Transcripts For CNBC Squawk 20240706

Mcmullen on persistent inflation and how the consumer is doing at the grocery store. Its a big deal for sure. Topping tape this morning is the focus on the fed and what youre seeing right now from markets is wait and see, Holding Pattern, if ive ever seen one. The s p is just about flat on the session and the nasdaq is outperforming, if you want to call it that, sarah. Its up about one quarter of 1 . Right now, weve got cnbc senior economics reporter Steve Liesman joining us right now steve, sarah and i talked about it this is very much about what the fed is going to say. Is there any surprise happening or is the market pretty much just baked in, that one quarter percentage point hike at this point . Actually, both of those are true the market has baked it in, but i think theres some possibility that the fed looks at the landscape, especially the landscape as tainted yesterday by the Regional Bank, the decline of Regional Bank stocks, and says, you know what, this is a problem here and we want to maybe pause for that its not the way the market is priced, but i want to bring you, dom, some comments that were made in the first instance, we had Eric Rosengren on, the former boston fed president he spoke yesterday and spoke pretty definitively against the rate hike. Hes a president that as the boston fed president was very attuned to what the market was saying, and what was going on in capital markets. He says, its not necessary at this point to be raising rates until we get a better view of what the second half of the year looks like and i want to bring you another quote, which is interesting. Because you have krishna guha coming up. This is Robert Kaplan saying, i wouldnt raise rates in this meeting or in march either what he says he would do on the fed is essentially, i would say the following. Were going to turn over a couple more cards on this banking situation to make sure that we understand the impacts of it. And these are not radical, crazy, dovish fed folks. These are people who voted for rate hikes along the way when they were there. And theyre saying because of the banking situation, and the potential impact on the economy, that the fed ought to pause here i wonder if well get it as soon as the statement, steve last time, remember, they made that key language change in the statement on some hikes might be appropriate. And whether, just right off the bat they use that language theres some that that one sentence where they said the rate hikes would be appropriate on how to change that. Some say, it would yet to be appropriate. You and i talked about this in the last hour, and its really important, i city think the fed has an inflation problem here. And theres an argument that they may have to go considerably higher in order to solve the inflation problem. The issue is the timing of it. At what pace does the fed the fed used to, by the way i know youll remember this, sarah. The fed used to hike every other meeting by a quarter point all of a sudden, its decided it has to go ten in a row and i want to quote my friend and our friend, Paul Mcculley here, who said, once youve had nine beers, what part of doing the tenth beer makes you think that everything is going to be better thats a really good quote, and very appropriate in this context. The problem is that chair powell himself said, i would rather do all the tightening and not have to go back and do more he said, he talked about front loading rate hikes hes also talked about not making a mistake, basically, where they pause and then inflation continues to run higher hes pretty sensitive about that youre right about that, sarah. Let me bring up two counterpoints to that. One is that powell in the last meeting talked quite a bit about credit tightening and the issue there. The second thing is, remember why he was so slow to hike rates, right the reason is pausebecause he ws concerned about the Financial System he did not want a repeat of the temper tantrum that would be kind of ironic, if he ends up going slow or too far and creates problems in the Banking System i dont think he wants to be the author of a broader banking meltdown here. Steve liesman, thank you so much at steve noted, Robert Kaplan making those hawkish comments to our next guess, krishna guha he sees a 25 basis point hike in the credit cards the bigger question is, what is the signal about what comes next what do you think . So youre right i am expecting a 25 basis point rate increase today. Im not sure i would hike if it was up to me i would be more in the rosengren camp here, turn over a few more cars, and you can always hike a bit later in the year. But it does look like they want to hike. Theyve seen hot data. The inflation rate, including on those Core Services remains hot. Epi wages came in firmer in the First Quarter than in the fourth quarter. And i think they worried that they could lose credibility if it looks like theyre stopped out in may because of bank threats and could be stopped out in june because of the debt ceiling. So it goes to the signal i think it will blend two components a tightening bias, that they think that they might need to do more but a period of assessment where they will assess whether they are or are not