Transcripts For CNBC Squawk On The Street 20150529

Expand its food and private lines. Why dick lowe said i have to focus on my job. That wide owning trade dove sit. As we head into the last trading session of may, stocks on track to finish the month in the green led by the nasdaq up 3. 2 . S p up 0. 6 . The transports still in correction territory. The transports really are terrible tale of things. Bank of america downgraded some of the great truckers. Commerce is not doing as well. When i looked at that gdp report, first reaction was how much does the fed have to cut . Of course the reaction from all these people is i guess the fed has to tighten. It is funny to see the weakness throughout. I had Union Pacific on mad money earlier this week. Every line item is down. Commerce is not happening in the country. Biggest trade gap in 30 years because of that dollar. What is incredible everyone felt once we had oil to the point we wouldnt need to import as much oil, that would change the balance. No. There is a lot of negative. The june swoon. Last 57, dows down in june. Last 47, s p down in june with one and changed. Its worked leaving at the end of may has done well. Yes. That does make sense in part because technology does take off during the summer. We see the european slowdown. I also think there is not a lot of money coming in the month of june. Historically, when you look at that it is daunting. I try to always figure out what could make that go differently. All i hear about is the fed if it isnt june its going to be september. Its not a good back drop. Unless the dollar gets defensively weak, which could be related to greece. Its going to be more of the same. This market does not feel good in separate takeovers. Is most of this dollar based . When you say commerce is not occurring, obviously lots of commerce is but maybe not growth in the rate of commerce. I think our manufacturing side, export side is very challenged because of the strong dollar. I think we are losing some share of autos. That is a consumer business. You are buying autos, but maybe not buying our autos. Right. Overall what i find there is just turns out the oil business, while not as huge job creators, did produce a lot of commerce domestically. Thats slowed down. When you have jpmorgan laying off 5,000 people you say the machines are doing better than people. Im finding a lot of pros and cons. You get these mergers. Whats the benefit . People get fired. For everything good i find something bad. Which leads you to what . More of the same when it comes to the stock market. Except when you get a takeover bid. Speaking of which, for the month of may, the top five s p gainers are all m a related. Whether its a cablevision or avago or broadcom. Thats amazing. The good thing is there are enough takeovers to get things propelled. Bad thing is there are a lot of companies international, domestically based. Look at emerson. Emerson is a Big International company. They are doing terribly. These major American Industrial companies are not doing as well as they should. We find the restaurants doing well but nobody seems to care. The retailers is mixed. David knows i think ulta is the key to this market. They know how to sell. For every one thats good i have a southwest air versus delta. You went to town with gary kelly last night. What changes this dynamic . The dollar getting weaker. Okay. Its not up to us. Its up to the europeans to make the euro stronger or japanese to decide they are not going to completely debasing their currency. We got news greece was not going to have a deal this weekend then there will be a deal. We cant get you might have been swimming at 3 15 already. I cant think of what i was doing. It happened before. You wouldnt find endless cuts for companies, you wouldnt see this constant in Constant Currency we would have done well. Its every company that expanded overseas. Its very hard to buy a company when you look at the numbers and know the estimates are coming down. If you do a lot of business overseas, you are still coming down. Not june, perhaps september. Our Central Banks around the world are not following the same policies. We are bullish. Unless you can find somebody that will get a takeover bid, im saying more of the same. Not saying big decline, not saying big advance. Getting used to the idea other than when faber is breaking a story, you say that was good ulta but not so good jp penney. Do i want to go for stuff that looks cheap or looks like momo will get taken out. Highest growth. Regeneron. Thats not getting taken out. No. You want high high growth. We had a company yesterday, united reynolds. A gigantic domestic construction play said may was weak. Gary kelly said last night, great ceo southwest, may was not up to expectations. Then we debate the fed, how much are they going to if they listen to the companies, they know wow, united reynolds touches a lot of industries. Sure they have business involved in oil. Thats just not good. Its not good. People bought a lot of video games. Lets do banks. Moodys giving up grades to four big u. S. Banks. Raising Morgan Stanley citing strategic changes at the bank it says resulted in improved profitability and safer Business Model. Goldman, b of a and citi. Jpmorgan plans to cut 5,000 jobs. You mentioned dimons comments about shareholders yesterday. I dont overlook the importance of this double upgrade from Morgan Stanley in terms of cost of funds and cost of capital. Its important. It is important. My Charitable Trust owns it. It was something they were hoping for and expected. Its in place. Remember, they got penalized a while back. Remember worried about their exposure to the euro zone, to a lot of different names there. This is important. Not to be overlooked. Sometimes i think we tend to when it comes to these rating agencies. They are always looking backwards, not forwards. This will impact their ability to access their cost to capital basically. They are doing every day in the markets. My Charitable Trust owns Morgan Stanley. They did a great job buying citi group. Morgan told you this would happen. Gorman delivered. Theyve been looking for this and hoping for it. Everyone talking about dick folds comments yesterday. He said lehman was the result of a perfect storm he says began with the government. A weird speech. Said enjoy the ride no regrets. Here is a listen to what dick fold said yesterday. Regardless of what you heard about Lehman Brothers risk management, i had 27,000 risk managers because they all owned a piece of the firm. Cover of ft quotes a former lehman employee saying he should have had a plexiglass shield in front of him. He did, like nixon, praise his mother. Why not . She is 96 apparently. Good for her. That was my take away. Why relive it again . Look at what the leverage ratio was and where the assets were and what they really were. Why with relive it . I dont know. Talk more about your mother. You can never go wrong. Nixon had game on the go out. Finally this morning, amazon reportedly planning to expand its private brand of product lineup. The journal said it will include milk cereal baby food household cleaners. Amazon approached private label manufacturers seeking a partner. What a week its been for amazon and e commerce in general. Whether its google adding a buy button android pay, same day delivery for prime. You were out there. You did a fabulous job. What did we talk about in the east . Firing people, jpmorgan. What did we talk about in the west . Innovation, trying to do different things. Real excitement. People actually get hired. I think this thing, the world is divided between the companies that really get it whether it be ecommerce digital, the digital wallet. There are companies that dont. Dont you find the universities out west produce different kind of kids than universities in the east . Yeah. Certainly the ones you and i are probably thinking of. People who are not number pushers but comp sci, comp engineer guys who want to create because i listen to every word you guys had there. I said boy, these guys are creative and thinking and theyre making a lot of money. They are ambitious. Your Business Model is made infinityely easier to grow because of this. Guys taking on huge conglomerates because of the cloud. Broadcom avago needed to do that because they needed more real estate in that phone. They did. Listen we are going to have a university on roosevelt dial and cornell will try to graduate a lot of computer engineers. Would be good. One of my buddies got a contract to develop a rocket in his dorm shot it right through the ceiling. Doesnt matter. Bezos likes that. They have game. I just find look i was telling my train they are morning when we were working out at 3 30 after we got the greek situation, if i had to do it all over again, you think i would have gone to an Eastern School . No way. Its not too late. Youve done a decent job. Last i look you also started a company. Yeah. Barts and miguel. Its going great. Thank you. Whats your app . Google versus apple in the mobile payment wars. Well talk to mastercard chief emerging payments officer. Take another look at the premarket on this final trading