Transcripts For CNBC Squawk On The Street 20170630

Plus shares of nike can climbing 6 . New science of a coming trade war. The Trump Administration reportedly near imposing new tar rifs of steel imports. Well dig into the story and the Market Movers on it. As we head into the final trading day of the month the dow and s p each on track for a 7th consecutive positive quarter nasdaq the best performer despite weakness in june also up some 14 that compares to 7 in the s p. 7. 7 for the dow. Its going to be the worse since 2010. 2010. How about that and a lot of it came recently. This week the dollar is down 2 and that was largely driven by the euro shooting higher theres this narrative that the rest of the world is coordinating and i mean the world Central Banks. The ecb, the bank of england, maybe the bank of japan but theyre coordinating the begins of an exit from super easy monetary policy. There was a lot of Central Bank Speak and that is what is being attributed to this rise in global yields that we have seen. Ten year treasury yield from 213 to 227 today and thats created some jitters in equity markets as well and its also hammered the u. S. Dollar. It created this catalyst to have the winners get sold and its a little bit of an unwind of some of the comfortable trades out there and yesterday the Big Bank Stocks and big tech stocks acted like bond surrogate which is is not strictly true. But because youre talking about a stable business, very, very longterm stream of earnings the Interest Rate you have today is how you discount those earnings and seems like they act that way. It created an opportunity or trigger to have a bit of a convergence back from the big performance gap you have. Nasdaq below the 50 day for the first time the xlk breaks its 50 day lower than the july 12th lows so a pattern of lower lows so how much is that a concern from a chart standpoint its a concern. Its the nasdaq 100 down about 5 the s p hasnt had a 5 pull back since october you would think at some point you would be overdue for Something Like that and some of the semiconductors they have given up a fair bit of their gains and its interesting, if you look at the dow performers year to date, techs have been the biggest winner as a sector this year with 5 of the 5 worst dow stocks its new tech or platform tech or secular growth tech growth is the keyword. Its not about the cycle. Its about the magic of the network. Theres so many others. I was having this conversation yesterday in terms of media. Media which took no growth at all. You look at the top line of somebody in the Big Media Companies wrote what they could manage and yet i was like but theres two huge Media Companies called facebook and google and they have grown quite quickly. Although viacom, one of the worst for the quarter, along with its interesting, you have media in there, foot locker is the worst for the quarter and then we know what oil has been through for the first half. Energy, lots of retail. Are Energy Factors big . Yeah. Exactly. So the trends for the quarter here have to some degree been reversed in the last week or so. The do you think well say this was the week the market came to regime policy in. The question is are conditions going to allow for that michael is a strategist today and had an interesting point which basically says Central Banks want to make wall street poorer you have this huge wealth gap and they want to get the markets back on their heels and essentially pressure these deflation nary type trades they get bullied into easier policy the condition question is right. This is the preferred inflation gauge falling 0. 1 month over month. Year over year 1. 4 slowest since november moderating inflation goes against the Federal Reserve trying to shrink the Balance Sheet, ramp up Interest Rates in any aggressive way if thats really what the world Central Banks want to do. Its aspirational they want to get to that point but even if they dont, even if its not a huge assault on Financial Markets and draining of liquidity is that perfect for the nasdaq they want to push against an overconfidence of the markets. We got this figured out. One factor is nicely. Better than respected quarterly results. Its launching a program to sell products on on it. Were executing a new pilot with amazon with a limited assortment as we do with all of our partners were looking for ways to improve the nike Consumer Experience by elevating the way the brand is presented and increasing the quality of product story telling. Were in the early stages but we really look forward to evaluating the result of the pilot. The important word there, he didnt give that much in terms of details as to what the product assortment is going to look like on amazon. Direct partnership with nike highly anticipated but they emphasize its going to be limited in scale and in roll out and theyre just going to test it so for analysts this morning its hard to model a revenue boost but they do see it as a longterm positive and also as a sign that nike can transform with the time and we got that in the new announcement where theyre going to focus on to consumer and key cities. This company is transitioning to where the consumer is going and they underscored that with the numbers yesterday. 35 of nike revenues are direct to consumer. Thats nike. Com or nike stores but its driving 75 of the growth right now emerging markets up 20 or so. Margins were down though. Theyre trying to get their inventory in control a little bit. Theyre facing stiff competition. Nike talks about the promotional environment in north america but thats the most important market for this company the offset is helpful but thats something theyll have to turn around they did talk about innovation thats going to be the driver if they do want to turn around north america. Basketball is back that was important for people to see and, you know, the amazon deal. The guidance for fiscal 18 is a little bit back half load. I just find the market response intere interesting. Everyone was flinching in advance of what they thought was going to be the worst report they sell jor dance on amazon that would be interesting. Which they would not commit to there was a question on the call and they didnt mention that one but jordan brand is doing well they have high hopes there was so much run way internationally and through apparel that they havent scratched the surface. The valuation has a planned to it mike. It has been deep relative to other companies and nikes valuation because there have been a lot of doubts and now that they set a longterm trajectory. Its a 21 times forward multiple its a premium but not a premium at where they have historically traded. Wheres under armour . It was a little bit stretched out. The president prefires meet his south korean counter part in the white house this Morning Health reform on the president s mind although aman is tweeting again. Good morning to you. Good morning. A lot to bring you up to speed on include on the trade front. The new Media Publication reporting today that the white house is leaning toward 20 tariffs on steel that they say comes from a meeting here at the white house on monday. I just talked to two officials here at the white house that are pouring some cold water on that report suggesting that its not clear yet where the president is going to land on tariffs so i think its maybe a little early to say that we know for sure where that fight is going