Transcripts For CNBC Squawk On The Street 20160607

Restructuring and lowering guidance. Shares of valeant are down sharply this after an earnings miss and sharply lower guidance. Well give you the latest on the stress theyre feeling over at valeant. And the viacom saga continues. A hearing is taking place right now in massachusetts. Weve got the details. But first up, futures rising a day after comments from janet yellen propelled the s p to its highest level of the year. The fed chair expressing optimism about the economy and said she sees rate hikes ahead but gave no timetable for a tightening. If incoming data are consistent with labor Market Conditions strengthening and inflation making progress toward our 2 objective, as i expect, further gradual increases in the federal funds rate are likely to be appropriate and most conducive to meeting and maintaining those objectives. She did call the jobs number concerning, disappointing, raising questions. Feds going to wrestle with it and drop that phrase in the months ahead. Right. Well, its good to see shes the chairperson. Because theres a lot of people who are not the chair people who when you look back make me feel like, you know what, clevelands going to crush the golden state warriors. I mean, these are people if we were listening say they were on espn and they were correspondents, there were people on, they wouldnt be there the next time would be incredibly incredibly disappearing sports analysts. So we have a chairperson who is data dependent. Shes waiting. She looks at the numbers. A number comes out that is the weakest in six years. And shes the only one that i dont feel has scrambled egg on her face, or, you know, eggs dun easy, hash browns, the dennys grand slam is not on her face, but a lot of these Federal Reserve guys i feel like its pass the mayo and a little ketchup because the eggs on their faces could be eating cold, hot, doesnt matter. Kicking coaches and special teams coaches those guys are the first guys you fire. No one gets fired at the Federal Reserve for being wrong. Its lifetime. They talk too much though. At least the special teams coach knows to just shut up and stay on the sidelines. Nobody wants to hear from them. Went to Training Camp and guy asked a question of the offensive coordinator of the eagles said what do you think of the idea of having a dual running back. Ask the head coach. Finally one of the Sports Writers turned to me and said i think im going to ask the head coach. Lets just ask the head coach from now on. The other people who want the mike, i mean, if you went into the Federal Reserve to be on a mike, i suggest you go into acting. You could go to summer stock. You know, the berkshires have summer stock. Great summer stock. Supposed to be terrific summer stock. It is lovely. Put it on a plate. Cable access. Rehearsal for murder starring eric rosengren. Williams town theater festival. Thats a good one. They have a Shakespeare Festival not one would be able to compete in that. Alls well doesnt end well with those guys. Much ado about nothing. I love when he trots out the shakespeare like that. Share spear holds up. Is that why were at highs for the year . Yes, the dollar was key. If you raise rates, the dollar goes up. If youre ford or gm struggling stock, i dont know, but you want the yen to make it so that at least you have a shot against toyota. You want the europeans to be able to say, you know, you want them to be able to say, you know what, maybe this whole keeping rates down, lets just get things going. I think it is such a positive because we dont have to cut numbers if we work at, you know, lets say you work at colgate where the dollar really does matter, or honeywell you can sit back and say were okay. Thats how you get to a new alltime high. We want to get to some movers this morning including one of our old favorites valeant. Hows it doing . Not that well. Valeants down sharply in the premarket. Were talking about 13 or 14 decline right now. Im looking below 24 a share. This because after it reported its delayed First Quarter results, operating profits, most important the company cut full year guidance significantly. New ceo joe papa says valeants q1 results reflect the impact of significant disruption over the last nine months but then adds progress has been made towards stabilizing the organization. And, guys, the key focus i think for so many investors right now is on their ebitda guidance, of course their kov nans of all that debt according to how much ebitda generate is key. Right now based on current capital structure or updated adjusted ebitda is between 4. 8 and 4. 95 million this year. As per interest coverage ratio, 0. 8, theyre going to be okay, it would seem. But getting awfully close. Okay. Okay in terms of meeting their interest coverage ratios, meeting the covenants that come along with their lending agreements. That they wont with violating them. But theyre coming very close. Jim, the weakness seems to be in dermatology and in g. I. Remember they bought salics. One has to wonder also whether they suffer in dermatology because of philador. Its all about the face, david. Okay. Remember, youre a salesperson, say youre a determine to logical salesperson, if you work for valeant, remember youre selling the lower part of the face, those lines, david, focus on those lines, you dont have them, i have them. Not yet. They had a drug that got rid of those lines and then allergan developed juvederm and remember they had the double chin thing. Yes. This was Brent Saunders i happened to speak to him yesterday, you go in and you are eviscerating valeant. By the way the guy who came up with medesis he works with allergan now. How about baush lomb, im hearing 5 billion . Thats what youre hearing . Five . Yes. Jnj, cooper, alcon, allergan, they all want it. Do you think valeant lets say youre a salesperson at valeant sorry, you arent because you dont work there anymore. This is an amazing this is a dissection by American Pharmaceutical Companies against valeant. And i dont know about sallics, i dont know who comes in against them. The Conference Call, jim, began at 8 00. Let me give you a couple headlines. Thanks for not updating us on headlines here, but time will be our friend at valeant says joe papa. Time is our friend. Time is our friend. They will be in compliance with debt covenants throughout 2016, as weve just told you. The g. I. Units perform below expectations as did dermatology of course. Under performance in dermatology. And the key drug for when they acquired salix. They also say their Liquidity Position remains solid and on and on from there. That womens libido product did not work. That did not work at all. You remember this in the end is a drug company. It is not a company that makes things where its like you know, jnj has great aaa Balance Sheet. And when they were pulled remember the unbelievable thing, tylenol was pulled. And not just by themselves, but i am talking about all drugs pulled. And they were able to survive because they had a aaa Balance Sheet. You have to wonder again use whether or not they are really being hit by the inability to raise prices significantly as they have been. Or rollbacks as papa told me. Or even some rollbacks, right. So papa went from one bad situation to maybe an even worse situation. Frying pan to inferno. Yeah. Frying pan to volcano. On squawk this morning talking about how it was a cult people were blindly following mike, as they called him. Any time a ceo goes by the first name you know theres a problem. Shes great. Great reporter. I covered jonestown as a kid reporter. Yes, i do. That was a cult. Yes, it was. Valeants guidance makes Ralph Laurens looks good. But still lauren announcing a Restructuring Plan including cost cuts. Company expecting to achieve up to 220 million in annualized net savings. Revenue for the current fiscal year down at a low double digit rate hurt in part by store closings, a pull back in inventory receipts, weak traffic. Stefan larson from old navy is swinging the axe. I know the stock is down, im not going to push it here, but isnt larsson doing what you have to do in the modern day taking a lot of gutsy action. I know everyones selling the stock today. Im not going to say today is the day to buy it because when you see a stock down that much what typically happens the sellers last for several days. But i thought larsson is biting the bullet. Look at pvh when stock was at 130 and had to say, listen, we bought this company and were going to have to take some charges. Big Analyst Meeting today. Of course the journal has the large takeout on the company as they sort of reintroduce themselves to the world and he sets out strategy. Hes been the ceo now for seven, eight months, right . Nine months. Come in in september. I come in and talk about there was a great piece by matthew boss yesterday, i dont know if you read that piece by j. P. Morgan, research, about what brands can absolutely like, you know didnt mention ralph lauren, but ralph lauren is a brand. And that brand is not going to be as amazon as people think. Look, again, i know you could argue, well, look this thing is down so much that there must be no comeback. I look at its an excellent brand. Larsson is doing whats right, old navy talk about a difficult situation. You can give up on ralph lauren all you want. I think the time to give up was at 130e. Interesting. Were going to see more about the severity of the job cuts, womens wear daily says 10 , obviously trimming their exposure to department stores. Look at that employment number on friday. Thats ralph lauren written large. We were saying yesterday in the meeting it was rather extraordinary. We literally saw companies that arms are taking positions in, 8 position in retailers that many of the people in the panel said wont exist. Take an 8 position you saber rattle and no one wants you. That can happen if you pick the wrong stock in the wrong sector, no amount of activism is going to help you. None. Im not going to mention the retailers because thats not fair. But theres a lot of retailers look at pac sun, thats done. Look at some of these teen retailers and quick silver, quick silver came on mad money and basically talked about a restructuring. And its like, well, okay, let me know whos buying give me a customer. This is not like watson where you give me a customer. Its like give me someone who walked into your store and bought something. Right. They make those . Let me think. You know, in the camp prussia mall there was a guy who came in and bought a rash guard. Rash guard. Got it. When we come back well get the latest on viacom and Sumner Redstone and one of the power players in commercial real estate blackstones Jonathan Gray on the state of the economy and more. Take a look at the premarket. Were going to get to some of these brexit polls, a primary in california tonight, a lot more to look at when squawk comes back. 