Transcripts For CNBC Squawk On The Street 20130627

the green as well as we sit two days now from the end of the quart quarter. our road map begins with the markets and good economic news on the personal income, and economic benefits and may give the bulls more room to run, but could the fed speak today put a wren inch the rally? >> well, the clear wire rally is over. and now what is dish and charlie ergen going to do having dropped out? food and shelter and two earnings coming out, conagra and k.d. home. >> and boeing ceo opens up to jim cramer about the dreamliner battery debacle, and here what he has to say. that we will have coming up. >> what a show on "mad." we can't wait to talk about that. but first, the dow is poised to open after the triple-digit rally yesterday. and we have had the most trading in a month since 2011 and wall street is bracing for comments from the federal officials including the fed chair of new york dudley. if there is a spokesman for bernanke other than yellen, it is dudley. he is supposed to talk about the regional economy and the job market for college grads, but you never know. >> look, i worked at goldman and dudley is a good guy, and a goldman guy, and that does not necessarily make him a good guy, but -- >> not necessary willy connected. >> but maria has lloyd blankfein, but he speaks the language that is not upsetting. he measures the words and knows whether to roil the market and he has not. so i find him informative and not ideological and i look forward to what he has to say in terms of making a world view. when he says that things are okay here, and we certainly didn't mean to derail the economy. the fed is all over the newspaper and i was waiting to see the bergen wrecker, and if bernanke called them in the philadelphia news, and the big win by the phils and bernanke is worried about the economy, and he is everywhere today and it is the unknown call they do, and the background call. you have gotten many background calls on your life. >> yes sh, but not typically one fed. that is one that i don't get, and there are others who do. >> well, when they happen, you tend to want to go out to say, hey, i think that the fed is wor worried and then you say, this is not the greenspan fed which did not care about the consequences, but this is the bernanke fed, and they don't like what they did, and what happened. that is my take. that is good for the stock market. >> last night you compared the fed and said they went into hamlet mode where you can no long er buy everything whenever you want, and now you have the make choices, specific choices and without a lot of room to run. >> right. they made it so that there are a lot of stocks that are neutral that you were excited about. remember, the longest period where you could buy the soft goods and the consumer products and the industrials, because it was game one for everything. and the real estate investment trust, but just for a couple, but now what is not sold here is very good. i concluded the memo to regina gilligan my unbelievable producer by switching barred metaphors by saying that all is well that ends well. >> to a different one? i am going to shakespeare this evening. >> you are? what are you seeing? >> "comedy of errors." it is supposed to be good, by it is supposed to pour. let's move on and i don't mean to take it away from the market. >> and if there is not room for shakespeare, there is room for nothing. >> brush up on the shakespeare. is yesterday setting a new trend? have we put in the bottom so to speak at least? >> if you look at the 10-year, yes. go back one week from today, and this is the 10-year from hades, and the 10-year had moved more than it had in two years. and what to focus on? bed, bath, okay, and conning a rashgs a -- conagra and kb is not that bad, and so if you are not possessed by the 10-year. and by the way -- >> and what about the earnings. >> and how about europe? the big bank deal, and we don't talk about, and you remember when the banks were on the red hot griddle and now they have a bank plan and italy does a big bond e de bond deal and it is pretty good, and remember when europe was a problem before it bottomed? >> yes, i remember that well before it bottomed. >> a nice surprise. >> the german unemployment comes out about quarter of 4:00 and i'm working out and i am saying, what, they added 12,000 jobs and i thought they would lose them. >>ly call the german report with the france confidence, and not good. >> should they be confident? they have a government that is the envy of brazil. did you see the protests dying down in sao paulo last night? well, they woke up. >> that is incredibly important the protests, but what has been going on in the bond market and the stock market is also equally, if you care, disturbing. >> well, a lot of the protesters say, put in a wealth tax. they are -- they are like government buy, and they are like one of the great growth markets. >> yes. it was. >> and how many people are building a profile built on the brazil and giant economic engine. >> and same way of australia, and another booming china. >> yes. and let them meet the olympics, and these countries were boomt countries and now we are compared to brazil. we don't have 1 million people in the streets. and we don't protest anything anymore not even keystone. >> we are celebrating a lot of people celebrating the decisions out of the supreme court. >> i thought they were. >> and you mentioned earnings, and really going to start in a week or two. >> oh, man, we will have to gear up with that call. >> and the earnings growth is 3% a year ago, 15%. >> i mean, i was going for the comparisons and there is one company that i saw that was going to be decent, but it is going to be tough to beat last year. i think that one of the thing ths that we will be looking for just in terms of the shrinkage of the pool of stock, some industrials will beat it simply related to autos and aerospace will beat it and some companies will do it. but we have to raeally worry about the retail, because this, i know it sounds stupid, but this weather, and if i have to hear about the weather one more time. everyone. like monsanto gave you the weather forecast. >> and the sentiment is not as strong as a while back and so maybe there is not as much momentum as possible. >> conagra had 60 cents on the operating expenses that beat expectations, and companies known for healthy choice and chef boy are dee. and k.b. home with losses and above estimates as well. the news on conagra, is the consumer groups back to positive growth? >> well, one of the tech innovators of food that comes up with new iterations, and he is a terrific ceo, and they come in with skyrocketing inflation, and talked about it on the air, and it was willing to be so honest as to hurt the stock and has inflation under control, and the corporation additive working. >> they lost a potato customer. >> but mckessen says the same thing. the industrials there is the quick serve restaurants. so everybody is having a problem with the industrials. paychecks report that still not a lot of new businesses created. i was joking with david that you can pick up a mosaic here which says that, you know what, they are not, a lot of the companies are not starting a new, and therefore there is not any new cafeterias or spending at the restaurants like we thought, and it is a little muted and then paychecks are saying more pay checks per customers, but not a lot of new customers. so it is saying that we won't get past 2.5% growth and bernanke should be worried. >> interesting of the first page of the journal businesses stung by higher rates, and tearic saying that he is worried about it. >> and memo to terek. good. >> and rates are incredibly low, but they are up sharply perhaps the lowest borrowing rates are gone, and you won't get them again, and to the extent it has he helped the earnings so much, and the ability to refinance for example and simply take the money that you would have been paying in interest costs is going to be gone, so one does wonder how much earnings at these companies have benefited just from the cheap money that we have seen work in so many ways. >> and we will see about kb homes, and they open up big, and then at one point an executive says that higher mortgage rates are not necessarily that good and the jaws drop, shocker. there is the element, and the sticker shock element. i am speak iing to alan mulally from ford, do they have to incentivize more and that hurts the profit margins. >> dish network by the way, moving on has withdrawn the offer to buy. there is a look at what is coming up on "mad money." >> every now and then. every now and then, you go for the trifecta. >> not a surprise that dish network is going to withdraw the offer to buy clearwire and nemt telewon the support from clearwire and they signed voting agreements and i told you that once you tell the minority agreement signed it was over and done with and the real question is what does charlie ergen and dish, the company he controls do? by the way, that is fueled a great deal of speculation amongst the investors that i speak to on a daily basis and weekly and i speak to many people, but the question is does dish try to sell spectrum? when you look back at the original tender he made for clearwire, the second sentence and here are the possible deals that we will go over. our goal is to monetize and commercialize our spectrum. that is still the goal. that is the goal. and the question is, how do you do that? do you sell the spectrum to at&t? that is a way to monetize it. could at&t do that deal? probably, but there are questions of the caps and they say that clearwire and sprint together, they have more spectrum and hence we can go up, but issues around it, and do you sell the entire company to at&t and i argue that is unlikely, but many believe that randall stevens at at&t would be willing to entertain the possibility. do you do the incredibly beneficial deal with directv that would have enormous sin r jerer jis that would then fund the commercialization and build out of the spectrum, because the synergys would be so enormous that you would have a lot of cash to do that and the anti-trust is the key one, would they allow it under the obama administration? >> something has to happen. you don't go through the big thing raising the money, and making all of the offers and then say, well, that is fun. now i'm going to go ski iing. >> well, he has the spectrum there not being use and the time line and he has time. and the other question of course is that we have watched the shares of tmus, t mobile, and does he try to do something with the germans and get ahead of what is still may be the play in the next play on banks off of sprint which is to do something with the germans and tmus which is t-mobile. >> that would have been a dog. and you are calling them tmus is what it is, but t-mobile. >> they have come alive just on the take of the talk. that would have to be substantial. >> well, people may be getting ahead of themselves on all of the fronts, and we will see. i think that the germans would love to see the momentum in fwizness overall, and if you could get t-mobile together with sprint is another open one on the anti-trust front again, and at least the business momentum going into it if they were try to the do it that they would not be shunted aside as they were when they went into the at&t and then watched the business suffer when that deal got voted down. >> any time there is a directv story that they overstated the brazilian subscribers knocking the stock down, that is a well run company, but there is a large latin america component. and latin america, and the bells are going off in every country in latin america. if you do a lot of business there, you are hurting. in the meantime, dish, no. that is a pure play. >> and where if you bought a lot of bonds in korcorporations in america, you having some real pain. >> and the business today is about bond mutual funds and equity funds. >> i wish that bernanke would have said, guys, you don't need to be in these, and i wish that the fed would explain to the everyday investor. >> well, they are looking for yield. the one good thing about it is if you are in a fixed income, you are getting a little bit more. you have to find the yield. >> can i say that one of the great stories is that suspending the diabetes information, and remember that she went and ate tons and got diabetes and then tried to profit from it? this is a horrible disease. just playing it out, because sometimes i read the ticker while we are talk and say, wow. what do you think of the story? >> and the interview on today from the business standpoint and who knows about public opinion, but it did not help her with her partners. >> absolutely. >> and now, coming back, delivering on the dreamliner, and what did the boeing ceo jim mcnerney tell jim cramer about the dreamliner, and the battery problems and china and when you can get the next dreamliner if you ordered today. also, paypal is shooting for the stars literally. they are announcing paypal galactic, a way to pay for space-strapped tourists. we will talk about that. another nice set of numbers when when we open? we will see when the opening bell rings in about 15 minutes. ♪ ♪ ♪ [ male announcer ] if you can't stand the heat, get off the test track. get the mercedes-benz you've been burning for at the summer event, going on now at your authorized mercedes-benz dealer. hurry, before this opportunity cools off. what a lineup jim has tonight. by the way, boeing announcing it has delivered british airways first 787 dreamliner arriving at heathrow a few hours away. last night if you missed it cramer asked boeing's jim mcnerney about the problems that grounded it earlier in the year. >> did you ever worry that the battery was a colossal mistake and that you would lose orders and owe a fortune to those who stuck by you? >> nef. >> never worried about it? >> no. it was a solvable problem and a difficult problem and one that we regretted having and impacted the customers, but the response of the people in the company was to roll up the sleeves and go the work and solve the problem. >> jim, you said that he was the most impressive guest that you have had in a while. >> yes, i just think that we are having a great parade of guests, and he could be trumped tonight by mull lally and schultz and o drink could put him to shame, but he delivered a prez sentati about boeing and the thing is that when he used the term never, it was a reminder when you go back to the vortex of coverage, many of the execs might have run from this one and many of the execs might have ducked, but he didn't. he was at the forefront and when i said, come on, this could have hurt you and when do you think that you can get a dreamliner, david? >> i don't know the answer to this. >> well sh, get in line, becaus 2019 is the first one. you can read all of the stories and watch the individuvideos -- >> longer than tesla. >> yes. by a few months. >> tesla, and it is good that we confuse the two. i think that boeing presented a world view that was incredibly strong. and talking about how many airports are being built in china, and talking about an amazing resurgence in the airline, and you know the airline traffic still grew 5% in the downturn? this is a secular growth trend, and bowing is the best manufacturer bar none and i asked him about the airbus and the rivalry and i said is this harvard and yale, and he was at the harvard/yale game and he is a great sportsman and knows the sports, and kcongratulations, hawks, for hockey. and these guys are coming in to sell the planes against airbus and offering the technological superiority, and how can you not own the tostock? >> you said on squawk at par, it is still a buy. >> the runway here is so long that the company is so well managed, the orders are so great, yeah. boeing. key corporate holding, key, and i mean for institution, it has to be. >> right. >> and individuals, $100 is too much and don't be put p off by a $100 price range. >> it is a dow component. >> of course, and second best performer. >> and up in the last four days, and how do we positiontoday, an dash" is next as we get ready for the futures coming back in a few minutes. in today's markets, a lot can happen in a second. with fidelity's guaranteed one-second trade execution, we route your order to up to 75 market centers to look for the best possible price -- maybe even better than you expected. it's all part of our goal to execute your trade in one second. i'm derrick chan of fidelity investments. our one-second trade execution is one more innovative reason serious investors are choosing fidelity. now get 200 free trades you open an account. 