Transcripts For CNBC Squawk On The Street 20170711

Worst performer is spains ibex 35 and theres wti which i know my partner here will have a lot to talk about he almost always does. It is often a key to this market, down this morning. Lets get to our road map this morning. It starts with the start of amazon shopping holiday, as the rest of retail suffers plus a number of recent ipos that have fallen below the bear syndicate what their pricing was, what it means for the valuations and rest of the companies that want to go pep. Pepsico is out with its results as earnings season begins. Well speak to the companys cfo on set in just a minute. Amazon prime day is under way. The company highlighting deals aimed at enticing customers to become prime subscribers as a number of retailers are coming off a rough day on wall street we were talking about it here before it began. Macys saw shares fall 7 . Best buy was yielding 7. Reports about a geek squad effort at amazon, jcpenney down now in the premarket after announcing the departure of its cfo. You said this yesterday. I know i got it ight. You said wait till today. Today is the day. There might be bargains in retail. Thats what i said. Everyone is going to panic well have to wait to hear its up 20 somebody is going to have to downgrade. This is going to be a day where im taking off people have become so people have never shopped in their career are shopping i looked at this thing i am not buying the 100 glow in the dark pebble walkways for a saving of look at this, 11 it used to be 12. 96 im not calling it a sham but i dont know anybody who actually went on and bought anything on amazon prime. I did this morning. I bought an echo and i bought a laptop. You, who has never shopped . Yeah. It was 89. 99. I was on my computer and with no intention i remembered, went on. The two things i wanted to buy said the deals ended im not sure what was going on this morning, though have you ever bought anything gl go back on. I went back on my phone. My wifes account. Its even better it just goes to her credit card. Okay. This is for the neophites. They can spy on my entire home. Listen in. Subpoena the tapes if they ever need them. Maybe this is bigger than i thought. A man who has never shopped shopped. And me, as a professional, never found anything that i want to buy. Why is that i dont need a 24pair shoe rack maybe i dont need the roomba. The roomba deal looked good, 249. No. Do you like the new balance sneaker deal for 30 i passed on that did you see blue apron for 6 a share . I think i would pass on it as well. How about snap at 15. 50 . I might also pass. Those are jokes i tried to make those jokes with my friend, wilf. They fell flat. They dont fall flat with me. Amazon prime is really one of those things short term Running Shoes were bargains i will give that people were mad at me on twitter that i did not highlight the running shoe bargains. Still to buy a running shoe online, zappos boxes are coming to my house all the time. But, david, this took down every retailer, including walmart, this day, took it down. Is it ridiculous . Im beginning to think its a little ridiculous. If i were to go its an adobe, ugly site spruce the site up. Look at amazon. What, that crock pot . How much time we spent promoting prime the last couple of days . Not even weber grill, coleman . Press releases they tell you nothing but everything millions of members have shopped. Amazon echo is the bestselling item. Wraparound 27 times. Number of things they bought. They turned us into nothing other than an algorithm. Im like jeff bezos remember, you know look at that do you think they had any brioni how many prime members there actually are more today than there were yesterday. Lot more than there were yesterday. We dont know the whole reason behind the foods deal maybe some of them are halfway decent. Dont you love these stocks i tried to get these wing tips same price today as they were yesterday. Do you really buy wing tips online only. Come on. Only. Lot of shoe stores still in new york. David, if they had these on sale, this whole dialogue would be very different. Well, im sorry that they didnt back to retail itself. Do you buy macys . I dont know that you buy it anyway. I would buy some macys debt maybe. Buy sears debt. How about jcpenney . Cfo left. I dont know it looks like i spoke too soon they have the brioni mens lapel suit david, this is the first time its ever happened im buying with one click on air right now. 2,001 they have it for 2,000. Thats a savings of 400. You cant buy a brioni suit on am ston whats wrong with you . Lets move on and talk about some of those ipos well get breaking news on tesla. No yes. No phil lebeau in chicago has it take it away. Rollout of the first vehicle delivered to customers at the end of the month, the company is dramatically expanding its Service Network. Here is what tess la is announcing, 100 Service Centers will be added. 300 mobile service vans, the vans that will go in service of a vehicle, rural location or area if youre not close to a Service Center and adding 1,500 Additional Service workers the importance of this news is the fact that many people have said, look, as these guys expand, as they go from being a niche automaker to being not a huge player but certainly more significant relative to other automakers will they have the Service Network in place to meet the demands of can customers one thing theyre doing thats sort of interesting, they know where all the reservation holders live theyre looking at those addresses and saying where are the density of orders coming from thats where i want to put our Service Centers. Tesla dramatically expanding its Service Component as they prepare for the rollout of the model threes coming up later this month guys, back to you. Phil, any idea what this is going to cost them they have not given me a cost i asked that specifically. They said were not divulging this at this point look, it will be interesting as they do this, guys this is part of the costs that go with beyond going from what they are to what they want to become. Its going to be costly, along with adding more plants, more giga factories at the end of the day, you and i have talked about this, david. They have to go back to the Capital Markets, will the Capital Markets say yeah, okay, as they have in the past or at some point will the Capital Market say, hmm, not sure about this . Right do they actually ever get the heisman . Thats the question. Phil, i have to ask this. Is there ever a sense in tesla, in the whole ecosystem, ilan musk, that its time to regain control of the stock this is certainly a welltimed event after that bad week. Or is this all happenstance . Look, they will tell you that they do not look at the stock price. All Companies Say this we dont look at the stock price when we decide what news were going to be putting out having said that, ilan musk is the master at sending out tweets, teaser social media in terms of whats coming up. And that juices the believers in this stock. Right. You and i both know that. Weve seen it time and time again. Right. They say we dont look at the stock and whats going on when it comes to making announcements. Well be watching that stock this morning thank you, phil lebeau with that breaking news on tesla. David, one brioni suit only 48 regular im a 42 i had to take it out of my cart. That was a bad choice. Coming out, pepsico reported better than expected quarterly results, upbeat guidance if you want a brioni suit well go shopping today. Whats working for the beverage and snacks giant this could be another look at futures as we go to the break. Well be going to mr. Johnston on the other side. Hey dad, come meet the new guy. The new guy . What new guy . I hired some help. He really knows his wine. This is the new guy . Hello, my name is watson. You know wine, huh . I know that you should check vineyard block 12. Block 12 . My analysis of satellite imagery shows it would benefit from decreased irrigation. I was wondering about that. Easy boy. Nice doggy. What do you think . Not bad. What do you think . What . Pony neighing] hey gary. Oh. Whats with the dogsized horse . Im crazy stressed trying to figure out this complex trade so i brought in my comfort pony, warren, to help me deal. Isnt that right warren . Well, you could get support from thinkorswims inapp chat. It lets you chat and share your screen directly with a live person right from the app, so you dont need a comfort pony. Oh, so what about my motivational meerkat . Inapp chat on thinkorswim. Only at td ameritrade. A used car, yogigspeed internet. Me . You know whats not awesome . When only certain people can get it. Lets fix that. Lets give this guy gig really . And these kids. And these guys. Him. Ah. Oh hello that lady. These houses yes, yes and yes. And dont forget about them. Uh huh. Sure. Still yes you can get it too. Welcome to the party. Introducing gigspeed internet from xfinity. Finally, gig for your neighborhood too. Were driving productivity to expand margins and at the same time using a portion of that productivity to invest in innovation we really ramped that up over the last couple of years were running about 8. 