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. Jake reese, day to feel alive jake reese, day to feel alive jake reese, day to feel alive they found out whos been who . Cking into our network. Guess. I dont know, some kids in a basement . You watch too many movies. Who . A Small Business in china. A business . They work nine to five. They take lunch hours. Like a job . Like a job. We tracked them. How did we do that . We have some new guys defending our network. New guys . Well, theyre not that new. Theyve been defending things for a long time. [ digital typewriting ] its not just security. Its defense. Bae systems. The viacom board versus Sumner Redstone saga has moved to a massachusetts courtroom this morning. A county and Family Court Judge is going to hear arguments on whether to expedite a case involving the mental capacity of the 93yearold redstone, Philippe Dauman, viacom ceo and george abrams, also a longtime trustee, both removed from the Irrevocable Trust that oversees the control position and on the board of National Amusements and oversees control position in viacom were both removed saying by undo influence. And they want a court to rule on that. Theres so much more going on here, guys, that it truly is one of the more fascinating stories weve run across in a long time. Simply put you have a board of directors of a controlled company actively at war with its controlling shareholder. And yesterday as we reported first at 4 30 yesterday, you had National Amusements as that control shareholder come out and say weve just changed the bylaws, viacom, and we have now made it necessary for unanimous vote should you do anything involving paramount other than normal course business. Of course this has had the effect of actually having people at paramount say what can we and cant we do without a unanimous vote at the board of directors. The board still includes Shari Redstone and Sumner Redstone, hence seems nothing at all will happen with paramount, the company has been talking to potential bidders for a Minority Stake in paramount, maybe those talks will still continue. Maybe this is a onetime only kind of thing that you could still get people to come to the negotiating table. But given what at least has been attributed to Sumner Redstone about his feelings about paramount, its hard to imagine they would approve virtually any deal. This may have had the effect of stopping in its tracks any hopes Philippe Dauman and the board had in retrieving any stake in paramount, but the key here is just this continued really territory ive never seen trot on where you have a board and open revolt against controlling shareholder, of course saying that that shareholder in the form of mr. Redstone, a 93yearold gentleman who just turned 93 last week, is not competent and is therefore not making the decisions but is actually in the hold of his daughter shari. Wow. We may debate his confidence, his legal teams confidence isnt getting a whole lot of debate. I mean, they are doing the job that he is asking them to do. They are. And theyve added to that, in fact. Youre now talking about law firms in the National Amusement sites, carl, are ones we know well. So, yes, they are theyre at war. And it goes back and forth. And i know it can be hard to follow, but you need to step back and consider a couple of key things, which is one what if you are at viacom right now . What are you doing . Youre kind of paralyzed. Yes, in case of paramount you very well may be but just in terms of going to your job every day and making sure youre doing what you need to do not knowing really where the leadership is as ive reported many times theres still an expectation and this is based on my reporting that at some point there will be a move to replace that board of directors and ceo mr. Dauman. It has not yet happened. It has not yet happened. And they have a little more time it would seem given they now can potentially make sure no paramount deal happens at least unless its one they want to happen. And finally, id come back to the Court Hearing today and to that trust, which of course in the event mr. Redstone is deemed yes competent, it is interesting to note he would then step off the trust and as is also the case his former wife would also step off the trust if hes deemed incompetent and two new members would come on. Those two members are the two members put on in place of mr. Abrams and mr. Dauman. So you get back to a situation says even if you were deemed incompetent, four of the trustees that would be on the trust in that case would still seemingly be those in favor of what mr. Redstone and his daughter shari are in favor of, namely making changes at viacom. So im not sure any of this matters. I dont even think theres a corporate analog. I mean, im thinking about unita and lpa during the great angolan civil war. I dont know what youre thinking of. The government which you were supposed to salute to. I mean, honestly, i think you have to go to geopolitical to find something this insane. I mean, honestly, who did you serve for in angola . I dont think theres a government. Yeah, people are searching for historical parallels. In South Carolina in 1861. And as salacious as it is and as much as they go back and forth, were talking about two very large Important Media Companies Whose future certainly in play here. You dont know what youre working for. You dont know whos in control. You dont. Alexander hague, im in control here. Maybe its one of those situations. Alexander hague. Saturday night massacre. Yes. Something like that. Yes. Out. Out. Well get cramers mad dash and count down to the opening bell after a short break. Dont go away. Here at td ameritrade, they work hard. Wow, that was random. Random . No. Its all about understanding patterns. Like the mail guy at 3 12pm every day or jerry getting dumped every third tuesday. Jerry every third tuesday. We have Pattern Recognition Technology on any chart plus over 300 customizable studies to help you anticipate potential price movement. Theres no way to predict that. Td ameritrade. 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. About five and a half minutes before the opening bell, where have you gone, spencer ras coff . Wow. I was going to say name me two cohosts of squawk on the street. Yeah, spencer and rich. There they are. Spencer came on mad money recently and talked about his lawsuit with move, which is news corp. And people were talking about they were suing for 2 billion for patent people talking about zillow perhaps owing 500 million how about a settlement for 130 million. Spencer said it would be small. David zillow, which is actually doing okay as a business too, this is obviously real estate listings, they got off very easy. And i think a lot of shorts were thinking it was going to be much bigger. Do you like the stock here . I dont know. My thought is thats kind of the pop and not as strong on real estate right now. Why . I think real estates peaked in a lot of the hotter markets. You do . Yeah, i really do. I think youve just got up to prices and let me look at that employment number. Now, hell tell you, look, it doesnt matter what it really is is market share. And thats true. It is market share. But in the end i find that you want zillow for market share. Whenever i hear market shares posted greenfield, i like greenfield. But theyre doing well. I can understand, i dont want to pay up for it. The one i would be willing to pay up for, david, is a place i want so badly to shop with you. You know i tweeted you this weekend about going to pier one, right . Yes. I didnt do olive garden, unlimited salad for vegetarian like my daughter. David, i want you to get to know a name. Okay. Ollies bargain store, you and i are going to shop there. They did a secondary today. Its mag nif sennificenmagnific. Our next outing. We can eat off the floor just like we can of my dollar tree. Where are you getting your july 4th stuff . Ollies bargain store. No dollar tree. Im working on it. Opening bell coming up right after this. My name is melissa snyder, im a Customer Relationship manager with pg e. Ive helped customers like plantronics meet their Energy Efficiency goals. So you save energy and you can save money. Energy efficiency and the environment go hand in hand. And i love how pg es commitment to the environment helps a Community Like santa cruz be a better place to live. And being able to pass that along to my family is really important to me. Just being together and appreciating what we have right here in santa cruz. See how you can save energy at pge. Com. Together, were building a better california. Youre watching cnbc squawk on the street live from the Financial Capital of the world. Opening bell in just about 25 seconds on a busy day po postyellen, watching some eurozone q1 gdp revised higher. German Industrial Production comes in ahead. I was thinking that numbers out of europe and its going to surprise people. Meanwhile our own numbers on productivity not great. Labor costs up. Theres the opening bell. At the big board today Belmont Stakes racing festival takes place in new york june 9th to 11th at the nasdaq eplus, provider of i. T. Products and financing services. If youve never been to the Belmont Stakes, let me recommend it. Its a very fun thing to do. I wonder what the read through is here. My writing colleague suggest whats the read through for macys. Perhaps ralph lauren is in too many places, its too available. I do find it. Anyway, thats also the macys anal analog, those are the same cost of clothes, thats that area. I just feel like the mall, you go to buy ralph lauren, you go to macys, these are places other than childrens place and some limited, i keep coming back to the mall as being a very hard place to do business. Really hard. I mean, i love my ralph lauren because i