sufficiently restrictive already having done that last hike today so its a kind of data dependence, but a new kind the data now has to come in hotter than they are expecting, in order for them to do more so not, i think, a formal pause, but something thats a little pausy. On the credibility question, as steve and i were just talking about it, i get it, they dont want to lose credibility on inflation. Theyve done a lot on that front, to fight inflation. Wouldnt it be a credibility problem, maybe even worse, if they poured fuel on the fire of a banking crisis so, again, i personally have quite a lot of sympathy for that view i think if it was down to me, it skip may and just say that i would expect to hike again in june or july if the data stays strong but it is in all fairness, the fact is that inflation is still on a core basis running in the mid4s, underlying inflation by their estimates, in the low 4s eci wages in the high 4s these arent numbers that are consistent or close to consistent with their 2 inflation target the big question, of course, is whether thats all of that strength is in the Rearview Mirror and looking forward, as i suspect, credit tightening, lag monetary tightening and other factors will mean the economy cools off quite a bit over the quarters ahead krishna, its dom speaking of that forwardlooking data, the Economic Data. Were already seeing anecdotal signs that the banking situation right now is having ripple effects. Were seeing lending standards tightening were seeing fewer loans out there for commercial and industrial uses. That sort of thing is there any timeline in your mind for how long we could see some of these stresses play out in the broader economy and if so, when would be the next time you could see any kind of an action on rates, is it the end of this year or maybe even in the next . Yeah, so i think we want to distinguish between two, of course, related strands of whats going on with respect to the bank the first is the stress, the turmoil, the risk possibly of further failures the second is the credit tightening youre going to get, even if there arent anymore failures because for every failed bank, theres a hundred out there who are going to be behaving more conservatively to rye to make sure they dont end up joining the list of failed banks now with respect to the turmoil, the stress part, its trouble. The delayed response for those republic, saying its a reminder that the phase may not be reliably over, but in any event we have seen enough to expect that there will be credit tightening it will probably emerge relatively gradually over the next several months and maybe the next three to six months before we can see how much of that credit tightening well get. But ill take the over rather than the under relative to consensus on this. What i would say i think some time around september, well have a much better clue of what direction the economy is going, whether its cooling off, not cooling off, disinflating, not disinflating, a lot of credit tightening, not a lot of credit tightening i would recommend that thats the horizon when the fed should be judging whether its done enough, needs to do a bit more, or whether it might then start contemplating a rate cut after all, at the end of the year. Just to push back a little bit on the inflation problem in the economy, because i think this is the debate inside the fed and clearly outside and in the markets, the numbers are high, too high for comfort. Theyre coming down, not coming down fast enough but what i cant get over is the Inflation Expectations in the market the breakevens. Theyve fallen theyre not showing any sign of concern. So if thats the case, look at where the concern actually is happen, in the Regional Banks. Thats not coming down and moving in the right direction. So ultimately, if you have to choose between higher inflation, which is too high for comfort and whats happening in the banking crisis, i feel like the market is telling you which one is the bigger issue right now. So sarah, i think you and i see this somewhat similarly, right . I think that its precisely the fact that those Inflation Expectations are very well behaved, that means that the fed does have the option to skip this meeting and see how things go if things stay strong and that would probably be my preferred route. But, you know, we dont perfectly measure Inflation Expectations and certainly, that fiveyear breakeven in the market is a very imperfect proxy for the true state of expected inflation in the economy so the feds looking at lots of issues obviously, household surveys, but theyre also looking at the actual behaviors of wage and price centers. And at this point in time, at least, companies are still marking up their prices, and workers are still demanding wage increases, significantly in excess of that 2 target and its been a bit sticky i say that as somebody who does believe it will eventually come down faster than the fed expects. I guess it all depends on what happens with the economy, if we go into recession and if that stops the company from being able to raise prices if we start to really see a turn in the labor market here, which is a central question. And i dont know i dont know if the fed knows or anybody knows if that