toend up we know there are two factions here inside the white house on tariffs and protectionism more broadly. On health care the president also tweeting this morning putting up a new proposal. The idea that they could simply vote on capitol hill not to repeal and replace but just simply to repeal obamacare now and then replace it at some later date i just talked to Kelly Ann Conway about that idea and she said the specifics are not entirely worked out yet. I asked her if that would violate the president s promise to keep the more popular elements of obamacare including that you can keep kids on the plan until age 26 and preexisting coverage bock blocked by Insurance Companies they havent worked out the specifics of that but theres Republican Sen tors on the hill that are supportive of repealing and then replacing at a later point and then on politics we saw the president tweet yesterday about morning joe host get a lot of attention i asked Kellyanne Conway if that hurts the president in terms of his legislative agenda on capitol hill she said that doesnt matter it doesnt matter what the president says on the tweets because the media would have been covering russia anyway so doesnt change the media lenses here and then we saw the president with a new tweet about morning josing that he actually watched the program this morning and he doesnt like what he sees effectively. So this is a lot going on at the white house here. So many things dont seem to get the attention of wall street but this trade issue does. Whats the next step in terms of getting a sense as to they havent reported where most of the cabinets say dont do it whats the next step here . The next step for me is to go back inside the building and find out more about it the folks are very good. A lot of those reporter versus good sources and theyre very plugged in but the two officials i talked in are pouring cold water on that particular report saying its not clear where the president is going to land in terms of tariffs if youre wall street and looking at this you might not want to react with certainty here that this is a done deal. You might want to suggest the needle on probabilities might be moving but i dont think we can say for sure where the president is going to land on this because theres internal tension in the white house between globalist faction and protectionist faction. We think we know where the president s weather mane goes on those issue. Were going to look at sectors highly concentrated in steel. Talk to you soon going to be a busy day in washington when we come back, his take on the markets as we wrap up the month, the quarter and the half. Taking a look at the premarket he did warn us about dwindling population on tragd desks over the holiday. What that would mean for volatility well see if we get a repeat when we come back. What happened yesterday was right after the opening bell, someone showed up when they went into near free fall. I think after searching around what it may have been is two or three automatted programs begin to compete with each other and one in front of the other they turn more aggressive but not having fully staffed then lead to more volatility we could be subject to it today. Were starting with the dow and s p looking for the opening but nasdaq looks far more neutral where it was idea so keep your eye on that and see how the techs hold up. The fang stocks, the big nasdaq 100 stocks are going down the way they went up which is in lock step. Similar percentage moves on a daily basis and then it seems like a bit of a reallocation so therefore the pressure on the broad indexes. No, youre right. A lot of people did try to make it a rotation but you, into energy and its up 1 10th of we had these reports that the president is considering steal tariffs. What is your sense as to whether its playing in at all to some of the jitters they have been giving them a little bit of latitude here. We havent gotten anything at all. We havent even come close to it if he were to suddenly slap on tariffs youll see a major shutter go through the market here people worry about trade wars and where were going from there. Well wait and see as we said yesterday the early part of july has a history of being lateral moves it would be okay to consolidate. All right thanks. Coming up well tell you why warren buffet and Berkshire Hathaway is now bank of americas biggest shareholder. Take another look at futures plus ten minutes to go before the opening bell looks like markets indicated to open higher at least the dow and the s p still some pressure on the tech heavy nasdaq down four on what is set to be a down week for stocks more squawk on the street straight ahead. It starts a chain reaction. Thats heard throughout the connected business world. At t Network Security helps protect business, from the largest Financial Markets to the smallest transactions, by sensing cyberattacks in near real time and automatically deploying countermeasures. Keeping the world of business connected and protected. Thats the power of and. So thats the idea. What do you think . Hate to play devils advocate but. I kind of feel like its a game changer. I wouldnt go that far. Are you there . Hes probably on mute. Yeah. Gary wont like it. Why . Because hes gary. phone ringing what . Keep going yeah. laughs voice on phone its not millennial enough. There are a lot of ways to say no. Thank you so much. Thank you so were doing it. Yes start saying yes to your companys best ideas. Let us help with money and knowhow, so you can get business done. American express open. In august of 2011. Virtual pay just about 7. 14 a share for the common and based just on the common stock price thats an instant profit of about 240 or very quick 12 billion if you wait a few years. Yeah we talked about the fact that only warren, i can use his first name, gets those kind of deals. The deals he got when youre not just looking for the money but youre looking for the endorsement thats so important and the confidence thats what he gave them in 2011 when he did that deal. He did similar deals during the crisis i remember with goldman sax and ge terms that no one else could get period. Whats interesting about this b of a deal in 2011 if you look back at his comments at the time it wasnt strictly like goldman and dprks e where there was a run on the bank and you needed capital and you needed to show you could get capital. He said it was a good investment the stock was down and i called the ceo and said i want to invest and thats the deal he managed to get anybody else calls and he might say were listed on the new york stock exchange. Feel free buy our bonds. B of a does have a statement this morning we appreciate buffets continued support. We welcome his decision. Well get to the opening bell in st f mut ju aewines im here at the Td Ameritrade trader offices. Ju aewines steve, other than making me move stuff, what are you working on . Let me show you. Okay. Our thinkorswim Trading Platform aggregates all the options data you need in one place and lets you visualize that information for any options series. Okay, cool. Hang on a second. You can even see the anticipated range of a stock expecting earnings. Impressive. Whats up, tim. See options data like never before. With thinkorswim only at Td Ameritrade. Live from the Financial Capital of the world the opening bell in 90 seconds on this friday which is for some a long Holiday Weekend a few movers