never i always feel safe. Always feel safe when i buy something ralph lauren. Club monaco, but it does matter. Were going to start questioning whether larsson is the guy. I think he is. You do think he is the guy . I have no sense for him at all. Never met the man, 41 years old, came over from old navy, been on the job for some time. Not that ralph lauren has pulled back. He hasnt. Still very actively involved in the business. Look, i came in when larsson came in i said theyre going to have to make some big changes. Larsson makes the big changes and then everybody doesnt like it, i dont know. I mean, i just think this company, you know, you got to come in and make some tough decisions. Look, we keep waiting for tiffany to make tough decisions. We keep waiting for a macys, for kohls. Im looking at kohls and thinking they better may some tough decisions. Ralph lauren made some tough decisio decisio decisions. Limited brands, we forget how much the people running victorias secret, he bit the bullet. Right. Its what you have to do in order to figure out what to do in the mall. Holy cow the mall is hurting. Yeah. Its true. Oils going to be a story all day it appears. West texas now the highest since october 9th of 2015. With above 50. Well see if it holds, as we said brent above 51. This newfound story about demand and the fact saudi arabias were now realizing opec is a joke. But i keep talking to oil people, i know that the rate count was up last week at 50. Again, some comes on, but i think the chinese demand, the chinese automaker, remember they used the worse oil, the worse gasoline, they dont even do gasoline, they dont do any filter. The air is bad. Onethird of the air of which 1. 5 Million People died of respiratory illness, onethird of the air thats bad is from autos, but theyre buying autos like crazy. The gm auto numbers, wow, do you see those . Gm is doing quite well in china. I did want to come back to valeant. You do . This is a new low for valeant, a stock now down over 90 . It has been such a saga we have gone over so many times for so long at this point of course. You have new management in in the form of joe papa. You have bill ackman on the board heavily invested in this companys future. You have value ax pulling back very much so from what had been a company that they really helped to form the strategy for many years ago. And there it is. Why . Its the guidance. On the Conference Call thats going on we told you earlier the ebitda guidance in particular is the focus of many investors who are looking at the debt on the Balance Sheet making sure this company is still going to be able to meet all of tests under the covenants that come along with the lending agreements in terms of ratios, in terms of meeting ebitda, interest coverage for example. On the call asked are you likely to exceed or fall short of guidance you just issued, company says in total we try to be realistic with what we know. Where theres uncertainty we try to be conservative. There are five weeks into the new quarter given the delay in issuing this quarter, First Quarter numbers, and all they would say is this quarter is looking favorable to q1. And also asks, you know, will you be able to be more clear on where youre seeing growth, were seeing disruptions in our sales was the answer. That disruption was significant. Thats the primary issue. We saw disruption because of turnover and changes. And that call, i believe, has now completed. They did emphasize they want people to understand we have a strong Liquidity Position at the company. Theyre also going back and forth between adjusted and nonadjusted and gap and nongap. Guys, which of course has become more of an issue as i think it should in terms of what companies are telling us or asking us to how were being asked to judge them. Maybe suggest joe papa coming in. Kitchen sinking things. Yeah. They are. You do that . You think that . Certainly possible. Maybe its garbage disposal. Could be. Maybe we have the wrong kitchen implement there. Yeah, maybe they hit the wrong button. Right. Maybe its garbage disposal. And the thing started up and you suddenly found your wedding ring down there and its too late. No, with a bottle cap you can wreck a good disposal with a bottle cap. Our bausch lomb. Ron barn on squawk this morning. Sports authority did not have the discounts that i thought they would have for under arm r armour, so it was just not worth it when you did the mall shopping trying to save a few bucks. He talked about tesla potentially being one of the Biggest Companies in the world in ten or fifteen years. I know. And then an interesting tale about giving up on netflix back in the day where price hikes were not working, everybody was panicking on the name. Heres what he said. I invested in the company at 50 or 60 or 70, down twothirds and im very nervous about investing in companies when the full twothirds like your valeant and you never know and everyones having all these negative stories and it goes up a bit and i say i dont understand it well enough and i sell it and then it goes up ten times or icahn buys at 80 and i was selling at 80. Its the stupidest thing. I totally blew that one. You know, so you make mistakes. And you learn from them. And you learn probably as much at least as much from your mistakes as you do from gains youve had. You could see the pain on his face on that one. Ive known ron for i dont know 30 years. And its so great that a manager comes on and just admits he made a mistake. Most managers dont. Its great to see someone who is as good as he is just say, listen, i got it wrong. I think people at home would try this often say listen every time i try to do something, you know, im maybe make a mistake but the managers on tv are so incredible. That was a bad call to sell netflix. It was. He was once a big owner of ralph lauren, i believe. They used to own a lot of that. I dont know, i have no idea im not giving up on ralph lauren. Todays the day when theyre talking about kitchen sink. We should mention biogen. There had been a thought there was this option this study they were doing phase two study for antibody being developed as potential neuropairtive therapy in people with lapsing forms of m. S. , but missed the primary end point and that stock getting hit almost 10 . Been selling it because belief of this and alzheimers that they just didnt have it and still kept a small position in it. Frankly theres no reason to own it. On the same front alexion also down this morning on a miss of data on solaris. That was a very good drug. And its interesting a lot of people thought it was going to get taken over. I think you talk with bob yugan yesterday, hes executive chairman. I think we kind of had a High Water Mark in some of these biotech buys, and i think a lot of people now when alex gorski goes out from jnj and says what didnt i do right, i think its daunting when someone points out says youve been following the medivation saga, now theyre someone not willing to pay up. Sanofi, not yet. I think acting by written consent and that will begin momentarily, i believe. So the 60day clock will start very soon. Although we had a very good story today. I dont know if you guys saw the zimmer, the deal they made for a company that i think is a very good company, this is lrdh bid. Novel spine treatment. I had invasive on which is another company, this is a very you get for them its cervical disk, but these are baby boomer problems. The fact that zimmer willing to pay up so much a lot of people feel this was a defense by zimmer. No, i think you need to have this is a money losing company theyre buying, but you need to have a back, something involving the back in your portfolio if youre a Device Company because its too big a market. And, again, newvasive had them on. I think theyre a takeover target. Its a phenomenal company. Sold Life Technologies to thermomade so much money. Devices work. I know people, hospitals surgeons like their products. Eight points away from 18k. Havent been there intraday since april 28th. Courtneys on the floor. Thats right, we are getting ever closer here, carl, as the Dow Jones Industrial average is creeping up little by little this morning. The first couple moments of trade the s p 500 above that key 2100 level. Perhaps markets taking cues from what yellen had to say yesterday slightly more dovish when it comes to the timing of a fed rate hike, but also were seeing some strength overseas. We have brent crude hitting eightmonth highs. Weve got wti also higher above 50. And if you take a look at what happened overseas, european markets are higher this morning. And this is ahead of tonights debate on the referendum debate on whether or not the uk should stay in the eu or not. Of course David Cameron is on one side and then the independent party leader is going to be on the other. But the latest polls actually show a slight preference for staying in the eu. Well see of course what happens in several weeks there. But if you take a look at asian markets those were higher overnight. Some commentary out of the peoples bank of china about the yuans stability. Perhaps thats part of the reason were seeing higher moves overnight there in asia. Weve got of course the game continuing for yahoo. The bids are coming in. And a report from the wall street journal that verizon is perhaps bidding 3 billion for the internet business. And then if you take a look at shares of hertz, we know carl icahn is upping his stake to 15. 2 . Shares higher by more than 3 , almost 3. 5 . Zillow is selling a lawsuit with move and actually for much less than what move had been looking for. Move is owned by news corp. Only settling for 130 million as opposed to the 2 billion as a result barclays actually upgrading zillow. You can see shares there higher by almost 7. 