Transcripts For CNBC Closing Bell 20170622

Replace obamacare. Hospital stocks are leading the way, but insurers are outperforming the market and drugmakers, too, have been going up well have much more on the proposal and the impact on various stocks thats coming up in just a few moments here. Molina health care is one insurer really profiting from obamacare. How will the bill affectmanage cops like molina well have the ceo weigh in. And were pleased to welcome Goldman Sachs new president and chief executive officer Harvey Schwartz who is with us here at the New York Stock Exchange. Well talk with him exclusively about financial reform, the latest round of the stress tests which, by the way, are coming out a little more than an hour from now a lot to talk with harvey coming up in a little bit here. Lets begin though with the Health Care Stocks rising after Senate Republicans released their discussion draft of the bill Kayla Tausche joins us from washington with some key takeaways. Kayla. The discussion draft is seen as an opening volley for the senate side piggybacking off the house plan using tax credits to replace the Affordable Care act mandates and reoperation virtually all of its taxes, but some key differences are there credits on the tax side are based on income, not on age. The plan elongates medicate expansion with bigger cuts overall when it eventually phases it out and upholds payments to insurers to offset plan costs for those lowincome enrollees. The u. S. Chamber of commerce says, quote, we have long sought this type of balanceled solution that doesnt jeopardize employersponsored coverage while seeking Affordable Access for all americans, but it had its detractors, too, called the better care plan, but it can only lose two republican votes and currently at least four senators oppose it last hour senators cruz, johnson, lee and paul all said they would vote no on the bill for a variety of reasons heres senator paul just last hour on capitol hill were keeping the subsidies and boosting the subsidies for stabilization or risk pools, and i think it looks a lot like obamacare actually. That may be a public negotiating tactic, but there may be some quieter opposition behind the scenes. The president today said it will take, quote, a little negotiation, but its going to be very good, but, bill and kelly, theres only about a week for them to figure out how good they can make it to get those republicans on board. But, you know, they are at odds on some key issues. Ted cruz was also saying he wants to see he doesnt see anything there that will bring premiums down, but you cant bring premiums down if youre not raising or at least maintaining the subsidies that are in there which rand paul opposes, so, you know, they are at odds on some very fundamental issues here still, arent they and it feels very much like the process we saw play out in the house from march to may where it wasnt one clear ideological issue where if you could just get that one thing solved then you could bring that whole caucus to the table. There are quite a few issues here theres an unofficial group called the coverage caucus that doesnt want to see millions of people lose their insurance coverage, so for them the cbo score is going to be the most important number out, and then you have ted cruz who wants to see premiums get lowered and senator rand paul who wants the subsidies to get repealed and wants it is to look more like a fullscale obamacare repeeshlgs so its hard to know which of these players Senate Leadership can please if they cant please all of them. Im wondering, too, about the time line at this point. We heard earlier they might want to bring this thing to a vote as son as next week, kayla, but youre saying can it even get out of committee yeah, i mean, thats going to be the real question, kelly. Theres a soft hold for next thursday for a potential vote on this, but the oddsmakers who watch these legislative movements are putting about a 40 odds on 35 , lets call it, odds on this actually getting voted before the july 4th holiday. Its quite a bit higher before august 4th, but at the same time, i mean, they are going to have to go back and forth with the house on this. Its going to be a really, really complicated endeavor behind the scenes to actually get some compromise here, but then theres another outlier question which is, guys, will they put it to a vote if they dont have 50 votes. We havent gotten an answer on that, and that question has been asked quite a few times. One last thing very quickly im very interested in the market response as well because all the health cashrelated stocks are going higher, and whats interesting is in the past weve learned thats whats good for hospitals isnt always good for Insurance Companies and vice versa, but they are all going up today, and Drug Companies too. They are all going up, bill, for a couple key reasons when you have a longer tail for medicaid, that means that the rate of insured in a lot of these states like ohio, arkansas, for instance, thats not going to go down right away, so hospitals will have some time to actually figure out how to regroup in preparation for their clientele to change a little bit. Thats not going to be the rug being pulled out from under them immediately and then on the insurance front, quite a few buckets of money being put towards the Affordable Care act exchanges to try and stabilize that, and those had been funds that the Insurance Companies have been saying we need certainty on that. We cant price our plansch we dont know how to operate if we dont have that, but the senate bill actually does go to quite Great Lengths to put some money behind that. Very interesting. Kayla thanks as always, Kayla Tausche on capitol hill lets get to our Closing Bell Exchange dow is up 33 points as you heard. Health care stocks leading the way to the upside. Doug sand sler with us from river front Investment Group at post nine and sitting next to the man himself, mr. Arthur cashin from Ubs Financial Services and Rick Santelli is joining us from the cme in chicago. Arthur, health care is going up. Energy has been a problem for this market as well. What do you make of todays actions so far well, youve gotten a little bit of a bounce in oil, but it really hasnt translated into much in the energy stocks, and i think that indicates the heavy skepticism that youre seeing. People arent buying this bounce as a real turn there are some speculation around that the new crown prince in saudi arabia may try to get the oil price higher in order to get his ramco ipo gunning, but, again, thats created by skepticism by a great many people oil is probably going to be center stage here for a couple of weeks. Doug, what about you guys where do you see the most opportunity right now . Yeah. So im a u. S. Investment central artery gist for river front but surprisingly most of the opportunities that were seeing are overseas i look at overseas markets, particularly europe. You know, were looking at markets at kind of where the u. S. Was three years ago, that they are seeing economic strength and Earnings Growth and have cheap valuations. Actually starting to see politics the political environment where everybody thought the worse was going to happen to hey, there might be a bright side here weve been talking money out of the u. S. And putting it international, not because we dislike the u. S. But simply the better opportunities are overseas rick, here we go again. We were talking the equity market, the responding positively in certain sectors to the Health Care Proposal out of the senate the yields on treasuries are sharply unchanged today. So youre not getting much of a response there at this point, hu no, youre really not you know, a monthtodate charge says everything you need to know we keep drifting lower and price keeps drifting higher in treasuries of the right now two basis points off the low yield close of the year. Dollar index has had a pretty good june, but its still 4 plus in the red, and as far as the health care issues, repeal and replace in the senate, you know, i enjoyed listening to the discussion and the information from kayla you know, handicappers, they havent done very well from trump to brexit to georgia, so i dont know i believe that the market is looking optimistically, and they are probably thinking along the kidney stones. They are painful best to pass them as quickly as portion and i think the latter is most likely what will occur that might be my new favorite analogy of all time. Doug, i mean, i was going to ask you about china real quickly so we have this move by msci to add chinese shares and then regulators are cracking down on streaming news, web kafgt, and then you have them talking about others being investigated, so what is happening there and what would you invest in china . Not one of our top places to invest, you know, but particularly like asia, emerging countries around china, but, you know, the conclusion of the a shares is good for the first year but as the country becomes more and more developed its going to be a great source of growth for the rest of the world. Not right now youre staying away from it for the time being. Were neutral weight, emerging marks and if i had a look at risk and return, i think the developed markets outside the u. S. Are certainly your best opportunity. Arthur, what are you watching energy obviously aside health care is a big mover right now. I i was reading today somebody was using the word placid to describe this market for the last several months as weve discussed here, but whats going to shake this market up that youre looking for down the road here . Well, youll have a pretty exciting day tomorrow. Youve got the russell rebalance going on. Okay. Youll see somewhere between 25 million and 30 billion in swaps going back and forth it could be record volume, so i think traders will be cautious going into the close here to see what that does, and then the friday after that will be the end of the half, the end of the month and the end of the sub quarter so that will be a busy day, too, so weve got backtoback big fridays coming up here. All right fridays are always big in the summertime, too, as well. Have fun with that tomorrow. Indeed. Thank you, everybody. May you never have to pass a kidney stone, as a matter of fact. Or legislation. 