day of may. Here at the Td Ameritrade trader group, they work all the time. Sup jj . Working hard . Working 24 7 on mobile trader, rated 1 trading app in the app store. It lets you trade stocks options, futures. Even advanced orders. And it offers more charts than a lot of the other competitors do in desktop. You work so late. I guess you dont see your family very much . I see them all the time. Did you finish your derivative pricing model, honey . For all the confidence you need. Td ameritrade. You got this. Will you be there at the end of the year . Look i have to focus on my job and what ive got ahead of me. I dont worry about am i going to be working on this date or working on that date. I focus on my job. You feel youre in sync with the board . I dont feel like im in sync with my board. I know im in sync with my board. The board and i communicate regularly. One of the things i do is probably overcommunicate with them. We are thoroughly in sync. Dick costolo, quite an exchange yesterday at the code conference. Is he going to set a record for the number of times he answers this question . This man is in a permanent existential crisis. It plays out every single day. I dont know another public ceo who gets asked, are you going to keep your job more than this guy. It doesnt seem fair. It is curious. He needs to be the chief i think ill keep my job executive officer. This whole thing it dont help your company when every minute its to be or not to be that is the question. You may have asked him that question as well when we had him in san francisco. The last Earnings Call it was a big topic. I dont know. This has happened before. Jack dorsey has tweeted up a storm about how committed the board is. That didnt happen this time. They were very committed to mcdonalds ceo. How committed were they . You are committed until youre not. A board dynamic can change. All you need is one board member to push things and see where they go. I dont know that board is in a position to want to do that. I believe him when he says he is fully in sync. I do know he communicates a lot with that board. He should communicate via twitter. Ive got good news for costolo. On the ulta Conference Call which was a seminole Conference Call because they had 11 Conference Calls. Mary dillon talked about the hashtag my beautiful mom campaign that worked. A Twitter Campaign that worked. Now there is something dick should be celebrating. I would have answered karen with, did you see how well my beautiful mom Hashtag Campaign did . That would have changed the dialogue. Weve got this kind of crisis of mind. Hes like the mindful ceo. Im in the present. Im living in the present. Im mindful. Ill give you the four pillars ceo. I dont hear you saying it deserves to go back to the low 50s. No. People on twitter say i found some new thing twitter does. Shouldnt amazon buy it . No company buys another Company Unless that company is doing well. Look at broadcom. Broadcom was doing so well. No activist targets a company that is doing badly. Dupont was doing maybe well. They could mix the next quarter and its all over. I think the secret to costolo is getting hold of mary dillon right now. If i were costolo, instead of getting up saying geez, i dont know. I think im the ceo today. I hope so. Its a tough day. Ill answer that question. Does he get up and say, look in the mirror when he is shaving does he shave . I think im ceo today. He ought to call mary dillon and say how come the hashtag my beautiful mom campaign worked . Come out here and tell us how to do it. No . Sure. Thank you. Yeah. Easier said than done. Look at ulta. Its up two. Its at 158. If he wants to get his stock to 58, call mary dillon. Well get to ulta deckers, gamestop cramers mad dash. Countdown to the opening bell. Last look at the premarket in may. The Technology Changes the design evolves the engineering advances. But the passion to drive a mercedesbenz is something that is common. To every generation of enthusiast. The 2015 dream machines, from mercedesbenz. Todays icons. Tomorrows legends. Visit the dream machine event today for up to 3,500 towards purchase. Hey, can i help you . Yeah, were interested in the iphone. We promised one to beth for her birthday. You know mobile share value ans now include rollover data, so the data you dont use this month rolls over to the next month. Wow, even better. So what are you gonna do with your old phone . Im giving it to my sister emily. She gets all my old handmedowns. Oh im into bedazzling too. And you admit that . Yeah. I. I used to be into bedazzling. Ill go get your phone. Get the iphone 6 with rollover data to share. Only from at t. Time for mad dash on a friday. Seven minutes to the opening bell. Where do you want to start . You say gopro, i say ambarella. This is a remarkable stock. Gopro is erratic. This company is genius. They are talking about drones. I dont know if you know this drones have become integral to the oil patch. Rbm my oil goto guy talked about how Oil Companies are prospecting drones. Drones are becoming to become commercial. When you open up a drone, if you did a teardown, you may see an ambarella piece of Technology Driving all these. How is a drone can you explain how a drone helps them . Drone is able to find out where oil is underneath quickly. Really . It doesnt have xray vision. Just the topography . Yes. I dont know if it can find the puffer the bird they are saving in wyoming. I dont know if you saw the bird they are trying to protect. No. Drone is the way to find oil. There is a lot of commercial uses and personal uses. People might use them at weddings. Exactly. Now david yes. Remember i said only thing people do in this country is get their hair done and played video games. I covered the hair done issue with ulta. Gamestop. This was a remarkable quarter. I said negative things like this. Ken langone said you are going to be blown away by what gamestop does. I was. Its the goto place to get at t apple. They are expanding stores. They have an apple store division. Its fantastic. I hope they didnt lose business. I hope tim cook didnt say you are not allowed to talk about apple because this is good for apple. People are buying playstation 4. This is a pattern people are still going to a store to buy video games . They are adding 200 stores david. They are taking over the radioshack stores. You know who buys this stuff there . Moms and dads for kids and real gamers. They buy what is known as loot there. Star wars is coming out and they have a video game for star wars. They are back, bigger than ever and it goes higher. Gamestop. Gamestop. Game over. Stay with us. Opening bell after this. You are watching cnbc squawk on the street live from the Financial Capital of the world. Well get the final opening bell of the month in 90 seconds. S p coming off the smallest five day hightolow range in eight months which is followed by the axiom, dont short a dull market. You dont want to fight the tape or fight the fed. The push me pull you market one step forward, one step back. Im watching battleground stocks. Mcdonalds. It might go up because they are going to make the burger taste better. Might go down because the burger doesnt taste good. Its a mcdonalds market. Up one, down one, up one, down one. Youre right. Going to toast the buns longer, try to get the sandwiches hotter. My nephew said just from dominos, he is my head writer said just like dominos had to admit their pizza takes like cardboard, its time for mcdonalds to admit their hamburgers taste like synthetic rubber. Once they get that out there, they can move. Theyve got to own that. Theres the opening bell and a look at the s p. At the big board today, the allianz investors celebrating its meeting at the nasdaq. Did you get to deckers over there . No. Deckers is very confusing. They really had very bad Comparable Store sales. Down 6 . They have some exciting things like the hoku that new sneaker. I tried it. I have a broken ankle, so its not that effective for me. Its taken forever. 