tesla up about 2 3 a participant on twitter asks musk to clarify a july release date for the model 3 give us some clarity musk says news on sunday. News on sunday. So thats what, july 2nd and the idea that whether it was in the first week of the month or the last week of the month because they already said july was going to be the release date and that was going to get the stock moving, its par for the course he keeps a constant teaser feed going to keep the anticipation alive. Thats whats happening and of course that stock has backed off with a lot of the other high okay tanstocks as well. Did get some earnings out of mirks, cron. Revenues ahead pricing up 14 and the guide above the estimate, 173 to 187 for physical q4 streets at 157. The fundamental momentum. All right so lets get this final trading session and q2 done opening bell here at the nyse. The s p at the bottom of your screen at the big board, Software Provider celebrating its ipo today at the nasdaq sell brath its celebrating its ipo. Ipos have been on our mind this week as blue apron yesterday closes essentially flat. Someone called it a reality check for unicorns looking at a lower valuation than its last fundraising round. Interestingly we average first day return of a u. S. Ipo this year is 6. 9. Maybe slightly less than underwriters report but thats good and blue apron having lowered the range you have to qualify flat on the first day but it held the ipo price at least through a day and this morning so far. That must have been tough on that ceo. No surprise dows best component and the s ps best component is nike starting off with a bang. Better than expected earnings. Its responsible for a large part of the ows gain. It was a 10 cent beat on the bottom line. Lower tax rate and cutting cost and also some strength in markets like western europe and china and emerging markets despite flattish results for north america. Nike also sounded upbeat when it came to innovation and they also confirmed the deal to sell directly on amazon even though its going to be a limited slow roll out that makes investors and analysts optimistic here. I do think theres a little bit of an overlay which is positive for the shock while the company doesnt emphasize that its still not so hot. Down 2 for north america so theyre going to have to prove that they can turn around their home market and get some of the innovation to drive higher selling prices which are also kind of a low point of the report. Worth taking a look at shares of hain and give you the background the stock up 10 this morning. This on news that came out yesterday. This is an activist fund founded in 2012. He had been a former principal at relational. They have been active. Theyre small, though. My friend that knows all about these things said about 400 million in assets at this point so the position which at 9. 9 is not that far from the total assets seen under management, well, actually they own a lot of it through options as you might imagine and i can get to some of the specifics there if i can actually read here in terms of what their ownership is. 8 million shares 2. 3 million shares under lying call options what theyre asking for, reductions 7 of 8 board seats though that got my attention and may get the attention of a number of investors. Some of the parts valued its much above it. Theyre also undergoing a huge Cost Savings Program and he looked at all the Cost Savings Program which is there are many going on in package food space and hain is the biggest. Not a lot of opportunity for value there but i would say one thing that excites investors, david, is this is the same fund and gauge that took a 9. 6 stake in bolder brands and four months later bolder sold to pinnacle foods. Its not an out right sale which hain is the last remaining pure play in the space and it does have some snack brands it has a lot of baby food brands leading in their categories and also has the tea we talked to simon just last week right after he put out results for the first time in more than a year about why now hes talk and how he feels about himself staying on as ceo and founder after such a period. Listen. Its important to get out there and tell our story okay . Tell our story about our brand tell our story about our positioning. Tell our story about what were going to do. I come back and i feel good about our story. This is something i found 23 years ago and they have more than 55 acquisitions which makes it hard to value to your point on some of the parts but they do have interesting brands and they actually are growing in terms of that well see ray kelly is one of the members of the board remember him former Police Commissioner well see how this goes. As you point out its had some success, small firm but with them also won something on rent a center recently. Not in the food related area. After this whole long period that was painful for the founder period and effectively manage that relationship. Two years ago when they were in bolder brands and it got sold hain was at double the price so hain stock was cut in half up to about 2 weeks ago. Its had a little bit of a pop since then so it seems like yes maybe you cant pencil in that this company is in play as a whole but the market is going to still sort of think it has value and its not going to get cheap on a pe basis before some other strategic buy. Also Jp Morgan Says its too risky because theres just so much appetite, pun intended, for stories when it comes to Consumer Staples especially in the food business and hain is at the center of them. Nike is giving the dow a 30 point boost here interestingly, mcdonalds, best dow stock of the quarter today another s p leader for the quarter today. I think you are seeing just a little bit of that kind of on the line type flow business and even on the sector basis you have financials leading today again. Not leading the entire market. I do think real estate, there is a little bit of that effect going on. Another winner today might be coh coach getting an initiation. Of a buy a 59 price target there they say the kate spade deal is a game changer this might be a little bit late of a call because coach has already implemented quite a turn around story but they say theres a lot of synergy between the kate spade and Coach Companies in terms of saving cost and not a lot of overlap in terms of customers and not a lot of runway. Something coach has done for its own name sake brand which is also turn around and hit on when it comes to style and fashion trends coach is get a boost. The market already has endorsed that deal. Its a late call but still how many winners are there in retail and Specialty Products right now. Seeing some additional buying in financials despite that weak pce number we got. We did get the tenure cracking 23 today. Everybody was fixated on the yield curve and hovering in that 0. 8 type range. Its up to 0. 9 nobodys idea but its definitely helped and its no longer being squeezed down toward zero. Right. I would argue that 90 basis points is fatter than 90 basis points when the ten career was at 4. 