50 minutes to go to the close. Dow up 30 as bill mention. We started unchange and did move higher around the same time the Health Care Bill came out interestingly now. Also, in the near term here, the fed is releasing the first part of its latest stress tests on the banks Goldman Sachs cochief operating officer Harvey Schwartz will give his first tv interview. A lot coming up from post nine. And a middle east rival looking to buy a stake in american all of this headscratcher ahead. Youre watching cnbc first in business worldwide. I love how usaa gives me the peace of mind and the security just like the marines did. At one point, i did change to a Different Company with car insurance, and i was not happy with the customer service. We have switched back over and we feel like were back home now. The process through usaa is so effortless, that you feel like youre a part of the family. I love that i can pass the membership to my children, and that they can be protected. Were the williams family, and were usaa members for life. Call usaa today to talk about your insurance needs. Youre searching for something. Like the perfect deal. On the perfect hotel. So wouldnt it be perfect if there was a single site where you could find the right hotel for you at the best price . There is. Because tripadvisor now compares prices from over 200 booking sites. To save you up to 30 . On the hotel you want. Trust this birds words. Tripadvisor. The latest reviews. The lowest prices. Welcome back shares of tesla are up 2, an its not just looking to revolutionize the Auto Industry or maybe give trump the idea for that solar wall. It set its sights on the music streaming business tesla is talking to record labels about create being its own streaming system and it would include licensing, a proprietary service, a bill that would come with their cars. Of course, they would think about a music streaming service. Its also cool. I dont know. What happened to sharply defined Business Models that, you know perhaps its the user experience, right. We talk about this in the fast Food Industry each fast food franchise chain has its clearly defined food group that its going after and now they are haul blending not why hasnt mcdonalds launched a streaming music yet because that may be torn to its restaurant experience. Whats next, Goldman Sachs will introduce a an Online Lending Service for less than 30,000 . Whats next in this business. Funny you should say. The fed is scheduled to release results from its twopart annual stress test a little over an hour from now. For more on the state of the u. S. Financial sector were joined at post nine for a cnbc exclusive by Harvey Schwartz, president and cochief executive officer of Goldman Sachs welcome to you. Welcome to post nine here. Kelly, bill, great to be here. Is it a game of thrones type of thing for who wins chief operating is that right for the palace intrigue. I mean, you know, do you guys just divvy up responsibilities, or is it, you know as you know, at goldman theres a long history of coeds for the vast majority. Ive had them. Its worked well its pretty easy worked together for years, and we both grew up on the client side and we lean towards our strengths. Do it right and one plus one equals a lot more than two. The stress tests are what, eight years old, seven years old . Yeah. Are they still working, still needed what kind of modifications would you want to see, if any, here . Were big supporters of stress test, the way we think about Risk Management. Its been a critical part of our tool kit so were supportive i think were seeing the evolution of stress testing. The Federal Reserve had to bring the industry standards up, and now the standards are quite high and whats interesting is whether or not the market is as focused on this years results or they are more focused on what the next steps are as all this discussion happens in washington about where does regulation head it always seems the treasurys recent announcement, and even Jerome Powell yesterday talking about, you know, maybe able to loosen up some of the regular industry regime. Whats most important for you guys what do you want to see happen theres not one thing that we would be focused on. What the we would say is when you look at the treasury report, its its really straightforward, quite sensible and and, look, before the crisis there wasnt enough regulation now theres been a lot of regulation, and the real question is has the pendulum swung too far and how can we calibrate so it better supports fundamental growth which is what i was getting at with the stress tests are there modifications you want to see they have set the bar pretty high, and a lot of banks are hitting that now with the late round of stress tests well see a lot of capital loosened up that could go back to Share Holders in some regard does that suggest to you that maybe they need to relax those standards just a little bit here well see how much capital comes out in the stress test itself i think even before dan who was the chief architect of the stress test, said they should be looking hat the stress test for modifications was an indication that the stress test itself, that standards were at a level where the system could can be looked at how to make better enhancements for the process. Right theres also legislation that would make these one every two years and the qualitative peace of it and maybe thats something they do away with, because by definition its hard to figure out what regulators look, if only you had someone in the white house that could kind of make the case for goldman. Yeah. And, you know, its do you get you go years, decades back with gary cohn. Yeah. You worked together for 20 years. Yeah. I talked to gary a lot more when we worked on the same floor. Dont talk to gary as much as now. Were super proud of gary, but as you know its a little awkward for us and for exactly the reason we mentioned. We dont talk all that frequently but very proud of him. You want to the ask how do you think hes doing so far . I think garry is doing great. I thought you might say that. I think garry is doing great. Look, its early days for the administration clearly they have had some challenges from had a market perspective, obviously expectations were very high, and they have cooled off a little bit, and, you know, hover the next six to nine months, what really our clients are going to be focused on is whether or not the Growth Initiatives and the policy actually come together, because thats what people were expecting at the beginning of the year. Yeah, i know. We were talking to dick bovane not long ago and had this remark when we were talking about the repeal of glass steagall, if that were to happen, go back to separating investment banks from commercial banks saying if that happened goldman shares would double because all of a sudden the Competitive Landscape dramatically favors you guys is the that true if we were to go back to the future in that sense, that even if its a 21st Century Glass steagall, whatever that would mean right i dont know what 21st Century Glass steagall means thats not something we would think would help us best serve our clients. Remember, glass steagall, thats late 90s. The firm went public in the late 90s were a vastly different organization, more global, more capital demands from our clients. As you mention, were now in online lending with consumers. Right. So i think the nature the services and the nature of the things our clients want globally from Financial Services require large banks. Speaking of marcus, the Online Lending Service long blankfein mentioned, does this open the door and does this tell you theres other areas you can do in the digital arena, the Consumer Online category here . The important thing for marcus and us and Goldman Sachs was how can we provide differentiated value to the consumer now client segment for us, new activity it, and we went out and talked to consumers and we said thousands of them, what do you really need . And they said borrowing is tough. We would like it to be simple. We dont understand the fees were charged, and and the whole process is complicated just understanding it, and so we hired a team we know we have strengths in technology and Risk Management and hired a team and the marcus platform is unique because other than the Interest Rate there are no fees. You never pay an original nation fee, never pay a late fee, and the consumer feedback has been quite strong now, were pretty new at this. Were cognizant were new at this as i said before,we kind of want to crawl before we walk before we run, but certainly its an important business for us with a lot of potential. How important is it i mean, why does granted, you guys became a bank holding cries company after the crisis you had this ability, and its a very low rate environment right now. Why do you want to grow the lending portfolio and how big do you think it would get ideally. So we dont target size because we think the most important thing is actually both from a Consumer Experience and a Risk Management experience to make shower that it grows as it should grow. The interest has been obviously quite high which is why lloyd talked about the numbers that he talked about and it could be quite meaningful more importantly from a core competency perspective, as long as we can provide value to consumers its something that Goldman Sachs should do, not unlike we do with all of our clients around the globe its just that historically more institutional, now consumers. Are you assuming that the feds are going to just keep rates hoe for the foreseeable future i mean, all banks are looking around for different Revenue Streams in a low Interest Rate environment. Yeah. Does that continue, do you think . Im not a great forecaster of things like this. I dont know anybody who is. And what happens is we know after the fact. Right. I would say the most interesting thing about the recent increases in rates is actually the response the market has had and actually the beginning of the year we didnt expect to come in with ten your bond yields dropping so dramatically and the real questions again, on clients minds is this an indicator now that as were raising rates, is inflation potentially not on the table, and with relooking more at economic weakness and i think thats the information thats out there, but if we get Economic Growth, the fed will keep going and i think it will be sensible. Meantime, theres been a huge boost, huge wave of dealmaking. Maybe it seems so visible with the amon wholesale foods deal on friday i dont know how the overall numbers are, but does that type of move, you know, trigger a bunch of Companies Think their strategies and, okay, how are we going to keep up and what kind of deals can you keep up how does that for you, your bread and butter area, translate into the dealmaking business . The advisory business really core to Goldman Sachs, has been for the entire history of the company, and when you see the landscapechanging transactions, undoubtedly they trigger a lot of dialogue in the board rooms and you saw the reaction in retail but this is a period time where people will ask about strategy some transactions might get extradited and clearly it sends a signal and people will be thinking very strategically on the back of it. Do you see a pickup coming . Weve been talking about the possibility, pickup of m m down the road, typically doesnt happen and there is a flaccid economy that may indicate a stagnant economy and we might bump along. What tends to get a lot of attention, kelly what you said, the big deals but actual volume, number of transactions this year, its up meaningfully its up 15 . Okay. I you know, my new role, ive been traveling the world a lot, so i was in europe i was in china and