Transcripts For CNBC Squawk On The Street 20160513

Shares of nordstrom down about 15 in the premarket, penne yerkss taking a hit. Well break down whats really happening in the sector. Donald trump launching another attack on amazon and jeff bezos. Trump saying when it comes to taxes, amazon is, quote, getting away with murder. Apple ceo tim cook told cnbc hes very optimistic about china and putting his money where his mouth is in a big way. Well look at the Chinese Company apple just invested 1 billion in. But first up, Government Data shows retail sales up 1. 3, surge led by autos, gasoline and Online Retail. But theres more Department Store pain on the earnings front. Both penney and nordstrom tumbling. At least eight firms cutting their price targets on nordstrom, which misses by a large margin 26 versus 45. Revenue was light. Comps down 1. 7, but the lesson here is that even retailers of that income demographic are not immune. Everybody at the mall was out of position, no way to put it otherwise. If you think of the three drivers of what matters to retail at any time its the kind of secular move toward online and everything else. Different ways of buying. Cyclical are Consumer Spending and then the weather. I think all three of those things went against you to some degree in april. But i think the government retail sales here its not a macro issue most directly, in fact within that report its nonstore sales that were the strongest. Nonstore retail up 10. 2 year on year. There it is. And its something weve been talking about now for years, actually, this movement for your phone to get your business done, willingness of stay home or do something else, take a walk in the park instead of in the mall while youre buying things. This is a trend were going to continue to see, im sure. And weve all talked about how the mall is suffering, or at least those retailers. This week we may look back on it as sort of a week where everybody started to wonder about the real future of mall base retail particularly as apparel, but at the same time these companies are still making money. Macys still has a dividend, a 5 yield at this point. You do have to wonder at what point the stocks will start to find some support, maybe even jc penney today around the dollar level despite what was not a great number. Jcp comps up 0. 4, looks good given the environment, but citi points out a model doesnt do well with negative comps and this is a little too close to that. Exactly right. Theyre not growing the store base. Yes, they have some cash flow. They have real estate. I mean, if thats going to be a fallback or not, maybe its a liability. But i do think whats interesting the xrts, the etf and srp index down 15 this week. Wow. So on a friday if you dont get some kind of short or reversal, the main thing to me nordstrom yesterday after the close and jc penney this morning, both stocks weak going into the reports and adding to the losses. So maybe theres some kind of a final crescendo of selling thats going to happen. They reiterated their 1 billion ebitda this year at jc penney. They stuck with their Comp Store Sales target as well despite what was a number below what theyre hoping for 3 to 4 for the full year. Even margins 36. 2 versus 36. 4. A lot of people if youd asked them last week they said well take it. This is where i think the street is saying, well, what do we have to actually look forward as a catalyst before holiday time, right . So you have this long summer stretch where its give me a fundamental reason why these things are going to move. Ultimately maybe the stocks have to get cheap enough so they can lift. I tweeted this morning remember when everybody laughed at urban for buying a pizza chain . Now it doesnt look so crazy. Theyre going to have to start thinking outside the sbarro box. Is that obvious by now . Or outside the pizza box. Whatever you have to do. And the world is telling these guys experiences matter, people want to spend time somewhere but not necessarily want to buy a pair of jeans. These companies and businesses can still generate a decent amount of cash, but theyll have to continue to take costs out. In the case of jc penney for example it appears they are taking significant cost cutting to try and maintain even those fairly skimpy margins theyre talking about. One would have to imagine thats going to be sort of a role for many of these retailers. And dillards no exception. 2. 17 misses by 35 cents. Comps down 5 double the loss expected. Tiffany, the cfo resigning may 20th. Going to a different company. So there really havent been too many exceptions this time around. Not many bright spots. I think to davids point the one place where the newspaper analogy breaks down, people say, wow, this is what happened to newspapers, people giving up newspapers to get something for free. They werent going elsewhere to pay for something. Thats the way i look at it. Theyre buying differently. Nobodys offering Free Clothing out there thats going to compete with the people trying to charge for clothing. Thats true. Maybe thats a very small comfort, but its a difference. They offer the ability to get it to your door now in less than 24 hours. Thats true. And send it back if it doesnt even fit. Amazon, although a different type of story today. Everything about amazon. Donald trump once again taking aim at amazon and jeff bezos in a big new way. Heres what he said last night on fncs hannity program. This is owned as a toy by jeff bezos who controls amazon. Amazon is getting away with murder tax wise. Hes using the Washington Post for power so that the politicians in washington dont tax amazon like they should be taxed. Hes getting absolutely away. Hes worried about me. And i think he said that to somebody, was in some article where he thinks i would go after him for antitrust because hes got a huge antitrust problem. Because hes controlling so much. Amazon is controlling so much of what theyre doing. And what theyve done is he bought this paper for practically nothing, and hes using that as a tool for political power against me and against other people. And ill tell you what, we cant let him get away with it. Wow. Now, bezos has gone after trumps gone after bezos before on the tax front. And certainly on the Washington Post cover front. The antitrust wrinkle is an evolution in his thinking. It is. Its new. I guess given the week weve had and the news weve been talking about in terms of amazon eating everybodys lunch you might expect it to enter the conversation. But curious to see the antitrust case against amazon what exactly theyd focus on. What do you define as the market . And how do you go about defining their dominance of the market . Its extraordinary to hear a presumptive nominee, the Republican Party tap one man and one company in particular in that way. And, guys, maybe you know better than i, but the state tax story seemed to have passed on amazon, right . Thats sort of an old story where theyre not paying sales tax. They are now. On a state basis. Yes. Where they tend to have infrastructure in place. Which is a lot of states now. Yes. Its just amazing to me that a billionaire who wont show you his tax returns still manages to find even richer people and more powerful institutions to put himself in opposition against on taxes, on somebody whos, you know, wielding their power in a way that he thinks is unfair. Its amazing. And of course his reference to the Washington Post i think bezos for 250 million or 350 million a number of years ago. Im not sure he ever thought it would bring him heat on the real part of his business, which of course is amazon. Fascinating to listen to mr. Trump make that attack. Very much unclear to me though exactly what it would actually mean in terms of the real world taxes wise, whether its sales tax or corporate tax. Its unclear to me. Wow. Lets bring in our chief washington correspondent john harwo harwood. John, im making a list of companies in his crosshairs, utx, starbucks, macys, is there Something Different about this attack on bezos and amazon . One thing different is the story the Washington Post has this morning about donald trump and his past penchant for posing as a publicist to generate stories about himself. Now, he came on the today show this morning, denied that he had done that. But this is something that the post had contemporaneous witnesses on and sounds an awful lot like donald trump. And donald trump is somebody who has shown a willingness to go very hard after his critics. And he knew that story was coming. He talked to hannity about, you know, the inquiries he was getting from post reporters and post assigning a team of people to go after him. Hes trying to protect himself against the effect of those stories. Bezos of course back in december responded via twitter saying that maybe they could send trump to space in his words through his blue origin company. Where does the rhetoric lead, john . We got 180 more days of this. Look, weve seen in this primary Campaign Donald trump is a politician of the kind that we have not seen before. He says things that other people wont say. He is inflammatory and direct in a way that past president ial nominees have not been willing to be. I would expect that donald trump there arent any guardrails on him as a politician. You see the things that he has been saying about Hillary Clinton and bill clinton. Were going to hear more of that. And i think as he gets targeted or criticized by institutions, by individuals, you can expect him to go hard after them. Remember the Ricketts Family with a stop trump Political Action committee, said better watch out hes got business interests and vulnerabilities stuff theyre hiding. In the end governor of nebraska is a member of the family, he came out the other day and endorsed donald trump as the republican nominee. So some of these things are going to shift. But Donald Trumps going to go after anybody who goes after him. John, were going to come back to you later on, im sure after a busy day yesterday in washington. John harwood in washington, d. C. Meanwhile, apple investing 1 billion in the chinese Ride Sharing Service didi chuxing. Lets bring in analyst from piper jaffry. Gene, good morning to you. Good morning. Is this a precursor to a car . Is it a way to build good will with the chinese . What do you make of it . Well, i mean, you jumped to probably the real story here is that theres probably something bigger going on. You take a step back and look at this, it purely face value, 1 billion investment on 160 billion in cash, its just a sign that theyre starting to edge outside of their core market, which is great. But then theres the bigger story which youre talking about and that is apple starting to inch into the autonomous car. And chinas done a lot around that. I think most investors dont know that baido, which is the google in china, has their own initiative. They have cars driving around the bay area and they want to have a global sales driving car business. So the idea of china being a frontrunner in that, i think, is very apparent. And i think apple is starting to plant some of the seeds for that potential, which is kind of consistent with a lot of people and our belief that apple is going to eventually have some form of a car. Gene, you know, you put this investment in context of 160 billion in net