5 of our revenues coming from products over the last they are typically more premium oriented. As a result were getting higher dollars per ounce or higher dollars per pound. Thats why you see a bit of the muted growth relative to the maybe it would be helpful to share a couple of examples if you look at this life water product that we just introduced at the super bowl this year, its an electrolyte water, has a new artist on it we feature new artists continually over time. Right now were doing a feature on women in art. And we sell it at a good price premium. So i think our innovation is working well and thats whats enabling us, along with productivity, to deliver strong results. I think its interesting, hugh, that you mentioned the beverage as part of the innovation story the Beverage Business is still a little bit soft and not quite seeing the growth. Fritolay continues to do the heavy lifting here what are you seeing specifically resurgent in coca cola to make it more lean or trends away from carbonated beverages were competing effectively with coca cola i certainly wouldnt characterize it as that. Theres a shift going on from carbonated to noncarbonated beverages. Whether its tropicana and juice, lipton and tea, starbucks and coffee i think youll see over the course of the year, we should compete effectively there. Carb carbonated soft drinks, were a little soft in the quarter youll see us turn up the advertising a little bit in the back half of the year. I suspect well clean that up pretty well. Regarding your comment on frito, exactly right. Terrific quarter for frito 3. 5 Revenue Growth, 7 Profit Growth leaning to innovation in a significant way. Popable product, not heavy from a volume perspective but revenue perspective as a premium product. Fritos premium revenue is up 8 in the quarter we see the consumer go more premium were going right there with Innovative New products. Hugh, jim i see great organic growth i see that you have a product that turns very quickly. So the supermarkets love it. Its not something that the groceries really want to come after you because youre a principle source of great profit people will not realize how good your organic growth is, sell the stock down and everybody else buys the stock this has been the pattern of late. Yeah. Jim, youre exactly right. We tend to be an early reporter. As we get further into the earnings season generally we do fair favorably to most of our peers, at least we have the last four or five years i expect that will be the case again. To your point about retailers they generally do think very favorably of us. A lot of our products are sold on the perimeter of the store. The center of the store, things are a little more challenging right now. Because our products are impulse in nature, because our products do well on the perimeter and retailers turn them so quickly on average, snacks turns 50 time ace year beverages turns about 80 times a year retailers do love selling pepsico products. Hugh, as sarah and jim have both indicated and you answered as well, it was a good quarter a citi note here says we find it hard to ignore the market slowdown in volume group in most of pepsis Business Segments do you think thats a fair note on their part . What do you say to that when people say, you know, volume growth is slowing down yeah. I think volume was a little bit slower over the last couple of quarters i dont think thats indicative of a longterm trend other than the shift into premium because, as Premium Products sell for a higher dollar per ounce or higher dollar per pound youre going to see less volume growth to generate the revenue. In a lot of ways thats good as consumers theyre willing to pay more for Innovative Products obviously its less stress on the supply chains if we have lower volume growth per dollar of sale. I think volume is just fine. Were not really overly worried about that at this point. You talk about the tax on soda ful philadelphia has one chicago is making a comeback is there a lag, drop and then you come back . Had has that been the pattern . Yeah. Typically a falloff for six to nine months and then the consumer tends to adapt to it. Then you see the volumes tend to come back after that in general, obviously, were not in favor of taxes that are discriminatory of one product. Were willing to pay our share of the tax burden for the good but generally speaking were not in favor of these beverage taxes. No surprise there a good economic snapshot on you from the consumer. I noticed better results in the emerging markets, places like mexico and doubledigit growth in china, russia coming back give us the spots where you still see trouble and which were the real highlights and surprises for you . Yeah. I think what you see in the developed markets is a consumer that generally is healthier but a bit cautious in terms of their spending lots of the turmoil that exists in the news, i think, does cause consumers to hold back on spending a little bit. Regarding international markets, mexico was terrific for us i think there was a pause with the mexican consumer in the latter half of the last year and earlier this year. Now the mexican consumer is clearly leaning in, as russia has started to rebound its general economy, we certainly saw single digit Revenue Growth there. China business overall performed for us a lot of that is less about the china consumer and more about the way were managing the business thats enabling us to perform well. You talk about the new channels i know youre on the board of twitter. You certainly have we know that amazon, getting more aggressive, without dealing with any particular supplier here, or distributor. What is the impact, say, of a deal like amazon, buying whole foods on you how much of yours is Convenience Store and can be, lets say, bought at impulse versus stored . Whats the impact of this deal yeah. So, i mean, in terms of that deal specifically, we try not to talk about any specific customer generally you do see consumers buying more food and beverage online from one perspective, you might argue the case as impulse products that may not be good for you. I would argue the opposite case. As we learn more about consumers, both through our digital customers as well as learning from consumers independently, we have the ability to target consumers more effectively with the things they really want to buy and deliver the right messages and the right promotions and the right price points to individual consumers so, over time, i actually see the move to digital from a consumer perspective as being very favorable to pepsico and other products more broadly regarding our Customer Base we have a big brick and mortar setup customers, pure play customers all of these channels seem to be converging anyway. My expectation is that from a margin perspective, it will probably net out about neutral and it represents our ability to sell innovation more effectively. Hugh johnston, thank you for joining us vice chairman and cfo of pepsico. Thank you. More food and beverage online, less bironi suits. 