Transcripts For CNBC Squawk On The Street 20130805

Wednesday. Pmi 50. 5 a twoyear high. Markets are mostly flat. Road map begins with the highest inflow ever for equities. Investors pouring 40 billion into stock funds in july. As we said, three key fed speech this week that could shake the markets. A big win for apple in its battle with samsung. The Obama Administration vetoing a ban on apple products. Share of samsung are falling in asia. Tv blackout, battle between Time Warner Cable and cbs show nothing signs of letting up. The Terror Threat overseas. Many u. S. Embassies stay closed now until august 10th. A live report from nbcs Pete Williams. First up, if you didnt see it, u. S. Equity funds saw a record inflow in july. According to trim tabs funds saw 40. 3 billion coming in last month while bond funds saw the fourth highest outflow on record. David seeburg at cowan. Good monday morning to you. Good morning. David, is this the beginning of something new . It seems to be. I mean, 40 billion in july, amazing. Still a ton of cash on the sidelines. Theres about 9. 5 trillion in xhrgs bank deposit and money mark accounts, companies obviously corporate Balance Sheets reflecting cash. M a starting to pick up its the beginning of a rotation that we expect to take equities higher. Peter, how do you read things here. S p gone from 666 to 1700 without the Retail Investor. Retail moneys coming in, thats going to push us higher. Remember for every buyer theres a seller. For every 100 shares bought, theres 100 shares sold. Its the aggressiveness of the buyer. If the money comes in theres an equal amount of sellers its not going to matter. The market had a tremendous run over the past couple of years without Retail Investor. I dont use that as a determinant of where the market goes from here. David and peter, it seems that the fed is pushing people into stocks. When you look at Revenue Growth, earnings for the last quarter, any real substantive reason at this level to get into stocks other than the fed pushing it . Its interesting. I mean i look at the way the market changed a bit. Its more of a stockspecific market. You know versus a sectordriven or overall market rally. People, hedge funds, individual investors looking at stocks as independent entity and theyre taking them higher. Look at our desk in particular, a ton of hedge fund activity. 60 40 hedge funds on our desk. Correlation is extremely low. And it just seems to me that the hedge funds seem to be chasing performance. A lot of individuals trying to find winners. And, yeah, i think earnings in general have been better across the board. David, citis got a note out this week that argues the collapse and correlation youre talking about is dangerous in that traders stop paying attention to big mac crow pictures and historically, when correlation between names breaks down, that there is the potential for a correction. Is that misguided . No question about it. I agree with that. Its more of a hedge fund positive, standser for the hedge funds. Gives them an opportunity to catch up to the tape and find winners, make bets on winners and benefit from it. I read the citi article and i agree with it. From a theme perspective, its viewed as a little bit of a negative. In general. Peter, whats most important this week . Weve got a couple of fed speakers. Weve got the ism Services Data out in a little bit. What do you think is going to take peoples attention as we move away from the friday jobs report . The only thing that matter is this week, the next couple of months and yearend is what the fed does. We can discuss the Economic Data, discuss the earnings but whether good or bad the market didnt care because its focuses on free money injected into the Financial System by the Federal Reserve. It comes down to what they do in september for the next couple of months. I was going to say, a lot of people over the weekend, its interesting, you see them working through data, not sure where things are shaking out but saying the feds going to taper in september. The september taper is divorced from how the macro picture evolves over the coming weeks, peter . Well, if we are around estimates, i think theyll taper. If we get a deviation from the downside, they can pull back. The slight miss on fridays payroll number i dont think was enough to move the needle. I think the fed wants to taper. Theyre trying to find excuses to do it. But it comes down to also the bond markets response to that. The bond market hasnt liked what its seen in terms of the possibility of tapering. The bond markets already tightened. Stock market is ignoring it. But the fed wants to proceed before bernanke leaves office. David, one last point here on seasonality. Trading in august is tough. We know there are some people this week and this month who are going to be on vacation. If we digest 1700 here with the relative degree of success, does that force traders to trade into the month, trade into labor day rather than completely divorcing themselves from the news flow . There yeah, i actually think it does. I mean, in just to sort of back up a bit and talk about this being a fedonly driven market i disagree with that entirely. I look at m a that weve seen. These companies see something, value in the market. We saw 20 billion of friendly m a last week. Companies are looking at that and saying theres value here and were going to make bets on that. They still have a lot of cash. Were going to continue to see that. Trading into the end of the month, absolutely see volume pick up a bit. Different than weve historically seen in august. Again, hedge funds getting more active. The flows in our desk have been bigger. And i think in general, i see a lot of very positive signs from m a, from the amount of money on the sidelines, its starting to be infused into the market. We saw the u. S. Equity fund data, its very strong. I believe well continue to trend higher. David and peter, sharing their thoughts on monday morning. Thanks to the both of you. News involving big tech. The white house has reverses an International Trade Commission Decision that banned the sale of certain older apple iphones and ipads. The original ruling said those products violated samsung patents as a result of the decision, samsung lost 1 billion in market cap overnight. Microsoft offering 100 discount on hit tablet coming after the company took 900 million writedown on unsold inventory. Dennis, you guys write this morning about the implications of this decision on obama overrulingisting itc. The rollback with political overlay of apple as a Great American jobs innovator if you remember the hearing in front of capitol hill with tim cook. Youre saying it might not have happened if it had been khoch brothers. Steve jobs, real job the government sided with apple. Long term this pushes the companies to come to some sort of negotiated settlement. As weve seen and reported in the journal over the last few weeks each one has won one, lost one, and they have different takes when it comes to their settlement negotiations. I think over the next few months or the next year you will see some negotiated settlement. As you recall, samsung produces a number of components for apple. This is another thing that put the two together. Talking about older models. Everyones all consumed with newer models. More rumors about september 20, i believe the date for a 5s, for a 6 on the iphone. That speculations going to heat up as we get closer and closer. I think the ruling, as we move forward in tech space, it does put a chill on the aggressive patent squabbling weve seen and from Companies Big and small. It does sort of like throw a wrench in the general understanding and thats why its important for people to Pay Attention to it. The interesting thing, people are criticizing itcs role in the first place, saying its being adjudicated in a way that wasnt in the best interest of American Business, if you wanted to call it that. Not that thats necessarily the deciding factor here. Right. The journal on the editorial side had been one of the places calling for the Obama Administration to overrule the decision, saying, come on, guys. Right. It does seem to be almost nakedly political move. But the a lot of people are saying thats not necessarily a bad thing. Right. Interesting to see how the court evolves. Its sort of been a rubber stamp for so many years. Whether it takes a more bite in the stance in the future is something to think about. On the higher end surface, kelly said 100 buck, cut price on rt. Its through august 29th. Plenty of time now i remember being on air with you and i said, have you seen anyone in the cafe, in an airport, on a train, using a microsoft tablet . I dont think you could answer that. No, never seen that. After posing that question i looked with an eagle eye to find people using those tablets. I cant find them. I think the discount is somewhat meaningless, 800 to 700 tablet. Why pay 700 when you get the latest ipad for 400, 500. The nexus, getting good reviews. If microsoft says we have too much inventory, go under 500 . 100. Is it that bad . Competition is so acute if theyre not the best, theyre going to have to be that cheap . We know about tablet carl is nodding 80 of tablet traffic is from ipads the rest from android. They wrote down 900 billion. 100, kelly. Not enough. Thats what im hearing from dkb. On the more serious front, the state department, as you might know by now, extending closings of u. S. Embassies in the face of a serious and credible threat against american interests overseas. Nbc news Pete Williams with latest on that developing story. Reporter these are embassies in 19 countries that the u. S. Says theyre going to remain closed through this saturday. Now the state Department Says many would have been closed for several days this week anyway because of the end of ramadan and the holiday associated with that. But they will also reopen embassies in Nine Countries that were closed on sunday, normally that would be a day when theyd be opening, beginning 0 the work week in the muslim world and that includes kabul and baghdad. You still have this concentration of u. S. Embassies and consulates in north africa and the middle east, thats where this threat is supposedly concentrated. Though, carl, they candidly say they dont know precisely where the attack would take place, what kind of attack it would be, how it would be done, precisely when. Theres a lot they dont know and thats why theyre taking all of these precautions. Its not just the u. S. Both the uk and france also say they will keep their embassy in yemen closed through thursday at least. Pete, has any of this translated into more worry or concern about threats to the homeland itself . Reporter not really. I mean i think theyre candid in saying they cant rule out a possible attack on the homeland or flights to the u. S. From overseas which have been favorite targets of al qaeda in the past. But the gravity or the central core of information that they have seems to suggest that the attack would be to u. S. Or western interests in yemen or north africa or the middle east. That seems to be the best educated guess about this. Pete williams in washington, thanks for the guidance on that. Good to see you. Okay. When we come back, Time Warner Cable cbs shut down showdown heats up. Two wellknown publications sold. Eye opening comments from cablevisions dolan. One more look at futures starting off with flattish action. More to come. Earnings, econ data. Live from post nine when we return. [ male announcer ] come to the lexus golden opportunity sales event and choose from one of five lexus hybrids thats right for you, including the lexus es and ct hybrids. This is the pursuit of perfection. A lot can happen in a second. With fidelitys guaranteed onesecond trade execution, we route your order to up to 75 Market Centers to look for the best possible price maybe even better than you expected. Its all part of our goal to execute your trade in one second. Im derrick chan of fidelity investments. Our onesecond trade execution is one more innovative reason serious investors are choosing fidelity. Now get 200 free trades whou open an account. We do . I took the trash out. I know. 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Go long. Time warner cable and cbs are not happy and the seam goes for millions of tv viewers. Twc dropped cbs stations from its systems in new york, los angeles and other markets as the two unable to agree on transmission fees despite extending the deadline a few times. This might have gotten solved in the 11th hour but people, if youre in new york and turn to channel 2, do you get stars . I think so, people were saying. The answer is i dont know. How many people are glued to the channels as they have been in the past . Its awfully convenient its happening in august for both side. When football season comes around there was a game last night. Thats when it matters. Its about football. You can bet, ill bet you they have this resolved before that big first nfl game. Those who wanted to see tiger woods play over the weekend were out, watching him win for bridgestone. Dont you think its another reminder you as viewer, with all due respect to the great products put on cable television, maybe you want to cut your cord, live without it. Jim dolan suggesting what the future is between broadband and linear television. Unbelievable that you even got him on the record. Tireless work by reporters. Years since jim dolan talked. What he said was really important. He acknowledged that the cable system as it is currently constituted will not stand. He calls the cable business living in a bubble of el selling packages of channels to consumers they do not no long term, broadband will overtake the system and thats why hes investing in that kind of content delivery. I was looking here, because you know all of the trends come together at the same time, you have chrome cast, what that is doing, the impact on the industry as well. And you put that together with ario, those guys with the work around the law. Chrome cast. Chrome cast. You could spend lots of hours amusing yourself without paying that cable bill. A lot of m a over the weekend, not only with newswee newsweek, tina brown facing about the challenges and trying to turn that entity around. Also the boston globe sold by the New York Times. 70 million. I think that went for a billion bought in the 90s by the New York Times company. Life moves on. As i like to think about it, used to be a time books were made by scrolls and they became books and scrollmakers were in trouble. The scrollmakers are in trouble. You could go through ten Digital Properties worth more than 70 million today. First of all the scroller had it right if you think the way digital devices are scrolling through. When it comes to the boston globe, arent we learning that content Still Matters and people will pay for it and the model can be sustainable in the Digital World . Its just that it creates winners and losers. You guys are looking the journals got advantage because it started that way from the beginning. The model says that free or close to free no, no. Anderson days are over. Dont you think the trend is favoring the journal model. Leo hindry said content is king but the king changes every day. True. You have to acknowledge the great work the boston globe did due when it came to the marathon bombing, that was a public service. Thats a risk of society, when we go down the line, no one covering things on a ground basis. If they were more aggressive, if they or the New York Times company i dont know what the better option would have been but they try to monetize better, other properties, the economists have managed to do it better. Is that the real lesson here . I think the real lesson here that is the local advertising dollar has gone completely away from the newspaper and has gone to yelp, google, facebook, twitter. Thats where the money is. Im excited to see twitter revolution wednesday to talk about that. Well talk more about it before wednesday. When we come back, life without facebook, twitter linked in. Meet a Technology Writer who is quitting social media for a month for the first time in a decade. How is she coping so far . One more look at futures. Lets get the opening bell open and over with. Start the trading session. Futu futures down 28. Geoff im the kind of guy who doesnt like being sold to. The last thing i want is to feel like someone is giving me a sales pitch, especially when it comes to my investments. You want a broker you can trust. A lot of guys at the other firms seemed more focused on selling than their clients. Thats why i stopped working at my old brokerage and became a Financial Consultant with charles schwab. Avo what kind of Financial Consultant are you looking for . Talk to us today. Stubborn love by the lumineers did you i did. Email . So what did you think of the house . 