People thought. The worst market overall was there, unfrozen that you can get a sense of things. Theres a look at europe. Again, the losses not particularly substantial given that move down in crude. In asia is where things were a bit tougher overnight, japan in particular with that stronger yen suffered a more than 3 decline. Lets get back here and start with our road map. And where does it start . Well, where youd expect, oil prices are down after the failed doha deal. Were going to take you there live and bring you the latest. Morgan stanley shares getting a boost from what was a better than expected quarter this morning, although not great. Well give you everything you need to know about that report. And we are also live with pepsis cfo, hugh johnston. Were going to talk about this companys earnings plus his new seat on twitters board of directors. All right. Lets start with oil. You were talking of course the squawk gang about it is its the key to this market im going to say this morning. Ill ask you what the key is at 9 30 when we typically do that. I guess that would be although you werent expecting from doha, didnt get anything from doha and what looked like a 6plus percent decline in the very early going when futures opened this morning were not down as much. No, what i did look at the last times oil fell 6 or more within a one or two day period and that day is always impactful for the s p. If you look two weeks later, there is zero impact, no correlation whatsoever. So oils trading that day is the key to that market. And then if oil goes up subsequent the market can go up. If oil goes down doesnt really impact the s p much. Interesting enough when you have these declines of this magnitude the stocks that have led us down are the airlines. As oil comes back up the airlines go up, which again is a little counterintuitive. So what im saying is those who trade off of oil do it as a day trade today because it will mean nothing by tomorrow. I looked at the last four since the peak in september of 2014. Just literally sat down there in the kitchen and just looked at the ratio of where s p was versus oil out two weeks, which i think should be your timeframe. And theres no correlation. None. I mean, s ps back to exactly where it was two weeks later. But intraday s ps always down. S p has to go down today, but a down 6 is not very key number past today. So keep that in mind. And theres a reason theres a lot of reasons why but has to do with demand of oil picking up. Specific to doha and well get a report from Brian Sullivan in a moment, but this strike in kuwait also seems to be having an impact in a different way because its taking oil off the market. Right. Nigerias got oil taken off too. Russia really cant pump more. Saudis have been pumping the same amount. Its not like they froze ahead, theyve been doing 101, 103, 101, 103 per month. Could they go to 113 . If they do that they are literally only doing a makeup for what the u. S. Is losing. The u. S. Decline is whats driving things here. And the u. S. Decline has been very severe in the last three months. And its going to be down a Million Barrels a day. Remember we import. People think we dont import. We import we will be importing another Million Barrels at this time next year. And saudi arabia preserved that relationship so most of it will come from the saudis, not from the kuwaitis, not from venezuela, not from nigeria. This is a pure win. What the saudis are trying to figure out at what level are they still able to fund their obligations. Yes. What level are they able to fund the yemen war and still wipe out u. S. Production. And the answer is theyve found it, its between 33 and 40. It seems to. Now theyve already hit the Public Markets in the last 12 months. Right. They need to raise a lot of money. And they can do that. Theres also been talk about taking certain parts of saudi aramco public. There are so many different parts its not clear what they would take if they chose to. No one thinks iran can pump out more than 1,000 barrels. Let me give you the math, every 100,000 barrels we drop per day youre going to have oil go up by my correlations roughly about 50 cents. Wow. Yeah. Were really the swing beyond what anybody thinks. Thats why the rig count has been a much better indicator. So another Million Barrels down from us is five bucks up in oil . Yes. You know what we ought to do . No, tell me. Rather than talk, i suggest we go right to doha. Right to it . To the source . Brian sullivan is there. Its amazing because you say there and it will come out here. Ive learned tv. Took me 20 years. Its taken a while. There he is looking very handsome and tough in his shirt there with the light streaming on him. Brian sullivan is live in doha and hes got a lot more for us this morning. Take it away, brian. You know, jim and david, i love what you guys are doing because youre ultimately talking about math. Ultimately oil does come down to math. Well get to that in a second. But lets talk about yesterday. What an amazing whirlwind and geopolitical intrigue filled day it was here in doha, qatar yesterday, because you had every range of emotion. In the morning reports out some kind of draft deal had already been agreed to. We talked to the ecuadoran minister about it, he said i like it, im going to sign it, saudis came in, big sbrouentour the delegates later went to visit the emir of qatar in his palace. Came back got eerily quiet, not a lot of reports from the meeting room. Then it turned serious. Occasionally a minister come out, smiles turn to a grim face, and you could tell that maybe, maybe something was wrong. A lot of talk that the fight really began between russia and saudi arabia about the language of any deal specifically with regard to iran. Then about 9 00 p. M. Local time almost exactly 12 hours after the meeting began, it was over. We saw down the hallway the saudis kind of left in a hurry out of the back door. The qatari minister kind of holding a press conference. And you could see from the podium a couple more