50 million in yearly sales there. In the end, they are slowing the number of stores ive been to one of those stores. They are quite nice. Thats got people nervous. If you really have a great product, why arent you opening more stores . And a strong dollar. A lot of those stores are destination stores. There are not as many tourists. Tourism has been hurt by the strong dollar. Strength in tiffany is a surprise. How many japanese buy from the new york store flagship . Guidance was great. The chief economist must be excited about the dollar peaking. What do they know we dont know . Their guidance did seem to be stronger than might have been implied, given the numbers were not that good. Its all about expectations as we know. In that case they differed markedly with kors that day which has not recovered from not that we would expect but it was down over 22 . That kors Conference Call you felt like sticking your head in your handbag and closing it. Its what happened to coach. Tailspins are hard in the accessory business. I was grasping for straws when i said their watch business was bad. Hoping it would be apple taking share with the watch. They are not talking about the watch. That was one of the great moments of what did you out there apple is not setting any expectations. Not yet. I dont need to explain why the biggest gainers are sky works, Broadcom Avago and altria right . Sky works, got a nice price target gain. Remember stop pri, the great runner in the 70s . Its about stopping aldridge. You love this guy aldridge. I love this guy aldridge. I am from the great man theory david. This is a love affair. Bromance. Bromance. Shares of yahoo were up almost 1 . Normally we might look quickly at alibaba and say was that up on some news . Yahoo japan was up over 10 in japan. On news that it is going to be doing something in terms of chinese ecommerce teaming with alibaba. Soft bank owns a huge stake and owns a lot of japan. And big move for yahoo. Over 10 . Want to get to altria this morning since jim mentioned it. Stock is up sorry. Let me take a quick look. About 5 . A New York Post story says they are getting closer to a deal with intel. I dont know. What i can tell you, they are talking. That is altria and intel continue to have conversations around a potential deal under which intel would buy the company. As i reported i think it was last week might have been the week prior, they continue the principletoprinciple discussions, not involving outside advisors a great deal. Well see where they end up. Of course we know 54 is that key price. It was the number previously rejected by altria. There were many people who believe maybe it will be 55 to get a deal done. The standstill does expire very soon. Its far from clear to me intel, in fact i doubt they would go hostile. But there is that idea they would be more aggressive. Perhaps you put a letter out and galvanize the share base at altria. They can act by consent. All thats got to be in altrias mind as it is negotiating with intel. Again, as to whether they get to a deal i have no insight for you. Sorry. I have the insight that avago keeps going higher on its deal in issuing stock. People love the consolidators. Avago is valeant. Its true. Amazing. When i say value, these companies that buy other companies it isnt brilliant acquisition. Broadcom is a very expensive stock. Its the story of the market. Yes. Rollups relying on m a, usually low tax rate cheap money, willingness to lever up. Doesnt matter what they buy half the time. In this case i think people applaud that purchase of are broadcom. My hat off to avago. I loved lsi. That was a Brilliant Company whose stock wasnt doing anything. Avago takes a look at Great Companies whose stock havent done anything and buy them. Good article about the ceo. He is very aggressive. You know what . Some guys have game. Speaking of stocks that arent doing much all the big losers today, first solar, urban, chipotle southwest. Would you expect people are going to dump their losers for the month . Chipotle was up big yesterday there was a big restaurant rollout by deutsche bank. They love mcdonalds. The quote, arches are tarnished but can shine. I like that. Starbucks should be called starbucks with the letter s being a dollar sign. That is no doubt a takeoff of kesha. Starbucks is interesting. Chipotles action has been surprising. 14 for the month down. Chipotle has a problem. This is what hormel talked about. The supply chain is not ready to meet the demand of what chipotle has. Humane pig treatment has been a big issue. They torture the pigs at some of these manufacturers. They put them on slats. The short, unhappy life of a pig. Yeah. Its kind of like a piece of veal not going too well for baby cows. Funny corveal he was on the first letterman. Well lose bob schefer on sunday. Lets get to Mary Thompson on the floor. A weak start to what will be a mixed weak for the markets and the end of the second strongest month of the year for the markets. Dow and s p set to close lower for the week. Nasdaq of course has been showing gains what we want to do is take a check of the transports. Yesterday following into correction territory. Extending those losses today, down 71 points. Certainly apong the weaker performers in early trading here at the big board. One area of strength could be semiconductors. You heard david talking about a potential deal between intel and altria. Semiconductor index has been strong recently. Helped by all this m a earlier this week. We did have the deal with avago buying broadcom. All of this m a weve seen that is expected to benefit some of the Big Money Center banking arms. As bloomberg is reporting m a is on track to have one of its best years ever. That means big fees for some of the banks. Four benefitting from an upgrade at moodys. Bank of america, Morgan Stanley, citi and Goldman Sachs all receiving upgrades from moodys in the wake of being downgraded in 2002 following the financial crisis. Checking on Energy Stocks this is the worst performing sector for the week as we head into the final hours of trading for this week. Its down about 2 . No change there. Oil is higher despite the strength we are seeing in the dollar we want to check on the russell. This is an important day. This is the reconstitution day. At the end of the day, stocks it will be determine bad stocks go in and out of the russell indices. About 4. 4 trillion is tied to these indices. This is important. What you want to look at is what trading volumes and market caps are for these stocks. That will be deciding factor in whether or not these stocks are added or deleted to the various russell industries. All these Companies Reporting better than expected results. Deckers saying its Current Quarter results will be below estimates. Its under pressure there. Dow off the lows of the session. Up 48 points. Lets check in with rick santelli. Good morning. I know theres lots of talks about accuracy of numbers. What else is new . I will say on the surface everybody expected a lower number to gdp. We could argue whether it was as low as whispers. Part of it is about growth. Look at one day chart of 10s. Clearly see the response in the marketplace was lower yields. You can pick it out. It wasnt huge because weve seen a deterioration. We are at 2. 21 last week. Trading ten basis points lower today. Look at two day of 30s. This chart shows you we are toying with the low yesterday. This is important because last week 30year close was close to 3 . If we look at bunds. This is fascinating. Its much more difficult to pick up the move at 8 30 eastern. There was a time where these moves were exact duplicates, clone charts. There is a dynamic where we are starting to separate a bit in terms of how these markets are linked together. 30s minus 5s this is a big spread yield curve spread on this floor. Popular trade. Its a long term chart. November. The reason i bring it up is because if we start to see a reflattening trade or steepening trade either way because there has been a bout of steepening its important. It correlates with the direction of interest rates. Look at that same starting day for 10s. See what im talking about there . If we see the spreads go back into flattening territory, that made mean lower rates. It sounds logical, but is a key chart to Pay Attention to. Foreign Exchange Euro versus the dollar. Hard to pick up the 8 30 move. There is a little drift to the upside there. The one that picked it up more than usual is the dollar yen. This makes total sense. Its broken out big time. Thats the trade to pay closest attention to. As currency weakens, pay close attention to their stock market. All things being equal, it will show up there. David faber, back to you. Thank you mr. Santelli. Earlier in our discussions about the Broader Market jim talked about one of the engines for stocks going higher being mergers and acquisitions. There is no doubt it is a very robust market. One that at least feels for the first time in a while as though its getting a little bit frothy. Nothing like what we saw in the mid to late 1990s where any dotcom could buy another dotcom, and you would put up huge number. It was all in paper. Nothing like what we you can 2005, 2006 with the enormous leverage buyouts that were financed by the big banks at very high multiples to ebitda. At very high leverage ratios with the inclusion of bridge equity and a lot of other things that had people worried and rightly so. Its frothy. You can take a look there i ask the question. You decide what you think about whether the answer is yes or no. By the way, doesnt mean we are not going to see more. Jim brought it up earlier. Avago. Take a look at the stock price or any others that do acquisitions. They are being rewarded for doing the deals, for adding leverage to their Balance Sheets using their capital more appropriately as activists want them to do. For taking advantage of extraordinarily low rates. For using cash oftentimes because in a cash deal no matter what you seem to pay, its going to be accretive. That cash is not doing anything on your Balance Sheet. At least it will earn you a Little Something when you buy a company. This weeks deal. Charter paying 9. 