5 or something before the crisis. Dow is up 104 lets get to bob on the last day of the quarter. Happy friday everybody. Nice start 41 advancing. Declining stocks and this goes into this rotation that we have been talking about all week banks on the upside just turned negative but retail has been horrible energy, small gains, semiconductors but were ending the first half of the year and there are attempts at least batting down the big momentum names. Whats been the leader this year semiconductors, biotech and you till gattis. All three of those groups have had problems for different reasons. Some in price evaluation we have seen great start to move to the upside. The problem is its not quite clear whether were going to have any leadership. Everyone in their mothers is rooting for banks to be the new technology for the second half of the year. Theres some early signs thats happening but the rest isnt there. Thats a number they have been shooting for for a long time in terms of what has been getting the inflows, its the plain vanilla things but were also seeing big money going into overseas for the first time in a long time. Van guard, european funds, emerging market funds are seeing in flows its for the full year then you can see this if you look at the numbers overseas here. Its very clear signs that theyre going to break the momentum of the Technology Stocks a trillion dollar in etf but these four guys control almost 90 of this prior etf business its rather remarkable and finally, heres something thats amazing to me. These are basically the same two funds. Theyre the same funds just four basis points has inflows and the other nine bases points is at outflows. People are moving around for that very purpose. Waiting to open on the enterprise to more effectively manage their crowd storage the number priced at the low end 7 to 8. Earlier in the week, heres the second one and down funding and finally i want to point out blue apron did break 10 today. Dow is up 94 points. Bob, thank you. Chicago pmi out. Rick santelli in chicago. Well get to pmi when it does come out in a few minutes. The first chart is a quarter today chart so looking at her two year yield theyre hovering at the highs and theyre up two on the week where as tens were up 14 on the week now Everything Else is quarter to date so were looking at the entirety of the Second Quarter theres your tens. Nothing but upside look at how the tens the twos and the 30s the 5s and next two yield curve trades have been denoted by flattened we could argue why is it whats going on in europe with rates going down and now it effects our rates or is it that and the notion of less growth whether its global or domestic but its definitely steepening and finally the euro versus the dollar and Pay Attention to and as for that chicago pmi of course its going to be the 2nd to the last big day for the week for chicago were looking for a number around 58 last look at 59. 4. Here we go, buckle up 65. 7 65. 7 its going to take me aways to go back here way back in the old way back machine. Its the best level since april. April of 2011. Thats a long time thats the one thought to leave everybody with here. Here we are at 228 we touched on 230. Yesterday during our time zone trade we briefly were within half a basis point so here we sit at 228 and despite some of the pce data on the softer side that gives you something to think about what is really driving the long end is something that might not be as economically fundamental as history would dictate. Sarah back to you. Love seeing your reaction to beating data in real time. Rick thank you nike is by far the biggest gainer of the dow adding 30 points to the rally beating wall street expectations. Joining us now is anna, managing director for those that were skeptical on nike youre also neutral so much of it is about expectations it got downgraded weeks ago. Talking about a guide down to fiscal 2018 and this big currency hit yes nike beat but who would argue the quality of the earns hasnt been stellar. They have been beating primarily on the lower tax trade and arguably does not warrant multiple expansion so we do think theres still issues in the athletic space. They did give an upbeat forecast and a number of your fellow analysts are optimistic about whether or not its a slow limited roll out. That is the right thing to do we have both been on amazon in a directly controlled presence that nike hasnt been up until now. Theyre also cutting back on some of the less profitable wholesale relationship lets be honest. The brand has gotten overdistributed here in north america. Does that explain the disparity between north america and overseas yes north american futures are down sharply. Thats part of what is happening with some of the farther shifts they talk about. They do expect north america to be modestly negative here in the first half but then positive for the year which also does imply some. Mention pressure on athletic as a category. Is that something that you see as a long lasting shift or just an indigestion period . We had a number of bankruptcies of course now those are mostly behind us overall, nike controls almost half of the marketplace here in footwear and nikes inventories were very lean the sales to inventory spread which is a very important me trick was finally positive for the first time in many quarters. A more rational nike as we look through the next year will bode well for the entire space. Whats happening in north america beyond the pressure in malls and Department Stores . How much of it is addidas gaining market share. This brand has gone from i believe about 6 or 7 market share just about 18 months ago to low double digits they talk about each region being at least 15 market share. So they gain some at expense of nike for sure. But specifically in performance they have been doing a very good job. Do you think that the investor fears of companies being amazons, foot locker is the biggest llagger for the swier quarter. Thats a fair question. I think overall theres not a lot of great ideas in consumer right now as we know nike as a dominant brand in foot ware i think the risk of beating amazon is negligible there so were less concerned on that front. Overall with the valuation, nike is trading at low 20s multiple which is at a premium to the space but thats a discount to their historic averages so even though estimates are coming town youre seeing some multiple expansion. Underarmour is near the top of the s p does that make sense to you or was there anything that underarmour should be scared of in that report last night from nike theres some things we will be concerned on on underarmour specifically nike talked about being back in basketball thats as much as 40 to 50 of under armours footwear sales. Also nikes apparel slowed its only about 30 of their revenue but its a bigger deal for under armour which is still primarily an Apparel Company we saw the lateral as more negative. Youre sceptical. The nike stock is up almost 9 thank you for joining us. Thank you for having me. When we return, some eye opening stats involving google and facebook y w is is up 110 on this final daof q2 well see what the afternoon and the rest of the morning session brings back in a minute baby crying minutes old. A babys skin is never more delicate. What do hospitals use to wash and protect it . Johnsons® the number 1 choices in hospitals. What should i watch . Show me sports. Its so fluffy look at that fluffy unicorn hes so fluffy im gonna die your voice is awesome. The x1 voice remote. Xfinity. The future of awesome. Typically we do see Short Covering thats been the factor all week. When the markets are closed for a holiday. Monday probably lighter volume than normal too. The story is still the same but im hearing the market could be getting ahead of itself here positive signs but the u. S. Supply is going down really a drop in the bucket longer term. Also the dollar. Nine month low dollar index around 95 more pronounced directional dollar moves are coming back in this case its supportive. 