Transcripts For CNBC Squawk 20240703

Jpmorgan, citi, wells fargo, they all reported earnings. All appear to have been fairly strong. Were going to break down the quarters. Plus blackrock now managing nearly 10. 5 trillion in assets. Were joined exclusively by chairman and ceo larry fink. That will be later this hour. Were also watching the semis this morning. Qualcomm, intel, amd and nvidia all moving lower ahead of the open. China reportedly telling its Telecom Carriers to phase out foreign chips. I want to start with the banks and the downturn in the market as well. Earnings season kicks off with the likes of jpmorgan and wells fargo and citi, for example. Mike, id love to just turn to you quickly, just get a sense on the market as well. Yeah. Its been an interesting day yesterday with that move up in apple shares, particularly, as the day went on. Obviously, moved the nasdaq appreciably higher. What do we think is behind some of the weakness were seeing beyond these bank earnings, which, at the worst, are a mixed picture . I dont think its bank earnings, necessarily, the catalyst. Yesterday, the indexes were rescued by not just apple bouncing on some reports about some a. I. Macbooks and whatnot, but nvidia going up 4 becauses this the market we have. When we get nervous about macro and yields and inflation, and we have had a 10 pullback in nvidia and some of the other a. I. Stocks, well, the market, when it gets defensive, actually goes into the growthy, secular names. So, i think that was yesterday. What we have now is a market that has been sort of chopping around, very familiar levels, for about four weeks, and i think no matter what you thought heading into this week, the picture did not get any less complicated with what we learned this week. In terms of inflation being sticky, repricing the feds path, bond yields going up to multimonth highs. I dont think that we have to have a strong, specific rationale for why gold is going vertical to say, maybe when gold is going vertical, things arent necessarily as settled as wed like them to be. Going to test the lower end of this s p range, and geopolitical upset is obviously in the mix. You have oil rising. This has been a feature of this market, especially ahead of weekends where normally you have the volatility index backing off because youre going to be closed for two days, and today, its popping again, and its obviously a volatile mix. On a limited basis, at least, but then we had the if, you know, hopefully theres no escalation of any sort, monday, you have a relief trade. Theres the sterno report that israel is preparing for a direct attack from iran on southern or northern israel as soon as friday or saturday, according to a person familiar with the matter. Irans been public with the threats. You have, just to reiterate, mike, you have Brent Crude Oil above 91 a barrel, Wti Crude Oil surging at the same time where the dollar is surging and gold is surging, and usually, those things dont happen together because gold and oil are prices in dollars. They usually go in different directions. Theres definitely a safe haven flight right now, and i would also mention that treasurys are catching a bid today as well. Its not like high rates are spooking the market this morning, because treasurys are getting bid. Yeah. And of course, as we were sort of kbicombining here, banks ande broader market, ill come to jpmorgan, not the numbers themselves, more the comments on the media call from jamie dimon. We already got a sense of this from his annual letter, which came out early in the week. But you know, he, once again, is saying, listen, im not predicting a recession or no recession. I dont know what the future portends of all the things that were talking about. But he does continue to say, sara, his own personal belief is things, you know, the price in the markets is probably too happy, and i think the chance of bad outcomes is high is higher than other people may think, not projecting them, just saying they may have to you have to look for a potential range of outcomes. Im working here off a transcript thats not exactly word for word accurate. He cites exactly what hes worried about, which are persistent themes he has been worried about. The Global Landscape is unsettling. Terrible wars and violence. He mentions that again. Continue to cause suffering. Second, he says there seems to be a very large number of inflationary pressures, which may continue. And he says, weve never fully experienced the effect of quantitative tightening on this scale. He has been warning about this for years. So far, the market hasnt really felt it, the move from 9 trillion to that was from the earnings release, not this media call, but yes, thats right. But he sort of highlights the three buckets that i think theyre worried about. If you look at the overall earnings numbers, though, i mean, they lifted Net Interest Income forecast. Maybe the street was looking for more on that, given how much weve pared back fed Interest Rate cuts, but that seems to be one of the primary areas of focus here for banks. It is. And i think you also have to emphasize how much jpmorgan, the stock, has outperformed Everything Else in the group. Up 15 this year. And i mean, over the last two years. Yeah. Its basically, you know, ahead of bank of america. Bank of america is the closest comp. Its got, like, i dont know, 75 percentage point outperformance in the stock to that point. Double the market cap of b of a with 40 more assets. It tells you the market has decided that perhaps because the ceo is always worried about what could go wrong, even as things look good in the business, theyre willing to say that this is the bank that survives almost, you know, any environment, and so thats the context in which you back off 3 when you dont raise net interest margin, you know, guidance as much as people were thinking. 89 billion is the new nii forecast, and i guess it was 90 billion in 2023, but thats still better than the 88 billion that they previously expected. There was also a reserve release, which means that credit looked better than they were anticipating, and so thats a part of the story that continues to really support both the banks in general and the overall, you know, economic outlook. I mean, i think the banks the reason we have to focus so much on the net interest piece of it is its really the main swing factor, along with Capital Markets and deals, and thats been really active. Massive Corporate Bond issuance in the First Quarter, jpmorgan gets their share of that. Weve got some ipos. Thats good, but the market doesnt usually pay a lot in advance for that. Its not like its a Growth Business overall, banking. Its not a Growth Business. To your point, they have a return on equity of 17 . I mean, you know, just to put it in perspective as to why, to mikes point, jpmorgan gets such a premium to many other banks, i mean, citi, which is working its way through this massive restructuring, and youve sat down with jane fraser a couple times, sara. Were talking about r. O. E. Of 6. 6 in the First Quarter, not to mention wells fargo at roughly, lets call it, little over 10 . So, that just does put in perspective why there is a willingness, mike, to pay more for jpmorgan and or at least the dollar of earnings, more on a multiple basis. Mike put it well. The bank analyst at wells fargo said, jpmorgan is a call option on a more hawkish fed in the shortterm. Capital relief from basal iii, and best in Class National deposit share, and thats sort of why jpmorgan has gotten a premium, even though you said banking, not a Growth Business. Really strong results from both citi, i noticed up 32 in Investment Banking and jpmorgan, which was up double digits as well. 27 , the Investment Banking. A year ago, i mean, First Quarter of last year was as bad as it gets. Youre absolutely right that thats a good swing factor. Its just that the banks no longer participate they dont want to have great leverage to a really booming u. S. Economy as much as they used to. A lot happens outside. Theyre overcapitalized. They cant do wild, risky stuff as much as they used to. I think theyre just more steady, which is a good thing for the system, you know . You would think so, although something theyre arguing about, certainly, the next round of potential capital requirements. Overshooting. They feel like its overshooting. We talked a lot about private credit as well and the market share its taken in terms of an area that used to be quite profitable for many of the banks, that they are sort of fighting back on to a certain extent through lower pricing, basically, financing in terms of deals and the like or the large credit needs of so many companies, private credit, obviously, i mean, weve covered it pretty closely this last year. Taking up a lot of loans. Alternative asset managers, apollo, on from there. Aar. Ares. H hps. It just goes on. Theres an interesting divergence shaping up between the big banks and the Regional Banks, and this idea that the more hawkish fed or fewer Interest Rate cuts is very helpful to the big banks, and while it is helpful to the regionals too, they get hit more with bad loans and bad credit quality and issues with deposits. And their deposit costs go up. The longer that the fed stays at 5 3 8, and thats what youre getting in money markets, the harder it is if youre a bank to compete for deposits, and thats been its not so much like a deposit flight issue. It raises your costs. But yeah, the Regional Banks, the selloff in bonlds, it creats more focus on the ones that have a little bit exposure in terms of unrealized losses. I think its much more about, you know, if the economy hangs together, theyre going to be fine. Theyre trying to hold these prices that are well above the march 2023 lows. Yeah. And before we go, just to come back to the broader markets again, to refresh people, we are going to look for a down open here, but you know, mentioned apple at the very top. I mean, that was i think that was the biggest move. Apples seen, what, 11 ill leave it to you. I dont want to Say Something i think it was many years. 