3 times ebitda. Thats the highest multiple ever paid other than what sudden link was paid for by altice a week earlier. They are paying about 10 times. They are paying over 9,000 per sub excuse me 8,000 a sub. Charter paying 7,000. These are high numbers. There was a belief altice might be in the running for time warner cable. As i reported it was working on a bid that included 160 a share in cash. That still wouldnt have been enough to satisfy time warner cables board who are petrified taking altice paper. Banks are willing to step up with huge checks. Another theme weve seen these rollups. This is the smaller rollup vehicle endo. It paid 16. 5 times for par . For a business that didnt seem inline with what it had been doing previously. It wants to get big. How do you get big . You buy whatever is available. Even if it means paying a years worth of ebitda for it. They did that. They did do a lot of debt. They had to take on a lot of debt to do it. Thats where we are right now in terms of the willingness of companies to do that. Telecom. We talked about 5 billion m a deals announced this year. Weve got the highest volume weve seen since 2006. You can take a look at Global Telecom m a volume as well. It is quite something. Its not just telecom. 22 times ebitda is what danaher paid for paul as you look at Global Telecom m a volume. These multiples are getting very high. The market is rewarding them for doing so. The rollups are the way to go no doubt about it. But i just simply ask the question, are we getting towards the end here . Well see. Its expensive. My biggest worry is whats also the greatest part of the market. Thats whats terrible. My biggest worry is they are paying too much for these deals. The best part of the market are the deals. You take those away youre stuck with a market where you get companies that cant get out of their own way unless they boost their dividend. Obviously those ones that boost the dividend will keep going. Confidence breeds confidence. Right now, avago, you are saying tell the guys from altria well just pay. Whatever they say. We are seeing a decline in prices. Dow down 71 session lose. Slow down with a rate hike. Perfect. That goes in front of a busy week next week. Well get a jobs number auto sales, isms. That will add to more. Not the signal we want. Rick is in chicago watching this. Ill tell you what. This 47. 7 is definitely a surprise. On many levels. That was milwaukee, 46. 2 is chicago. Both of them. Im a second late. After talking to traders on the floor, theres two issues here. We all know general data these days isnt looked at the same way, maybe the seasonalities arent right. Isms are areas that traders thought they would be looking to to be more accurate. If this is more accurate its a big miss. Its reflected in yields as we start to challenge 210 in 10s. Challenging this 2. 85 area. We closed at 2. 75 in 30s. Big misses on 2. Well be back in an hour and dig deeper with pmi. Thank you very much. Dow down 65. When we come back he went from acting in bill and teds excellent adventure to directing and producing a documentary to the underground website silk road. As the founder prepares to be sentenced today and markets close to session lose. Theres some facts about seaworld wed like you to know. We dont collect killer whales from the wild. And havent for 35 years. With the hightest standard of animal care in the world, our whales are healthy. Theyre thriving. I wouldnt work here if they werent. And Government Research shows they live just as long as whales in the wild. Caring for these whales, we have a great responsibility to get that right. And we take it very seriously. Because we love them. And we know you love them too. You probably know xerox as the company thats all about printing. But did you know we also support hospitals using Electronic Health records for more than 30 million patients . Or that our Software Helps over 20 million smartphone users remotely configure email every month . Or how about processing nearly 5 billion in electronic toll payments a year . In fact, todays xerox is working in surprising ways to help companies simplify the way work gets done and life gets lived. With xerox, youre ready for real business. Its been a busy week with snap chat. Evan speegle, the ceo of snap chat was talking about the eventual path is an ipo. They are raising private capital and a lot of it. In a filing overnight, a form d filing, they outlined a shelf of about 650 million in equity that it is in the process of raising. The filing details about 112 million of that is stock that is reserved for future sale or not currently committed to existing investors. It does seem like all these highly valued private companies are in a perpetual state of fundraising. Weve been reporting on this for several months. You remember at the beginning of march, alibaba invested 200 million in the company in fundraising that valued snap chat at 15 billion. That 200 million slice, that is a portion of what this current fundraising round actually is. About 537 million committed so far. My sources tell me also participating in this round, in addition to alibaba is fidelity. All these Companies Want to get blue chip managers in their capital structure. It seems snap chat has done that with fidelity. York capital, which is interesting because weve seen a lot of these hedge funds get into private investing. York hasnt been one weve been seeing that often pursuing this strategy. Glade brooke capital, a tiger cub run by paul hudson. That fund raised two funds this spring in pursuit of private investments. That was the strategy there. We did say alibaba, when it invested in the company, that valued snap chat around 15 billion. Sort of between 15 billion and 16 billion, depending if you are counting the money they are raising in the current valuation. Whether its fixed 15 or up to 16 billion, certainly seems there is capital chasing these companies, trying to get in before an ipo. Especially as snap chat has said that is the eventual exit for the company. I think there is a sense, and you guys know about it more than i may. So much of the alpha is while the company is private. There is this aggressive effort on part of institutions you wouldnt expect. Many hedge funds have been getting in the game on a significant way. Chase coleman was doing it early on. Now a lot of others piling in. It does raise the question of they can ride the alpha up but what does happen if some of these valuations correct . How does that affect main street and investors . Well see. Thanks kayla. Well get stop trading with jim in a minute. We live in a pick and choose world. Choose choose choose. But at bedtime . Why settle for this . Enter sleep number. Dont miss the memorial day event going on now. Sleepiq tells you how well you slept and what adjustments you can make. You like the bed soft. Hes more hardcore. So your sleep goes from good to great to wow only at a sleep number store. Save 300 to 600 on select mattress sets. Ends sunday queen mattresses start at just 699. 99. Know better sleep with sleep number. When youre not confident your companys data is secure the possibility of a breach can quickly become the only thing you think about. Thats where at t can help. We monitor Network Traffic worldwide, so we can see things others cant. Mitigating risks across your business. Leaving you free to focus on what matters most. Time for cramer and stop trading. Lilly never stops innovating. They are doing a tieup with astrazeneca on cancer drugs. This weekend is zasko. Astrazeneca does have a fabulous anticancer lineup. Someone should have bought them. They spend more on r d than any of the majors. Lilly. There is a lot of companies, a lot of people are not that happy with lilly. Its a combative company. This is a brilliant move. The stock has been even better than bristolmeyers. Of late. What is on mad tonight . We are going to talk burger wars. We made some jokes, perhaps, about the unnatural and inorganic burgers mcdonalds has been serving. Dont rule out mcdonalds as being the best. Well measure the stocks. They just have to own up to the fact firestone and michelin make really good hamburger meat. Thats nasty. Doubling down on the synthetic rubber companies. And dick costolo, stop it. Say i answered all the questions about that when Carl Quintanilla interviewed me. Im done answering the questions. Hes got to reference you and do the job. Hes a nice guy. See you tonight, jim. Mad money 6 00 p. M. Breaking news on Consumer Sentiment. Dont go away. Its part adrenaline and part adventure. Its part geek and part chic. Its part relaxation and part exhilaration. Its part sports car and part suv. And the best part . The 2015 gla. Its 100 mercedesbenz. Can it make a dentist appointment when my teeth are ready . Can it tell the doctor how long you have to wear this thing . Can it tell the Flight Attendant to please not wake me this time . The answer is yes, it can. So, the question your customers are really asking is can your business deliver . Time upon a once people approached problems the way same. Always start at the starting. And questions the same asking. But that only resulted in improvements small. So we step a took back and problems turned these insideupdown to approach them newly. And thats when we it saw. Garbage can create energy. Light can talk. Countries can run on jet engine technology. When you look at problems in ways different you new solutions find. Good friday morning welcome to squawk on the street. Carl quintanilla with sara eisen, simon hobbs and david faber. A weak chicago pmi. Markets in the red and ten year below 2. 