hong kong and tokyo and i can tell you the level of interest and dialogue particularly in this world where things are front and center for us the pace of discussion is quite good. Let me go back to the share price for just one second because while all the financials had a good run after the election, you guys are kind of back to where you were ten years ago. In stock right now, is it a priority tone hants share price, you know, to do things is there going to be further change in the business . I dont think people realize how tej lol call a firm you are. Out take overyour equities floor from 600 to three and some of the wear developers sitting on every desk, so one way or the other, how do you think your share price might start to go meaningfully higher than where its been for quite tom time. The one thing you try to treatment yourself, the share price is an output other a long peter of time and try not to get disprangtd by the share pride. The yet way to do is stay on our clients and keep growing book value. Yes, its important but in the short run not that focused on it. Can i just ask one more thing. Absolutely. Whats the difference between you you were cfo for four years and now income this role. When youre a cfo of Goldman Sachs, its really your team that did all the work. I inherited a great team i dont remember being on your show as a cfo. Thats the biggest difference. I was never on tv. Oh, boy now he gets to wear makeup. I hope we can have you back. Great to be here. Kelly, thanks so much. Harvey schwartz, the Goldman Sachs cochief operating officer. We said goodbye, but you cant leave just yet because we have nice parting gifts the microphone is not one of them. Kind of looking to take the ear piece with me. Only been used a few times with me. 30 minutes or so to go to the close. Hot or not. Well do a checkup of wall streets second biggest ipo of the year thats coming up in just a moment. And Bed Bath Beyond touching a 52week low ahead of its Earnings Report ahead of the close. Well break down the results as soon as it hits the tape now you can go. Now you can go. Gru get your mojo back. Become a villain again. Mmm. [ minion babble ] [ minions cheering ] [ minions sighing ] [ minions cheering ] [ minions booing ] okay minions, were going back to villainy. [ minions shouting ] so bad so good that im so bad. [ honking ] so, youre villains now . [ nervous laughter ] i mean, hello sweetie. Despicable me 3. Rated pg. Welcome back time now for a cnbc news update with contessa brewer. Heres whats happening right now. Senate republicans have released their version of a Health Care Bill in his Daily Briefing House Speaker paul ryan says hes happy that the smart is working to repeal and replace obamacare. We made a promise that we would repeal and replace this law. Im very happy that the senate has gone to the work of putting together a bill that keeps that promise and so, yeah, im eager for them to pass it but i wont opine on the details. Cleanup is under way in parts of central am am after Tropical Storm cindy moved through the area officials are warning residents to be on lookout for mounds of floating fire ants that could form in these floodwaters. President trump, of course, loves golf, but during a recent round at his club in bed minister he just kind of ignored the etiquette of golf. He drove over one of the clubs greens, and, of course, anybody who plays golf knows thats a nono in golf decorum and then he went over to engage his guests in conversations, although i will say, you know, if its your house, house rules, right . You can change them. Exactly. Didnt seem to leave a mark. If you own a house, you can drive anywhere you want. Should have seen what we did to the golf courses on crosscountry meets with spikes on we would tear those things apart. Did you have caddies to fix that yeah, no, or to give us water. That would have been great. Thank you, contessa. Sure. See you late remember. By the way, so, you know, dont forget, we are raising money for a Fabulous Charity thats near and dear to our hearts here at cnbc the lulu and leo fund which helps families and children foster and create confidence and build resilience. Yes. Go to charitybuzz. Come to place a bid to visit the set here thats what were offering, for you and a friend to come to the New York Stock Exchange, watch us anchor closing bell, join us afterwards over at bobby vans for a drink. You can meet some of your favorite traders here at the New York Stock Exchange. Look at that. And weve hit the bid. I dont know how they came up that amount. Five grand, whatever it is. Let me just say this yesterday i mentioned to sweeten the deal im going to offer up two copies of my book that ill sign and ill get kelly to sign it as well. I cant sign your book. You can sign any book you want i know what youre doing youre lying the bidding ends on tuesday, so youre lying back and you want to wait to see what the bidding is going to look like at the end. Dont do that. You dont want to get lost in the whole thing here, so im just here to say weve got to get above five digits so heres what im going to offer up now as long as the bidding gets above 10,000, when it does, im going to add 10,000 of my own money. Mr. Bill. To the offer. This is a worthy cause. Im telling you. This is not just about coming to the New York Stock Exchange. Lets remember what this is for. No, absolutely. This is for the lulu and leo fund and im more than happy to add that amount. Get above 10,000 and when it docile commit 10,000 of my hone money. Will that show up in the bid price. Then we better hit 10, people. Got to do that. Anyways go there now and place your bid. Up next, a cable giant has wall street cheering on its first day of trade, but what happens tomorrow atus stay with us they are the natural borns enemy of the way things are. Yes, ideas are scary, and messy and fragile. But under the proper care, they become something beautiful. Dynamic performance, so you can own the road. Tracktuned handling, so you can conquer corners. Aggressivestyling, so you can break away from everyone else. Experience the exhilaration of the bold lexus is. Experience amazing. Okay were standing here in front of the trading post where they are trading atus, todays big ipo created by the acquisition of cablevision and suddenly by the dutch telecongiant altice. 46 million shares they were going to float hand they upped it to 63 million, 64 million thats a huge increase now thats 1. 3 billion to 1. 9 billion, second biggest ipo and still got an 8 pop on this and ill tell you why. Number one, 8 float. Wow. They are floating a big company like this at 8 . Right. Remember, bill, big flow companies, 15 , 20 , 25 of the float. And these are shares that dont even have no. Dont get me started about that, thats another issue thats one thing number two, of course, this is a big play on broadband right now. Everybody thinks that this is a Cable Company. No, no, this is about broadband. Thats like saying comcast is a Cable Company but it is but thats becoming the least important thing about it. All the millenials think that they will get tv for free forever. Wait until they start seeing their broadband bills over the next couple of years i was adding up the amount of spend on apps, between apple music and throw in a few other things everybody is going to start paying more for broadband because they want all the overthetop stuff because they want more content. This company is well positioned. When we had although wireless going and all of that, you know, at t wireless, the other big one im thinking from 2000, a whole other story. Oh, boy. But had a 2 billion float is a pretty sizable deal. Huge. Period, even snap was what, 4 billion, so, you know, its up there. Were going to get blue apron next week, and, remember, everybody is talking about this because obviously amazon deal has everybody wondering how they are going to be able to compete. Blue apron sends out meals, essentially prepared meal kits, a millenial darling right now, so thats one i really want how big is that going to be do we know that yet . They havent price it had exactly and the question is whether the terms will hold or whether or not they have to move it to the downside. Thats the question is the this a special situation today, or is this the opening of the ipo window i think this is a special situation because broadband is really popular right now. Right. We havent seen one of these in a long time, and the story was very, very clear its, by the way, a very wellmanaged company remember, this was the dolans own cablevision and bought it essentially from them. Operating in europe at margins that, you know much, much, much tighter, keeping the costs way, way down. I dont know how much cheaper it is over there but considerably cheaper. I know my cable bill would be a lot lower if i were in belgium than if im here not that im complaining about comcast. Love our cable bills and bob is also going to sign the copies of my book for the lulu and leo deal. Keep sweetening it. Hold off until the last bid because theres more coming. More coming. See you at the close. The dow heading to the close is down five points we continue to lose departure. And American Airlines has led the charge in pressing the u. S. Government to curb u. S. Flights by persian gulf airways and now the dallasbased carrier may see the gulf rival as a partner. All those details just ahead rays always been different. Last year, he said he was going to dig a hole to china. At t is working with farmers to improve irrigation techniques. Remote moisture sensors use a Reliable Network to tell them when and where to water. So that farmers like ray can compete in big ways. China. Oh. He got there. Thats the power of and. Welcome back more shakeups at uber longtime uber venture capitalist bill gurley is stepping down from the board he led the effort to remove travis kalanick. There you can see ubers current board of directors. A lot of opportunity there. A lot of opportunity for whoever is going to come in as ceo of that company, dont you think . Meantime, American Airlines, the kun interest is largest carrier by fleet size, revenue, profit and passengers is getting what may be an unwanted stake. Qatar airways has given the indication to American Airlines that it plans to buy up to 10 of the company the key thing to keep in mind, they can buy up to 4. 15 after that, it will need the approval of the American Airlines board if it wants to go up to that 10 threshold keep in mind that Foreign Companies cannot own more than 24. 9 of any u. S. Airline, and given the fact that they dont want qatar to be buying shares in the beginning, its unlikely they will go beyond 4. 