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Hoping for some volatility to be worth coming in, paying money for a boat fare and a clean shirt. Other than that, the macro, take a look at macro effect. Record dollars flow into equity funds and etfs. Most traders looking for a pullback in the market to fight that inflow has been a painful trade. Saying that the pan trade has caught people on the short side of the market . Yeah. The naturalen stink for trade to short the market. Rule one, never short a dull tape. You do a great job putting shine on it. Intraday, its a brutal tape to trade. Help from the ribbon dancers. Yeah. But yet you have the fed and all of the fed governors making statements. Absolutely. Thats enough, right . Take a look, see what mr. Fisher can do. He adds fireworks and evans tomorrow and close on wednesday. That will keep some activity at watching the tape, or twitter, who can say what. Expectation is that tapering will take effect. Im still of the school it happens in september. So that being said, the market has to price in the tapering and how exactly that does tighten natural markets though the fed says thats not how the tool is used. The fact of the matter is tapering does create tightening. What do you think accounts for inflows . Is this are these Kitchen Table mom and mop conversations or hedge funds fridaying to catch up . Originally mom and pop. And the hedge funds that missed, you have to scratch your head wondering why theyve missed this. Sure. When rates go up, the value of the bonds, Principal Holdings go down and can jamie dimon and the big banks to see what happened to their portfolios. Anything in particular youre watching today . I think, as a group, well keep an eye on the financials again because of whats happening in the tenyear. The tech stocks with some of the chips in particular. The tech seems to be where the more hotter money, so to speak, has been going to work as opposed to the pure flows into etfs. Ben willis, thank you. A couple of things to keep an eye on as were a couple of minutes away from the opening bell. After six consecutive weeks up, will this be another record setting week for the markets . Brace yourself for the kickoff. Opening bell moments away. For over 60,000 california foster children, having Necessary School supplies can mean the difference between success and failure. The day i start, im already behind. I never know what im gonna need. New school, new classes, new kids. Its hard starting over. To help, sleep train is collecting School Supplies for local foster children. Bring your gift to any sleep train, and help a foster child start the school year right. Not everyone can be a foster parent, but anyone can help a foster child. Hi. Im clarence. Are we too late to get my wife a camry . No, theres still time at our onceayear clearance event. Youre so stylish. Youve got good taste. Oh, cammie. Mom . Yes, blake. It would look cool in black. 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Hes an architect with two kids and a mortgage. Luckily, he found someone who gave him a fresh perspective on his portfolio. And with some planning and effort, hopefully bob can retire at a more appropriate age. Its not rocket science. Its just common sense. From td ameritrade. Into youre watching cnbc squawk on the street. Opening bell in just about 30 seconds or so. A lot going on. The dows up six in consecutive weeks, the longest stretch since early 2011. Up almost 20 this year which makes it the best percentage gain since 2003. And if we get to 25, youve got to go back to 96, to put into perspective where we are so far. Talking about earlier, if it doesnt feel real, look at corporate profits in particular it doesnt feel earned. Profitability, youre right. Theres a disconnect. Theres the opening bell. Look at s p at top of your screen. At the big board, this is a nice treat. 23rd new York Hong Kong dagrago boat festival. Youve seen a lot of red ribbons. I missed the dragon. I had no idea they did it here. Ill catch some of it. Youre right. Over at nasdaq, focusing on therapeutics for blood clots and blood cancers. A look at early movers. Downgrades today. A trio of them. Brinker down to a hold, saying no longer trades at a discount. Cuts to market perform. Jeffries cutting kraft on valuation but also in their view increased competition. Favorite line from the report this morning is, mac and cheese is a crowded space. Yes. 2012, but whats trading at a discount these days, not much. Yeah. Energy names, maybe. Kraft still has a 3. 5 dividend, peer group leader, one reason to stay in the name. Qualcomm, cut to neutral. Concerns about smalling smartphone demand at high end. Take multiple from 16 to a 15 and that takes the target from 71 down to 67. So typical monday action, dennis, on the research front. Yes, id say so. Mergers, theres not a lot of there were a lot last week. Still a pause. Well keep our eye on berkshire hathaway. If you missed friday, why does he post friday . Profit up 46 . Revenue up 16 . Talk about environment where companies have had a hard time posting on the top line. Buffett does it. Big investment game, big gain from derivatives. If you look at aig stock, an indicator where insurance profits are going. Dont forget, the Great Railroad business that buffett has now. Yes, burlington northern. Theres the chart. As josh brown pointed out this morning, for those who were thought this bet on america, on an american recovery was misguided or naive. Slammed it in their face. Stocks up 31 this year. To go back to the point as well, book value which buffett likes to use, up 2 for the quarter. In a period where travelers, some of the other big insurance competitors suffered because of their exposure to what was happening in the bond market. Buffett what does he do . He buys companies. Concentrated stakes in equities which did well in the Second Quarter and that helped outperform a the lot of his peers. Buy a railroad, Utility Company in nevada hoping on recovery from recession there. Big mac cr macro bets. Tyson food, 69 cents, beat business 9 cents. Revenue a beat. Chicken and beef volume, up 4 , hard to do in this in economy. Especially with beef prices the way they are. Interesting you mention that. Chicken feed costs up 105 million in the quart, less than 335 in the first half. The thinking is, theyre looking at commodity costs coming down, even as Pricing Power continues to be strong and next year you might see fatter margins on the likes of the big chicken and pork producers. I would not expect that Revenue Growth given where the average person, nonwarren buffetts. If you look at beef prices, up substantially year on year. Volume may not be as good as suggested. Facebook friday closed above 38 for the second time in its history, First Time Since its debut may of last year. Its up more than a percent today, 38. 56, psychologically, dennis, for some reason, for a while, not for ever, the 38 marker will continue its a classic note of behavioral economics, anchoring price 38. If we said back in may 2012, its trading at 38. 50 in august of 2013, that is a success . We would say no. Yet we would say no, right . Yes. The way in which friday, Facebook Holding up well early in the day after the market was suffering after the payrolls report, people looking to that as a barometer, facebook, despite everything its been through, playing that role . The crazier stock, linkedin, up 11 , i dont know the multiple on that. Something like 250 250, Something Like that. Facebook has an event i think tuesday night, if im not mistake. Anything any event they have right now holds the promise in the eyes of some of revenue generation. That would be a story to watch. Apple, holding in at 465. Had the best month in july, i think, since middle of last year, if i recall correctly. Even 2012. Below 400 not long ago. People watching to see if it can hold above 460. When the president s got your back, it helps. Ouch. Ouch. Lets get to bob pisani, what happens moving on the floor. Good morning. And talking to traders over the weekend, the uls cynicism about cynicism in august in addition to light volumes. August is the worst month for trading now. Its been that way for a good 20 years. In the early part of the century, when harvesting was big, farming, this was a good month. But it hasnt been for a very long time. Of course, today, the second anniversary of that standard and poors downgrade in the outlook for u. S. Debt, what, two years ago. Remember when that happened . The close, it was a friday after the close, it was a lousy week for the markets. A lot of worries about europe. The s p was down about 6 or 7 that week. Friday, s p came out with their announcement. Monday morning the s p dropped another 6 . So we dropped almost 13 in the space of about six trading days this week two years ago and people remember that. Its i very different world. Friday, the debt downgrade fears faded, theres not as much concern about a euro meltdown. Monetary policy, this is where we are right now, accommodative, number one. Central banks around the world from u. S. To europe to japan abovish. Macro environment quiter than two years ago. Earnings are fashg n fair, not. The above factors argue stocks are preferable. Did you see what happened in mmi numbers in europe . Uk had best numbers going back to december 2006. Morin enyafrp yafrp enthusiasm about the uk. Still either way on china, very iffy. A slower economic environment there. Did you see what was go on with numbers around pc sales . Idc estimated pc spending going to drop 7. 2 this year. They said spending growth worldwide on i. T. Will be up 4. 6 down from the previous forecast of 4. 9. Numbers are coming down on concerns about slower china overall. The best stocks, it is a stock pickers market, are overbought now. There is something to this idea. Look at qualcomm, the stock Everybody Loves, Everybody Loves it because of its smartphone presence. Great note from piper jaffray, downgrading it because highend smartphone demand is decelerating a bit largely on on the china issue. A smart note. I looked at it, noted there were similar comments earlier. Royalty Revenue Growth lower for qualcomm if the highend sales drop. This makes some sense. Everybody loves qualcomm. Some 32 analysts following it. All by five have a buy recommendation on it. I think theres one sell out there. So 90 of the street, 85 of the street, a buy recommendation on it. I think this is a very interesting call. The kind of thing you want to look for right now when a stock like that starts seeing analysts saying, not on valuation but concerns that the Revenue Growth might not be as strong, thats the kind of thing you want to Pay Attention to. For the top line, bob, the services pmi, u. S. Reading comes out in 20 minutes time. In the meantime, lets check in with seema mody. Apple is a big story in tech land after the white house overturned the ban on the sale of some of apples older iphones and ipad. Shares of apple up on the day. Shares of apples top competitor, samsung, in response, moving lower, losing 1 billion in market value overnight when it traded in south korea. Semiconductor stocks, qualcomm downgraded to neutral. The analysts citing reduced demand for highend smartphone. The Semiconductor Industry association today announced that worldwide sales of semiconductors in the Second Quarter reached 74. 7 billion, up 6 from the first quarter. This marks the largest quarterly increase in three years, thanks to strong sales in the americas. Data out on the tablet space. Idc reporting that worldwide tablet shipments experienced a decline as total volumes fell 9. 7 from the first quarter. Competition, saturation in different product verticals, whether it be tablets or smartphones, pcs, that seems to be a major challenge for tech corporations in general. Thank you. Shift over to bonds and the dollar. Rick santelli at the cme group in chicago. Hope you had a good weekend, rick. Absolutely. When i looked at the treasury market a couple of things need to be pointed out. First of all, after the Employment Data and considering that it is august, i noticed that volatility, not the price fluctuation, the option metric, implied volatility, crushed. What does that mean in english . Means were probably not going to see the type of movement in options, therefore probably not the type of movement weve seen of late in Interest Rates, as summer, holidays and of course looking to big eventses like the september elections in germany. Look at entra day 24hour, twoday chart of ten, one thing jumps out at you, a big dropoff in rates after the weaker than expected employment. But thats made a big deal. Lets put it in proper context. The 5th of july high yield close in tens going back two years to 2. 74. The last unemployment report. It was as strong as this report is weak. Lets go to the day before. Look at charts from the 3rd of july. Tens, the penalty of rates going up on a strong was stronger to give back on the weak report. Fiveyear, theres curve imcomplications meaning that the price has risen further somewhere faster since that july 5th employment report. So the curve has steepened. The same said for the bund in the european markets. Look at continueyear bund. Yield is over 95 basis points lower than ours than it was he 100 basis points friday. Its near where it was based on the last employment report. Look at fiveyear booun, no major curve implications. The next one, the dollar index. Lets look at dollar index. Look how much weaker the dollar index is than the strong labor report on the 5th of july. We need to keep in proper perspective the residual idea of stubborn higher Interest Rates. Kelly, back to you. Will do. Thank you, Rick Santelli. Check out the action in commodities with sharon epperson. Looking at gold right now. Gold prices are still above 1300 an ounce but seeing gold slip a bit. After the latest jobs report, traders are waiting for the next data point to watch. Cutting bullish bets and looking at shorts that have risen 7 in the last the biggest increase in the last six weeks and that was as of last week. Taking a look at whats happening in the exchangetraded fund market with gold, thats a key determinant perhaps where prices go. Looking at gld in particular and seeing that that touched the lowest level in four weeks in terms of holdings last week. Well be watching that carefully. If it dips below 1300 in term of price, we could see a decline in etf holdings. Oil as well, we are seeing greater output from libya and the north sea and that is putting some pressure on oil prices. We have brent crude and wti futures lower on the session right now. Traders are are watching what is happening in libbia, in particular, to see where Oil Prices May go from here. Speaking of which, the transports have been doing more than just chugging along. Coming off their best week in six months. How does that happen with the cost of fuel around the world . Well talk about that after a break. Also, outperforming s p this year, well explore the best ways to ride the transport to profits as we go to break with the dow down 53 points. Take a look at the early movers. [ male announcer ] come to the golden opportunity sales event to experience the precision handling of the lexus performance vehicles, including the gs and allnew is. This is the pursuit of perfection. To prove to you that aleve is the better choice for him, hes agreed to give it up. Thats today . [ male announcer ] well be with him all day as he goes back to taking tylenol. I was okay, but after lunch my knee started to hurt again. And now ive got to take more pills. Yup. Another pill stop. Can i get my aleve back yet . For my pain, i want my aleve. [ male announcer ] look for the easyopen red arthritis cap. So you want to drive more safely . Of smart. Stop eating. Take deep breaths. Avoid bad weather. [ whispers ] get eight hours. [ shouts over music ] turn it down and, of course, talk to farmers. Hi. Hi. 