2,000 but not my size. Saving of 100. Sarah, thank you for bringing that. Thanks, guys. Jims mad dash as we count down to the opening bell one more look at futures before th at i put everything into my business. And i had all these points from my chase ink card. So i bought ingredients, utensils, even made custom donut cutters. Wow all with points. Thats how i created the ripple the doughnut in a doughnut in a doughnut. Suddenly its everywhere. I mean, it really took off. What will you create with your points . Learn more about the ink business preferred card. Thats a look at snap now below day one where the stock opened well talk about whether this sends a bad signal to ipos in the offing, with jim, of course, enco back. Mad dash, opening bell right after this baby crying slow jazz music fly me to the moon and let me play bell ring a mad dash before weget to the opening bell, jim. An obituary comes out this morning. They didnt mean to make an obituary but Morgan Stanley, competition increasing price starts at 16 snap, crackle, pop. Boom, boom, boom. Boom, boom, boom. David, why . Instagram. They have a couple of reasons. The other ones are the window dressing advertisers strong growth on return investment, bidding not working. But sponsored lenses for freebie instagram. This is zuckerberg going after them in a way that is only, as i imagine what hes doing, instagram thats behind the downgrade. David, the print price is broken now, remember, i told you i felt bad for these billionaires yes yesterday, you said that i said come on. This was a very devastating downgrade. And others are going to have to start taking account return on investing may not be there for advertisers. Its very damning and thats what started the long decline of twitter. I want to talk about whats happening on the other side of this bell. I can hear it, of course tuesday here the big board, serenity shares. Not serenity now serenity shares, recent launch of its impact, victory capital, two Exchange Funds speaking that have, you see the s p 500 back at hq there kind of a mixed opening after not a bad day yesterday. Pepsico getting hurt here exactly what we talked about people will look back and say why did we sell that this has been a common pattern pepsico had a good quarter, good organic growth. 3 organic growth we talked about mongolese. 1 . Kellogg, General Mills has none so youre looking at the best of the best its getting hit but this is the way it works the stock went up a lot versus the best of the best they report a number that does not cause you to raise forecasts. Everyone kind of freaks out and says its no good. We see their colleagues in the industry and theyre not that good we circle back and buy pepsico timehonored, doing a fantastic job. It doesnt matter. The company is first out of the chute and were saying, hmm, soda not that good. Its 12 , right snacks is whats driving things. And its very good. Understand, this was in the context of food, a fantastic quarter. In the context of everything Johnson Johnson quarter. Johnson johnson is the best drug stock they report and people say and then a few weeks later they realize, wow, alex gorsky did the best job its time honored. Its the way the business works. When i look at coca cola by the way, respected market caps are not that far off at this point pepsi is about were talking about 106, coke is 190 what do i think when i look at coke coca cola is 23 times earnings. A lot more of it is beverages. Right new ceo coke coke is doing interesting things and packaging spurring sales i dont regard that as the true innovation regarding pepsico but what astounds me is the market would pay more for coke than pepsi it doesnt make sense. At least the gap has been there. It used to be much bigger. Yeah. Again, i mean, as you say, it was a solid quarter. We didnt talk about Convenience Stores with price of gasoline down, Convenience Stores are up. Fritolay. You go to the store, have an extra dollar, go in and buy the fritolays, doritos. Love doritos. I know. Im a sucker for doritos. Big mac, fries and diet coke. You know theyre bad for you. They are . Tesla is up. Oh, no it is. Hes the magician. Phil lebeau reported 100 new Service Centers will be put in place ahead of the model rollout. They have about 150 now. A significant expansion. No, its a real thing he is the david blaine i dont know if youve ever seen him. I have. Ilan musk is the david blaine phil actually mentioned ilan is the master ive often felt the higher the stock goes, the more excitement. Its almost like amazon prime. We talk about tesla, people say i got to go kick the tires of tesla. We talk about amazon, people go to amazon. If walmart were to do some big walmart day, we would be talking about wall mamplt maybe it starts a buy America Great day. I like t. Bad day. What are they selling have you ever been through a walmart . They dont sell brioni there are plenty of american manufactured goods, i think, but theres an awful lot of stuff from other places. I want to see the stuff sold well underneath the price. Remember how they used to sell those rubbermaid coolers and they were below the price they paid draw you in. Put the best thing straight down the aisle at the other end, make you walk the whole way across. Amazon prime was not directed at walmart but, yes, you did buy a pc. I did. My wife is going to buy the cottonelle toilet paper but i beat her to it. Youre buying your toilet paper on amazon . Exactly did you ever schlep two bags of toilet paper from a rite aid whats cramer doing schleping toilet paper have it delivered to the house. Amazon pantry. Tesla is up almost 1 . There you go. I want to come back to snap you did it in the mad dash but its worth focusing on a little over 4 , you noted the downgrade from Morgan Stanley, fairly negative. Evan spiegle was not what do you do . You and i had an opportunity to sort of get the sense early on, prior to the ipo they wanted to focus investors not on a daily metrics, on levels of engagement. I know. Where do you go now facebook, early on, was able to make that pivot after a very poor start. Right. You pointed out that key Conference Call they had where suddenly they were all about mobile and made it happen. If youre snap, what do you do to use the word pivot to a certain extent in terms of your story and or your Business Model to try to assuage the concerns you have to develop a product that is for the 21 to 30yearold. That is what . To the 21 to 30yearold. Im just saying that this thing is a little too underage and its viewed as being a little too subversive and has a way of delivering a message that instagram is david, its really hard. Instagram, facebook wants to smash snap, it can do it what happens here is what you have to do a guy by the name of evan has to come on air and talk about what hes doing evan spiegle. Hes not going to do that. Why not he was here the day of the ipo and doesnt want to talk. The stock was at 17 he doesnt care. Why because they own all the stock its a private company he has all the votes, every single one of them. North korean not parliament he should come on air. Focus on the long term thats not about coming on and he needs to communicate with his Customer Base. Well, yeah, but the Customer Base is going to instagram, according to you have to come on and say, listen, the Morgan Stanley declaration, not true. Let me tell but the shortform videos im doing sponsored by really very big Consumer Product companies that youre missing because youre not seeing what we have in the pipe. I need to know what they have in the pipe otherwise, david, this is becoming one of the great but haves of 2017. Its a bust you want to talk about another bust blue apron. Blue apron . 