to be measures cholesterol and Blood Pressure to see whether, in fact, they do have a positive impact, broadly speaking, beyond just reducing weight losing 25 of your weight in a 12month period isnt always a great thing either healthwise. Remember obesity is epidemic. Therefore, we know unfortunately from covid that diet and exercise fail the American People these are two things that were just not very good at. I want to spend a moment on it because we talk about them occasionally, we havent been following pharma. Littlly built capacity david ricks, a fantastic ceo in the Pharma Business is building out tremendous amount of capacity for moderna lets keep that in mind. Bristol didnt help them as much as we thought a limited number of Drug Companies that are really doing well here. You have a number of none is good if were not going to have a reception. Do you know what you want caterpillar. Well talk to the ceo later in the program we didnt get to uber. Shares are up this morning i want to talk about that perhaps in the next block of time. Up two bucks initially. Dont forget lyft was one of the better performing stocks. Lyft is like a little nothing, a few billion dollar market cap. Why do you dismiss me as if i didnt even bother to do the work. Im questioning why you would do the work on things that dont matter why bother the tenth greatest gainer in the russell 1000 in march was lyft thats why i wasted my time, why i didnt watch the game. I take it all back. Dr. Arnold t. Petsworth, hes the owner of petsworth vetworld. Business was steady, but then an influx of new fourlegged friends changed everything. Dr. Petsworth welcomed these new patients. The only problem . More appointments meant he needed more space. Thats when dr. Petsworth turned to his American Express business card, which offers flexible spending limits that adapt with his business. He used his card to furnish a new exam room, and everyone was happy. Built for dr. Petsworth business. Built for your business. Amex business. Here is a look at the s p gainers premarket. The bottom of the list eaton just passed it ten minutes before trading at the new york Stock Exchange. Black decker. One of the things this quarter is destocking. Thats something by the way that nwl did. Youll see that 500 million pre stock flow bonus the numbers looks like they didnt do so well. If you look beneath the numbers, theyre able to keep the price point because its not a great brand. Theyre moving a lot of production from expensive places in the u. S. To mexico. There seems to be in the last six or seven weeks a dramatic increase in the amount of refurbishment and renovation done in peoples homes there is a bit of a sea change going on in the country where we realized you cant sell your home, dont want to lose your mortgage, youre fixing it up. The biggest beneficiary of this will be that was one of the most cogent explanations ive heard you give in a long time. I dont even have any questions. A lot of Companies Feel like this is one of the reasons china is having a hard time a lot of countries made decisions during the previous administration, perhaps moving from china to Mexico Health care is free. The pollution rules are not as stringent, but most importantly, david, ksu and Union Pacific much faster to lowes has a much bigger percentage of Stanley Black decker and home depot z does wahl. Theyre loaded for bear and ready for the refurbishment wave opening bell a few minutes away you can catch us any time anywhere listen to the squawk on the street opening bell podcast a lot remo earnings and stocks to discuss right after this. sfx people cheering sfx Stock Exchange bell ringing sfx people celebrating sfx people celebrating sfx Stock Exchange bell ringing good luck. Td ameritrade, this is anna. Hi anna, this position is all over the place, help hey professor, subscriptions are down but thats only an estimated 15 of their valuation. Do you think the market is overreacting . Howd you know that . The Company Profile tool, in thinkorswim®. Yes, i love you please ignore that. Td ameritrade. Awardwinning Customer Service that has your back. We dend tounder promise and overdeliver. The team executed really well, and we plan to be popular for every quarter going forward. Uber ceo earlier on squawk box. The company did surprise investors. First ever quarterly operating profit gross bookings up 18 a year ago. Revenue was shy of analyst consensus. Its not doing much for the stock. Its up exactly 100 right now its almost exactly a 100 billion market cap company. Thats pretty great this is one of those that excited people, went down. There were a lot of issues they were one of the first to pivot, decide to go for profitability. Many of that class has gone for, they recognize the market switch wanting profitable growth from losses dara has done a remarkable job and done a great job like doordash, like is shopify, a airbnb that we recognize as Free Cash Flow is a very important metric 1. 1 billion that cash flow from operating activities, less Capital Expenditures thats 1. 1 billion. 5. 5 billion in unrestricted cash and Cash Equivalents at the end of the quarter its a different story now, jim, for uber freight has not been doing as well. No. They decided they didnt like that i do think we have to sit back and say day one lyft will be in there. They won a category that was up for grabs. Its the gamechanger that succeeded, like airbnb is a gamechanger and succeeded shopify is doing incredible work on the incredible roku quarter last week. Shopify succeeded. These are as a result of great engineering and management i think its worth it saluting them i know it sounds thats very id say lets just say idealistic, that there should be companies that we should look at wow, david, come on. They deliver. Deliveries, by the way, gross bookings up 15 points. They bought post mates doordash could be involved david, ive got to tell you, when this first started, there was a dream that was unrealized z. Of course, the management is quite lean its come around people who own the stocks are going to the dream that travis had was really all about autonomy one day which, of course, we still talk about i remember him saying by this time manhattan was just going to be filled with Autonomous Vehicles in perfect unison nobody would ever need a garage again. Nobody would ever get hit by a car. There wouldnt be hospital visits would go down he had this yutopia. Tesla has good numbers yeah. I guess thats still the dream for uber one day. I think jensen huang, once again, braus of what hes building, musk has gotten very id say once again jensen huang saying you need a huge amount of power to be able to figure out autonomous i think theyll combine resources again. Some people, by the way, david, are not as happy as when i come out and say great things about musk they talk about individual issues become a divisive figure. No doubt about that. Doesnt take away from being the most consequential businessman on the planet. Hes made a choice to be divisive so did henry ford really interesting analysis, by the way, adam jonas talking about losing 50,000 per unit. [ bell ringing ]. American homes for rent celebrating an anniversary. [ cheers and applause ]. Release the homes a nonprofit pouring young people in new york city to take control of their future. Where do you want to start now that we have started trading, jim . David, i want to come back to these Transformational Companies that are doing things that we just dont herald. Again, ill start wed den its an 84 billion company that decided, you know what we need to have the infrastructure for charging. So were going to help redo the grid that is a powerful theme its a theme stock the companies in aerospace, theyre theme stocks the reason i bring this up, it turned out they had nothing do with the topdown analysis and what would happen with the fed in the 20year versus the 2year we got caught up in the mumbo jumbo, you have to respect the yield curves and checking your commons sense at the door. Had you spoken to craig arnold, a remarkable ceo at eaton, are you really thinking im being constrained by the 20year parker hannifin, i have a business to run, get out of my way. Dave calhoun at boeing, i have a business to run. What we have misjudged is the ability of American Business people to outrun jay powell, the yield curve, all those people. If we focus on the yield curve, we miss eaton, get caught up in 5 and were happy i dont want no stirninging 5 here youve got a lot more than that, even over the last three years. 