4488 is your session low 4548 is the high so far. That is significant. Thank you goinged and facebook set to make more from ads this year than every newspaper magazine and Radio Network in the worldcom biened thats according to any article. Google will generate almost 81 billion in ad dollars in 2017 for facebook got a digital ad. Market value of over 1 trillion add up all the tv networks they dont add up to a trillion dollar. I dont think they add up to 20 of that. Citigroups cohead of m a on the alde making landscape for the second half of the year. Were back in a minute our road map for the hour does begin with being halfway there. Investors gearing up toward the last trading day of the week, the month, the quarter and the half of the year well break down how to play your portfolio for the rest of 2017. Confirming big news on a partnership for amazon. President trump gets ready to welcome south korean president moon to the white house. Well take you there live but first we have more Economic Data today crossing the tape. Lets get back to rick san terks li for the numbers the 94. 5 gets tossed out once you take the 94. 5 out the 95. 1 even though its better is actually the weakest number of the year going back to november its much better than 109. 6. What we did on the 5 to 10 year inflation outlook for the mid month look at 2. 6 to ultimately the 2. 5. Still the 228 up a basis point trading pretty brisk actually for a Holiday Weekend but the ranges were pretty tight carl back to you. Thank you very much Rick Santelli investors ready to close out the trading day. After that sell off yesterday. Joining us that morning is the chief Investment Officer sounds like you think the second half is going to sound and feel different when it comes to rates and financials and a few other things. We have a nice preview this weekend. Especially the fixed income market is really underappreciating a very important shift with Global Central Bank Balance Sheet policy that means higher longterm yields in europe as well as the u. S. Harder second half for fixed income. All of those head fakes are in the past. You dont see a repeat of the period and ended with only one in december. I dont think so. Both on the short end as well as on the long end in terms of the policy around the Balance Sheet, right . We got a lot of very confident body central bankers around the world. The fed as well as the ecp and the bank of england. Theres much better confidence and comfort around growth. Will move fast to the target. Very much steady as she goes in terms of policy here. Thats how he felt. Do you think theyre as confident as they sound initially. Im not so sure and that worked great until february and inflation rolled over and the fed raised one more time i do think they are concerned about the slope of the yield curve. Thats probably why theyre starting to talk about Balance Sheet reduction. That would help push yields in the space higher and what that mean is look at all the central combine. And i think that could be a concern if we start to see that pull back. Even a slight tightening of policy in the u. S. Its still super easy and well take a long time to get this 2 which is still way below historical Interest Rates in europe, japan, the u. K. , were talking very easy policy. Theyve never seen it before. People have never seen it. I dont think we should be concerned about it its a vote of confidence that the economy, inflation, financial conditions are all moving in the right direction. What were saying is appreciate the effect thats going to have in fixed income. Its not going to be such a rosey environment for fixed income such as a case in the first half of the year it will just be a little bit more careful. Should you be shifting now into groups that benefit to financials that have stood out this week. The only other group that is positive and at the week at large. But out of the sectors like you till gattis and telecom that are going the other way. I dont think that could be problematic. Also the fact that the s p 500 outpaced the trajectory. We would prefer investors shift incrementally overseas where developed markets are traded at a 10 to 15 discount emerging markets at a 15 to 20 discount this friend were seeing with momentum shifting this year, thats more of a secular trend that should continue for the next three to five years were merging outpacing the s p 500. Back home, how much of this reinflation trade will be consumer central because do you expect the decline in consumption to continue. We did see a pause in the First Quarter. But still consumption around that and we should see that back to a 3 space in the Second Quarter. But still thats the part of the city were converging in the middle the survey data is coming down a little bit ultimately what were left with is a 2 economy. What happened to the trump trade . I was pretty sceptical among investors. It went from the election at 1. 8 to 2. 65. Now its retraced about 65 of that move. Probably retraced about half the move mexico retraced 60 of that move reading those tea leaves that would suggest the hope there you got one final thought on that we would agree that we do seeing a 2 economy. Its really internationally involved well see what the second half brings guys thank you so much speaking of the president just moments from now were expecting the arrival of south corr can reen president moon at the white house. Meeting with trump he was there at the white house yesterday as well. Dined with the president and his wife overdinner. He joins us more on what we can expect in todays meeting. Its a work visit today no honor guard here on the drive way behind me. This is really a get to work kind of a session here at the white house today. And chinese based global unity shipping company all of those in china but the u. S. Government doing business and the Global Financial market and shutdown that access and i asked the treasury secretary yesterday and other banks that the u. S. Has its eye on and also wouldnt answer a question giving a heads up and saying he simply doesnt want to get into the behind the scenes conversation president moon here yesterday here at the white house for a lavish dinner. You were expecting the president to come in and i can see it here to my right on the north lawn. For the official greeting just about 35 yards away from me here waiting to be rolled in for that greeting at the west wing. So a big day here at the white house. Thanks for the update on the choreography well get back to you. For more on this relationship were joined by former u. S. Ambassadors. And chris hill now the school of International Studies at the university of denver good morning to both of you. Start with you ambassador hill there does seem to be friction going into the meeting on the trade side President Trump had spoken about the deal implemented about five years ago with south korea and how it was a horrible deal in his words. Do you expect that to enter into the conversation or is north korea too urging and too pressing i expect both will be discussed. I couldnt imagine President Trump going into a discussion with the south korean president after one of these trade agreements that he has