10. Look at that. Someone came out with a 2 price target. The ceo, we had them on, defended a very good Business Model which, frankly, i had experience with and raised questions early on because of various things that i wondered about, whether they would be portion sized and whether its enough whether it would be the weight of the delivery and the waste that is generated as a result of it. For younger millennials. Not to mention certain things that were good, others that werent . He was talking about sustainability, the supply chain and how they can scale the Company Stock price has been a disaster that is really embarrassing, to take somebody public. Their sales are not growing as fast. Their advertising budget is growing faster many competitors of course, amazon, if they wanted to, could offer this service once they own whole foods and bring it to you whenever you want and theyll use much better packaging. Yeah. I dont know, david this was really not a great idea to bring it in terms of this was a desperate ipo. Desperate. And did not have a dedicated set of shareholders there. It was a relatively small percentage of the overall company. Does this put a chill into anyone else who is thinking about an ipo or, frankly, is it always, you know, take a look and make a decision based on the merits of the particular security that is being brought the consumerrelated ipos are going to be troublesome because theres so much competition all through. Anything thats enterprised is very interesting to me although, you know, youre seeing some im not saying i dont want to be blanket but enterprise ipos been okay. Its casebycase. Not a disaster blue apron had a very bad timing. Whole foods deal with amazon didnt help at all. No. Not at all not at all i do think that its indicative of only a company that just felt like they had to come public no matter what. I dont like it because, wow, people lost a lot of money. Yeah, they did. Very tough once its been broken like that, its hard. It could take years. You know, its a mr. T prediction for rocky, right . Yes forecast calls for pain. Got it. Calls for more patriotism this morning. Does he no more thomas payne to the pain mr. T but actually a good follow on twitter. Thats what i just you have to bring him on. Have him become an analyst. Ill give him a jingle after. Hes funny, too you wouldnt expect that from the u. S. Attorney, former u. S. Attorney. I asked him whether snap was going to be used by insider traders. He was not prepared. Now i think didnt really know what snap was when you asked him that. News breaking story, not unlikemacys but also alibaba at 90. The most important thing that you and i do together every year. I do not agree with that. That and shopping on amazon. Any thoughts of the general market here as we head into the day . S p down a little bit. Bugs the heck out of me. Im asking you right now. Costco. Costco . Driven down from 180 to 150 mostly on fears because they had that 6 number and nobody bought it thats the end this is the end. Jim morrison the end my friend story. That stock may be overdone, given the even though i expect amazon prime to be up 20 , the kind of like overall, it wasnt against costco they got oversold. Time to buy costco etfs being created to bet against Nuclear Holocausts with the malls. Im tired of those theres an antimall etf. Not real Nuclear Holocaust . No, no. I thought maybe there was something based on north koreas ability to no. I think that costco is what you have to watch. That was the stock that was most brought low. We want to see if walmart recovers im telling walmart right now that they should have a special day. Special day. They should call it i dont know ro rollback day. Rollback. With a smile face. They used to do that before. Its time they did it again thats the key to this market. Lets get to seema mody on the floor. She has more for us on what is moving this morning, seema. That drop of the nifb, Small Business optimism report, a telling sign of how the gridlock in washington over the Health Care Bill is having an impact on sentiment and how consumers view the economy. Taking a look at u. S. Markets, were lower right now after that mixed day we saw on monday keep an eye on the dollar getting a lot of attention this morning, finding support after hitting that tenmonth low in june, ahead of fed chair Janet Yellens testimony in front of congress tomorrow. Economists have been quick to dismiss the notion that the lack of inflation in the United States wont stop the fed from raising rates one more time in 2017 well get a read on retail sale this is friday, key Economic Indicator to watch this week speaking of the fed, President Trump expected to nominate fund manager randall corals at the Federal Reserve. Writing this morning its a positive sign for the bigger banks as quarels should support deregulation that move in oil, that midday reversal, output from libya and nigeria continues to get some chatter. Oil ministers from those two countries have been invited to attend a meeting on july 24th in russian to discuss production. Wti crude lower here india is a Net Oil Importer overnight one of the best emerging markets of 2017 chinese stocks ending lower. Marginal gains in europe ahead that have key german inflation number coming out tomorrow you were discussing two main stocks in focus today, snap dipping below its ipo price of 17. Lockup period approaches, facebook, twitter and linkedin fell an average of 24 in the 30 days ahead of their lockup we can see snap down as much as 4 blue apron lower by over 6 . Finally, a series of downgrades putting a few s p components under pressure lennar, michael kors and schwab. Back to you. Lets check in with Rick Santelli of the cme group. Thank you, david. The back half of 2016 after the election, periods of very low volatility very small retracements against the major trend which has been higher sound familiar the sovereign fixed income markets around the globe, especially the bund tenyear are demonstrating the same qualities. Notice what the top of the range is right around 240 open it up to one week, right around 240 its pretty compact, all things considered, as one week of tenyear bund deals. Most drawing the magic line of resistance right around 60 basis points seven is a good number lets stick with the sevenyear chart. It might be especially enlightening to take a bigger view on the Foreign Exchange moves. Look at the dollar yen, looks good, especially on that sevenyear chart theres a lot of dynamics going on, especially considering whats going on in a japanese economy and what isnt going on is maybe more specific lets look at the euro yen that looks even more aggressive an important trade to monitor, especially considering all the issues we learned at g20, trade agreements that are supposedly done member countries havent really signed yet more of a banner than a document this is very key and, finally, i was just toying around one of the traders left this chart on the system. He left a fiveyear chart. I opened it up to seven. Euro pound, very interesting getting to some very important areas right around that 89 level. Pay attention. This looks like it could be breaking out dave and jim, back to you. Thank you, Rick Santelli. We go to Jackie Deangelis at the commodity desk jackie oil prices turned a corner into positive territory, trading around 44. 5. This is a bit of a wishy washy trade right now. We need to watch the momentum throughout the day important thing to note, Goldman Sachs is out with a note talking about oil prices, no signal yet, goldman is saying, for an oil price inflection their price scenarios, 37. 