spots. We thought thered be three or four ministers thereupon, it was just the qatar representative saying that they needed, quote, more time. Who knows why. And he tried to make it sound like the fundamentals of the market were on their side as well. But theres no discounting it, folks, there was a lot of disappointment here yesterday. Among some of the producers, venezuelas, ecuadors, nigerias of the world who need higher prices. And all this extra pumping could see prices fall. Now, you referenced kuwait. Perhaps nobody is luckier today than iran because of kuwait. Massive oil strike could take a million to a million and a half barrels a day off the kuwaiti market. And heres where the math comes in to jims point. Weve seen the u. S. Come down, kuwaits now going to come down. This provides iran a lot of cover to do what they want to do, which is kind of stick their thumb in saudi arabias eye and increase oil output by a couple hundred thousand barrels a day, guys. They want to get back to 4 Million Barrels. All the talk was that yesterday saudi arabia wanted to put something in writing that would limit everybodys output including iran even though they were not here, but that some of the representatives according to the nigerian industry minister who i spoke with afterward said they simply did not feel comfortable for it. Perhaps a win for iran. They got some support from other nations and theyve got the cover to increase production. Guys, i dont know how you feel. Ill send it back to you with a question. If we did not have the kuwaiti oil strike, we might see oil down 5 or 6 , i think the Kuwait Oil Strike has put the battle of the bulls and the bears squarely in focus. So thats it from doha, well be here all day. Ill come back with a tan, well, my tan, its actually red. Back to you. All right. Well watch that happen. With each successive report from brian. Right here in my hand 76 issuances of equity by Oil Companies. 76. Now, which is rather amazing. I want to mention well take a look at a partnership formed a Million Dollar private placement. I dont know if you include private placements on your sheet as well. No, i just do public deals. But shows you many of the Oil Companies are ready for this. The one to watch just so we know is ensco, if that deal holds up then you know that the decline in oil will not be that meaningful for the u. S. , because that deal would just happen. And that was you know, you were talking about a deal where they did 57 million shares at 9 and a quarter. Watch that. That is the key piece of business because thats the last one in. But 76 deals has really liquefied this group. So, again, the cushion is there. Theres a cushion. And if you want to sell some of the banks off this, its okay. But kuwait the fact that iran can pump like they can, the fact that saudis do not have the ability to immediately ramp to 11 million, the fact we are dropping by the month because there are only a few places where you can still make money. Speaking of making money, its not that difficult not that easy to make money in the Capital Markets these days. I want to get to Morgan Stanleys numbers. They reported that is the firm reported First Quarter earnings 55 cents a share, that was ahead of wall street estimates despite what was a 54 decline in profits. Revenue was in line amid weakness and trading in investment banking. Ceo james gorman saying while he sees some signs of market recovery, global uncertainties continue to weigh on investor activity. The return on equity was 6. 2 . I know. Oh, my. However, m a was very strong. Of 25 completed deals they were number one. Equity trading was solid at about i think 2. 1 billion. That was up 15 quarter over quarter, down 9 year over year. Global Wealth Management not too bad, revenues down 4 year over year. They also kept expenses down. I think their comp ratio was 37 . Did have a drop overall in expenses. And they got a book value now of around 35. 34 is what im looking at, jim. And the share count was down 2. 4 . So some positives in there. They beat the estimate. The stock is looking up. You can see it less than 1 . But 6. 2 , you cant live on a 6. 2 world for too long. No, you can keep cutting expenses and the expensive cutting is very, very good. I was surprised at the m a because havent been that many deals but looks like theyve done their share. Di spa when you get off the desk you talk about the disparities, the tangible book value. Yes. Keith says it was a low quality meaning for citi they are 72 of the stock is 72 of the tangible book. Tangible book is meant to be the cash on hands. Basically what if you close the bank. What would be left. Where would you be. I had a ramp up in capital at Morgan Stanley 30. 44 is tangible book value. When i last saw this disparity i always mention cal fed and thats the last time i saw it. Of course those went bust. These are not going to go bust, but the disparity is too great to be believed. Its either about the business is about to fall off a cliff or the market is just stupid. I havent been able to figure it out. The market doesnt stay stupid for all that long. No, it doesnt. It can for periods of time. But these stocks have to start moving up. And proving the market okay. Or else youre going to get worried. Or else i think the book is not right. I hate to think after all the scrubbing that the books not right. 