4 daily move, yeah. And again, it just shows you how the market gets very twitchy on these days when its decided that its going to just since last may. Okay. Im sorry. I thought it was even longer than that. Its a pretty good size move in a twoplus trillion dollar company. Again, this has been the rotational yesterday was a weak day in the markets. You had most stocks down, but the index managed to hang in there. Alphabet and amazon also, though, as they both sort of i mean, amazon in particular was very close to that 2 trillion mark that we sort of follow. You pointed out nvidia as well. Do we expect followthrough . Yesterday at the end of one of our shows, i forget which one, mike, we were talking about the douring is the word you used as opposed to the broadening theme weve been stressing for the last few months. Its definitely flagged quite a bit. Thats when higher yields bite is on the majority of stocks. In fact, if you looked at sort of equalweighted s p relative to the market cap weighted, its back on its lows, more or less, so its not as if theres been a lot of progress. And you know, if youre an index owner, you kind of dont care. The overall market hangs in there. I think you have to sort of stack up what we know and what we think we know. Its a bull market. The strength and persistence of the bull market in the fivemonth run we had off the october low is of the sort that usually means its not the end of it. In other words, its persistent, 6 to 12 months later, so you know all those things. What you dont know is what happens in between, and there has to be some giveback. Were in one of the top 12 or 13 longest stretches in the last 80 years without the s p at least touching its 50day average. All it means is the market is up a lot, hasnt backed off much. And there are a few other negative catalysts we didnt even mention. The semis, theyre weak, especially intel and amd on this report from the journal that china continues to crack down and is trying to wean the Telecom Providers off of american chips. And theyre doing it. And they have set a deadline. The cpus in particular made by the likes of amd and intel are very important. And it extends beyond telecom as well into the pcs that are made and provided for in china as well. But you can see the weakness in particular, i think, amd, down as much as 3 . Phase out by 2027 is the headline. And then the only other sort of negative data point from china was the export data. I dont know if you saw. Down 7. 5 . And that is worse than it has been, and also, its worse given that there was some optimism lately on china, particularly in terms of exports. This was a downside surprise. Imports were also down 2 , so just speaking to the persistent weakness in chinas economy, and just when, you know, just when some of the Hedge Fund Managers get a little bit more bullish on china, we saw outflows in japan for the first week last week, and inflows into china, disappointing data. Its kind of the new widowmaker trade is the pick the low in chinese risk assets. Hard to do. Well see. All right, weve got a big morning on tap here. Blackrocks ceo, larry fink, will join us exclusively here at post nine on a big earnings day for him and for financials in general. And in the next hour, nike going for gold. Weve got an exclusive interview with ceo john donahoe as they unveil their new olympic kits. Taking a look at futures here as we head into the opening bell. As we mentioned, down session, dow down almost 300 points ahead of the open. Nasdaq futures, down 1 gin back yesterdays big tech gains. More squawk on the street straight ahead. You know whats brilliant . Boring. 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Our timetested fixed income suite, backed by over 145 years of risk experience, helps investors meet their goals. Pgim investments. Shaping tomorrow today. My name is oluseyi pgim investments. And some of my favorite moments throughout my life are watching sports with my dad. Now, i work at comcast as part of the team that created our ai highlights technology, which uses ai to detect the major plays in a sports game. Giving millions of fans, like my dad and me, new ways of catching up on their favorite sport. Blackrock reporting financials and also that it has record assets under management. Theyve now reached 10. 5 trillion as of the First Quarter. Company also posting a 30 jump in its profits. Ceo larry fink will join us and well talk about the numbers and the overall economy. 10. 5 trillion is a pretty big number. It is. I can remember when it was below a trillion, i think. I can go back a long way. Fixed income, interestingly, was the largest inflows, i think, at 42 billion for the quarter as opposed to equities. Steady inflows. I think he characterized it as 76 billion net inflows in longterm, so noncashtype funds. Yeah, its moving right along. Obviously, the markets helped in terms of getting the overall aum up, and the company is built to be somewhat agnostic as to what asset class, what strategy, active passive, retail institutional. I think thats very much by design. They just sort of capture it, and i think thats by design. Theyre using their scale to their advantage where there is earnings lefrmg in the model because it doesnt necessarily take more people or costs to manage an extra 60 billion in a given quarter. 62 billion inflows for etfs. Thats the ishares business. Obviously, thats strong as well. Strong but lower fee. Thats the tradeoff. They did benefit, obviously, from performance overall of the market and therefore performance fees fairly strong. Although you can see a mixed reaction. A number of the analysts saying, generally, i would say, a positive take on the quarter, a bit better than anticipated. Margins came in fairly good on lower expenses. Its already at 20 times earnings. Its kind of its certainly got the markets respect in terms of being a quality business, so its not as if there have been times blackrocks traded cheap. When people hate the market and theres outflows, it actually has gotten pretty cheap, and its not been the case, because we have had pretty strong markets, and theyre right in the middle of it. Alternatives, also, attracted some money there, 11 billion in alternatives. You know, larry fink has been, i think, way out front on the inflation call. Jamie dimon has also been saying sticky inflation, but fink early was talking about fiscal stimulus, just permeating the economy, no recession. I remember when he was on with us last year, talking about, i dont see a recession because we have had so much fiscal spending, and by the way, thats going to make inflation sticky. Its an interesting time to talk to him on a week where cpi surprised to the upside, and has made investors rethink the entire rate view. A number of wall street firms, today, mike, are saying its not going to be until december that we get a rate cut. It could be. And that would be one cut for the year. Exactly. And so, that i was sort of dangling that out there, starting a few weeks ago, about this whole, were in the opposite version of 2015 where the fed wanted to get off zero, they wanted to punctuate a whole fed cycle, and they couldnt. The economic numbers were weak. Inflation was low. They didnt have the basis to do the multiple cuts that year that they anticipated a year earlier, and finally, in december, without the economy telling them they should, they raised rates by a quarter percentage point off of zero. So, i was this is now starting to become the chatter out there. No landing. But they want to get it done. They want to finish up this cycle. I think. Well see. Somehow, i think you two are going to be discussing this for some time to come. As we have been. Always. I always enjoy it. Its better when we disagree, though. I particularly enjoy that. Yeah. Is there something you guys will disagree about . We always disagree on how much rates matter for stocks. How much rates matter for stocks. I think theyre everything. He thinks they dont matter. All right. Well dig into that, see what we can do here between mike and sara. But if you havent noticed, we are on track or at least looking for what will be a significantly lower open. Its been a, i dont know, volatile week. Can we call it a volatile week . We got a lot more squawk on the street for you when we return. This is our future, ma. Godaddy airo. Creates a logo, website, even social posts. In minutes how . A. I. impressed ay i like it who wants to come see the future . get your Business Online in minutes with godaddy airo moving forward with nodepositive Breast Cancer is overwhelming. But i never just found my way; i made it. And did all i could to prevent recurrence. Verzenio reduces the risk of recurrence of hrpositive, her2negative, nodepositive, early Breast Cancer with a high chance of returning as determined by your doctor when added to hormone therapy. Diarrhea is common, may be severe, or cause dehydration or infection. At the first sign, call your doctor, start an antidiarrheal , and drink fluids. Before taking verzenio, tell your doctor about any fever, chills, or other signs of infection. 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Cpus,for example, in their telecommunications infrastructure. Advanced micro and intel, two of the larger providers of the chips. Perhaps not a surprise. Nu nonethels,heto ielises t srytsf taking a toll on stocks betradi. Trading at schwab is now powered by ameritrade, unlocking the power of thinkorswim, the awardwinning trading platforms. Bring your trades into focus on thinkorswim desktop with robust charting and analysis tools, including over 400 technical studies. Tailor the platforms to your unique needs with nearly endless customization. And track Market Trends with uptotheminute news and insights. Trade brilliantly with schwab. [alarm beeping] amelia, turn off alarm. Amelia, weather. 70 degrees and sunny today. Amelia, unlock the door. Im afraid i cant do that, jen. Why not . Did you forget something . My protein shake. The future isnt scary, not investing in it is. Youre so dramatic amelia. Bye jen. 100 innovative companies, one etf. Before investing, carefully read and consider Fund Investment objectives, risks, charges expenses and more prospectus at invesco. Com. Announcer the opening bell is brought to you by nuveen, a leader in income, alternatives, and responsible investing. Teslas been the subject of a number of wall street calls this morning, citing lowering its price target on the stock from 180 to to 180 from 196. Maintaining a neutral rating. Wedbush reiterated its outperform rating. Dan ives. Wells fargo lowered its price. I dont know, mike. I dont know who wants to take a shot at this one. Well, whats going on is the earnings estimates for next year are down 30 so far this year. So, in other words, you keep having to roll forward when this is going to kind of get some relief in terms of pricing and earnings falling to the bottom line. So, as the stock has come down, every analyst has to review, you know, where the valuation is. You talk about 370, earning 370 next year is where the consensus is right now. So, youre well over 40 times the lower of next years estimates. The stock has actually bounced nicely around 160 a few times, so i dont know if thats where the buyers are sitting. Its just above a half a trillion dollar market cap. I mean, the question is on deliveries, and thats why wells fargo took their price target down, expecting fewer deliveries, but they do wonder, again, elon musk, razzledazzle investors. Thats a quote. Full selfdriving. Hes teased the robo taxi now, although nbc news did an interesting story about how the california agencies that would regulate robo taxis havent heard from musk, so hes teasing this is going to come out in august, but the department of Motor Vehicles and Public Utilities commission saying they have not applied. There you have it, an opening bell for this friday. More red on that board than green. Here at the big board, it was ul solutions celebrating its ipo. Lot of people. Yeah. Over at the nasdaq, european securities and markets, the eus Financial Markets regulator. All right, we were looking at the broader markets. We talked about chips. Were talking a bit about tesla. Its funny, on musk and the magic, i did notice the exa. I. Effort he has under way, valued at 18 billion with the recent raise theyre trying to do of some 4 billion, which would put it far ahead of the value fidelity has the old twitter marked at. Absolutely. Its never been clear to me how the a. I. Gets all divided up. Teslas got its a. I. X, the platform, has brock. And then theres xai as well. Again, of course, a private company. Dont worry, well get to tesla as well. Its mission is to uncover the nature of the universe. Right. Just saying. Right. Theres no doubt about it, that, you know, basically, the next thing is always worth more than the current thing, right, when it comes to the muskverse. And the a. I. Story. Look, its a down market, and technology and financials are at the bottom of the market. Whats working is Energy Continues to go up thanks, in part, to the price of oil, which is up again today. Crude oil at 87. 