happens or when that happens, right youre quite right. I think the probability of a recession unfolding over the course of this year is probably 60 , 65 type probability. So more likelily than not, but by no means a slam dunk. The fed itself seems conflicted. Policy makers continue to say that they dont expect a recession, while giving us forecasts that suggests the labor market will skate the edge of a recession and we learned from the last set of fed minutes, that the professional fed board staff do expect a recession or at least they did at the time of that meeting. Krishna, good to talk you, especially on a fed day. I love vhashing it out huge pleasure thank you. Coming up, an exclusive interview with the ceo of kroger on persistent food inflation ahead of todays fed decision. Plus, it was the pesbest of times, the worst of times for amd. Well break down what this quarter means for the rest of at ssemi industry. Thtock is down 8 . Strength in the nasdaq is holding up thanks to apple, tesla, damazon, tesla, and meta. Were back in just a moment with the dow down 80 points whats th . A thousand dollar hospital bill . But i have Good Health Insurance gaaaaaap did you say gap . Hes talking about the expenses Health Insurance doesnt cover. But with aflac, you can get money to help close that gap. Aflac, huh . Gaaaap aflac gaaaap get help with expenses Health Insurance doesnt cover at aflac. Com when i was his age, we had to be inside to watch live sports. S Health Insurance but with xfinity, we get the Fastest Mobile Service and can stream down the street or around the block hey, can you be less sister, more car . All right, lets get this over with. Switch to Xfinity Mobile and get the best price for 2 lines of unlimited. Just 30 a line per month. I should get paid more for this. You get paid when you win. From xfinity. Home of the 10g network. Welcome back youre seeing shares of eli lilly which are up just about 4 right now. Shares are trading at an alltime show after data shows its experimental alzheimers drug slows progression of the disease by roughly 35 Ceo David Ricks joined squawk box earlier this morning saying, although this is not a cure, it is a significant step forward. All right thought we were going to listen to him eli lilly trading at alltime highs. It sat down with kroger ceo Rodney Mcmillen for an exclusive interview at the milken conference where we covered a lot of ground, from Consumer Trends to the labor market to krogers trending merger with albertsons. But of course, we started off by me asking him about what is happening with food inflation. If you look at inflation, you can start seeing inflation is starting to slow down. And obviously, thats a good thing for everyone but its taken longer than what we would have expected and still, in some areas, theres still constrained product splice, as well. From an economy standpoint, people that are on a budget are definitely changing their behavior so theyre moving to our brand theyre startingin ito make decisions outside of grocery spending the things that we still see people doing is eating as a family and eating together that helps stretch the budget, because, you know, you can eat at home for about a third of the cost of going to a restaurant. And you also sat down together as a family and eat. Thats something thats been helpful for us and continues to be so. Its something that you and i have talked about for a number of quarters now, more people looking for the discounts and trading down to generic brands has that picked up is it getting worse . We dont look at it as getting worse, because were really proud of our brands and the quality of our brands is just as good as any national brand. And if its not, we wont have it i guess what i meant is, is it a strain on the consumer. Its fascinating, because people initially do it because of the financial strain. But the repurchase is because they find the products really good so if you watch over time, our brands continue to gain share over the last several years, and wherever the economy is tough, we gain just a portion, if not a share. And youre able to maintain that when the economy gets better obviously, at some point, the economy is going to get better and its just a matter of time have you seen any impact as a result of the expiration of the emergency foods benefit . I feel like with s. N. A. P. , we can definitely see a change in behavior from s. N. A. P. Customers. And thats pretty broad. And its been kind of throughout the last year or so, because in some states, they had eliminated the emergency a year ago some are just now doing it but there is no doubt that you can see people in their household spending, theyre not spending as much, or theyre using credit cards and things like that to pay for part of their food purchases so recessionarytype behavior or not yet not yet nothing like what we would expect now, as i mentioned before, people that are on a budget, youre definitely seeing behavior changes there but theres still people without cons constraints, spending money just like they have been all along. Part of it is that the job market still looks pretty good very good now, if you look at like for us, the number of openings we have is about half of what we had a year and a