Big earnings out this morning set to weigh heavily on the averages, cat, mcdonalds, dow, dupont, 3m and coke all on the move. Wow express scripts shares falling down hard on news it is likely losing one of its biggest contracts. Well dig in on that and the companys earnings. The trade war is heating up. The u. S. Will impose a major tariff on canadian softwood lumber. Hear what the commerce secretary says about that action. Futures are getting a lift, earnings from dow components adding to the momentum. We mentioned cat, blowing past expectations with its results, raising their full year guidance, 3m exceeding consensus helped by renewed strength on latin and asia. The story of the morning may be cat, jim. Nowhere near what analysts were expecting, almost double the estimate. Whats happened with caterpillar . We call it leverage and a lot of people think leverage, what does that mean, leverage with the president with congress or leverage leverage as in debt, how we typically refer to it. Exactly and the leverage here is when you have a dollar in sales, a huge amount of money is falling to the bottom line here. That has to do with the fact that caterpillar has streamlined the company in a way that they can do 9. 8 billion in revenues and just have a monster increase even though they did 9. 5 billion a year ago. So you take that just a small amount of revenues but youve g got 1. 28 in earnings versus 46 cents the restructure. If they have a big year and they will have a big year, youre going to see dramatic, and i think that frankly far in excess of what they are saying theyre going to earn. I mean, i think this could be, when you see Mining Minerals part of the business come back, construction come back, when you see china as strong as they are, this stock is heavily shorted. Its been the hedge fund whipping boy, a pinata. People worried about the tax situation. When you take that revenue from 36, 39, to 41 billion i have no idea but its substantially more than the 3. 75 they say they can do. Congratulations caterpillar. Street is 3. 26. Good luck. Put this genie back in the bottle. If these guys get the turn im seeing in asia and from so many countries, latin america, brazils stabilization the United States not doing much at the all. The United States like the stock market is indicating kind of a dud in almost every single case. Thats no referendum on the president but its dudlike. How does this compare with some Industrial Metals pricing, right . I think that you got the alcoa number. There is some better pricing, al cowith a benefiting from the fact chinese realize you have to stop producing something that pollutes so much. You are seeing coal do better, oil stabilize. Its not up. Its the return we better buy some trackers and buy some big engines, some mining equipment, because frankly they hadnt bought it in years. This is a catchup, pentup command play and a play on the fact that they just must have gotten rid of so many people. I mean, it is incredible. And produce the same amount of sales, this is what we talked about. This is Artificial Intelligence machine learning. All the things that you have to be worried about if youre trying to figure out how to put people to work because man, they did the number. Wow. Right, so its productivity increases . Big time. It is extraordinary. The company as always is just, you know, they cant save their lives to promote. They just dont do that. Thats up to me. Price realizations, lower cost, higher sales volume, favorable mix of products. It is a remarkable quarter and its right it should be up. Oil and gas higher sales in north america, thats really the kind of only real north american line that i like, but youve got Business Confidence going up, Global Growth going up, backlog growing up, everything is positive. U. S. Construction activity is one positive for the u. S. Amazing. Three months rolling retail sales on the verge of going positive after how many months . Is. After years, and good for them, that they took out costs. I remember that when goldman put the sell on in the summer, it was not so great there. The only thing is that the people getting credit for it are maybe not the people who did it. Thats okay. Right, you referred over helmet farthering. Lets not forget the fbi thing thats still going on. It is. Lot of people stayed out and shorted it. I believe its a 2 billion liability over multiple years max and what is important is that this company is the leanest ive ever seen cat since 198283, when they decided take on the union and 8485, big earnings split. Mcdonalds better than expected numbers as well. Global comps up 4 , company says the u. S. Benefiting from the expansion of allDay Breakfast, meantime coke misses on the bottom line, beats on revenue. Stay tuned for an exclusive with the incoming Ceo James Quincey coming up later this morning on squawk alley. Mcdonalds, the twoyear stack in the u. S. Is 7. 1, thats the best result since the First Quarter of 2013. Yes, easterbrooks doing a lot here. The comp. Plus 4 . People say how can that be if the u. S. Is only up, is up less, even though that is a great stack number. U. S. Is only 33 of the company. China was called out, the big mac and beverage promotions called out. Steve is very matteroffact about it. He has the franchisees motivated and i this i that matters. Hes talking about gain laps customers, convert casual customers to committed customers. The personalized and better visit has to do with the fact the franchisees feel like this guy has their back and this stock, which has, and this man continually underestimated. We had an aflac commercial who is the ceo of mcdonalds . We better Start Talking about easterbrook because he delivers, one of the better ceos around. It was the trivia question. Like who is on the dollar bill . Hello . Uhm, the Stock Performance itself is saying that, isnt it, jim . Yes. Seemingly was mired right around 100 f not below that for some time and has had a significant move up as we can see over the last year. Hes underestimated constantly. Why is that . Why do we underestimate this man . I dont know. We had two