20. Brent crudealmost to 92 per barrel. Morgan stanley publishes on the Energy Sector this morning. Hot summer, they say, expected. They like energy. Basically, on the fact that oil is moving higher and thats going to raise the earnings estimates for the entire sector. Yes. They are working off a 94 a barrel price. And its i mean, its part of this general reflation trade. Everybody is now observing, well under way. So, mining, materials, chemicals, its all there. So, you do have this phase of older economy commoditybased stuff is working. We talked about gold as a piece of that. Coppers participating as well. Honestly, on a twoyear chart, nothing looks that crazy in terms of getting out of the range. Its still about rebuilding from relatively low levels. The thing about the Energy Pricing at this point, too, is because the economys so strong, because wage growth has been fine, its not as if theyre destroying a ton of demand with wti near 90 bucks or gasoline prices pushing 4 bucks National Average again. Its almost like part of the bull case is, we can afford it, even though the prices are up. Gold is the number one best sub sector. The gold miners are having another very strong day. Gold has been up for several days in a row, despite the strong dollar, whether its geopolitical concerns, the fact that Central Banks have been buying gold. Theres capital flight out of china. And a technical breakout literally to a new alltime high in something that people have been buying for thousands of years. I think it has people excited. Im nervous at the angle of the chart. But you know, thats just me. I dont you know . I dont like things that are too easy in a short period of time. But it looks like its got plenty of momentum here. Apple shares actually have continued a bit of that momentum they showed yesterday as, again, we pointed out it had its biggest up day since may of last year, up 38 cents, but that revaluation im not sure how to phrase it but you know, its been so beat down in a way in terms of the lack of an a. I. Strategy, i guess, in the view of any number of investors. Suddenly, that changed yesterday. There was a bloomberg story about the imac, including some new a. I. Features, and then just in general, jpmorgan sort of putting out a piece as well yesterday that seemed to capture the imagination of a number of investors, saying, is it right for an a. I. Rerating . Im not even sure that its suddenly something changed or if suddenly we have insight on this. Its, the stock is badly underperforming. Anything that looked like it in the market for, you know, a number of weeks, it got down to these levels, around 170, everyone said that seems like a bit of a floor. The valuation comes off the boil, and you know, they can make these gestures to say, were part of it. You know, were going to anticipate the developers conference. Thats coming up. Thats now within sight, and that has been magic for all these companies that have one of those with the possible exception of adobe. I would note, in a conversation with jim a few days ago, and having spoken to somebody whos bullish on apple, they did talk about the opportunity there perhaps being a lot larger than people were anticipating in terms of what they can do with the coming cycle, what it will mean for the next iteration of the iphone when a. I. Is incorporated on that through siri most likely, but they have your location data, your text messages, they have an enormous amount of data they can use to train that would be helpful for them in terms of targeting and information. They have the ingredients. To me, the question is, its almost getting to that point where the fact that iphone has been disappointing in the upgrade cycle to this point becomes the bull case, because now you have all these older phones that need to be upgraded. Only other tech darling getting a little love today is netflix. Price target increase, Morgan Stanley, to 700. Wedbush, also, 725 price target. They think theres upside on subs ahead of earnings. All right. I got Something Else that well, its down no, blackrock. Larry fink is sitting next to me, as promised. Now its up. Its moving around a lot. But were taking a look at shares of blackrock. The company did have an earnings beat this morning. Assets under management hit a record, theyre now 10. 5 trillion, and as you probably guessed, you already saw him, joining us exclusively is blackrocks chairman and ceo, larry fink. Lot of noise. Ipos are always a good thing. Brings more capital into the market, expands the Capital Markets. I might want to get to that with you, but lets start off with the earnings themselves. Youre talking about the uncertain backdrop, but it doesnt mean theres a lack of opportunities. You had decent inflows this quarter, interestingly more into fixed income than other areas, although maybe that was expected. I think in the in a period of so much uncertainty, growing fear of more anxiety throughout the world, people are staying a little close, and you know, we have had 9 trillion of money now into money market funds. Record levels. And some of that money is going into fixed income. But the alternative, though, if you were fully invested in the equity market, you would have made 25 return, and this is what i try to talk about. Its not about the moment. Yes, theres uncertainty, but over the long run, do you believe in americanstyle capitalism . Do you believe in the markets . Over the long run, i do believe our markets are going to continue to be driving excess returns above what you can earn in a money market fund. And on the call, you talked about what you believe are still great opportunities, your words, for investors across a number of structural trends. I might expect those include the likes of, what, a. I. . What else . The combination a. I. Cannot truly happen unless theres a Huge Investment in infrastructure. The amount of energy that is required for a. I. Is enormous, and the amount of power generation. We will run out of electricity if we are going to fully adapt a full a. I. World, and so the need to build on this is all going to stimulate our economy, by the way, to build out a more a. I. Which at the backside is that means building out more electricity power. For the datacenters, obviously, they consume so much electricity. Were going to have to be building out tens and tens of gigawatts. Not mega watts, gigawatts, and were talking trillions of dollars of investing. So, the opportunity is enormous in the coming years, and this is one of the fundamental reasons why i believe the United States is leading this, but lets be clear. Im talking to political leaders in other countries, and their desire to build out datacenters, a. I. , technology at the same time decarbonization, so i remain a little more constructive, why i believe theres elevated inflation in the world, and i think all of this is playing out. But back to our earnings, you know, we had a record amount of assets, 10. 5 trillion. All of its our clients money. More than 50 of it is retirement. And we saw flows across the board, worldwide. We had active flows where still, in many cases, active outflows are occurring in the industry. We had inflows. And so, the resiliency of our business is only accelerating. For the first time in a long time, i noted our pipeline has never been stronger of noted wins that are going to fund in the future. And so, what we see is acceleration in our business model. I want to ask you about inflation, because i gave you credit earlier for being, i think, one of the first and early ones last year to say, this is going to be sticky. Inflation is going to stick around. We saw it come down at the end of last year, but now, this year, three in a row, hotter reports. Sara, never came down to the target of the Federal Reserve. Im saying, youve been right now. Not yet. Even when everyone became enthusiastic, it never got to 2 . And you dont see it getting there for how long . I think 2 is a hard number. We have restructured how we frame our economic policy. We have a trillion dollars of fiscal stimulus in the chips act, the infrastructure act, and the i. R. A. We have very poor Legal Immigration policies that have restricted, and that is all inflationary in jobs. And then, the bigger issue is how we think about how we spend our incremental dollars as were spending a lot more money on services. So, if you think about where Service Inflation is really the main culprit of high, elevated inflation. We have an aging Housing Stock in america. So, our homes have more frequency of leaks from older roofs. We have more frequency of busted pipes. This is now translating into a higher elevated insurance cost. Our behavior driving we have more frequency of accidents than at any time, and that means we have elevated Car Insurance. So, if you look at the most recent Inflation Numbers, so much of it was insurance, and if you overlay what i talked about in terms of my in my chairmans letter about elongation of life, the cost of elongation of life is going up. And longterm Health Care Costs are going up. All those numbers were shown in the inflation number. So, Central Banks have a harder time arresting Service Inflation. A great statistic that my good friend, rick rieder, uses all the time, the cost of a pair of nikes or adidas is about the same price for 30 years. So, you would say, product prices are virtually unchanged. But the cost of going to a sporting event, the cost of going to a rock concert to see taylor swift, is so elevated. Six, seven times. And so, its a sign that, okay, prices on goods are pretty stable. But what were willing to pay to go to a restaurant, to go to a sporting event has been so elevated. Do you think the fed is going to be able to cut rates . Look, when everybody said were going to have six cuts earlier this year from noted economists, i said, maybe two. And i dont look now youre saying maybe two . Im still saying maybe two. The market got crazed over 0. 1 difference than the estimates. And the market went crazy over that. Were inflation has moderated, and weve always said inflations going to moderate. But its going to moderate to the terminal level that the Federal Reserve is looking for . I feel doubtful. Do i believe we could get a stable inflation between 2. 8 and 3 . Id call it a day and a win. Look, we should remind folks that the pce number, which is what the target is based on, the like 2. 