5 . And im going to have more on ralph lauren coming up in the next hour. The investor day is continuing. No media allowed but were listening in. Bring you the latest coming up soon. Thank you very much, courtney. Get to pandora, a stock thats been in the news a bit lately. Of course it was a few weeks ago that Keith Meister of corvex filed 13d. Analysts come out to see the Company Brought by various brokerages, i think it was isi that brought people to see john malone and the ceo of liberty. I mention that because liberty controls sirius. And theres been a lot of talk over time would sirius be interested in buying pandora, did it even make a bid. In these meetings mr. Maffei spoke to investors. Those who left the meeting tell me that he spoke positively at least about the possibility of that, or i should say positively about the benefits that would potentially be brought to bear should there be a link between sirius and pandora. I called greg maffei yesterday, he said, yeah, we did talk about potential synergies and the fact in his belief pandora should potentially consider selling itself at this point. But he also went onto end our conversation by simply saying theyre not for sale. And that of course may be the key reason why the stock actually was down yesterday after all these people came back from denver with this, you know, thinking about that of a potential siriuspandora tie up. Nothing new, weve been hearing that kind of chatter for a long time. And its what keith at corvex seized on in his 13d as one reason why in fact he thinks the company should move ahead with looking at all of its alternatives. That said, tim westergren, the companys current ceo and its founder, a couple of days ago over this weekend he was in france at a big conference asked about the possibility of a sale said the following, were on a path to do something big. And something for the long term. And thats why i got back in the saddle. So no plans for that. Meaning a sale. Corvex by the way just to refresh when they did come with a 9. 9 stake having elected to actually not go after board seats when the window before the window closed said we urge the company to immediately engage in independent Investment Bank with fresh perspective without any prior history of advising in terms of value, they want to maximize including execution of a sales process and to evaluate the results against other options including the risk adjusted value of continuing to operate on a stand alone basis. And they did point out that mr. Westergrens public statements suggest he has no intention of comparing alternative option such a sale with the companys current state of affairs. But interesting. Sirius, pandora, jim, there are others who believe now is not the right time to sale. Maybe google would enter the fray at some point, and perhaps others. Well, look, always adamant apple should do a big thing, big service roll up. You do sirius, you do pandora, you get a lot of people on the rolls and revenue, but thats not been apples way. But i remember going back to that last Conference Call and you heard tim cook talk about maybe its time to do a bigger deal. Now, thats obviously not whats going to happen here, but thats what i wish would happen because this Service Revenue would break out this once again we have a note today ubs range bound, range bound. Goldman sachs downgrades j bill to a sell. People often communicate that as being a handset play. Its a treadmill, kind of like youre a hamster, you got to get out of that. One of the ways to do is this way. I pay for sirius and dont even think about it. My kids pay for spotify, they dont think about it. Probably think the same way at amazon prime where goes to a 930 target today. All right, lets get to rick. Lets get to him. Hes at the cme group in chicago. Rick santelli, take it away. Thanks, david. You know, a lot of people on this Trading Floor considering there are nasdaq futures along with the other equity indices watching the nasdaq, it hasnt been in the black all year and its pretty easy to tell when it is because we closed a smidge over 5,000. Traders are looking at that and not seeing a lot of logic, but if you have somewhat illogical monetary policy, regulatory policy, tax policy, and were just the tip of the iceberg when you look all around the globe, it doesnt surprise many traders though that the markets are a acting a bit incongruent. Look at the oneweek chart of twoyear note yields then oneweek chart of dollar index. Obviously they rhyme pretty well because of the impact of the dollar of the fed on both those markets. Now, yeartodate tenyear reveals were only a handful literally five basis points away from a new low yield close for the year, current is february 11th at 166. Bund yields, you see the intraday chart there. Theyre hovering right at six basis points. This could be the third lowest yield close ever for bunds, the second lowest. This could be the lowest and a third pass of under ten basis points. Mub, okay, this is muni index, etf, closest to the highest level of 2012. Lots of articles written about the sponsorship in munis. Look how different and more aggressive compared to the hyg and yld. Continues to underscore despite many cities and municipalities having issues investors seem e namerred with munis. Thank you very much, Rick Santelli. When we come back, a big surprise from a legendary hollywood producer courtesy of our new Digital Series binge. Well tell you what were talking about. Dow backed off of that 18k mark. Never got there. Our new digital binge apollo 13 and the show 24, take a listen to a clip from our binge fast forward lightning round. Some of the people youve interviewed. Okay. The first thing that comes to your mind when you hear their name. Jeff bezos, brilliant. Tim cook. Funny. Brilliant and funny. Tim cook. Sincere and honorable. Jack dorsey. Smart and much funnier than people think he is. Oprah. Oprah is the greatest one of the greatest human beings on the planet. Jim cramer. Smart but just out of his mind. [ laughter ] so, brian did a book about curiosity. Right. Interviews people from all walks of life. You were one of them. Yeah, i did. We had a lot of fun. He did a lightning round with me. And i got them all right ahead and i didnt know when is this . So its live now on apple tv. Oh, youve got to i think brian he said to me i got to know if you have a beautiful mind. And at the end of it he said kind of youre crazy. And i said is that good or bad . It wasnt clear. He pushed you on your knowledge of tickers, right . Oh, my god, he played a lightning round with me that was just one it was like, holy cow, this guy is really going at it. I was about 100 . And at the end he said, well, yeah, youre nuts. Well, i guess he kind of reiterated that. Thank you. Thank you for asking. Of course. We love that answer. We will get stop trading with jim in a moment. Youre watching squawk on the street on cnbc. Lexus is f spo. Because the ultimate expression of power, is control. This is the pursuit of perfection. Its time for cramer and stop trading. Whenever i think of retail i think of stores id like to take david to. And one i was at recently was michaels. Theres a new one in brooklyn. This is a craft store. And it shows you no one is immune to the mall. They had 3. 1 comps before, people are looking for maybe 2. 2. They came in at 0. 9. Now, this is a company a lot of people feel defies amazon because crafts are kind of like etsy, you can make them yourself. It doesnt matter. Its in the wrong place on earth, which is the mall. And even though they have some stand alones, this was remarkable to me because michaels has been a great comeback story, p e. The kids, they need all their art supplies. Yeah. Waiting on long lines. Youve been too, right . Absolutely. Really quick, jim, whats on mad tonight . Weve got wix, which is important. And talking about stealing guests, david, this is an outright steal of meg whitman. I know. Its grand theft. The sun doesnt set on the mad money empire. Youre going to talk cloud, i think, right . Were going to talk whatever you were going to talk. You talk to meg whatever you need to. Just remember on earnings shes mine. When we come back, david kostin who only comes on this show, in a minute. You can fly across welcome town in minutes16, or across the globe in under an hour. Whole communities are living on mars and solar satellites provide earth with unlimited clean power. In less than a century, boeing took the world from seaplanes to space planes, across the universe and beyond. And if you thought that was amazing, you just wait. My m. About my toothpasteice. She eveand mouthwash. Ice. But shes a dentist so. I kind of have to listen. She said jen, go pro with crest prohealth advanced. Advance to healthier gums. And stronger teeth from day one. Using crest toothpaste and mouthwash makes my. Whole mouth feel awesome. And my teeth are stronger too. Crestpro health advanced. Is superior to colgate total. In these 5 areas dentists check. This check up . So good. Go pro with crest prohealth advanced. Moms right. Again good tuesday morning. Welcome back to squawk on the street. Im Carl Quintanilla with simon hobbs and david faber at the new york stock exchange. Dow almost gone to 18k this morning for the First Time Since april, but stopping just below that level. S p up a touch to 2114, pharma and retail getting hurt, crude still above 50. Our road map for the next 60 minutes on cnbc, janet yellen clearly soothing the markets, global stocks rallying to their highest level in five weeks. Well speak in a moment to Goldman Sachs david kostin, his thoughts on yellens comments and where stocks go from here. Plus, a restructuring at ralph lauren. The struggling retailer announcing plans to cut costs and shed real estate assets. That stock is tumbling on the news. And Hillary Clinton hits that magic number ahead of todays big primaries, whats next for the Presumptive Democratic nominee . Well break down the race. Federal reserve chair janet yellen striking a generally positive tone on the u. S. Economy warning investors should not overreact to last weeks disappointing jobs number. Our very own Steve Liesman has more on that this morning. Hey, steve. Carl, good morning. Fed chair janet yellen suggesting to markets what it thought it knew but needed to hear that a june rate hike was off the table. Yellen did that by saying the weak may jobs report was d disappointing though said shouldnt focus on one report. Hikes are appropriate if the data improve but pointedly did not put a time period around the next hike the way she did in late may. Another implication of yellens comments is the idea that likely only one rate hike coming this year, not two. Thats at least the way the market is currently priced. And the market has been more right than the fed. The fed funds futures market now isnt fully pricing in a single hike until december. Thats where it crosses the 50 line. That could change