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Dow transports coming off their best week in six months top break down some of the big winners in the sector, a transportation analyst over at barclays. Good morning to you. Good morning, carl. Explain whats going on. I mean is this about shipping volumes . Why is this happening in the face of what we know, short term, rising fuel costs . I tell you what, when we look at fundamental data, the u. S. And europe, Consumer Base is not growing ran idly as everyone knows. And thats the end driver to a lot of transportation demand. Across our universe from a fundamental perspective we dont see an Inflection Point positively or negatively in date fan what were seeing is investors looking for laggard stocks with decent yields and inexpensive valuations and transports fit the bill. The rally has more to do with the market than transportation fundamental. Is this rally evenly distributed . Is there a sense that its the likes of the rails and some of the freight companies, et cetera, or are there names which are doing a lot of the heavy lifting for everyone else . Well, really when i look across the large cap names here, its the u. S. And canadian railroads putting in the work this year. I think for good reason theyve been seeing the better top line performance from things like shale energy development, chemical franchises in the gulf coast, trade with mexico. All of those things outperforming the broader economy. Railroads leading that rally. And thats whats so interesting, because i wonder if we havent seen an Inflection Point where higher fuel costs used to be a headwind for the stocks and now a tail weekend because theyre transporting oil more so than necessarily paying to operate on or something to that effect. Thats right. Its not only the crude oil that theyre directly moving but railroads, by in general, the cheapest mode of transportation. As fuel costs go higher the differential between a rail and truck goes higher. The railroads see influx of demand in higher oil prices. Talk about that, its near a 52week high, theyve fessed up to their problems with next day air deliverly. I think it fits the criteria i talked about earlier, people are looking for a laggard stock with a cheap multiple. Fedex lagged the Broader Market since 2006. Its clear vests are understand there are challenges in the express air business. In a mark inflating this has been left behind. Management has plans to restructure some businesses. Were not sure its going far enough but the markets saying its a shot that we can get some improvement from the management team. I think its, again, much more about a cheap stock than fundamentals that are getting better. Im not sure how closely you cover burlington postbuffett, to what degree do you think that drove berkshires quarter . If you had to rate some of the rails at least on a spectrum, would they be the best performing . I have looked at the latest results last quarter. Burlingtons performance has been tracking in leine with unin pacific, which is our top pick in the space. Burlington northern, Union Pacific sitting on top of the shale regions and energy plays and chemical markets has led to good top line and bottom line expansion for both companies. Provocative point what it says about the sector and the market, brandon. Thank you for your time. Since marisa meyer became the ceo of yahoo the company has made, get this, two dozen acquisitions. Is this money well spent . Well look at her shopping spree in a moment. And this will be your premium right here. Sorry to interrupt, i just want to say, i combined home and auto with state farm, saved 760 bucks. Love this guy. Okay, does it bother anybody else that the mime is talking . Frrreeeeaky [ male announcer ] bundle home and auto and you could save 760 bucks. Alright, mama, lets get going. [ yawns ] naptime is calling my name. [ male announcer ] get to a better state. State farm. Easytouse platform. No, thank you. We know youre always looking for the best fill price. And walk limit automatically tries to find it for you. Just set your start and end price. And let it do its thing. Wow, more fan mail. My uncle wanted to say thanks for idea hub. He loves how he can click on it and get specific actionable trade ideas with their probabilities throughout the day. [ male announcer ] open an account and get a 150 amazon. Com gift card. Call 18882800149 now. Optionsxpress by charles schwab. Marissa meyer at yahoo on quite april spending spree. Rock melt announced on friday. Is her strategy working for the company . Dennis has a lot of thoughts. Working theory shes buying time. Agree. Make it to make it, fakings going well. Faking it . Top line growth foryahoo a f to negative. Googles up almost 25 top line, facebook higher than that. You see companies in the spashgs theres organic shift online. Yahoo s not a part of that. Theyre faking it, and by that i mean faking it to get engineers, us talking about it. Shes on tv. Shes on magazine covers. Let get activity and energy going and maybe something will happen there you want to retain people, right . Acquire smart people. Appears to be working some of the metrics theyve put out. Any of this happening with ali baba . The stock price . No. As it gets ready for its huge ipo and the performance stellar, thats raised yahoo s boat. If you take ali baba out of it there isnt anything that recommends yahoo has organic place. Globes exit perfectly timed for him. I think so. If i were Marissa Meyer id be doing the exact same thing. Prior to that it had a string of failed ceos, no strategy exdirection. The problem going ford, ifward,i had to ask you describe what yahoo is or does, can you do that . A search engine. Portal. Stuck in 1999. A giant, you cant turn your head on how many users. The traffic is certainly there but the Revenue Growth and act to get money out of the traffic base has not shown itself. I think you have to give meyer time to make that work. So far, id say its more in the faking it part than the making it part. We all remember the tumbler acquisition, one shes made so far, too many . Integration a concern at some point or not . A lot of these are small teams, five to contintenperson. Most of them are probably make sense. More than yahoo s ever done, its an na inquisitive company. Microsoft offering 100 discounts on surface pro. Cuts up to 30 on the rt. This mornings squawk on the tweet. For get price cuts if microsoft wants people to buy the surface, it needs to what . Tweet us. Well get your responses late on in the morning. Thats not fair. Good ones thats not nice. Nobody ever accused us of being nice, i tell you that. Cnbcs documentary twitter revolution premieres wednesday august 7th, 9 00 p. M. Eastern time there you had something to do with that one. Yes. Well talk about that tomorrow. A good project. Simon hobbs joins us with a look at whats coming up in the next hour of squawk on the street. See you tomorrow, i believe. Sounds good. Good morning. In the next hour of the program, were getting a key reading on what the economy might do in the second half of the year. Well enter the furious debate thats raging about what the white house veto on apple samsung case means moving forward. Cold turkey on social media, how bad can it be . Jesse hemple will join us live. [ male announcer ] heres a word you should keep in mind. Unbiased. Some Brokerage Firms are. But way too many arent. Why . Because selling their funds makes them more money. Which makes you wonder isnt that a conflict . Search proprietary mutual funds. Yikes then go to etrade. Weve got over 8,000 mutual funds, and not one of them has our name on it. Were in the business of finding the right investments for you. Etrade. Less for us. More for you. The funds prospectus contains its investment objectives, risks, charges, expenses, and other Important Information and should be read and considered carefully before investing. For a current prospectus, visit etrade. Com mutualfunds. Since aflac is helping with his expenses while he cant work, he can focus on his recovery. He doesnt have to worry so much about his mortgage, groceries, or even gas bills. Kick kick. Feel it feel it feel it nice work you got it you got it yes aflacs gonna help take care of his expenses. And us. Were gonna get him back in fighting shape. [ male announcer ] see whats happening behind the scenes at aflac. Com. Like carpools. Polly wants to know if we can pick her up. Yeah, we can make room. Yeah. [ male announcer ]. Office space. Yes, were loving this communal seating. Its great. [ male announcer ] the best thing to share . A data plan. At t mobile share for business. One bucket of data for everyone on the plan, unlimited talk and text on smart phones. Now, everyones in the spirit of sharing. Hey, can i borrow your boat this weekend . No. [ male announcer ] share more. Save more. At t mobile share for business. Welcome back to squawk on the street. We are awaiting the july read on ism, nonmanufacturing, and that is, of course, the Service Sector. 56. 0, much stronger than we were looking at. Now, lets look at this in our wait, 52. 2 has doob yus honor of being 3. 5 year low. Jump up to 56 equals february of this year at 56. We have to go back, let me see, to february of last year to find a higher read at 56. 1. So it seems though february is the month to pay the most attention to. Ism, nonmanufacturing moves in the direction that many in other countries have moved towards. Lets dig in. If the employment scene is important to you, that move down from 54. 7 to 53. 2 on this report. If you think new ors is your cup of tea, that moved up smartly from 50. 8 to 57. 7. Somewhat mixed but the headline stronger. Back to you. All right. Rick santelli, thank you. More from bill stone, chief investment strategist with pnc asset management. Good morning. Good morning. Thanks for joining us. With 56 crossing the tape it rounds out what overnight has been a series of stronger reads for the Service Sector. Surprised that the markets not positive in response . Well, i think part of it is i do think you have to say weve had a heck of a run in this market and a lot of it has been based on the fact that, frankly, i think the market was expecting this second half, the Economic Growth, and earnings as well, to be better in the second half. So i think its a bit of we needed that to come in to keep what weve got, not that i dont think its good news but i think thats part of the issue as well. Right. To some extent all of this gets priced in and its a downside surprise that stings more. You think thats what happened friday . Despite the jobs report we did close at record highs. Yeah. Its a tough one abo. A lot of people thought of the gold did locks scenario, it had to push the fed to taper quicker. Some might say we keep pushing it off. Were still saying september but it could be pushed off till december for the tapering. I guess id say better sooner than later because sooner means that they think the datas coming in better. I think that is part of it. I think the or side is, you know, bonds are continuing to, and the market knows, not very attractive, even at rates having come up a bit. So, is september your baseline . Do you think we have to get a real big deviation in the data for that time line to move significantly off . I do i dont know that we have to get a big i dont think we need to get a big deviation where were headed at the moment. I think thats i think theyd like to start it, frankly, in september. It doesnt mean that they, you know, cut it off completely or something in terms of the tapering. But at least get it started and then they can move it around as they wish in terms of speed it up, if unemployment continues to move down or you know slow it down a little bit if we get some backups or slower data. Bill, good morning. Good morning. You are one of the most bullish people on wall street. You had an expectation friday on the jobs report that we get to 5,000. You were disappointed. Yes. What is the bull case for the rebound and the shape of the rebound in the second half of the year. Look at Employment Data, year on year rate accelerated 2. 3 million for payrolls, the strongest now since march of 2012. Tax receipts are healthy. Jobless claims making new lows. Seeing purchasing manager indices improve. Economys not great. I make that point. People are too bearish. This equity market continues and were going it see yields go higher. What point, i mean a lot of people want to know, when in the second half of the year is that likely to come . When will rates move . When will the dollar move . What will the impact been the stock market . Most movement in rates has occurred this year. Thats it . Rates will go higher, maybe to 275 to 3 . Then theyll make a next leg higher next year, a steplike function. In terms of the economy, what happens with i sequester . It seems to me that that is moderating. Combination of Less Government drag combined with stronger Housing Market and i know that the job numbers were d disappointing friday, but income is still there. Tax receipts up 5 year on year. The economy gets better. You know, a big question is where does everybody else think we are, therefore, where will the money flow . Piper jaffray raised s p target to end of the year to 1850. Thats 8 higher than where they are. They make the argument Investor Sentiment is tepid at the moment because people do not believe the economy can stand on its on without the fed and the fed is likely to be slower in pulling out because its also concerned we might go book into recession. Thats exactly right. The problem with that analysis the fed cannot be slow in removing accommodation and when they tighten, tighten gradually. They may be slow. Keep accommodation aggressive for a while. That will push people into risk assets. Qe or Interest Rates will be low. Interest rates will be low. I believe they taper in september. We can do a mini taper or change this threshold. I think the hurdle for september tapering is lower than people think. That doesnt mean theyre raising rates or pulling back qe dramatically. This is a slowdown in the pace of extraordinary easing. I wonder, just, bill to get back to the point, about whats priced in, so we start to look into the second half of the year. Weve been looking at this piece making rounds in barrons over the weekend where david levys talking, people arent taking seriously enough the disinflation on the economy, structural weaknesses were working through and you can see the tenyear back down to 1 . The u. S. Is still in a long, dran out period of trying to get over the effects of the 2000 crisis . S that a tough one. I dont anticipate well see the tenyear at 1 . I think like everybody, im worried about the downside risk. We would be on the case of being more positive than others in saying there are some good things going on in the economy. We think, you know, its no longer quite as fragile as i think some people would have you believe. So i do think you probably need to think about it more in terms of the risk of higher rates and higher rates because youre seeing better Economic Growth, not thats a good reason for higher rates. Look, one quick point on that, we do have this issue, as we face every year now at this point about the debt ceiling, congress is away, doesnt look like a nearterm resolution in sight. Are we Strong Enough to handle that headwind again . You know, i think weve done it a couple of times already. So i do think we will, you know, its more worrisome in the sense with the markets up with the highs, you know, i think you raise the risk just that you know the market gets more concerned about it because of where you are. But i dont think it really derails because i actually doesnt think, when push comes to shove, theyll end up shutting down the government. We shall see. Bill, joe, thank you very much for joining us. Well follow the debt ceiling negotiations, just as we have every other time. Bearish today, miss evans . Im monday morning, come on. I know. Feels like were having the same old debates about the same old topics. You need to go out to lunch with levorneau. Last week we touched 2. 