129 can you get more specific at all in terms of what are they providing into this charging infrastructure that is being put in place they also make the grid so its much harder, they do all this stuff involving trucks, truck drive train. Theyre not a beneficiary directly from the inflation reduction act. Theyll be a beneficiary of all the building that takes place. Thats where im going. One of the that the great larry fink from blackrock talked about is the next wave of business will be all the people that we need in order to be able to develop the inflation reduction ability, all the things we need to do to do the climate control, the batteries. We saw yesterday on semiconductor, remarkable number because theyre involved with battery. Do the 5,000 people lid off at cvs, what do we do do they just become they go on the dole, so to speak. Dole seems to be an opportunity for people looking for employment jim, i want to stop you there. You mentioned ford very briefly. We have news regarding that company and the f150 lightning. Lets get over to phil lebeau. David, they have reopened the line they are restarting production of the f150 lightning at the rouge production plant in dea dearborn, michigan its been shut down the last six weeks for retooling. This is what well see in terms of production that ford expects of the f150 lightning you have a triple of the previous rate. Now they have retooled the plant and reopened the plant they expect to build 70,000 light things this year altogether the annual production rate is going to ramp up between now and the end of the year. It will be up to 150,000 at least thats the target from ford from terms of the order bank, what do they have right now for people who ordered lightning and are building it . The company isnt giving a total. But they have orders to cover 45 days of lightning production they have noticed an increase in the number of orders that have been placed since they announced the price cuts two weeks ago they say there is a sixfold increase in the number of orders that have been placed since then over the last two weeks. Lightning prices, remember, they cut them by approximately 10,000 up to 10,000 dollars depending on the trim level youre looking at. Certainly good news if youre a ford investor, the city, that the rouge plant has reopened. Im so glad when i was there, they were talking about doing exactly this i was afraid what they might do. Obviously it seems like the world changed in a short period of time in terms of what they can make adam jonas, whose work we all know is hot button, talking about ford could be losing an amount of money per electric vehicle that is just unsustainable. I have to believe that jim farley is going to react to that and maybe figure out a way so that those types of losses dont occur. Well, the price cuts will certainly help the volume will help theres no doubt about that. They are looking to lose 4. 5 billion on electric vehicles this year. Three months ago, the expectation was they were going to lose 3 billion you do the math, jim this has been a rough threemonth stretch for ford as they look at higher costs being sunk into their electric vehicles will the volume increase that theyre expecting from these price cuts be enough to make a dramatic cut in terms of how much they are losing per lightning . Not immediately, but theyre counting on the second and Third Generation lightning to really get the production volumes to the level they need in order to become profitable on that line. Phil, isnt it time for a time of rivals, theyre krushing it its very clear if you have a car that has a combined engine where it goes youre not hybrid. What im worried about is this if i work at those two divisions, i sit there and look at all my profit being lost by ev at what point do they say to jim, you know what were tired of being redheaded stepchildren were making all the money, theyre losing all the money do something basically what youre advocating there with that scenario is siphon it off. Do some type of a spinoff with the electric vehicle business. Thats not going to happen thats not in the card for bill ford he believes they can make this transition i understand what youre saying, jim. Its going to be far costlier than they expected three months ago. They do believe they can make this transition with the internal Combustion Engine vehicles, with the commercial vehicles, funding, the losses in the ev business until they get up to scale. But why cant those two divisions say, listen, were okay were all one ford, but you have to be held accountable, too. Were not the only ones that have to fire people all the time ev, youre fat and youre driving our business and youre crushing us. Cant those two companies, their leaders say, listen, were happy to have you, but youre just the rival, not the fairhaired child after this now you get into the kpe that all companies encounter when youve got basically a conglomerate type of approach. Youve got one division and another division this is going to be a real challenge for ford for 100 years this has been under one umbrella at ford there have been truck people have not always worked well with other divisions, but theyve always been under one division thats not the case anymore. Now you have these three divisions. Theyre all going to play nice in the sand box because ford wants them to play nice in the sand box make no mistake. You will continue to see the ice vehicles as well as the commercial Vehicles Fund electric vehicles. If youre working in the ice division, you may not be crazy about that, but you know where the future is and you know whats in the future for ford. You know you have to do this. Fantastic just fantastic. Phil, thank you, as always, for bringing us the news and a lot of analysis along with it. Phil lebeau. Speaking of companies in transition, jim. Cvs comes to mind. Sometimes i think we fail to explain what transition has taken place there, still from what Many Americans think of, as their drugstore, their pharmacy to a broad provider of Health Care Services and insurance. Obviously they own aetna, they own signify health they just completed a large acquisition of a home health company. And on from there. Theyre also laying off 5,000 workers, as you pointed out earlier. Karen lynch understand the hand shes been given. The stock is down 20 for the year i think people recognize, david, you can get your some of your products faster from achlson than it takes to get that person with the key to open the plastic. They make it so its one of the least hospitable place to shop in america other than its competitor walgreens. When you want an ice cream sandwich, although its hard to find a good one nowadays and then you have to ask someone with the key to open the freezer. Its a darn Good Health Care company. It doesnt get credit and im glad you brought it up. Very different approach walgreens is not as certain you have to do the pivot. Theyll be doing it with docs in a box, whatever you want to call it these two companies, david, are uniquely challenged by a world where you can put something on amazon you put in automatic and it comes to your house its so much easier. At the same time, the estimates for amazon are very high. Well hear later in the week. Amazon web service, people are still using a number of growth 10 . I dont think they can do that for web services. You dont no. I think it would be 5 , 6 . That would be the lowest growth rate aws has ever had without a doubt. Agreed. Theres a belief its going to start reflecting were talking now about amazon and its nor mousily important cloud unit david, i am sick of companies coming on my show and talking about their Artificial Intelligence why its such a small part of so Many Companies business the only company that has user business is nvidia secondarily, adobe does have companies have come on they have money. If youre going to start by talking about how your ai is going to revolutionize the world, you better be named jensen huang. Theyve been put on notice. It does excite the investor base. Thats the problem. We see lawsuits generated by horrific proportion by people who decide, my company is ai in the same way we said my company is bitcoin. At the same time, if youre running one of these companies, you need to think about how to incorporate ai tell your spouse, dont come on my show no free pass. No free passes. Still to come, caterpillars ceo will be joining us momentarily after the Company Reported results for the quarter. Well talk about those results, business in china. A lot more there before we head to break, a quick look at the bond market and check how treasuries are faring at this hour weve got jeelds up, 4. 9 on the twoyear as we like to look at the 10, 4. 