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[ thunder rumbles ] ♪ [ male announcer ] when the world moves... futures move first. learn futures from experienced pros with dedicated chats and daily live webinars. and trade with papermoney to test-drive the market. ♪ all on thinkorswim. from td ameritrade. you are watching cnbc's "squawk on the street" live from the financial capital of world. the opening bell is set to ring in about 60 seconds or so. we are up two in a row on the dow. got back about 250 points in that time. >> pretty impressive week to week, and remember last week we were pretty much thinking that it is ball game over, because we were looking at the 10-year going to 3 and the 10-year has calmed down and suddenly back thinking sell in june, and buy it back at end of the june. >> yes. in the meantime, we do have a couple of ipos pricing, and more of this trend at least if not trading below the range when they opened, certainly lower when they priced. >> yes, there is a lack of enthusiasm about the ipos and certainly don't feel it down here. >> yes, we will keep an eye. and we will keep an eye on both of those, because it is interesting, because the back story of prime equity not perhaps selling. >> you used to pay down the debt with the equity and a virtuous circle. >> well, it is still allows e i equity game, and it is all about exits in the private equity and a lot more to that story. >> and speaking of the ipos and at the big board it is tremor video, an advertising technology company, selling their ipo, and at the nasdaq, the h.d. holdings selling their ipo, a distributor of construction materials. >> tremor is emblematic that video is something that you can monetize online, but the group has been terrible, the ones who have come public have been terrible. and millennial media was a disast disaster. >> i remember when it was being purchased and the deal was in jep di because of the financing coming at the outset of the financial crisis, but they got it down, and an exit, and paves the way for a exit by the private equity owners. >> and how incredible is the window here? these deals would have been may 21st say, the day before may 22nd when bernanke, and these deals would have been hot, and we would have been here, bob pisani at the denver post saying, hey, this, and the h.d. and holy cow, and instead, eh, eh. >> and tonight, the gainer behind the conagra is nike. >> well, i agree with this, you don't chase nike here, and i want to hear from terry lundgren at macy's, because they have a pull in the store. and it has been good in the united states for nike. >> the journal talk tact range -- talking about the range of estimates, because they don't give blackberry, but nobody knows what they will say essentially. >> well, this is wone where thee was channel checks. channel checks indicate that nobody is -- and the channel checks are all or none. channel checks say that you cannot get one, because it is so hot, and the channel checks say they are everywhere. so it is becoming one of the guess i guessing games where the people are openly talking, the analysts about the short squeeze. well, 30% is short because they believe it is palm. this has been a tough level for the stock, and it has failed here before. >> and watching apple computer this morning. >> they dropped the computer, and they tell you that when they say it. >> and the source of funds is what i guess, and what explains it? >> well, yeah. you don't want to show that you own it, because everybody and his brother knows that it was not good. you want the show that you own google, but that you were wise enough to dump apple today, and they won't know it today obviously, because -- >> this is quarter end stuff? >> yes. >> this is quarter end selling. >> another guy came out susquehanna and said that we are taking the numbers below consensus, and analysts, the consensus is much lower than you think by now and at the same time, why show that you own it? be a hero and go to the board of directors i own apple and are you kidding me? did you not know to sell apple. >> and a year ago everybody had to buy it for the same reason. how could you not own it? >> and everybody had written off hewlett packard, and speaking today with a excellent report by kay kelly, but i think that we are going to say a decent yield play, but they haven't gotten it together yet. it will happen. >> and no matter what the tape, cantor has a bullish call on the facebook and you call it curious? >> my charity trust owns it, and full disclosure, and the number of shares that carl shoalberg was sharing, but with her feet, you don't want to see her sell ing the stock here given where the ipo came. she is a revered individual and best seller, and a great, great spokesman, but speaking positively and then selling is just not something that people like. >> right. right. >> it is another stock that people don't want to show that they own. >> overalthough, it is a market that is up again. >> yeah. >> and 26%. >> triple-digit. >> and the nasdaq following through almost exactly with the same percentage rise at this point. we do have the 10-year off a little bit in yield. >> yes. calling it at 102. this is a remarkable market, because they have come back to what they have liked. it is like a do-over. >> one thing you don't want to be is shanghai. seven days in a row. does it ever go up? >> 9% in five days. >> well, the companies used to be the largest market cap companies and now disappearing. and china is maybe the government has decided, look, we will go for the real data and honest stuff, and maybe an s.e.c. thing developing, because a number of the financials of the companies are not as good as we thought. that is my take. >> and today, initiates may cy' with a buy at $55 target -- on all sorts of radars, jim. what is happening at macy's? and you will talk to terry tonight? >> well, terry has done a remarkable job. terry lundgren, and i think that we will see good numbers going forward and they have a great balance sheet. they have a lot of flexibility. they have buy macy's is working and the omni is working, and everything is working for lundgren. and looking at the come petitio if jcpenney gets it together, will that matter? but terry lundgren has pulled it off. remarkable run for him. >> and tremor video opens and quick open. they got it open very quick ly. >> tremors was a movie. "tremors." >> yes. >> starring? >> kevin bacon. >> very good. >> you guys are good, man. >> let's get to our own -- >> good separation movie. >> and over to josh lipton on the floor. >> well, carl, you are watching the tremor video, and the ad network that opened up at the post 5 behind me, and looking like it is opening in the green. we will keep you posted on that one throughout the trading day, and you can see the blue chips here opening with the triple digits and a lot of the fed speak today. you have dudley referred to as a key lieutenant to dr. bernanke, and then pal, and then lockhart at 12:30, and that fed speak could do a lot to shape the trade. and the jobless claims initially, if you are a bull, that is exactly the number that you want to see. on the one hand, claims are falling, but they are slightly above the consensus, so maybe calming some concerns about the fed. and let's get to the individual moves. you start with the kb home and besting the expectations and lennar did the same thing earlier in the week with the ceo talking about the solid housing markets strengthening, and you saw that net oar is back up. and another mover, how about winnebago beats on the bottom line and the top line and the ceo calling this the best shipment quarter in five years and that stock is up triple digits in the last 12 months. and again, finally, tremor video, we will keep you updated on that one, and it opened higher at the open. guys, back to you. >> well, thank you so much, josh. a lot of excitement down here with it. it may not pop, but there's nice to see a couple of deals. shifting to the bonds and the dollar risk at the cme group in chicago, rick? >> well, thank you, jim. as we are closer to tend of the qua -- closer to the end of the movement, the markets reflecting a need to price in the rates and maybe not about fed funds predicting a probability or the euro dollar futures and the 90-day forward rate of the feds raising the rates and maybe a contagion that the markets try to be efficient, and the guy next to you is trading the 5s and the next guy is 10s, and the guy across is entertaining the fed funds, and fed speak seems to avoid which is scary in and of itself. look at the intraday, and the two-day of 10s, and fundamentals don't change that much, and 261, and the high yield close for this move. what? less than 24 hours ago, and here we are at 2.48 and the first time in a week, we have a true shot to settle under 2.5%. now, we will go to the high yield market. if you look at the etf, you can clearly see that it is also reflecting that the risk trade is on. whoopee! now if you look at the btaat th barkley's, it is ahead of the spread and thank you barkley's, but the 5-year with the perspective on it. swifting gears, looking at what is going on with the dollar index since may 1st, and we know that the interest rates historically, and historic works once in a while liked the dollar high interest rates and little nibble of the dollar index today, because it is barely moving into the negative territory, and this is a trend to pay attention to in the day, and if you are thinking that a sub 250 close is in order. carl, all yours. >> thank you, rick santelli at the cme. kelly evans is here at post 9 and watching some things credit related? >> yes. it is important as the dust settles what has happened since may 22nd and try to figure out if it was really the beginning of the end of the 30-year bull run, and see if it is already settling down. so unchartered waters here, and we will see if the yields behave consistently before we see what happened before the may 22nd. citi on the call with clients talking about how the credit has never been more vulnerable to the treasury yields, because the people in the mark to market exposures at historic highs. moving on. what we have seen since the rates are moving higher, guys, and the spread on the investment junk credit have widened, and all of the times that we are seen this move historically, the opposite has happened and tightened and so a different case this time. and the etfs and the mutual funds are making up four times as much of the historical norm in the credit space. all of these are reasons why despite the bloodbath that we have seen in some of the credit markets for the next couple of weeks, you can have bill gross coming out to say that the 10-year should be down to 2.2%, and not where we were. it is a call that of course we have heard from jeff gunlauk, and interested to see what he has to say to the investors this afternoon, because he did not expect the 10-year to go above 2.5, but it did. last week in pointing to some of the things that we are seeing here, we are not seeing the markets behave in a way that they have typically at the beginning of the end of other big moves so that is why it is extremely important with the 10-year at 2.2%, and now did we digest cred it pit panic, and t the clocks back to six weeks ago? >> i liked the etf information that you pointed out that these could distort what we felt happens. >> and jim, it is unusual, because most of the time what the guys used to do, they traded the stocks and now it is etfs and that can be expose sure to all parts of the credit market and have no concept what they are dealing with. >> and this is how the people are blown out. i love what you are pointing out a 10-year looker. and just looking at the 10-year, 10-year, i'm wrong. i have to look at more of it. >> to some extent. >> but you have to understand why. >> and two ways of thinking of what happened and all of those who expected that the next move is 3% or 4% on the 10-year, you have to explain why these other parts of the credit market are not falling into line with that view, and why we are not there today. >> and one of the things that is mystifying to everybody is that, hey, we don't have the business activity to justify -- >> exactly, exactly. >> and maybe the mechanics have gone awry. >> and today, the data is sog gishgs and 10-year back to 2.5%. >> and so does dudley have more water to carry? >> well, this is an interesting position, because the markets have die and that we have gotte that the fed is going to taper. we will be really, really curious. >> that is a recipe for new highs is what you said? >> yes, exactly, because we are back in the grim old goal di locks with the 10-year that is not ready to leave yet situation. >> and although we are up substantially from the lows. do not forget that 