7 . One of the worst i was watching that. 2. 7, oh. That got my attention. I see were back down this morning. Well see what happens. Thank you. Goldman sachs hit with a classaction lawsuit over aluminum storage methods. Kate kelly on a huge story moving forward. Reporter less than a week after goldman president on our air defending his firms metal storage business, accused of exacerbating getting aluminum out of warehouses. In a lawsuit filed friday a michigan manufactu michiganbased company, accuses goldman and the London Metal Exchange which sets the rules for warehouses like goldmans of anticompetitive and monopolistic behavior in the wareHousing Market in connection with Aluminum Prices which resulted in inflating prices of aluminum and threatening worker layoffs at aluminumdependent manufacturers. The suit describes goldman as having a master of the universe Investment Bank mentality. Plaintiffs seeking class action status and jury trial. Goldman denies the charges and intends to contest it. Hong Kong Stock Exchange which owns the Metal Exchange in london says it is seeking legal advice in relation to the proceedings. Regardless of how the sue is resolved its another black eye for the commodity business of the u. S. Banks these days. Goldman can hang tonight the metal Storage Company until 2020. Other commodities holdings at goldman and other banks may be under scrutiny thanks to regulatory violations in various places and legislative deadlines looming in september. Jpmorgan opted to sell its physical commodities business or will seek to, and, carl it remains uncertain what morgan stanley, which flirted over the years wthdith a similar sale bu not acted, will do. Every desk gets its moment in the spotlight. Kate kelly talking commodities. The Obama White House in the apple samsung battle. A big win for apple. When youve got 200 Million People who use twitter without paying accent, how does the social media site make money . Well talk about that when squawk on the street returns. [ male announcer ] you wait all year for summer. This summer was definitely worth the wait. Summers best event from cadillac. Let summer try and pass you by. Lease this cadillac srx for around 369 per month or purchase for 0 apr for 60 months. Come in now for the best offers of the model year. Hi. Im jan. Welcome to toyotas onceayear clearance event. Can i still get a great deal . Yes, theres lots to choose from, but youd better hurry. Theyre going fast. [ gasping ] what is that . this is ted. Hes gonna help pick the color. Blue. We have that. Can you take him . [ gasps ] ah, we have that, too. Aah [ male announcer ] save big on a great selection at toyotas nationwide clearance event right now, get 0 apr financing on a 2013 camry. Hurry. The amazing deals wont last long. Did you find him . Still looking. [ male announcer ] toyota. Lets go places. The dow was down 72. Now down 36. Lets get josh lipton. Watching facebook, in green this morning, trading above 39 bucks setting a new 52week high. Of course the run there has been fast and furious. Remember, it was at 17. 55 back in september. But now, up some 50 since reporting earnings on july 24th. Back to you. Thank you, josh. Its a good day for apple, not so much for samsung after the Obama Administration overturned the u. S. International trade commissions decision to ban the sale of older iphones and ipads. It the first time the white house has used a veto of this kind in over 25 years. Theres now a furious debate about what the decision actually means. Chris is an intellectual property attorney. He joins us from chicago. Good morning. Good morning. Were you surprised by this move by the white house . Well, certainly remarkable event in a remarkable and continuing saga. But as far as being surprised, i wasnt. The day that the order came down, 60 days ago, i was commenting that i thought this was the sort of unique set of facts where there was a chance, a chance, that the president might invoke this unique ability and remedy. What is that . Is it about the fact that were talking about what they call standard essential patterns here . Both the doj and the Patent Office itself said that in these cases, for example, whether you can connect a device to wireless network, Old Fashioned patterns if you like standard patents you shouldnt have bans on that basis, that is the deal . Indeed. The case and the matter here is surrounding a standard essential patent. The patent involved implicates the interoperatibility of the communication devices. In other words, how a smartphone connects to a network. So you want that as consumers, as a society, we want that ability so we do have interoperatibility between a device be an apple or samsung device. The issue is, was there a game of holdup, in other words, was Samsung Holding up the competitors here, apple, or was apple playing hold out and refusing to license the patent . The end, it turns out the president feld thet there was a of holdup and vetoed the importation ban. One thing people are struggling to understand is whether you know what the itcs role is here, are we supposed to be trying to decide whats in the best interest of American Business or trying to decide whether these companies have a fair claim to these patents. Can you explain the different roles and how people are sort of seeing the signal that the Obama Administration is sending . Yes. Keep in mind, theres two avenues that you could pursue these type of remedies for patent infringement. First in the courts, the judicial branch, United States District Courts and theres many battles brewing, four between apple and samsung. The International Trade commission, which is which is an agency situated in the executive branch thats supposed to be controlling trade. Thats a quasi judicial branch. Here, only job not to decide money damages but only to decide injunctions. And its a much quicker route. I mean about where it would take one year to go through itc, it would take three years to go through District Courts. It become a forum of choice among Tech Companies in order to secure leverage by pursuing an injunction. An nan junctive relea relief mat be possible. You think it adds certainty . A lot of people say it makes the situation less certain, chris. No, i do. Okay. You have to keep in mine there are two main remedies youre after. One monetary damages, the other un une un uninjunctive relief. Almost every device has a standard essential patent. If youre removing the threat of relief in these cases, therefore, that risk has also been removed. What youre going it sees a shift away from the itc, in fact, maybe in parties withdrawing current complaints at itc and moving to District Courts and pursuing traditional remedies of monetary relief. One things for sure, im sure attorneys will make as much money. Im sure theyre trying. One way or another. Nice to see you. Chris carani. Meantime, 200 Million People use twitter every month for free. How does the site make money . Cnbcs Julia Boorstin joins us break down the business. Reporter good morning. The most important part of twitters business is ad. Designed to be integrated with regular tweets into feellike content. The first part of their business and the most important are promoted tweets from staples for backtoschool shopping. Tireses say how hutch theyre willing to pay to reach a certain number of people in target audience, moms of tweens in the midwest. Marketers only pay went users reply or click favorite on this within. Advertisers pay less the more engaging an ad is, which is incentive to make messages compelling. A second ad revenue stream is promoted profiles. Twitter users including brands like chase and fedex pay to promote accounts to draw followers. A third ad business is promoted trends like this one for the new motox which grabs real estate above the list of trending topic. Advertisers pay based on audience size. Anyone can sift through all of the information on twitter the Company Sells data through Analytics Companies like data sift which mine for insight into customers and information on brand perception. And then bing and yahoo pay twitter to include firehose of tweets and search result. No comment on how much money changes hand for that data. Potential future gold mine are tv partnerships like the one that twit ar announced with espn which embeds clips with adds inside them. The sponsors buy a certain number of promoted posts. Another partnership with viacom to have ad campaigns around mtv and nickelodeon shows. The companys tight lipped, wont say how much money will make from the tv ad deals but is driving millions of viewers from television to twitter where theyll see ads certainly has value. Right about being tightlipped. They dont talk about those metrics unless they go public, in which case we might learn more if they do write an s1. Reporter thats right. We expect them to file an s1 in the next six months. Theyre taking advantage of the fact they dont have to reveal information about revenue or what different profits look like from the different revenue streams. Nor now theyre not saying much. Yeah. Well talk more about it this week. Thank you for that. By the way, dont forget, documentary on twitter, the twitter revolution, premieres this wednesday night august 7th, 9 00 p. M. Eastern time. If you miss it at 9 00, theyll replay it at 10 00. You have no excuse. Backtoback. Were both very excited. Theres a premiere at a secret location tomorrow night and weve been invited to your doc. Secret location, 30 rock, anybody who has a ticket can get in tuesday. Is that right, the public . In no, for people invited. But they can see it the next night. Twice. Yes. 9 00 and 10 00. Yo. Mortgage rates rise, lending standards are loosening. Is this a healthy expansion for the mark or a bad habit. Inside one womans experiment into dropping social media dependence. Firsthand how bad that cole turkey withdrawal can be. Squawk on the street will be right back. [ male announcer ] come to the golden opportunity sales event and experience the connectivity of the available lexus enform, including the es and rx. This is the pursuit of perfection. Before Global Opportunities were part of their investment strategy. Before they funded scholarships to the schools that gave them scholarships. Before they planned for their parents future needs and their sons future. They chose a partner to help manage their wealth, one whose insights, solutions and approach have been relied on for over 200 years. Thats the value of trusted connections. Thats u. S. Trust. So you want to drive more safely . Of smart. Stop eating. Take deep breaths. Avoid bad weather. [ whispers ] get eight hours. [ shouts over music ] turn it down and, of course, talk to farmers. Hi. Hi. 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Now get 200 free trades when you open an account. Theres a look at the dow 30 heat map. We were off 70plus point but the ism with a big beat. New orders, even bigger beat, at least by looking at delta. Majority of the dow components in the red. New study today finds as rates are rising people with lower Credit Scores are getting more loans. Diana olick. Reporter thats right, kelly. As Mortgage Rates rise, credit avalibility is eating and that is no coincidence. Mortgage lenders have seen a huge drop in applications and that means they have to be more aggressive about finding new business. Take a look if you will. Credit avalibility rose 2 in july month to month, up 3 from may according to the mortgage banks are association. Increase was driven by increases in cashout refis which had been a nono during the housing crash, risky. But theyve seen increases in offering for borrowers with higher ltvs and lower Credit Scores due to the drop in overall applications. They were down 47 last week from a year ago. Refis down 59 . Purchase applications, only up 5 . So really not making up that difference. Refis where the banks had been doing a lot of their business in the mortgage space with all of the fees involved. Refis are now just 63 of all mortgage applications. During the housing crash, during last couple of years, they had been up in the 80 range of mortgage applications. On average, in addition, mortgage Closing Costs are up over 6 over the past year to just over 2,000, according to bankrate. Com and accounting for the bulk of then crease, origination fees up 8 . As rates rise, and theyre up a pull percentage point over just in may, you are beginning to see credit easing because the banks want to make more loans. Back to you. Diana olick, thank you so much for that. When we come back, time warner cbs battle heating up and viewers caught in the cross fire. Cablevision ceo says future of his Company Might not include tv at all. 