8 . Thats basically where were going. Is that a real good number for the average consumer . It is not. Actually but why do they prefer it . Its because its weighted by the amount of money we spend on each thing as opposed to what people say they spend more money on. At least thats the feds theory. But it if you use the same statistics, how they measured inflation, in the 1980s, higher w weightings from food and housing costs and Interest Rates but Household Budgets spend so much less on food. Regardless of what it means for the fed, throughout the long span of history, inflation, 2. 5, 3 , plus or minus, has been okay. Call it a day. Exactly. Thats what i i do believe theres room for one or two more easings, and test it out. There are some segments of the economy that are starting to struggle. I think i said over a year ago, the transmission of elevated Interest Rates in the United States are muted because most people who have a home have a 30year mortgage. We do not have that structural problem that so many other places in the world that have floating rate mortgages, adjustable rate mortgages, where that impact is immediate. It is very muted. Its very delayed, because of the structure which is a fantastic foundation for the american economy. Although, it is keeping a lid, to a certain extent, on people selling and or buying new homes right now. We have an extraordinarily low number. Its really bad for those who need to move. And its really bad for the young home buyers who would like to buy. So, im not trying to suggest its even and perfect. But its not as severe. The longer we have elevated Interest Rates, the more of what you just suggested is going to be a bigger problem for the economy. You know, larry, when you mentioned Car Insurance numbers, and the fact that theres, unfortunately, more crashes and the like right now, in part because of distracted driving, i couldnt help but think about full selfdriving when it comes, which gets you to the idea of a. I. And what thats going to mean from both a productivity enhancement and potentially as a sort of a deflationary aspect as well, but im curious how you think about the advent, particularly of generative a. I. Of late, in your business and throughout the corporate world. I think a. I. Will be the will totally transform the business world, the corporate world. If you intersect a. I. With improved Sensor Technology in addition to that, to improved robotics, its not only going to transform the business side, the back office, its going to transform how we manufacture, and blackrock started our a. I. Lab in 2018 at stanford university. It is really helped us improve some of our active active growth is in our Systematic Equity Team that uses a. I. And our performance over ten years is about 93 above the, you know, consistent performance. We believe that a. I. Will transform how we think, how we invest, data retrieval, information retrieval will be essential. We are using a. I. To revolutionize our aladdin system that we provide to so many people. Im so neurotic about a. I. I think a. I. Is going to when you say neurotic, is it both a concern or just that youre not using it as effectively as you could . All of the above. What does that mean . Whats your neurosis based on . Are we moving fast enough . Are we cautious enough . Are we making sure we have the structure in place to make sure we can utilize it properly . Are we focusing on how we could use new technologies in a. I. To improve the workforce at blackrock and improve how we work with our clients and how do we build deeper, better relationships . Its a very complex issue. I also believe were going to be using a. I. To transcend how we live. I mean, elon musk, we were talking about earlier, about robo taxis. I mean, if you think about an automobile, its a very expensive Capital Expenditure for something that you use for ten hours a week. And if there is an advancement towards more and more robo taxis in cities, you know, think about that. If you dont have to put all that money down on owning a car, more people probably could own a home. There are so many wonderful transformations in society that technologys going to do to improve most peoples quality of life. I was with a ceo earlier this week, and this ceo said to me, we are going to use more technology than ever before, and it means, as we grow our business, as a percent of our business, well have fewer human beings as a percent of our business, but each employee will have higher wages. Right. So, youre going to be able to do that. And look at blackrock and our earnings. We have raised assets over 1. 5 trillion in the last 18 months and did not add a job. That is productivity. Although, man, all those people who may not be working and maybe we have to i dont know what we do for them. And by the way, what about their retirement savings, which you spend a lot of time in your letter on recently, talking about, and being concerned about. Again, to these transformational changes youre talking about. Theyre going to create new jobs. Think about all the needs for building out datacenters and management. Its going to reshape our jobs. Lets be clear. Think about all the jobs that have been lost in society, whether telephone operators, even you know, theres so many jobs that have been eliminated, but we have 3. 7 unemployment. Over time, we create new jobs, and you know, unfortunately, theres a timing differential, and in many cases, a geographic differential. But look, between decarbonization, between what were doing in our own country related to hydrocarbons, think about, we went from 8 Million Barrels of energy in the United States to 13 Million Barrels of energy, all on new technology. So, were not even were not focusing on how technology has reshaped even Something Like energy extraction, energy identification. And its going to be the same technological transformation that is going to build other industries. Its a new jobs, new job creations, and so i actually believe we should be enthusiastic and frontcentered on it. And i do believe this is whats going to be leading the United States to be the strongest economy in the world. I just want to ask you, finally, about china, because i was there this week, and while youre thinking about big picture investment themes, there are some serious questions about where the geopolitics go between the u. S. And china and where the Economic Growth comes from in china and whether weve seen the peak. How are you thinking about it . So getting back to my chairmans letter i talk about hope and fear. I think the biggest fundamental undiscussed question about china is a fear within china. Were spending so much time talk about imports and exports. China is at a 35 savings rate. Highest savings rate in the world. And most of that savings rate because theyre frightened of the real estate market, they dont have a retirement system or Health Care System and so the Savings Rates are extraordinarily high. Theyre not consuming. China knowing they dont have a strong domestic economy, trying to export it ways out of its problem and that remainsby to a problem. If you look at most advanced economies, the domestic consumption is 70 plus percent of gdp. In china its 30 and more of it is export. There lies the paradigm problem between the world and china and china, and the world. China needs to develop more hope within its country, more opportunity in the country and thats the statistic i look at. What is the savings rate. Its a simple thing to look at, and if the Savings Rates go lower and starting to consume more, thats a good outcome. During covid, because of the behaviors of the china and the lockdown, savings rate was 50 . Thats not a good thing. We need to focus on these simple concepts of hope and fear and translating that to Savings Rates, and in china that is the most important statistic to look at. Whether they can find different places to export thats going to be a big question, but i think secretary yellen said some very appropriate issues related to if, you know, china is not going to be able to export its problem. Its going to have to advance its own economy, and lets see how that plays out. Larry, thank you for being here. Thank you. Stopping by. Appreciate it as always. Good to be here. The chairman and ceo of blackrock. Speaking of china, a topic for our next conversation, nike ceo john don know who in the next hour. Before we head to break the bond report and show you what treasuries are doing. A bid for bonds which is a reverse of what weve seen for the past week, past few weeks. 10year note yield remains above 4. 5 . Elevated even though theyre getting bought with lower yields today. Well be right back. When you need to prepare for unpredictable adventures. gasp you need weathertech. [hot dog splat. ] laser measured floorliners front and rear. [drink slurp and splat. ] scream seat protector to save the seats. [honk ] theyre all yours were here hey, i knew you were comin. So i weatherteched the car can we get ice cream . We can now. Kid proof your vehicle with American Made products at weathertech. Com. Top amazon executive says it is a myth that robots and other technologies take jobs away from people. Take a listen to what companys director of Global Robotics told cnbc europe yesterday. Its a myth that Technology Robots take out jobs. The number you mentioned is already a demonstration of that. Robots and Technology Help our employees by reducing work in distance, by taking away repetitive motion or by helping them to lift heavy weight. In turn, our employees can learn new skills, new competency, supply new capabilities that allow them to progress towards the career objectives. Hundreds of thousands of people, obviously, employed in Distribution Centers owned by amazon. I was going to say, they have i think 750,000 robots and 1. 5 million people. That jives with what he says. Right. It takes away jobs from specific people, but look the auto plants, you know, integrated robotics decades ago. Its sort of a supplement. Yeah. Curious to see what it looks like. They are adding more robotics all the time. Positive takes at least on the coming of advanced technology. Larry fink saying ai wont take jobs. Productivity. People make more and do more things. Want to be on the right side of the robots when they take over. Im all with you. I know. I dont know where im going. Once they have general Artificial Intelligence in the robots that exceeds our own. Can they have your hair . Still a concern. We know what our edge is. No. Mine. She went with the hair not the mind. Coming up an exclusive nike ceo john donahoe is going to be a guest on squawk on the street. Dont go anywhere. Oh, charades okay love it umm. First word. Tonsillitis nostril uhuh. Bill uhhuh. Hiphop limping mmhmm medical bills uhhuh pancakes cash who pays you cash when you have medical bills . Grrr no idea. [tapping] gap the gap left by Health Insurance . Who pays cash to help close that gap . Aflac oh, aflac get help with expenses Health Insurance doesnt cover at aflac. Com pictionary . the future is not just going to happen. You have to make it. And if you want a successful business, all it takes is an idea, and now becomes the future where you grew a dream into a reality. The all new godaddy airo. Put your Business Online in minutes with the power of ai. What is cirkul . Cirkul is the fuel you need to take flight. Cirkul is the energy that gets you to the next level. Cirkul is what you hope for when life tosses lemons your way. Cirkul, available at walmart and drinkcirkul. Com. I cant believe you corporate types are still calling each other rock stars. Youre a rock star. Were all rock stars. Oooo look look at my data driven insights, im a rock star. Great job putting finance and hr on one platform with workday. Thank you guys, can you keep it down. Im working. You people are guitar noises . Hand over the air guitar. Ive got another one. Good friday morning. Welcome to another hour of squawk on the street. Im sara eisen here with david faber live as always at post nine of the new york stock exchange. Carl is on assignment. Take a look at stocks. We are lower today, but weve paired some of the early losses. The dow is down about 228 points. The s p down 0. 