2.5 is not 16. >> yes, and there has been a bloodbath for those who were caught in the more vulnerable asset classes. >> and that is what i mean, if you consider cred it exotic, and if you were in that credit markets, this is a bad period for you. but equities? a couple of percent? >> well, general mills up, and coned down, but right, there was no tsunami in the equities. >> but in certain parts as we have pointed out several times, yes, there was. >> and in the real estate investment trust. >> yes, and we will see what the whole trade and depending what the fed guy says happened. >> and the philippines have had the biggest two-day rally in years, but that is because they crashed. >> they got hammered. >> it is the smith myth of the emerging markets finally busted? this is a question to ponder. >> no, it will come back. they don't correlate, a nd well -- every single time. it is always correlating. >> and at these levels, this is the best three-day rally on the dow and the s&p 500 since the beginning of the year, since january 2nd to the 4th. >> it does not feel like it. >> on 450 points alone, believe it or not. >> and the volatility is tough. >> it is tough. >> thank you, kelly. student loan interest rates will double next week unless lawmakers can do something about it. senator richard blumenthal of connecticut has a solution, and he will tell us about it. the dow is up 120 and almost 121 and back in a minute. in a world that's changing faster than ever, we believe outshining the competition tomorrow requires challenging your business inside and out today. at cognizant, we help forward-looking companies run better and run different - to give your customers every reason to keep looking for you. so if you're ready to see opportunities and see them through, we say: let's get to work. because the future belongs to those who challenge the present. to accept less and less in the name of style and sophistication. but to us, less isn't more. more is more. abundant space, available leading-edge technology, impeccable design, and more than you've come to expect from a luxury vehicle. the lexus es350 and epa-estimated 40 mpg es hybrid. this is the pursuit of perfection. flying is old hat for business travelers. the act of soaring across an ocean in a three-hundred-ton rocket doesn't raise as much as an eyebrow for these veterans of the sky. however, seeing this little beauty over international waters is enough to bring a traveler to tears. we're putting the wonder back into air travel, one innovation at a time. the new american is arriving. 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[ female announcer ] you trust your doctor. doctors trust citracal. >> dow is up 132 on this thursday morning. let's get "6 with 660" with jim >> when bank of america and merrill lynch can cut stock, goldman sachs goes down. >> and what about this one? >> well, these are at the cusp of business being done air gas. >> and what about velp? >> well sh, i like it. >> and what about this one name a couple of times, cisco systems? >> well, this is a company that you need to make liquefied gas and convert and united parcel says they will have some gas trucks. >> and what about this one? >> this is in homage to mcnerney and what he is doing with the precisions cast, all-time high. look at that. what a stock. >> that is amazing. >> speaking with other things that are at an all-tie high tonight, you have a trika of guests. >> well, howard schultz has been ten years at the job, and he is great. and terry lundgren getting it rig right. and alan mulally had the best month selling trucks since 2006 and the company could be on fire here, america, and we have to find out about latin america and europe. >> the f-150 has replaced the camary has the most american-made car on the market. >> well, i have bought a f-350, and i have to tell you, you are king of the highway, carl. king! >> and let me tell you about the market here as we said the best three days since the beginning of the year, and does it seem like too short of a time to reset expectations on rates, on growth? is this a head fake? >> well, we are all, and again, i don't want to be too technical here, but we are all at resistance of the charts a wnd e seem to be going through the reset that was almost as if, okay, now we are going to look at the stock market with a new prism, and the stocks that are going up are different from the stocks that were going up before. so don't confuse things too much. within, there is a tremendous average going on toward a little bit more cyclical which is being masked by the overall. so there has been a sea change in what we buy, but it is moving it right up. >> so you don't think that you'd be going back to the old general mills and verizon play? >> well, they won't go down here if the 10-year stays at 2.5. they won't go down, so they won't cause dislocation, and a source of funds to go by boeing. look at this. this is report and nobody liked the quarter, but it is not going down. that is the new normal and the stocks are fine, because they are still okay versus the 10-year, and meantime, western digital, and sea gate, and micron and boeing and general electric, okay -- these are all working. they are working. wells fargo, and my charitable trust, and look at that busting out. these were novel and not working in the last six month, so it is a nice change. i like it. >> that is good to keep in mind. >> new leadership. >> fresh legs. we will see you tonight, jim. >> okay. i can't wait for tonight, carl. >> you can't miss "mad" tonight. and now moments from potentially market mover comments from new york chair fed bill dudley. and plus we will see how the battle it out here, and whether you should buy or sell here. back in a minute. simpler, how-on-earth-does-it-do-that... er. and they make it that way. because things can always be better. we like those people. they think like us. introducing the best civic sedan yet. made possible by honda. in that time there've been some good days. and some difficult ones. but, through it all we've persevered, supporting some of the biggest ideas in modern history. so why should our history matter to you? 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does it seem -- because there is a lot of people out there thinking through what bernanke has said and why and said that he was trying to blow some of the froth out of the markets, et cetera, et cetera. do you think that what dudley is saying is the opposite? >> no, there is a clarification process in the works here. i think it has gone from, you know, fed presidents all of the way now to the bill dudley who, as you know, the vice chair of the market committee and a permanent vote. and the message is i think this, yes sh yes, the outlook is as we said, the forecast comes true, the way we believe it is going to play out, then we are going to be tapering later this year probably ending in mid-2014. but that's asset purchases. what we want you to understand, the fed is saying, that what we are doing with the asset purchases has no bearing really on the plan to hike interest rates. the plan to hike interest rates is one that is a long way off. it is tied to a 6.5% unemployment rate, and that they say is a threshold and not a trigger. in other words, room around that, and it could be below that. so what they are trying to do is to clarify it. i don't think that they are changing that message and in fact, dudley repeats the message from bernanke at the press conference and then he goes on the clarify it saying that the effect that it has on the short term rates. >> okay. looking at the market reaction and getting more on this from a chief global economist with decision economics, and the chief economist with moody's capital markets research group. good morning, gentlemen. >> good morning, kelly. >> we have looked at the markets off of the highs and gone from 130 to nearly 150 off of the dow, and what is your interpretation of what bill dudley just told us? >> it is important to remind the financial markets that the economy has strengthened not enough to justify unambiguously winding down of a fed bond purchases. the corporate bond market has responded even more adversely, and more negatively than the treasury bond market. as of late, we have had corporate bond yields outpace this increase by treasury yields by a very wide margin. >> right. that is unusual. >> what this tells me as a corporate bond market is very much concerned that the economy is not yet strong enough to shoulder a 2.5% 10-year treasury yield. >> exactly. john, that is an important point, because in other cycles and periods when the treasure rates started to rise, the opposite would happen, corporate bond yields would fall or the spread would narrow, and that is going to suggest because the economy is better, and this is different. >> exactly. there is really no convincing evidence that we are about to enter a period of persistently faster economic growth. we have gotten some good signs on the economy here or there, but the reality is that of late, both business sales and corporate profits are rising at rates that are well under their long term averages, and the corporate profits. when the fed started to tighten monetary policy in the past, corporate profits were growing by between 15% and 25% annually. in the recently completed first quarter, corporate profits grew by less than 3% annually. this is no time for higher borrowing costs. >> and allan, what about you? >> well, you know, dudley is not telling us anything that we don't know and he told us exactly what bernanke told us. we know the message of bernanke, and the fed is surprised at what the markets are doing, but here is the thing, if they taper, slow deflow demand for treasuries, the interest rate of all interest rates will diminish. if i'm a trader on the fixed asset side, i can't be long until i see how it plays out. if the economy does not come back, and the fed is dialing up, different story as the long rates will reverse. at this moment of time on the fixed income side, i have to play it from the short side. that is a short run reaction. when i look out farther, one way or another, the federal reserve, we will get a better economy, and inflation will bottom out and begin to pick up, and the unemployment rate will come up, and the fed will be less ak come m -- accommodataccommodatetive. short term, there is a rise, and that is the only way to look at it from a short-term investment point of view. >> and is that your reaction that the treasure yields fall a little bit and now back at 2.35%. >> what -- back at 2.5%. >> well, what he says is not going to matter, because we know what he thinks and bernanke thinks, and that is not the point. the fed does not understand the dynamics or the short term movements of the markets, and maybe they should not pay attention it to, but in the short run, you just cannot be long on bonds, and that also is why corporate bond yields are rising, because you are going to get an outsize d reaction to th interest rates of a view to permanently have higher long-term rates down the road. >> important points. thank you both this morning. we have been talking that freddie mac has come out with the mortgage rate -- >> oh, you didn't give me the drum roll. >> 4.46. and pending across the top is tieian na olick wi-- diana olic that. >> yes, that is right. pending home sales is from a downwardly revised april figure from the national association of real estate and that is a big beat. pending home sales up 12.1% from a year ago. remember, these are contracts sign and not closing. so the contracts buying the contracts and existing homes in may, and it is the rising mortgage rates that you just talked about that may be getting a lot of people off of the fence and into the home sales contract, because they are af r afraid that the rates will go higher. the biggest spike in rates was in june and not may. so these contracts signed before the rates hit the highs, and across the nation, the pending sales index was flat. jumped up 16% out west, and 10.2% in the midwest. and it is only up 1% from the west, because there is such little supply there, and that is why the home prices are rising dramatically out west, but a big beat on the pending sales index, and likely due to people who are afraid that mortgage rates would go higher in june, and just as you said, they did. carl. >> diana, thank you. a lot of information at the the top of the hour. when we come back, the american ceo who was being held in china is now free. heading back to the united states. we have all of the details on that. plus, going to space any time soon? if you are worried about the missed bills, paypal has you covered, because they are launching a paypal service in space. david marcus, the paypal president will tell us more about that in a moment. clients are always learning more to make their money do more. 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(announcer) scottrade... ranked "highest in customer loyalty for brokerage and investment companies." the american ceo who was being held hostage at his own factory in china is free. chip starnes walked to freedom today and headed back to the u.s. eunice yoon is in beijing with more. >> this reads like a movie script after the american ceo secured his release from the factory in china and he jumped from one car into another before boarding a plane out of here. >> reporter: american ceo chip starnes has said good-bye to his de facto prison in china after being held captive by the factory workers here for a week, starnes is on a plane back home to the u.s. the two sides finally struck a deal. more workers get payouts, and starnes no longer needs to live under constant surveillance. but he was threatened by a vendor and fearing for his personal safety, he fled. in a text message to me, he said, i was, let's say, threatened this morning, and i freaked out. starnes says that he was being held because of rumors that he was about to close the entire plant. he said he planned to move part of the business the india. rumors maybe, but chinese workers have little legal recourse, and they are used to losing out. factory bosses in china do flee without giving them pay, and the workers didn't want the same thing to happen to them. over the phone starnes wrote, deal was done and all employees paid. but the chinese union official told me that international companies are welcome here, but with the wages rising, the chinese laborers are trying to compete with cheaper workers from other countries just as the american workers lost jobs the china. i feel numb this worker says. we will continue the fight. as for chip starnes, his fight is finally over. for now, starnes says that he plans to keep the factory in china, and as of friday, workers can reapply to their jobs to get the factory up and running again. over to you. >> and the debate continues over how much danger he was ever in, what the motives were, and what he was taken, i guess prisoner and i'm trying to find the words, because we don't know what the situation was. >> and the perhaps the larger take away is taking the jobs out of china to move them somewhere else, and this is not being done in a vacuum, but a trend to keep an eye on. >> because of the cost of labor in the country. >> the story is interesting, because he said, i was trying to take the jobs to india now and instead of china and what it reveals about the situation as much as the weird details of the personal situation, and why it is interesting. >> and inflation and one of the reasons that the chinese are more focussed on a consumer-led economy and they don't want to be the manufacturing base, because they are vulnerable to india, vietnam and you name it. >> and in china, they call it a lost decade what has happened in the last ten years and there is a view that the prior premiere, the leadership did not take them to the place, and the pressure is on for them to pull this off. >> it is hard to get people to -- >> and re-enter people from the farms to the cities, and we have not seen it in history. >> forget who feeds paris, and who feeds china is the question. smithfield might have an answer. up next, we are blasting off with paypal. >> yes. coming up, justin bieber, leonardo dicaprio, and ashton kutcher are headed into space. you know what that means -- >> merchandising, merchandising with the real money from the movie is made. >> how will they pay for it? >> well, paypal galactic may have the answer to that when "squawk on the street" returns. 