017. Narrowing a bit today i think. Were back after this. fan 1 there ya go thats what im talkin about josh allen is this your plan to watch the game today . hero fan uh, yea. I have to watch my neighbors nfl sunday ticket. josh allen its not your best plan. But you know what is . Myplan from verizon. Switch now and theyll give you nfl sunday ticket from youtubetv, on them. hero fan this plan is amazing josh allen another amazing plan, backing away from here very slowly. fan 1 that was josh allen. fan 2 mmhm. vo for a limited time get nfl sunday ticket from youtubetv on us. A 449 value. Plus, get a free Samsung Galaxy s23. Only on verizon. I was having relationship issues with my old bank. Next to no interest, the fees. It was just take, take, take. So i broke up with bad banking and moved to sofi checking and savings. Now i get higher interest, pay no account fees, and get my paycheck two days early. Get up to 4. 40 apy, pay no account fees, and up to 2m in fdic insurance. Download the sofi app and earn up to 250 when you set up direct deposit. Sofi get your money right. A terrible incident so close to new york, took so many people i always think about it because we have chart week, not shark week nobody gets urt. I introduce chartists in person. You like it. We have rob well, the great story of reshoring, american industrialization. And pinterest, remember when that became a problematic situation . I want to compare pinterest to letter x, not u. S. Steel. Formerly known as twitter. They are bigger than u. S. Steel. Up next, ceratpillars ceo will join us dont go anywhere. So i called Innovation Refunds. Their team of independent tax attorneys will work with your cpa to determine if your company is eligible. [whip sound] take the first step to see if your Small Business qualifies. Caterpillar reporting Second Quarter results that beat both on the top and bottom line chairman and ceo jim umpleby the business you have is probably the best ive ever seen in the history of my watching caterpillar. Good morning, jim great to be with you and david this morning tell me, when youre making more, have more demand than youve ever had and making it for less money, what does that do for the bottom line you know, i want to start by thanking our global team for another very strong quarter. Our sales were up 22 . We22 . We all three of our primary segments were up between 19 and 27 on the top line. 555 in adjusted operating per share, first time weve broken 5 maybe thats answered your question. Right. The results are showing up in the bottom line. Thats the number we all remember from 1982 when we said one day cat will do it and you did it one of the things i thought was very good, you did not hype what could happen in 2024 but there is an amount of infrastructure money coming your way that they want to buy american, i know that from speaking with the people involved, i want to know whether youre prepared for the influx of orders . Jim, you know, we do serve a diverse set of attractive markets and talked about all three of those markets on our Earnings Call and were starting to see benefit from the bills that passed earlier this year, but 75 of our construction industrys business what is we call nonresidential and we are starting to see some benefit from that. Its uncertain in terms of how long it will take for permitting to occur on certain projects, but we feel that projects will manifest themselves over time which will help us we are working very hard to ensure that our supply chain is robust enough to handle future increases in demand, and we have seen improvement, but there are pockets of real challenge were dealing with. You know i own them in my travel trust and a huge believer of 206, this is the bottom you came on, but i want people to understand not everything is perfect, and youve got some examples including the next quarter which some people will say will not be as strong as some would like. We caexpect the Third Quarter to be up in revenue and margins compared to the Third Quarter of last year. Sequentially we expect it to be down, Second Quarter this year to Third Quarter thats in line with our normal seasonal pattern and shouldnt be a surprise to anyone. We are still dealing with some supply chain issues. The situation has improved, but we do have areas of challenge, particularly around large engines, which impacts energy and transportation and some of our larger machines. We are dealing, believe it or not, with still some chip issues, which impact things like displays again, overall, its gotten better but only takes one component to prevent us from shipping a machine or engine. But there is a great misunderstanding about your company. I still speak to people and they say their China Business isnt that strong. I think ive got a half dozen businesses you have that matter more than china these days, isnt that true . Well, china typically is 5 to 10 of our total company sales, and we told our investors during our First Quarter call we expected to be below that range, and the market has gotten weaker so we expect to be down in china. But the good news is, even with the chinese market, below that 5 to 10 of our typical range, we just produced record results again, as i mentioned earlier, we serve a diverse set of end markets, oil, gas, mining, construction. Yeah. I want to actually ask about another one but come back to china for a second, not as much as it matters to cat as broadly speaking, you indicated things are weaker than you anticipated. What is going on there , you know, i think its important, david, to remember our business in china is primarily hydraulic excavators 10 ton and above when we talk about weakness in china were really talking about that market. That market does move up and down over time we saw strong years in 20 and 21, a decline in 2022 and a further decline in 2023. I think its difficult to draw too many analogies from the market that we serve to the total chinese economy. Okay. Ill try to get you to draw an analogy then for something we talk about every day here which is Data Center Demand in particular of course the rise of a. I. And what thats going to mean. I note in your call that was called out early in terms of Power Generation can you explain to our viewers how youre benefitting from that thank you we sell backup generator sets for data centers and that business is strong its driven by a. I. And a lot of other factors. Not only is it increasing our sales of generator sets for bull pen backup its increasing Energy Demand which is a positive thing for our business. Our customers use our products to produce the commodities to help satisfy the worlds global Energy Demand. One of the things thats occurring is more renewables get added to the grid that does create some instability issues due to the intermittent nature of those Power Sources we believe that presents an opportunity for us over time, more of a medium and longterm kind of opportunity to sell our reciprocating engines and gas turban sets for distributed Power Generations across the grid and those engines convert a variety of fuels, natural gas, hydrogen, blends, bio fuels and the rest. I think when you talk about that, what people have to realize theres two camps that follow your stock. The camp that says this has to be a cyclical peak and sell it, and then a camp that says wait a second this man has come in and decided hes going to decyclicalize this company when i see this quarter i tend not to believe, geez, i dont see anything about soft landing, i dont see anything about fed, i dont see anything about the twoyear, i dont see anything about the 10year. I see a group of businesses that are uniquely purposeful for this time can you talk about how you made this company uncyclical and you decyclicalized it . Again, im very proud of our global team and the hard work they have done we introduced a strategy in 2017 and it told our investors we would produce higher operating margins at different sales levels and also would produce higher Free Cash Flows, and im proud of what our team has done. To your point, we do serve a variety of end markets, so oftentimes people think about caterpillar they think about construction very important segment for us and were doing well there, but we have other segments as well so again, just proud of what the team has accomplished. Between 2017 and 2022, for every year except 2020, we produced 5 to 6 billion of Free Cash Flow and in 2020 when we lost 20 of our top line we achieve 3 billion of cash flow today we told investors just in our Earnings Call we expected to be around the top end of our range for m t Free Cash Flow, around 8 billion this year. Very excited how the team has performed. You know, youve been successful not only in terms of increasing volumes and price