10 since may 4th. Lets get over to chicago. Rick santelli has breaking news on Consumer Sentiment at this hour. It does. It does continue. 90. 7. This is the may final. If you just look at the may preliminary at 88. 6 you think wow, that doesnt look bad. The preliminary is useless. Toss it away. What was the previous months final . 95. 9. That was the april final. You can see sequentially not good. It is the lowest university of Michigan Sentiment read of the year. You have to go back to november to find a lower one which was 88. 8. These eights are wild lately. Misses across the board. We are not seeing as much kickdown on yields we did breach 2. 10 . Thats where we hover. We slipped about six or seven points on the dow. Markets clearly in the red today. May still on pace to be the second best month of the year. Blackrocks global chief Investment Strategy joins us. Good morning, simon. An early start for you. I guess the hope for many people was Consumer Sentiment in particular would come back. Consumer spending would come back. Weve got a strong surge in pending home sales yesterday. Consumer confidence ticked higher earlier in the week. This data does that give you concern that we may not see this big surge in spending as we hoped i think what we are seeing is another lackluster year. Q1 was influenced by the weather. If you look how the data fared since then it hasnt rebounded as strongly as people expected. As a matter of fact, an index of u. S. Economic surprise is still hovering near the lowest level since 2009. Weve seen softness out of europe or a deceleration out of europe. China continues to decelerate. What it comes down to we are in a world that is generally described by sluggish growth and modest inflation. I think this is whats happening with the consumer. You are not getting that sharp rebound people hoped for. Lets assume for the sake of argument since weve been through it so many times and the fed does hike rates, thats the first bounce of the ball. What becomes the second bounce of the ball . S is the economy so weak they could hold off for a protracted period of time . Maybe Consumer Sentiment could come back and we could get a further rally on the stock market . Certainly, weve gone back to a little environment where bad news is being treated as good. If is there a perception the feds going to push back their liftoff. Yes, i do thinks stocks would rally. I dont think that will happen. I think the fed does have enough latitude to go in the fall. If you put into context of we are still creating the jobs at the fastest pace since the late 1990s. At that point in time short term rates around 6 . Its hard to justify keeping the policy rate at zero. I accept there will be a rate hike michlt question and open question for many people should be, what happens after that first or second rate hike. Does it really flatten off and therefore we can migraine traction . Yes. Its not the end of the world. You will see volatility in and around that number. Its in the 5 magnitude. Not a bear market. Mate not even be a correction. Dpichb given the fact i believe the fed lifts off, they will be slow and measured. Obviously, we are moving higher from historically low levels. That will mitigate the impact. Not to dwell on the First Quarter gdp, but one component is troublesome. That it trait. Biggest drag in 30 years. Exports dropped 7. 6 in the first three months of the year. A lot of that was the strong dollar which is not transitory. Excellent point. It brings up a broader point. There were oneoff factors in q1, the weather west coast port strike. We are seeing that the consumer response to lower gasoline is not what it used to be. Finally, flip side s of lower oil we had this collapse in cap x. The rebound is not quite as strong as some hoped for. So the equity market Central Banks spinning in the air. What about the bopped market . What do you think is going to happen to fixed income . I think yields are going to grind higher. I think we are at a low for a long environment. My view is we will be higher at the end of the year maybe around 2. 50. Where nominal growth is slow, there is a dearth of bonds, there are demographic changes. I dont think youll see a meltup in longterm yields. Particularly if yields in europe and japan remain low. That is exerting downward pressure on the u. S. Yield curve. Stocks have been sleepy and boring to watch. Do the lower than historical average volumes matter right now . We see fresh record highs in sluggish sessions. I think there are a couple of things going on. One reason volumes have been low, the u. S. Is seeing stronger markets elsewhere. We saw that this week. If you look at etf flows out of the u. S. Large cap space into broad nonu. S. Funds into china. After being years outperformance in a strong overweight many investors are starting to reallocate in more of the action, more of the volume is actually occurring overseas. That would be your recommendation . That is our recommendation. Its not as if other markets dont have their share of problems. Greece is a lingering issue. Things are getting frothy in china. Looking at relative valuation and other Central Banks are going to maintain accommodative Monetary Policy through the year to next year at the margin some of the better opportunities are outside the u. S. Equity market, in japan and in select emerging markets. Good to see you, russ. Thank you for your time. Have a good one. Four of the top u. S. Banks just received longawaited ratings upgrades from moodys investor services. This parts as part of downgrades they issued in 2012. Are we seeing more consistent performance across the Banking Sector . Happy friday to you, eric. David pointed out two notches for morgan standly. Is that the prevailing view they deserved extra . I guess so. They have done more to restructure their Balance Sheet than many other banks. Maybe that is reflected in the ratings. They are my favorite name among the large cap banks because of some of this transition that occurred to remix the revenues, which creates a more stabler, longer term earnings streak. We got this rate picture which we talked about last week. Are the banks in a rising rate environment . At the same time that seems to be a question today given the macrodata. Have you updated that view . I think the primary risk is when you look at earnings estimates next year, the expectations about earnings are very significant in terms of the ramp which suggest if the fed doesnt hike enough or the yield curve shape isnt whats embedded, even with some hike you get negative revisions on the 16 estimates. With dick fuld breaking his silence yesterday in a strange, took us all back to the crisis time, which bank is in the best shape . Structurally . Structurally . I think the two brokers have done the most to realign their funding mix. Thats probably the most significant. All of them made very significant strides in terms of improving capital levels lowering costs and improving liquidity positions. What about the 5,000 jobs going at jpmorgan . Is there a restructuring story . I appreciate that is a small number to the total work force but could that counteract the negative earnings revisions you talk about there . Specifically for jpmorgan that is a small slice but part of a broader Cost Containment strategy. What you are seeing at jpmorgan is what you are seeing from a lot of institutions. As Technology Enabled the consumer to better selfservice for daytoday transactions, it eliminates a lot of need to maintain the teleforce they have. I walk down the high street main street there are big banks in big buildings with nobody in them. Maybe five or six members of staff and one or two queueing it. It doesnt seem right when rents are rising. Are they locked into longterm leases . It takes a while to undo a massive Brand Strategy that was prevailing for the three or four decades leading up to the financial crisis. Take b of a. They used to have 120 million square feet of corporate real estate that. Number is 90 headed to 80. Its a big change. Overall, youre neutral on the sector right . You are not terribly excited about any names. What would it take to go overweight on the group . We tend to be led by earnings revagss. We need circumstances that would cause us to believe earnings revagsre revisions are moving higher than lower. While rate hikes are on the horizon, we argue thats factored. In it needs to be more broad than that. Thanks for coming. Thank you very much. Up next seems the seasonal problems we uncovered are happening with the nations productivity data. Steve liesman will have a new report. Fifa congress is under way. Members could elect a new president when they start voting in about an hour. Well get a live report from zurich. Dow is down about 63 points. That Big Government report out this morning. Senior economics reporter Steve Liesman says the street is taking it with a big grain of salt. Also new research explains why. The street quickly moved on from this First Quarter gdp report showing the economy contracted, in part because of Research Done by cnbc showing its been reported weaker than normal the past 30 years, the First Quarter, and especially the past five. Here are the details. Consumer spending down a tick. Biz investment up, housing up. That higher trade deficit. That takes away from gdp and lower inventories that helps play a big role in the contraction. Here what is mizuho said because everyone is aware of the residual seasonality in the q1 report, everyone is now looking past this data to q 2. We lowered our q2 growth estimate to 2. 