expressed great concern about and of course u. S. , the u. S. Bilateral relationship or bilateral trade relationship has gone south. He did say after the dinner last night that he wants to talk about a new trade deal im not sure why thats in the cards but there will be some markers put down on some issues. So i would not at all be surprise first degree that could be part of the meeting but of course the north korean issues front and center of the administration pushed recently and especially those right down there on the border of north korea that is the bank and the whole issue of what is going on in northeast china with respect to trade with the north koreans so i think those, north korea will figure prominently into the discussion as well. Before we get to north korea and sticky situation there, just on trade, how do you expect the south korean president to respond. Theyre our 6th biggest trading partner. Its a big manufacturing power house like china and the deficit is nowhere near the size of chinas deficit for instance. I think first and foremost president moon is going to try to point out that Korean Companies arent make a very large contribution to the u. S. Economy through investments that generate employment and has plans dramatically the trading relationship is more balanced and also willingness to continue to discuss ways in which we can improve performance. Ways in which korean implementation of our bilateral trade will improve were back to this question of whether or not we ceded some ground and are trying to make it back whether thats possible. We got out of that regional deal we had a Bilateral Agreement with korea and disappointed by ttp and i believe it was a huge mistake. On china specifically ambassador hill, how do they deal with that what is south korea going to say there . What does President Trump say when it comes to chinas role in the region first of all president moon wants to camp down the south korean china relationship set off by the employment of this antiballistic Missile System it will be in the form of whether we can get there on north korea that will get implementation through china or do we need another track and president moon has been on record about talking about possibly having the u. S. Agree to seek a freeze of north korean testing as a first base toward discussion that would lead to it i suspect the american side will be pretty careful about that atheyll listen to proposals about a more direct approach to north korea. North korea has shown zero interest in denuclearization and the question is what are we going to do about that because a deliverable Nuclear Weapon is coming down the track soon. Well give you the final word what do you predict for the north korea situation . How its going to play out what the u. S. Strategy is shaping up to be where that leads us . I think its the final in negotiation. Very much agreed to that and i think investor hill is quite correct. North korea is showing no sign willing to denuclearize. Been entering in a dialogue. Certainly a military approach to the problem is not at all required have to find ways of something to return to a negotiating table. It will be interesting. A lot on the agenda for you today. White house for president moon to meet President Trump again. Thank you. A big stock to hit today were keeping an eye on shares of nike leading the market reporting better than expect earnings hitting on the top and bottom line. The Worlds Largest sportswear maker was held by demand in key markets around the world western europe and emerging markets. The company confirmed that new partnership with amazon. Heres what Ceo Mark Parker said instead of that were going to go to the white house where we have President Trump, the official greeting with president moon. Theres and that shake which everybody always watches going to start taking place at 10 30 im not sure were going to get q and a but well find out and tonight well visit joint base andrews. Biggest trade issue is going to be especially with all the talk that the president is leaning toward potentially tariffs on steel next week as i mentioned south korea is an important trade partner for us its the 6th biggest behind germany and head to the u. K. Well take a look at some of the m a deals you might see in the second half of the year. In mergers and acquisitions since city is with us. 83 points to the upside. S p 2424 jack knocked over a candlestick, onto the shag carpeting. And his pants ignited into flames, causing him to stop, drop and roll. Luckily jack recently had geico help him with renters insurance. Because all his belongings went up in flames. Jack got full replacement and now has new pants he ordered from banana republic. Visit geico. Com and see how affordable renters insurance can be. [ no[ laughing ] an ] its driving me crazy come on. [ spitting from tongue ] time for my secret weapon. Sports, movies, tv, ah, show me music to distract a minion. [ voice remote click ] oh [ pharrell starts to play ] [ minion so happy to see screen ] ahh im pretty smart. Ahhh [ lots of minions ] [ mooing sound ] show me unicorns. [ click noise for tv ] ahhh that works too. Find your awesome with the xfinity x1 voice remote. See despicable me 3. In theaters in june. 75 by the way but as for global m a volume, 5 trillion for the first half. That was shy of last years total of 1. 6 trillion but more notably its down from that. Its 25 while europe targeted m a is actually up 15 year over year global cohead of m a at citigroup. City in the top ranks. Work hard i mention those numbers globally its very good the guys that sit in the seat i sit in are going to have a good first half europe has been a real bright spot, europe is 40 of the markets. I do think that its for a much tougher environment going forward. The business is slow today time warner and at t and the media and then telecom not to mention technology all of which saw big deals last year the irony is if you look at the 10 billion plus, its not tech its health care and consumer so if the market is is shifting, technology is down health care, energy, consumer are big drivers and as you said the fact is when you look at 1 billion plus, you have to look at the driver. A number of deals is off and slightly down. Now you might ask me why. Why, mark the thing is and i saw a whole lot of commentary in the press today but i think theyre focused on valuations at an all time high. Were talking about a number just under 13 times. A very high number premiums are now i think what i see, its big strategic stuff becomes axable the other piece of it is we havent seen much legislation in the u. S. You see concerns. Again the list because what i think you can hear to your point is a lot of people talking the chance that you give any particular conversation back seen lower. I dont disaagree with that i dont think the time frame has lengthened partially because you have to get people in the seats. And as you know you have taken a fairly tough line in a lot of cases. If it comes at you somebody else sets it off at table the question in this market is still a sellers market i dont disagree result of the second half comparisons are going to be interesting. Even if we get that were looking at a mark that will be down roughly 10 year over year in volume. So the question is are we starting to kick down. Is this beginning a downturn. And the you think. Legislation macro and gdp in europe including the u. S. Were