cash apple has so therefore no big deal might as well experiment in a fast growing area perhaps. But what about the response even such a small investment like this reminds me of the beats deal, 3 billion, really not a big strategic move and yet everybody criticizes or thinks apple is moving away or going away from its core. Does that constrain or steer apple, the fact that everything is so scrutinized . I think it probably doesnt because theyve been pretty slow. I mean, they talk about all the acquisitions, most of them are very small. To your point this investment is a pretty big deal from apples perspective. They spent about 3 billion for beats. This is 1 billion. This would be their second largest in some ways form of an acquisition. And so i think that that part is important and will get scrutinized because its just a little bit bigger. One of the Critical Issues that apple has in terms of their stock is this idea that its not a growth company. And the idea that theyre not getting into fast growing markets. So i think a small investment in their context 1 billion can help persuade investors that they are thinking of other things. Gene, you know, the journal just states as fact they have 1,000 people working on autonomous people. They dont even source it anymore. I guess its widely known. Is that your understanding . Do you have any census in terms of how much the resources the company is devoting to the effort . Well, one of the reporters for the wall street journal has probably done the best work on titan, so im going to defer to him on that kind of 1,000 people. Theres been talk about some people leaving titan, and thats true. There have been some people coming and going, but the net number of people has gone up. A year ago that number was about 600. So theyve almost doubled the number of people working on that. Ive been learned some hard lessons over the past few years to understand because apple is working on something may not see the light of day, but this is a pretty big internal initiative for apple. Yeah. We love to needle you sometimes, gene, about tv. But, i mean, if youre going to go here on a car, how long of a wait, how vertical will it be . Do you have any guesses on that . Well, i can say what the industry has said, we also talk to consultants that work with these companies about this. Most of them say that a working pro prototype is probably around 2020, which probably means 2021 or 22 is when you could actually purchase one. Thats a long wait for some. Were going to talk about it until then though. Gene, good to see you. Happy friday. Gene munster joining us at piper jaffry. Thank you. When we come back, more on todays movers plus a board battle david will talk about. The premarket does imply a fourth week down for the nasdaq. Thank you, apple. And three weeks down for the dow and s p. Dont go away. In a world held back by compromise, businesses need the agility to do one thing another. Only at t has the network, people, and partners to help companies be. Local global. Open secure. Because no one knows like at t. Welcome back. An update now on french drug giant pursuit of the Oncology Company medivation. Sources close to the situation tell me that sanofi is going to nominate eight directors, the entire slate actually, to replace the current board at medivation. This because of the ability to act by written consent to replace the entire board of directors at medivation. Sources say as soon as next week the names will be filed, slate will be out for sanofi to move forward when the company made its offer public after not really getting a sufficient audience, medivation has since rejected that proposal as substantially inadequate. On a Conference Call last week in terms of earnings the company also saying were all about value and we and our board believe we can deliver significantly more value by executing on our Strategic Plan versus the sanofi proposal. But sanofi now moving ahead with what we expected would be the case namely naming eight new directors that it wants to place on medivations board by written consent of its shareholders which then would have the effect of saying were going to actually accept your bid, or if they were to win the company would simply it would be a sign the Company Needs to negotiate. Perhaps more importantly some speculation earlier this week and late last week about Goldman Sachs. Goldman sachs became restricted in the name. That led to some speculation that perhaps it was being hired as an advisor by a particular Company Interested in participating in an auction to buy medivation. I can tell you sanofi has been the company that hired Goldman Sachs. Goldman an advisor joining Morgan Stanley as it continues to try to acquire that company. And so goldman, which has typically advised the likes of a pfizer or an amgen, they participated a couple years ago when they were facing potential activism, goldman is now on the sanofi team. Sometimes companies will go out and try to lock up other bankers they think might take part in a potential rival and simply by virtue of doing that sanofi can perhaps send a sign to anybody considering a bid that were very serious here. Doesnt necessarily wont mean there wont be potential other bids for the company. And at this point weve heard nothing from medivation indicating willingness to put itself up by sale. But acting by written consent as sanofi is going to do it limits the choices for the company, which right now is simply arguing its fundamental value, michael and carl, is above or will be above what sanofi is offering. It traded they keep talking about 52week high at the very least when they talk about value. Something oftentimes company say and many people speculating believe sanofi would have to pay a 52week high because psychologically that stays in there. Just when the drama at yahoo goes down we get drama some place else. We do. When we come back, cashins take on the market this friday 13th. And the fed as we count down the opening bell. More squawk on the street from the nyse in a minute. Every year, the amount of data your enterprise uses goes up. Smart devices are up. Cloud is up. Analytics is up. Seems like everything is up except your budget. Introducing comcast Business Enterprise solutions. 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We make a great team, watson. Take a look at shares of shake shack, they beat by about three cents. Revenue ahead, comps up, and raising their guide on both sales and eps. Good for a gain of almost 7 . Well get the opening bell in just a couple of minutes. Thats charmin ultra strong, dude. Cleans so well, it keeps your underwear cleaner. So clean. You could wear them a second day. Charmin ultra strong. Its 4 times stronger, and you can use up to 4 times less. Enjoy the go with charmin. Youre watching cnbcs squawk on the street live from the Financial Capital of the world. The opening bell in just about two and a half minutes. A lot to get to. Were going to count down to the bell with art cashin, director of floor operations with ubs who joins us here at post nine. Art, good morning to you. Happy friday. Happy friday the 13th. Were looking at our third week down, transports back below their 200day. You say these day after day reversals are starting to do some damage. What do you mean . Well, its beginning to look like were at the start of what possibly could be a broadening top here. The reversals give you on a slightly longer range the look of a flat line. And that is making some technical people uncomfortable. Now, its not fully a broadening top yet, but if it continues to operate like this it will cause some trouble. Art, the kind of relationships between stocks and these other markets, it seems like it kind of shifts back and forth. We havent made much progress in the s p since the dollar stopped going down consistently. Is that the one that would matter the most right now . Obviously oils kind of been hanging in there not too far from the highs and maybe has been support. Yeah, i think if worried somewhat more dramatic move in currency, particularly the dollar, that would be reflected. Im going to watch if wti dips below 46 today, see if that brings additional pressure in on stocks. That relationship is returned with some elasticity to it. Yeah. Yellen meanwhile making comments to congress that she will not rule out negative Interest Rates. Even though she says the economys coming along just fine. Yes. Because of the potential one day for a very adverse scenario, she says. Well, i think we have a real problem here not just with chair yellen, but the entire fed is beginning to strain its own credibility. I mean, these guys trying to push for another june hike, when the market cant believe it and with the exception of retail sales data, the Economic Data coming in has been dreadful. The Employment Situation a lot of stuff to look at. So your call for no hikes this year is in tact . Still is. One stubborn man. Art cashin, thank you very much. Lets get to the opening bell here get a look at the s p at the bottom of your screen. Again, the nasdaq going for four weeks down. By the way, today marks about the halfway mark of q2. And nasdaq has lost as much quartertodate as it lost in all of q1. At the big board city harvest highlighting its annual campaign, skip hung well be talking to the ceo later this morning on squawk alley. Retail will be the story. Yeah. Retail will remain the story in the morning. Obviously, you know, reassurance on that government retail sales beat, on the other hand treasury yields dont respond to it. Its not like anybody looked at this and said were really going to radically revise our growth expectations for the moment. I do think, again, when you look at that retail index down 50 this week and i would imagine should be some kind of rally attempt in there somewhere. Getting research out this morning we talked yesterday about this resumption of coverage on ge with an underperform at j. P. Morgan. Today its btig cutting jnj to a neutral. No price target but their argument is that we had counted on some m a in medical devices and price appreciation makes it less likely thats going to happen. I think you have a lot of that. When you look at these kind of marquee blue chip stocks that really have been up. And jnj in a really great group if you consider it a consumer staple little more than its obviously a health care company, but trades as if one of these kind of steady dividend paying stocks. Its hard to necessarily find the fundamental drivers for that. Another one Lockheed Martin got a downgrade today. Again, a very strong group within the industrials, aerospace has been great. I think people have been putting on this trade for this sort of fiscal spending no matter who wins in november kind of idea, if you look at the stocks that make rock and gravel for infrastructure, theyve been flying. Lockheeds in that group too. Its not an edgy you got to sell this stock now call. Its more take it off the table. Shares of allergan are up today on an upgrade from Goldman Sachs. Prime for growth with catalysts on the horizon says goldman. They add it to their lists of some kind or other, but they talk about the fact that of course it will be delevering once the deal to sell generics closes, lets call it a month from now or something along those lines. You can see the stock though