5 due to downward revisions due to sales. More later this hour. First quarter productivity data suspect. In part because they rely on the gdp data. Cnbc found productivity, the critical measure of efficiency in the economy averaged 1. 1 First Quarter over the past 30 years compared to overall productivity growth of 2 . Over the past six years, the output per hour in the First Quarter, nothing short of abysmal. Shrinking 1. 2 . Felt sharply First Quarter this year. It was noticed by fed chair janet yellen. The most important factor determining Living Standards is productivity growth. Over time, sustained increases in productivity are necessary to support rising incomes. Here at the recent data have been disappointing. Cnbc in april uncovered a 30year problem in gdp. The bureau of Economic Analysis put together gdp, acknowledged the problem and pledged to revise some of the data with the july 30th release. Productivity which is calculated by the bureau of labor statistics relies on gdp data. It is the output part. John glazer telling cnbc anything in the b. A. Data will come through in the productivity data. Bls guys have to revise the data when the bea does. Stay tuned for erasing. You have been doing a lot of homework. My only question is if you cant fully trust the gdp data and trust the productivity data what does a datadependent Federal Reserve chairman to do about that . Wait until the data clear. You can look over longer periods of time. Use a four quarter moving average. Year over year data does not seem to be that polluted, if you look at it year to year. It doesnt give you the most immediate momentum of the economy. Take a step back. The Employment Data although revised, also seems, if you take a couple of months or three months together seems to trend well and give you an idea of whats going on in the economy. Along with the most frequent report of all which is weekly jobless claims. Smooth it out, i guess. Thank you. Thanks. Lets move over to the scandal in world soccer. The Fifa Congress continuing in zurich with a vote potentially within the hour that could see a new president. The election comes days after fifa officials were arrested on corruption charges. Wilford frost is live in zurich with the latest. Do we think seth blatter wont win a fifth election today . He seems to be pulling rank on people saying its time for team spirit. Absolutely right. He remains the overwhelming favorite. I want to update you on the timing. We are in a tenminute recess before the agenda item where the president ial votes will begin. We are close to that moment. As you said blatter remains favorite. He was clear this morning when he opened the agenda by saying that it is not fifa itself that has been accused, not him thats been accused, but nine of his executives. Thus he Still Believes he is the right man to lead soccers governing body forward. His critics are backing prince ali of jordan. If the sport is to change change has to stop from the top. We are due to start voting within the next hour or so. Well see votes from the 209 delegates by secret ballot. In terms of what the likely result is the important thing to note it is only the European Confederation which has 54 of the 209 votes that is overwhelmingly supporting prince ali. Most of the others are seemingly still very loyal to president blatter. That is why he remains the favorite in this vote. Aside from the president ial vote that has been a little bit of excitement today. There was a Security Threat which was cleared quickly. Protests by a group of palestinians who got close to the entrance. That particular agenda item ended with a handshake between the palestinian and Israeli Football Association members. Allowing focus to come back to the president ial vote which starts, as i said within the next hour. Back to you. We will see if he is reelected, whether there is a full boycott of the world cup moving forward. Thank you. Coming up google setting to take on apple pay with its own android pay. Will it be successful . Mastercards chief emerging payment officer will join us to weigh in. The network that monitors her health. The secure Cloud Services that store her genetic data the servers and software on a mission to find the perfect match. And the mom who gets to hear her daughters heart beat once again. Were helping organizations transform the way they work so they can transform the lives of the people they serve. Summer is peak sales season for beverages. Is where the growth . The answer may surprise you. For all the healthy talk natural and organic, the Fastest Growing drinks right now are anything but. Energy drinks. Absolutely exploding into a 10 billion business. Almost ten times what it was a decade ago. Sales continue to surge. We are receiving growth 12 in the last month or so according to nielsen. Red bull is the market leader. Monster rising and close behind. Thats why cocacola is taking a nearly 17 stake in monster energy. We see double digit growth in cold or ready to drink tea. Actually saw at coke headquarters how cocacola is trying to boost its brands honest tea is one of them a sign of how popular tea is becoming wendys will sell honest tea. Fast food selling cold tea. Pepsico is number one here in the market thanks to a partnership with unilever which owns lipton. Theyve got a 28 market share over the last four weeks in liquid tea. Snapple arizona is often seen as a takeover target. Fuse and gold peak growing rapidly, becoming the newest billion dollar brands in cokes portfolio in 2014. Obviously, one trend is caffeine is very much in vogue right now. Are they sweetened teas . Many actually do. Thats the thing. They say they want healthy, but its watch what the consumer does not what he says. Just to underscore that point, another fastgrowing beverage real sugar cola mexican coke with suiten ensweeten eded with real sugar. Acceptsy says real sugar pepsi grew 64 last year. 140 this year. It was a very small market coming off barely anything but absolutely tremendous growth for soda. It does seem odd to choose soda sweetened with sugar for health reasons. It underscores the fact its an authenticity question. Knowing whats in your food and drink. That perhaps is the real trend over healthier drinks. Rather have that than high fructose corn syrup. How does it compare to water . Water is the best. Bottled water is growing faster. It already has the volume doesnt it . They expect water to take over soda as the biggest beverage in the united states. Just thought it was interesting to see caffeinated, sugary drinks like energy drink, tea and real sugar as the hottest beverage out there. Tough being young. You need the caffeine. Or sugar. June is notoriously lackluster month. There are two sectors that had a positive average return in that month. Well tell you which ones after the break. Ne les of diabetic nerve pain, these feet. Served my country. Carried the weight of a family. And walked a daughter down the aisle. But i couldnt bear my diabetic nerve pain any longer. So i talked to my doctor and he prescribed lyrica. Nerve damage from diabetes causes diabetic nerve pain. Lyrica is fdaapproved to treat this pain. Lyrica may cause serious allergic reactions or suicidal thoughts or actions. Tell your doctor right away if you have these, new, or worsening depression or unusual changes in mood or behavior. Or swelling, trouble breathing rash, hives, blisters, muscle pain with fever, tired feeling, or blurry vision. Common side effects are dizziness, sleepiness, weight gain and swelling of hands, legs and feet. Dont drink alcohol while taking lyrica. Dont drive or use machinery until you know how lyrica affects you. Those who have had a drug or alcohol problem may be more likely to misuse lyrica. Now i have less diabetic nerve pain. And my biggest reason to walk. Calls me grandpa. Ask your doctor about lyrica. 