50. Theyre sticking to that but raising the possibility that oil could go under 40 a barrel in the short term theyre saying as the market tests opec and shale reaction functions. It will be interesting to see how this bounces around. It makes them, in fact, the department of Energy Number very important. Well get the api setup for that later this afternoon people watching these numbers closely. As i said, theyre looking for trends here to see that the shale players will do something to turn the boat around. They may or may not. Back over to you. Thank you, jackie Jackie Deangelis for now, hathaway and its 9 billion takeover as the distributor is in the middle of a bidding war, it seems, between berkshire and paul singers hedge fund here is what he oncor ceo told jim cramer on mad money. The Berkshire Hathaway deal would be great for this company. I just dont know enough about elliott yet. We know a good deal about elliott to a certain extent. They may have a significant enough position to have a voice if not a significant one in the approval of the plan that would be needed to take this thing and sell it to berkshire. Yes, and the Bankruptcy Court judge, i think, will listen to them 9. 3 billion for them. Obviously mr. Stafford is saying its not about us. The junior debt that elliott has bought could be worth a substantial amount is it, apparently, worth all that much . Do you think this is just a gambit to be able to make it so that debt is paid off more or do they want it very opportunistic fellows at elliott. What i do wonder is mr. Buffett is not one to be toyed with. Typically, this is my number take it or leave it. Bankruptcy court judge, i believe, does have the obligation to get as much as possible to return to creditors. Thats my point 9. 3 does trump 9. Another 300,000 bucks. I thought elliott was accommodating saying we want to hear what elliott has to say you know paul singer. I do. Rigorous. Theyre rigorous, very aggressive there is, however, another aspect to this, which is the texas Regulatory Regime, which did not seem particularly happy with other potential buyers. They turned down next year and turned down hunt they like buffett very much. Theres a lot of capital behind him, too. Right and buffett has been involved for a long time too much debt to be ignored. I think elliott doesnt let go so quickly this will be on for interesting to see if buffett just walks. Walks away. Yeah. I love this fight on the one hand youve got one of the tough as nails guys in the business, buffett and maybe the toughest guy when it comes to Portfolio Management in this country, paul singer they do some great singer doesnt back away from a fight. Youve interviewed singer. I have. He has gone after argentina, he spent 15 years doing something nobody thought possible he had other guys working on it for him. Samsung, too. Buffett doesnt sit there and say ooh, im scared of the oracle. No, he doesnt. This will be great. Respects him, i hope he does. This is going to be great. I have my own favorite. Western digital. Thats not my reporting they apparently say theyre matching on toshiba flash. I dont know, jim. I have to check in on that. Youre the only guy that has that. I have to check in. As you and i both said, such an important story even though its not on our shores. Up next, stock trading with jim. Squawk on the street will be right back on mi came across this housentry with water dripping from the ceiling. You never know when Something Like this will happen. So let the Geico Insurance agency help you with Homeowners Insurance and protect yourself from things like fire, theft, or in this case, water damage. Cannonball now if i had to guess, id say somewhere upstairs theres a broken pipe. Let the Geico Insurance agency help you with Homeowners Insurance. Call today to see how much you could save. Hey. Hi. Hi. You guys going to the Company Picnic this weekend . Picnics are delightful. Oh, wish we could. But were stuck here catching up on claims. But we just compared historical claims to coverages. But we have those new audits. My natural language api can help us score those by noon. Great. See you guys there. We would not miss it. Watson, you gotta learn how to take a hint. I love to learn. What have you got for us barclays, very important upgrade. Exxon, hold to buy near term opportunity. David, costco is the key to the market because of the amazon tsunami. But if exxon can make the stand here, maybe the oil stocks arent finished. Obviously, we have the inventories tomorrow i thought this was a gutsy upgrade basically saying enough is enough. A lot of these stocks are back to where they were, literally, in the 26 period. Multiples here and whats appropriate. Thats a really good point. One of the things thats been lost here is that these companies do have a rate of return theyre not all just sitting there losing money the problem, david, the idea that no one is making money is just wrong because they all lower lower lowered it to the point that they can make money. Snap i want to reiterate, i feel bad for them i know they have everything. Theyve got money and theyve got lifestyle but i feel bad for them. Im sure thats going to resonate at headquarters today. I think they have to rethink and say i bet theyre glum. Theyre not sitting there, taking selfies and giving high fives. A guy will never do a high five but deserving of it, rob sands of consolation brands. He has the best wines, best beers, best whiskey. He does it the street doesnt give him the respect. Weve liked it for more than 120 quarters pepsico, remember the pattern. Goes down. People forget, see General Mills isnt taking over. What did i do . Why did i sell pepsico i forget j j and pepsico. God, this was fun. I have to go you know what i have to do. Buy a brioni suit. Maybe walmart has one im a 42 regular. Hes going to keep looking. Goldman sachs chief strategist david kostin will join us. The power of a low volatility investing approach. The power of smart beta. Power your clients portfolio with powershares. 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. 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. Live at the Stock Exchange im sara eisen with david faber. Carl quintanilla is off. Down more than a tenth of a percent. Financials are getting hit health care is doing well. Nasdaq going positive. Well see if that outperformance holds. We saw that in yesterdays session as well. Crude oil helping the mood up 44. 48. Possible watchdog on the block. President trump nominating a new banking regulator at the fed who is he and what will it mean for wall street . Plus, in case you havent heard, its prime day. Deals and steals look inside july sales holiday and what it means for the ecommerce giant. Snap sinking ipo price since going public theyre not alone. We look at that straight ahead first, Economic Data lets get to Rick Santelli for those numbers. Rick yes on the may final wholesale trade number down. 5 the weakest percentage month over month in one year since last july when it was down six tenths wholesale industry side. Its the best number since december of last year when it was up. 8. Remember, we do have, i believe, july 28th our first look at Second Quarter gdp the inventory number here may help that a bit. Finally our may read on job readings and turnover, disappointment coming from record numbers over 6,000 job openings that gave up a lot of ground but did hit some lofty alltime Historic Records for that data series yields, stubbornly in the tenyear just below 240. And in bund land, hovering below 60 basis points, sara. We want to Pay Attention to these big banner type yields its all yours. Rick, thank you it is a busy week for marks. Fed chair janet yellen set to testify as jp morgan, wells fargo are preparing to report earnings starting friday were joined by goldman sax u. S. Chief strategist david kostin. Always nice to see you. Nice to see you. Were about to get going in full is it going to be as good as the First Quarter . It will not be as good as the First Quarter in our forecast. The First Quarter you had year over year, Earnings Growth at 14 . Forecast we had for this quarter is around 7 7 Earnings Growth that is aided by a tailwind for energy you take away energy for a moment, you look at 4 that compares with last quarter at 10 . Answer to thought process gave me out this earning season will start on friday and earnest growth will be about 4 . Margin is likely to be flat and thats consistent with the market, in my view, that is likely to be kind of at these levels, trending lower to around 2,000 end of the year. What are we, 1 away from the record high for s p . Is tech still the earnings leader best Earnings Growth will come from tech, followed by financials with the speculation, having seen the results of ccar, more cash being returned to shareholders in the form of dividends and buy backs that brought to the financial sector. Big focus on two areas as a strategist first on top line secular growth, top line Revenue Growth, largely concentrated in the tech area and on margins, a key issue. Margins have been flat roughly speaking the last couple of years and a couple of companies likely to increase margins, we could think of deer, semantec 50 basis points. Margin expansion this year and next year. Market multiple or lower and thats a pretty good upside from that level. Youre talking about Companies Whose Profit Margins from these levels can go up in the context of an overall s p 500 with margins that are, what, kind of stuck . My forecast likely to be climbing around 9. 