has had a rough go of it for quite some time. Didnt respond particularly well after the deal to be acquired by pfizer was gutted by the treasury departments new rules on inversions. For its part goldman saying after a series of management meetings they came away with several key points that reinforced their confidence that the underlying business as expressed by the First Quarter earnings is strong and will continue to expand. They also of course point to that reloaded Balance Sheet and the delevering that will take place in the big Share Repurchase announced earlier this week by allergan. When i think of allergan i think of valeant. Down over 10 but came back a bit in the session. But hit new lows. At least worth taking a look. Yeah, looking at that goldman note today you almost could have said were putting it on the condition buy list on the basis its not valeant. There are all these specialty Pharma Companies that basically got dragged down along with it. Whether its the smaller ones like endo and perrigo and all those guys, look extremely cheap. But theyve gone down because people are concerned about various elements of it, you know, whether its reliance on m a and nongap accounting. Or increasing drug prices. To be fair endo reported a terrible guidance as well. And that helped put pressure on valeant yet again. And even on allergan, all the idea of these companies rolling up with a very low tax rate too, which also allergan shares of course given its a dublin base. I always forget where theyre based these days. Their all over the place. Across the ocean somewhere. Theyre not in the u. S. Nvidia beat by a penny. Gaming was not the source, theyre calling deep learning adoption by cloud providers, amazon, microsoft, ibm not a surprise. But talking more and more about it as a tailwind and whether its halo or not, intel is the best performing dow component at the moment. Yeah. The semis have been a tough place to be. If people looked at the apple suppliers and that was a tell to have this last leg down in apple shares, it seems like people were looking for any kind of glimmer right there because once again it looked like there was not a very challenging valuation story to be told in semis. Being cheap hasnt worked. What would you advise people to think about, mike, ahead of next week when we do get a walmart, a target. H. D. And lowes off a bit, building retail sales on Building Supplies was not that hot. It was not that hot. And those stocks have been the ones that people have been hiding in, i think, to a large degree. The broad picture to consider, i think, when it comes to this whole retail mess is that if you took amazon, home depot, lowes price line out of the retail index of the s p 500, the rest of retail was like 3 to 4 of the overall index. Its a very intense amount of pain on a relatively small area. Now, walmart and target and costco and cvs, theyre categorized by s p as consumer staples. So basically theyve kind of gone down in sympathy a little bit, but you would think they dont necessarily you know, discounting is not toxic to them in clothing. Thats been the problem for the other guys. Shares of apple, guys, are up for the first time in a bit. Of course yesterday hitting a 52week low and for a brief moment its value eclipsed by alphabet. Theyre very tight, about 6 billion market cap difference between the two companies at this point. But shares are up. Of course we talked earlier about that 1 billion investment. Perhaps it has the effect of putting the spotlight on just how much cash they do have, which i think is an even bigger number when you subtract about 160, man, thats a lot of money. Which is why alphabets enterprise value has been higher than apples for a while because apple does have so much cash it kind of works against the enterprise value. It does. But particularly poor week for shares of apple, which really has suffered more or less consistently since the Company Reported earnings. But today its up 5 cents. So its got that going for it. People want to make 90 a little bit of a stand. Jc penney shares not getting hit particularly badly after it looked like it would be down sort of sharply. Stock Holding Ground about 7. 50. Down a little more than 3 after of course what we talked about has been a devastating week for much of retail, certainly those in the apparel business whether it be macys or gap or so many other names including nordstrom, which is down more than jcp. Yeah, apparently the call has included some comments about moving away from apparel. And Courtney Reagan will have more on that. Facebooks not a big mover, in fact, its less than a buck away from the alltime high. Anniversary of the ipo coming up next wednesday. Four years its been as a Public Company. And speaking of amazon, companies in the general news environment they continue to be fighting this battle on the news of their timelines, their trends. They absolutely fight the battle. Whats interesting is it reminds me of the kind of first years after google came public when ech the bad press about google was really underscoring its dominance. Theyre kind of steering search results a certain way and maybe its not a perfectly clean view of whats going on on the internet. And yet the rieal takeaway from that was they dominate so tremendously as a business its hard to assail it. Zuckerberg breaking his silence with this long post about you could argue an attack from congress to some degree making public these 28 pages of their guidelines. In fact, they do allow for some human intervention. If you see a trend that is not automatically working its way into the algorithm, they can import it by hand. Which maybe nobody would necessarily object to unless theres secondary arules. Shares reported on earlier up about 1. 4 , again to reprize that sanofi which is seeking to acquire the company is going to nominate eight directors, thats an entire slate, to replace the board through means of written consent. Also importantly Goldman Sachs added to the advisory seam for sano sanofi. Well be hearing from or some people will at least the ceo of medivation, hes scheduled to join barclays on a Conference Call with some of their clients at 11 00 a. M. So well see if theres any headlines that come from mr. Hung is his name. Finally, these shack comps are getting a lot of attention. Management raising their guidance on that update. A lot of talk about good execution, strong traffic, chicken once again driving some traffic. Of course we know what the shares have done relative to some others in the past year. Absolutely. Theyve struggled, but the comp number was very dramatic, guidance and what they managed to put up was like double the expected comp. Which says to me are they moving the lines faster . Maybe the lines are not as much of a core issue outside of the ones ive seen. And they are also consistently talking about 20 increase in the store base for this year, 13 new locations or Something Like that. So it became it becomes, you know, i guess a little less of a leap of faith stock if you see the execution rolling out and the comps dont suffer. Not a lot of buyers on this one. Goldman maintains their sell even though they rab e raised their price target. Lets get to bob pisani on the floor. Mixed open today. Really a mixed week. The s p is up just fractionally overall for the week. Sectors modest gains in tech, banks up a little bit. Energy positive early on, now negative. Materials also fractionally totd upside. Of course the big story the retailers again today with nordstrom down about 14 , jc penney also weak, rather surprising on jc penney because even though revenues were light, they left the guidance in tact largely. But you still see a decline of 5 here. Its important to look at this in little longer term. Just look whats happened in the retail space this week with mid with doubledigit declines here in all the major names. This is from the open. Im including the opening here. So nordstrom, macys, kohls, sears, jc penney the only one of the big Department Stores escaping a doubledigit decline. Its important to look at this in a broader context. People may not be buying apparel in Department Stores, but theyre definitely going out. We saw in the april retail Sales Numbers much stronger than expected. I look at year over year numbers for these and thats where you see the big trends. Internet sales up 10 year over year. Restaurants and bars we joke people are drinking more, but they are up 5 . Sports, sports stores, Sporting Good stores, books and music stores still doing well, Auto Parts Stores are doing well. Theres the Department Stores down 1. 7 . That number will certainly accelerate in light of what weve seen in the First Quarter here. But everybody is aware of these trends in the other areas. People going out. So look at some of the other retailers out there that are not in the Department Store space. Dicks Sporting Goods doing well this year. Cabelas outdoor clothing, thats up 4 . Auto zone in the auto parts space. And barnes noble, that stocks been all over the place but books are starting to stabilize. More positive comments on the book sale industry overall thats up 22 . So you can see people are going out. People are buying things. Just not in the Department Stores as much. I want to note something thats very strange yesterday. I noticed at the close apple is at a 52week low, a number of other traders including my friend michael o rourk pointed out to me apple was at 52week low while exxon at a 52week high. Very strange world were sitting in right now because the market seems to be implying that exxons earnings are troughing and apples earnings are peaking. I dont know if thats true or not, all i know is i sit and look at the markets and that seems to be the implication. Theres apple on the bottom and exxon on the top. You can see most of this move has happened since this year in the last four or five months. Very strange situation now the world upsidedown. I want to note the ipo market, second strong ipo in as many days acacia communications, High Speed Optical Networks priced at 23. They priced at the high end. Well have the ceo on in just a couple hours right here on cnbc. So stay tuned for that. But this is the second positive ipo weve had in two days. Remember yesterday here at the nyse site one Landscape Supply came out priced at 21. That was the mid range. And closed yesterday at 26 and change. Remember, were waiting for that to open we were waiting for acacia to open but that was a strong opening on that one. Guys, theres still just a trickle of ipos coming. Theres more than 100 that are waiting. Its been slow process, but this is definitely going to give encouragement to the market two ipos priced well. Again, well have to wait. Acacia will probably open within the next hour. Right now dow up five points. Back to you. Thank you very much, bob. Take it from the equity market to the Debt Capital Markets. Before we get to Rick Santelli and him talking about it, im going to talk about it a bit. Next week dells underwriters are going to begin marketing a massive deal or series of deals to fund that emc purchase. More than 40 billion of debt will be brought to market over time by the underwriters for dell. And its interesting because it does shine a spotlight on the robustness right now of Debt Capital Markets in part because of negative yields. Well get to that in a moment, but to the specifics of dells debt deal, which at one point had thought to be as much as 50 billion but it will be closer to 40 billion, the Investment Grade offering and this goes to that insatiable desire of investors out there to find something with the yield, Investment Grade part of this is now going to go, sources tell me, from as much as 16 billion im sorry, from 16 billion to as much as 20 billion. The Bank Term Loan a thrks is the term loan syndicated to other banks originally targeted for 10. 