upgrades last week and another outperform initiated. The samestore sales for worldwide are incredible. I do think that people are underestimating how much, you know, how much that is not allDay Breakfast. All Day Breakfast is important. There is some discussion past the initiation of breakfast comps. Right. Its a much easier compare. I think people ought to recognize this is like a dollar store. They have cut prices. They have given, theyre giving you a value meal that you kind of worldwide resonates, and that does matter. People like a value. And are they eating big macs now because they dont worry about calories . I dont know. It is rather amazing, big mac making a comeback here. Big mac. The big mac is like if you eat those, you get i wouldnt know. Wouldnt know. Havent eaten have you ever had an egg mcmuffin . Theres 337 calories delicious. What do you do after you had a big night out on the town . A long time. Orange juice, a cold pressed beet and asparagus . Orange juice has a lot of sugar in that. Nothing like an egg mcmuffin after a big night on the town. You got that right. To your point, jim, there was a time people thought it would go out of business because millenials would never go and a time we thought shake shack could disrupt their Business Model or operating margin. They didnt realize the key to mcdonalds, i told mr. Easterbrook there was a very dirty bathroom on the exit to go to the l. I. E. Off the hamptons. You know how clean it was the next time i went in there . This guy is about the basics. Keep it clean, simplify the menu, get some technology in there. He is about blocking and tack tackling. He is the offensive line of mcdonalds. Never gets enough credit. Never. I agree. They struggle in the trenches all the time and nobody even knows their name, even when they go to the hall of fame. Right here right now. Thats true. The president is upping the antein a trade dispute between the u. S. And canada. Trump white house announcing a 20 tariff on canadian border, typically used to build Single Family homes. Earlier on squawk wilbur ross explained where it fits into the president s strategy. I think there is a larger takeaway. The Trump Administration has been much more focused on enforcement, than had been true previously, and theres a good reason for that. U. S. Is the least protectionist of major powers and yet we have the highest deficit, 500 billion. The other countries that talk about free trade are really very protectionist europe, china, japan. So they have the rhetoric of free trade, but the reality of protectionism. That set of facts is not going to be permitted to continue. That is the commerce secretary. Top of the fold of the journal if you think its an arcane topic its not. Well watch lumber futures which have been anticipating this, watch Home Builders and see if their prices rise. We got to get first of all when i listen to the secretary, i think his, hes speaking some common sense for anybody who tried to do business overseas. The numbers here. The average wood is 15,413 in a house, so we tack on some money there, not all bought in canada. Lets use polte at the entry level home. They report today and people werent crazy about the number, its 375,000. Are you hurting their margins, no. Is it a shot across the bow what canada is doing . Its been a long running dispute and pulte is not down because of that. They are missing some numbers. The others are not down like that. Some people were saying labor is hard to get. It depends. Home builder versus home builder, some are complaining, most arent. I just say this is not the devastating thing that people are saying. It is being played up big. Dairy and last night apparently the president said aluminum is coming next. Well aluminum if you go over the alcoa quarter, theres consistent dumping. The chinese continue to the only reason the chinese have cut back is because they realize its nothing sturdier than smelting, but alcoa has some good numbers about what is going on with china, and theyre still throwing it around. Theyre just not as bad as they were, which is one of the reasons alcoa is going up. China is producing way too much. Chinese stockpiles continue to grow, chinese are ramping up in guinea. There is, lets just say the chinese arent playing fair. One important point here weve speculated about what the president s approach would be in terms of tax reform and what a border adjustment tax, in other words a broad tax on imports be part of it. These oneoffs, whether its aluminum or lumber or whatever it may be, seemed to indicate to me at least, and well find out soon enough, that border adjustment tax may very well not be a part of any planned proposed by the white house when it comes to tax reform. I want to talk more about of course that later in the program. Youre dead right. If you invoke the very contentious steel the actual you do steel. Do you aluminum. Do you lumber. No longer price by price steel. Listen, steel is of national import. Right. Of course some people say listen, its not going to hold up under the world trade because the Defense Department hasnt called for it, but hes talk being steel plate, talking about making tanks and not being reliant on chinese steel to make tampg tanks. To me thats common sense. I think its horse sense. It may also indicate that approach. Tariffs as opposed to a broad border adjustment tax being a part of anything the white house supports. Which is essentially the obits are being written on border adjustment as of today. Mnuchin and kohn with meet with congress tonight on tax. If youre involved in some of the industries i think wilbur ross is right. My view is irrelevant, im not in the business, but i know that these market have been, we dont sell much in korea. They wont let us. We dont sell much in china but they dump. Why is alcoa good . Do you think theres a surge in demand . Its been decent but the chi knees cant make it as much because its polluting the skies and they have a Million People dying of respiratory illness so maybe cut back in dumping of aluminum. Thats the saviour, they want cleaner ear. I dont hear cat pill ear squawking about the high price of steel. Theyre not. Well look at the premarket and might have the biggest two days of the year and potentially nasdaq 6000 around the open. Well check on that when squawk on the street comes back. Been. Last year, he said he was going to dig a hole to china. At t is working with farmers to improve irrigation techniques. Remote moisture sensors use a Reliable Network to tell them when and where to water. So that farmers like ray can compete in big ways. China. Oh. He got there. Thats the power of and. We cut the price of trades to give investors even more value. And at 4. 