75 . Remember, doug parker, the ceo of american, has been extremely volk a. M. About the persian gulf carriers getting government subsidies and adding flights to the u. S. And that ultimately hurting both the u. S. Airlines and those jobs that are supported by u. S. Airlines here in this country. They issued a Statement Today or he did to employees saying while anyone can purchase our shares on the open market, we arent particularly excited about qatars outreach and find it puzzling given our extreme public stance on the illegal subsidies, the subsidies being the ones that qatar and etihad and others receive from their governments. Almost everybody you talk with in the Airline Industry and American Airlines who have anything close to do with this including analysts, they are all scratching their heads saying not really sure what qatar is doing here because they wont be able to get beyond 4. 75 likely, and they are going to be a passive investor who have are they trying to prove by taking a stake in a company that has a ceo who is very, very critical of them . Okay. So weve got all the pc stuff out of the way why do you think they are doing this reporter probably the most logical explanation is the ceo of qatar, on some kind of a bit of a fire clarke, if you will, he doesnt hold back when he thinks something i think he is hoping that by taking this stake, perhaps he muddies the water a little bit and in the eyes of washington when they look at enforcing the open skies agreement which ultimately could curtail the number of flights that the middle Eastern Airlines are adding to the United States. Thats one theory that is out there, and really its the theory that makes the most sense. Maybe its a savvy move, you know i often find my initial reaction what . It starts to make sense over time. Maybe they just want to make money. Yeah works knows. Thanks, phil. True, you bet. The why american . Thats whats also so interesting. The dow did turn negative here, down about five points a moment ago and less than a point with 15 minutes to go the health care names leading the way after the senate Health Care Bill was unveiled they still, are but were losing some steam here. S p is barely higher and nasdaq up 6 and russell up 5. Final call time for the nations big banks the results of the twopart stress test, first part of the stress test will be out in about 45 minutes when we come back. Well have a bull bear debate. Test or no test . Is it time to buy the banks . Coming up. baby crying fly me to the moon elegant music and let me play bell rings and the wolf huffed like you do sometimes, grandpa . Well, when you have copd, it can be hard to breathe. It can be hard to get air out, which can make it hard to get air in. So i talked to my doctor. She said. Symbicort could help you breathe better, starting within 5 minutes. Symbicort doesnt replace a rescue inhaler for sudden symptoms. Symbicort helps provide significant improvement of your lung function. Symbicort is for copd, including chronic bronchitis and emphysema. It should not be taken more than twice a day. Symbicort contains formoterol. Medicines like formoterol increase the risk of death from asthma problems. Symbicort may increase your risk of lung infections, osteoporosis, and some eye problems. You should tell your doctor if you have a heart condition or high Blood Pressure before taking it. Symbicort could mean a day with better breathing. Watch out, piggies child giggles symbicort. Breathe better starting within 5 minutes. Get symbicort free for up to one year. Visit saveonsymbicort. Com today to learn more. Welcome back the financials today are lagging. Some of the biggest banks down about 1 this ahead of the first round of stress tests due out this afternoon in just about 40 minutes time the first round will see if the banks have enough capital to withstand an economic downturn an economy with 10 unemployment and 6 drop in gdp and the tenyear at just 0. 75 is the worst Case Scenario. So whats in store for the results, and should you own the banks ahead of the test, even afterwards andy kapran from region atlantic is our bull and eric wasserstrum, were calling you a bear even though youre neutral. A couple of buys out there, so youre hardly a fullflown bear, but what are your expectations for the stress test . You know, theres a lot of expectation it will loosen up a lot of capital from these banks. Youre not quite as optimistic in that regard, are you . No, im afraid im not. I think my view is theres sort of a really dichotomy that you have to draw in this exam. For the smaller institutions i think that the stress tests will probably be a catalyst for more significant capital return, but for the big eight Bank Holding Companies which are the ones that the fed considers to be systemically significant, i dont see any incentive for regulators to allow capital return in excess of 100 of net income. And the other scenarios that they tested for this year, apparently include a 35 drop in commercial real estate prices. If that were to happen, it would aforecast the smaller regional players the most here. Would you be more cautious about those or some of the bigger names . So, these regulations really written in response to our last recession which was severe it was the worst since the Great Depression i dont think these particular stress tests are really going to create a big sea change with regard to the Regulatory Framework with the banks, but i think what might happen is as the Trump Administration realizes they cant legislation, they might seek to deregulate instead. That can be incredibly important for financials it as a whole big banks in particular because nobody else is regulated more heavily than the big Financial Institutions so youre saying, andy, if im hearing you right, you know, stress tests or no stress tests this, administration is a deregulatory one and that should benefit the whole sector they are on warpath i think they are borrowing from the Previous Administration, a page out of their playbook so to speak is when you cant legislate, youve got to focus on your your various powers which is usually your regulatory branches the Previous Administration ramped up regulation this administration is on a warpath to reduce it. Andy, do you also think, to erics point, that he doesnt believe that they will be able to do payout more than all of their earnings i see youre a shareholder of morgan and citi both of which are candidates of bigtime payouts. Whats your expectation for how much capital bill to return to shareholders i completely agree. It would be imprudent to pay out more than you earn that said, most of these institutions are very well capitalized compared to when these regulations went into place. Their capital ratios are better today than they were 12 months ago and much better than they were 36 months ago, so its time to get out of recessionary mindset and think about whats prudent in the long term at the end of the day having too much Capital Raise the cost of capital for everybody in the economy. That means hire Mortgage Rates and higher borrowing against corporations its not a good thing. So, eric, therefore, its not just as simple as waiting for rates to rise to buy the banks, or, i mean, youve got plenty. I was just looking here. I was told you had only two buy recommendations. You have allied financial, american express, citigroup, Morgan Stanley, jpmorgan i mean, youve got a lot of bice out there, but a lot of these are lagging, and the theory is that they are still lagging because rates are just not rising to help the Banking Industry out here. Yeah, i mean, our thesis generally is not predicated on some assumption of macro improvement. We tend to focus on more idiosyncratic factors, but what you underscore is one of i think the flaws in the bull thesis for banks which is that were getting into a broadly better environment from rates, maybe from regulatory items, et cetera, and while some of those things are manifesting, for example, the fed is hiking rates, the yield curve, on the other hand, is flattening. Right. And what youve heard from banks hover this past quarter is them talking down earnings expectations for the period despite two rate hikes through the year so far. Yeah. And as were just talking about Goldman Sachs here, banks have to find new ways to make money in this lowrate industry environment. Andy, eric, thank you both for joining us today. Thank you. Thank you. See you later former fdic share sheila bair will give us her reaction to the results of the stress test this will all come across we think about 4 30 p. M. Meantime with the dow down four points, were coming back for the closing count don. And well speak with carnival ceo around donald and well speak with the former ceo of Molina Health about the Senates Health care plan the impact of changes on obamacare and how st f may all have impacted his ouerrom his company. Youre watching cnbc, first in business worldwide its over. Ive found a permanent escape from monotony. Together, we are perfectly balanced. Our senses awake. Our hearts racing as one. I know this is sudden, but they say. If you love something set it free. See you around, giulia welcome to holiday inn whether for big meetings or little getaways, there are always smiles ahead at holiday inn. Our 18 year old wase army in an accident. 98. When i call usaa it was that voice asking me, is your daughter ok . Thats where i felt relief. Were the rivera family, and we will be with usaa for life. large boat honking im living that yacht life life life life top speed fifty knots life on the caribbean its a champagne and models potpourri on my yacht made of cuban mahogany gany, gany, gany watch this just inside the 2 00 mark with the dow down eight points as we head to the close. Second day other where the Health Care Stocks have been the stars of the show. This is that etf that reflects the value of the Health Care Stocks, and yesterday they were anticipating the unveiling of the republicans version of obamacare repeal, and today they got it it, and they still rallied those stocks across the board there. Altise, the Broadband Company ipoing here at the stock exchange, a positive debut its going out with a gain of about 8. 