6 . Were negative week, down 0. 7 for the week but the nasdaq up for the week. 5 . Even though todays fall is sharp, a lot of tech winners giving back their games. All lagging today. Apple up again after a 4 up day. Alphabet higher in todays session. Treasuries are also going the other way. Its been a trend of hire yields. Today lower yields. 10year above 4. 5 . Theres buying today potentially on this jump in crude oil. Brent crude 91. 73. Geopolitical tensions front and center. Gold is higher again. Its been up for several weeks there a row. Were 30 minutes into the trading session, were going to get to the banks in a moment. Here are other movers were watching. Semiconductors under pressure following reports china is telling the countrys biggest Telecom Carriers to phase out foreign chips that are important to their networks. The move could impact the likes of intel and amd in particular. Apple is trying to build on yesterdays gains as mentioned coming off its best day in nearly a year but shares are enough for the year. Goldman out with a new note reiterating a buy rating, expecting the company to deliver on upcoming earnings. Tesla another tech stock struggling this year. Citigroup lowering its price target to 180 per share from 196, saying analysts there still see more downside than upside ahead due to demand headwinds. We have some breaking Economic Data crossing the tape. University of Michigan Consumer sentiment data and it is a miss. 77. 9. The estimate was around 79. 9. Breaking it out a little bit, year ahead inflation expectations, which we know the fed watches, they ticked up to 2. 9 last month excuse me from 2. 9 to 3. 1 this morning. You never want to see that number go in a higher direction. Although when it comes to consumer inflation expectations, a lot of is influenced by Energy Prices and oil prices have been moving up. You see it at the gas pumps and thats been a problem and has fed into the inflationary worry lately. Thats where we begin. This is a week where, you know, january and february hotter Inflation Numbers were taken as okay, theres some seasonal issues. Lets wait for march. We got the march cpi and it was disappointingly high, and that has led to a complete rethink on wall street about how many fed cuts were going to get, whether were even going to get cuts this year. You heard from larry fink head of blackrock on with us, hes been saying for a while inflation will remain sticky and heres what he says about the prospect of getting back to the feds target. I think 2 is a hard number. We have restructured how we frame our economic policy. We have a trillion dollars of fiscal stimulus in the chips act, structure act and ira. We have very poor Legal Immigration policies that have restricted and that is all inflationary in jobs. The bigger issue is how we think about how we spend our incremental dollars. Were spending a lot more money on services. If you think about where Service Inflation is really the main culprit of high elevated inflation. We have an aging Housing Stock in america. Our homes have more free constit frequency of older roofs, busted pipes, this is translating into a higher elevated insurance costs. We did see the insurance costs rise significantly in the cpi. He hit that and Auto Insurance as well, talking that. One day you can imagine that will start going down. I didnt think we would goat busted pipes when talking to larry fink there, but thats where he went. Brought it home. 22 rise in Car Insurance was what we saw for the month of march and he attributes that to increased crashes and safety issues. Some would say the fed cant do anything about that, so why not cut rates. Interestingly, fink said that he saw the ability of the fed to cut rates about two times. Now the market is wondering are we going to get one, two, three . Boston fed president Susan Collins was on the wires, made some news. Shes not a voter this year but said i am still expecting were going to see slowing in demand start and continue too 2024, and that will help bring inflation down later in the year. I am in the range of two expected rate cuts. Theres still plenty of members of the fed, david, worried about the economy and want to get out in front of any slowdowns. 2 , you know, why is that always the perfect number for inflation . Given what larry was saying, is there a day that we could imagine that at some point, inflation and or that number is moved up a bit . Its a good debate to have, especially when youre talking about structural factors in the economy, like esg, for instance, when everybody was esg, they should raise the inflation target because thats going to drive prices up across the board. The problem is and the fed can think about this but cant talk about it because it will hurt their credibility on getting back to their inflation target, and, you know, as mike pointed out, were not too far away if you look at their preferred measure of the pce, its in the 2. 8 range, so its not too far off. The fed is talking about cutting rates before it gets to 2 , so its basically accepting that it doesnt have to be all the way there. It doesnt really matter if they raise their inflation target in the long term because of structural factors as long as they dont end up in a situation where theyre cutting rates and then inflation flairs back up and goes back say above 3 . That would be the worst from a credibility stand point. So all the banks are weighing in. Bank of america says dont expect anything now until december following another upside surprise to inflation in march. Fed cuts will start in december, rather than june. Furthermore we expect four 25 cuts in 2025 and another two in 2026, risks skewed towards a later start to rate cuts if housing reflation remains sticky. Deutsche bank goes to december. One rate cut this year at the december meeting followed by reductions in 2025. Beyond next year we expect the fed to guide the policy rate back to a neutral level likely below 4 by the end of 2026. Now were into 2025 rate cut expectations. The question is, is the market going to be okay with it because can the economy hold up without rate cuts . Right. As for the broader equity markets, of course, trying to weigh this, to the point of your debate with mike in terms of the influence of rate policy on equities. It would prove your point this week perhaps given the weakness weve seen to a certain extent, but the economy is strong and, therefore, as we move into earnings season, the expectations are we will see fairly strong reports and or the possibility of decent guidance, although then i come back to so many things you share with us from the Conference Call from last quarter. Uncertainty. Its a lot of uncertainty. Depends what industry youre in. The economy is not strong if youre in some parts of retail that cater to the low income consumer or in electronics or, you know, these categories if youre in housing, household products. These are deflationary goods categories. It really is in the Services Sector that has been strong. You know, it also, we get into now were talking about rate cut timing. We get into the election and bank of america i thought had a great chart. Its a flow chart, so it shows probabilities based on current readings of cpi that i decided to make for us because it showed that we could be on trend for 4 to 5 inflation year over year by the election time if we continue to get readings like we have gotten. The 0. 3 monthly gains on inflation. That could be a big problem for president biden. Even with the disinflation last year people were still feeling the cumulative impact. If we start to go back up and see these stickier prices whats happening with gas prices, not great. Also not a great look for the fed to start cutting in september. Right before an election. All good points. All right. Weve started earnings season, in fact. It does kick off with the banks. Leslie picker is monitoring the Conference Calls. If i can exacome to you on jpmorgan. I did note that stock is down almost 5 . Not sure exactly what it is they said on the call, but certainly curious to hear your reporting. David, i saw a headline that thats the worst open for jpmorgan shares since march of 2023, which i would imagine was dragged down due to the Regional Bank turmoil and kearns about contagion therein. Notable, 4. 6 decline right now. Those shares under pressure after the Firm Guidance showed slightly higher expenses and Net Interest Income for the year. The firm saying the profitability metric for loan making will be 89 billion, boosted by 1 billion from Prior Guidance given in january. Analysts call that a moderate disappointment given the rate environment, appeared to have grown more favorable for some of the large banks, including jpmorgan. Now chairman and Ceo Jamie Dimon addressing the macro environment on the firms analyst call which ended a short while ago in response to a question about the health of the commercial real estate environment, a subject very well covered on this show. Dimon said rising rates, particularly if the 10year were to go up to 2 more, assets would be worth about onefifth less and that could put strain on the system. Interest rates are important. The recession is important. If things stay where they are today we have kind of the soft landing that seems to be embedded in the marketplace, you know, the real estate will muddle through. You know, obviously, it will be idiosyncratic in different types, a versus b buildings and all hat, but people will muddle through. They wont muddle through under higher rates with a recession. That will be tougher for a lot of folks, not Just Real Estate f that happens. Jpmorgans cfo addressing commercial real estate on a media call where he said, quote, theres no light at the end of the tunnel there. The firm reported 144 billion in commercial real estate loans at quarter end, guys, but david to your question about why the stock is falling of course i think its largely on the guidance, which disappointed wall street, which was expecting more of an increase to the fullyear Net Interest Income outlook for 2024. All right. Were going to find out even more about that, leslie. Thank you. Leslie