75 billion also going to likely be upsized. The effect of all that is going to be to significantly reduce the size of dells needs in the high yield debt market. Originally their underwriters have been targeting as much as a 9 billion high yield bond offering. That now dropping closer to 3 billion. Again, all these numbers can change a bit, but it does give you a sense as to what dells going to be able to accomplish. By the way, triple b credits borrowing call it little more than 4 , dell will borrow above that, but blended Interest Rate from various bank loans, Investment Grade deal and high yield debt deal all going to bring a blended rate below what dell had certainly anticipated when it signed up to purchase emc many, many months ago. Why is all this happening now . Well, in part because of negative rates. Right now you have as many as 25 of all debt out there, all bonds trading at negative rates. That obviously including sovereigns. Much of those bonds many of those bonds in fact the vast majority were bought not at negative rates but theyve traded into it. Meaning price has gone up, when they do, youre going to have people reinvest proceeds and managers having to do that. What do they look for . Any sort of yield. Where do they come . Right here to the u. S. Corporate bond market. That is having an effect of depressing rates. Back in january and february it was a rough time for the high yield market. We were on tv talking about it. Its gone. Its like a distant memory. Exactly. Things are back to being as strong as they have been, in part many would argue because of this idea negative rates are forcing people to go anywhere they can find. Dell is going to be the beneficiary of that. Without a doubt. The yields are not at the lows of lets say, you know, before last may when the stock market topped, but even in this latest period when stocks have backed off highs, the high yield credit market has been very firm and one of those things people can point to and say the markets arent necessarily raising any strong alarms about, you know, s systemic issues or macro scare. Most of dells borrowing will be done in Investment Grade markets in banks and also in the Investment Grade bond market in part because they have been so successful in repaying the debt from their lbo and finding all sorts of savings in terms of working capital. Were talking debt, lets keep doing that and head to Rick Santelli at the cme group in chicago. Hey, david, that was a great piece. I give you a fist bump because the topic were going to have all day today, Santelli Exchange guest negative Interest Rates and all the activity it sparks. Michael dell ought to be very happy that this condition exists, as you pointed out. But theres some big minuses too. Well get to that throughout the day. What happened today . Retail sales. Consider this the headline number at up 1. 3 was the best headline number since march of 2015. The control number, 0. 9 that you insert into the more macro formulas for other data points, that 0. 9 was the best since march of 2014. So look for atlanta fed gdp to get really bumped up. And of course thats always good news. You see the intraday ten it popped in yields, makes sense. Intraday twoyear it popped in yield. I find that one fascinating because that pop was more dramatic. Lets look at tens minus twos, it flattened. As a matter of fact outside of one basis point low made it the end of february this year, open the chart up were about to challenge the flattest yield curve since christmas 2007. Why are they selling the short end more . Maybe they think junes on the table. I personally dont, but somebody does and thats important to watch the market interpretation. Now, if we want to look at the dollar index it should love all this. And it did. Now, if the fed raises rates of course, that has Huge Foreign Exchange implications. Were still not at lofty levels for the dollar index, but a oneweek chart shows weve been up pretty much every session in the last nine except for one. So you really want to watch the dollar index. Moves have been small. Mike, its all yours. Rick, thanks so much. Appreciate it. Lets get a closer look at oil prices. Bertha coombs is at the nymex. We are seeing oil here off a sixmonth high, nonetheless we are on pace for some fairly healthy gains this week in oil. And a lot of it has to do with the feeling that production and demand are balanced at the moment. The surge in production that we have seen from iran coming back in the market has been offset by the fires in canada. And then as well by the unrest that continues in opec producers like nigeria also in venezuela as well where theres been so much disruption there because of political and economic turmoil. So a lot of analysts are saying for now that appears to be balanced. And we are seeing oil here up for the fifth week in six, notwithstanding the fact today we have that strong dollar putting some pressure. Its also putting pressure over on the metals space with gold set for a near 2 decline this week. Were seeing a little bit of a bid for copper with some hopes for Economic News and some hopes that things will continue to produce maybe some more easing in china. Nonetheless sort of a mixed day in the metals. Metals overall not as robust this week, carl. All right. Bertha, thank you very much. Bertha coombs. When we come back, what penneys ceo is telling cnbc in light of the Quarterly Results that are weighing on the stock. Dows up 11 points. S p up to 2066. Back after a break. Approaching medicare eligibility . You may think you can put off checking out your Medicare Options until youre sixtyfive, but now is a good time to get the ball rolling. Keep in mind, medicare only covers about eighty percent of part b medical costs. The rest is up to you. Thats where aarp Medicare Supplement insurance plans insured by Unitedhealthcare Insurance Company come in. Like all standardized Medicare Supplement insurance plans, they could help pay some of what medicare doesnt, saving you in outofpocket medical costs. Youve learned that taking informed steps along the way really makes a difference later. Thats what it means to go long™. Call now and request this free decision guide. Its full of information on medicare and the range of aarp Medicare Supplement plans to choose from based on your needs and budget. All plans like these let you choose any doctor or hospital that accepts medicare patients, and there are no network restrictions. Unitedhealthcare Insurance Company has over thirty Years Experience and the commitment to roll along with you, keeping you on course. So call now and discover how an aarp Medicare Supplement plan could go long™ for you. These are the only Medicare Supplement insurance plans endorsed by aarp, an Organization Serving the needs of people 50 and over for generations. Plus, nine out of ten plan members surveyed say they would recommend their plan to a friend. Remember, medicare doesnt cover everything. The rest is up to you. Call now, request your free decision guide and start gathering the information you need to help you keep rolling with confidence. Go long™. Obviously retail has been arguably the story of the week. Take a look at the biggest losers with nordstrom, korss coach, urban and walmart leading the list ahead of more specialty earnings next week. Back after a break. The light bulb, a bright idea if you use the right ones. Led bulbs use 85 less energy and last a long time, saving you up to 100 over their lifetime. Heres an idea replace yours today. [light instrumental music] facebook is detailing just how its trending topic feature works. This after a report this week claims the social network down plays conservative news. In a blog post series of checks and balances involving both algos and humans ensures stories and trending topics are not bias. The post links to a 28page internal document that facebook uses to determine topics. Mark zuckerberg planning he posts to talk to leading conservatives in coming weeks. I think its john thune from south dakota become the poibt man calling for a congressional inquiry. The concept of equal time and balance between the two sides of the political spectrum was abandoned. Other thing that it gets to though, i think, is what bucket facebook puts certain sources. So in other words if certain websites are not categorized as news sites, maybe their opinion or political advocacadvocacy, l how the sausage is made. Exactly. When we come back well get breaking news on Consumer Sentiment plus more on this retail rout and apples latest best on china. Dont go away. Whoa. Whats going on here . Oh hey allison. Im val, the orange money retirement squirrel from voya. Val from voya . Yeah, val from voya. Quick question, what are voya retirement squirrels doing in my house . Were putting away acorns. You know, to show the importance of saving for the future. So youre sort of like a Spokes Person . No, im more like a metaphor. Okay, a spokesmetaphor. No, im. Youre a spokesmetaphor. Yeah. Ok. See how voya can help you get organized at voya. Com. Anything worth pursuing hard work and a plan. At baird, we approach your Wealth Management strategy the same way to create a Financial Plan built to last from generation to generation. Well listen. Well talk. Well plan. Baird. E trade is all about seizing opportunity. And id like to. Cut. Thank you, well call you. Evening, film noir, smoke, atmosphere. Bob. Youre a young farmhand and e trade is your cow. Milk it. E trade is all about seizing opportunity. Sign up at etrade. Com and get up to six hundred dollars. Good friday morning. Welcome back to squawk on the street. Im Carl Quintanilla with sa sara eisen, simon hobbs and david faber at the New York Stock Exchange. The pain in retail remains acute, especially on some of the specialized guys. Oil also with some losses down to 46. But first we have Consumer Sentiment and business inventories. Lets send it over to Rick Santelli. Well, lets go in reverse chronological order, thank you, thank you. We have a march number for inventories and thats up 0. 4, double what we expected. Interesting thing about when you increase inventories, more widgets end up with better Growth Numbers on revisions, keep that in mind. The more realtimes are preliminary read for may on the university of michigan sentiment. And in this regard were looking for number just a little bit south of 90, were way north of 90, 95. 8. Remember, this is preliminary. Now, comparing that to all the final numbers, this would be the best number since june of last year at 96. 