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Time warner cable dropped cbs stations from its systems in new york, los angeles, and other markets as the two sides have been unable to agree on transmission fees despite ext d extending a deadline several times. Is there hope for resolution in future or will viewers be left in the dark . Rich, good morning. Thanks for joining us. Thanks for having me. We were surprised to some extent cbs went bark in some markets. How long will this last . I think its a question for cbs. I think this is a very unique opportunity for time warner to push back. You know, retransmission consent was never intended to be used if this way. Leverage and balance between broadcast somewhere multichannel video distributors that grown out of whack. Broadcasters like cbs they are, by definition, free over the air broadcasters and they also put all of their content online for free but they want cable operators, satellite operators, to pay upwards of 2 per sub, per month for every broadcast chan until a given market. Time warners fighting back. The question is time warner can be dark for quite a while. Theres not a lot of high value programming on cbs until middle end of september. The question, to answer your question, becomes what does cbs want to do . The longer theyre dark, the greater the likelihood the government looks at this issue and may intervene, something cbs doesnt want. The question of cbs like as to mark the lineup for the fall throughout august and early september. Theyre dark right now and the two biggest cities in the United States, new york and l. A. Rich, does this reflect the changing power structure or the balance of power between the stations like cbs and the cable channels whereas maybe 10, 15 years ago, i dont know how far back this goes they may have been able to say, show us the money for us to give you the privilege of the channels and now a lot of the Cable Companies times, have more of the upper hand . , the reality is most of the time the cable operator, satellite operator, has no leverage and they just get run over in these battles. This battle just the timing coming up in the middle of summer, where most high value programming is off the air, also this battle occurring in new york, l. A. , new york is an interesting market because new york now has an alternative. So whereas before you had to go out to a store to buy an antenna. Anyone new york who want to see tiger woods could go on to the computer, click on areo. Com and they could be watching cbs for the first 30 days at no cost. So people have alternatives in new york. I think that changes the leverage and balance a bit. At the end of the day by the time you get to the end of september, if cbs can wait that long, i have no doubt cbs will be back on the zblar why did you say that cbs would not want the government getting involved . What is it that the broadcasters fear that perhaps capitol hill will look again at bundling of channels . I think the bundling of Cable Networks with broadcast networks was never the intention of the 1992 cable act. Look, broadcasters, you know, when you look at back to where we were in 1992, the leverage between a broadcaster and a cable operator was fairly balanced. That balance hskewed. Theres nor competition. As time warner goes bark consumers can switch. You can see consumers are saying ill switch to directv or x, y, z. The balance of power that the law was intended originally, you know, to be involved with has shifted and that balance is so out of whack what cbs risks by going too far and pushing too hard the government looks at this and says this nose longer proper legislation. Changes retransmission consent and all of a sudden cbs, counting on big dollars over the next decade to pay for rights like football, all of a sudden dont have the power they once had. Cbs has said, look, wooere streaming some stuff. What if they stream sports . Whats interesting here is that cbs has gone further than i thought they would honestly go. Theyve cut off all streaming of content to not just time warner subscribers in the markets affected. For f. Youre a direct tv subscriber, in some other part of the country, like lets say, you know, the middle of the country, the time warner internet signal that allows you to get to cbs content has been turned off. Theyve not just turned off cbs. Com content in the markets affected like new york and l. A. But every single time warner subscriber and that is upsetting Companies Like directv and others. You go further than i would have expected them to go in cutting off internet feeds. Rich greenfield with the latest on this spat. Thank you so much. Well keep an eye on what happens from here. Lets check where energy and commodities are shaping up after so much press over the weekend. Sharon epperson is live at the nymex. Continuing to see pressure in oil and definitely that has a lot to do with libya regaining output. Looking at libyas oilme minists talking about output up to 800,000 barrels per day. Also getting word from the new president in iran, hes taking a less hawkish tone and traders say thats something that reduced the geopolitical risk premium in the marketplace. Natural gas, you know its been cooler than some expected for this time of year in many parts of country, particularly the east coast. That had an affect on natural gas prices. Fell to a five of month low. Down 50 cents in the past 2 1 2 weeks. What traders are doing with bullish bets for oil and gold, theyre cutting them, first time weve seen that in five weeks time. Well continue to watch what Money Managers are doing with their money on the table here at the latest commitment of trader report will start for the week beginning for tuesday. Back to you. Thank you, sharon epperson, watching the energy complex. Do you think you could completely disconnect from all social media at least for a month . After the break, well talk to someone who is doing that now. No facebook, no twitter, no linkedin, no log. How is she surviving . Stubborn love by the lumineers did you get my email . I did. So what did you think of the house . Did you see the School Ratings . Oh, youre right. Hey babe, i got to go. Bye daddy have a good day at school, ok . But what about when my parents visit . Ok. I just love this one. And its next to a park. I love it. I love it too. Heres our new house. Daddy youre not just looking for a house. Youre looking for a place for your life to happen. For the strong and the elegant. For the authentic. For at home and on the go. For pessimists and optimists. For those who love you a little and those who love you a lot. For ultimate flavor and great refreshment with or without calories. For carefree enjoyment. For those who have a lot to say and those who have nothing to add. For those who want to choose and choose. For every generation. For us. For everyone. Forever. Right now, 7 years of music is being streamed. A quarter million tweeters are tweeting. And 900 Million Dollars are changing hands online. Thats why hp built a new kind of server. One thats 80 smaller. Uses 89 less energy. And costs 77 less. Its called hp moonshot. And its giving the internet the room it needs to grow. This is gonna be big. Hp moonshot. Its time to build a better enterprise. Together. Rodriguez will reportedly be suspended likely through the end of the 2014 season. Good morning. How are you . Yes, Major League Baseball expected at noon today to announce a suspension of Alex Rodriguez and 12 other players for violation of the leagues performance enhancing drug policy. All of this in connection, of course, with the now defunct miami biogeny sis clinic. Rodriguezs suspension to cover the rest of the year and next year, thats 214 games total. And it will cost him about 34 million in salary if it takes place today. That makes it by far the most expensive suspension in the history of Major League Baseball. All indications are at this point, carl, Alex Rodriguez will appeal this suspension. Thats a process that will go through an arbitrator and take a month to complete. And Alex Rodriguez would be eligible to play in games during that appeals process. In fact, the yankees have him pencilled into their lineup in chicago tonight apparently over the weekend, rodriguez and the Players Union reached out to the Commissioners Office and tried to initiate a lastminute settlement negotiation but they rebuffed the offer. Suspensions announced today. Well see how rodriguez and his camp respond to it. Incredible front page of the New York Post sums up the attitude, they argue in new york city, that is just go. The back, of course, one of the great headlines in the post, the banned plays on. Well see what happens when this comes down. Thanks for your time. The big story. A lot of money on the line, too, as im sure you know. Absolutely. You have to wonder about the money in sports generally. Relates to what were talking about cbs. What extent is the world changing . Were starting to see cracks. 1. 1 billion users worldwide, facebook and media sites part of our day life and how we communicate. Going cold turkey for the month of august to see what weve gained and lost. A Senior Writer at fortune. Welcome, great to have you. Thank you. You started august 1. Cold turkey, makes it sound like an addiction. Some of our cases it is. How does it feel so far . Well, i got through the entire New York Times before i got in this morning. Thats the first time. It feels great. Its really hard. Its really hard. Why . Youre not privileged to stuff people are buzzing about . Somebody could be talking about me and i dont know about it. More realistically, ive covered social media since early days. I had a friend store account which you dont remember. We all remember. Ive layered the stuff on. Every time something new comes i try it but i dont take away the old stuff. I thought, this summer, wouldnt i be better about writing about technologies if i figured out what life felt like without them. I thought ill go off for a month. I had no idea anybody else besides my mom would be interested. Do you feel dumber or smarter as a result . Dumber, i think people expect i would say this is better, witness you get over it, its much better to be off of it. The truth is i do feel dumber. Right . Turns out there are certain things i want and i want in realtime and i want to figure out how in my new life, post this detox i can get all of the things i want without the stuff thats annoying. People want to focus on that and concentrate on one facebook account or whatever. Right. Youve run into a problem which is common to a lot of people, its kind of hard to stop when you want to stop these places are able to track you down. Right. They do, so like i went through all of my settings, as i tell other people to do, i took off of the reminders and announcements you get over free email. I took them all off i woke up to a note in my email account, we miss you. Youll never kill facebook. Ive tried several times. I have, too, its true. Years. When they say they deleted it on all servers. What is it that you need when you say you want to be connected . What is it you desperately want. Either with a business or a person, what i need wont email or texting give you that . It will give plea that if i want to text and email with my peers, baby boomers and genxors. I have a couple of teenagers in my life, its been five days, i have no idea what theyre doing and im not going to find out because theyre not returning my calls. That happens. Does it matter . Theyre teenagers. A lot of people, i mean theres a huge proportion of people watching you know who are not on social media. They will be fascinated the way in i which your life has speed up and communication has become rapid with people who wont return your phone call if you get the point im making. It changes to much. It does it change so much. Social media, it still feels to some small subset of people its a Young Persons game or entertainment. I also cover Companies Like ibm, using social media internally to further collaboration and that was sprshexperimental two years its not now. I need it back. Pretend you can have one content back. I would want facebook. Im not saying for entertainment value. I dont need to poke anybody or throw a sheet. Facebook is the social, social peoples network. Carl has a twitter documentary tomorrow night. Great longterm question, whether twit. Can topple facebook which lass five time as many users. I learned about your endeavor from a tweet by you. Wow. Huh. Thats reason enough i need to go back on in september. Exactly. Which you will. Which i will. Ive seen the documentary, its great. Thank you. Well be watching your efforts. Youre rightiwriting this for fortune. You dont have the shakes yet. You cant follow me on twitter or facebook but fortune. Com. Jessy, thanks for coming in. If you want the inside story on twitter from the founder, tune into the twitter revolution, this wednesday 9 00 p. M. , eastern time here on cnbc. Coming up, well talk about walmarts new mission to bring back made in america. Find out how the Discount Retail giant is trying to turn the manufacturing tide more rapidly here in the United States. Plus, on the second anniversary of s ps downgrade of america, the chair of Standard Poors global Ratings Committee join us live here. Squawk on the street will be right back. [ kitt ] you know whats impressive . A talking car. But ill tell you what impresses me. A talking train. This ge locomotive can tell you exactly where it is, what its carrying, while using less fuel. Delivering whatever the world needs, when it needs it. After all, whats the point of talking if you dont have something important to say . [ male announcer ] you wait all year for summer. This summer was definitely worth the wait. Summers best event from cadillac. Let summer try and pass you by. Lease this allnew cadillac ats for around 299 per month or purchase for 0 apr for 60 months. Come in now for the best offers of the model year. Down 28 points. Lets get to Rick Santelli at the cme. There is a lot of discussion, almost ad nauseam some say say as to what are the real underpinnings of the u. S. Equity markets and of course when we see a dynamic to discuss this from the Vantage Point of the economy is doing pretty well, we get many analysts that can back it up with fundamentals. At the end of the day it comes back to the same argument. If things are really this good, why do we need the training wheels on . Well dig back again to try to put a sharper pencil on what really is motivating stocks, and i really do think that all roads do lead to the fed. Lets start at the beginning. Roughly about 21 primary dealers, why do i bring this up . It is the like it is like the goldmans, ubs, morgans, hsbcs. These entities are the only entities allowed to play in the game called pomo, permanent Market Operations so almost on a daily basis we see the Federal Reserve come in and make bids for paper, newly auctioned or recently auctioned in the hands of the primary dealers. The primary dealers give the fed securities and the fed gives them money and for the most part it is that money we want to Pay Attention to. This is a chart prepared by wall street examiner. Theyre contributors to zero hedge, a fairly popular website. It is a great chart. Well keep it simple. This blue line represents what we call the soma growth. What is soma . It is where all the purchases of the Federal Reserve, thats the portfolio, thats the part of the Balance Sheet, you can see them on. Among other things they own, a big driver of somo balances are the mortgages and the treasuries being purchased by the Federal Reserve. You can see the crisis right here in 2008, and you can see the feds Balance Sheet was roughly a half a trillion, and i think that is important to Pay Attention to for the following reason. Here was basically your first qe in december of 2008. Here is the price of stock. First qe, look at the stock market. Second qe begins around 2010. Look at the stock market. Look what happens when they pause by the way. The market goes flat. Look what happens to equities. Qe2, equity markets and reinvestments begin and you get another bump. Qe3 settles and you go flat and qe 4 you go higher. I think it is pretty clear if you look at the blue line, especially after the credit crisis and you look at the market, that the lines are fairly synonymous. Enough said, and one more thing, who does business with the 21 primary dealers . This is a close ended group. Basically i know i am not getting loans and money reconstituted through arrangements with goldman or morgan. Not only are primary dealers the only transmission with regard to q3, it is those with Financial Relationships with the primary dealer that is are in essence the entity that is are goosing the stock market. Thank you, rick. Lets send it out to josh lipton for a quick market flash back at hq. Were watching tyson this morning hitting a new alltime high. Reports and beats the street expectations, demand for chicken and beef and sales up some 6 to 8. 