picker. Lets continue the conversation with ubs bank analyst erica na jar yan who has a buy on jpmorgan and wells fargo and neutral on citi. Lets start there. Its unusual to see jpmorgan shares down 5 after earnings, erica. Yeah. Absolutely. The street really went there in terms of how they were thinking about the revisions to Net Interest Income or nii. You know, keep in mind that jpmorgan and the other Money Center Banks are asset sensitive, so the more cuts you take out of the forward curve, the more they theoretically earn, so the 89 billion number mentioned in the earlier bid, i think the street was already above 90 for that metric, and so the 89 was a bit of a disappointment and also when asked, you know, if we took out the three rate cuts that were embedded in, you know, their guidance for the 89, what difference would that make, and we didnt really get a strong answer, firm answer, from jpmorgan. I think thats really a big part of the disappointment. So part of it is simply the fact that we very well may not get three rate cuts this year and not getting a clearer answer, i guess n terms of what impact thats going to have on the sfwhank. Yeah. Absolutely. And the other thing, too, is, you know, the provision is going to go up from consensus estimates. Those are, you know, those credit costs related to better credit card growth. The tax rate was higher. Expenses were a little bit higher because of the fdic. Net, net the stock is ripped into the print and now youre not going to get a consequent epps upgrade. I think thats why the stock is taking a breather here today. What about wells fargo . You seem more impressed with the number, although i dont think they upgraded Net Interest Income based on fed path either . They didnt. But their fee number was quite the blowout. So, you know, youre looking closely to see if there were any sort of onetime idiosyncrasies in terms of what caused that blowout to consensus, but what was happening there, they earned more in trading, more in Investment Banking, and they just had overall strength in that line. I think thats really, really important for the long only narrative. The longterm shareholder narrative to the stock, right, because, you know, clearly wells fargo is a fixer upper so to speak, as they deal with the regulatory issues, and i think that beat in the fee revenue item essentially told the street look, they were not just cutting costs, but they were cutting costs overall, but using some of those cost savings to invest back into the business. And as for Net Interest Income, sara, i think its too early for wells fargo to upgrade their nii guidance, so i think its still potentially on the come but jpmorgan not upgrading their nii guidance today makes me less confidence it is to come for wells fargo in the future. We will have the wells fargo ceo on in the next hour, but on the expense side i think it was a miss on wells fargo and they reiterated the longterm expense guide thats been important for investors long this stock. What did we learn about expenses there be and at some of the competitors . Yeah. I think theres not really anything to report. Usually the First Quarter is seasonally higher, and for jpmorgan, for which was impacted by the fdic, but for wells and citi, theyre reiterating the core expense run rate. Nothing to report other than the quarter is typically seasonally higher. Finally to citi which as a stock at least has outperformed many of its peers. Something i cant remember having done for years, at least during the First Quarter. Did this Quarter Report do enough to continue that momentum . I think for now, yeah, sure. Im a little bit of a citi skeptic in the history and many of us analysts have been burned having buy ratings on that stock, being in love with just the multiple, but ill tell you what, i think that, you know, citi is truly making good progress. Like sara mentioned expenses are still in line with what theyre guiding for the year and becoming a more Efficient Company is critical for that stock to continue to do well. Looking forward from here theres a lot of skepticism about whether or not they can hit the Revenue Target of 80 to 81 billion which they did reiterate today, which its impossible for me to believe you can cut expenses as a bank and grow revenues without rate tailwinds. That being said, i think a critical, critical catalyst beyond today for citigroup, are the stress test results in june. You can buy back more than 500 million, what they did this quarter, then that stock can maybe really start working for real and get long only investors from the sidelines because buying back the stock at that kind of discount to tangible book value, is very, very powerful in terms of what that could mean for tangible book value accretion. Great. Something for us to keep in mind as we lead to june. Erica, always appreciate it. Thank you. Thank you. As we head to break, heres our road map for you for the rest of the hour. Wild week for stocks and bonds, how to position your portfolio from here as we head into next weeks flood of earnings. Plus, always some big moves in technology. Apple, for example, shares coming off the best day in almost a year. Amazon at alltime highs. We got a number of street calls that you need to know about. And a rare exclusive with nike ceo john donahoe on his preparations for the paris olympics, the health of retail and the consumer and much more. Big show still ahead. Squawk on the street will be right back after a quick break. At pgim, finding opportunity in fixed income today, helps secure tomorrow. Our timetested fixed income suite, backed by over 145 years of risk experience, helps investors meet their goals. Pgim investments. Shaping tomorrow today. Investment professionals know the importance of keeping their clients on track. Sometimes they need help cutting through the noise, to ensure fresh investment ideas keep flowing, and to analyze the market from every angle. At allspring, we deliver the unexpected, by relentlessly exploring where others dont. Allspring, follow the insight. Her uncles unhappy. Im sensing an underlying issue. Its tmobile. It started when we tried to get him under a new plan. But they they unexpectedly unraveled their price lock guarantee. Which has made him, a bit. Unruly. You called yourself the uncarrier. You sing about price lock on those commercials. the price lock, the price lock. so, if you could change the price, change the name its not a lock, i know a lock. So how can we undo the damage . We could all unsubscribe and switch to xfinity. Their connection is unreal. And we could all unexperience this whole session. Okay, thats uncalled for. Stocks sliding again here as investors digest this mornings batch of bank earnings. The dow and s p on pace for their second negative week in a row. The 10year shy of its highest levels. Joining us now is cross mark Global Investment ceo and cio bob dahl. I wonder if theres some sort of gold is up, oil is up, dollar is up and commodities and tech and what that tells you happened this week. What its saying, sara, the economy is okay, inflation is not. That its too stubborn and you covered that well in the first two minutes. Less rate cuts, thats not good for valuations. Stocks selling at 21. 5 times are assuming that [ inaudible ] cut rates in the year six times and then four and then three and now its two, maybe not at all, i think we will also have fresh [ inaudible ] sara, 11 this year, 13 consecutive year, theyre big numbers without coming off some depressed level from a recession, and First Quarter analysts are only expecting 5 gain, probably going to get 11 for the full year. Im concerned with all the cross currents. Youve been pretty cautious. Youve been cautious coming into this year, right . Cautious, yes. The gains weve had so far this year, i guess you still think that were heading for a challenging period . Yeah. You know, when the p es are over 20, things better be nearly perfect, and when youre not getting the rate cuts, you cant sustain the p e, and then if if earnings become a question mark, that will cause a lot more people to ask questions. Why do you think earnings will become a question mark if the Economic Data continues to surprise mostly in a better place . Well, lets look at the evidence. First quarter prereleases, the percentage that were negative were the highest in five years. Companies are struggling to raise prices as much as they were earlier. Consumers are beginning to balk at that. Theyre still having cost pressures, whether its labor or, as you mentioned, raw materials, so i think well have some profit issues as the year transpires. What do you like, if anything, bob, given the rest of the year is ahead of us . Right. A lot of portfolios my long onlies are fully invested. Im focusing on common factors, companies with high earnings predictability, high earnings persistence, strong free cash flow. Those stocks ahave done just fie as the markets have gone up. They will show defensive characters if the market has further slippage here in the next weeks. Okay. Bob, thanks for checking in. Appreciate it. After a bumpy ride this week. Were down 0. 75 , almost a full for the week. Bob dahl. As we head to break lets give you a look at the biggest gainers on the s p for the week. Theres that ge vernova, the spinoff from ge aerospace. Everything trades independently. You can see its had a very strong week. Joined there by at the bottom palo alto and first solar. Were back in two. When it comes to investing, we live in uncertain times. Some assets can evaporate at the click of a button. Others can deflate with a single policy change. Savvy investors know that gold has stood the test of time as a reliable real asset. So how do you invest in gold . Sandstorm gold royalties is a publicly traded Company Offering a diversified portfolio of mining royalties in one simple investment. Learn more about a brighter way to invest in gold at sandstormgold. Com. Upbeat music upbeat music you founded your Kayak Company because you love the ocean not spreadsheets. You need to hire. I need indeed. Indeed you do. Indeed instant match instantly delivers quality candidates matching your job description. Visit indeed. Com hire cnbc and the nrf out with data on the consumer. Steve liesman has the exclusive results. Good morning, david. Consumers continue moderately strong spending in march, spending that looks a little bit better when you consider that inflation in the consumer goods sector apart from the overall number is flat and even negative. The cnbcnrf retail monitor for march powered by real credit card spending data shows retail sales exauto and gas up 0. 04 in february, a february by the way where we removed the leap day for comparison purposes, taking out, look at year over year 2. 7 versus 2. 7. Take out restaurants for the core retail number 0. 2, down less than 0. 1 at 0. 23 versus 0. 27. The rounding. 0. 1 decline 2. 