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Amazon adding to its own line of food and household products broadly expanding its lineup of private labeled brands according to wall street journal. The paper says it approached private label food makers seeking a partner, including tree house foods. North korea staterun tv releasing photos of a public appearance by kim jonguns sister. The first time shes been seen in 50 days. A volcano in southwestern japan erupting sending thick black smoke as high as 20,000 feet in the air. Officials ordering an immediate evacuation of all residents on that island. They say magma likely triggered that eruption. Back to you guys. It is a big week for markets. Asian currency heading for their biggest monthly drop since november. The dollar reasserted itself ahead of greeces debt deadline next friday. Jack lew saying its the responsibility of that country and its creditors to meet the deadline. All parties need to move. There needs to be flexibility on the part of the institutions and tough policy commitment and implemented in greece. One wont happen without the other. They have to happen at the same time. It can only happen when you go from the high level of generalities to the very specific levels of what actions you are prepared to take. I have delivered the same message to, in conversations with the Prime Minister of greece as i have with the different institutions. I think it is in everyones interest for this to be resolved and for it to be resolved as quickly as possible. That was the treasury secretary at a g7 meeting. David woo from bank of America Merrill lynch. And jack renn. Senior Global Equity strategist. David, investors seem not to care as we go from deadline to deadline here on greece. Could that change if they cant meet it next friday . With jack lews comments notwithstanding three months of negotiation, very little should the narrowing have taken place. Little substantive agreement has been made. 5. 6 euros leaving the greek Banking System for elsewhere. If we start to see basically taking their money elsewhere, this will force a showdown as we go into the end of june. What do you do with that information and risk factors out there . Do you sell the euro . Do you look hard at what kind of european exposure your companies have . How do you think about it . The way i think about it is that greek uncertainty is going to cause volatility. Volatility is going to hopefully cause more buying opportunities. Even in a worstcase scenario for greece which i dont think is going to happen they are going to bandaid this thing and kick it down the road even in a worstcase scenario we would be buyers. We might not step in the first day. Would you have a good correction if it was greece getting ready to leave the euro zone or some sort of tension. For us its going to cause volatility potentially. That potentially is going to give us buying opportunities. I think that this greek situation, whether they bandaid it or not now, its going to continue to be a problem down the road. Euro dollar is in the range where Currency Team thinks it will be 1. 05, 1. 10. It wouldnt surprise me if the euro bounced back a little bit. I thought we would see 1. 20. We didnt quite get there. This volatility is good because it causes people like me who have to deal with retail clients, it gives us a reason to get in there and buy stocks. Retail investors are underinvested in stocks. On the euro dollar forecast i know you guys have been bulls on the u. S. Dollar. Weve seen that trend come back in the past few weeks. Does it continue and does it act as a barrier to stocks . Are you surprised that with a near historic rally in the u. S. Dollar, we managed to see record highs in stocks . Thats true. Ive been dumbfounded. Last week i think waits a bit of a game changer. Since the dollar started to rally, s p has been down. Most days the dollar has gone up. From our point of view equity markets are paying more attention to the market finally. We are not trading Dollar Strength but rather euro weakness. Not just talking about greece per se. The greek issue is a red herring. Things will get worse. Ultimately greece will exit the euro. That will be positive for the euro. I think im talking more about the ecb qe. We are talking about minus 120 billion euros of negative supply of european bonds. Well see a lot of Foreign Investors dumping or exiting european bonds in the summer months, which means some of them will sell euros, as well. Im looking for euros to head towards parity. My biggest worry is asia and china in particular. It has been the strongest currency next to the dollar. This stock market rallies not sustainable. From our point of view eventually, i dont know when to tell you exactly, i think the euro will have an issue. German exposure is more than u. S. Exposure to china. The stronger dollar is basically oneway bet is what some people are saying. Currency markets usually react to the change or the rate of change in expectations, not to the stock of where we are. Is it a danger that say the fed after one rate hike becomes super dovish or the conversation within europe becomes about an end to qe early because inflation is coming back . That is a much more powerful argument in the moment on the session, isnt it . Than the stock of things you talk about. I think you make a very good point. Only thing i would say is the following. We are in the middle of a currency war. I think from our point of view the ecb Statement Last week at the infamous dinner which it talked about maybe buying more bonds is a strong significantal. Where do you think the fed is playing in that currency war, to the point im making . The fed are the least able to play that game. You could argue the u. S. Got back on the street playing that game. Now the u. S. Cannot tell others they cannot play this game. U. S. Companies are doing better. Inflation picking up. Fed has less excuse to start to engage at this stage. Im not saying the dollar is massively strong. In terms of positioning, most of the people short the euro got stopped out. This moved from 1. 15 to 1. 10 level. Very few people participated in it. Scott, final question to you. Ahead of a very important week of Economic Data we get jobs next week. This whole theory is predicated on the idea the u. S. Stages a sharp rebound in the economy like we saw last year. How are we positioned . How does the economy look to you . I think we are going to come out of this year with about a 2. 8 gdp number. Maybe a touch lower than that. Not much lower than that. We do expect better growth as we move down the road. Sara, you want to focus on industrials, Technology Consumer discretionary sector. Those sensitive to the continuation of recovery here and continuation abroad. Well see 1. 3 gdp in the euro zone. Things are moving in the right direction, just moving slowly. Thats what you want to keep in mind. Scott renn david woo, good to see you both. Thanks very much. We didnt get to the nikkei up for 11 days in a row because of the weaker yen. Dow is down 88 points. Today is the last trading day in may. Could we be looking at a june swoon . Historically only two sectors have had positive average return during june. Dom chu has more than that at hq. You guys spoke a lot about those fundamental aspects in your last segment. These are the quantitative elements. What are the numbers telling us . Its not to say these numbers predict the feature, but give us an indication how things performed in june over the past decade. Our partners over at markets data look at june performance numbers of the s p 500 on average over the last ten years. Its not a pretty picture. On average down about 1. 3 for the s p 500. We are down six out of the last ten years. The odds are not good. Lets look at hot and gold ones. First of all, the june performance for ten years utility stocks up 610 years. Thats one of the better odds in terms of historical data. Average return up by 1. 3 . Maybe if things hold true well see that happen again. Energy stocks also very controversial right now. We know about the whole energy move in terms of volatility. Its up six of the last ten years. Average return up by 0. 8 . These are the hotter ones in terms of sector performers on average. Industrials have been down 810 years in the s p. Down by nearly 2. 5 on average. Look at this one. Material stocks down 810 years on average, down close to 2 . These are are where historically weve seen colder performance. An indication from a Historical Perspective what you might see. Some stocks to watch and sectors, for sure. Persuasive numbers. When we come back you might know him best as bill s. Preston esquire. Alex winter has a new film out. Hell join squawk alley live a little later on. Friday night, buddy. You are gonna need a wingman. And with my cash back, you are money. Forget him. My Airline Miles will take your game worldwide. What im really looking for is i got two words for you rewards. Theres got to be better cards than this. [ male announcer ] theres a better way with creditcards. Com. Compare hundreds of cards from all the major banks to find the one thats right for you. Its simple. Search, compare, and apply at creditcards. Com. First rounds on me. Banks stops have been busting a move. Charts could point to more upside ahead. Why and which ones may look the best on trading nation. Cnbc. Com. announcer you run a business. Could be any kind of business. And every day, youve got important decisions to make. Like hiring. Where are you gonna find those essential people you need . With ziprecruiter, its simple. We post your job to over a hundred job boards with just a single click. So you can reach millions of qualified candidates. Then well give you the tools to help you manage, screen and rank your applicants. All so you can find the right one. Try ziprecruiter for free today. Lets get the santelli exchange. Good morning, carl we had a spat of softer than expected data. Today chicago is no exception. I always like to bring in alice andre franz. Welcome. We could start simply 46. 