75 . The dow, might see a cautious close and they are getting that in fact ahead of tomorrow when youll have a russell rebalancing which just means a lot of buying and selling of various stocks in that in that indeck, and it will be very heavy volume, and then bob pisani, earnings coming out after the bell Bed Bath Beyond, and after all of these years ive still never eaten at a sonic have you no. I here the lime ade slushy is to die for. Speaking of retail, you were talking b. Tomorrow the russell rebalancing. Its always fun to see the stocks that are going out of the 1000, the big cap and into the small cap. Its kind of a morbid curesity a lot of retail names. Jc penney getting kicked out of the 1,000 into the 2,000 a little more than 1 billion market cap and dillards is getting kicked out, and some former darlings, groupon, fitbit getting kicked out watch one big name going into the 1000 and amd has had a great year thats been a big, big mover sometimes reality hurts speaking of reality, the Bank Stress Tests coming up in about 30 minutes stay tuned for that. Sheila bair will react to that on the second hour of the closing bell with kelly evans, and ill see you on there as well momentarily see you in a bit, kell thank you, bill. Welcome to closing bell, everybody. Im kelly evans. Lets lock at how were finishing the day on wall street the dow dropping about 12 points on the bell. Art cashin mentioned we had 350 million to sell. Pushed us down ten points. We were in positive territory for much of the session, really since the Senate Released its version of the Health Care Bill. We saw the Insurance Company, the hospitals leading these indexes higher, but that did moderate with the dow dropping 12 or 13 points on the close to fall below 21n100 and the nasdaq managed to stay positive and as all this shakes out thats still thecase, 6236 and russell 2000 an outperformer today, up a little more than a third of a percent to 1404h. Earnings heading our way. Bed bath beyond, samestore sales solid in past quarters will the positive momentum continue or will they be revealing yet more pain across the Retail Sector . Those results coming up. Financials trading lower ahead of the first round of stress tests due out in the 30 minutes time well get you the results as soon as they are out and look at the impact across the financial space. They were down twothirds of 1 today, by the way. Joining us is ian winer and stephanie link from tiaa investments is here with me on the set. Youre here in the mike santoli seat. Big shoes to fill. Big shoes to fill like i said, feel free if you want to channel michael in all of this. What do you think about this market though . I mean, it was interesting to look at the impact, so health care has now been one of the best performing sectors this year talked about the biotechs yesterday, super strong and now today the insurers, the hospitals. What did they like so much about what was posted from the senate that i had you know whats so interesting, kelly, the Biggest Surprise to me this year in the market has been sector rotation so the markets kind of is ebbing and flowing here, but the underneath, they are such big moves, and if youre not involved in some of these sectors that really take off you get left behind. Look at retail. Oh. The exposure there. Retail on negative side, energy on the negative side. On Positive Side health care i think health care has some room to continue because i do think youre seeing some tech money, tech growth money going into some of the biotechs and the Growth Health care numbers you mentioned the hmos, they have been strong performers for a um koof years and nothing in the senate bill suggests that will stop. The whole gameuality is broadening out. And why when you look at the response from some conservativeleaning senators, four who put out a news, including ted cruz and rand paul and they are not on board. The Market Reaction pretty much tells you that if they were getting more of the true repeal you wanted, you want see this action. Look at the medicaid names. Its all over the place still a favorable place for the insurers and med tech and to see if biotech continues to grow and outperform i think it also, especially since the pricing environment is really much more benign in washington, and, again, i say you have these fun flows, money out of tech into health care its kind of a like for lifnlg you are getting growth and getting it at a more reasonable price than some of the tech names. What do you see here . Are people mutting pun to work in the beaten down sectors or are they sticking with some of the winners . I see people sticking with the winners. Depends on whether youre looking at the actual consumer, the individual investor in the United States or youre talking about the model hedge funds in the United States and some of the index funds. I think they are two different things, so the speculation thats taking place is really happening outside the stock market, and its pretty rampant. If you look at the cryptocurrencies. I was just going to see beboin, etherium. If you look at growth in gambling and a lot of multilevel marketers, theres just a lot of speculation going on that really is making me very nervous, and were not seeing it in the stock market as much because its a different investor than it was 20 years ago when we used to be able when it wasa lot clearer when it is the tax cab driver pitching stocks. Not seeing that anymore. By the way, the gambling that youre talking about is it daily fantasy in that and that type of stuff, or just the fact that theres casinos i was out on the west coast not long ago, and you drive up, you know, and all these chinese restaurants and they have the slot the video slot machines, you know, and i realize this is now normal, but but maybe its just a good thing its not happening in the stock market. Do you think thats ever going to change again . Ill give you a statistic gambling as a reason for divorce is up about 100 year over year. Who even tracks that . I track that. I track that. Is that in the legal files . Just another data point. No, im impressed that you have that in front of you. Its also interesting though thats all about the experience theme. Weve talked about the consumer being very choosey and not going and buying apparel and people dont need five pairs of leggings if you look halt mgm, that stock has been very, very strong if you look at wynn and las vegas sands, a little more china exposure, but that, too, is all about experiences. Look at the cruise ships and Carnival Cruise today. I mean, a great, great number. People want experiences. They feel like their value is being met in experiences versus things. And were actually talking to the ceo a little bit later this hour meantime today, you also had the big move in oracle is oracle going to be a f. A. N. G. Name maybe thats a little bit of a lead, but when you have people saying we can give it a microsoft multiple and look the way microsoft has transformed its business over the past decade. It went from a 12 multiple to a 20 multiple as the crowd business showed growth and the margin started to improve. I think oracle absolutely has the same chance. Maybe it doesnt get to the that coined of a multiple, and its starting off at about 16 times forward so its not as cheap as microsoft was, but they certainly are proving that the cloud transition is right at inflection. Yes. And you know what, the stocks hold on one second. Yeah. Ian oracle has gone from 30 to 50, so i think its already rerated its already gotten, you know, the multiple expansion or whatever you want to call it, and i hear you about its inflicting now, but i think the buy side on a lot of people have already sort of been on to that, and it will be interesting to see, you know, who is the incremental buyer from here to me is the most interesting. I think weve been waiting for three years for them to inflict. They have been talking about this story for three years, and they havent been able to consistently execute, so ian to your point, the stock has certainly moved, and i would say that it started really last quarter because last quarter also it seemed like the cloud momentum was building, and now you string along two quarters in a row of better than expected numbers. Estimates are going higher, so, therefore, the valuation is still very attractive relative to some of these other cloud transition plays let me ask you before we have to go about retail because bed bat is going to report soon. Clearly a storm happening. Wheres the value there in bed bath not really a lot of volume other than the fact that its multiple has halved and the stock is down 17 . We know its very much at a threat from amazon and online and offprice, so all that have might be in the stock, but i think its very hard to try and pick these names as a secular winner it may be a day trade. It may be a week trade or a month trade, but i just dont think they are out of the woods. Very much like the department stores. Ian, people will tell us, look, ive got to put my stuff in my kids dorm room. Bed bath is a onestop shop. Move in staples and is there anyone in retail who can thrive in other than t. J. Maxx, by the way, in this environment . Well, i think wayfair is a name that we like a lot. Thats actually going to be one of the names killing Bed Bath Beyond, and i think you picked the internet guy i mean, is there a traditional. Anything that amazon doesnt sell, so how about home depot and lowes otherwise amazons going to retire more people than Social Security look, they also employ if you want a job right now, go look at Amazon Warehouse near you. They are hiring like crazy. Mmhmm. Anyway. Thats a whole other story guys, thank you very much. Stephanie link and ian winer joining us today to talk about the markets. As we mentioned Health Care Stocks higher after the senate draft proposal of its plan to replace obamacare. Lets get to kayla tauschy in washington who has the latest for us kayla. Its a modification of the American Health care act but the similarity is its a structure based on tax credits with which people can use to buy their own insurance, but the senates plan is based on income instead of age and for that reason its more generous to lowincome americans. Tax credits cover those up to 350 of the federal poverty level. Second, change in this bill compared to the house is medicaid will still see cuts but over a longer period of time, and funding for some specific issues will still remain for instance there, e 2 billion in state grants for opioid addiction just to name one, and finally businesses are expected to like it we did see the physicians lobbies come out against it, but senators expected that insurers that have so far been mum will actually like it and they will be incentivized by the commitment to pay those aca subsidies as well as some of these new stabilization funds to either stay in the market or come back to the market. The chamber of commerce for its part, putting out a statement of resounding support saying, quote, weve long south this type of balanced solution that doesnt jeopardize employersponsored coverage while seeking Affordable Access for all americans. But a handful of senators have said they either need longer to study or they want to see the cbo score which would come out in the next few days can, but four senators came out publicly this afternoon one of those senators, senator ted cruz, spoke to reporters earlier. The key to getting an agreement, to getting a bill that can pass, is we need common sense reforms in the bill that lower the cost of premiums the single biggest reason that so many people are unhappy with obamacare, that are hurting under obamacare is because its caused premiums to skyrocket. He, senators lee, johnson and paul have all sailed that they have a variety of Different Reasons why they oppose bringing this bill to the floor cruz says hes open to negotiation. He could make changes in his hardline stance on medicaid funding to be able to get some lower premiums, but senator john thune, who is a member had much leadership speaking to nbc news saying they are at this point a little bit short on votes. Kelly. All right, kay. [ laughter ] thank you. Kayla tausche in washington. Lets go now to dr. Mario molina who