9 versus 3 in february, adjusted to remove the leap day. The history shows volatility over the past several months. Spending has bounced back in the positive territory for two months in a row after the january decline. Some wondering whether we were seeing the long awaited consumer slowdown. Still waiting for that. Evenly mixed result, six up, six down, the top and bottom three. Nonstore retailers, thats your internet number up strong, food and beverages up strong and Sporting Goods and hobbies up almost a percentage point, thats a discretionary area. The two next sector, the negative, connected with what weve seen to the home buildings sectors and appliances also. Those prices have come down. There could be deflation in the electronics and appliances as well as an impact on the housing market, despite higher overall inflation which we reported in the market and rocked the market earlier this week. Goods inflation has been flat to negative in eight of the past 12 months. Consumers are looking for value and its a competitive market according to the nrf. Government reported that prices for consumer goods imports, autos, fell in march and yesterdays wholesale price report showed 0. 1 increase for consumer goods prices that should be good news for retail margins even with a consumer looking for value and a competitive market, but, of course, there are the challenges, guys, from high labor costs that we have to watch out for when it comes to margins. I dont know what youre hearing from your retail contacts when it comes to the margins, but at least the input costs seems to be well controlled on the goods side. Theyre getting the tailwind from lower input and freight costs on one hand, but apparel prices not getting a ton of pricing power. A weaker category. Yeah. Actually it was up in the last report, kind of like an eye popper on this. 0. 7 increase. Well have to see if thats a trend. I am interested in how the minimum wage increases feed through to the bottom line. It i did get a note from matt shay from the nrf, there is not price gouging not going on in the Retail Business and that may be accurate given whats happened. Well see if the Profit Margins remain relatively stable or if they come down even a little bit, given they had increased during the prior two years. And everybody is doing a little productivity savings too which could help margins. Thank you, steve liesman, interesting take on the consumer. After the break, our exclusive with the ceo of nike, live from paris, unveiling new uniforms for the summer olympics. Well be right back. Your shipping manager left to find themself. leaving you lost. You need to hire. I need indeed. Indeed you do. Indeed instant match instantly delivers quality candidates matching your job description. Visit indeed. Com hire welcome back to squawk on the street. Im Bertha Coombs with your cnbc news update. The u. S. Is restricting travel for its staff in israel as tel aviv reportedly prepares for an iranian attack this weekend. The security alert restricts u. S. Employees and their family members from personal travel in certain parts of israel out of an abundance of caution. India, france and other countries have issued similar warnings to their citizens. Russia is reviewing a peace proposal from 2022 that ukraine had previously rejected. The kremlin said today that the Draft Agreement could serve as a starting point for talks to end the war. Russia has dismissed ukraines proposal which demands for moscow to pull back its troops, compensate ukraine and face an international tribunal. President biden announced another round of student Debt Forgiveness this morning. He said today his administration will cancel 7. 4 billion in loans for 277,000 borrowers in certain low income programs. With this latest move the white house says it has now canceled 153 billion in loans for 4. 3 million americans. Sara, back over to you. Thank you very much. Were about an hour into trading just want to show you whats happening in the market. Weve turned south again. The dow down 321 points. The banks are definitely part of that story with jpmorgan the biggest drag off earnings. Goldman sachs right down there with it. Microsoft is getting hit. Technology giving back a lot of yesterdays gains. The only two sectors working today are energy and utilities. Oil prices marching higher on these increased geopolitical fears around potential iranian attack on israel. Brent crude above 91 per barrel. Gold is higher again. The geopolitical tension reflected there. The u. S. Dollar continues to march higher and had a very strong week up almost 1. 7 on stickier inflation. The summer olympics are just over three months away. While paris is preparing for the games, so are major sponsors like nike. Unveiling its new uniforms for teams and athletes. Team usa and others from running to break dancing. Ceo john donahoe joins me now to discuss his outlook for the summer games and the company as a whole. John, welcome, good to see you in paris this morning. Great to see you, sara. Tell us whats new and different about this olympics unveil. Well, as you mentioned, im here in paris where in this very venue last night we unveiled a major multiyear innovation cycle. We did it in a way only nike can, with the worlds greatest athletes, what is the biggest stage in sport, the summer games. Ill tell you, i wish you could have been here, sara. It was remarkable. We had 40 of the greatest athletes in the world ranging from fourtime medalist elliott, shacarri richardson, serena williams, dawn staley, they were showcasing an unprecedented array of Disruptive Innovation from nike. They are the models in the show. And that just portends what is coming this summer on the track, on the court, on the pitch, in the summer olympics. I wish i could have been there, too, because its paris in part. How do you take this momentum and use it to reignite growth on a bigger scale in mass market . Well, what nike has always done, sara is take bold moments of Disruptive Innovation, combine them with major moments in sport, and then use that as a launching pad for delivering that same innovation to consumers. So an example would be, we are launching the fastest shoe in the world. The alphafly 3, the super show, broke the marathon world record last year. It is incredible demand. It will be on the feet of many marathoners this summer. Thats for the elite runner. At the same time, were cascading that same Disruptive Technology down for everyday runners so well be launching the peg 41 in the summer for consumers. Our most significant advancement in the pegasus yet. And well be announcing and launching a disruptive shoe for everyday a runners in the pegasus premium, a first time weve taken full length zoom air and put it in a shoe that delivers great performance and comfort, and cushioning for consumers, which what is they want. So our experience has been when we launch these big moments in sport, we then cascade them down to consumers all over the world. Some investors do see the olympics as a catalyst for you. I wonder how much of a sales bump you anticipate from the games themselves and then how sustainable that is to future quarters . Well, the way, sara, we think about innovation is, its got to come season after season after season. Thats why were so excited about this multiyear innovation cycle. Its not just one product or one platform. Its going to be continuous. So we started two weeks ago by launching the air max dn. Our most innovative air max in years. Its got dynamic air technology. Its a lifestyle shoe thats been very well received worldwide. Then this spring, well be launching, as i mentioned, the peg 41 through the channels our most advanced football kits and soccer kits in football. The way we drive our growth is have the innovation coming season after season and thats what drives our growth over time. So why has that not been happening, john . Because you mentioned on recent earnings calls that theres been a lack of newness and thats what investors have been concerned about. So what happened that youre doing differently now . Yeah. Theres ill reiterate a huge amount of innovation going on at nike, sara, in this multiyear pipeline, the innovation engine is running at full speed. Over the last four years, weve grown. Weve grown from 39 billion to 52 billion last year, 39 billion in 2019 to 52. Weve been growing at a 9 growth rate on a Constant Currency basis over the last four years. Growth hasnt been the issue. Whats driven that growth is what i would characterize as iterative innovation. We still have the best basketball shoes in the world. Launching new shoes like the sabrina 1, the best football shoes, the best fitness, and the best iterative innovation in lifestyle and thats whats driven our growth. Whats been missing is the kind of bold Disruptive Innovation that nike is known for. And when we look back, the reasons are fairly straightforward. I think lorain mentioned this yesterday, but our industry has gone through an awful lot of operational challenges with supply chain, all the footwear factories in vietnam closed for 12 weeks a couple years ago, so 25 of the worlds sneakers didnt get made, and so we were navigating through that. But even more importantly our employees were working from home for two and a half years. In hindsight it turns out its really hard to do bold Disruptive Innovation, to develop a boldly disruptive shoe, on zoom. And so our teams came back together, 18 months ago in person, and we recognize this, and so we realigned our company and over the last year we have been ruthlessly focused on rebuilding our Disruptive Innovation pipeline with our iterative pipeline. The pipeline is as strong as ever, and were going into the period where well see season after season, Great Innovator product from nike along with the kind of story telling were known for and well drive growth. Is that why brands like hoka and on were able to capture market share, specifically in running, which is such a core category for you and what do you expect Going Forward there . Well, as you know, nike was fo founded as a Running Company and done more to advance running than any other brand in the world over the last 50 years. We continue to lead with elite runners, but innovation has always been whats marked nike in running as another category. Were not just going to copy what other people do. Were going to bring innovation. The kind of Disruptive Innovation i mentioned a minute ago with updating the pegasus family, so well be bringing new, fresh, bold innovation to running, and well be getting back to where the runners are, the everyday runners are, in the local races, the marathons, at the retail running shops. So our innovative product, plus our presence in the running community, is what will drive our continued leadership in running. You mentioned lorain hutchinson who upgraded your stock yesterday at bank of america because she sees a turn in the cycle. A number of analysts have downgraded the stock in recent months and ones said it appears if consultants rather than nike experts are leading strategy decisions. I wonder how you can respond to that and what you can tell us about the new team, because you have made a lot of executive changes. Well, theres nothing further from the truth than that statement. We have a great team of seasoned veterans who are leading this project innovation cycle. I think the average tenure of the top 40 people in the company is close to 20 years. These are people that have had huge