73 billion. Thats also beat and the stock up more than 50 so far in 2013. Kelly, back to you. All right. Thank you, sir. It is tweet time. Microsoft offering a 100 discount on the surface pro. The tech giant previously announcing price cuts of up to 30 . Fill in the blank. Forget price cuts f they really want people to buy the surface it needs to what . Tweet us your thoughts at squawk street and well read your answers when we come back. 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Stubborn love by the lumineers did you i did. Email . So what did you think of the house . Did you see the School Ratings . Oh, youre right. Hey babe, i got to go. Bye daddy have a good day at school, ok . But what about when my parents visit . Ok. I just love this one. And its next to a park. I love it. I love it too. Heres our new house. Daddy youre not just looking for a house. Youre looking for a place for your life to happen. Want to mention where we are with priceline hitting a fresh 14 year high. This is interesting because in particular because priceline is reporting on thursday and you may have thought there could be negative follow through from what expedia anournsed a week last friday and lost a quarter of the market cap. The view seems to be you have two different businesses here, room bookings and bookings in general should be strong and of course the expedia commentary is priceline may have made gains on the huge advertising you have seen across the country this year on television, this summer, and indeed gains from trip adviser as well. This is the highest price stock now in the s p 500 at around 928 and a 14year high for priceline today. Only a handful of companies i think above 400 in the s p, seven or so priceline one of them, google, apple and a few who and interesting what it moving it more than anything are apple and facebook, facebook hung onto 38 and added a little bit more. When it comes to priceline as the stock crawls closer it will get more and more attention. The question is stocks like other companies, well, do they go that route . Can they get there in the first place sth. On the macro front a note following up on the jobs number from friday saying jobs number was a miss but ism has beaten and gdp, claims was a bit and in the words. Microsoft offering 100 discounts on the surface pro. They said price cuts up to 30 would be taking place rt and of course that brings us to the squawk on the tweet this morning. Forget price cuts. What you this is do if it really wants people to do, it would need to blank. Ryan tweets they need to put an apple sticker on it. Ouch. Dan tweets if microsoft wants to sell the surface, they need to bundle it with a free ipad. Starting to see a theme. Darrell tweets advertise it as a business tool, not a toy. Interesting. And jordan tweets be considered a charitable donation so buyers can write it off. Not a bad idea there. Write off is the name of the game over there. By the way, even though the dow is down and the s p is down, russell and the nas out performing, a new alltime high for the russell. And it doesnt weight as heavily towards the energy names. And also not as weighted internationally and you still have the huge issues with emerging markets and slowing down which was again the message from hsbc today. Yes. Well talk europe in a little bit and in the meantime if youre just tuning in, here is what you missed. Welcome to squawk on the street. Here is whats happened so far. I dont think the fed is going to do anything between now and year end. I think the economy is going to be fast, fast, slow, slow, and right now it is slow slow, so i dont think theyll taper. I would say the sectors most likely to generate debt are energy, health care, if were serious about getting costs down, and my own sector in education where we have disastrously low productivity. It has become much more of a stock specific market versus a sector driven or overall market rally. People, hedge funds, individual investors are looking at stocks as an independent entity and taking them higher. There is no market right now for a microsoft tablet. They wrote down 900 million. They will continue to write down inventory because people do not want the product. There is the opening bell. Tax receipts are healthy. Jobless claims making new lows. Were seeing various purchasing manager indices improve. The economy is not great. I headache that point. I think theyre way too bearish. Better at doing this and writing with these technologies if you figured out what life felt like without them. I thought i will go off for a month. I had no idea anybody else besides my mom would even be interested. Good monday morning. Lets get a check on the markets today. Dow hanging in with a loss of 39 points, s p down 1. 5 or so, nasdaq with a little more, up 2 points, a retailer on a roll, costco hitting a new alltime high and Goldman Sachs this morning at the highest level since february of 2011. Time for the road map. It has been two years since s p downgraded americas Credit Rating, so where are we now . S ps chaired the global sovereign Ratings Committee will join us live right here at post nine. Discount carrier jetblue is adding a little luxury to its transcontinental flights. It is a major shift for the airline. The question is whether it will pay off. Social media stocks have seeb doubledigit gains in the last couple weeks. Well find out if it is time for the portfolio to get more social in a bit. Two years ago today s p downgraded the u. S. To double a plus from aaa. I am sure you remember that striking a cord from washington to wall street. We learned that the United States received a downgrade by one of the Credit Rating agencies. Not so much because they doubt our ability to pay our debt if we make good decisions, but because after witnessing a month of wrangling over raising the debt ceiling, they doubted our political systems ability to act. So where do we stand . John chambers is the chairman over at Standard Poors and joins us this morning and i am saying i cant believe it has been two years. Good morning. The downgrade reflects our opinion that the Fiscal Consolidation plan that congress and the administration recently agreed to falls short of what in our view is necessary to stabilize the governments medium term debt dynamics. Do you feel any differently today . No. I think we feel the same. We rate the u. S. Debt double a plus and were a little bit more constructive than we were before back in june of this year. We revised the outlook to stable from negative and indicating that we think that the chances of a further downgrade had reser rereceded to less than 1 in 3. Why more optimistic and still double a plus . We have seen some ability of the democrats and the republicans to compromise. You saw at the beginning of the year with the negotiations over the fiscal cliff, and we see the debt to gdp, the Government Debt to gdp at a federal and local government level stabilizing at a higher level than we thought two years ago and nonetheless stabilizing at 84 of gdp, thats pretty high, but we think it is going to stay there until about 2016 in which at what point the demographics begin to turn against the u. S. , but that gives policymakers a couple of years to get their house in order. I am curious as we start to approach another round of negotiations with regard to the debt ceiling, how you guys are looking at this. It has been said in the past that what troubles the ratings firms is not even the fundamentals so much as the willingness of the government to go there, to almost trigger a Government Shutdown because of political inhouse. Were bracing for a lot of noise over raising the debt ceiling over the 2014 budget. We think at the end of the day and it might not 11th hour there will be a deal struck, that would avoid a major cash flow problem for the United States, but this illustrates one of our concerns is simply not consistent with the aaa rating that you have to worry about this. It is a simple rule of thumb that you shouldnt have to worry about getting paid on time if youre aaa. Of the three things to watch, right, you mentioned this nascent ability to compromise in congress. Thats one piece. Tax receipts look a little better, the sequester is in place and Government Spending in a little bit. Are any of those more favorable than the other . I think what you are seeing on the fiscal side is a cyclical improve also have you seen one off measures. I dont want to we little this but decapitalizing fran and i freddie is a one off measure. Some of the taxes coming in are because people took gains in anticipating the Capital Gains rate going up. So those arent going to be repeated. The economy is growing, but it is still growing below trend which is a little bit alarming seeing as there is still a lot of slack in the economy. I think the things to look at are whether or not we can move forward with tax reform, the president has announced willingness to try to get somewhere on the Corporate Income tax. That may not give you so much on the fiscal side. It could be a big boost to growth. This is interesting because why should you guys have any opinion on Corporate Tax overhaul . Except with regard to your narrow do you know what i mean, a lot of issues, a lot of things that will touch on revenues and expenditures in the u. S. Government. Why would Corporate Tax reform be one of your main areas. Thats whats been put on the table and could engender stronger growth than were seeing now because it would remove some of the distortions that keep u. S. Corporations keeping their money abroad and not bringing it back here to invest. All i am saying is if growth is important from your point of view shouldnt you have been saying for years now, for example, that fiscal that deficit reduction isnt as important as near term stimulus, for example . If growth is a focus, that i am applies a whole other set of policies. Growth is important and there is no way the u. S. Government is going to be able just to grow its way out of this deficit. There is no credible forecast for that. It is going to take a combination of adjustment on the primary side and policies, that keep growth in check, and policies at the fed that dont royal the markets. I dont want to put you on the spot or anything, but the way you are talking and the way you describe aaa, not having to worry about getting paid, it is supposed to be sterling credit. It is hard to imagine you upgrading the u. S. Back in the near future. Right now the outlook is stable. It indicates the upward and downward pressures are balanced. Traditionally, when you look at sovereigns that have lost their triplea which there is a dozen, five agotten them back and those five did it on an average of about nine years. Nine years. That gives us one way of interest. Thank you so much, john. I remember that day, and it is good to have you back. Thank you very much. Millions of Time Warner Cable customers remain without cbs programming for a fourth day as they battle it out over fees. Julia boorstin is live in l. A. That is one of the three markets affected and negotiations ground to a halt. Cbs says theyre no longer in talks, and the longer the battle draws out, the worse it is for both companies. Cbs is losing out on what ubs estimates is about 400,000 per day in both retransmission and Advertising Fees and plus the opportunity to promote its big fall lineup. Meanwhile, Time Warner Cable risks losing describers. And time warner skabl subscribers are getting frustrate. 3. 5 Million People in los angeles, new york and dallas lost access to cbs on friday night including tiger woods playing in the bridgestone invitation skpl and all of the show time subscribers lost access to the premium cable channel over the weekend. The company which stands to gain a lot from this is the start up that offers Live Streaming tv over the internet starting at just 8 a month. Time warner cable is actually suggesting that the subscribers try out ario during the blackout saying theyre confident theyll still want to pay for cable. Now the question is how soon the two companies will get back to the negotiating table. Cbs is issuing a statement saying we asked Time Warner Cable to continue the negotiation while programming was still on the air in consideration for our viewers. They rejected this request and told us they would have more leverage against us if they took us off their service. We remain ready to negotiate in good faith. Time warner cable responding we regret the inconvenience to our customers and look forward to resolving the situation as soon as possible. Now well have to see whether the fcc will take action on friday the fcc issued a statement saying, quote, we urge all parties involved to resolve the situation as soon as possible. Well see if they put any muscle behind the urging. This one is a doozy, no question about that. Thank you so much, julia. When we come back, how walmarts push to buy more American Made products could roll back the trend of offshore manufacturing. Rick santelli talking markets and a little flow later on, rick. Absolutely. I like andy brenner because he is somewhat irreverent. I like irreverent market guys. Well talk about a slow august mean a slow bond market . Well talk about all of this reform everybody wants to center on regarding Corporate Taxes. Whats going to really happen with this money . I bet you andy will have an opinion and last but not least well talk fed and a little about supply all coming up in about ten minutes. announcer at scottrade, our clients trade and invest exactly how they want. With scottrades online banking, i get one view of my bank and brokerage accounts with one login. To easily move my money when i need to. Plus, when i call my local scottrade office, i can talk to someone who knows how i trade. Because i dont trade like everybody. I trade like me. Im with scottrade. announcer scottrade. Awarded fivestars from smartmoney magazine. A quarter million tweeters is beare tweeting. And 900 Million Dollars are changing hands online. Thats why hp built a new kind of server. One thats 80 smaller. Uses 89 less energy. And costs 77 less. Its called hp moonshot. And its giving the internet the room it needs to grow. This is gonna be big. Hp moonshot. Its time to build a better enterprise. Together. Jetblue is about to get a little more luxurious. Theyre planning to add more premium seats on some of its planes. Jane wells is live at the Global Business and travel Association Convention in san diego with more. Have you gotten to try out one of these seats . No. I am still a k0e67 girl, kelly. How important is Business Travel . So important that jetblue is no longer going to be one class fits all, a new class of seats is coming. So as you say here jetblue will unveil its new premium seats which will followed down into flatbeds and some will have sliding doors for privacy. Business class is where the money is at. Delta and u. S. Airways forecast good growth in front of the plane later this year and delta is unveiling a Business Elite flatbed cabin with moonlighting, leather, Inflight Entertainment and expect those next spring. They say Business Travel in the u. S. Will grow over 4 this year to 273 billion. That is just in the u. S. Look out for china china is projected to grow even faster, pretty much