6 return on equity. Yeah. Remember jamie diman said certainly hard to sustain since the crisis. I love talking with the music in the background. Makes me feel like were on 1010 the typewriters too, right . Yeah. We are going to a commercial. Yeah. Coming up, pepsico out with better than expected earnings. Stock at an alltime high. Were going to talk with the companys cfo after this. Its more than a network and the cloud. Its reliable uptime. And multilayered security. Its how you stay connected to each other and to your customers. With centurylink you get advanced Technology Solutions, including an industry leading Broadband Network, and cloud and hosting services all with dedicated, responsive support. With centurylink as your trusted technology partner, youre free to focus on growing your business. Centurylink. Your link to whats next. Pepsi was out with better than expected first kwartd e quarter earnings. The stock looked up, now its actually looking down. So people still trying to figure it out. It was a better bottom line, lower costs though sales continue to get hit by the stronger u. S. Dollar. They maintain their guidance for the year. And joining us now from his companys headquarters to discuss hugh johnson, the cfo of pepsico, member of cnbcs Global Council and newest member of twitters board. Good morning to you. Good morning, sarah, nice to be with you all. Nice to see you. I just mentioned the bottom line beat. Good way to start off the year. Some are wondering why you didnt raise your guidance given the dollars been weakening and things are looking up from a cost perspective. Sure. Happy to talk a little bit about that. As you said in the quarter we delivered 3. 5 revenue growth, so continuation of our ongoing trend. Good Strong Revenue performance. In particular we saw Strong Performance in the u. S. As well as our everyday nutrition portfolio. In terms of the cost, Cost Management was excellent for the quarter. We saw both favorable commodities as well as the impact of our smart spending initiative. And that drove margins up significantly 165 basis points for the quarter. So a good start, but as we know the world is a volatile place. As you all report on cnbc every day. And that leads us to be cautious at this point in the year until we see more factors emerge. We thought the most prudent thing to do was to stick with the guidance we had published just a couple of months ago. As a Global Consumer company, can you give us a taste of what youre seeing economically . North america strong, but latin america, boy, more than 25 decline. I know venezuela was a big part of that. Are you seeing any kind of stabilization in some of those emerging markets like russia, like brazil . Yeah. Let me do a quick walk around the world. As you said north america the consumer seems to continue to do quite well for us and i think for some other companies as well. I think the fact that we sell everyday pleasures makes consumers come to our category. The bellwether for me is Convenience Stores and Convenience Store business broadly was up about 5 . We gained a little bit of share in that environment. Latin americas almost a tale of two cities. Mexico continues to perform very well. Brazil obviously facing its challenges. And venezuela we deconsolidated out of pepsicos operations, so thats not in our numbers going forward. From the standpoint of the rest of the world a hot spot obviously eastern europe, russian economy continues to be challenged. China relatively stable, indias doing quite well. And western europe is doing okay, but okay in a relatively low growth environment. So the net of it is outside the u. S. The world is certainly more challenging. Our developing and emerging markets business was up 7 , which is a good solid number by any stretch by any metric that you would use. But were cautious on outside the u. S. Because the world is such a volatile place. Hi, hugh. Jim cramer. I know when pepsico reports they have a firm guide not raised those selling it are typically doing something stupid. But thats okay First Amendment allows tremendously stupid trading. Ive looked it over, totally on board. But i would like to point out the u. S. , the war is over, cocacola and pepsico the war is over. Had you use spot pricing you would have gotten up but the real positives to me no more price war. And you wanted a just currency, you could have. But obviously youre waiting for more verification of that change in currencies for the dollar before you make your move. Yeah. Thats exactly right, jim. Two points there. In terms of north american pricing, that environment remains very rational, very solid. Obviously we only control we can control which is our own pricing, but our pricing up 2. 5 as reported externally on the quarter overall lrb pricing was up 1. 8 . So those are good solid numbers and numbers wed be happy to see all year long. I do think the economic structure of the industry is such that it would logically lead to continued rational pricing in the marketplace. Regarding currency youre absolutely right. Spot rates have come down such that if i use those the numbers would be stronger in the balance of the year. We use a consensus rate. And as those two converge well see whether current spot is right or whether consensus is right to the degree that current spot is right obviously thats a tailwind for us. We do see the weakening of the dollar as potentially being a benefit to us in the balance of the year. Lets go over that Convenience Store number because thats in focus. Weve seen very little pickup anywhere in the whole food chain because of oil going down except for Convenience Stores. Does that seem in sync . The extra pennies at the pump in sync with the convenience number . Yeah, i think it really affects the Consumer Behavior truly at the pump. I heard some discussion earlier today on cnbc about consumers arent spending back the oil dividend that theyve all received. What we see in Convenience Store is in fact they are at least spending that little portion of it back. In terms of the behavior at the pump is going, pump gas and now because theres a few extra dollars in your pocket, go in and buy a little bit of a treat or a nutritious product. And as a result of that were seeing benefit from it. In addition to that because of all the innovation weve done like mountain dew kick start, customers are tending to pick us more than other companies. Before you go we have to ask you about your new appointment on the board of twitter. Whats your diagnosis of the problem for that company . And how as a new board member do you plan to fix it . Well, seeing how i havent actually been to a Board Meeting yet, i think i better spend a little bit of time un