95, you can trade with a clear advantage. Fidelity, where smarter investors will always be. And at 4. 95, you can trade with a clear advantage. Hey youve gotta see this. Cno. N. Alright, see you down there. Mmm, fine. Okay, what do we got . Okay, watch this. Do the thing we talked about. What do we say . Its going to be great. Watch. Remember what we were just saying . Go irish see that . Yes im gonna just go back to doing what i was doing. Find your awesome with the xfinity x1 voice remote. Im ricardo, a sales and Service Consultant here at the xfinity store in bellevue, washington. Here at the store, we offer internet, tv, phone, customer service, home security. Every situation is a little different. It could be about billing, simple questions like changing the phone number. Sometimes, they want to upgrade, downgrade, but at the end of the day, you want to take care of the customer. One of the great things about comcast, theres always room to move up. Of course, it depends on you, how hard you work. Big day for earnings as five dow xocomponents report and a l more tonight with chipotle, at t, wynn, Texas Instruments. We have express scripps false sharply. The manager says its contract with anthem unlikely to be renewed after it expires in 2019. Anthem is one of the companys largest customers, accounts for about 18 of revenue during q1 and the stock is reflecting that today, jim. Thats about as ugly a fight. David you focused on the idea they couldnt resolve anything. No. They hate each other. When you talk to the companies, theyre not like tmobile, where john ledger is like its d b and fu for the other guys. This is just a real dispute where they dont like each other. And they couldnt reach any it wasnt like they were chatting. For those who care, read appendix a in the release that came out yesterday gives you background on the relationship with anthem of course which really is a result of a contract signed back in 2009, but is somewhat complex. Thats the tenyear pbm contract, they talk about how during the several years initially of the contract the anthem business underperformed express financial expectations as anthems prescription plan volume was significantly below, and they go sort of to give you a real background as to what is behind this cessation of a relationship. As it appears to be likely. How do you make that business up . Im not sure. Im not sure. Its a lot of business. Yes. I think its interesting of course they kept their current earnings forecast, not that anybody cares. I mean, this is a real battleground. I know cvs traded up immediately. People think theyll get the business and no surety to any of that. Imly bi la little surprised. Anyone who talked to either Company Recognized there was tremendous acrimony. Express scripps says it was surprised that anthem intends to move its business without fully pursuing discussions. So express was a little surprise. Maybe they should have talked to anthem and they wouldnt have been surprised. Those guys dont like each other. This is not like harvard versus yale. Cramers mad dash and count down to the opening bell. Lot more squawk on the street still to come. The power of the nasdaq market. The power of 100 of the worlds top companies. The power of an etf. The power of qqq. The thinking we put in, clients get out. Power your clients portfolio at powershares. Com qqq. Before investing, consider the Funds Investment objectives, risks, charges and expenses. Call 8009830903 for the prospectus containing this information. Read it carefully. Distributed by invesco distributors inc. In about eight minutes start with trading. We are looking like were going to have a significantly strong open, that is if you are long the market, with the nasdaq poised to hit new highs. Is dupont a referendum on President Trump or a referendum on ed green . I dont know, as we get to our mad dash, about eight minutes before we get started trading . I think ed breen. Well go with the breen. This man is a quiet miracle worker. Managed to be able to, the organic growth here is extraordinary, plus five. Theres a 20 cent delta here. Literally 20 cents better. You have to move it so its the first half because theres crop issues but i got to tell you, david, he did that deal with fmc, still 20 billion in are ef knews coming from crops. Theyre going to merge with dow. That deal is going to close fairly soon. August, hes given us, thats a late day. Its not like the rite aid walgreens deal. They split 18 months late near three different companies. Theres some decisiivisions. Consumer electronics is strong. David, thats tv, thats cell phone, and by the way thats why best buy was upgraded today. Tv and cell phone, remember the days, wow corning, best buy. Tv and cell phones are doing very well. This is the two iconic cell phone companies. I cant mention one, just kidding, apple and samsung are shipping product and all of these guys benefit. Dupont, breen, when he splits this he will create value. Im using a 100 per share target when they xwcombine. Bernstein writes dupont is joining the culture club with the 80s party. As far as we can tell as much by internal culture changes as by external markets they say while were not sure breen is roaming the halls with dye and beads in his hair, the end result is we got the beat. Colorfully they are saying it is culture, it is what breen has been able to do. Its not a lot of and improving performance. Breen is a guy who came in, a lot of people felt there was nothing, there was nothing t