doubling from 2012 to 2017. India Business Travel has surpassed canada. Brazil will be the sixth largest Business Travel market by next year and mexico the Fastest Growing narcotic many north america. Elm rates looks to unveil its own seats and the New York Times got a sneak peek into lufthans, and the real challenge, guys, is to create the seats with lying down flatbeds where you dont take up too much space. You dont want to lose too many seats to make up for folding it down like that so they experiment with all kinds of configurations. Jean, i am sitting here trying to think through at what point well be able to get you on one of those jetblue seats. Really appreciate it. Apparently in coach they just stop talking in the middle. Thanks a lot. American factories are hiring again and in fact there were more Manufacturing Activity in july than any other time in the last year. So today on squawk on the street we kick off a new series made in america and we start with the worlds biggest retailer, walmart, announcing plans to buy more u. S. Made products over the next decade. Mary thompson visited one of the super chain suppliers to see the walmart economy at work. Hey, mary. Some say it is just pr move. Walmart push to buy more American Made products could push back on a trend toward offshore manufacturing. In fact, you can call it the walmart economy. Here in fayetteville new orders are pouring in. The factory added 60 full time jobs to produce an additional 10 million candles destined for the shelves at walmart. The state of our business before our partnership with walmart was very slow, dismal at best. Last year walmart accounted for 4 million in sales at hannahs candles and now walmart says it plans to buy 30 million this year alone. By 2017 the retailing giant projects that number will hit 45 million. It is just one of the manufacturers getting the boost from walmart which has pledged to buy 50 billion in American Made products over the next ten years. Walmart is partnering with highly automated company that is use Raw Materials found right here in the u. S. , but the economics dont stop at the end of the factory line. This is not a put an American Flag or label on a product and let it sit on a shelf. This has to be proven with customer demand and movement. How many more jobs might be created if walmart buys 50 billion more of American Made goods like these candles . Boston Consulting Group estimates 100,000 jobs. Factories like hannahs candles generally have to update their facilities to accommodate more orders, so the push to buy american would be more viable longterm if additional retailers were to get on board. The ceo says he is already getting calls from other outlets. I think it is our responsibility as manufacturers to try to keep the jobs here in america and figure out a way to do it. Of course 50 billion is only about 10 of walmarts retail sales this year, still the initiative could be a game changer. Keep in mind walmart has often been criticized for contributing to the demise of u. S. Manufacturing. However, this new initiative maybe could help turn the tide even if it is one factory at a time. Kelly, back to you. A great point, mary. Mary thompson, thank you very much this morning. Social stocks are seeing huge gains over the last couple weeks. Is it time for the stocks to make friends with your portfolio . Well show you how to play this sector as squawk on the secret is back after a short break. Ive been doing a few things for a while that i really love tdd 18003452550 playing this and trading. Tdd 18003452550 and the better i am at them, the more i enjoy them. Tdd 18003452550 so im always looking to take them up a notch or two. 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The new blackberry q10. Its time. Welcome back to squawk on the street. I am josh lipton. Lets call it retail monday, a lot of names in this sector hitting new 52week highs, best buy, costco, lowes, tjx, bed, bath and beyond and pet smart and the rtm, the retail etf trading at a 52week high. Thanks, karl. Like to welcome andy brenner. One of my goto guys when markets need a little desiefring. Andy, august down on Trading Floor is a time when people are taking time off, a big time off issue with regard to europe as well. Do you think any of that will make a material difference in the type of volatility we have seen and lets keep this more exclusively towards the fixed income markets which have had a touch of volatility, just think this past friday and a month ago the day after the fourth of july. With august and september, not great months for equities and as far as fixed income goes a lot of players out as you say and everyone knows the fed will taper, whether it will be september or whether it will be december, it is going to happen. Were going to higher rates. You tested 274, twice in ten years, once at last months unemployment number and once right before this past months unemployment number and you get down there a third time and blow through it and probably going to get to 27 8, maybe 31 4. I like that. I saw many of the media making a big deal about the volatility coming down but net net what i saw was 11 basis points lower. If i go back a month to the july 5th read, when we had an equally strong report, we had a settlement of 250 and on the fifth hit the High Water Mark at 2. 74. We get a bigger response on Interest Rates on strong data than takebacks on weak data. I think it is important. What say you . Absolutely. No question about it. Since the fed started their qe3, everyone looks at it as being the god savior. Have you gone from 1 5 8, three quarters when they start and now 25 8 and 3 4 now. The market is looking at the tapering. It is not looking at qe anymore. The fed might as well get out of the way. Were going to higher rates and it is just the end of it. Dhs going to be a big watershed moment. As i showed, if you look at the portfolio, and you look at the permanent Market Operations, equity still respond to the upside even though Interest Rates dont. Last topic, everybody talking about the benefits of Corporate Tax reform. I agree. Any kind of tax reform is huge. You know, most of the time it is nibbling at the edges. Here is my question. Okay, we bring back all of this money thats overseas and everybody saying it is the cure for all that alz us. Why is this money going to do anything different than all the money sitting around right now not necessarily generating jobs because investors are skiddish. Your thoughts . Rick, if they do it, and without really having it an end goal, it is exactly whats going to happen. If they somehow link that money coming back to jobs being created in this country, then i think well have a positive aspect. We have the highest Corporate Taxes in the world except maybe one country. We have to reduce it. We have to make it more economical and more refined. Andrew, thank you for taking the time on this kind of lazy monday morning. Lets get over to the nasdaq and saying a look at blackberry. Staging a major come back. Images of what some blogs are alleging could be the next generation blackberry handset, seems to be catching the attention of wall street and keep in mind roughly 30 of blackberrys outstanding shares are short so some traders are suggesting that this could be short squeeze. Shares up better than 6 on the day. Kelly. Great. Well keep an eye on that one. Just a couple minutes left to go in europes trading day as we await the close and well take a look at the surprisingly strong Economic Data out of the region lately. A lot of people asking the question has europe turned the corner, thats coming up in squawk on the street comes back. [ male announcer ] you wait all year for summer. This summer was definitely worth the wait. Summers best event from cadillac. Let summer try and pass you by. Lease this allnew cadillac xts for around 399 per month or purchase for 0 apr for 60 months. Come in now for the best offers of the model year. Fffffff. Laclaclac. Hes an actor whos known for his voice. But his accident took that away. Thankfully, hes got aflac. Theyre gonna give him cash to help pay his bills so he can just focus on getting better. Were taking it one day at a time. One day at a time. [ male announcer ] see how the ducks lessons are going at aflac. Com we do . I took the trash out. I know. And thank you so much for that. 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We can just go back and forth on this. We have a minute to go, a little under a minute left. A look at where we are on the European Equity markets as we trade into the close. The big solid question we have to keep coming back to, can we have a look at the individual countries, is that possible . We touched two month highs earlier on and come slightly down. The big question were focused on really in europe is whether or not we bottom there economically. Now, the data from u. K. Was strong for the services and we concentrate on the rest of the eurozone, the 18 countries which are five times the economic power. It is really what were focused on for earnings on both sides of the atlantic. More survey data is suggesting we may have bottomed out. A final reading on the composite pmi, thats manufacturing and services, revised slightly higher into expansion territory, above 50 as you can see and it is perhaps weighted more towards manufacturing there and Investors Sentiment doing great guns or much better than it was, broadly because of the recovery in france and southern europe. Germany still very much a pillar of strength in that Overall Index as you see. Retail sales are soft for the first time fallen for three months. There is a very active debate which in a couple of minutes on the show we will pick up about whether or not we can talk now about growth in europe in the third quarter. Of course the equity market in europe has begun to pull away during the course of the last one month, a big article in the journal today about whether or not you should perhaps be by verse if iing increaselying into europe and whether you get better returns in the next 2we68 months there than here in the United States and rebalancing the portfolio and goldmans is there and ubs less pessimistic. Well talk about that in five minutes. Thank you very much. Lets bring in bob with a look at whats moving at the big board. Hey, bob. Pretty good morning for Economic News. Ism Services Better than expected. Lets call it two out of three so far on the july economic numbers. Put up the full screen. The ism Services Numbers, that beat number one. Number two, ism Services Numbers beating and now the nonfarm payroll, well, that was a miss. A little bit of a problem here, something is wrong because the employment component of the manufacturing and services were pretty good, suggesting we should get expansion on the payrolls and so somebody is wrong here. Thats my point. Who is right, the ism is seeing employment expanding and nonfarm payrolls are below expectations. This will be resolved in the next few weeks and obviously i think that the ism numbers are very important for the sentiment overall. One good thing about today, higher rates arent dramatically affecting the stock market. There is the ten year yield. It is up about five, almost 6 basis points in the past. Thats put pressure on the stock market. Not really happening today. Take a look at the dow industrials. Once again today if it wasnt for the crummy performance of big oil, we would be almost positive, not quite, but almost positive on the dow industrials. Again today exxon and chevron are the laggards, exxon down about 3 last week, a real drag on the dow. Both had disappointing earnings and big oil in general has had disappointing earnings and production levels down and growing is a big problem for those companies right now. Home builders lagging a little bit today and down about 2 , a pretty good week last week. I think the reason the builders are down today is fastenal had the monthly numbers out. Theyre a big company that provide a lot of Little Things like nuts and bolts to Construction Companies and Industrial Companies and fast fasteners and Hardware Supplies and the samestore sales down 2. 9 . That was below expectations, a lot of people had 5 as you can see fastenal down about 2 . Finally a fairly good day in health care. This is why the market is so healthy overall. You get disappointments in areas like energy, and other areas sort of come in and make up for it. You have this wellbalanced stock market and health care up one day and Energy Stocks down and then reverses the next day. Back to you. Thank you so much, bob, watching whats moving. Getting headlines and the fed is closer to dialing down bond purchases, no reversal and economic momentum and also saying the central bank has a monetary knot to untie and the fed will have to move gingerly to avoid wreaking havoc on the markets and the qe in his view has not achieved much in terms of job creation. And whats happening may have less to do with how the macro picture is evolving and more to do with concerns fisher have about its impact. If it is a gordan knot, it is a gordan knot theyre making. I think keith would argue that. There are signs of strength across the pond in europe. The eurozone manufacturing pmi hit a twoyear high and the u. K. s a 28 month high and better news on the Service Sector front. With good news on growth and nothing to suggest centralbacks arent getting more hawkish is the time to add more europe to the portfolio. Lets bring in paul donovan, global economist and managing director with ubs. Simon hobbs is joining the discussion as well. Good morning. Good morning. Paul, i would like to start with you and just ask is the sentiment over there that europe has bottomed and when we talk about bottoming, do we have to differentiate between Economic Activity and the stock market there . I think you always have to differentiate between Economic Activity and the stock market. We have to remember about 70 of the private sector economy in the euro area is Small Businesses, whats called the metal stand over here and you call mom and pops. Theyre not quoted on the stock market and have a far worse recession than the large companies, so there is a difference. I think for both parts of the economy thats to say the listed companies and the Small Business sector we have to the stage where things cant get any worse, and so therefore theyre getting somewhat better. It doesnt mean were back to trend growth, very, very far from it. It means that we are ended the period of negative Economic Growth. Would you agree with that . I certainly think we have seen quite a remarkable turn around in the up and pmis, of course a stronger outcome in the u. K. Than your area. When you look at the european economies and the turn around in the last few months is certainly impressive. Now, i would certainly agree with paul, doesnt mean just about to still see Economic Growth but just means we get to the point and where we are likely to see some improvement in the second half. Do we need to worry about kind of systemic shocks any more or fully insulated on that now . I wouldnt say were fully insulated. I think that there are still some troughs ahead and the fiscal problems by no means dissipated. And europe is squabbling still over how to do the most basic structural things that accompany a union like have a banking union. There are still plenty of political risks and noise and what i think we have avoided and what we will avoid Going Forward is the risks that we saw surrounding greece. I dont think there is an existential crisis in the euro ahead. I dont think people will question euro stability and the way they were doing two or three years