half ago. Our turnover is a little better today than it was a year and a half ago but we still have 7 or 8,000 openings theres still plenty of job opportunities. So the labor market is still tight, but not as tight . That would be a very good way to say it. What about on the wage front . Weve decreased average hourly rates by over 6 in the last year, by over 30 in the last five years. And we would expect to continue to invest in wages and if you look at the merger with albertsons, as part of that transaction, weve committed to invest 1 billion in wages as part of the combined companies, as well and you know, for us, as we improve productivity in other parts of the organization, we take some of those savings and invest it in our associates. You mentioned the albertsons deal how is that going . The back and forth with the regulators were exactly where we thought we would be at this point in time. And we always had expected that it would be 2024 before we would be finished. And we continue to expect to be 2024 but its one of those things where we appreciate the engagement with the regulators, because we know communities will be better off. We know our associates will be better off, and well improve the value for the customer in terms of the value for the money. And those are all things that are good are you getting good indications . Because the Biden Administration has blocked a lot of deals lately were too early to have any kind of indication other than, its an active dialogue in process. Rodney mcmullen, ceo of kroger and a very noisy time during the milken conference. The milken conference is often noisy, given the public we are front and center setup, cnbc theres a lot of activity and action going around. We talk a lot about food inflation, obviously and the persistently high prices, but he tells me that raw material costs are falling slowly, but usually takes six to nine months to flow through the supply chain, because a lot of the Companies Buy early on that. And weve seen that across the consumer staple sector doubledigit price hikes for kimberly clark, nestle, procter gamble, pepsi. Even kraft heinz and clorox last night, kraft heinz saying prices were up about 16 . Kroger part of that basket, but mcmullen did tell me he expects those doubledigit food Inflation Numbers to come down by 2 to 3 this is obviously part of the feds fight. High inflation, high food inflation. Its part of what is costing American Consumers the most. That, of course theyre worried about rent prices and shelter prices as well if you show the brands in the companies that have reported and the ability to raise prices, theres probably a reason why youre also seeing many of those stocks trade at highs for the year, if not highs alltime. And at higher multiples, because investors have been looking towards some of these brand warehouses, like pepsico, like png, as places where they have pricing power. Which is the ability to actually raise those prices, and have customers pay them not even really question paying them just pay them. The elasticity in the industry the elastity, and elasticity of demand. Pepsico, the multiple was up there at one of the highest levels weve seen in years people are willing to find those brand warehouses and go into it. But i would also a, sarah, a lot of viewers and listeners know, im a guy that does my own shopping i shop for my family youll see me at the local grocery store, at costco you are seeing food prices abate for things like eggs, for things like milk. I saw bacon on sale the other day for 2. 99 per package. These are things where if you go every week and you shop, there are signs. It is still very high. Theres no doubt about it. But its coming down and there are signs. And what were hearing from these companies on the back of doubledigit price increase that is the prices are not going to moderate too much, but they are going to moderate. Their costs are coming down. They cannot keep raising prices at this high level it doesnt mean its going to be a swift dropoff and inflation are come right back down it means it will go up less throughout the year and at least its going in that direction and wall street, as for the valuation, a lot of these companies have raised guidance on better sales, on the fact the volumes have held up really well to your point. And theyre defensive. If youre going into a weaker economic environment and recession, we still have to buy tooth paste, toilet paper, and food you juxtapose that to what were seeing in crude oil prices right now and thats right. Incremental drops in gasoline prices and Everything Else well talk about that still ahead, the commerce secretary of the United States, gina raimo nndo, how she is tracting investment into america right now. Well be right back. Welcome back i want to take a look at shares of estee lauder. Off the lows, but still down 17 , worst day ever. The company lowering its outlook for the year citing headwinds from travel retail in asia the ceo saying, as the Pandemic Recovery in asia comes into better focus, its proving to be far more volatile and gradual than other regions obviously, people were bullish on the china recovery story. China is about 30 of their precovid sales, according to rbc. So its a big deal you also wonder