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[ female announcer ] today cisco is connecting the internet of everything. so everything works like never before. the most free research reports, customizable charts, powerful screening tools, and guaranteed 1-second trades. and at the center of it all is a surprisingly low price -- just $7.95. in fact, fidelity gives you lower trade commissions than schwab, td ameritrade, and etrade. i'm monica santiago of fidelity investments, and low fees and commissions are another reason serious investors are choosing fidelity. now get 200 free trades when you open an account. ♪ guess who is back >> are you really going to save the world? >> yes shg, i am. >> i'm your new partner. >> oh, no. >> no, yay! >> wow, wow. ♪ guess who's back >> rated pg in theaters wednesday. welcome back to "squawk on the street," i'm mary thomp swon a market flash. we are looking at the shares of paychecks which are down 4.6 which is a provider of payroll service services. the company's fourth quarter earnings are coming in shy at 34 cents a share and the analysts were looking for 37 cents a sha share. the company saw expenses in the quarter increase by 5%. additionally the company's outlook for the fiscal year '14 is not better and the investors are not happy with it. it sees the net income of $620 mi million and that is the p below the analysts forecast of $621 million and the stock is reacting off 4.5%. kelly, back to you. >> mary, yes, those of us hoping for the better jobs environment are hoping those are company specific. thank you for that. turning to the bank fees which is a norm in the low-rate environment, but many customers are trying to use mobile banking to avoid them. and banks are looking to experiment with the mobile fees to pick up revenues, and kayla tausche, will they succeed? >> well, they are trying to, and remember when the mobile banking got off of the ground, and it was convenience and point, snap, deposit and transfer and never step in the branch. banking is up 28% in the last year, and the number of web savvy customers who only bank on the app jumped 50%, and that is in a year's time. banks are playing big bucks to refresh, and keep these bells and whistles for the apps that people want, and those are costs to be passed on to the consumer, like it or not. >> i do it solely for the convenien convenience, and it is not that often, and if they started to charge me for it, enough is enough. >> if bank of america charges me $1 to deposit a $49, yes, i will continue to use the services, but $5, no, i will not use it. >> $5 though? what alabama's regions bank will charge you to deposit and get the funds will be only 50 cens.s minnesota's largest bank has been charging 50 cents and customers have been sticking around, but for the big banks, b and a customers deposit $4 million and chase $3 million, but they say that making a deposit is a service that should stay free, but other task like bank to bank transfer and emergency payment service is not so much, and they can charge you. but in a low fee, and low yield environment, carl, what is most convenient will be the least free. back to you. >> kayla, a quick question for the people who are maybe doing these mobile banking things. are they aware that they are charged the fees or do they only find out when they see a statement if they take a look at it? >> well, usually to enact this service, kelly, so if i'm a customer at regions bank and i take a picture of my check and i want to deposit, it will give you a choice. do you want to pay the 50 cents to deposit the check. and you have to opt into it and say yes and you would like to do it. one interesting thing is that the apps, themselves, are still free. free to download and you don't have to pay a single cent to get them on the phone, but when you go the actually enact the service, when you realize that, this is not going the be free forever. >> right. all right. kayla, good to know. thank you very much. >> we have early trades here in the cdw, the company that priced the initial public offering with 23 million shares priced 17 and currently up some 75 cents, and one of two big issues priced today with hd supply and tremor video down here at the exchange and smaller issue. >> well, a little uptick of the ipo activity comes at a time when brazil has put off a big ipo and hong kong market has had to shelve a couple of the afterings, and even though we have not seen a number of huge pops the fact that they are listing despite the market condition and in some case doing reasonably well, a good sign in terms of geographics. >> yes, as the trend of companies pricing above the range is down sequentially, it is down year over year, and so ipos are important space to watch. >> and interesting in london how there is a lot of talk of the investors not trust ing ting th market, because they felt that the private equity was dumping the companies into the market, and settling for a position that is not worth holding, but here, it is not as much a concern, but still. >> we have seen it happen. and if you want to avoid the banking fees, going into space is one way to do that. to that end, paypal has been exploring a framework for a financial system that spans galaxies, and today, pay pal is announcing a pay program for future pay tourists called paypal galactic. they are working with the leaders in the science community to prepare and support the future of space commerce. joining us is president of paypal david marcus. good to have you, david. >> good morning. >> i have heard of planning into the future, but how far into the future, and when is this a business and not a punchline? >> well, it is actually not that far out. if you think about it, in three years there is a russian space consortium that is about to open up a space hotel. and the first virgin galactic flights are starting in december of this year, so space tourism is becoming a reality for all of us in the next decade. yes, it is not an immediate thi thing, but you know, as thors of online payments, it is our duty to lead the way and have the conversation of how commerce and payments in space will happen. >> so what kinds of payments are you envisioning here? is this i'm in space and i need to make sure that the mortgage is paid or my dealing with another vendor from somewhere else from earth? walk me through a model transaction. >> well, it's all of the above. you know, at first, it is mostly astronauts, and astronauts spend more and more time in space. they still need to take care of their business, but you know, for the space tourists, it is harder, and they don't have a staff on the ground managing all of the things. and if you spend more time in space, first of all, you have to figure out how to pay each other, but also to ensure that you can send and receive money from and to earth. again, this is not immediate. and we have a lot of work to do on earth before it happens, but probably a decade out. but big, big problems to solve. what is the currency going to be used and what the regulation. >> i don't understand what the problem is, because we live in basically a space age payment system for anybody who is not paying with cash. is it not a -- what satellites that power the way that the entire global payment system works? what does it matter either what the currency is or where you are located if you are a couple of miles north today than where you are in an airplane. >> lots of actual problems. for instance, if you are a merchant in space, and fost forward ten or 15 years and you are a merchant in space, what is the currency of reference you accept? how do you handle the disputes of us managing the risks at the time, and what is an i.p. address from space looking like? we use the country as origins as a risk detection, and you know, how do you do all of these things, and what government has regulation authority over space. those are big problems that will take years to solve, and we want to start the conversation. >> well, you are definitely doing that and making some people laugh at the same time, and i am sure that you expected that. one question on square, the payment service founded by jack dorsey of twitter fame taking their web payment, the payment business to the web. how much of a threat to you at paypal? >> well, look, we still feel that offline payments is a good business model. so we are still very focused in developing that. we are part of ebay, the biggest marketplace on the planet, and we know for a fact that it is not easy to build and at scale global marketplace, and it took ebay over a decade to solve these fundamental issues, so we feel good about our position. >> david, any support from elan on that? >> well, we did not discuss it with him at length, but we look forward to him at the table. >> and thank you, david marcus, president of paypal, and joining us there as they try to move the payments into space. thank you. >> and gold hitting the lowest level in three years. we have been watching this one trying to rebound this morning adding 0.1%, and has the commodity gotten too volatile for the safe haven trade. pretty sure that the answer is yes, but a bull and a bear will fight it out when we come back. a talking car. but i'll tell you what impresses me. a talking train. this ge locomotive can tell you exactly where it is, what it's carrying, while using less fuel. delivering whatever the world needs, when it needs it. ♪ after all, what's the point of talking if you don't have something important to say? ♪ vo: i've always thought the best part about this country is that we get to create our future. you get to take ownership of the choices you make. the person you become. i've been around long enough to recognize the people who are out there owning it. the ones getting involved and staying engaged. they're not sitting by as their life unfolds. and they're not afraid to question the path they're on. because the one question they never want to ask is "how did i end up here?" i started schwab for those people. people who want to take ownership of their investments, like they do in every other aspect of their lives. welcome back to "squawk on the street." i'm bertha coombs and we are seeing a sell-off of natural gas, and the federal government telling us about an injection of 95 billion cubic feet. that is outside of the projection of the and itselves they were looking for 86 to 92 and now it is eight straight weeks of the above average injections and apart from some warm weather here in the northeast, the problem is not much demand and it is fairly cool across the untri, and not much demand for the energy generation, and we are seeing prices sink here on natural gas. the rest of the energy complex though holding in. kelly, back to you. >> great. thank you for that. we are also keeping an eye ob gold continuing to trade to the downside. the 1,200 mark is not too far off from here, and the question is whether and if gold will bounce back. jim riccards is our bull, and tom mcclellan who is the editor of the "mcclellan news market report" joining us. jim, you are buying gold at these levels? >> well, it depends on the fed policy, and the reason it is going down lately is because the fed is tightening and the interest grates have gone from 70 basis points negative to positive. gold likes negative inflation rates, and what has happened is that inflation down, and nominal rates up. and so that is bad for the gold. if you say that fed continues the tight policy, then the gold will continue the trade down -- >> jim, yjim, what is the case for buying right now because you are bullish? >> well, the fed is going to back off. they are not going the taper, and later this year, they will increase the purchases, because deflation is winning the tug of war over inflation. and deflation is the fed's worst nightmare, and in the next two months they will make it clear they won't taper and increase the purchases and trying to get negative rates and that is bullish for gold. >> tom, you like to put cha charts on the charts and look at the price patterns, but at the request of one of the readers you have tried to do that between gold and what the stock did in the '09 low, and what does it tell you? >> well, it is a fascinating comparison and anything that we see is the personality of the people trading what is looked at, and what we are seeing in gold is the same pattern of the decline in the last two years that we saw in the stock market from 2007-2009, and it is the same emotional play that's going on. and people are falling out of love with the stocks back then, and people are falling out of love with gold now, and we are reaching the climax point similar to the 2009 low for the stock market. >> and that chart that we showed, tom, suggests that jim might be right at least in the near term. >> there are lots of reasons to be in love with gold right now, and the biggest one is that everybody else is falling out of love and nobody seems to like it. the commercial traders if you look at the commitment of the traders' data, and the commercial