1. So a nice surprise on most of the data points this morning. To the upside. Back to you. Thank you very much, rick. Retail stocks continue to get hammered. Jc penney of course this morning is the latest link in the Department Store chain to report disappointing earnings. As retail continues to struggle. So how should investors be weighing the sector . Joining us is ceo of jay Rogers Enterprises and cnbc contributor along with sbuinstitutional investor joins us from jr. P. Morgan. Matt, this looks horrible. What is the broader view here . It was probably the worst week for Department Stores that weve seen since the financial crisis. The bottom line is i think the Department Store sector is losing a degree of relevance. I do think the consumer is also finding more convenient ways to shop. And theyre looking for value. And right now the Department Stores are not delivering that. Although, john, you do see a Silver Lining in todays jcp figures. They didnt miss earnings. They did miss sales. And everybody missed sales. And i think the weather cost people a couple of points. And 2 on sales is a really big deal. I agree with everything mat just said, but i think what we saw right here was every retailer giving up a couple hundred basis points of sales to the cool weather in the spring. And yet retail sales on the aggregate level on the data today look very strong. I have a figure from one says if you strip out autos, gas and food youre gaining at an annualized rate of 5. 5 . Thats a very, very buoyant backdrop. I agree. Theres nothing wrong with the consumer. The consumers working, the consumers got higher wages, the consumer has a really good attitude as we just saw, the consumer is spending on experiences, the consumer is spending on cars, buying at home depot and lowes. They are not buying in the Department Stores. I think weve been through this so many times now about what exactly is going on in the bricks and mortar problems. Within that general overlaid problem there has to be opportunity. Even in sectors that are in structural decline youll see ceos who pull it out of the bag and return a lot of value to shareholders. Where do we look next here to make money . I think you can look as soon as next week. I think the off pricers are going to report next week. Youre going to see an entirely different picture. I think tjx will be almost a complete reversal of what youve seen from the Department Stores this week. I think burlington, i think the dollar stores, again, going back to if you offer either convenience or value, or innovation, i think some of these Sporting Good companies the true innovators, thats where wed look to concentrate. I think the Department Stores, again, you know, a tough rout and on jans comments on weather, weather was definite excuse in the fourth quarter. I take the under on weather this quarter. I think the beginning of the quarter was actually great, back half of the quarter suffered. Jc penney talked about an improvement in trend at the end of april, bear in mind the trend fell off extremely hard in the end of april last year. I think that was a really, really concerning way to back your guidance for the year based on the back half of april improvement. I agree with matt on that from the point of view of the way the quarter worked, but when the weather counted, which was at easter and in april when it matters, it was really unseasonable. And i do think that a piece of this business. That doesnt mean i dont think i still believe that the off price guys are winning. I still believe that the fast fashion guys are winning. I still believe that the internet is winning. All of thats happening, that doesnt change the fact these guys gave up a couple hundred basis points on weather. I want to pick up, matt, on something you just said about the innovators and the sporting apparel makers. We often talk about nike and under armour with you, are those companies a sell . If you think about where they get a large majority of their sales its in the Department Stores, which are suffering so badly. I think as nordstrom said last night, the real concern here is the overdistributed brands and the brands that are heavily promoted. Thats exactly what nordstroms ceo said last night. And thats what were hearing from the Department Store sector is theyre actually looking to move away from some of these brands. Now, that does not include such as a nike or an under armour. These guys are actually creating innovative product that changes year in and year out. The consumer sees the technical aspect and interested in that. What it really points to is what macys and nordstrom are doing with things like the beyonce brand in athletic, with things like top shop, some of the things macys is doing i think thats what youre going to see Going Forward is more of these shop in shops, more licenses and almost a collaboration between the onlineonlies today and the brick and mortar retailers. Im curious to know, jan, how do you how do these Department Stores close doors, remodel the ones theyre going to keep, save money for the buyback, spend more on online . This is a big tug of war on their cash flow, isnt it . Yeah, its very tough. Department stores have been in secular decline since walmart opened their doors in 62. This is not new. There were 100 Department Stores, now there are a handful. This whole problem is just now exacerbated by off price, online and all that. And, yes, every time a Department Store takes a sale out of the store and puts it online, the roi goes down. Every time ralph lauren takes a sale away from macys and puts it online, it goes up. Right now i like suppliers better than stores. I like ralph, hanes, columbia, vf, i think in the shorter term those guys are going to be winners. Would you expect them to start limiting inventory to Department Stores . Thinking its just going to go to waste and be discounted in the end . Right now the biggest seller of ralph lauren product is t. J. Maxx, not macys. Theyre bringing it in and were going to see a disintermediation from stores to the vendors. I think its positive for vendors, negative for stores. I also like tate and coach, you can like some of the products, its just harder to like the stores. However, the back half of the year for Department Stores is going to be a darn sight better than the front half because all of the negatives we saw last year in the back half, were going to get the mirror image of this year. Right now people are going to be buying the darn things again in august. Were running out of time, just one more important question to you, matt. Last night donald trump did an interview and a lot of the disintermediation we talk about is clearly because amazon is now selling a lot of apparel online. That comes up time and time again. Yesterday donald trump in an interview appeared to say and this was in reference really to the attacks at the Washington Post had made on him as an individual. But he said amazon, quote, has a huge antitrust problem and is getting away with murder tax wise. Now, if trump wins and trump were to look at some sort of antitrust claim against amazon, how significant might that be for the industry and for all the names that weve just spoken about through this interview . I mean, its absolutely would be significant to the industry. I think amazon is a major player, becoming a much larger player. That said, i mean, as jan said fast fashion is still a big constrnt. The off price sector. But weve done the work, and amazon in the National Brand arena, i mean, makes up an almost 80 overlap with all of the brands most of these Department Stores sell. So theres really no way out other than creating innovation and partnering up with brands and private label thats just not sold on amazon. The issue with that is it takes time, its not going to happen overnight. Most of these Department Stores are probably facing a three to fiveyear turnaround if thats the case. Okay. Have a good weekend both of you. Thank you, matt and jan. Thanks for having us. Imf chief Christine Lagarde commenting on the possibility of a brexit today, saying it could have a, quote, negative and substantial effect. Weve got an allstar panel on the other side with their analysis on brexit and some of the other risks. Images, videos, social updates. We call it dark data. 80 is invisible to most businesses. The ibm cloud has tools that can help see dark data and put it to work. Hello, my name is watson. Working with watson in the ibm cloud, we can help an Energy Company predict pipeline corrosion. And help a startup to use social data to predict market trends. Now businesses can get more out of their data. Thats what the ibm cloud is built for. Theres a lot of places you never want to see 7. 95. [ beep ] but youll be glad to see it here. Fidelity where smarter investors will always be. If only the signs were as obvious when you trade. Fidelitys active trader pro can help you find smarter entry and exit points and can help protect your potential profits. Fidelity where smarter investors will always be. Man 1 man 2 i am. Woman exmilitary . Man 2 four tours. Woman you worked with computers . Man 2 thats classified, maam. Man 1 but youre job was Network Security . Man 2 thats classified, sir. Woman lets cut to the chase, here. Man 1 whats youre assessment of our security . Man 2 [ gasps ] porous. Woman porous . Man 2 the Old Solutions arent working. Man 2 the world has changed. Man 1 meaning . Man 2 its not just security. Its defense. Its not just security. Its defense. Bae systems. Our Courtney Reagan just got off the call with the jc penney ceo. I just spoke to Marvin Ellison on the phone after he finished with the analyst and he was pretty positive particularly in the face of the rest of the Department Store results this week. Ellison says, look, it was a difficult sales environment, but we feel great about our Operational Performance relative to our peer group. We performed very well. Were taking share and continuing to win. Thats a quote directly from ellison. We also said we have confidence that our Current Trends are allowing us to hold our sales guidance. Ellison says his team is working towards migrating the assortment to skew towards products and services that consumers are spending on. And after an overreliance on apparel that really hurts when weather isnt seasonable, remember jc penney is expanding its appliance pilot. Ellisons Prior Experience at home depot tells him even if its snowing and the fridge breaks, youre going to go out and buy another one. He says appliances are bringing new customers to our store. Sales productivity in the pilots are ten times greater than they were before in that area of the store. Thats especially helpful because the Home Department is the lowest productivity area of jc penney stores. And that hasnt always been the case. So hes working very hard to turn that around. Some interesting comments and, again, a pretty positive tone after many of the other retailers earnings were just crum crummy, simon. Well, thats one adjective, courtney, thank you very much for that. Meantime economy level retail sales coming in better than many were expecting. We just got Consumer Sentiment data as well. Steve liesman is back at hq looking at the figures. Whats the takeaway . You know, simon, hes not dead yet. That was the famous line. It applies now to the American Consumer who amid plaguelike retail earnings this week that courtneys been reporting about, they thought the consumer was down for the count. Come this mornings april retail Sales Numbers with a 1. 