how much more you have there to push customers in terms of that . We make price decisions based on a variety of factors. We look at input costs, but we also look closely at whats happening competitively in the markets we serve and those diverse end markets that we talked about so there isnt one size fits all. We look at the individual situation by geography, by product and make a call. Again, very difficult to predict whats going on in the future, but im confident that, you know, we have the ability to remain competitive and still produce the returns for our shareholders we talked about t this morning. Every time i said you did good you said your team did good ceo of chaterpillar, good to se you. Thank you appreciate it. 52week high. 145 billion market value now, and as you pointed out at the beginning of the show the stock has reacted positive to the call. In 2017 he told me he was going to make it so there would be no peaks and valleys. Ill believe it when i see it. I see it. You do . I will see you later. Thank you. So will everybody else on mad money. More reaction to all those earnings were getting as we kick off n mthf adg. Aewon otrin were back after this. At morgan stanley, old school hard work meets bold new thinking. Partnering to unlock new ideas, to create new legacies, to transform a company, industry, economy, generation. Because grit and vision working in lockstep puts you on the path to your full potential. Old school grit. New world ideas. Morgan stanley. The first time your sales reached 100k with godaddy was also the first time your profits left you speechless. At the counter or on the go, save 20 with the lowest transaction fees and keep more of what you make. Start saving today at godaddy. Com vo sail through the heart of historic cities and unforgettable scenery with viking. Unpack once, and get closer to iconic landmarks, local life, of what you make. And cultural treasures. Because when you experience europe on a viking longship, youll spend less time getting there and more time being there. Viking. Exploring the world in comfort. Welcome back to squawk on the street. Im Rick Santelli live from cme hq breaking news of this Tuesday Morning. Construction spending for the month of june expected to be up 0. 6 very close to expectations up 0. 5 . And if we look at job openings and labor it turnover, known as jolts, june number, expecting around 9. 6 million, disappoint, 982,000, the weakest level back to april of 2021 ism manufacturing for the month of july, expecting a headline number of 46. 9 46. 4 hasnt been above 50 since september of 22 lets move down the list from manufacturing to prices paid this is a number we prefer move lower. Expecting a number around 44 and indeed it is lower than expectations 42. 6 42. 6 stacks up with the lightest since last month at 41. 8 that was the lightest since december of last year. Employment, important week, considering whats coming at the end of the week, july employment, 44. 4 hasnt been above 50 since may when it was 51. 4 if we look at new orders, 47. 3 hasnt been above 50 since august of last year. Interest rates move down on the mostly weaker than expected data points, especially on the jolt and we see that equity markets seem to like the number. David faber, back to you. Thank you, Rick Santelli. Good Tuesday Morning to everybody. Welcome to another hour of squawk on the street. Im david faber with melissa lee live from post nine at the new york Stock Exchange. Half hour into trading, 32 minutes and the s p and the nasdaq both down on the session it at this point. Lets get to Steve Liesman, our senior economics reporter to help us react to those mostly weaker than expected numbers that rick laid out for us. Steve . Yeah. I was kind of smiling a little bit when rick said the jolts number was a disappointment. Im not sure nto the extent that number comes in below expectations, i think thats a positive, at least for the market in the sense that we know that fed is looking for this number to come down and to show more slack in the job market so i think maybe thats a good thing. And it wasnt really that far off, so its kind of interesting. Hes absolutely rick was right, it is a disappointment as in there are fier job openings, but you can bring down job openings, not necessarily jobs t ism was a disappointment, that maybe this thing would return to growth its an it interesting story out there. We do hear about strength in the manufacturing sector, some of that propelled by some of the Government Spending and the programs in the inflation reduction act, but were not seeing it in these numbers it is interesting that employment also ticked down here and worrisome that prices it ticked up. Guys, ill leave it there. Were in an interesting spot here now that the conventional wisdom is for a soft land, the economy has to get this just right theres now risks on both sides that it goes down too fast or that it speeds up too much were trying to thread a needle here i think this data is within the bounds of threading that needle. Whats going to be difficult, too, steve is that the forward reads on inflation that were going to be getting, will probably have no more base effects or start not to have those base effects and inflation will show up as hotter than what we have been used to that could throw a wrench in the whole thing. Yeah. You know, thats been something that i think powell has emphasized the extent to which the market thinks the reduction of inflation is a Straight Line down, i think hes trying to disabuse investors of that idea. He sees, i think, inflation as a much more bumpy road he may even used that phrase a couple times he thinks it goes lower over time but to the extent we get there, we may have some aspects of the Inflation Report going up you have the higher oil prices, you have the higher prices paid here well be watching other indices for what theyre saying about inflation. Its something you have to watch. Its going to be a bumpy road, and the only thing that worries me is the extent to which the market is priced for the perfection of this soft landing and doesnt have tolerance on either side of it because its not going to be a Straight Line. Were going to get a lot this month, arent we n terms of data, right . Not to mention it ends with you in jackson hole . Well, hopefully thats not the ending but it is where i will end the month. Didnt say it was the ending ending. I know. Lot of mortality these days, steve. Were getting old. But heres the thing. We do have this jobs number at the end of the month were looking for a kind of perfection number. 200,000 is the number. Some of the early indications, ill report on this thursday, waiting for the other High Frequency data to come in, but the early High Frequency data has been on the weak side and what i think the market would cheer that to a point, right, david. If we get that to 100,000 maybe thats okay, below that might be a matter of concern. Wait a second, maybe this economy is weakening i will say one thing, im not sure the market or even we at cnbc have made enough of that survey there was weakness in there and credit crunch stuff in there, to use an unofficial phrase there, that made it look ominous in terms of the availability of credit to the economy is something withdrawing. Thank you Steve Liesman. Its a good way to segue to our next guest aries, the large private credit company, lot of other things going on, alternative asset manager, out with Second Quarter results that topped 377 billion in assets under management, fundraising commitments at 17 billion, private credit it continued to be a dominant area of importance. Joining us in an exclusive is the president and ceo of ares. Good to have you. Good to be here, thank you. After the quarter as well 17 billion, can that kind of money continue to flow in . Obviously, its the engine for so much of the fees that then are the profits that you see look, weve been out with guidance that says that the Company Expects to achieve 500 billion by the end of 2025, and also articulated coming into this year the setup for our large flagship funds we expect, not surprisingly seeing 30 billion in the First Six Months is in line with expectations the sense that things will get overheated in terms of private credit in particular and the question whether underwriting standards will decline as everybody competes because theres a lot of money, obviously, chasing this market how do you respond to those who worry about that i think its a little bit of a false narrative, to be honest. You have to think about private credit in terms of other markets. So if you look at the private credit market its grown about 15 per year for the last 10 