whether or not the u. S. Is a blueprint for a postcovid recovery, whether chinese consumers gravitate towards services and travel spending as opposed to goods spending so that could also be something as well. Right, but estee lauder does well with the travel space theyre in the airports. They need to see they want to see a pickup in that i think its been slower in china, more gradual. And definitely more shifted towards luxury goods we didnt hear that from ldmh, for instance time for a news update Bertha Coombs is here with that. Good morning, bertha good morning, dom heres your cnbc news update at this hour. A seventh Grade Student has been arrested and is suspected of killing nine people in a shooting at a school in belgrade, Serbia Police say the child was a student at the school and used his fathers gun to kill eight children and a security guard. Mass shootings in serbia are extremely rare, with none reported at schools in recent years. More than 100 people were arrested today as part of an effort against the Notorious International crime group, the ndrangheta a total of 130 people arrested across 12 countries. The organization is responsible for much of europes cocaine trade, along with systemic money laundering, bribery, and violence and gop lawmakers in florida passed a bill to shield the travel records of Governor Ron Desantis and other top elected officials. Desantis has traveled extensively outside of florida in advance of an expected 2024 president ial bid critics say there are questions about whether some taxpayer money may have been used to pay for those trips. Back over to you, dom. Bertha coombs, thank you very much for the news update a quick programming note, dont miss cnbcs exclusive access this weekend at Berkshire Hathaways annual meeting in omaha, nebraska. Becky quick and mike santoli sll be there and so should you. It 10 00 a. M. Eastern time this weekend right here on cnbc this saturday. Stay with us well be back after this break home, and we do too. Pnc bank. 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 cecily youre looking pleased with yourself. seth not to brag, matching your job description. But i just switched to verizon. cecily so you got an awesome network. seth and when i switched, i got to choose the phone i wanted. For free. Not bragging. cecily youre bragging. neighbor oh, hes bragging. seth who, me . Never. Oh, excuse me. Hello, your royal highness, sir. cecily okay, thats a brag. seth hey, mom. I gotta call you back. vo switch and choose the phone you want, like the incredible iphone 14, on us. cecily on the network worth bragging about. Verizon our customers dont do what they do for likes or followers. Their path isnt for the casually curious. And thats what makes it matter the most when they find it. The exact thing that can change the world. Some say its what they were born to do. Its what they live to do. Trinet serves small and medium sized businesses. So they can do more of what matters. Benefits. Payroll. Compliance. Trinet. People matter. Welcome back check out shares of cvs, down about 3 the company did cut its Earnings Guidance due to the early close of the oak Street Health deal yesterday. Thats going to lead to higher integration costs as a result. Some of those profits and margins may be a little bit shadier in the future. You can see right now, those shares down roughly 3 70. 65, the last trade though theyve digested a lot of big deals lately. Were about two hours into trading. Lets go posttopost now with bob pisani for a look at whats moving what are you watching, bob the Regional Banks. Yesterday, they were going ker flewy. The museum volumes were so heavy moved the average daily volumes of the exchanges things are a lot calmer today. And you dont even have to look at the stock prices. Just look at the trading volumes. U. S. Bancorp is one of the big super regionals. 7 million shares here. We did 29 to 30 million shares yesterday. And this happens every day you get four, five, six times normal volume on days when theres concerns about the Regional Banks and again, it moves the average daily volume on the major exchanges. Same with comerica, another big super regional that trades down here 1. 5 million shares 1. 5 million yesterday. 12, 13 million shares. Again, big, big movements here with people just moving stuff around, unsure about whats going on and then it calms down again same thing here, pnc you can see here, 2. 2 million shares yesterday, we did almost 10 million shares pnc, by the way, some news that we were just talking about a little earlier here. The Banking Industry is offering up to 15 billion of its commercial paper to provide additional liquidity theyre trying to address this issue as well. The big problem with all of this see these numbers . These are all 2020 lows, going back to where the financial crisis was, where we were dealing with the pandemic. But none of these banks have done very well we were talking about this yesterday, at the btig Charity Event day. None of these banks have ever really recovered from the great financial crisis the kre is the Regional Bank index that came in in 2006 since it started in 2006, its a basket of all of these Regional Banks, its down 20 down 20 after 17 years, you lose 20 of