traders are at the most bullish and since the 2001 low. they usually get proven right. it may take a week or two before it starts to matter, but it is a hugely bullish condition for gold, and i'm expecting a large rebound. >> that may be the case, but how do we know when we have put in the lows? because obviously, everyone would have loved to buy and the right time in march 2009 and how do they know the right time to buy here? >> well, when the fed starts to ease up, and they are tightening the monetary policy, and that is the most important thing. they can't do that, because deflation is the worst nightmare. they have to loosen up. i own the gold and buy gold and recommend it for the clients and not 20% of the assets, but the destination for gold is 7,000 an ounce, but the fed continues to tighten and it could trade down to 1,000 on the way to 7,000, and that is important for the investors to know. >> 7,000. tom, can you comment on that? >> i cannot target that. i have targets of 2800 and 2400 based on the technical studies, but we could get to 7,000 maybe later, but the biggest reason that the thing we haven't had is the orange county, california, blowup moment like we had in the 1994 bear market in gold. orange ko orange county, california, went bankrupt and that marked a low for the bond prices, and the moment that we see a big major gold producers announcing that it is curtailing the production or going out of business, that is the moment that we mark the low in gold. i expect to have any of those announcements any minute. >> well, if it is a gold producer, it is more favorable than somebody on wall street per se? >> well, we are getting down to the production price of gold right now, and they won't continue to produce gold unprofitably for long. >> that is a good fundamental analysis, and looking at it geopolitically, china will announce they have acquired over 400 tons of gold and that is a catalyst as well. why is china buying the gold if it is so worthless. >> and jim, "usa today" reminds people that in the early '80s, gold lost 65% of the value. even though this quarter, we are looking at 20-some-odd percent, and are you thinking that a decline of that magnitude is impossible? >> no, but there were reasons for it, carl. when gold was 800 per ounce, that was more than m 1 and that is truly a bubble. now the number 17%. they are not at all comparable, and it should have gone down in the '80s, because was you had positive real rates and that is what volcker created. you had a horrible environment for gold, but today, we are seeing the positive realizing, but the fed will flip it and get negative real rates and a catalyst for the gold. >> well, we have gotten comments from jerome powell from the fed saying that they will act if the inflation falls below the limits. jim and tom, thank you, both. as mentioned fed chair jerome powell to speak, and he says that he continues the fed to continue bond buying and if it is scaled back later in the year, it is good news to acknowledge economic progress. he adds that the fed could delay the taper, which is exactly what we heard from fred dudley. he said that given the declines in deflation, i have no doubt that the committee will monitor this carefully and defend the inflation from below if necessary. >> we will see what lockhart says at 12:30, and one of the more hawkish members, and nonvoting, but he speaks at 12:30 today. and apple falls to below 200, and whilet has suffered, blackberry has silently made a comeback. who is the better stock to bet on? we will debate that after the break. ♪ [ cows moo ] [ sizzling ] more rain... 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[ male announcer ] usaa auto insurance is often handed down from generation to generation. because it offers a superior level of protection and because usaa's commitment to serve military members, veterans, and their families is without equal. begin your legacy, get an auto insurance quote. usaa. we know what it means to serve. all your important legal matters in just minutes. protect your family... and launch your dreams. at legalzoom.com we put the law on your side. we are getting a head of steam here after the additional fed comments from powell and dudley this morning. that is a 162-point gain for the dow putting us above 15k once again and not to 50-day moving average, but getting there. and people watching 1620 and very closely on the s&p and some of the technician who were alarmed by the damage done last week and that is a 16.5 gain. >> well, i am thinking through what we have heard from the fed today, because what we have heard from powell and dudley is no real surprise, and they lay out, especially in powell's case where we have seen the dow react to 160, and basically, inflation, and maybe in the middle, but if it too low, we will act, but unemployment well short and keep the support in place. that is the message that investors were to some extent expecting to hear from bernanke in the statement, the press conference, et cetera, and it was the fact that he didn't choose that message, carl, that upset the apple cart. so what is still interesting here is not what these guys have said, because they have reiterated the kind of thing that we expected to hear from the fed, but why bernanke didn't go this route in the first place. >> that is a question, and we don't know whether it was a mistake or not. >> and nothing that we have heard today clarifies whether they thought that element of the communication was a mistake or whether it was -- i mean, still a kind of giant unknown hanging out there. >> yes. >> but as leaseman said, no mistaking dudley's remarks and the most direct remarks in steve's view that a fed governor has made in some time. >> absolutely. >> now to the two big smartphone operators. apple has gone to the lowest, and now friday, blackberry will report the quarterly, and we joined by our strategists here. good morning to both of you. >> okay. so walk me through what the damage here is on apple and why it is happening again, and is this related to the end of the quarter? what do you like or not like about it? >> well, yeah. cle clearly, i don't like where the stock is at. it is clearly gotten to where six times earnings and nine times cash, and six times even if you include the cash and that is a low valuation for stock that has a loyal customer base. clearly, what is the happening is that as we are getting into the quarter end, the people are adjusting for what we should expect on the earnings call. and given the timing of new product cycle, it seems that the new products have finally launched so they could rescue the september numbers and that is where the people are adjusting the expectations. >> so you target, an unless i'm wrong, still 550, right? >> yes. 550 and 12-month price target and next year what we see as catalyst for them is the products in the second half of the year on the iphone and the ipad side, and early next year, we expect them to launch a product category, a 23457bd is a big catalyst for the stock. those are the things that should get us to mid-500s. >> gus, a lot of coverage this morning about the guessing game that is the blackberry 10 metric we will get. and the numbers all over the street. what is your estimate on, that and how much room to run does the stock have, having had a nice gain here today? >> yeah. so first of all, thank you for having me on the show. so what we are looking at is 3.6 blackberry 10 devices tomorrow, and the street is 3.3, and we are slightly higher, and we are differentiating between the street when you expect the bb 10 to boost the margins for the compa company. we are expecting the gross margins to go to 44% from 40% last quarter and as a result, we are expecting a material beat on the number, the street is 3 cents a and we are expecting the company to come in better than that. if it does, we saw the eps move from negative to positive 35 for the year, and i would nopt doubt that we will see the numbers pushed up north of 1.50 for the year, and if thatp has, this thing can start to go north of $20. >> gus, what about the cash position? what about the fact that blackberry having seen the shares rally 60% is now going to have to tell the story of that we are not out of the picture entirely? >> yes, the cash position we expect to come down, and 2.9 billion last quarter and no debt. and the cap position is fine, and nobody is worried about that, but clearly the second question is a good one. this company has to demonstrate that not only are they here, but they are going to thrive. we need to see good blackberry 10 volumes and the uptake of the vez 10 enterprises and see more apps coming on to the platform. those are the three things that investors look for. but i do think that the way they will surprise is profitability, because i think that the company will deliver a decent profitability this quarter which is going to make people reposition and rethink their position on the stock. >> and with 40% of the float, and you say that a lot of people will be surprise and i would say 40% of them essentially, right? >> yes, a huge short position on the stock. you know, i think that tomorrow, we have been saying for a while, we think that this quarter, it is a catalyst quarter where blackberry 10 can demonstrate the impact it can have on this company. >> by briefly, who is gaining share, because i look at the apple shares down so much, and concerns about the september quarter that you mentioned and samsung by the way, we don't watch it as much here, but they have been down significantly this month as well, and is blackberry gaining shares from players from where else? >> sorry, vai, go ahead. >> well, there is other peoplee other windows in the mid space, and that is where we believe that the capital will launch a low-end smartphone in the $300 to $400 range to capture some of the market potential. >> and that brings us full circle to the gross margin, and we will have to keep an eye out for that, and thank you both for joining us. and now over to mary thompson with a quick market flash. >> we have bank of america cutting shares of air products to underperform from neutral. and also lowering the estimates for rivals prax air and air gas raising prices on a number of the products a month ago. you can see the shares of all of the companies are lower on and other wise up day on the move by merrill lynch. >> thank you, mary thompson. new home sales have been strong, but the rise in mortgage rates and a spike we should call it really and putting all of that at risk. can home builders overcome the high er rates? and plus, she is called new york city's head nerd, the first of the kind in the u.s., and meet the woman in charge of bringing the apple into the digital age. "squawk on the street" will be right back. ♪ she blinded me with science. " "" (announcer) at scottrade, our clients trade and invest exactly how they want. with scottrade's online banking, i get one view of my bank and brokerage accounts with one login... to easily move my money when i need to. plus, when i call my local scottrade office, i can talk to someone who knows how i trade. because i don't trade like everybody. i trade like me. i'm with scottrade. (announcer) scottrade. awarded five-stars from smartmoney magazine. still plenty of focus on that ten-year this morning. let's get out to the cme group now. rick santelli joins us. >> hi, kelly. this morning we had allen on. he gets it. bill gross' july newsletter, read it. bill gross gets it. all the people around me, they get it. and in my opinion who doesn't get it, the fed and the fomc committee. what am i talking about? the market. short term, as managed and controlled as it appears and is, in a shorm short-term world the market can still flex its muscles, but when it does, it isn't necessarily strategic. as a matter of fact, i can almost guarantee you it isn't strategic. do you know what it's about? it's about money, okay? because nobody likes to hold their money more than people that play the markets. they want to hold it and they want to protect it and if something happens, they don't want to lose any of it. so when it comes to all the talk about the fed and what they didn't say and what they may have said and the fact that we just don't get it. you know, we just don't get it. we're not quite bright enough to get it. we get it. maybe they don't get it. long term, $3.5 trillion bal balance sheet, there's a lot of battles they're going to win, when it comes to market efficiencies, how markets move, why they move, and who makes them move, they don't get it. now, that bugs me a little bit. $3.5 trillion. i didn't elect any of them. it bugs me a little bit. they need to get that. and don't dismiss short-term market moves because whether you're talking about a flash crash for the fact that we are still at a 2.51% yield, the landscape can be permanently adjusted by those short-term moves. they're very, very important. all right. we're going to really change topics. there's been talk about willful blindness in terms of going against steven cohen and sac. what i understand is when it comes to people like hank greenberg or when it comes to people like senator, ex governor corzine, it seems like justice, the blindness of justice isn't so blind. i don't think willful blindness is going to be the vehicle they want. but they will never give up trying. but when it comes to friend or foe, obviously foe, hank greenberg, foe, corzine, not foe. and that's a little bit scary because whether it's the irs story for the teeth of going after people that they choose or don't like, that's also a bit disturbing. back to you. >> rick, thanks so much. speaking of which, new york fed president bill dudley now answering some questions following that speech in new york. he says that market volatility notwithstanding, chairman bernanke was, quote, very clear last week in stating the outlook for fed policy and nothing bernanke said should have surprised investors and just to hop on rick's point. he also says he can't judge if the fed has taken a credibility hit, although i think rick could probably have an opinion on that as well as some guys in chicago. >> what's interesting as well is the extent to which what people are saying as they think through what's happened over the last couple weeks isn't necessarily whether the fed has take an credibility hit but whether they've delivered exactly what they intended to deliver. which is not something the fed has ever acknowledged. whats dudley and powell didn't say that is going to have to factor into decisions today. >> dow is up 155. best gain in two weeks. when we come back, tweet time. first it was samsung, now it's windows 8. poking fun at the tech giant's latest ads and products. >> this is it. this is what matters. the experience of a product. this is our signature. and it means everything. >> so we want to know what can apple say in its ads to win back consumers? 