5 to 9. 7 , peaking around 9. 9 thats your level. Dr Different Companies are operating at different levels. If you look at much bigger margin expansions, 50, 100 basis points thats the story we like. Real gdp, growing , gdp inflation around 2 , thats the sales growth most are experiencing so top line Revenue Growth, which is tech or margin expansions, the two ways to get you to better returns in the market. You came with a few names there. I heard you say our analysts. So i deal with my goldman analyst colleagues we go through the stocks and meet some of the macro criteria were looking for. Clearly the big stock people like to focus on, simple math there, if revenues are growing 4 Association Many of those are growing their revenue 16, 18, 20 . Top line growth revenue margins that are twice as high thats the story. Get back to growth stories, always get peoples attention. If growth is limited through cost savings . More technology applications. Some cases just more efficient management and thats a slow and steady process. Some companies have more that opportunity. Ours less so. You have recently, i think, advised people to buy companies that pay higher taxes versus the s p 500. Right. That hasnt exactly worked out as the prospects for tax reform look farther and farther away giving up . No. The thought process for this is investment horizon depends on your horizon. Tactically, seven Quarter Results in the next couple of weeks, change in growth dividends. Look into next year, our forecast, you will get some tax reform or tax cuts and, therefore, companies that are currently paying high tax rates would benefit from a tax reduction. They would get positive earnings revisions as a result of that and that would be a catalyst for those companies. Thats really, i think, later this year into next year, would have thought expecting more activity out of the congress and administration didnt happen this year so far. You still expect it do you include retail in those high taxpayers thats a tricky group to nav xw igate. What i think about this basically, strategically, is this a group of Hedge Fund Portfolio managers, sector neutral going long, some stocks with high tax rates, selling those with low tax rate companies, a sector neutral way to think about it. Thats an approach that would include some of the retail you have Retail Stocks on both sides that trade. How do Interest Rates come into this mix . Bond yields lifting globally may be okay with that as long as it comes along with Economic Growth getting better. Is that the world were in or do we have to worry about the fed and other Central Banks getting more hostile you have a tapering that starts in september. Four hikes next year so from a policy point of view, thats more aggressive than the bond market is pricing in. Thats a relatively next six months, its one hike in six months the rate is likely to be not such a big issue tenyear forecast we have is that bond yields are 2. 75 at the end of the year. Slightly higher from the 2. 40 levels we are now. That is more of a headwind for multiple expansion youve got the intersection between slightly better Economic Growth or Economic Growth, leads to sales growth. But lower multiple as a result of higher Interest Rates. Pitching stock valuations, perhaps . In a very narrow channel. And you say modestly up to 2. 75 on the tenyear, that would feel like a moderate move. If you have more inflation, unemployment low, were anticipating some Wage Inflation pickup so theres certain evidence of inflation that would lead to high rate. Is that the biggest threat to the market right now, sharply higher rates what could cause a more pronounced correction . Protectionist measures, tariffs, higher rates would be another issue. That is always the geopolitical questions. Those are the three areas we focus on. So lets say more movement on the chinese steel, for example, that started more conversations about protectionism, that that would have an impact be concerned about inflation. How does that feed through the margins and what does that do for earnings to say nothing of overall Economic Growth. Those are the kind of issues that one would associate typically with some kind of tariff or protectionism. Well see what happens there. David, thank you always good to check in with you, chief u. S. Equities strategist at Goldman Sachs. Amazon prime day has arrived, kicking off their holiday 12, 13 hours ago more on the deals and what the day means for the ecommerce giant. Hi, courtney. Hi, mike. Successfully created a holiday millions around the world are participating in 13 hours, as you said, into third annual prime day le the Company Tells cnbc, more members are shopping at record levels top sellers are amazons own echo devices, key device for keeping consumers in its echo system hundreds of thousands of other deals are rolling out over this 30hour event. Some of the most recent discounts and subsequent sellouts include 88 off bluetooth headphones then 84 off Crystal Necklace and, of course, we have an lncht e. D. Camping lantern fourpack Everyone Needs one of those, apparently, 82 off the regular price. Those discounts sound enticing carl quist notices a couple of things when he looks at 10 of the top prime deals across several categories first, 40 of the deals are for items that are sold exclusively on amazon. Which means you cant price compare. 20 of the deals hes looking at are actually cheaper elsewhere, even after shipping and tax. Theremaining 40 , amazon does, in fact, have the lowest price by an average of 18 prime day, of course, is worth a lot to amazon. For both acquiring new prime members and accruing sales am ston says last years prime day was its biggest day ever analysts estimate it likely landed around 640 million in 2016 analysts are expecting prime day sales to hit between 860 million and 1 billion mike, back over to you. Not bad for a random day in the middle of july courtney, thank you very much. Thats right. Appreciate it. Brick and mortar retailers continuing to get crushed as amazons prime day does kick off. Were joined by cnn analyst as well as Piper Jaffries analyst thank you for being here this morning. Michael, lets start with you here as we get into prime days we ooh and ahh over how popular and busy it looks like its going to be amazon has added 125 billion in market value year to date, 90 of analysts recommending it. 1100 and change. My point is, can much new incremental good news come out of prime day that we in the market havent already built in . Probably not out of prime day itself i think thats a good point. Look at specifically, you know, the thing theyre doing with prime day, as you said, they created their own holiday. Same time theyre steering people to do the activities that they want them to do theyre discounting the echo devices. Theyre discounting groceries. These are all things that are