is the former president and ceo of Molina Health care. Thanks so much for being with us. My pleasure thank you for having me. Is this bill more favorable than the house version was as we previously discussed is this an important well, President Trump said that the house bill was mean i would characterize this bill as heartless this should not be the better care this should be the we dont care bill. Wait, what . What specifically in here do you think is worse from your point of view . Well, this bill destroys medicaid as we know it, and 70 Million People depend on medicaid for their health care this is going to make huge cuts to the Medicaid Program, and a compact that the congress has had with the American People for over 50 years to be there in tough times when you need help is going away. But dr. Molina, your former company i mean, it was up 3 . The investor, the Public Markets are telling you they are relieved by this bill. They are applauding it these things are trading near their highs. Well, i think when people really understand what this bill is going to do, the American People are going to be very disappointed medicaid has been gutted the premiums are going to go up, and the amount that people are going to have to contribute out of pocket for Exchange Policies is going to go up. They have removed the individual mandate which will destabilize the individual market. The only good thing here is that they have relieved some taxes on Health Care Companies and they are giving a tax break to people who make more than 200,000 a year in exchange for that were going to have 24 Million People lose their Health Insurance doesnt team like a good deal by most americans. You know, the most vocal opponents right now are the conservatives because they think this doesnt go nearly far enough to address the flaws that they believe are in the obamacare bill, so if they are the ones who arent happy that it goes far enough. This basically is meant to placate and bring into the fold even perhaps some democrats, so it appears as though and, again, the reaction does tell you a lot. You know, theres a couple of different of pieces of this, but medicaid in particular, theres an idea by those who elected these guys that they want to see changes made to that program, to rein in the spending long term its not an accident that this is happening. Well, there are ways to rein in spending, but this is not the way to go. If we want to rein in spending, we need to attack highest cost patients, those who are the duos on medicaid and medicare those are not addressed here at all and we need to do something about drug pricing thats not addressed this is going to destabilize the individual market and take Health Care Away from millions of lowincome patients and give tax breaks to the corporations and the wealthy. I dont think this is a better way of providing health care, and i think its a disaster, and i think if the public really understands what it means they will understand that. If the government steps back here especially from the medicaid business, will there be a role for more insurers to step up with some private offerings, or where where will that population go who might have been part i think it was 11 million who are under the expansion of medicaid added to those roles. Again this, doesnt begin to taper real reuntil 2020 and then over a several year period of time where do you think they will ultimately is there a place for them in the marketplace where you think they can go . Well, weve rolled back health care 50 years. Those patients are going to go back to the emergency room whery in used to go. The cost to the hospitals for uncompensated care and the cost to the doctors will go up. They will pass that along to the insurers and premiums will rise, and lowincome people will do without care or have to go to the emergency room many of them will not be able to afford their medications and diseases like diabetes and high Blood Pressure will go untreated because they are not painful, but years later those people will develop renal failure they will develop heart failure. This is a pennywise but pound foolish bill thats going to cost us much more further on than what were saving now. Last thing i just want to the point out though is that the hospital stocks are some of the best performers today, tenet and hc up up 7 , 10 those are big rounds of applause that investors are getting they dont concerned by the very premise that you just laid out. Thats because the market is focused on shortterm profits. If you lock at whats going to happen five to ten years down the road, this is going to cost much more, so were going have shortterm savings, but in the end the taxpayers are going to pay much more. All right dr. Molina, i want to ask you, too. Tough to watching it all play out from the sidelines of the company, and whats next for you . Well, my goal right now for the immediate future is to try to preserve the Medicaid Program so that lowincome patients still have that safety net weve got 72 million americans that are counting on this, and thats what im focused on at the present time all right well, we hope to check in with you again as that goes on. Thanks again for joining us. Dr. Mario mole noh former ceo of Molina Health care. Were just ahead for the next round of stress test results see if the key banks pass the test or whether you should be buying or selling bank stocks right now. Leaking m a activity to a press before a deal is announced adds a lot of money to a price tag. Details with a special fast take guest next and we do want to hear from you. Contact us on facebook, twitter contact us on facebook, twitter on send us an email, closingbell nbcuni. Com, youre watching cnbc, first in business worldwide. Okay. Our thinkorswim Trading Platform aggregates all the options data you need in one place and lets you visualize that information for any options series. Okay, cool. Hang on a second. You can even see the anticipated range of a stock expecting earnings. Impressive. Whats up, tim. See options data like never before. With thinkorswim only at td ameritrade. Welcome back time for todays fast take with the very special defendant mr. Bill is back because its just more fun. Im a bad penny i keep returning. Have i shiny, anyway. Time for fast take. Yes, it is. Thank you for being here, mr. Bill. Lets begin with twitter, shall we this is interesting news today you can now tip people on periscope. Twitter launched this super hearts feature today a little tricky to figure out but streamers amass 185,000 of these super hearts they can start to cash in via digital current de, and investors seem to like. It shares were up. Shares were up. But you said it though its very complicated. To recap here, users, you buy coins that you then turn into super hearts that you can give to the broadcaster the broadcaster stores the super hearts and they turn those into stars and then they reteam them for cash after they have accumulated 175,000. Twitter is clearly going to take its cut this clearly points to competition. Want to go over youtube and others that are making money. Its been working in chfnl i want you to tell me when you do your first super heart. When that happens you know the world is coming to an end. How about this sign of the world coming to an end the snap map they just bought zenly, already popular in europe as a way to locate friends or kids without drank your phones battery r. Being used already for snap chat. I heres the thing i dont understand i im going to bet you dont use Something Like this. The locate you want to know where your friends are. What . Pick up the phone. You dont pick this does not exist anymore. Call your friends. Where are you. Why do i need to know where all my friends are at any given moment if you want to find them at a concert. Or want to know where the hot party is give me a release. Want to find the im finding this very cynical. Youre already poopooed the cnbc premium for people who come on our air deals liked to the best see their volumes increased by 21 million, according to intralinks there is a publication called the annual m a leaks report that measures this and found 8. 6 of deals worldwide were leaked in 2016 well, guess why, because the premium went up. I mean, i will say when theres Public Knowledge of a deal, of course the premium is going to go up. When i worked at the wall street journal, the deals reporters or anywhere, they will you know, listen, they will say, look, you give me a scoop on this, well be able to get this good place and well have all the details they need and tell our readers and have the whole thing ready. Thats more publicity. Otherwise is goes on c8 the next day and especially if youre a smaller company, i can understand that there is actually a premium for in a. Theres a reason we didnt hear about the whole food amazon deal until it was actually consummated because they saved probably a pretty good premium. If it gets out before they are able to price the deal. Hopefully it whole foods went down when it came out. My pleasure. Hope you can join us tonight on nightly Business Report on pbs. There you go lets check on shares of Bed Bath Beyond. Down down sharply, 12 all the details from its Earnings Release and if it got amazon next and the Financial Sector underperforming the Broader Market since the president took late effort but could the latest stress results that are due out in a moment help to turn things around thats coming up w york. We are building new airports all across the state. New roads and bridges. New mass transit. New business friendly environment. New lower taxes. And new University Partnerships to grow the businesses of tomorrow today. Learn more at esd. Ny. Gov the dodd frank Financial Stress test results are due out any moment now sus y wulg to bring the fl relttoouhen we come right back stay with us [ intense music playing ] its here, but its going by fast. The opportunity of the year is back the mercedesbenz summer event. Get to your dealer today for incredible onceaseason offers, and start firing up those grilles. Lease the gle350 for 579 a month at your local mercedesbenz dealer. Mercedesbenz. The best or nothing. Welcome back lets get Courtney Reagan with a report on bebe yopd. Shares down very sharply. Bed bath beyond mission on earnings, ref now and samestore sales decloing 2 . Analysts were locking for the slightest of increases there no updated guidance. The company said they gave that updated guidance on april 5th. They will consider whether they node to do so after the end of the quarter. The company isnt sure if the problems that it saw in the First Quarter will be continuing from here on out kelly, back over to you. Yeah. They said comp sales from customers facing Digital Channels were strong, more than 20 up but comp sales from stores were down thank you. First of the feds Bank Stress Tests are out but lets just get to it. Reporter all 30 banks have fared well these the results show even during a severe recession our large banks would remain well capitalized which would allow them to lend throughout the Economic Cycle and support households and businesses when times are tough. The severe adverse scenario is coined as worse than the recent situation but less bad than the Great Depression and includes unemployment at 10 and real gdp6. 