your money the s p 500 is up a over 200 , dom. So to give you an idea here. One guy yesterday, a bank analyst said, this is like buying the airlines. Theyve been heartbreakers for years and years and years. This is just the latest disappointment in owning those Regional Banks bob pisani, posttopost here at the stock exchange. Thank you so much. 100 yes, all of the respondents in cnbcs fed survey are expecting an Interest Rate hike this afternoon. But banking troubles are far from over and some are hoping for an actual pause from the fed. But, what happens to the markets if they hike and dont signal that they are done if powell sticks with his aggressive stance on fighting inflation, what could happen joining us now with his expectations and how it could affect your portfolio is Morgan Stanley wealth managements jim lacamp thank you very much for being here right now this is pretty stark and maybe this is also a license for the fed to go ahead and maybe make that raise, because everybody is expecting it. What exactly do you think they should be doing right now . Well, john, the fed is well aware of the past mistakes of the fed one of which, arthur burns, who quit hiking rates too early. And same thing happened with paul volcker so the feds very aware that you cant kind of halfdead this you have to completely kill off the inflation increases before you stop raising rates here. So they painted themselves into this terrible box. Because right now, we have an already inverted yield curve we have leading economic indicators, all pointing south you have problems with Regional Banks, as you were just talking about. Its not a great environment to raise rates into, but inflation is still too sticky. The fed created this box, too much money printing, too loose of monetary conditions, but theyre in a really difficult spot here. I think theyre going to raise quarter of a point, and then do a conditional pause depending offen what the inflation readings do throughout the summer and they still have to see what the impact of all of these rate hikes that theyve done so far, the impact its going to have on the economy, not all of that has worked its way into the economy yet. I think theyre in a very tough spot, and i dont think anybody is taking off their hard hats here, dom, in terms of other shoes that might be dropping with these local and Regional Banks. And that makes it even more acute. Jim, i looked back over the last 12 months, and there have been folks who have been pointing to leading Economic Data and pointing towards the slowdown of the economy over the past 12 months weve seen maybe a little bit of a slowdown, but the jobs market remains resilient. The economy is certainly not in a huge recession by any means. How long does this take to play out . And is the economy good enough right now where maybe the fed feels like it can do this without cratering things its a great question, dom. You can throw in that the stock market hasnt broken down, either theres a lot of people who have been calling for that for a long, long time. So the market and the economy, theyve both been more resilient than anybody expected. But if you just look at the raw data and say, what have these data sets meant to us in the past whether its the inverted yield curve, whether its leading indicators, now down 12 months in a row whether its purchasing managers indices, the shape of the philly fed curve. All of these have been consistent with recessions in the past the problem for the stock market is that, if you look back at previous stock markets, go to 160, 69, 73 , 80, 2003, 2000, all of these stock markets havent recovered until you were already in a recession in terms of the stock market, i think we have to be a little careful here yes, the technicals look okay. Maybe we have to keep our mind open, that we could be wrong and maybe the stock market is going to move for other reasons that were not seeing for example, the fed added a bunch of liquidity in the First Quarter. They were tightening, but they were adding liquidity. Did that have an impact on the market it probably did. Maybe the markets moving for other reasons, but the data, the data sets, dom, all show that were heading into a recession, and now you add in even more tightening of lending standards and a slowdown, you had a senior loan officer say, a major slowdown ahead and its hard to argue that we arent going to enter into at least a mild recession, probably not aw red wedding, but a litte blood will be coming jim lacamp at Morgan Stanley wealth management, thank you very much. Well see you soon, sir. Thank you, dom. Never want to hear about the th mef ing from thega o rones in the context of the market shares of amd getting hit hard today well look at the divergence from nvidia after the break. Dont go anywhere. Shares of amd are sinking today after the chipmaker forecasted weak revenues in the Current Quarter amid a pc market downturn thats the focus of todays tech check with our own deirdre bosa deirdre, its not just about pcs. The story gets so wide, it even encompasses ai at this point exactly, amd, like a number of other chipmakers, it is a battleground stock for that reason investors are trying to balance that shortterm slowdown in pc ss and data center with