years. Thats squarely in line with the growth in the private equity market and squarely in line with the growth and high yield market and a little bit faster growth than the Public Markets but in line part of whats happening its a fairly new asset class for people, and so theyre learning about it and the speed with which its growing to some is shocking if you zoom out and contextualize it in terms of the growth of the economy and the markets that surround it, it makes a ton of sense. Im always curious, theres a race to underwrite and deploy capital to some extent how do you differentiate your underwriting standards from your competitors . A lot of the Business People are paying attention to, which is only a fraction of the Global Private credit market, is supporting private equity. If you look at it through that lens theres about 2 trillion of private equity dry powder in the market theres about 300 billion of private credit dry powder. Order of magnitude when someone buys a company with leveraged credit theyre going to borrow 2 for every dollar of equity and right now, even with the rapid pace of fund raising in private credit, private credit dry powder is 30 max of available p e. Theres still a supplydemand imbalance. In terms of ares we were one of the first into the market, been a Market Leader and differentiate on scale, on flexibility, we differentiate on terms of the number of people, geographic footprint theres a lot of things that go into it. Interestingly 70 of the credit that we extended this quarter was into the exist portfolio thats one of the ways we dishate in slow markets. Slow markets being there arent that many what are your expectations im curious what youre seeing and hearing from the sponsors in the remainder of the year and whether things will pick up . People have been waiting to get to the end of the hiking cycle, and now that were getting there were starting to see the pipeline build transaction activity in terms of deals logged across our platform was up 20 q2 versus q1 and were seeing that shadow pipeline build i think as we get into q3, q4, the markets will thaw. A lot of the sell side bankingers we talk to are seeing the same thing. We heard Steve Liesman talking broadly about macro. Youve made the case that returns that you can get right now in terms of potentially double digit on a relatively short it term basis make it a strong asset class how long do you see that continuing for its quite attractive were generating 12 to 15 rates of return on pretty plain vanilla credit assets. Are they plain vanilla. Seems hard to imagine you can get 12 to 15 on plain vanilla. A big chunk is fees if you look at spreads, spreads have been fairly consistpoint its just the benefit of the underlining. Part of the reason people are attracted to private credit youre capturing the short duration front end of the curve floating rate. Its been a big outperformer if you look at the performance of the asset class over time its been a consistent performer because it has a pretty durable excess spread, excess return relative to other instruments. I also think theres a view that as rates come back down, youll see a softening in demand for private credit i dont expect that. I think that people have now come to appreciate it durability of that premium that were able to generate. Its here to stay now i ask this question every time in terms of the banks, you always come back and say the banks are our partner, but i am curious, this is sort of how you see things playing out, particularly after the disruption that occurred last spring when many banks learned, not the biggest, that deposits can disappear very quickly. Yeah. Look do you we do the banking market is going through a period of transition i think the u. S. Market is over banked were seeing new regulation being proposed were seeing a digestion of the bassle framework all of that will, obviously, drive more capital into the private markets. We do talk a lot, you and i, about partnering with the banks and a good example, we just bought a 3. 5 billion lender finance book from pacwest prior to the recently announced merger that was a good trade for them it was a good trade for our investors. It was actually financed with a very cap friendly financing from another large bank that to me is the playbook how far private markets can support the Banking Sector as it goes through this transition and i think well see a lot more of that. Something else you guys i think it was started during covid but you have a relatively new sported related fund. We do. What are you doing there, and why is that seen as an opportunity . It feels like its getting a little overheated as well, how much capital seems to be chasing teams or parts of teams . Its one of the reasons why the fund exists, so if you go back precovid, the way that finance sports assets was financed was High Net Worth capital, rich guys, rich people, and banks and leagues had very stringent rules on who could own, et cetera when covid happened it blew a noel a lot of peoples Capital Structures because people werent going to the stadium, couldnt go to live events, and so leagues and team owners get more creative how to finance themselves that was our entry point what weve seen postcovid the market has healed. Its a noncorrelated value that people are very attracted to theres only so many wealthy people that can you have to find the next incredibly rich person to get you out. Its not based on the fundamentals of the underlying cash flow characteristics . Not cash flow but value its grown 15 per year for the last 15 years. The need for Institutional Capital in all of its form, private credit, private equity, media, right securitization, to come in and support that growth, i think is whats going on now. Finally, sort of the idea of sort of the alternative private credit or, you know, abs and that area, is that a real opportunity for you . I think thats going to be the Fastest Growing part of our private credit business and private credit in general. Thats really at the next u. S. Of this whole bank market transition if you look postgfc the securitization apparatus has largely been dismantled. A lot of those finance companies have found their way into the private market and reaggregating assets and now with the next wave of bank consolidation, Bank Simplification and congratregulation youll see that come into the hands of the private market. A key area of focus 100 . Mike from ares. As we lead to a break our road map for the hour, the road ahead for uber did post its first ever operating profit the newest meme trade tupperware crushing shorts along the way. And caterpillar is higher we just spoke to the ceo actually in the first hour of squawk on the street. It beat earnings system and did warn of decline in sales for the Third Quarter. We will break that down. Big show ahead still dont go anywhere. Please dont go by harry casey, Richard Raymond finch sfx ping please dont go please dont go. Please dont go please dont go dont goooooo dont go away get a free storage upgrade when you preorder at tmobile. Please dont go uber out with q2 results posting its first ever operating profit that stock up 100 year to date but coming down from the initial highs today, down by 5 . Dee dra has more on the numbers. The takeaway uber has matured and todays volatile share action investors arent sure how they feel about it lets consider the first one, Dara Khosrowshahi achieving profitability feat after profitability feet 1 billion in Free Cash Flow, first ever operating profit. Gap income and returning capital to shareholders. This is what investors wanted since uber became a Public Company in 2019. But on the other hand, its giving more mature utility, less disruptive startup. Revenue missed the streets expectation this quarter and continues to slow post pandemic and the First Quarter top line grew 29 , nearly halved to 14 in the most recent Second Quarter. When bankers were pitching the ipo four years ago they thought that this is a company that could be valued at 120 billion. Instead, it went out at about 75 billion and passed the 100 billion in market cap. It got here by delivering on Unit Economics and some might argue lyfts mismanagement remember that uber no longer has some of the moonshots it once did that made it disruptive like selfdriving cars and fin tech ambitions. Freight thought to become the aws of logistics has proved challenging. Uber does on the plus side have a developing advertising business which could be a growth and a profit engine. Its hard to say, guys, what is behind todays move. It may be as simple as this is a company that has doubled and investors could be taking sfl sfl profit. Is the Conference Call going on as we speak im wondering if theres guidance or the investor sticking points and flagging as concerns i mean, at first the reason it was up is because investors saw sort of the outlook which they gave not in the press conference or the press call, excuse me, but the actual results when they were released that ebitda adjusted ebitda guidance was better than expected so that was providing some upside, but down 5 ive been messaging analysts to figure out whats happening. A lot of folks think its profit taking or maybe paying more attention to the top line revenue number, which did miss ill check it out as far as i thoughi dont think anything has materially changed well check it out it is lower by 5 . This is a stock up 100 this year. Yeah. Or at least it was now only 90 . 