5 , lower than qh last year no stated pass or fail this time around however, all the banks have a minimum c e t1 ratio under severely extreme scenarios and big banks are comfortably above the 6. 5 level the loan loss rates have improved due to better underwriting standards and runoff of some precrisis loans. As for the losses, the aggregate loss in a severe adverse scenario is 493 billion of which the big increase from last year was credit card losses now accepteding at 100 million. This will all passes for part of the quantitative results of the ccar results next week an likely ability of the big banks to meaningfully return shareholder results. A look at the bank share prices, and you can see they have improved Goldman Sachs before this was down about 1. 2 for the day, so this is the aftermarket price. They are all sort of still flat in the after market trade at this moment. Kelly. All right more as we get it and well see shows of morgan and stowe, two of the expected rhames that would happen this week stephanie, whats your just sort of gut reaction here to what we know so far . Kind of as expected i mean, this is one of the reasons you wanted to own financial. It was deregulation, Interest Rates and then capital return, and this year we were all expecting very good results. 10 out of the 23 largecap banks actually are expected to post very good numbers in terms of patriots over 100 . Right. So thats thats versus three last year, so i think the numbers are going to come in better i think this is a real good place for the banks. They didnt rally today, and i think maybe they will rally tomorrow if we get more information. Or wednesday depending on if they are kind of waiting for the details. Sheila, to that point theres so much discussion about how much banks should pay out of their capital right now. What do you think is appropriate . Well, i still think the regulators should be cautious. This is good news, and they have been working on it for year, and and so im not surprised and happy that they have all passed but i do think, you know, payouts in excess of earnings are problematic. You know, frankly the capital levels in my view are still a little too low by i believe is the most important metric. I just dont think we should get ahead of our elves and there are other factors and yield curve is still pretty flat. We dont know whats going to happen with capital levels im hoping in terms of deregulation we dont weaken the capital standards which would allow more distributions to shareholders, so i hope the market doesnt get too ahead of itself and reading too much into any of of this. By the way, the reaction from at least Big Bank Stocks is very mouthed. Just slightly higher David Ellison, what about your expectations here for the banks, for capital return and, you know, the results that we just learned today . Well, again, i think this is six years now that weve had this end of the school year final exam thing it, and i think this is the third year where most of the banks have passed and i think we have an industry well tested by the regulators in terms of endofworld scenarios. Again, some of the numbers youre looking at, the worth Case Scenario is stock market down 50 and housing down 25 and commercial real estate down 35 , and longterm bonds or tenyear treasury goes to 80 bips so the viewers maybe dont understand how stressful this test is. We also know that, at least ive been told by some of the banks, that this submission from the banks is about a 40,000 page document. Wow. So thats a huge amount of effort that goes into this, and, again, were six years, seven years into this, so what this tells you is this industry has gone through this cycle now six years. Everybody is in reasonbly good shape, and thats why you see the economy the way it is, and thats why you see the stock market the way people always ask why the stock market is so good its because the banks are in great shape. They have capital. They are lending they have got capital protections it, and this will continue. So stephanie, again, just to reiterate the headline as wolf told us. All 36 did pass the stress test result and did not give the pass fail designation, all of them passed and all but two got the payout nod and is next wednesday more important for investors . Youll be able to back into some of the numbers after we get the details tonight, and so i think you probably have a better rally in the next couple of days and sell the news. I would say that wells fargo is the most surprising because they have been in the headlines, of course no one real expects a lot from them they did passion, and even if they do, their payout ratio will probably be equal to what they did last year. They may not see a raise like all of the other banks and citi and Morgan Stanley are the ones that can pay out. Will, ill bring you back in here. Ill added to what you have been saying which is clearly this is the round of tests where the same capital return issues are applied to all of the banks so you can compare them against each other next week is the real key area where it brings in what the banks want to do in terms of capital return, so it can change things a little bit and whats encouraging today is the buffer, if we look at the big six in terms of this is the loan loss rate and not what were looking at now in terms. Cet ratio. The big six have quite a big gap between that 4. 5 which is a good indicator that they should pass the quantitative part next week. Yeah. In terms of the call at the same timive part, thats slightly different and eyes on wells fargo. Bringing in the loan logs rates, the one standout is Goldman Sachs at 8. 1 and thats quite a lot higher than the other big six and something to just focus on over the course of the next 24 hours as to why that is. Okay. Especially if that shows up in the share price reaction sheila i think it was my understanding that the u. S. Bank subsidiaries or foreign banks are not participating this year . Well, no, they are participating, but next week its not they are participating, but the qualitative, so theres a quantitative test and qualitative test it, and what has tripped them up in the past has been the qualitative test it, and the fed earlier this year finalized a rule to exempt all but the 13 largest banks so well, 21 banks are out of that call at the same timive test now which is probably good news for investors because frequently though the banks were passing the quantitative, they were not passing the qualitative so the group of banks is much smaller now that has to pass a qualitative standard for distribution. Going back to leverage ratio, theres been a lot of talk about loosening that up or doing away with some of the regulations there. Yes, there is. Are you saying that you dont think that thats a good idea . Why is that, and do you think theres a way they can apply it different lever over the size of institution . Yeah, i think for Smaller Banks thead that if you have a strong leverage ratio, 10 or above, you should get rid of all the other regulation probably a good idea for the larger banks i dont think you want to go there but its very dangerous to weaken the leverage ratio its not that big already, 5 for a Large Banking Organization and 6 for a large insured bank. That means you fund 990 of your assets i have confidence, its simply and all the analysis show the the those reported at riskweighted ratios and leveraged ratios performed very perfectly. They shouldnt touch those raise them if anything david, what would you say to that well, you know, i think the industry has enough capital. The question is how down get the returns higher next week youll hear that the average payout is going to be 80 to 90 of earnings for the year in buybacks and dividends and what they are telling you is they dont need more capital how do they get the capital up in order to drive the stocks higher thats going to be the challenge the next thats the challenge for those geese and who willy is on. What do you have baked in and lets take the biggest banks out thereto for the kind of capital return they may be able to do next week if all goes according to how you think it will again, i think there are 10 of the 34 could potentially have 100 capital payout between the dividends and the buyback. I dont know if they will get that, but youre going to have, again, between 80 and 90 of the earnings are going to be thats it the expectation that they are going to be allowed to do again, it comes back to how do they, you know, improve the return of the capital that they have so, again, the big bank industry, its big enough and probably still too big for the economy that we have, and so they need, to you know, not grow, but they need to get the return up. I mentioned, you know, you look at this amazon deal that business, you know, a big grocer there was never a question of how that would get financed. I was going to make a joke on the cash pile. Youre right, youre right. Theres no need no need, the Debt Financing will be there. The industry doesnt need it like they used to be needed years ago, and the question is how do they sort of become moreportable they need to restructure their enbusiness and i think the bigger binges have the capital and earnings and people and have to just start making some to significance sghz and there are some of the regional banks, m t and key down and their real estate values, they still passed and for all the reasons we were outlining, investors sensing some weakness there, so as we head into next week is the better outcome in terms of capital return priced into the bigger bank shares and what happens now for the sector for the rest of year . Thats the number one question, and a great one. You need more than just capital return in in a story, in a stock, especially given that the stocks have rallied so much from the novellos, since the election, right . Had a nice rally and stalled a little bit recently and still up 20 , double digits you need deregulation and Interest Rates you node a steep yield curve. If we get that Economic Data you will get a steeper yield curve. That hasnt happened now stay patient and pick your spots and you still go with the winners. Jpmorgan is a winner Morgan Stanley is a winner a lot of names, suntrust is the winner, names that i like and that i own but clearly you need the other pieces to kind of put into place of these things take off. Sheila i was going to ask you about the droneflying experience, hope that that goes i wont be starting a second career ill stick to my knitting. Thank you, everybody, for joining us sheila bair, David Ellison and steve any link. Meantime, it is speaking of those drones, its tech week at the white house, and today the president was meeting with teleco executive and carnival up nearly 28 this year and its climbed even higher on strong secondquarter earnings today. The Ceo Arnold Donald will join us to tell us how his companies are faring under the countrys new travel policies. How would you like to have a strike with me and mr. Bill griffeth, all for an extremely good cause and billy will match you. Hell head to our page on charity buzz right n towo learn all the details and get to bidding. Bidding. Cl are. It starts a chaintion. Thats heard throughout the connected business world. At t Network Security helps protect business, from the largest Financial Markets to the smallest transactions, by sensing cyberattacks in near real time and automatically deploying countermeasures. Keeping the world of business connected and protected. Thats the power of and. Its not just a car, work sfx its your daily retreat. The es and es hybrid. Lease the 2017 es 350 for 329 a month for 36 months. Experience amazing at your lexus dealer. Parts a and b and want more coverage, guess what . You could apply for a Medicare Supplement Insurance Plan whenever you want. 