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[ static warbles ] welcome back. do want to take a look at cable stocks. it's been almost two weekses since i reported on charter communications interest in leading cable consolidation and a meeting that had taken place now some time ago between liberty media which owns 27% of charter and the man who runs time warner cable. the object being is there a way to put that those two companies together? surprisingly these stocks have never looked back. at least not much. it was a $94 stock. charter is also up sharply. the sort of public whispering campaign if you can have public and whispering at the same time continues on the part of charter but nothing i have been able to come up with indicates there's been any change in posture from time warner cable in terms of how it views that potential combination or whether it would even have any interest in pursuing it. that being said, the more the stock goes up, the more you get shareholders in there that believes consolidation would be something positive for the industry. the more perhaps the pressure rises. we shall see how this ends up. it would seem to be a slower process, but the markets certainly seems to want to quicken it, and it is worth noting all of those stocks up sharply. >> all right. a few seconds before 11:00 with the dow up 49. >> even with the ten-year retracing. >> if you're just joining us this morning, here is what you missed. >> welcome to "squawk on the street." here is what's happened so far. >> the difference today is when there's a hack, the hack is en masse. it's not just somebody getting me, it's getting all of us, and that's where it becomes a lot different. i think the environment today that's safer for the individual than it was 20 years ago. >> the initial jobless claims moved down 9,000. >> do you remember when the banks were in the red hot griddle in europe? now they have a bank plan at the same time italy does a big bond deal and it's pretty good. remember when europe was a problem before it bottomed? >> i remember that very well. >> when do you think you can get a dreamliner? >> i know the answer to this. i don't know the answer. >> get in line. 2019 is the first time. you can watch all those videos -- >> longer than a tesla. >> yes. >> new york fed president bill dudley saying market expectations of an earlier fed rate hike are, quote, quite out of sync with the federal open market's statement. dudley saying the rise in short term rates is likely to be a long way off. >> if you spend more time in space, first of all, you'd have to figure out how to pay each other but also to ensure that you can send and receive money from and to earth. good morning. we're living at post 9 at the new york stock exchange taking a look at markets which are doing a nice rally right now. almost 150 points on the dow. we're seeing gains of almost 1% on the nasdaq and the s&p 500 as well. conagra foods rallying after fourth quarter profit beat analysts' expectations. the company's revenue is basically in line with consensus. the food producer said it's benefiting from its recent acquisition. shares up 5.6%. directv moving to the downside as the company said its latin american segment reported more subscribers than it did inflating numbers. expecting a $25 million tre tax charge in the second quarter and down 1% this morning. >> this sell-off appears to be over for now. the dow is up over 100 points for the second day in a row. we will tell you if the good times may last. rates on student loans set to double unless congress acts in the next few days. will a last-minute deal get done. we'll talk with senator richard blumenthal. and we'll talk to the first chief digital officer for the city of new york. but first up, the new ipo hd supply just opened for trading. seema mody has more at the nasdaq. >> good morning. hd supply has opened for trading. slightly lower on the day. priced at $18 a share which was below the initial range of $22 to $25. it has raised roughly $950 million in proceeds making it one of the biggest ipos this year. a couple details behind the company. hd supply is one of the largest industrial distributors in new york america and it's seen as a play on the housing market. they were bought out of home depot from three private equity fir firms. you can see shares down around 0.6% on the day. >> new york fed president bill dudley also speaking this morning on labor markets and purning back hard against concerns over withdrawal of qe saying tightening could be further away than markets think. >> some commentators have interpreted the recent shift in the market implied path as indicating that market participants now expect the first increase in the federal funds rate to come considerably earlier than previously thought. setting aside whether this is the right way to interpret recent price moves, let me emphasize that such an expectation would be quite out of sync with both the fomc statements and the expectations of most fomc participants. >> lots of chatter out of the fed this morning. let's bring in sam stovall, chief equity strategist with s & p. and kevin kaeern. good morning. kevin, let's start with you. we heard from dudley. we heard from jerome powell on the fed board. both of them seem to send out a dovish message saying if the data doesn't come through strong enough, they'll do more. surprise, is there any surprises? >> not surprised. the fed is committed to maintaining liquidity in the marketplace, but i think where the disconnect came was even before the fomc statement, we saw that real interest rates, when you take the short rate and subtract out inflation expectations in the bond market, real rates before the announcement was -- were actually beginning to increase. so i think what's happening here is the market is looking at the data in addition to the fed, and they're concluding that we are in a recovering economy with the unemployment rate coming down. and they're starting to think about where we might be a year and a half or two years from now, and if you do have a strong economy, a 0% interest rate this far below the growth rate in the economy is inappropriate. so i think the market is very much forward looking and thinking about where we're going to be maybe not in september or december, but looking out well beyond that and comparing today's very low interest rate with an economy that's getting better and concluding that rates have to move higher eventually. >> okay. which would maybe explain a little bit about what we're seeing in the ten-year back above 2.5%. sam, in that case why are equities so strong here? is it just kind of that same idea that if rates are rising because actually there is growth there and we expect growth over the next four quarters, then, yeah, everything is fine? >> well, i think what the investors are saying is that really there's nothing out of the ordinary. that we realize that the fed is doing what it can to try to stimulate the economy but as kevin said, if we took away what the fed is doing right now, what would normally be the yield on the ten-year note? typically the neld on tyield aps gdp. or you take the rate of inflation at a point and a half and that brings you to the ten-year note. anywhere from 3% to 3.3% is where it should be in a normal rate environment. right now when you look to inflation, you look over the past 60 years, the implication is we're trading at an 11% discount to where we normally trade, and we have a potential of 10% gain in the coming 12 months. >> speaking of which, sam, we've talked about your targets on 12 months, 1780 is the last number i have. is that con tin jent tingent on being at a certain level. if we got to 3.5% on the ten-year. would you raein that? >> our model is based on inputs from our chief economist, chief technici technician, global strategists, et cetera. we come up with a median based on a lot of those forecasts. our estimate tries to incorporate all of those different things. earlier on we were discussing in the latter part of may i thought we would see a pull back and maybe as much as an 8% decline when we had declined by about 5%, we thought that's all we were going to get and we raised our target and increased our outlook on financials. obviously, it's a moving number, but right now we think a good 10% from here is doable. >> i just want to go back to the first point you made about what's happened with real rates. if you consider the drop in inflation expectations and the increase in the ten-year, you're talking about effective tightening of 1.5 percentage points which is massive, especially given how low real rates were. do you think that's something that the economy can absorb? are we being so sanguine here? >> i think at some point the patient, if it is getting better, at some point the patient needs to be taken out of the icu. it's that transition process that will be a little lumpy. we got an installment of that last week. i think the bond market was expecting a more dovish statement from ben bernanke. they didn't get it, and we saw a little bit of that volatility here. if you take a step back and you think about the two possible outcomes, getting on a growth trajectory where the economy is self-sustaining driven by private initiative and investment spending or staying here with very low growth and low interest rates, i think potentially bringing the japan scenario back onto the table, i think just about any investor in the stock market would hope for the former, not the latter. so it's ultimately a good thing we're seeing this transition and growth in the economy. we still see 2% growth in the economy, the s&p potentially moving to about 1750 next year under a growth -- under that growth scenario. >> as powell said, he wanted to emphasize they are data and not date dependent which means july 5th, payroll day, will be a big one. we'll hear from you soon. >> thank you. >> sales of new homes have been strong lately but a lot of those sales might be at risk because of mortgage rates going up. we'll talk more about that after a break. but first, rick santelli watching the fed speak today and, rick, we are not done yet. >> no, no, we're never done. that's the interesting thing about talk. talk happens a lot. when it comes to freddie mac, you know, our kind of native bankrupt son, they came out today with a 4.46% 30-year mortgage. highest in two years. we'll talk about how mortgage interest rates, part of what's happened after the miscommunication reportedly by the fed, may affect housing with our buddy glenn schultz in about ten minutes. be there. announcer: where can an investor be a name and not a number? scottrade. ron: i'm never alone with scottrade. i can always call or stop by my local office. they're nearby and ready to help. so when i have questions, i can talk to someone who knows exactly how i trade. because i don't trade like everybody. i trade like me. that's why i'm with scottrade. announcer: scottrade- proud to be ranked "best overall client experience." we've been watching financials closely for a number of reasons. take a look at generally where we're trading there today. we're up about 1.1% for the sector. interestingly telecom leading the way up 1.3%. the laggard today materials and utilities. mary thompson is following what's happening. >> we're going to actually focus on one stock, that being the hartford financial. there are a couple pieces of news. it's selling its variable annuity business to berkshire hath waway hathaway. this is the continuing of a restructuring program. s&p came out with a note saying the company's recent plans to increase its share buyback plan shouldn't have any impact on its capital plan and noted the company continues to make good progress on improving its credit profile. the stock is responding up over 2%. carl, back to you. >> all right. thanks so much, mary. new home sales have been on a tear but there could be trouble brewing. a majority of new homes could be at risk because of rising mortgage rates. hi, diana. >> sales of newly built homes rose to their highest level in five years according to a report released earlier this week, but that is signed contracts, not closings, and that's a huge red flag because of rising mortgage rates. of the sales contracts signed in may, 31% were for completed homes. so buyers would have locked in mortgage rates near the record lows, no problem. 24% were for homes that were under construction, so some may have locked in a rate if the home was almost done. but some may not have. but 36% of the contracts signed were on homes that were not started yet. those buyers in most cases could not lock in a mortgage rate yet, and rates are up a full percentage point from the beginning of may and they continue to rise. now, analyst mark hanson, who pointed me to these numbers, says he believes that at least 70% of all may sales are suspect with respect to mortgage rates. some will move to a higher risk a.r.m. he says in order to save the deals. some of the builders we've spoken to say in just the last two weeks they've had a lot of calls from customers concerned about locking in rates. >> the challenge for a loan lock for a home that's under construction is they never know when they're going to actually have their closing dates. the cost of doing a loan lock up to nine months runs 2.5 points and a lock for a three months is a half point. and so people are trying to judge on whether they want to invest in that loan lock. >> now, those loan locks may be so expensive they could price some customers out of the deal. analysts for home builders say they are watching this extremely closely. steven east at isi says, i do think cancellations will climb. he said the 100 basis point rise we've seen affects the monthly payment by 13%, and he says that can be make or break to many buyers. we've got a lot more of this, a lot more analysis online. realty check .cnbc.com. >> is morning ford unveiling the f-150 trimmer and phil lebeau got a firsthand look. we hope you got behind the wheel. >> no, and we won't be behind the wheel until this fall when it's expected to roll into showrooms but the significance of this event is not so much that there is a new version of the f-150 and by the way, there are 11 trim versions now. but when they unveiled it this morning, what's significant here is that ford is taking its strength when it comes to pickup trucks and leveraging that strength by expanding the lineup. this is it. the new f-150 cretremor. joe hendricks says this is all about taking advantage of a red hot pick cup market. >> with the housing market, construction market, oil industry growing, it's helping drive that end of the segment which is regular cab and super cab versions as well. but we're also seeing growth in the crew cab versions. we're seeing great sales, up 22% so far this year and we expect that to continue. >> i was mentioning ford is trying to leverage its strength in pickup trucks. they have almost 40% of the full-size market with the f-150 to 350s and again they have 11 trim versions. ford has been increasing its f series production to meet demand frankly because they're not only seeing demand for the pickup trucks and the work trucks out there being replaced but also for that recreational buyer. the person who is using the pickup truck when they're driving around town or driving 234 t in the suburbs. profit margins have been near an all-time time in part because of the money they get out of the f-150. on average $10,000 in profit per pickup truck. the reason we're putting gm in here, they are trading in tandem, and, two, remember, gm, guys, has its new pickup trucks coming out late they are year. we will see a bit of a battle when it comes to full-size pickups. expect the price of the temor to be somewhere between $25,000 and $27,000. >> interesting and exciting. ford ceo's alan mullally will join cramer tonight. along with howard schultz and terry lundgren. 