95. Theyll take it reaching 100 billion market value. Thank you. Deirdre bosa. Still to come well break down the caterpillar earnings as well that stock actually has picked up its pace up now 7 . Higher prices and sales contributed to a significant top line beat. Also keep an eye on the cruise lines. Norwegian exceeded system. Did post weak guidance for the Third Quarter and that is sending other names along with its own down rather sharply. Well be back right after this ye on the horizon . Uncertainty . Or opportunity. Whatever you see, at pgim we can help you rise to the challenges of today, when active investing and disciplined Risk Management are needed most. Drawing on deep expertise across the worlds public and private markets in pursuit of longterm returns. Pgim. Our investments shape tomorrow today. upbeat music [narrator] what if there was a hearing aid that could keep up with you . notification dings this is jabra enhance select. Its a smart hearing solution that makes hearing aids more convenient and less expensive. 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Also sold a lot more in north america than might have been anticipated. Chairman and ceo jim umpleby joined us last hour and also talking about having taking guidance up or talking about guidance for the Third Quarter take a listen. We do expect the Third Quarter to be up in both revenue and margins compared to the Third Quarter of last year sequentially we expect it to be down, Second Quarter this year to Third Quarter, but thats in line with our normal seasonal pattern and shouldnt be a surprise to anyone we are still dealing with some supply chain issues. The situation has improved, but we do have areas of challenge, particularly around large engines, which impacts energy and transportation and some of our larger machines. We are still dealing, believe it or not, will still some chip issues which impact things like displays overall its gotten better, but it only takes one component to prevent us from shipping a machine or engine. Believe it or not a very strong quarter, melissa, whether its energy and transportation, Power Generation for data centers, they are seeing a lot of demand for their product and pricing power. Right what has been such a strong headwind a couple quarters ago when it comes to china, remember the commentary when they said they were not seeing an uptick in china, now that has improved. Its interesting to hear him talk about the supply chain challenges its amazing to think, but he mentioned in that interview pockets of real challenges in the supply chain, so that seemed to me like hey, this is out there and that could be a factor in the future when demand picks up. Yeah. Theyve tried, theyve made clear to investors, china only represents 5 to 10 of Enterprise Sales at this point it was weak. In fact, weaker than they had anticipated, specifically. He did point out its mostly excavator, the Excavator Industry they play in there, and that has declined more than they thought it would. Right its amazing to think also caterpillar being 209 or so, just in may. And the stock has really had such a climb since with the turn, of course, in industrial names, that weve seen. Without a doubt jim has mentioned eaton as well, sort of another wellknown industrial name, also surging yet again. Quite a strong period for those names. Still trying to track across the space to see if this translates for the rest of the day. All right still to come, it is the first trading day of august with the markets lose something steam here, weve got the s p and nasdaq down. The nasdaq down by 0. 75 the nasdaq down 0. 4 tom lee will join us with his take on all of this. We will be back in two ah, these bills are crazy. She has no idea shes sitting on a goldmine. Well she doesnt know that if she owns a Life Insurance policy of 100,000 or more she can sell all or part of it to coventry for cash. Even a term policy. Even a term policy . Even a term policy find out if youre sitting on a goldmine. Call Coventry Direct today at the number on your screen, or visit coventrydirect. Com. All right. Ill talk to this camera over here lets get over to bob pisani now. Were about one hour into trading. What are you seeing this morning . Two to one declining to advancing stocks we had an amazing july, amazing run of the year. Reversal of trend often happens at the start of a new month and quarter. Take a look at some of the stocks that are moving here. Industrials strong today Consumer Staples, generally kind of on the under performing side in july doing better, colgate, coke are moving to the upside. Health care was an under performer. Pfizer good numbers. Pfizer turned around after the open strongly positive you see caterpillar there. Thats doing well. New high there weve talked about that all morning. Eaton had good numbers thats a new 52week high. Industrials, Consumer Staples and health care. Regional banks had an astonishingly great turnaround in the month of july and not sur surprisingly, as a group, all the super regional banks down. This is a mean reversion, whatever you want to call it, traders tend to sell really big outperforming stocks at the start of a new month and thats no surprise here we have recovered almost 60 of the losses for the super regional banks from the march declines that we saw where are we right now i just want to make it clear about how strong the july numbers were here. We were up 3 on the s p 71 of the s p was higher. Only 34 of the gains came from the top ten stocks the tech stocks that dominated everything in the First Six Months, more than 100 of the gains in the top ten names, they are not nearly as important as they were in the First Six Months of the year for july. Theres the broadening out story and a simple format. How about earnings where are we q2, one of the principle ideas about the stories, q2 is the trough the market betting on a ushaped earnings recovery, q3 is going to be higher, q4, q1, q2, by q2 of next year well be 15 higher in earnings, thats the bet, the ushaped recovery. Were hitting a valuation ceiling so weve had great beats on a number of companies, but unless unless theyre truly outstanding theres no follow through. Stocks are not higher the following day after earnings beats. Thats because prices have generally risen. You have valuation issues. Theyre not sure how much more were going to push forward based on the p e ratios or the multiples looking ahead. Thats the main concern right now. Going into august, weve talked about how august is. This is the third worst month of the year for the s p 500 september is the worst month so were in a seasonally weak period here. And were going into a seasonally weak period with unusual situations the positioning is very, very long for everybody right now a lot of people have been degrossing, reducing their exposure and short positions sentiment is extremely bullish gone from baesh to bullish volatility is low. What does this mean . It means that market is very susceptible to a sudden down draft like we saw last week. Pay attention, dont be surprised if you see 3, 4, 5 correction some time in august on very little excuse. Where are we going here . Well, take a look at the 10year. Here we are 4 on the 10 again and guys we have talked about this before, when the 10year goes over 4 , the market has fluttered a number of times and thats whats happening today. Back to you. Bob, thank you. Bob pisani lets continue this conversation with fund star cofounder and head of research tom lee. Youre also in the camp that august could be tricky yes i think august is tricky because as bob mentioned people are on vacation and its more vulnerable to sort of shocks and i think were in a period where theres good news. We dont want a strong jobs report or pmi because that brings a september hike back on the table along with the 10year where it is, i think it its very possible we could