2 means three of the last four numbers have been below 50. Right. Lets talk about that. There is no way to spin this month. It was very weak. We have all the components that comprise the barometer in contraction. The only glimmer of hope i found were in the comments. That was weakness is not broad based. Weve seen that a couple of months in a row. What does that mean for an average investor looking for where to invest . Did they give you more color, direction or granular information on what is doing better than others . Whats the weakest and whats the strongest . I could tell you the Service Sector is doing better. Thats the biggest swath in the economy . Exactly. In our survey its about 60 . People making Big Industrial equipment, not so good. Anybody who can make a speciality item really quick, great guns. Lets dig through it. The first place we are going to look is inventories. Last time alice was on we said we had an inventory build. We havent had the growth to chew through it. You were spot on. Lets talk about inventories. Right. When you have all five components that make up the barometer below 50 and inventories at 53. 3 that is an indication you are over inventoried we did a special survey question. How are your inventory levels . S 42 of our survey panel said they are overinventoried. That compares to 12 in november. 42 from 12 since november. Second and third quarters is where all the strength was last year. It makes sense thats where they picked up on it. Right. Survey panel said 53 said inventories are about just right. If you are just right and have low demand and weak headline number. You are saying the inventory level wouldnt be bad if the growth was better. Right. Inventory numbers and what people are telling us about their inventory levels do not bode well for growth going forward. What we talked about in our purchasing manager meetings is where are inventories going to go . We are in a building period. Fourth quarter they have to be ready for the holidays. Right. The thought is there is going to be just a gradual build. People have shifted to this build to order type of inventory system. Its just going to be gradual through july. Not gangbusters. The big problem is unless we get a gangbusters june all hopes have shifted to quarter four. We can do the rest in the final 30 seconds. Everybody gasped when they saw it up 8. 1 on prices paid. What do you say . Its all fuel. Lets not worry about that. Employment next week. We have the jobs report. Employment down six at 48. Weakest since tax time 2013. This goes along with weak demand. When you have weak new orders ive got to lay off work force. That is what we are seeing. Thank you. You always make murky clear. Simon hobbs, shaken not stirred, back to you. Make mine a double. Up next google taking on apple pay with android pay. Why is big tech making such a push into mobile payments . Mastercards chief emerging payments officer will join us live to talk about that as squawk on the street heads into the weekend. Just because im away from my desk doesnt mean im not working. Comcast business understands that. Their wifi isnt just fast near the router. Its fast in the break room. Fast in the conference room. Fast in toms office. Fast in other toms office. Fast in the foyer [pronounced foyyer] or is it foyer [pronounced foyyay] . Fast in the hallway. I feel like ive been here before. Switch now and get the fastest wifi everywhere. Comcast business. Built for business. Google taking aim at apple pay. The Company Unveiling a new digital wallet called android pay, with android running around 80 of the smartphones around the world, google hopes it will become the dominant mobile pay system. Joining us for more post 9 mastercard mastercards chief payments officer. Its another great deal for you. Another great deal. With 80 of the worlds smartphones, how does the Android System stack up to what we have on the table from apple . It gives consumers choice. As you all know something is passion for people which smartphone they have. What it is and how they use it. This means regardless of the handset you have you can have a Great Payment experience using the mastercards you already have. Are they the same . Its very different applications as you would expect from two different companies. For whichever handset you have you get access to secure payments. I understand with apple pay, that apple will get a cut of the transaction fees with google and android, thats not immediately obvious. As being part of the chain, if i use android is it going to take the data like it does with gmail, where i am what im paying and sell that to advertisers . Is this a different concern for me as a user . Its not a concern for you at all and that was very important for us at mastercard. When you use your mastercard through android pay, its just as if you were using the card itself. No Additional Data is being sent or shared or resold for you. But google knows where i am and what im paying and who im shopping with, doesnt it . Its a private transaction between you and your merchant. Google could not use that data elsewhere . The technology doesnt allow that . Right. So the information about the transaction is shared with the consumer and only with the consumer for that. And the great news for merchants, whether theyre getting mastercard physical card or whether its a contactless application from any of the environments that we see out there, the data works and the data rights are the same. Do retailers need to choose . Can they do all of this reasonably well . Thats the great news when you use android pay, its a general mastercard contactless transaction, it will work anywhere in the world that mastercard contactless does today. Folks like macys and panera and whole food we have new ones coming on like best bay and staples that have that. Globally we have millions of merchants that do it. So today i can tuesday at the tube in lopd the taxis in singapore. Anywhere mastercard contactless works. If ive committed to apple pay, does that mean im not going to accept android pay . No not at all. America chabtss want to serve as many customerings as possible. People have different kinds of handsets, our goal is to make sure if you have a mastercard, you can use it in all of these new environments. Two billion people are going to use smartphones each year. How do you become relevant given that the plaster cards dont matter and its really about software and systems and encryption how do you to get ahead of the game . We call mastercards digit allen abling service. Its a program that allows you to take your mastercard and easily put it into whatever device you want to use. Its a tokenized transaction, its a Different Number than is on your mastercard. But we use all the same type of security we would use for emv transactions. Let me give you an example. A program launched from affect from vodafone. People sms money they have on their account through a phone provider to each other. If that gross, do you lose market share rapidly here . No we work with those types of systems. We have a system with ecocash in zimbabwe. People can receive cash and use mobile money, they have a companion mastercard, they can go to atms or shop online and breakthrough for them. Almost 30 of our ecommerce coming out of zimbabwe is people using the mobile money application. When do you see consumers actually using mobile pay. This is an early stage for it, right . One of the big things is getting the platforms out there that you now see. A great thing about android pay is its backward compatible. To handsets that are out there. If youre on a kitkat version or higher you can use it. You had to get the latest iphone to use apple pay. This will work with existing systems. Were out of time. Have to take a break. Ed mclaughlin, chief payment officer at mastercard. Kayla tausche with whats coming up next on squawk alley. We take a deeper dive into the conversation we were just having about googles dive into the epayment space. Were going to talk about it with kara swisher and get her take on comments from dick costolo about his fate at the company. And actor turned filmmaker alex winter is here to talk about his new documentary about bitcoin and the silk road. All of it coming up next on squawk alley. You are looking at two airplane fuel gauges. Can you spot the difference . No . You cant see that . Alright, lets take a look. The one on the right just used 1 less fuel than the one on the left. Now, to an airline a 1 difference could save enough fuel to power hundreds of flights around the world. Hey, look at that. Pyramids. So you see, two things that are exactly the same have never been more different. Ge software. Get connected. Get insights. Get optimized. Good morning, it is 8 00 a. M. At snapchat headquarters in los angeles, its 11 00 a. M. Here on wall street, squawk alley is live