driving future growth of total adjustable markets that the company is trying to get more into and future Growth Initiatives like automative consumption. Prime day is about good deals for consumers but its also about steering consumers to the behaviors that amazon wants you to do. So, john, are we not, from amazons perspective, just front loading sales that probably would happen at some point in subsequent months . Is this generally new sticky customers or new business that otherwise would not be picked up by amazon is this. Yeah. I mean, its definitely incremental. They may pull forward some sales. But for us, prime day is a lot about the Financial Impact for the company over the 30 hours of sales. Its about growing the prime adoption prime, in our view, will drive the Retail Business over the long term. We think theres 53 million u. S. Prime households right now prime day has actually jumpstarted prime penetration the last two years in the United States per our data, 5 increase in u. S. Prime penetration, prime day helping there, obviously, the holidays as well here is the thing. Theres about 60 million remaining residential households that are not prime members our data suggests 30 million of them buy something on amazon every month. Prime day, other innovations holidays will help conversion and ultimately we think drive the long runway for further prime subgrowth. John, where is the limit . Where is the peak period of disruption of the Retail Industry by amazon can you see that far ahead we posted a report at the end of january that said, you know, its very early from an ecommerce disrupter perspective. So, yeah, you look at some of these verticals. What we have said and written about is amazon will be the number one apparel retailer this year in the United States. Apparel is about 20 ecommerce penetration. You have consumables, household goods, thats 8 or 9 penetrated grocery is 3 penetrated thats a long way to go. And the drivers of growth for the company are these really big categories that are still, you know, kind of have a long way to go from an ecommerce penetration perspective. Mike, who is the biggest competitor on the ecommerce side walmart with jet. Com and if so, what are the ecommerce market shares look like at this point yeah. Walmart has surprised people, i think. Rewind to a couple of years, walmart was really kind of off the radar screen jet certainly helped i think walmart is back as the biggest competitor and i would say certain competitors within verticals, you know, if you look at certain areas of furniture or mattresses or auto parts or apparel or other categories where amazon is newer and grocery is certainly one of those. Theyre trying to, obviously, augment that with the whole foods deal in swregeneral, amazon has a lof bets placed very wide. As i mentioned earlier, that just increases the total adjustable market of an already massive company. Sara, i would just go ahead. Im sorry i would just add that we think amazon, across all the different verticals probably is getting, you know, 30 , 40 of every incremental dollar in. So, you know, there are other competitors, clearly but theyre the leader by a long by a pretty wide margin at this point. John, i wanted to focus in on one of the data points you had here in your work, which actually was surprising. You think that the echo is in 12 of u. S. Households right now. So one in eight households, you think, has an echo at this point . Yeah. Thanks for bringing that up. Yeah we started this proprietary data set. 12 penetration, on average, in 2q, versus 11 in the First Quarter. Obviously, theyre very aggressive with echo, the discounting on prime day so, that number should go up and the other things we found was like 85 of echo owners use it at least once a day 60 of users use it multiple times a day and a third do voiceenabled direct purchasing. They have a really wide lead here over google and, obviously, apple came out with their product and i think microsoft is coming out with something. Theyre well ahead at this point, amazon. It bodes well overall from an ecosystem perspective. Yeah. We were debating that. That number sounded hard to believe, especially because i dont have one mike, ill ask you about the echo 50 price cut for prime day. The dot drops. Those lower prices, do they signal that theyre getting ready to release new versions or are just desperate to get into your home and reach a big audience amazon style . Not necessarily new versions. Theyre just trying to, as you said, get into the home. This is really about seeding the market and alexaenabled devices are a trojan horse to getting into living rooms, kitchens and households all over to drive better ordering as well as Data Collection amazon is getting light years ahead of the competition we talked about walmart earlier. This is something that differentiates the Company Versus what walmart is doing in addition to everything that amazon has related to fulfi fulfillment and logistics and same day and same hour delivery. So its just part of their way of reaching an escape velocity versus the competitive set. All right if i can just john, final word . Yeah. If i could just add the 12 penetration number, we do survey 2,500 u. S. Customers, its census weighted. We think its a pretty firm number. Well hold you to that. I guess we need to get sara one of those. Happy prime day. Thanks. Happy tuesday when we come back, President Trump nominating a new banking regulator at the fed weve got all the details. Plus, Senate Republicans getting back to work on their bill to repeal and replace obamacare. Is a vote actually in sight . Well discuss. The power of innovative thinking. 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. President trump nominating a Bank Regulator Steve Liesman joins us with more. Reporter nominating Randall Quarles to the top Bank Supervisory job, unfilled, technically, since it was created by the new dodd Regulatory Reform rule it had been held by orreall dan tarullo, former fed governor had been serving as that governor as such, he will also be able to vote on Monetary Policy. Its one of three open positions at the Federal Reserve right now. Randall quarles is a former private equity executive, who had been involved in buying small and midsized companies, investing in them as well as managing what looked like family money as well as other Wealth Management jobs he did there former treasury official involved with the g7 as well as reforming the financials, fannie mae and freddie mac, a trained lawyer as well as at the carlyle group. He is advocating change to dodd frank, wrote an oped in t the wall street journal about breaking up big banks and criticizing low Interest Rates at the Federal Reserve he said, years of near zero Interest Rates have led to a rise in speculative positions as all Financial Institutions find themselves under intense pressure to seek adequate returns. How much that matters now that hes at the Federal Reserve is raising Interest Rates is unclear. How much change he alone can effect at the Federal Reserve. Can he propose ideas but the full board of the Federal Reserve has to vote on changes that he would propose. Back to you guys. Proving actually not so controversial pick to be the firstever vice chair Bank Regulator at the fed. Yeah. Steve, thank you. Mean tile, the senate we want to move on to health care possible changes to the health care as the bill continues to stall, following their holiday recess for more, were joined by m. I. T. Economist and adviser to the obamacare team as well as mario valino welcome to you both, gentlemen great to have you here mario, you made headlines when you said the Senate Version of the bill, quote, is heartless. We know its a work in progress. But if there is work to be done to appeal to the centrists and the Republican Party to sort of cut back on the steep cuts in medicaid and allocate more money for the Opioid Crisis would that go far enough in alleviating some of your concerns . I really doubt it had