generative ai today the bears are in control bringing shares back to ground somewhat after a 30 rise this year so a few key questions Going Forward. One, is this the bottom of the current cycle as ceo lisa sue positioned the quarter and, two, can amd be a real player in this ai race heres what she said about the latter were actually at the beginning of an Inflection Point in the cycle so, you know, were sizing the ai market in the cloud to be upwards of 60 billion over the next three or four years so were at the very early stages now, part of that opportunity lies in its chip called the mi300 that will compete with nvidias flagship chips for ai its called more than a onetrick pony but perhaps more importantly, she said it will represent, quote, tangible revenue in the First Quarter. For now, nvidia dominates the market with an estimated 80 of all ai workloads, currently run on its highly advanced processors but competition is well underway remember, the maeg caps, google, microsoft, meta, theyre all working on their own inhouse chips and supercomputers apple, which reports tomorrow, will be a chance for investors to hear how it is developing its own ai technology, which it certainly is, guys so, deirdre if you take a look at the landscape now with all of these chipmakers, its safe to say ai is a big part of it. What exactly does that do for the resource allocation . Are all of these Companies Going to be striking the ai chord with all investors Going Forward . Thats why you have the megacap companies, that dont traditionally make their own chips in house starting to do this and working on this apple has been working on it for years. So theyre right to make it more efficient, more lower cost, avoid that middle man. Remember that apple did that for its personal computers and some of the other companies that are trying to do that in data centers. So that cuts out players like intel and amd. It remains to be seen, certainly, if they can do that in the ai space and create a better chip than nvidia. But this is part of this massive platform shift that is changing everything we know about technology deirdre, thank you. Not the first time, not the last time well hear from you on this deirdre bosa commerce secretary Gina Raimondo on the other side of this break. How shes right to attract new investment into america when squawk on the street comes right back the first time you connected your godaddy website and your store was also the first time you realized. Well, we can do anything. Cheesecake cookies . The chookie manage all your sales from one place with a partner that always puts you first. we did it start today at godaddy. Com upbeat music with the push of a button, constant contacts ai tools help you know what to say, even when you dont. Hi constant contact. Helping the small stand tall. And i remember kind of thinking like, oh my gosh, i think we could be sisters. Because i think we looked. Yes. Right. Yeah. And i dont think at that time i think youre the one to tell me that we had the same birthday. Yes. Its really unbelievable when you think about it, and i remember kind of thi that you were my mother and fathers banker, you became my banker and now fran is in her third year of college and youre her banker. Its so unbelievable because im just 20 years old. [laughing] americas the best country to invest in right now thats what the commerce secretary Gina Raimondo is telling businesses, startups and delegates at the select usa Conference Today joining us first on cnbc is the commerce secretary welcome back good to have you thank you great to be with you so, secretary raimondo, is the pitch harder right now given all this ridiculous drama were dealing with on the debt ceiling, seeing multiple Bank Failures this is the discussion on wall street im curious what the pitch is now for getting investment in america given these head winds that is not what i am hearing at all is this is the biggest select usa ive ever had and ive never seen this level of excitement. I think a lot of it is on account of the fact of the incredible investments were making under president bidens leadership, investments in infrastructure, the chips act, all of the businesses that im talking to here are saying they want to invest in america. We have the best talent source, the deepest capital markets, and, again, theres huge opportunities in the Semiconductor Opportunity to invest, in the electric vehicle space, in the battery space. Even the governors im talking to here are saying they are just overwhelmed by the interest on behalf of other investors and companies from outside of the u. S. To invest in america. Its great to hear. I also notice that there are a number of chinese businesses, 100 people from china, i believe, and hong kong attending, which is up sharply from last year and the year before its sort of surprising. Are we welcoming Chinese Investment in america despite some of the security concerns . Absolutely. As i have said so many times, as the president has said, we have no interest in decoupling. We are going to fiercely guard our most advanced technology to make sure were not fueling chinas Civil Military fusion operation. But with respect to trade in other kinds of goods or goods that have nothing to do with technology