3 monthly gain, upward revisions to prior month suggesting consumers havent down shifted their spending, what theyve done is shifted their spending. Here are the retail details. Overall up 1. 3. Autos coming back up 3. 2. Gasoline coming back, but other areas, furniture up 0. 7 . And the control group, this is the number that economists follow very carefully, it flows directly into the Consumer Spending numbers for gdp, that was up 0. 9 . A very healthy clip for a month on month gain. The result is many economists now think Consumer Spending could be rising at a very healthy 3. 5 to 4. 5 annual rate in the second quarter. This of course helps confirm the worries about the prospects for a rebound from that very weak First Quarter numbers we had. The shift to online spending continued in april with Department Store sales up 0. 3, and the category that includes both fuel and Online Retail sales surging 2. 1 . You can see just looking at the Electronics Shopping part its been growing at doubledigit rates. Along with changing attitudes about the consumer and rebounding economy, do come changing attitudes of course about the fed. Rdq says we think there will be a number of people on the fomc who, as recent speeches from moderates have suggested, would like to have a serious discussion about raising rates. I would say, guys, if other data confirm this strength, the fed might have to rethink waiting until september for that next hike, carl. All right. Steve liesman, thank you very much for that back at headquarters. Take a check on the markets here. Dow close to session lows down 48. Stocks are mixed as the dollar continues to rise. And a surprisingly strong reading on retail sales. And as you just saw on michigan as well, that growth did calm some worries about slowing Economic Growth while perhaps as steve said bolstering the case for rising rates. Joining us this morning the chief u. S. Market strategist at rbc capital markets, and the Global Economic advisor at pimco. Guys, happy friday to both of you. Jonathan, are you getting more defensive as were getting into some of these tent pole events in the summer . I dont think so. I think when youre looking towards the latter part of the year youre going to see earnings pick up as the headw d headwinds from energy roll away. The economy is the data showing is, you know, tepid, but absolutely not recessionary. So, no, these News Headlines dont change my overall outlook. You worried at all that the dollar has bottomed here . No, i mean, i think the real big issue with the dollar falling the way that it did was it bailed out oil, which was very helpful for, you know, big chunks of the economy that are dependent on that. It was creating a tremendous amount of stress. That stress is gone. The vix right now is well below 15. Id love to see Interest Rates a little higher as a sign of health, but i think that the dollar is nowhere near as much of a concern today as it was, you know, only ten weeks ago when it was much stronger. It does feel like we are facing a higher degree than normal of uncertainty Going Forward. And one of those big risks is the brexit referendum in about six weeks in the uk. Heres Christine Lagarde, the chief of the imf, talking about some of the risks facing the Global Economy as a result of this vote. Negotiations on new arrangements with the European Union and other trading partners could in our view take years. Leading to a protracted period of uncertainty, and the longer this uncertainty goes on, the more heavily it will weigh on investment and growth. The majority of Economic Analysis that has been conducted agree that a vote to depart the eu would be costly in the long run. So a number of warnings there from the head of the imf. Are investors underestimating the risk of a brexit . I think they are. Ive lived in london for 20 years, im glad im in california now. If you look at the polls in the uk, its very close. We think theres at least a 40 chance that they vote for leave. And if they do, its not going to be pretty, not for the uk, not for europe as a whole, and certainly not for Global Financial markets. I think there is a very serious risk that a brexit vote could lead to a global risk off move. So thats why i think theres quite some volatility ahead. So how are you guys at pimco preparing for that risk scenario . Well, weve had, as you know, a period of relative calm in Financial Markets since the february lows. So weve been using this rally to get up in quality. We like credit, but weve been moving in the rally. Weve been moving out of the more risky and less liquid stuff, which has rallied a lot, into the Higher Quality parts of the credit spectrum. So thats one way. The other way is that we think the dollar has probably overshot on the downside, so we think theres going to be some moderate strengthening of the dollar. So thats the other way to play this. Hey, jonathan, lets say that the uk votes to stay in the European Union. Right. Lets use that as an example, then you have a fed meeting july 26th, 27, do you think the market is underestimating the degree to which the fed could raise rates . A lot of people are talking about retail, Employment Data is pretty good. Do you think they could surprise the market and those type of noises support going in might actually bring the equity market down . Or how are we positioned . Simon, its been quite amazing that with unemployment at 5 , with inflation right now of course epi running over 2 that the fed keep Interest Rates at 37 basis points. I think its time for them to move. But if they do intend to move in june, theyre going to have to start signaling that right now where the market is not going to be happy. Im not seeing any signal like that at all. Hang on, jonathan, the argument goes time and time again they wont move in june because the meeting dates the 14th and the 15th and the uk referendum is on the 23rd. Or is that wrong . They could move then. I would be surprised if they do. Right. But the more important thing is the fed can surely give us guidance on where theyre taking us. If the fed were to tell us that the economy is in good enough shape that we should have higher Interest Rates and they focus on the success and the economy and they move up the expectations for the latter part of the year, i think that the market looks at that, you know, quite positively as a sign of success as opposed to the fed pulling away the punch bowl. And thats probably the more likely scenario than a june move. Yeah. It has struck some as curious that even the doves have been onboard with this two hike year. Well see what happens as we get into june. Thank you so much, Jonathan Golub at rbc. Ahead on the program, donald trump taking aim at amazon saying jeff bezos has some serious antitrust issues to answer to. And apple betting on an uber competitor investing in a billiondollar chinese operator. What you need to know about its biggest investment this year. In new york state, we believe tomorrow starts today. All across the state, the economy is growing, with creative new business incentives, and the lowest taxes in decades, attracting the talent and companies of tomorrow. Like in buffalo, where the largest solar gigafactory in the western hemisphere will soon energize the world. And in syracuse, where imagination is in production. Let us help grow your companys tomorrow today at business. Ny. Gov e. T. Phone home. [ soft music ] when you find something you love, you can never get enough of it. Change the way you experience tv with xfinity x1. Donald trump is going after jeff bezos yet again. This isnt the first time that hes taken aim. Some harsh words coming from the gops now presumptive nominee. John harwood is in d. C. With the latest. John, i think this took kind of a lot of people aback. It did, simon. But donald trump throughout his campaign made clear hes not reluctant to go after any corporate leader when the opportunity presents itself. He did it last night on foxs hannity show. This is owned as a toy by jeff bezos who controls amazon. Amazon is getting away with murder tax wise. Hes using the Washington Post for power so that the politicians in washington dont tax amazon like they should be taxed. Hes getting absolutely away. Hes worried about me. And i think he said that to somebody, it was in some article where he thinks i would go after him for antitrust because hes got a huge antitrust problem. Because hes controlling so much. Amazon is controlling so much of what theyre doing. Now, the comments he made on hannity last night may have had something to do with this the Washington Post story that was out this morning quoting witnesses at the time saying donald trump used to call reporters in the name of a pr person, but it was actually donald trump, to praise trump and plant stories about trump. Heres the exchange that he had this morning with Savannah Guthrie on the today show about that the Washington Post story. The person on it talks about his dating exploits, goes on about his divorce, things like that. I guess the simple question this morning, are you aware of the tape . Is it you . No, i dont think i dont know anything about it. Youre telling me about it for the first time. And it doesnt sound like my voice at all. I have many, many people that are trying to imitate my voice. And you can imagine that. And this sounds like one of the scams, one of the many scams, doesnt sound like me. The post says that you acknowledged a couple decades ago that in fact that was you but it was a joke . I dont think it was me. It doesnt sound like me. I dont even know what theyre talking about. I have no idea. So donald trump says that there are scams and people trying to imitate his voice, a lot of people will be listening to that tape today and they can all make up their minds as to who it was on that tape, guys. You know, john, its david, but the key here is the Washington Post, isnt it . Mr. Trump does seem to focus on wherever the criticisms coming from and it may be hes going after amazon but its really about bezos ownership of the post. No question about it. He talked about how the post has a team of reporters doing stories about his background. The truth is that every News Organization has got teams with reporters exploring donald trump as well as Hillary Clinton. Thats simply what happens when you become the presumptive nominee of a Major Political party. What we havent seen in the past is a presumptive nominee with such lack of inhibition about going after individual executives as well as institutions. Well, you also see when you have a presumptive nominee, john, is them releasing their own personal tax returns, which continues to be a big story. He says its none of your business. How can he criticize a company like amazon for tax dodging when he wont even release his own . I realize theres a Public Company and a private individual, but hes the presumptive nominee and thats what you do. Yes, and past nominees have all released their tax returns. We will see whether voters care about this issue. You know, George Stephanopoulos on Good Morning America today pressed him on that. He said its none of your business what his tax rate was. When he was asked directly do voters have a right to see these returns before they vote, he said, no, i dont think they do. It is an open question whether that is something that would simply alienate people already against trump to begin with