with a strong jobs report or better Economic Data, which yellen said she expects. But the likely earliest date for hike is july or september, cautious fed might wait until 2017 before coming back with an encore. Take a look here where different forecasters are on when the fed will do the next hike. J. P. Morgan and Goldman Sachs along with oxford in the july camp. The bulk of the forecasters are in the september camp, which is kind of the new median including bank of america, ubs, and then December Deutsche bank and rbc for just that first hike of 2016. The futures market you can see here currently pricing in just a 50 basis point funds rate through november. Just 60 all the way out to february 2017. And when you look further out the curve it isnt until late 2017 that the market begins to price in a second hike. Fed officials went into the march meeting projecting three hikes, and theyve lowered it to two coming closer to the market. Markets will look carefully at next weeks forecast from fed officials which come out with the policy statement on wednesday to see if fed officials back down again going from the two hikes expected to one and meaning the market once again has it more right than the fed, carl, on its own funds rate. Not the first time. Maybe not the last, steve. Thank you so much. Right. Steve liesman. Lets bring in david kostin, chief u. S. Equity strategist at Goldman Sachs joining us exclusively at post nine. David, welcome to you. Nice to see you. Last time you were here i argued you were a little more net bearish because you were looking for some chop in the summertime. Has that view evolved in the last couple weeks . No, the view is the market strategically is likely to continue to rise slowly over the next couple of years basically in line with the economy growing at a modest pace leading to slightly higher Revenue Growth and Earnings Growth and ultimately as Interest Rates go higher multiples go lower and maybe takes the market up 5 rate for the next five years. Tactically i think there are more risks to the downside than the upside at this starting point in valuation. Very high level of valuation, couple of variables to think about, Goldman Sachs perspective as you just heard from Steve Liesman, my colleague hatzius expecting about a 40 probability in july. Number two is politics, the uncertainty around the collection and the political or economic or equity market uncertainty has been very low recently. And we think that is likely to increase over time. As you get closer to the election. And number three is tactically we are in a lull that will begin in about a week when the buyback, the wave of discretionary buybacks will end ahead of the earnings season, Second Quarter earnings, so about a month before companies are precluded from repurchasing shares. From a money flow point of view, from a rates point of view, economic point of view, theres more risk and that would be more tactically to the downside. So does june become this liquidity vacuum ahead of brexit and entering that buyback window . Well, the end would be middle in my view the end will be middle of june and basically in second part of june and all of july youll have less discretionary purchases and that will pick up in august. I think the risk nearterm is more to the downside. To the tune of what . 5 . 5 , 5 pullback would be 2000, level s p 500. The market is trading out 17 times forward p e multiple. And in the last four years when youve had various drawdowns at a 5 level, the market has tended to have a p e multiple base around 15 times forward earnings. That would put you all the way down at 1900 as an example. A modest pull back would be to around 2,000. The market has been in this trading range and the mantra weve had all year has been as you know flat is the new up and thats essentially the kind of environment for this year. To be in the trading range, to have the key goldman say flat is the new up, wheres the market positions . If thats as good as it gets, what are people expecting . Yesterday on the show we were hearing people are positioned for downside, which could potentially be important of course surprise is there to the upside. I would disagree with that. My conversations with Portfolio Managers people are concerned about the market moving higher. And theyre not positioned that way, so theyre buying upside calls to protect themselves in that context. My view is that is less likely to happen. And so tactically where are the opportunities . They tend to be in certain pockets. You have a Margin Expansion. Theres not that Many Companies that are in a position to raise their margins. You saw this morning some of the Economic Data showing that labor inflation is rising and that began as a concern about margin. So thats one area. Secondly do you have names, david . Are you putting names out . Sure. You can look at starbucks, amazon you did a list of companies. That Goldman Sachs, my colleagues in Equity Research are anticipating more than 50 basis points margin improvement each of the next several years. Those would be examples. So Margin Expansion number one. Number two would be dividends. Dividend yield, dividend growth. You can look at various companies, honeywell, cisco, companies with high yield and dividend growth. Companies have wage inflation, low labor cost inflation, low exposure to higher wages would be another because again one of the issues on higher wages which is a good thing economically speaking is a bad thing from a margin perspective. Thats why margins dividends would be areas of focus. There are opportunities again tactically in an environment where the market is high from valuation perspective. Whats the risk of surprise rally in crude and how would the overall market respond to that . So i mean, something thats i dont know 70. That would be a big increase given the current levels we are and our view from Goldman Sachs is the Market Oil Price is likely to be closer in the sort of trading range 30 to 50 dollars as opposed to moving that much higher. If you had that much higher be pressure on margins for a lot of companies. More specifically its positive for Energy Company profits. Headwind for some of the Consumer Discretionary companies. You mentioned hatzius on the side aggressive in many rates did the world change on friday when we got that poor employment report and then maybe you ratchet down in general your Interest Rate expectations. Thats got to be positive to the market to the comments you were making earlier. Well, certainly a question of whether that was an indicator the canary in the coal mine of things slowing down or an aberration, but the view is economy is generally getting better. A number of economic readings suggesting the economy is getting better. You saw some of the Inflation Numbers this morning. Sure. But if you ratchet down those expectations, although were not expecting huge Interest Rate rises and talking the next year, 18 months if youre able to suppress those, do you get a big bounce in the stock market . Or have those days gone, do you think . It is generally a more positive i think stabilizes and gives benefit for why the market stays at these levels. Again, we are at the 90th percentile of historical valuation. Youve said that every time for and the market has been sitting here at this level. Its fine, but were at a pretty high level about 2,100, which is consistent with a market that is highly valued. So the risk would be tactically slightly more to the downside, but strategically still have positive expansion in the economy and earnings market. Going to be a fascinating month. D. K. , thank you for coming in. My pleasure. Turn our attention to shares of valeant this morning which hit a new low, but off of that low 22. 52, but still down almost 20 , this after the Company Reported its delayed First Quarter earnings. It was not the earnings which were not particularly good that is consuming investors in terms of their fears, it is the guidance from the company for the rest of the year that really has hit hard. That guidance being you see there full year now 6. 80 to 7 a share down from what had been 8. 50 to 9. 50. Theres the revenue guidance. Most importantly it is the ebitda guidance that is now between 4. 8 and 4. 95 billion for this year. And you can see where it was previously that really has investors concerned. Immediately going to the covenants and loan agreements and taking a look and making sure theyre still going to be within what is the allowed framework in terms of that ebitda as it relates ratio to what their Interest Payments are and the like. That is pressuring the shares. The weakness does seem to be sort of in dermatology and as well in some of their g. I. Products including the key drug that they acquired when they bought salix for a big price some time back. New management at the company some saying under the leadership of new chairman and ceo joe papa this is an opportunity to do what we call kitchen sink things, take everything down to the lowest possible level you can and then begin the slow steady climb back. He did indicate on the Conference Call which ended about a half hour or so ago, perhaps a bit more than that, that theyre trying to be realistic with what they know. Where theres uncertainty theyre trying to be skoempbtive. And they also say that since were five weeks into this quarter the question how is the june quarter going, the answer all im going to say is favorable to the First Quarter. They are focused and having people focus on their strong Liquidity Position they say, guys, but again, stock of course including its very large shareholder purchasing square getting hammered yet again in what has been an extraordinarily awful year for investors in valeant. As youre talking, david, House Speaker ryan with comments on trumps comments about judge talk about this agenda and policies contained in this agenda. Thats why i believe were far better off advancing these policies and getting them in law with his policy than Hillary Clinton policy. [ inaudible question ] i fundamentally disagree with that. I think its wrong. The way i look at this is if you Say Something thats wrong, i think the mature and responsible thing is to acknowledge it was wrong. [ inaudible question ] im not going to comment on that. Weve got enough work to do here in the house to comment about people running their campaigns. [ inaudible question [ inaudible question ] i dont know whats in his heart but i think the comment itself is defined that way. Im not going to defend these kinds of comments because theyre indefensible. Im going to defend our ideas and our majority. I think our likelihood of getting these ideas into law are far more likely if we are unified as a party. I see it as my job as speaker of the house to keep my party unified. I think if we go into the fall as a divided party, we are doomed to lose. Im going to focus on these and not try and attempt to defend the indefensible. That is speaker ryan responding to questions about donald trump and those comments that trump made about the judge in the Trump University case. Ryan saying he disavows the comments, that theyre absolutely unacceptable calling them a, quote, textbook definition of a racist comment. If he makes any additional headlines, well get them to you. Coming up on the program, shares of ralph lauren are struggling this morning. Restructuring measures and cutting costs to reduce real estate assets. We will have the latest. And exclusive interview with blackstones global head of real estate Jonathan Gray, says prices will continue to rise even if the fed hikes rates. Much more ahead on squawk on the street. Using 60,000 points from my chase ink card i bought all the fruit. Veggies. And herbs needed to create a popup pickyourown juice bar in the middle of the city, so now everyone knows. We have some of the freshest juice in town. See what the power of points can do for your business. Learn more at chase. Com ink see what the power of points can do for your business. I am a First Responder tor and iemergencies 24 hours a day, everyday of the year. My children and my family are on my mind when im working all the time. My neighbors are here, my friends and family live here, so its important for me to respond as quickly as possible and get the power back on. Its an amazing feeling turning those lights back on. Be informed about outages in your area. Sign up for outage alerts at pge. Com outagealerts. Together, were building a better california. Ralph lauren out with its restructuring announcement following earlier reports of job cuts. Our very own Courtney Reagan joins us this morning with more as the stock is under pressure. Court. Thats right, hi, carl. So ralph lauren is Holding First investor day in the brands 50year history. Wall street is finally hearing ceo Stefan Larssons plan as ceo. Larssons way forward plan centers around reigning in costs, brands and stores. The brand will focus on three name brands, ralph lauren, polo and lauren. The brand will close 10 of mainly high end stores, strip out three layers of management, which means 1,000 job cuts or 8 of fulltime staff. Its also going to reduce the inventory that it ships to department stores, which is 45 of revenue in hopes of reigning in promotional levels and selling more items at full price. Leaning on his strengths from old navy and h m will shorten merchandise production times from 15 months to 9 months with an eightweek test pipeline. Now sees revenues dropping at a low double digit rate due to the decline in inventory receipts which is proactive as part of the closures, but also weak retail traffic environment. But the savings from the restructuring costs theyre undertaking are expected to result in 180 million to 220 million in annualized expense savings. Ceo Stefan Larsson also says hell focus even more on the shopping experience. Part of that he says his number one priority winning at the wholesale channel. But hes also going to build strength in ecommerce. Hes included an executive from ebay for that role. He also wants to evolve the Retail Shopping experience. We have about an hour left in the meeting. As you mentioned, carl, shares have fallen by a third over the past year as sales and profit have also fallen and costs have risen. So certainly something needs to be done. It remains to be seen if these are the right changes, simon. Clearly some disappointment today, courtney, thank you very much. The latest on ralph lauren. The largest private Equity Investor in real estate says prices will continue to rise even if the fed hikes rates. Jonathan gray says blackstone is still buying and selling real estate in equal proportion despite having 100 billion under management and over 30 billion to spend in cash. John gray also chairman of hilton with a 46 stake spoke to us at the nyu hospitality conference. If you step back and look at real estate landscape today in the u. S. , the thing that makes you feel good is the supply demand fundamentals. New supply, new construction of real estates running about 1 . The economy is growing around 2 . And thats why the fundamentals are strong. The biggest challenge on real estate is to your point rates are low, and thats led to very low cap rates, or unleveraged yields in real estate. As the fed tightens that puts some pressure, if you thought about it like a stock, youd say i like the Earnings Growth in real estate, but im worried about the multiple. And netnet what we believe is rather than seeing a big sharp upward growth in value weve seen, well see growth in value but at a more modest pace going forward. Youre also a huge investor or holder of assets in housing. Youve got 50,000 rental houses, Single Family homes and then multifamilies, another 50,000 there. What do you think is going to happen with housing . I think housing in the u. S. Is in a very good spot today. We just look again at supply and demand. If you looked at population, household formation, youd say you need about 1. 6 million in terms of homes, this year well deliver about 1 million. That is leading to rising rents in apartments and home values as well and rising rents for Single Family homes that are rented out. So i think housing is one of the Great Stories today in the u. S. Economy. There are obviously some headwinds coming from outside the u. S. But if you wanted to put your hat on one thing that would make you feel good about where the economy will go over the next couple years, i would say u. S. Housing. What do you make of the Public Markets of the stock market in general . If you look at the lodging space, what youd see is the companies are not trading well. Stocks are off 35 , 40 , because Market Participants are very worried about a recession, a slowdown and sort of the end of the lodging cycle. We think the markets being overly punitive and that could create Investment Opportunities for us as well. Youve done two notable deals with the chinese. You sold the waldorf to the chinese as part of hilton, and of course youre selling strategic to them for 6 billion. Where are we on the chinese . Are those deals going through . Well, i would step back and say on the chinese what people i dont think fully appreciate is many of these companies didnt have an opportunity to invest overseas up until a year or two ago, which are the Insurance Companies in particular. And theyre now looking at overseas assets particularly high quality real estate or real estate companies. And thats what youre seeing. I think this is the beginning of a longer term trend where they deploy capital globally not much differently than u. S. Insurance companies who look to invest or u. S. Investment companies around the world. Some of these deals may not make as weve seen they lost out in starwood situation, but i think they will continue to invest more over time. And part of this is theyre getting their sea legs in this business. Theyre understanding how the process works, how the Regulatory Framework works. So that takes time. I think these are companies that have longterm investment horizons who want to own great quality assets so i think youll still see more investment dollars from china. And in general are they good for the cash . Yes, i mean, the chinese economy is grown to be quite large. Its the second largest economy in the world. Their insurers are enormous companies with very substantial financial means. I think the skepticism around china i think will go down over time as they become larger players and people see them. But, you know, they have made some mistakes as theyve been learning. Although obviously real estate outside china is thought to be relatively safe bet. Jonathan gray joining us there the head of real estate at blackstone. When we come back, cnbcs disrupter 50 list, who made it to the top . Well tell you after the break. The heirloom tomato. Intenselyflavored. Colorfullydiverse. Beautifullymisshapen. Cultivated for generations, its the unexpected hero of any dish. When you cook with incredible ingredients. You make incredible meals. Fresh ingredients. Stepbysteprecipes. Delivered to your door. Get your first two meals free blueapron. Com cook. Today cnbcs unveiling its Fourth Annual disrupter 50 list, more competitive than ever with 750 companies in the running. Our julia boorstins at headquarters of one company on the list where they look at some of the leading disrupters. Hey, julia. Hey, carl, good morning to you. Well, what this years methodology placing increased importance on scaleability, uber landed in the number one spot on this years list. Since starting six years ago the ride hailing app expanded to nearly 60 countries with estimated revenues close to 2. 