ago. Jenn, what people really want to do is should they be investing in european markets . Obviously ubs has slightly more upbeat and goldman a far better return than the u. S. Markets over the next year or so. What do you think . I know your economist is not primarily what your subject matter is. Whats the general feeling . I would put it this way. There is no one i talk to who isnt aware of the strengthening of the u. S. Outlooking over the last six months and isnt aware there is a good Economic News story to be told in the u. S. And the Corporate Outlook in the u. S. Is pretty robust. I think when i try to explain to them that the spanish and the italian outcome is improving on the domestic front and also for the spanish and italian corporates that are exporting, that that outlook is improving and that matters, and i think that is much harder story and i think a story still about to be discovered. So if you want my opinion on that, i think there is potential in europe. I think there is potential and compared to where we were six months ago where we werent talking about existential threats but certainly a much prolonged recession and now in a recovery mode and very modest recovery. It is a very different conversation about the corporate in the area in those circumstances. The other day we celebrated. That might be too strong a word. We marked the anniversary of draghis laying down the law saying he would do whatever it takes. How much credit does he deserve for that . Where would europe be if he had never said that . I think if we hadnt had that open ended commitment, then the risk premium in europe would have been a lot higher. We would have had more problems at a difficult time. By making it clear the ecb was prepared to put unlimited amounts to work to avoid the systemic failure, i think that was an important step. However, it doesnt solve the problems of the euro and i think what we have to focus on now that we are putting the negative gdp episode behind us is how do you get back to an environment where we actually create positive Economic Growth . How do we get back to an environment where we are reversing to trend . And draghi doesnt have the answers to that because he cant have the answers to that. They lie in the political fear, not in the central bank sphere. Well leave it there. Have to go. Appreciate your views and well come back to both of you as we follow this narrative. In less than 30 minutes from now Major League Baseball expected to suspend Alex Rodriguez likely through the end of the 2014 season. Well assess the impact with the han that wrote the textbook on the business of sports coming up next. In todays markets, a lot can happen in a second. With fidelitys guaranteed onesecond trade execution, we route your order to up to 75 Market Centers to look for the best possible price maybe even better than you expected. Its all part of our goal to execute your trade in one second. Im derrick chan of fidelity investments. Our onesecond trade execution is one more innovative reason serious investors are choosing fidelity. Now get 200 free trades when you open an account. [ male announcer ] come to the lexus golden opportunity sales event and choose from one of five lexus hybrids thats right for you, including the lexus es and ct hybrids. This is the pursuit of perfection. [ agent smith ] ive Found Software that intrigues me. 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Yankees third base man Alex Rodriguez expected to be suspended through the 2014 season for using performanceenhancing drugs. It was thought the announcement was maybe a few minutes away. Were getting word it probably wont come until later this afternoon. Arods face as you know is plastered all over the papers here in new york especially as the cover of the New York Post saying just go. He is expected to immediately appeal the ban and he may even play tonight against the Chicago White sox. You know the subject well. Nbc sports tweeted a few moments ago that arods legacy has not been tarnished today. It was ruined a long time ago. What are we to make of today . I think today is really a culmination of years of use on the part of Alex Rodriguez. I think that finally he got caught. The evidence is overwhelming from what everybody understands about what Major League Baseball has on alex, but i think it is the end of the road. He may have a few games here if he is going to go through with the appeal and doesnt have ab 11th our decision to take the medicine, and maybe that gives him a few more days in the limelight, a few more days to control the mess i think ultimately is over for him. From an ethics standpoint, obviously the announcement is not out yet but do we start making big broad comparisons to pete rose . . I think it is different from pete rose. Obviously pete was involved in violations that led to his lifetime ban under the best interests clause and that the commissioner has, and i think this is a bit different. This involves actually giving you a competitive advantage on the field. It is a very strong economic incentive to do so for all the players to land the bigger contract and make it in the big leagues in the first place for less talented players so i am not sure there is a great comparison other than the fact they both violated rules of Major League Baseball. What about the earnings specifics when it comes to Alex Rodriguez now . How much of his income is potentially at stake and what does this decision mean for all of that . Sure. The player will not bet paid during any suspension from Major League Baseball, so if what the tea leaves are reading and what were seeing is correct, were looking at a 214 game suspension and remainder of the season and all of the 2014 playing season, it would cost rodriguez about 35, 36 million, he would also see the potential then for any remaining sponsors to walk away as well from any existing contractual obligations they may have with rodriguez. Thats interesting. Youre saying most would have clauses or something that is triggered if the suspension goes down where theyre able to walk away . Like a lot of high priced talent, they will have morals clauses that are part and parcel that far contract that will stipulate various terms upon which the contract can be voided, and for a player like Alex Rodriguez who has drug speculation following him for a long period of time, you would expect that that would be part of any contractual relationship he might have with any company. Salina, is it possible that this delay that were seeing even though it is apparently just a matter of a few hours is a sign that negotiations are taking some turn behind the scenes right now . You know, it wouldnt be surprising. It is a good point that the longer this goes, the more opportunity alex has to have a Second Thought about this or perhaps take a suspension that is more on the order of maybe 100 to 120 games instead of the 214 games to try to save a little bit of the end of his career. I think the one thing alex wants is a chance to end it on his terms in some way and maybe he has taken the opportunity now to try to make it easier on him in the pocket. He has a big lifestyle. He lives an incredible lifestyle. Do you think that if it hadnt been for just thinking back in recent memory, annoying cash man with some talk about coming back earlier than people thought, seeing your own doctor apparently in violation of some union rules or league rules, if those things hadnt happened, would he have as easier path today. He may have an easier path. I think it is still about Major League Baseball demanding more of its players and to be honest when they are brought in for questioning and i think he has a long history of lying to Major League Baseball and obstructing the investigation here in this case and i think if this is really about Major League Baseball and certainly if it helps to irritate your employer by saying things that really, really, youre looking at possible insurance payments in question with some of the things alex has said and i think the yankees were right to be irritable and irritated by what he is doing. Right. Finally, scott, i am just wondering nfl season kicks off a month from today. What kind of grade would you give Major League Baseball in dealing not just with the arod issues but the other names that surfaced over the past ten or 15 years . I think you have to take it in context. Major League Baseball has made tremendous strides in the Drug Testing Program in the last ten years going back to the 2002 collective bargaining agreement. I think it is a longer part of this is a big part of a much longer process that were seeing that involves the relationship between the Major League Baseball players and their union and Major League Baseball management. And so this is an important moment but it is part of a much longer evolution. Good to talk to both of you. Thank you so much. Social climbers can help pull you up and also step on you. We are not talking about people but rather stocks. You can find out who likes facebook, which you can trust as the sector spikes when we come back. The latest buzz on social media is about social media stocks themselves or at least among people we talk to. Facebook shares hitting a 52week high after closing above the price of 38 last week. Linked in shares more than doubled in the last year and theyre kushtsly trading at 231 you can see there. A bit lower on the day and the broader question is why are they climbing so high and can it continue . Beal bring in collin sebasten and also joining us gene munster from piper jaf fray. Thanks for your time. Collin, a lot of people buzzing about social media. In your space how well are these companies doing and who do you think is best positioned here . Well, i think that you mentioned both facebook and linked in. Both of these companies have massive gravitational pull from both the user and content perspective, and they are genuine platforms. Theyre not dependent upon Search Engines or other sites for traffic. Certainly those two are standouts in the social media field. We would also point to google. While theyre not specifically a social network, they have tremendous amount of social data and personalized data that theyre monetizing as well. And, gene, from your point of view, is this a story of suddenly waking up and realizing that facebook can monetize mobile and maybe everyone else can, too, or has this been building in the background for some time . Thats a big part of it. More recently with the june Quarter Results but today we have a note out where we outline the opportunity in video and as well as instagram, two areas they havent started to monetize, so when you think forward, it is all part of mobile but there is impressive new opportunities they have, so you have to start thinking about 2014 and maybe even 2015 at this point. Lets talk about some of the leadership, the managers here, zuckerberg, weiner over at linked in and larry paige and i wonder in terms of their performance and their ability to see around strategic corners, is one outpacing the rest of them . I dont know if we can say that at this point. Theyre both in similar markets, but in different trajectories and each i think distinguish themselves as having created massive platforms as we discussed, and so i think larry page in terms of initiatives in browsers and search and display is doing a phenomenal job within the Human Capital category, obviously linked in doing exceptionally well and taking big market share and facebook, i would say perhaps the common denominator with the others may be a focus on technology, really strong engineering sophistication that distinguishes these platforms from a lot of other companies. Colin, there is a lot of focus in the space that on valuation now. Especially after the rallies we have seen and linked in getting the headlines on this trading at better than 100 times next years earnings. What is the basis for buying into the sector . Well, i think if you were only looking towards one year forward earnings, that might be missing some of the larger trends. There is a lot of a Network Effect happening and user growth is still happening, and monetization is improving, and those have a multiplier effect. As gene said, looking out to 2014 and beyond i think is important to truly valuing the Intrinsic Value of these companies. If thats the case do you have to watch the news flow and the earnings season for these guys and understand it is a web in that sense, that if facebook does well, this he all do well and if one has a bad quarter, look out for everyone . Well, i think it may be different than that. I think whats going on, theyre thematic sorries, both facebook and linked in and for linked in specifically the recruiting market is a 27 billion market in the u. S. Linked in about a billion and a half market cap. They have a straight shot to really taking over and transforming that industry and so the good news for investing in the stocks despite the fact they have is had wild runs is it is more a thematic play. Linked in is probably better positioned versus facebook because facebook there is still concern been gaugement around teens and what have you, and in general it is less about quarter to quarter and more about the theme. Okay. And the theme right now is working for this space. Colin and gene, thank you for your time this morning thank you. Speaking of social networks, the guy sitting to my right has a twitter documentary about to hit twitter revolution appear this is wednesday, august 7th at 9 p. M. Eastern. You put a ton of work into this. I cant wait to see it. And a long hard road, looking forward to putting it on the air wednesday night. Microsoft is offering a 100 discounts on the surface pro and the tech giant previously announced price cuts up to 30 on the rt. Fill in the blank. Forget price cuts f microsoft wants people to buy the surface it needs to blank. Tweet us at squawk street. Youre answers are now. [ male announcer ] this store knows how to handle a saturday crowd. 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One bucket of data for everyone on the plan, unlimited talk and text on smart phones. Now, everyones in the spirit of sharing. Hey, can i borrow your boat this weekend . No. [ male announcer ] share more. Save more. At t mobile share for business. At tso, if youre sleepingness. In your contact lenses, what you wear to bed is your business. Ask about the air optix® contacts so breathable theyre approved for up to 30 nights of continuous wear. Serious eye problems may occur. Ask your doctor and visit airoptix. Com for Safety Information and a free onemonth trial. Microsoft offering 100 discounts on the surface pro. We asked to you fill in the blank. If microsoft wants people to buy the surface it needs to what . David writes integrate into public schools. Interesting. Microsoft needs to change its name to a popular fruit. And schuman writes if they want to sell the surface, advertise how well it skips across water. Splash. Blackberry is a popular fruit. Interesting marketing ideas. Dow is stubbornly down 50 points. Well see what happens this afternoon. And and back to headquarters and scott wapner and the halftime. Welcome to the halftime show. Four hours to go until close. Down across the board right now. There is the nasdaq and it is down two. Here is what were following on the half. The road to 2,000, some on wall street say thats where the s p and heading. Well tell you where we get there. Chipped or broken, qualcomms under perform the market and is a turn around in the cards . One trader says yes and another no which means we will debate it just ahead. The top story, follow the money, new numbers showing a record