or whether it would affect people who might be on the fence on trump. Were going to have to see how that plays out. But you can bet that the Clinton Campaign is going to press that issue. Of course Donald Trumps response to Hillary Clinton who says ive released 30 years of tax returns is what about those Goldman Sachs speeches, what about those emails, and hes going to try to hit her on transparency just like shes going to hit him. Yeah. You know, one of the open questions here, john, is the degree to which the press and the investigative press, the papers that still have the resources to do this are going to take any candidate through the mill of investigation as we go through this process. And the suggestion that maybe they wouldnt be as aggressive on trump as they ought to be. Do you feel that the sand is beginning to shift here as to how deep people will dig on either side . I think the serious elements of the press, major News Organizations, major news networks, are going to seriously press both of these candidates. I think that in fact has been happening for quite some time. Hillary clinton has been explored at length over the email controversy for example stories about the clinton foundation. Theres a new one out about potential favors being done for friends of the clinton by the foundation. All of those things are in the news because News Organizations are willing to do that strutny. And theyre going to do that on trump as well. That lack of inbigs, john, his supporters would argue is part of his appeal. We will see if it matters. John harwood in washington. Thanks. Apple hovering just above 90 today. Remaining far in the bear market, but is the widely held simply overbought . Company has a billion dollar bet in ubers competitor in china now whachlt that all means for the tech giant after a break. Amazing sleep stays with you all day and all night. Sleep number beds with Sleepiq Technology give you the knowledge to adjust for the best sleep ever. Its the semiannual sale save 500 on the memorial day special Edition Mattress with Sleepiq Technology. Know better sleep. Only at a sleep number store. Welcome back. Im eamon javers in washington where weve got a bit of new news here on the bank of bangladesh heist story. When this story first broke, congresswoman Caroline Maloney of new york sent a letter to the new york fed demanding answers to a series of questions. The fed responded to her. And weve now obtained at cnbc the new york feds response to her questions. We can put this out, this comes now a day after swift itself, the International Bank messaging system, said it had discovered additional incidence of malware in the Banking System that may have led to a heist at another unnamed commercial bank. Caroline maloney asked the new york fed if its appropriate to rely entirely on swift authentication for outgoing payments from the accounts of foreign central banks. What the new york fed responds in this letter to her is given swifts predominance around the world, swift is used routinely by banks in the United States to communicate payments for cross border payments. Theyre saying the swift system is so ubiquitous we have to use it. Also a bit of a blame game going on here. The new york fed saying it does try to authenticate some of these messages. It does manually review some of them when a withdraw request comes in, but they also say however if a manual review occurs either before or after execution, it is not a review for authenticity of the swift sender and does not supplant the swift authentication procedures on which the new york fed and its foreign official account holders rely. That seems to be the new york fed pointing at swift and saying its their fault, its their responsibility rather to check and make sure these accounts are actually being sent legitimately, guys. A very complicated situation here. Fascinating developments in the swift case. And, sue, ill turn it over to you. We will continue to follow that story. Thank you, eamon. Cnbc news update at this hour, the Obama Administration telling u. S. Public School Districts across the country to allow transgender students to use the bathrooms that match their gender identity rather than their gender at birth. Schools that dont comply risk the loss of federal aid. Hezbollah is saying today that one of its top commanders was killed this week in an real estate air strike at the lebanese syrian border. He was being tried for the murder of the former lebanese prime minister. Four suspected bomb makers were killed and 17 others hurt in an explosion in a mainly kurdish area of turkey. The interior Ministry Said the blast occurred as militants from the Kurdistan Workers Party loaded explosives onto a small truck. Eight people are going to share last weekends 429. 6 million Powerball Jackpot bought at a 7eleven in trenton, new jersey. Theyll claim their prize later this afternoon. They spent 6 for two tickets and they chose the lump sum payment of 284 million before taxes. Well see who they are. Thats our cnbc news update this hour. Carl, back to you. Someones having a good week, sue. Thank you very much. Yes, indeed. Apple meantime is betting big on the ride sharing market. What does this billion dollar bet on didi mean for the company . Our josh liptons in San Francisco with that. Hey, josh. Carl, when i last spoke to ceo tim cook, he said that china is more stable than many believe. And now he is putting his money where his mouth is by investing 1 billion in didi, chinas home grown rival to uber. We know 1 billion is a drop in the bucket for apple which boasts a Cash Mountain of 233 billion. So why is cook committing this capital . Well, for one, it could be a smart investment. Didi is a 20 billion company. That means its one of the top five most valuable startups in the world, according to cb insights. Controls nearly 90 of the private car hailing market in china, completing 11 million rides a day. Creative strategies says the investment could also please the Chinese Government at a time when we know that government has taken a tougher line with apple. Regulators there have now suspended apples online books and movies services. This news does come as apple is under real pressure. That stock down some 13 this year. Down more than 30 from its alltime high of 135 hit last spring. Just yesterday company briefly lost its spot as the worlds most valuable company to google parent alphabet. Among the worries q2 sales in Greater China dropped 26 . But highlighting another reason this investment could make sense, if apple is serious about creating its own car, this could give the company a way to learn a lot more very quickly about the tastes and preferences of the chinese consumers. Guys, back to you. Josh, thank you very much. So apple is betting big on cars in china. The company as josh just mentioned investing 1 billion in that Ride Sharing Service, didi. This as apple shares fell below 90 yesterday for the First Time Since 2014, rebounding a bit this morning. Lets bring in channing smith, coportfolio mounder and founder and editor and chief at the information jessica lesson to discuss. Jessica, you wrote that this move was surprising and would send shockwaves through Silicon Valley in technology. How are you interpreting it . Well, our sources are confirming, i think, what josh said, too, about hearing there is a political motivation here. Apple has been in hot water in china. And a move like this, investing in its home grown tech darling, goes a long way towards showing respect towards making the government happy. Our sources really do believe this is driving a component of this, but for what it does in the valley it messes a lot of alliances up. Youve got uber google on one side, google big uber investor, youve got apple and didi on the other. We also reported that this week the ceo of uber was planning to go to apple to talk about partnerships. Hopefully those will continue. I suspect they will. So theres just a lot of moving pieces here. That is an interesting angle. Just quickly, channing, on the political side of things that jessica and josh both alluded to, as a shareholder, do you approve of the fact that apple spent 1 billion, which is a drop in the bucket compared to its massive more than 200 billion cash pile on Something Like this . Or does it worry you that its becoming increasingly expensive to do business in china . Look, chinas a huge Growth Market for apple. Last quarter we had a little bit of a blip, but apple knows this is going to provide tremendous growth in the coming years. So its important to have good will with the government. So we think this is really first and foremost what they want to do. I think secondly there is a genuine interest in the car. We dont know what thats going to look like, but apple wants to have their products and services in the car. We like the move. Like jess said its a drop in the bucket but it is positive moving forward. On this notion of apple investing in the selfdriving car business, gene munster was on last hour suggesting this as well, jessica, where is apple in this process . What is your latest reporting indicated on what its doing with the car . I think there isnt a clear sense of timing yet, but theres a lot of activity. Theres also a lot of turmoil and turnover inside the group thats working on this. Which i think is to be expected. So dont have a timeline yet, but a ton of activity. And there are going to be big stakes to grab partnerships in that as well. Weve seen what googles announced with some of the leading Car Companies recently. So apples got to be working on those types of deals too. Its worth noting that didi doesnt have a selfdriving car play or technology, uber does. Uber has been growing its team, working with cmu. And in china working with baidu that has been developing technology. So this investment does plug a key hole for didi as well. Jessica, if i owned apple stock, were not allowed to own stock, but if i did own apple stock, i would actually be quite worried by this conversation because if i look at what were getting from josh lipton or from you or from everybody theyre saying theres a political problem here. Icahn said and hes a guy who does call up tim cook to say ive sold my stake in your company. When he spoke up recently why he sold he said because the Chinese Government can make it very difficult for apple to sell there. And then you come along with a 1 billion investment and you say this is because it could be difficult for them to sell there. What we dont know is whether it resolves the political problem. Youre raising it as an issue. Tim cooks putting his money on the table, but we have no context or judgment as to whether it moves the Company Forward or not. Thats what i find quite distressing here. You know, youre always on thin ice if you are doing business in china. I mean, this is in some ways its the same old same old. This is just the latest move apples making. You know, apples gone on University Boards in china to really show respect, to get to know the culture. So i dont think this is anything new. Although we do know that the Chinese Government has become more hostile to Foreign Companies doing business in china. So there are some big changes there. But i think apples always been pragmatic at identifying things it can do to play nice. And i think this is the next one. And