history, theyre incredibly talented, most creative innovator, shoe designer, apparel creators,brand marketers and merchandisers in the world, and so we have a very strong Seasoned Team thats leading this innovation cycle. Nike has been here before. Nike has a history of having periods of Significant Growth like weve had over the past four years, and then reestablishing the next wave of growth on the backs of innovative products. Our team has everything that it takes and performing in extraordinary ways. I want to ask about china, john, because, obviously, that is a key story for you for growth, and it has been growing, but not as much as weve seen in recent years. What are you seeing there . Is it macro related spending factors . Is it brand or competition . Whats happening on the ground . Well, what we see, sara, is sport is strong in china. And nike is strong if china. Were the number one sports brand, and weve always taken a longterm view. We entered china 40 years ago and thats what a enabled us to have a leadership position today. What a were doing is continuing to do what has gotten us to this stage. The china consumer wants global innovation, and wants it hyper localized. It wants global brand and getting its hyper localized. Thats exactly what well do. Well take the air max dn, a bold Disruptive Global innovation, but hyper localize it in colors and ways of bringing it to the china market. Were doing the same with our story telling. Hyper localizing the china consumer. The china consumer feels like nike is their brand, and if we bring innovation, they respond. Were a very were very optimistic about growth over the long term. Theres Macro Economic headwinds right now, but were you know we face those like anyone else and were gaining share and well continue to lean into china. Were investing in china and continue to lean in for the long term. Youre leaning into wholesale which is a bit of a change from nike. Its been about direct to consumer, sellen your website and sell on your website and stores, now theres a shift and what does that strategy look like Going Forward . Well, sara, our marketplace approach has always been starting with the consumer. In simple terms, consumers today want to get what they want, when they want it, how they want it. Thats true in consuming media as you know. Sometimes watch you on my mobile device, sometimes on my ipad, sometimes on my tv. The same thing is true of shoppers. Shoppers, theres not digital shoppers versus physical retail shoppers. Theres not shoppers who only shop in Mono Brand Stores versus multibrand stores. Shoppers shop across Consumers Want to get what they want across multiple channels. Now it almost always these days starts with a mobile device, where consumers are doing their homework, investigating and were blessed to have two of the biggest mobile apps in our industry, the nike mobile app and sneakers mobile app and doubled down in growing our mobile business and Digital Business which has grown remarkably, tripled in the last four years from roughly 10 to now almost 30, over 10 billion. We also offer consumers the choice of coming into one of our doors like our house of innovation here in paris, but retail come out of covid, it was clear that consumers were also coming back into physical retail and we recognize in our Movement Towards digital we overrotated away from wholesale more than we intended. Weve corrected that. Were investing heavily with our retail partners. They were all here over the last couple days. Theyre very excited about the innovation pipeline leaning in, and so working together well do what only nike and the worlds leading retailers can do, to both elevate the marketplace and grow the marketplace. Thats whats driven nikes growth over the years. We grow the market, we grow the market of sport, lifestyle, off of sport, and thats what well be doing. Consumer will have a choice to come to nike directly, to come to a nike door or to one of our wholesale or one of our retail partners, we call them wholesale partners. The key for us is to be where the consumer is at all times. I got to ask you about what the whole country is talking about, womens basketball. You sponsor Caitlin Clark and angel reese and its having a moment right now and i wonder if thats translating into a sales bump for you, and whether its sustainable and how you plan to leverage that . Well, it was an incredible ncaa tournament, incredible season for Caitlin Clark and angel and so many athletes, but what a tournament. Yo youre right, womens sports is on fire. Thats true in basketball. I went to the womens world cup last summer in australia and new zealand, womens soccer around the world is on fire. Its an exciting moment for womens sports, and were right there. Our womens is an important business for us and opportunity for us. Over the last four years weve doubled our investment in innovation, in our women products. Thats showing results. We grew double digits in womens last year. We have more women who are joining our Membership Program than even men, and heres an interesting thing, sara. Its no longer separate womens and mens. Theres a lot of crossover. We launched the sabrina 1, her hallmark shoe last year. It got enormous reception. Both from women, elite basketball players in the wnba, from young girls, but also nba players. Many nba players and ncaa players wearing the sa written na 1 on the court, young boys, its the number one basketball shoe in beijing for boys. Theres crossover appeal when you innovate for one gender, it can apply across the board. Thats one of the, citing things that sports does. Sports connects people. When is the caitlin shoe coming . Thats what i want to know, the caitlin 1. Well see. Well see. Maybe when she goes keep watching. You know i will. Thank you for the time and for taking on all the topics. Appreciate it. From paris, john donahoe, ceo of nike. A programming note, cnbcs coverage of the summer olympics live from paris does begin friday, july 26th. Of course, our Carl Quintanilla will be there to cover it as he always does. And i think the important headline there, david, was that he looks at the olympics as kicking off what donahoe called a multiyear cycle of innovation. And thats something that investors have been hungry for. Its why the stock has underperformed this year and over the last few. I thought the headline was work from home doesnt work. True. Thats part of the reason why. Those were interesting comments. Disruptive innovation. Disruptive innovation does not happen on zoom. Its an excuse. Its valid, right . We know that. Were better in person together, anchoring a tv show. Thats the only way i would have it. Unfortunately, were not in person with dom, but were watching a market thats a good deal lower right now. Apple, though, coming off what was its best day in almost a year. There he is, dom chu, watching things back at hq. What have you got . David, sara, im with you in spirit always. To your point, its been a roller coaster ride of a week. It led to a full recovery in certain parts of the market by certain measures to the hotter than expected cpi selloff happening on wednesday. That recovery has specifically been led by mega cap technology, indicating muscle memory of buying these stocks is still very much intact. You take the biggest of the big, 2 trillion, Microsoft Holding relatively steady over the course of the last week. Notable upside moves, apple and nvidia to close out the week, as you can see on the bottom end of this chart. Especially in apple, more optimism around its a. I. Ambitions. Analysts at goldman reiteratedr. The 2 trillion club, google, meta, alphabet, finally hitting amazon, joining new peers. Apple mega cap around 9. 9 trillion. Amazons market cap around 1. 96 trillion, each higher for the week as well. More broadly speaking, theres a little more optimism around that rally in Energy Stocks and it could have more upside. Analysts at Morgan Stanley are upping it to attractive, giving a number of factor, including stronger oil, more buybacks in the future, compelling valuations. So, that plays into this whole market rally broadening theme, sara. Sara, david, keep a close eye on that equal weighted s p. Well see what happens. Next hour on money movers, dont miss the cfo of wells fargo breaking down his banks earnings beat at the top of the hour. Thheowbe right back. Wi t d down 400 points. Banks are the biggest weight there. bobby my store and my Design Business . Were exploding. But my old internet, was not letting me run the show. So, we switched to Verizon Business internet. They have business grade internet, nationwide. vo make the switch. Its your business. Its your verizon. Norman, bad news. I never graduated from med school. What . But the good news is. Xfinity mobile just got even better now, you can automatically connect to wifi speeds up to a gig on the go. Plus, buy one unlimited line and get one free for a year. I gotta get this deal. Thats like 20 a month per unlimited line. I dont want to miss that. Thats amazing doc. Mobile savings are calling. Visit xfinitymobile. Com to learn more. Doc . Welcome back to squawk on the street. Were monitoring the wells fargo Conference Call after that bank q1 earnings. Shares bouncing back somewhat after initial disappointment when wells first reported earlier this morning. Wells fargo opted not to adjust its Net Interest Income guidance for the year and nii for q1 missed expectations and decline 8 year over year. In the higher for longer Interest Rate environment, which the street expected to bolster that metric for loan making, such muted performance initially pressured shares. Executives on the call urging analysts to look at the Bigger Picture on how higher for longer rates impact nii. And when you look at the impact of that in isolation, you certainly would see a benefit from less rate cuts, but i do think you have to put that in context of, okay, now whats going to happen with, you know, client behavior and mixed shifts as we look for the rest of the year. I mean, its certainly clear. We feel better today than we did in january about, you know, our guidance and our forecast there, but i do think we have to let some more time play out to see how people react to whats happening. Wells executives say they now see three rate cuts this year, which is down from earlier in the year, guys. Leslie, thank you. Well keep an eye on that. Of course, well have the cfo coming up in the next hour. And our coverage of a market that is at the lows of the session continues right after this. Trading at schwab is now powered by ameritrade, giving traders even more ways to sharpen their skills with tailored education. 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Reverse reverse next level moments, were 30 seconds out. Need the next level network. [north corridor, hurry ] coming through or 3, lets go. The network more businesses choose. Transplant received. At t business. Good friday morning. Welcome to money movers. Im sara eisen with david faber live from the floor of the new york stock exchange. Coming up, bank results have kicked off earnings season. The cfo of wells fargo joins us this hour as the sector struggles to stay in positive territory