5 billion. And 66 billion valuation. Similar story for number two, airbnb taking on the hotel industry. Now active in 34,000 cities and valued at more than 25 billion. Coming in third, india based mobile payment startup easy tap poised to tap into the explosion of payments in the developing world and take advantage of the indian governments efforts to get more people to participate in the financial system. Fourth, secretive Palantir Technologies which analyzes and visualizes big data for clients ranging from the u. S. Government to wall street firms. And fifth, Genetic Testing Company 23 and me which reinvented its offerings after the fda effectively shut it down. Apart from the top five we want to highlight a few other notable members of this years disruptor 50 class. First time weve included education disruptors courseera landing number ten offering access to courses from the worlds top schools. Lyft on the list for the first time after partnering with General Motors to develop a fleet of selfservice cars. And jaunt landed on the list at number 47. Its tools are designed to help artists, brands and consumers create Virtual Reality content. And here we are at houzz. Check out this office theres a slide from the fifth to the fourth floor, each of the different Conference Rooms is designed to look like a different room of the house. Well be sitting down with houzzs ceo coming up in squawk alley. Back to you. Julia, thank you very much. Disruptor 50 on cnbc. Coming up, the final push of the primary season as clinton hits of course the magic number making former secretary of state now the presumptive nominee of the Democratic Party although shes yet to claim victory on that. The latest on the campaign next. I could get used to this. Now you can. When you lease the 2016 es 350 for 329 a month for 36 months. See your lexus dealer. Thank you. Ordering chinese food is a very predictable experience. I order b14. I get b14. No surprises. Buying business internet, on the other hand, can be a roller coaster White Knuckle thrill ride. Youre promised one speed. But do you consistently get it . You do with comcast business. Its reliable. Just like kung pao fish. Thank you, ping. Reliably fast internet starts at 59. 95 a month. Comcast business. Built for business. Good morning everyone. Im sue herera, and here is your cnbc news update at this hour. A rush hour car bomb attack targeting a bus carrying riot Police Killed 11 people and injured 36 more in istanbul. The police bus was overturned from the sheer force of that blast, which also damaged nearby buildings. Treasury secretary jack lew and secretary of state john kerry wrapping up two days of strategic and economic talks with their chinese counterparts in beijing. The two telling beijing it needs to provide a level Playing Field for u. S. Companies to do business in china. Widespread outrage over the sentencing of a convicted rapist who is a former Stanford University swimmer. 20yearold brock turner given a sixmonth jail term for sexually assaulting an unconscious woman. His father wrote a letter to the judge saying his son should not be put in jail for, quote, 20 minutes of action, end quote. And Tropical Storm colin expected to continue to drop heavy rain over the southeastern parts of florida after moving across the northern part of the state knocking out power and flooding roads. Security cameras on this house really capturing the sheer force of those winds. That is the cnbc news update this hour, simon, back down to you. Thank you very much, sue. House Speaker Paul Ryan moments ago coming out forcefully to condemn recent controversial comments from the presumptive gop nominee donald trump concerning the federal judge that hes overseeing the trump case. Heres what ryan had to say. I disavow these comments. I regret those comments that he made. I dont think claiming a person cant do their job because of their race is sort of the textbook definition of a racist comment. I think that should be absolutely disavowed. Its absolutely unacceptable. For more now joined by cnbc contributor former Economic Advisor to Vice President biden, and sarah fagan, former political director for the george w. Bush white house. Sarah, how serious is this split for the gop, do you think . Well, the challenge that donald trump faces is at a moment when he had wrapped up the republican nomination and he was starting to bring key republicans like paul ryan to defend him, hes now put them on the defensive. So in a week where Hillary Clinton is claiming her partys nomination, were talking for five days as republicans about a judges race. And republicans are disavowing donald trump. That is a very Bad Development for the trump campaign. Whats interesting, sarah, is hes doubling down, it would appear, from what he said previously. I know. Why do you think that . What does that point to . Whos advising him here . Well, i think the only person advising him is donald trump, and thats part of the problem. This is quintessential trump. When you make a mistake, own it and double down. He doesnt apologize. He doesnt ever say that hes wrong. And at some point as a candidate that is going to catch up for him. It may not be this moment, but i do believe that the collective weight of all of these missteps that he has rhetorically and verbally will ultimately probably cost him this election. The challenge for him is hes got to quickly pivot. Hes got to pivot on two fronts. Hes got to pivot from a policy perspective. Hes got to start to give very thoughtful, deep policy speeches where people understand what he is for. And secondly, he has to pivot politically. He has to start making very good decisions, good speeches, doing them in places that matter to the electoral college. He spent five days in california, a state he has no chance of winning in the general election. Thats just bad politics. Jared. Well, i just think its the idea of donald trump giving a deep and thoughtful policy speech is kind of hard to wrap your head around. I think saras analysis is essentially correct, and i give paul ryan a lot of credit having just essentially endorsed donald trump to turn around a few days later and call it like he sees it. Look, this candidate is a huge problem and precisely for republicans and precisely the way sara just said. He is not following a playbook that neither sara nor i nor a lot of other people including paul ryan would recognize. And importantly the fact, the very fact that hes not followed that playbook has gotten him to where he is today. That worked i think demonstratablely well with republican voters, it probably wont work in the general election. Hes got a real problem. At the same time we have this extremely historic event occurring as we speak, which is this country is about to have a presumptive nominee for president who is a woman, the first time in our history. After electing an africanamerican two times, our chief economist is a woman, janet yellen. I mean, this kind of diversity is not only, i think, great for america, flies in the face of the kind of xenophobic racism you get out of donald trump. Sara, before we leave the topic and perhaps talk about whats happening in california with Hillary Clinton, there was a suggestion from senator Lindsey Graham this was now the off ramp opportunity for those within the gop who were nervous about supporting trump anyway. Paul ryan hasnt withdrawn his endorsement as i understand it at this stage. Right. So if trump can make it through this, i guess, in many senses hell know whos likely to stand with him through the rest of the campaign. Well, donald trump does have some things going for him politically. Of course. Republicans are far more energized in this election than democrats. And Hillary Clinton except for this week, this one week in the campaign, has proven to be a pretty bad candidate. And what donald trump needs to do is not only give people a reason to vote for him, he has to make a more articulate case against her, which he did not do. She attacked him very aggressively. And i think very effectively last week. Rather than respond to that and talk about all of the failed Foreign Policy missteps by the Obama Clinton white house which there are many from syria to Missile Defense to iran to iraq, he, you know, spent time talking about this Trump University lawsuit. Sure. So hes got to pivot. And if he doesnt do that, these republicans are going to, as you mention, are probably going to start bailing on him. Theyre going to be forced to bail on him. Jared, what is your reading now of the degree to which Hillary Clinton can united pa y party . At what point does obama come out and endorse in your view . And what does sanders do . Start with the last point because i think it connects to the others. A lot of people are saying Bernie Sanders should get out of the race perhaps after california. It was about this time in 2008 when Hillary Clinton did just that and began to unify around barack obama. What i think is key now and what i dont hear people talking about is really the posture of the Clinton Campaign to embrace sanders supporters. I heard someone from the Clinton Campaign this morning talking about Bernie Sanders as a hypocrite if he doesnt get out hes undermining the party, hear a lot of that kind of talk. I think thats really misguided and not smart, not forward looking at all. I think that Hillary Clintons best move at this point would be to think about ways to try to pull those sanders supporters, at least the ones open to buying into the fold and not to Bernie Sanders out of the way. Sara. All weve seen is staffers talking about the need to bring the sanders Team Together with the clinton team. I think they are striking the right tone, at least as a campaign organization. And so theyre very cognizant of the fact that Bernie Sanders has a wide swath of the Democratic Party very loyal to him and very energized by him. And the Clinton Campaign while theyre going to win regardless of the results tonight, shes clearly going to be the nominee, they do need to bring the party together. And i thought her speech last week criticizing donald trump was effective not only because of what she did to trump but it was very effective in that she gave the reasoning for the sanders team and the sanders supporters to come to her defense and to coalesce into one Democratic Party. And she laid that out effectively. And i think she did herself a lot of good in her own primary last week as well. Can i make just one briefly. A quick economic point. You know, i never like to attach a particular event to a market bounce, but i actually think the markets today and in general that the economic fallout from a hillary unification hillary winning this candidacy is going to be positive because i think theres a great deal of economic insecurity about the destruction that a donald trump would do to both domestic and international. So i think we may be sitting a bit of a Hillary Clinton bounce. I think thats continuing. Well leave it there. Clearly weve got six primaries to get through today not least of course california and jersey. But for the moment, thank you both. Thank you. When we come back, Oil Prices Moving higher, brent above 51 today. Plus, jim grant with Rick Santelli when squawk on the street comes back. At t introdus a buy one get one offer that sounds really good. And looks good. Thanks nice job on the typesetting, guys. This bogo offer is making me feel all tingly inside. Is that normal . Yes. Anyway, come in and take advantage of this offer. Huh . yelling its a great offer what . Buy one get one free yeah, this bus goes downtown. Lets just go back to the graphics. Right now at at t, buy a Samsung Galaxy s7 and get one free. With a weak jobs report and a lot of questions about the Federal Reserve, what should you be buying, if anything . Find out at tradingnation. Cnbc. Com. More squawk on the street coming up. Im susan lee. Stocks are trading higher, but health care is sticking to the downside. Standing out as worst performing s p 500 sector today. Among the stocks dragging are biotech names like biogen, alexion and vertex. Biotech etf is trading lower by more than 2 . Yesterday the Health Care Sector turned positive for the year and well watch to see if it can actually hold onto those gains with todays losses. Back to you. Thank you very much. In the meantime, serepta therapeutics rocking taking a second look at one of the Biotech Companies has more on that in chicago. This is a big move, meg. Simon, it is. Its been a roller coaster ride. It has a drug developingdystrop. We learned last night that the fda has requested more information from some ongoing studies of this drug from sarepta. Plan to submit those in the coming weeks to help facilitate what it hopes will be a prompt decision on application for approval. Up until this point most analysts had been bearish on this drug getting approved tested in just 12 patients initially. They are doing more studies and some data has been requested. Most analysts thought the drug would get rejected, but today were seeing notes while some analysts are still skeptical it will get approved, others are saying if these data are good and consistent with what weve already seen, this drug could get accelerated approval. So that is why youre seeing the stock trading up so much today, simon. Okay. Thank you very much. Up now 25 . Thank you. Meantime the dow just hit 18,000 for the First Time Since april 28th. Of course a delayed reaction across World Markets to what appears to be a more dovish janet yellen as we heard from her yesterday afternoon. Lets send it over to Rick Santelli for the mornings exchange. Good morning, rick. Good morning, simon. And thank you. Id like to welcome my very special legendary, if you will, guest, jim grant. Thanks for taking the time this tuesday morning, jim. Youre welcome, rick. You just heard simon hobbs, we crossed 18,000. If my maths right were about 35 points away from going into positive territory for the first time of the year in nasdaq, both the equity indices, the s p and dollar up over 3 . We all know the fed doesnt have enough confidence in the market to normalize, so why are equity markets where they are, jim . Well, i will be able to tell you why they are where they are in about six years with more perspective, rick. For now it seems to me the stock markets presented an image of a kitten up a tree. Imagine the Fire Department coming and the presence of janet yellen with a truck and wondering how it might help get going again. The stock market, you know, is wiser than even socalled legend watching it. Let me say that. Frankly and sincerely. But one cant help but wonder if the stock market is where it is on account of the dynamism of American Enterprise or because of the words, deeds and errant judgment of our Federal Reserve. Well, you know, everybody seems to think that down on this Trading Floor that we have a fed that very few have confidence in is making the right call, theyre out of phase with the market in terms of their cycles of strength in the economy and when they chose not to versus when they choose to normalize. Considering that weve had many, including myself a few years ago, who think flat may be the ugly side of the stock market. You know, jim, the age old question, we know that the fed may not be up to the challenge of normalization, maybe no central bank is. But investors still have to invest somewhere. They know normalization or recession is coming, one or the other. Yeah, we do live in the feds world. You wonder about the world. Lets conceive we are not infor investors but rather basketball players and the games about to be televistelevised, playoff ga theres a final and all they can talk about is the referee. What the referee is thinking. What the referee he or she where theyve gone to school, what has been writing about in scholarly journals. So the Federal Reserve has come to occupy the anomalous place of the referee who dominates, overshadows and is in utter control of the game that he or she is intended to be merely supervising. Quite extraordinary. Now, jim, youve talked at great length in some of your newsletters regarding the yield curve and how flat it is. One of the reasons you bring up is obviously a valid reason that theres a fragileness to not only the u. S. Economy but the global economy. And we all know normalization coming sooner later keeping long the short end higher than the long end with regard to recent moves on rate. Having said that i look overseas, i see bund yields at six basis points, i see over 10 trillion of negative rates. Isnt a good chunk of this also the dynamic that you express regarding the referees it extends to the yield curve as well, especially the long end. Its looking at other securities a lot more than it may be other issues. Your final thought. Yeah. I mean, you mentioned several times normalization, it seems to me the fed has missed its market and the next move is likely to be down as it is up. Its very good economist named steve blitz to whom im now shouting out. And he has called attention to a relatively new indicator the fed has a 19comment thing called the labor Market Conditions index and its turned negative. And if this indicator were back tested, it would show that the fed is more incline to cut rates when it is in this territory than it is to raise them. And i think this comports with the yield curve, comports to any number of citings on the economy. So the world economies are weak. The American Economy is weaker than the Federal Reserve is willing to acknowledge. Jim, we rare out of time, an we have to leave it there, and simon hobbs, back to you. Thank you very much, rick. Coming up, we will have a look at the oil market. Oil was moving higher today, and partly because of what is happening with the dollar, and a view that if we see more than 50 a barrel, you will see more short, and we are trading at 49. 88 and how netflix is hollywoods frenemy. 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. With a different kind of network that delivers the bandwidth you need without the high cost. Because you cant build the business of tomorrow on the network of yesterday. Because you cant build the business of tomorrow imagine if the things you bought every day earned you miles to get to the places you really want to go. With the united mileageplus explorer card, youll get a free checked bag, 2 united club passes. Priority boarding. And 30,000 bonus miles. Everything you need for an unforgettable vacation. The united mileageplus explorer card. 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And you remember that the break with the dollar index is supportive of the crude prices, and remember that dollar rally when it is likely that the fed may hike in june, and now that seems to be off of the table, the dollar index is correcting a little bit, and the second reason is that we are in the uptrend of the driving season, and that is when the demand boosts, and pretty much the whole complex isle rallying to derek and last year this time, crude was trading around 60 a barrel to give you a frame of reference, and traders are saying that 55 is the upside this time around and not as high, but remember what happened when the summer driving was down, the crude prois prices went down to 30 in august and expect to see saw pattern to continue. And also, some support from the supply disruptions, and we discussed venezuela and some concerns about can a da easing. On deck, we have the epi setting us up for the department of energy tomorrow. We have seen the department of Energy Report total production for the u. S. Down 15 straight weeks. At around 15 a barrel, and 50 a barrel, that means that the crude producers may be pemping back online, and remember a that we did see the inkrecrease for first time in a long time last week as well, and that may be a sign that we will see the fluctuations here, and you to keep an eye on the production numbers. Back to you. Thank you, jackie. And basketball shaquille oneil, and phil jackson were back together last night. The two of them have 17 titles between them, and talked some hoops. Cnbc caught up with shaq and asked him about the future of payment. I always wanted to be at the forefront of all new technology. No secret im one of the worlds biggest geeks and any time you can pay without using cash, it is a good thing, and you have to be real responsible and know what is going on. I gave one of my kids applepay, and it did not turn out real well. One of the worlds biggest anything i think applies to shaq given the size of that gentleman. And maybe not freethrow shooter. Well, that is true. The one thing. Okay. Over the Kayla Tausche with a look of what is coming up on the squawk alley. Good morning, kayla. Yes, and we will start out by talking about the deadline forbids for yahoo that verizon is preparing another one of its own in the 3 billion range. And we will talk about how the election is shaping up here in the bay area, and we will talk to michael from reputation. Com now that clinton is the presumptive nominee and how the tide might be turning for trump, and today, this is when we will be unveiling the disruptive 5050, and we will talk to sofi who is disrupting the world of banking. A all of that is coming up on squawk alley. Okay, so you launched your banks app. Now what . How will you keep up with the new demands of todays Digital Economy . 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On wall street, and 8 00 in sunnyvale, california, and we are on squawk street live. Good tuesday morning, and welcome to squawk alley. Jon fortt is out, but Kayla Tausche is in san francisco, and here for the hour we have mike santole, and dennis berman, the financial editor at the wall street journal, and also, joining us is lead writer at fortune as well. And now, verizon is looking to bid