ultimately tide to growth. S p Consumer Confidence moving forward. In terms of the second half here again this expectation is a big deal and tmobile this week a lot of time on comcast and sprint but are we going to see any of those or are people going to be disappointed its an interesting point because we talk about it and obviously, in fact, impacts production. Knock whole foods out. The most important day of the year. Clearly we should see it theyre down 30 year over year. I actually think we will the question is is it a secular downturn at this point you get the market direction. You get market disruption the last couple of days. And what about that conversation in the board room that i would assume took place early in the year when the expectation seemed higher about taxes . Is that what were done with and our sellers less reluctant now to sell because originally they thought wait a second my multiples are going to go up. Market valuations are high. I mean, i hear you while theres hope for much higher expectation hopefully well get it hopefully well get meaningful tax reform but thats much more valuation. Its a pretty good time. People want it. It still looks like its aways out. Look at loads this week we dont know where that will go. But theres still a lot of activities. Absolutely. I think youre looking at it in some cases you looked at whole foods, i think were talking about this the last few years. I dont think its going away. Thats another one back here there are some very positive things but i do think at this point. All right going to bring you back so i can tell you youre wrong. Lets see. Every now and then. Once in awhile number two. Number two. Thank you very much. Appreciate it thank you. When we come back, a lot more on nike surprise beat and the big announcement with az aamonnd detienls what it means for the stock when squawk on the street comes back he hopes this will be the start of further Market Access of u. S. Farm products in china were very hopeful that just the beginning of Significant Growth in our trade relationship. Former president waum balm meeting with indonesias president. Obama and his family are currently on vacation in indonesia. The former president is scheduled to speak at the Indonesian Congress tomorrow as burts bees is recalling its infant cover alls because of a choking hazard theyre sold from december 2016 to this past may it received 11 reports of the snaps detaching but luckily so far no injuries. Thats the news update this hour ill send it back downtown to you sarah. Sue, thank you. Were keeping our eye on shares of nike this morning the stock is on the move its up almost 9 . Also helping the dows rally today. Joining us is the retail analyst that likes the company whats your target 69. 69 price target. So you like what you heard out of niek. What about the vision of 2018 which is now going into its fiscal year. You have a large cap Growth Company thats outlining to you a specific point in time of when they expect revenue and earnings which is the First Quarter and they provided visibility for a return to double digit Earnings Growth and couple that with adjusted margins and it speaks to improvement in full price settings and were in an environment and retail that have been very promotional. Also higher asp and benefits that theyre going to receive by moving more product through their direct channel so that combination is to me very bullish. Certainly thats the Market Reaction today north america still remains weak, challenged and promotional and its not clear that thats turning around. Any investor is fair to highlight that the data points that we see on a weekly or monthly basis today are not very supportive of this proposed resurgence in nike i think that you have a company here that has quite a historical track record they have been a leader in innovation their vapor max as an example. Theres not many units out still has been favorable so he comes across and says well put millions of units in the marketplace in the second half thats what we think is supportive of this reacceleration in overall revenue. In ordertrom announces theyre going to close another store near dulles. Niek isnt saying much about the wholesale model of retail in general. If youre show casing in a meaningful manner, nike is going to allocate even more product to you. However in essence, their conversation around more through their own direct units or this potential and growing relationship with amazon does speak to the mid tier channel. Maybe more other Department Stores or other family footwear retailers that theyre not pleased with and it sounds to me like nike will be moving product or reducing supply into those channels. So this whole shift that nike is making to direct to consumer and focussing on key markets you dont think it represent ace threat to those with a premium distribution like foot locker and dicks having not seen what product will be put on amazon i certainly cant speak to that with certainly but nike has probably done as good of a job as any brand in terms of seg menation of their product across various retailers and various channels and we see clear differentiation between nike product at kohls versus at Dicks Sporting Goods or foot locker and we believe that will continue and we think theres low likelihood that the premium, two premium jordan brand hightech nike fleece jacket is what well find on amazon. It would surprise you. It would surprise me. More of a toe in the water dynamic at this point anyway. Absolutely. Amazon has become a clearly fast growing channel that a pretty High Percentage of americans use on a daily basis and nike should be there in a primary manner as opposed to through all the Third Party Vendors that already sell nike. Or fakes. Or fakes as well so this is a good move for nike and it makes a lot of sense but it does not, at least our view right now, it does not take away from some of the very key partnerships that they have in a foot locker and Dicks Sporting Goods do come to mind as crucial Retail Partners for nike. So the narrative over the last year was adiddas is killing it and nailed the retro trend and theyre taking share in north america and there are signs that athlesuire as a trend has peaked. Theyre still going to have to prove what they outlined for the balance of fiscal 18 is going to come to fruition. They have to do that with the customer responding to the product they put out in the marketplace. Retail is still challenged it is still promotional and traffic is remaining negative. But this is in my view a little bit of a glimmer of hope around what is to come in the second half and youre providing real information and exclusivity and product and something unique it will respond. Well have to see what the new nba uniforms look like thank you for joining us. Niek still adding about 30 points to the dow. I want to draw your attention to shares of the home con destruction etf. The first ever since the inception in 2006 and check them out on pace for the First Time Since 1993 jumping about 15 so far this month perhaps a positive sign for the housing story in the u. S. As we kick off the second half of the year carl. Thank you very much for that. When we come back a look at warren buffetbis g bet on bank of america squawk on the street continues after a break. Minutes old. A babys skin is never more delicate. What do hospitals use to wash and protect it . 