have a pretty painful draw down in the first half. Youve been bullish when others have not been. Yes. The first half of the year. And now that you see strategists bumping up their price targets for year end, bob was talking about the extreme bullishness does that make you worry its a bad sign i think we know the strategists tend to reflect the buy side, and all these price target hikes are chases of a market thats already extended, and then we have august which is seasonally kind of bumpy, and i am kind of worried were going to get good jobs data, strong job numbers, and people will think september and higher rates oil is already rising. It feels like it could be pretty messy. How do you see the path of the markets going into the fall, traditionally seasonally a difficult period, september, october . All these things i mentioned are tactical i think the second half will be really strong. But to me its a broadening of the market its more about the industrials, really responding to the pmis bottoming and its energy reflecting the rise in oil and so i think its a broader market, but we could still finish, you know, over 4800, well above it on the s p. Were seeing that today with caterpillar, for example, advancing. That said, bob raised that idea of a sort of valuation ceiling and the fact that we may be hitting or bumping against it in terms of where p es are based on the earnings weve gotten so far. Do you worry about overall valuation levels yeah. You know, the reason im less worried about valuation is so many clients tell us valuation is a problem, and when you know thats already top of mind for clients, then theyre already being selective. I think the valuation problem tends to be in the mega cap, ex the top fang, thats reasonable for a four year. Youre taking out the big twice and then get down to 16 . Is that a way to justify it or is it still i mean thats how our clients pick stocks, right they dont have to buy the f. A. A. N. G. S. They dont really dont people i mean if youre indexing, right . Thats your comparison thats right. If someone is making a case for f. A. A. N. G. , imagine someones thesis dont buy it because its expensive. You have uchlds have avoided it for 20 years theres a reason to own both. If valuation is not a worry, 4 shouldnt be a worry either its not. It puts stress in peoples minds, but youre right. The 10year average 5. 3 from 1990 to 2007, and the markets total p e was 18 times were at 16 times exf. A. A. N. G theres room for plenty of multiple expansion its a Good Environment for companies when the 4 on 10year because it limits competition, right. Capital formation slows so the dominant Companies Make more money. Really is more room for multiple expansion with i mean, again a 4 tenure . That history would tell us yes yeah. I mean i know we all think 4 sounds like a nose bleed i remember that area and youre right, excuse me, i remember that stocks did go up. Yes its it depends on why youre at 4 . If its purely inflation, where its not great environment, but if its because of reflation and stephanie link mentioned, talking about, creating reflation here, but deflation in asia so globalization is not going anywhere i would rather allocate capital in america on a 4 10year so i think these are the right reasons for the 10year to be pushing up, but, of course, look, near term, wed have to see how the market feels about 4 thats why in august i do think it gets pretty bumpy. Finally, i stopped asking you this years ago, you used to track active managers and how much they were trailing their benchmarks, which seemed every year they were where do we stand halfway into this year and is there catchup being played its not great this year as you know theres mechanical reasons because not everybody can break the cap on what they can own on f. A. A. N. G. Butt theres a lot thought this was hard landing and overweight defensives which have been horrific theres catching up to do i know thats going to be the reason we have a shallow correction in august i dont think its the start of a 10 draw down but it could be sloppy. Its really positioning, you think, thats going to power us through . A small draw down in august and strong end to the year well, you know, theres position but then theres narrative adjustment we havent been in the recession camp so many thought earnings would fall apart some time, and it hasnt in fact, estimates are going up. Recalibration of the view, plus positioning amplifying that. Tom, always good to see you thank you. Tom lee. Time for a news update to Courtney Reagan. Hi, melissa good to see you. I am Courtney Reagan with your cnbc update. Donald trump says he expects another indictment any day now, members of the federal grand jury are back in the d. C. Courthouse today theyre hearing evidence and testimony into his alleged interference in the 2020 election thermal fisher says it reached a settlement with the living relatives of Henrietta Lacks suing the company over its routine use of lacks socalled helio cells taken without her consent when she received treatment for cervical cancer. The 31yearold mother of five died in 1951 from the disease. The terms of the settlement will not be made public. President biden is scrapping the Trump Administration plan to move space headquarters to alabama. The pentagon announced it will keep Space Command in colorado white house officials deny alabamas restrictive abortion law was a factor in the decision back to you. Courtney, thanks so much. Courtney reagan. After the break, the return of the meme trade, tupperware brand, is continuing to rally. The stock is up more than 500 over the last month. We will take a closer look and a quick programming note, tomorrow dont miss it, a cnbc exclusive with that man right there, jamie dimon he will be live on power lunch and give us his take on the economy and reaction to recent regulation, i guess, and everything else. So much. So much comes to mind. Exactly. For jamie donim thats tomorrow at 2 00 p. M. Eastern. Stay with us e our focus is to always support the people who live and work there. Because you call these communities home, and we do too. Pnc bank. This is your moment. Critics declare oppenheimer is magnificent. The New York Times calls it staggering. Its utterly enthralling and one of the best movies of the century. Welcome back to squawk on the street. Im dominic chu. A close eye on several key earnings reports out of the Health Care Sector this morning. Still marlee to the downside off about one quarter of 1 . We will start with shares of merck. It reported a smaller than expected loss, thanks in large parts to keytruda Cancer Treatment and gardasil vaccine for hpv. Merck rival pfizer higher as better than expected profits, revenue figure came in below analyst expects due to covid vaccines and treatments. Merck and pfizer are two of the big earnings movingers back to you at the new york Stock Exchange. Thank you shares of tupperware continuing to surge see another 31 this morning short sellers to the extent that any of them were short this name, theyre getting crushed. Kate rooney has more on what some are calling the next meme stock. David, good morning tupperware is also what some are calling the most squeezable stock out there or at least among the most squeezable stocks, betting against tupperware had been a pretty profitable trade this year shares were down 81 in the First Six Months of the year, but that changed as the stocks momentum reversed and quintupled in july and short squeeze started playing out with traders rushing to buy back the shares and limit their losses according to new data from s 3 partners, tupperware shorts are down 348 . This month alone and down 171 for the year its become expensive to stay in the trade. S 3 puts borrowing rates at roughly 34 for the existing shorts and 140 for any new stock that might be out there. The firm lays out other socalled squeezable names in the market they talk about carvana on that list, upstart quantumscape, amc, beyond meat, all on the list as well tupperware hardly the only stock Spring Loaded for a short squeeze here the number of companies with 20 of their outstanding shares sold short has hit record levels this year back in 2021 of the meme stock craze and what happened with gamestop according to adam parkers research. Like other contrarian meme stock trades this company has had a tough year and has a heavy debt load and warned it might not have enough money to make the Interest Payments and also concerns that this could be delisted from the new york Stock Exchange as its market cap dropped. All of this underlines the influence right now of retail traders and some of the momentum trading going on while reddit