as josh said its probably not going to be a bad investment. Didi is a huge potential business. Its not yet at a point where its great from a financial perspective because it has uber helping eat the profits in the market by going headtohead. But i think you can say its going to be a big company. Apple isnt going to lose a lot of money. So, channing, that brings us to the final stock question here as apple and google are sort of neck and neck as most valuable company, you prefer alphabet, or google. Why is that . And does this whole selfdriving future have anything to do with the thesis . Not really. I mean, if you look at google alphabet, big drivers are mobile search, youtube. Those are basically areas where were seeing secular growth. Were in the early innings of that. If you look at apple, were kind of at the end of the cycle for smartphone growth. And so the Growth Profile for alphabet is much better here. We expect to see 20 earnings growth, 20 Revenue Growth for the next couple of years driven by growth in mobile search and youtube. If you look at apple, were transitioning to a Slower Growth company. That doesnt mean that apples not going to be a good investment. We see a 120 price target which gets you to about the same price as apple or google going to 1,000. So apples still a good investment here. Theres just not a lot of catalyst in the coming months. But you still want to be involved in apple before this 7 launch. And we would suggest investors start to pick up the stock in the 85 to 90 range which is where we expect it to go in the nearterm. A lot riding on that launch in the fall. Guys, great discussion. Thank you for joining us. Ahead on the show, its been one hell of a week for the art market in new york. This is from tuesday night which sold for a near record price. Not all the works did as well notably impressionist during the course of the week. Were going to talk to the lead auction near for christys next on cnbc. Olay luminous illuminates skin with pearl optics science. Your concert style might show your age, your skin never will. With olay you age less, so youre ageless. Olay. Ageless. With the president ial election fast approaching, are the polls your best way to determine where stocks are going . Thats what one trader tells us. He makes his case on tradingnation. Cnbc. Com. More squawk on the street coming right up. Theres a lot of places you never want to see 7. 95. [ beep ] but youll be glad to see it here. Fidelity where smarter investors will always be. If only the signs were as obvious when you trade. Fidelitys active trader pro can help you find smarter entry and exit points and can help protect your potential profits. Fidelity where smarter investors will always be. Lets get to the cme group, check in with Rick Santelli. Hey, rick. Good morning. And thank you, carl. I like to welcome Peter Bookvar for the last guest of the week. Thanks for taking the time, peter. Thank you, rick, for having me. So, you know, all the viewers out there that have been waiting for their day of fundamental info, today was your day. Retail sales pretty strong, ppi lighter, a little cooler than expected. And for people worried about inflation i guess its a good thing. If youre worried about less inflation maybe not a good thing. University of michigan, pretty darn strong. Inventories kicking up in march. Its an older number, First Quarter. How do you read all that data, peter . Well, certainly q2 were going to get a nice bounceback. But last three quarters looking potentially below 2 gdp growth rate for the year. So growth is still okay, but okay is still mediocre and certainly no acceleration. And if anything theres a slight deceleration. Okay. Now when i look up at the markets, at least the kneejerk reaction in holding because long end rates have come back down a bit, short end rates are higher. Were at 78 basis points on the 2, the threes are under water from where they came out on wednesday, and yield curve tens to twos about to cross the threshold of being the flattest curve since december of 2007. Does that mean the markets getting ready for a tightening . Sounds like some fed president s continue to want to raise Interest Rates, but seems like the rhetoric now is somewhat different from the Economic Data were seeing. But, yeah, they want to raise Interest Rates, but yellen, dudley and fisher do not. And the odds of them raising Interest Rates before the uk vote i think is slim to none. If theyre not going to raise until september because july theres no press conference, well, theres so much data between now and then that i take the move with a grain of salt. See, i would as well, peter. And it wouldnt surprise me to see the yield curve remain in this capacity. But some of the things we handicap, some of the contracts, euro dollar future, fed fund futures doesnt look like its anywhere near a tightening. With regard to the rhetoric, with regard to certain voting numbers, you know, holding out or voting against the crowd, is this just theater, peter . I mean, at the end of the day i dont talk to any traders that ive seen historically do pretty well trading the short end, trading the fed, so they have a proven track record, they just dont think its in the cards. Well, first of all, its what yellen wants is what yellen will get. Irrespective of the opinions and thoughts and comments from all these fed president s. The fed is in a major problem that the Economic Data on the growth side doesnt necessarily support more rate hikes. But the inflation data is becoming more sticky. So i think they should be raising Interest Rates, but theres pain to that. Theres pain in terms of the market response. Theres pain in terms of the economic response. But on the other hand sitting there doing nothing at near zero has created its own problem. So either way the fed is stuck. Yeah, theyre stuck all right. If we go into recession before they raise rates and we get negative rates, wow, were going to know what its like to be a frog when they touch the wires to whats left of you. Thank you, peter boockvar, sarah, back to you. Thats one way to put it. Thank you, Rick Santelli. When we and sarah, back to you. Wow, one way to put it. And thank you, Rick Santelli. Squawk on the will be back with the dow down 70 points. The first stock index was created over 100 years ago as a benchmark for average. Yet many people still build portfolios with strategies that just track the benchmarks. But investing isnt about achieving average. Its about achieving goals. And invesco believes doing that today requires the art and expertise of highconviction investing. Translation . Its time to bench the benchmarks. Apples deep dive. Today, what can be done the turn the stoc another sense of whiplash to this weeks art auctions in london. Only one bidder for the water lilly painting. They are trying to clear 1 third of the inventory. Sothebys managed to follow through on the sale. And so to work through this is christies lead action near and president bill canon. Is there a problem with the impressionist works selling at the moment . Well, a lack of material coming through. Last night, 80 of our art sold at christies, and 87 is healthy and looking at the price of the monet for over 27 million is a significant number, but nonetheless, not that much competition at the top end, but the pricing is, you are to bear in mind set in january and february as we were moving into the markets insecure, and the old price dropping and the finance markets in a little bit of trouble. And why is the price of oil which is in the middle of february down around 30, and below 30, and why would that affect you . Well, people have to choose the right moment to sell a major work of art, and they can choose, and it is the key moment of say if you were the owner of the postwar objects, many of which made World Records, you have a view of the marketplace, and they made good guesses, and the market proved to be on their side, and we have had fantastic results in the post war era. And the whole endeavor is a new york artist who died at age 87, and what is driving this part of the market do you think . 57 million which is a record. It is an incredible price. The last great price was for a world record, and now, baskier. And the 40yearold man who has grown up with the art from the 1980s and the 1990s and this is a prime example of a picture which resonated with him. And he has been open oabout it. The reason he bought it is meant to be something personal. And that is when you get the record prices when they are not only engage ed d in the artworkt it is a reflection of their own, and it is going to be in a museum, and it deserves to be, because it is fantastic. And so you and sothebys are not coming forward saying that if this does not sell, we will arrange to buy it off of you or off of the floor, and that not happening on the same scale yearround, and i wonder to the extent of what is happening in sothebys, and daniel lobe on the board, and activist investor, and wanting to return some cash to people, and hemorrhaging almost on a daily basis, and that destabilizing the market overall, because both of you have to come through to persuade the people to sell and sit in the room and buy. And obviously, people make the choices of who to sell with. We have 90 sold rates which is close to the record for any period in the art market. So whilst the sales may be down in volume, christys is up on the volume, and so they are a different result. What is happening at sothebys is a different matter, and they will comment. Yes, they are coming in the next hour of the show it must be sa said. And with the sale, not a lot of enthusiasm and excitement, and is this a turn in the cycle of the art market that we can glean about the broader picture of the economy where we are spending . Well, the pashgt has found its feet, and the market was very hard last year, and slightly inflationary in some areas, and having seen that, we have seen the World Records this week, and World Records for b baskou and record for freida. Were you expecting more . Well, a artist from latin america, and they are happy out there, and twitter has gone crazy i gather with the fact that a woman artist is holding the record for latin america, and that is very good for her. Yes. And enjoy london as well with the british art. And it is nice to see you, ju sshs jussi. The lead acti auctionneer at christies. The call just came in. Shes about to arrive. And with her, a flood of potential patients. A deluge of digital records. Xrays, mris. All on account. Of penelope. But with the help of at t, and a network that scales up and down ondemand, this hospital can be ready. Giving them the agility to be flexible reliable. Because no one knows like at t. Because you cant beat zero heartburn i take prilosec otc each morning for my frequent heartburn ahhh the sweet taste of victory prilosec otc. One pill each morning. 24 hours. Zero heartburn. Technology moves faster than ever. The allnew audi a4, with apple carplay integration. Welcome back. Bob pisani on the floor of the New York Stock Exchange. U. S. Foods are announcing the long awaited ipo. The shares are 22 to 24 and the largest food distributor out of cisco, and the distribution to begin may 26th here at the New York Stock Exchange and why is this important . Size. 1 million, and most are only