or the military apparatus, that creates american jobs and that is something that we want to encourage this year we have about 100 chinese businesses, as you said, a couple years ago it was under 50 so even the chinese and these companies recognize what we know, america is the best place to invest, the best place to start and run a company. Its dom. I wonder from that competitive dynamic there are those who will argue china today is what the soviet union was to america back in the 70s and 80s how would you characterize how we treat our relationship with china from that perspective of commerce and defense and Everything Else . And does the Business Aspect maybe make things a little bit more difficult i think thats a little bit apples and oranges china is a massive economy, one of our largest trading partners, et cetera. I think of it as we want to promote American Business and exports and trade where its in our interests and where it can create jobs, but we also need to be eyes wide open about the military threat and the fact that china were ahead of china on ai, on chips, on a lot of advanced technology and we need to protect that we would be crazy to allow that. Were going to protect ourselves. Were going to protect the American People but were going to trade and do business where it makes sense to create jobs and to deescalate any tension escalation is in nobodys interest and doing business where appropriate is the right thing. You mentioned chips, and i was wondering if you could give us an update about eight months since the passing of the chips act i know youve had your hands full are you on schedule, on target what is the time line here for when we can get those factories built in the u. S. . We are on target, pedaling as fast as we possibly can. Weve been so pleased with the response weve received over 200 statements of interest from companies all over the world who want to manufacture chips or package chips in the United States we will have significant announcements before the year is out and we are just working in partnership with companies to invest this money in a way that makes sure america leads the world in semiconductor design, production and development we want to lead the world in ai, but we want to do it safely, madam secretary. You are part of this meeting the Vice President is holding tomorrow with the ceos of google and microsoft and open ai. Im curious what the goal is and what your concern level is around some of this technology the concern level is high its a challenge because on the one hand the excitement level is high when you think of the promise and potential of ai and what it means for advances in health care, in education, advances in business were in the lead and we want to keep the lead, but it has to be done safely. Its an incredibly powerful technology so we want to have a serious discussion with industry as tomorrow will be one discussion among many were having with many stakeholders to figure out how we go fast but without breaking things. Fast but safely. Without unintended negative consequences madam secretary, before we let you go, theres one more point a lot of folks have made about the competitiveness of the u. S. And that is perhaps some of the head winds facing the economy. From your standpoint and where you sit what do you think will be the most significant challenge in the coming Months Congress needs to do its job and raise the debt limit i worry about that that would be a forced error thats inexcusable ive spoken with a number of ceos businesses are doing well. Gdp is up. Growth is happening. But its inexcusable to not pay the bills that prior administrations have incurred. That would inject a level of disruption and uncertainty into this economy that would be devastating at a time we cant afford it. We have to make sure that gets resolved quickly i want to follow up on ai, is there a role for commerce for your department . Probably not regulation thats not what the Commerce Department does but some of the leading experts in ai in the administration are in the National Institute of standards, nis, setting standards and frame works and determining a level of risk understood. Thank you very much. Keep us posted on that meeting very interesting and thank you for the time today from select usa, commerce secretary Gina Raimondo. Keeping our eye on the markets, the s p is a little bit higher Regional Banks have stabilized the dow is down eight points. This is very much about what will happen at 2 00 p. M. Expecting a hike. Well see what he signals. Thats it for squawk on the street. Thank you, dom over to scott wapner and the halftime report. Sara, thank you very much. Welcome to the halftime report. Im scott wapner front and center the countdown to the fed Decision Just two hours away now another rate hike widely expected, but its the road ahead that matters more to your money and this market. We discuss and we debate whats likely to happen and what it means in the hour today. Bryn talkington, steve weiss, Joe Terranova and what the market is doing. Were in a Holding Pattern obviously wanting to hear what the fed does, what jay powell says, the chairman, shortly after that, joe, johnny fine, goldman sachs, was on and said its the most important fed me