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Its been a rough deal for the United States but i think that it will be much different and good for both parties so were in the process of doing that and were also in the process of discussing our frankly many options. We have many options with respect to north korea thank you very much the president will speak i would like to thank President Trump for inviting me to the white house and for his warm welcome President Trump was the first among all foreign leaders to call me and congratulate me. Translator i believe that was to reconfirm the strength, the u. S. Alliance and also President Trumps warm message to the Korean People that had been suffering through political turmoil. Last night after dinner we discussed various issues through diverse scope and very honest discussions on issues to include the north Korean Nuclear issue and other issues of mutual interest it was a great opportunity for us to further the trust and friendship between me and President Trump. It was also an opportunity to reconfirm the fact that the United States and korea are walking together on the same path toward a Great Alliance i hope that our relationship can further develop into a more meaningful and fruitful relationship thank you very much. What many people dont know is that south korea is a Major Trading partner with the United States and we want something thats going to be good for the american worker. And i think well be able to do that today and many other things the relationship is very strong and our personal relationship with president moon, our personal relationship is very, very good. Thank you very much everybody. Thank you. That is the president with the president of the republic of korea. His first countrys leader, talking mostly about trade of course, south korea is a big ally of the United States and asia big trade partner. The trade deficit with the United States, our trade deficit doubled since the bilateral was put in place five years ago. The president called that deal horrible well see if they make moves to change it. 27. 5 billion was the trade deficit last year. We imported about 70 billion worth of goods from korea, exported about 42 billion and this has been one of the most consistent pledges and issues for President Trump and that is the u. S. Worker getting a bad deal on trade, getting taken advantage of by these trade deals. It is unclear whether the president can renegotiate them in a more beneficial way he said that we are renegotiating in a more fairway as we speak. Well see if anything comes out of that but clearly that was the talking point. He was speaking to those that got him elected. And something that hes been talking about consistently from the campaign trail to all these meetings with foreign leaders. Squawk on the street will be right back keeping an eye on this market rally on the final day of the weekthe , month, and the quarter. Well be right back. Their leadership is instinctive. 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He manages a portfolio municipal securities, one of the largest in the world john, whats going on with illinois and chicago on the state of illinois, its been a long time, over two years, since theyve been able to get a budget agreement. Were about to go into potentially the third fiscal year s p in particular has warned they will take the state below Investment Grade if a budget agreement cant be found and the time is running short. Im. Narrator impression, i read it ll, studied it all, it seem as thoughits binary they made this clear for years and years. How tight is midnight . Do things really happen right at midnight its uncertain the process inside the Rating Agency there is Committee Process they telegraphed this in an unusually clear fashion. Particularly at s p and to some extent mootidys as well there is a deadline that is soon maybe they give an extra week two weeks at the most. A week is going to make a difference after how many generation weefz been sweeping this under the rug this is the wall of shame. I call it the white board of shame. One highlight in particular i want to concentrate on i was asked by brian sullivan, you think illinois will go bankrupt i remember reading no state is allowed to go bankrupt that is federal. Tell me what the cities and municipalities have when it comes to making their odecision there is no bankruptcy access for cities and counties. Soun like harrisburg mshgs cities have gone bankrupt since credit crisis. No entity can go bankrupt in illinois based on its constitution and the federal constitution says no state can thats correct. Holy cow so whats the end game here . Well, chicago has actually done a lot of things in terms of tax increases and spending cuts and economy. The engine of growth for the state. The engine of growth for the state, no question chicago has made some change thats has stabilized the ratings. And some of the Interest Rates have moderated a bit. Correct what happened to i will snll . Theyve gone the opposite direction. Theyve been downgraded several times including this year. On watch for another downgrade number budget agreement, no new taxes, no spending cuts or Pension Reforms yet. So thats pushing the bonds in the other direction. With the president , we really dont have as much time as id like so were going to jump into the next thing if youre holding any paper for illinois or chicago, or you are thinking about purchasing some, give us some advice here, john generally, i would not panic Holding Illinois gos i would not panic. There is going to be volatility. I suspect theyll probably get a little cheaper over next month as these what if youre a bargain hunter that understands the notion a sliver of risk may enhance portfolio possibly it k were north of 5 yields for most illinois gos. That could go to 5. 5 maybe. So its a little capital loss. It longer term that, is a very good yield on tax is something go to happen at midnight is something positive going to happen in the next 72 hours in your opinion, yes or no . I think its going to take another week. All right thats a number all right. John, we could talk about this for hours because its taking decades to get here. Thank you, john miller sarah, back to you your state isnt bankrupt. No. Its not i dont know if were talking about new york or ohio neither are. When we come back, rbc capital maaheys th urk man iwis. Crude prices paired year to date losses to a little bit more than 15 improvement but its still been a volatile year for oil prices which are on track for seven Straight Days of gains and maybe well close over 45 a barrel. Market participants watching the daily fluctuations in price suggested that looser Energy Policies coming from washington may be having an impact on crudes recent swings. There is a longer term strategy at play made clear at this weeks energy week at the white house. The Trump Administration now saying that the u. S. Will export more energy than imports as soon as 2020. That is three years away faster than the eias most recent forecast which has this happening about a decade out the Global Market has more room to absorb this supply. Energy demand has not peaked and wont if prices remain lower for longer playing on the global field also squeezes other countries which xerts pressure in an inadvertent way. Lets send it back down to squawk alley. Good morning. 8 00 a. M. At nike headquarters out west, its 11 00 on wall street and squawk alley is live