traders could spark these rallies some of the long only hedge funds are chasing that momentum and monitoring whats going on on social media. Back to you. That squeezable list by s 3 had a dollar amount associated with the short it interest but not a percentage of shares outstanding. Im wondering what that sort of looks like in terms of order of magnitude percentage so they have this squeezable score. It takes into account the percentage of the Short Interest, dollar amount, and then Something Else out there thats basically a measure of how long or how many days it takes to get out of the trade. The average is six days. Some of these have a longer time period for a variety of reasons, and that also adds to sort of the squeezable score you see overlap with high Short Interest and the squeezable, but its this proprietary system theyve come up with for hedge funds and a lot of hedge funds now are kind of watching their backs in terms of what might be squeezable and its not necessarily just the percentage of Short Interest. Theres a couple other inputs that go in there. Wanted to ask you, kate, to crypto currency, about the judges decision yesterday that seemed to upend the ripple decision earlier coinbase shares are reacting sharply to that news today. So, yeah, melissa, thats been a big driver of coinbases strength in the past couple weeks. Investors interpreted this ruling from july that another Crypto Company ripple didnt violate security laws so that would have supported coinbases defense against the sec and the lawsuit against coinbase that sec has brought. Another ruling yesterday, though, from a judge in the same district in new york, was seen as pretty much a rejection of that and complicates some of the use of coinbases looking at that ruling for its own case and the Legal Defense there, and that has been pouring a little bit of cold water on the enthusiasm that came out of the first case sort of conflicting rulings out of the same court system in new york we did get analyst calls this morning that were pretty bullish. You see the stock down 7 now. Thats not having much of an effect but coinbase this morning seeing bullishness almost doubled its price target ahead of earnings. The Company Reports on thursday and likely hear more about the regulatory landscape. Kate, thank you kate rooney. Speaking of crypto, tomorrow morning dont miss our interview with bitcoin bull Michael Saylor who has joined us a number of times and great interest in what he has to say. His company micro strategy will be out with results after the bell and they own a significant amount of bitcoin in the 10 00 a. M. Tomorrow. Marriott raising its guidance amid a surge of International Demand and revenue. The companys cfo will join us to break down the numbers and the read on the consumer in the next hour at 11 00 ayitusst wh mom hey cheap flight alert daughter hawaii can we go . Dad maybe. Ill put a request in monday. Sfx shattering glass. Theme song unnecessary action hero dad was that necessary . Unnecessary action hero no. Neither is missing this deal. With paycom, vacation is yours to manage. Unnecessary action hero not to mention benefits, scheduling, payroll. Its hr in the palm of your hand. Dad wow. Unnecessary action hero ask your employer about paycom. And make the unnecessary, unnecessary. Dad approved fairly quiet day overall in the s p 500. Take a look at standouts Global Payments up 7 . Same with caterpillar. Commercial real estate players both out with earnings both beat. Our next guest notes office reits are up 12 in the last month. Investors still assessing a longstanding risks that that sector faces joining us bmo Capital Markets analyst john kim we tried to explain to our viewers, commercial real estate is a broad portfolio because we tend to focus on office. What did we see from vornado in that quarter anything encouraging very encouraging. Theyve been up over 50 the last three months. There was a chance they would be bankrupt thats not going to happen last night they refinanced over 600 million in debt they put in some capital to get the refinancing done and on top of that, theyre gaining occupancy and gaining some new york office peers, new york state, sl green that gained occupancy during the quart as a result, theyve been the winners in reit land. Too early to say the worst is over for office . It is too early because we dont know whats going to happen with demand its encouraging that people have been coming back to office, returntooffice mandates have been incriesing and theres hope this is going to happen. Weve been hoping the last few summers that come september, people come back to the office it hasnt really happened. This time it seems like theres more traction that it will. Is a. I. Creating demand for office space in some markets like San Francisco, for instance right now it is San Francisco seems to be the one part of the market gaining a lot of employees and demand in San Francisco. We dont know whats going to happen medium to long term but right now its a nice tailwind. As an analyst we have earnings and earnings Conference Calls, but between those periods are you using data like cell phone usage within a city to see if people are truly back to office and the degree to occupancy . Some would say, oh, when we pull cell phone data we see people are only in the office for an hour at a time, which hardly constitutes back to work. Its interesting. Were comparing a lot of this to 2019 think how much the new york Office Landscape has changed since 2019 weve had hudson yards fully developed. The newer buildings have higher occupancy and we dont have that data going back three or four years ago. We can say how does it compare last month or last year. Its been somewhat encouraging but it hasnt been that strong as far as people coming back fully. To your point, we have seen a rebound of sl green, voluntary nad dough, some deals that were done you saw the sell on voluntary nad dough. We thought they would have a lot more issues refinancing and a lot more assets. So, chicago, San Francisco, our two major markets for vornado. We most bullish on new york within the Office Landscape. That said, again, as i said at the top, theres a lot of different ways to slice the commercial real estate pie what is it you see that really does have strength right now and you would advise, perhaps, our viewers to be thinking about industrials, multifamily. I think these are two strong asset classes. Secular tailwinds are there. You have a lower capex business. They held up well with the economy and job growth being decent, better than expected we like the coastal apartment names. In industrials we like prologis and stagg. Rents for apartments are coming down. Have they peaked at this point so what point do you get concerned about that story thats one of the disappointing earnings market rents have peaked last month in june. July it seems like its tapering off quite a bit. Thats earlier than what we see historically seasonally it peaks july to august if we have job losses mount, which people are anticipating, i think thats when we get to be more cautious. Right now i think the stocks are cheap. We just dont know at this point. Listen, we focus a lot as well on the banks, certain banks that have particular focus on that area that may be taking back a lot of real estate or at least have to extend and pretend we just dont know how this is going to play out. We dont know but we know class a are getting record rent. Now we see people come back to the office a lot of landlords are putting capital into their assets to make it class a. Now theres hope or proof now i dont want to own a b, do i . You dont want to own a b. Unless i can effectively convert it to residential, which is not easy. The office reits we cover about 70 of the assets are a. That a can move around quite a bit just based on demand right now we feel comfortable with 70 of the asset base t t oicsue. It hanks for taking the time. Appreciate it. You ok, man . The internet is telling me a million different ways i should be trading. Look whats up my trade dogs . You should be listening to me. You want to be rich like me . You want to trust me on this one. [inaudible] wow yeah its time to take control of your investing education. Cut through the noise with bestinclass Education Resources that match your preferred style of learning. Learn your way. Not theirs. Td ameritrade. Where smart investors get smarter℠. vo verizon Small Business days are coming. Learn your way. Not theirs. From august 7th to the 13th. Now is the time to partner with our experts. Get started today with verizon business. Its your business. 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