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Eamon, did he ever get his hands on that drone . Reporter you know, kell, we didnt get to see the president flying a drone today but we did get to see him examining a drone. Ill put it the that way was shown one of the industrial jones that they use for mapping and agricultural settings, and he seemed to like that look, this was the president today sort of in his element this is what he likes to do. He likes to back slap and glad hand with a lot of the biggest names in business and talk about jobs and economy and Economic Growth in this country heres a snippet of sort of his interactions with a lot of bigname ceos starting with ges jeff immelt. Jeff, congratulations, on a great career. Thank you very much. A great career. I was sad to hear it in one way and another way i said, boy, what a good job. Steve, really great to have you here, by the way youve done a good job you got a hell of a lot of money for that sale. I dont think you were ever given enough credit for the deal that you did for your shareholders. Randall, the job that youve done at at t like two companies youve start and then it was made very different by government and now here you are again, really a top job, and i want to congratulate you thats not easy to do. Reporter so the president clearly in a good mood today, interacting with all the ceos there. This was a little bit different than some of the other sessions that weve seen, not only because there was a drone in the room but also because the president got some advice he hasnt gotten much of this year which was from one of the drone startup ceos who says he thinks the president needs to push for more regulations they want more regulations from the faa in order to allow the Drone Companies to really mow what the rules of the road are to fly their drones and to do their businesses not often that this president hears from Business Leaders that they need more regulations kelly . Yeah. Thats for sure. Still, an interesting subject, especially with all the fiveg stuff weve been covering from different angles thanks so much. President trump walking back parts of the normalization of the u. S. Cuba relations that president obama put into place and the ceo of Carnival Cruise lines joins us next to talk about what that means for cuba hand how it will aforecast the cruise industry. History suggests its time to buy tech and our guest has two names that can help you get into the real. You totanobodys hurt, new car. But there will still be pain. It comes when your Insurance Company says theyll only pay threequarters of what it takes to replace it. What are you supposed to do . Drive threequarters of a car . Now if you had Liberty Mutual new car replacement™, youd get your whole car back. I guess they dont want you driving around on three wheels. Smart. With Liberty Mutual new car replacement™, well replace the full value of your car. Liberty stands with you™. Liberty mutual insurance. Welcome back carnival hitting a new alltime high today its up 28 this year. Results this morning, and while there was some concern about travel to cuba after the president s new order, the new rules still allow for cruise lines to go there. Whats it mean for carnival and the competition . We have exclusive with the companys ceo. Susan . Record earnings, raising full year guidance, but on the Conference Call everybody kept talking about Fourth Quarter revenue, yields, thats all they wanted to talk about, because youre really guided for conservative estimates as you said, we raised our guidance for the full year we had a very Strong Quarter people are asking questions about the Fourth Quarter, but we have tougher comparisons in the Fourth Quarter, and, frankly, weve took the gains weve had this year and added to our guidance and left the guidance for the rest of the year that we said earlier in one place. Right is there a reason why youre being so conservative for the Fourth Quarter are you concerned about geopolitical risk, terrorism scaring away potential cruisers . Susan, we always give our best estimate, but for our businesses, there are always things that come up and every quarter as they have this quarter, and we try to manage through them and, obviously, are going to try hard to beat the guidance now you also offer cruises out of the uk, out of britain, and im just wondering in light of the tragic terrorism events weve seen over the last few months, has that had an impact on passenger bookings . At this point in time we havent seen a falloff in bookings unfortunately these things have happened and they are happening around the world, but just as their street crime in new york or whatever people dont stop living, and so at this point in time we havent seen any falloff and from the events that have happened in the past and many have happened in the past quarters and years, we havent seen a major impact on bookings, because as you can see the industry is doing well and were doing particularly well. What about cuba is there a sigh of relief to still operate . First of all, were proud to make history, being the First Company to cruise from the u. S. To cuba over a year ago, so its an anniversary we have two new brands now, carnival and Holland America will be sailing to cuba before, as you know, it was in essence youre doubling down on the number of itineraries and ships sailing to cuba well continue to expand, but its still a very small part of our business we already are sailing under the 12 approved forms of travel, so were already doing that and we were doing that all along, and as long as that stays in place, its fine. But were hoping we have the opportunity as a company and as an industry to react to whatever the final execution of, you know, the declarations are why are you doubling down so theres no unintended consequences if theres no problems what will stay in place right now what we do feel confident in, the white house said the 12 approved forms of travel is going to be the standard they will enforce that, and thats what weve been operating under all along. As long as thats the case, well continue to cruise there we just want to bring people together financially for us, to be honest with you, cuba is less than a half a percent of our business, so you could never find it in our numbers, but in the future, it can be significant, and in the short term, its bringing people to people and its driving Economic Vitality for the citizens of cuba when the guests go to cuba, they do spend money locally with locals in the restaurants and in the small shops and what not, and that helps drive the economy there for the local people mr. Donald, its kelly evans here at the New York Stock Exchange you know, ive been racking what is im trying to think, what would get me on a cruise . Ive never taken one, okay i dont know, trapped on the boat, but i think i came up with something. I think if you guys did, like, an american ninja warrior, okay, you got the sets with the crazy obstacle course. That, i think i would sign up for three, five, seven days floating around and being able to try that out. All right then, well have to do that just for you, kelly, but the reality is might be a couple hundred million dollars, but, you know well find a way, well find a way. You should cruise. Many people havent, but the best way to get you to cruise is talk to someone you know and trust who has cruised. Oh, they love it. I know, youre right, everyone raves about it they will drag you with them and youll be dragging somebody else once you cruise, youll continue to theres 70 recurring rate, right, for firsttime cruisers so, arnold, we have to let you go, but youre in brooklyn tonight for the nba draft. Yeah, im going to go jason tatum, whos a duke player who is now going to be one of the top five picks in the nba draft, ill be joining his family to celebrate. Hopefully, hell go in the top five im pretty sure he will, and his familys very excited. So shout out to you, jason, congratulations, youve worked really hard. All right, thank you so much. Kelly, back to you have fun tonight. As long as he doesnt go to the lakers, okay we have to let that one happen its meant to be, okay, lonzo ball yeah, thank you, guys, great stuff. Arnold donald. Thank you whole foods ceo jeff mackey called it love at first sight when he met with jeff bezos. Well tell you what the ceo of mondelez thinks about the buyout after this dont you mean dad kind of ruined our hawaii fund . I thud go to the thothpital. There goes the airfair. I dont think Health Insurance will cover all. Of that. Buth my fathe without that cash from aflac we might have to choose between hawaii or your face. Hawaii what . Haha. Hawaii you might have less coverage than you think. Visit aflac. Com and keep your lifestyle healthy. Aflac the power of a low volatility investing approach. The power of smart beta. Power your clients portfolio with powershares. 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If anything its telling consumers are shopping everywhere snacks instead of categories are not yet that big, only about 2 to 3 of sales here in the u. S. , but over time we intend to be the snacking leader online, as we are in the bricks and mortar space. That was part of jim cramers interview with mondelez ceo irene rosenfeld. You can catch the whole thing tonight on mad money starting at 6 00. Be sure not to miss that coming up, as well, financier Steve Schwartzman rolling the dice on a unique oneyear all expenses paid program in china for extraordinarily young people that he hopes will change the world. Billionaires bet 10 00 p. M. Eastern here on cnbc time now for fast money. Fast money starts right now live from the Nasdaq Market site overlooking new york citys times square tonight on fast, oldie but goody. Oracle blowing past its dot com bubble levels and there are two other 90s tech darlings that could soon follow to new highs well explain. Plus, no stress. What the results mean for the rally in financials. And later, Dennis Garthman says theres something in