6:00 p.m. >> i wish he would do a studio audience. >> he's done it before. this would be a natural candidate, but that's just an amazing lineup. packed into 60 minutes. incredible. >> really curious. i hope they talk a lot about demand they're currently seeing. >> he's psyched about it, too. call it the big apple tech boom. new york city is growing as one of the country's leading tech hubs, second only to silicon valley. the city now has its own officer in charge of technology across town and we'll talk to her when we come right back. [ panting ] we're headed the same way, right? yeah. ♪ [ panting ] uh... after you. ♪ [ sighs ] [ male announcer ] it's all in how you get there. the srx, from cadillac. awarded best interior design of any luxury brand. lease this 2013 cadillac srx for around $399 per month, with premium care maintenance included. with the innovating and the transforming and the revolutionizing. it's enough to make you forget that you're flying five hundred miles an hour on a chair that just became a bed. you see, we're doing some changing of our own. ah, we can talk about it later. we're putting the wonder back into air travel, one innovation at a time. the new american is arriving. the place we're dying to be is tumblr. how do we become a part of that? become a part of that in a way that feels really natural and i think there's a huge amount of opportunity there. >> that's yahoo!'s marissa mayer talking to us the other day when they bought tumblr. there's perhaps no greater success story for a new york city startup than yahoo!'s $1.1 billion ak whii acquisition of tumblr. while most city governments are not known for being early adopters of tech and innovation, new york is trying to change that. we're joined by rachel hoat who was appoint eed to the role by mayor bloomberg. >> thank you so much. >> that was a big day for the city. >> very exciting. >> in what sense? in that they're keeping them here? will it be expanding their footprint? >> in many ways. it's a big validation of the tech sector and the fact it's yahoo!'s first major acquisition since marissa mayer has come on board is a new york city tech company this and announcement was here in new york city speaks volumes to the sector. it speaks to the creative community and the fact their users are here and the future of their company is here. >> you already hear people talking about silicon alley. what's interesting almost about having a position like yours is that this was starting to happen organically to some extent. what's the difference between it sprouting and what you have done to really try to incubate that here? >> absolutely. first and foremost, we're lucky to have the ultimate entrepreneur as our mayor, mayor bloomberg, and what we wanted to make sure is not only does that momentum keep going but that it's actually growing as well. and in order to do that we have done a number of things including shining a spotlight on the tech sector through a program called we are made in new york. the same sort of says it all. it's pride of place and it's also telling the tech community we appreciate that you're here and we want everyone to know you're hiring for thousands and thousands of jobs, and then funneling all of that back to a website we are made in ny.com that has dozens of resources for anyone looking to learn, launch, or find a job in tech. >> we've done some reporting lately in silicon valley, and a lot of developers there wish they could have started their business here. they can't find the engineers. when does that change? how does that change? >> well, it's already changing. we hear already there's been an inflection point because that perception is shifting that there are -- there's such a critical mass of tech companies and they're all hiring. we know that right now we are hiring for more tech jobs in new york city than any other city in the country. it's validated by indeed.com, because not only do we have a thriving tech sector, with he have so many powerful industries. as all of those modernize, they will neat that tech to fuel the future. this is one of the reasons why the mayor invested in the cornell school going on roosevelt island. it will add another 2,000 engineers. it's making sure people know what it's like to live here and work here. >> i can't help but be reminded of the cost of living in new york. yes, san francisco is expensive but there are lots of other places where you might get startups simply because it's a more affordable place for people to be. how much of a challenge is that for you that you're battling this global trend of people pouring money into new york for reasons beyond trying to incubate that next great company. >> absolutely. and it's true in certain hot neighborhoods, you're not going to find the lowest rates in the country, but that's the great thing about new york city. we have five boroughs and if you're willing to go into different regions, you can absolutely find a cost of living that's comparable, and if you look at some of the real estate values have skyrocketed in palo alto -- >> no city has more. >> in many ways it's a much more reasonable landscape here and there are a lot of different options. >> finally, the mayor's official schedule i'm told is he's meeting with spotify. any idea what they're talking about or maybe i should ask is there a company you would love to land to get to move here, a name we would already know? >> well, i think we'll just have to wait and see. i think spotify is one of thousands of tech companies that already have a very significant presence. they already have 100 people in new york city and in addition to that, i mentioned we are made in new york. made in new york is for tech companies that are 75% or more basing their operation here. so headquartered here. there are nearly 1,000 of those companies right now. >> what do they get from the city in turn for being made in new york? >> there's a range of different resources. first, they're just proud to be here. they want to tell the message loud and clear that the tech sector in new york city is here to stay and it's growing. there are a range of different resources -- >> but it's not tax breaks? >> the tax breaks are not what they're asking for to be honest. they want the visibility, the marketing, and they want people to know they're here and that they're hiring so we created a map of where all the tech companies are in new york city. you can filter that by the tech company that is are hiring and you can go directly, zoom right in, see what's the metro stop nearby and the cafe. >> you don't mind we called you the city's head nerd. that doesn't bothder you? >> i love it. i am honored. >> raich 'echel, thank you so m. >> let's send it over to mary thompson. >> look at shares of deutsche bank. right now down just about 1.4%. headlines crossing the wire saying that german regulators as well as bundesbank officials continue their special probe into some derivatives accounting at deutsche bank and they have interviewed former employees of deutsche bank's u.s. unit. this, of course, comes in the wake of the company -- or allegations that the company actually miscalculated some of its credit derivatives from 2007 to 2010 allowing the firm to hide about 12 bmds $12 billion losses. deutsche bank has denied that, nevertheless, the stock is responding to the news as the probe continues. >> underperforming the market. thank you. without action from congress, rates on federal student loans are 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time in the air. suddenly, faraway places don't seem so...far away. ♪ the european markets are closing now. >> that's the bell for the session in europe and britain. you can see mostly glean there. stocks posting gains for a third consecutive session. remarks from u.s. fed officials better than expected german unemployment data, and a rise in eurozone consumer confidence with the exclusion of france all adding to the positive sentiment and take a look across the major european bourses. we can see them adding 1%. the ftse 100 in britain is up 1.3%. the dax holding in there as well. italy and spain just barely closing in the green. the national back of greece plummeting in new york trading. published reports say greece may lift a ban on short selling of the nation's banks. it's off about 20% today, carl. >> meantime, kel, new york fed president bill dudley taking the stage in new york this morning trying to reassure the markets over this potential would-be rise in rates. our own steve liesman was there and he joins us with more. sounds like it was a fruitful q & a, too, steve. >> yeah. interesting conversation, carl. new york fed president bill dudley giving more details on his views on the economy saying that tighter financial conditions, in other words higher rates, could impact the growth outlook somewhat, but saying, look, it's not going to change the growth outlook if the higher rates are a response to a higher growth forecast that's out there in the market. he emphasized that the changes to quantitative easing when tied to the labor market outlook have growth factors into that in part because if the unemployment rate would hit 7% but the growth outlook were weak, that may not cause the fed to reduce the quantitative easing that's out there. he's not all that concerned right now about the impact of higher rates on bank balance sheets. something that the fed monitors. now, i asked him whether or not -- you know, to explain what went wrong in terms of the fed's communication and the market's reaction. he rejected the idea that something had gone wrong. he said sometime market trading is akin to a beauty contest. he said maybe the market focused on the wrong thing. this is what he said. >> all that we can do is try to be as clear as possible in terms of our communications and i think that to be really fair to the chairman, i think he was very clear about what we would -- how we would likely behave under a particular set of circumstances. it's perhaps possible the market overweighted the likelihood of that particular set of circumstances because life is highly uncertain. >> he said the market could have been looking for a hint in what the fed chairman was saying but there wasn't any hint there about rates. the fed chairman was being as clear as he could be and, of course, we had the headline from his speech earlier today in which dudley said that the market expectations for higher rates are out of sync with the fomc's expectations. carl, back to you. >> that's right. we also see stocks rallying on those comments, steve. so 125 points to the upside after some perhaps reassuring words from those fed officials. thanks very much. speaking of interest rates, interest rates on some federal student loans could double next week if the senate doesn't come to an agreement by july 1st. senator richard blumenthal of connecticut sits on the health, education, labor, and pensions committee and is calling for legislative action to provide long-term stability for students. senator, good morning. >> good morning. thank you. >> if you had your way, what would happen with student loans because the rate for new loans is set to double starting july 1st affecting 9 million students if no action is currently taken. >> speaking very realistically, if i could dictate the result, it would be more a short-term extension at 3.4% interest rate and a longer term more comprehensive plan that sets interest rates way lower. in fact, tying it to the rates that the big banks pay when they borrow from the federal reserve discount window. you know, you have to start with a fundamental premise here, which is, and it's my premise, the federal government should not be profiting from student loans. right now they profit even at the 3.4% interest rate at about $51 billion a year. remember, these young people going to college are the ones we're counting on to buy new homes, build families, start businesses which they can't do if they are financially crippled with this debt. >> senator, you said two different things though. you said you'd like to see the rate way lower and that you'd like to tie it to the rates that banks, for example, pay. those are two different things. could keep the rate lower, you are ultimately going to have to fix it. if you fix rates for the most part that means taxpayers have to pay the difference. for example about an $8 billion difference at the moment. >> my proposal is to set that rate at the discount window rate. right now it's less than 1%, 0.75%. so you could also put a cap on it so if it were tied to that rate that the banks pay the federal reserve, it might vary slightly, but it would be essentially cost neutral to the taxpayer. >> but brookings poses this very question which is to say, this doesn't actually come down to the difference in some of these rates which they calculate might affect payments by about $33 a month. what it does point to though is the need for the government to get out of setting rates for products like student lobes and that's a hard thing to quibble with. there's really a lot of risk here ultimately if you're going to guarantee to students that they will be able to pay a low rate on these loans. >> i think you have to view student loans as an investment. as an investment in our future and not just their future. these are our future scientists, entrepreneurs, purchasers, consumers, and if they are crippled with $1.2 trillion in debt, our entire economy and our future will suffer. one more point here, you know, this debt is now the biggest debt that we have in the consumer area, and it is rising exponentially. it's feeding on itself. so that's why i think taxpayers have to bear part of the burden and why setting those rates at a cost neutral level for taxpayers is the best way to go. >> senator, are we basically then stuck with a package that will be voted on after the break and be made retroactive? is that the best we can hope for? >> i think the best we can hope for, very good question, is rates will double on july 1 and the congress will return and try to do the best it can, apply those rates retroactively. i think a short-term solution at 3.4% is the best that we can hope for right now. >> so any parent with a kid enrolling this fall, you would tell them to wait before signing anything, i imagine. >> i'd urge them to call and write their congress people and say we ought to be outraged. all of america should be outraged that we're profiting off the backs of your sons and daughters, our sons and daughters -- >> senator, to say we're profiting is actually not necessarily the case if we're paying the cost of keeping these rates lower than they otherwise would be. >> well, we're not at the moment because that 3.4% enables the government to reap $51 billion from those students. >> okay. we still need to solve this issue longer term, and these loans remain the one form that can't be discharged in bankruptcy. tons of issues. a deadline that blooms. senator richard blumenthal from connecticut, thank you for your time. >> thank you. >> dow is slowly off its highs. sc scott wapner has some breaking news. >> on a day when there's an awful lot of fed speak, some comments from jeffrey gundlach to me just a short time ago that i wanted to share with all of you. he, of course, the ceo as you look there of doubleline capital, $60 billion under management. mr. gundlach telling me, i will read you the detective statements, the liquidation cycle appears to have run its course with maeshth bonds and mbs, all of which substantially underperform treasuries during the rate rise now recovering sharply in his words. the 200 basis point yield rise on certain sectors brought absolute yields up to levels high enough to create a compelling value proposition. investors have been drawn to these values leading to interest rate stabilization and finally his last comment will certainly be focused on. july will not be a repeat of may/june in the interest rate market. that according to the ceo of doubleline, jeffrey gundlach. by the way, he's holding a conference call at 4:15 eastern this afternoon that mary thompson is going to be listening to and reporting on what jeff gundlach has to say to his investors and others who are listening. it's interesting. we'll certainly talk about it more on our show in 20 minutes, carl, where we're also going to hear from a barrons 100 financial adviser on how to play the market, not only what's happening in the bond mark but with stocks in the three-day run we've had. >> we will watch the market's reaction to everything you just said and we will see you at noon. scott wapner there back at headquarters with news on gundlach. someone is bullish on facebook. an analyst reiterating a buy call this morning. he will tell us what he likes and maybe he will explain cheryl sandberg selling some of those shares in just a moment. with the spark miles card from capital one, bjorn earns unlimited rewards for his small business. take these bags to room 12 please. 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[ crows ] now where's the snooze button? welcome back to "squawk on the street" and the second edition of the santelli exchange with my guest glen schultz. >> hi, rick. >> welcome. all right. i look at the world a little different than most whether for good or for bad. rate of change, okay? when it comes to the rate on a mortgage, we've basically gone on a 30-year from between 3.25% to arguably between 4.46%. keynesians never really get rate of change but when it comes to housing it seems they do. >> what i think is going to happen is the rate of home price appreciation is going to begin to decline. so what we've seen in the housing market right now is fast money moving in, investors, the hedge funds, those type of investors coming in and supporting the housing market. largely the beneficiaries from the federal reserve's quantitative easing. as liquidity gets pulled away -- >> or the perception. >> or the perception, what we will see is a true demand for housing. he we will see housing slow. >> this isn't our grandfather's housing market. i think we see a more two-sided market if for nothing else we've gone from single creation, single family, to the investor class. investor class is all about basis points. so those basis points have to come out from somewhere in the equation. >> that's right. as soon as they begin to see lower rates of appreciation and home prices, fast money will go somewhere else. >> you're very aware of your return on capital. >> that's right. >> so now different parts of the country. the northeast or the sun states, do you think they will be more or less affected. >> on the west and east coasts they will be more affected. affordability is already being trained. as the mortgage rates move up, affordability goes down. west coast and east coast will probably see more stress in terms of home price appreciation. that's where most of the homes are, west coast and east coast. >> so do you think we will see more inventory as a result of rate of change increase? >> i think we'll see more days on market. so we'll see inventory potentially go up a little bit, but we're going to see demand begin to slip. longer days on market -- or longer months on market are going to imply softer home prices. >> i don't think this is a bad thing. i think if we have a housing market that ebbs and flows, that the price goes lower when the cost of carry or financing goes higher, is that really a bad thing? >> no. that's not a bad thing. i would look at it saying if we can get to just even flat home prices over the next two or three years, we're going to intersect back onto the long term historic trend lines. that's when we're going to say now we have a healthy housing market. >> thanks for talking the time to be our guest today. >> thanks so much. the price of gold sinking to its lowest level in nearly three years. but are the people who own physical gold selling as well? we'll go straight to the source. jane wells is on deck when we come right back. to generate income? with fidelity's options platform, we've completely integrated every step of the process, making it easier to try filters and strategies... to get a list of equity options... evaluate them with our p&l calculator... and execute faster with our more intuitive trade ticket. i'm greg stevens, and i helped create fidelity's options platform. it's one more innovative reason serious investors are choosing fidelity. now get 200 free trades when you open an account. gold has been hit hard we know and there were huge price swings yesterday. it fell over 3.5% to its lowest level in three years. sor the people who own physical gold also heading for the exits? jane wells wept to find out and joins us now with more. jane? >> hey, kelly, this sheet is worth about 25 grand. that's a lot less than when i was last year here. they're getting ready to open the doors in ten minutes and volume has spiked as it always does when they see the big price swings. when we were last here gold was around $1,360. back then we saw over two-day period here a guy who had a whole bunch of gold, he unloaded about $7 million worth of it. he's not yet returned to come buy it back. but kenny edwards say they are seeing buyers who now think gold is a bargain and believe even if it drops to $1,000, they feel inflation will be an issue and will drive prices back up. >> the chinese are buying, the indians are buying, other central banks are still buying. i don't see it going a lot lower but you never know in the short run. there is some selling going on, particularly in gomd, bld, but no the as heavy as you might think especially in the physical market where gold and metals are much more important component of their existence than just an investment. >> a survey of jpmorgan -- by jpmorgan of gold investors shows that 44% believe the price of gold will go up in the next 12 months. now, that is down from over 70% of investors who believed it a year ago. one change here since we were last here, back in april they were buying gold at $25 over the spot price, selling it at $75 over. those premiums have come down. they're now buying at about $10 over and selling at $55 over. >> jane, that's a lot of gold -- gold worth a lot of money you're holding there. i wonder as well because i was covering these gold parties going back a year or two when women would have at their houses these -- you could bring your jewelry and then they'd weigh it, do you get a sense, are those answer neck doecdotally f wayside. >> the gold parties are not the big thing but they have a line of people, there are people who see this now as a buying opportunity. really when he says when you see a lot of selling going on is back when gold is up at $1,800. >> we're certainly a ways from there. jane wells with the buffalo gold coins. thanks. >> let's get to this bullish call on facebook. cantor fitzgerald reiterating their buy and $35 target saying the valuation is compelling and it will benefit from some strong mobile ad sales. the man who made that call, global head of internet and media research at cantor joins us. >> y yus yussef, good to have you back. >> thank you. >> what's the number they have to post on mobile ad revenue? what's the magic number this quarter? >> so last quarter was about $375 million. we think they need to probably clear about $475 million to get people really, really excited. that implies about a 25% sequential increase. to put things in perspective, 18 months ago that number was zero. clearly mobile is really what facebook is becoming about and the data we saw as of april and may seem to indicate that so far so good. >> they recently surpassed a million advertisers. you cite some rising evidence of a better roi. they have added hash tags, added video to instagram. why is there still this impression that they are not as sticky as some of the younger, smaller platforms we all talk about? >> well, that has -- historically that's the wrong word but over the last let's say six months to nine months, the knock against the stock has been engagement. meaning that fewer and fewer people are using the site. that said, if you look at the data, in fact, that's one of the reasons we came out this morning to say if you look at april, if you look at may, the total amount of minutes used on the site keep growing even may versus april there was a 3% increase. in mobile it was an 8% sequential increase. granted, that decrease was about 5% but in aggregate when you put all the devices or device utilization on facebook, we're still talking increased ingaegemeingaeg engagement. i think those guys talking about less engagement are missing the point. >> we will see how the quarter shapes up. thank you so much for your time. >> if paintings could talk, this one might have some of the best stories in all of new york city. which one? there it is. we'll explain when we come back. plus, we'll read some of your answers to our twitter question. what can apple say in its ads to win back consumers? this is a question. 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[ female announcer ] today, cisco is connecting the internet of everything. so everyone goes home happy. a talking car. but i'll tell you what impresses me. a talking train. this ge locomotive can tell you exactly where it is, what it's carrying, while using less fuel. delivering whatever the world needs, when it needs it. ♪ after all, what's the point of talking if you don't have something important to say? ♪ cue the guitar. in today's million darr minuolle we're taking you to one of the most iconic bars. robert frank explains. >> welcome to the king cole bar at the st. regis hotel where the good stuff is locked up in a safe. >> this bottle of cognac with a 24 karat gold top sells for more than $7,000. what's the most expensive bar bill that you have ever seen in this bar? >> i had a gentleman ordering all our top cognacs whose bill was well over $15,000. >> but that bar tab is tiny compared to the price of that 30-foot masterpiece behind the bar. >> john jacob astor is here in the middle of the mural. the builder of this hotel. it was commissioned to maxfield parrish in 190. you're looking at about $10 million. >> the m is tri and fystery and bar is people figuring out what people are doing in in picture. >> you have to figure out what the king did. >> and this kind of joke never gets old. >> nope, never gets old. >> robert franks here. there's so many interesting things about this story. i don't know where to begin. >> i was going to ask if you were sobered up yet. >> a lot of bloody marys. this is where the bloody miry was invented in the 1930s. it's a cultural treasure of new york, the st. regis. ernest hemingway, marlena dietrich imbibed a lot in this bar. one of the most famous murals in this bar. he was a quaker and didn't like the idea of a mural in the bar. he played a big joke on john jacob aster in this painting. >> restored it from all the smoking and drinking that's happened. >> there's a lot of cigarette smoke and drinks on the thing but it is beautiful. >> $15,000 bar tab as well. oh, my god, that's a lot of booze. >> you can get a beer for a lot cheaper. it's a fun place to be and people watch. >> it's a great piece, robert. talking about this apple ad that's getting a lot of criticism, especially from this analytics firm saying the commercial is actually not very effective. let's skip the sound here and tell you our question. what can apple say in its commercials to win back its consumers? apple to consumers, we have cut prices. wayne tweets, a commercial featuring the song baby come back. williamson tweets, they say we can't walk on water after all. they need to get rid of the arrogan arrogance. >> we finally have what you have been waiting for all these years, the apple tv. we'll leave it at that. >> yes. great tweets. thanks, guys. let's get back to headquarters. scott wapner and "the ha oftime." >> thanks, welcome to "the halftime show." i'll take you to the wall and show you where we stand. we have the nasdaq, s&p, there's the dow. the dow is up 132 points. it's nearly a gain of 1%. that's where the nasdaq and s&p currently stand. top dog. a barrons 1 o00 adviser on wher to make money. just own it. nike shares are up but are too many heain

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