is a very bad bill its going to cost 22 Million People their Health Insuranc for which the government will save about 321 billion. Theres an estimate from internal medicine, one patient will die for every million patient who loses their insurance im sorry, 1300 for every million. That means that 268,000 people will die over ten years as a result of this legislation its wildly unpopular with the american people. John thanathan, i would expea you have the same opinion. A big participant in medicare and obamacare. I dont know if we know the specific details of what theyre doing to amend it. It is a moving target. And much like the house bill, theyre trying to move both right and left at the same time. Moving left is things like putting money into helping with opioid addiction by the best estimates just to replace the money they would take away for supporting opioid addicts, they would have to put 180 to 220 billion in, not the 45 billion they want to put in that doesnt account for the fact we only treat 20 of opioid addicts in America Today and massive increase in opioid addicts. Instead of increasing that path well go backwards with this law. Other hand, the big thing theyre pushing is this cruz amendment from the right, which would essentially split Health Insurance marks, allowing Healthy People to buy skimpy plans at low prices and sticking poor sicker people in essentially highrisk pools. Trying to have it both ways. And, you know, if the senators are on their toes that wont happen. I was going to ask you about that, jonathan you brought it up but didnt answer, why is that a bad idea look, at the end of the day, theres one fundamental rule we have to keep in mind 80 of health care spend something done by 0 of the people, who cannot afford to pay 80 of Health Care Costs thats all about risk sharing, what mr. Molina did. Thats how insurers make money, risk sharing ted cruz essentially wants to undo the risk sharing we all enjoy. Employer sponsored insurance, we joir the risk sharing from our coworkers and those in Government Insurance enjoy risk sharing from the taxpayer. Cruzs amendment would undo that risk sharing, sticking sick people with an unfair share of their Health Care Costs. Bending the cost curve on Health Care Overall was something that was aimed for with the aca its not necessarily something thats come up that often. It would seem, at least, in the debates going on in the senate right now. Are we actually going to figure out an effective way to start taking costs out of the system well, unfortunately, this bill and the previous bill are about who pays for health care the reason Health Insurance is so expensive is because health care could haves are so high in this country and we havent done enough to address that issue frankly, if i were in the senate, i would scrap this bill. I would convene a Bipartisan Group and attack the fundamental problem of the high cost of health care. You do that, insurance rates will come down health care Health Insurance becomes more affordable and we dont have this issue. Until we attack the root problem, were going to constantly be revisiting this issue and were not going to come up with a good solution. Dr. Molina, hasnt medical cost inflation actually moderated, though, in the last several years, whether it was coincident with the aca or just because of overall trends . Obviously its still a big issue. But is that really the core of the problem right now that we have to be debating . I think it still is the core problem. Health care trends have moderated somewhat if you look at the United States and you compare that with Great Britain, for example, doctors in Great Britain get paid half of what doctors in america get paid a hospital bed day in the United States could haves four times what it does in england. Until we address these fundamental cost issues its still going to be a problem. We still have the high cost of drugs. And were seeing a big escalation in pharmaceutical costs. Thats something thats on the horizon. We still have a big problem with costs. And deciding whether its obamacare or some replacement package is not going to solve that problem its just going to shift the uk, is that really the model we want to go after . A lot of people would argue the rich just pay for better care and the quality of health care is much lower. The quality of medical health. And the bar for getting tested on basic tests like a colonoscopy is very high. I agree with that european nations, their costs are lower. Thats the fundamental problem utilization rates are similar across these western nations but its the unit costs that are driving up the cost of health care and the cost of insurance. Unfortunately, we have to leave it there well have you both back on to debate this. Im sure, because it is still to be continued jonathan grouper, thank you. Mario molina, thanks to you as well. Thank you. Lets send it over to sue h herrera with a news update sue . Thank you President Trump sending his con dole ences to the families of those on board the military plane. Kc130 plane is used primarily as a refueling tanker. Secretary of state Rex Tillerson arriving in qatar from kuwait where he hopes to break the deadlock from that country and four arab states that have accused qatar of supporting extremist groups china says it should not be held solely responsible for solving the north Korea Nuclear tandof and accused other countries of shirking their responsibilities. Its Foreign Ministry says beijing is upholding its obligations. And canadas British Columbia has declared a state of emergency as more than 200 wildfires raged through that province dozens of buildings have been destroyed and more than 3,000 people have been told to evacuate more than 1800 fire fieffightere battling those fires hot, dry weather in that part of the world is expected to continue, unfortunately. Back down to you, david. Okay, sue i will take it thank you. When we come back, snap and blue apron look at that both below their ipo prices. Well below in the case of apron. Well take a look at the road after going public, straight ahead. [ male announcer ] eligible for medicare . Thats a good thing, but it doesnt cover everything. Only about 80 of your part b medical expenses. The rest is up to you. So consider an aarp Medicare Supplement insurance plan, insured by unitedhealthcare insurance company. Like all standardized Medicare Supplement insurance plans, they pick up some of what medicare doesnt pay and could save you in outofpocket medical costs. Call today to request a free decision guide to help you better understand what medicare is all about and which aarp Medicare Supplement plan works best for you. With these types of plans, youll be able to visit any doctor or hospital that accepts medicare patients. Plus, there are no networks, and virtually no referrals needed. 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Counting down to the big reveal of cnbcs top states for business in the winner state, scott has a clue for us. Scott . Hi, david here we are, in americas top state for business, which well reveal later on today in the closing bell this is the 11th year weve been doing this exclusive study one of the things that has come out of it, you start to get a sense of the ebbs and flows of the economy and different trends here and there keep that in mind as you look at state number four. Texas, the lone star state, comes in fourth this year, with 1,602 out of 2,500 points. Texas came in second last year the state is still a powerhouse with americas best workforce and the number one infrastructure but texas finishes 37th for quality of life, crime rates are high air quality is low and with no statewide protections against discrimination, texas is one of the least inclusive states in the nation the texas economy, once the envy of the nation, has ground to a relative halt along with the domestic oil industry. The state drops to 25 in the category from number one last year still adding jobs at one of the fastest rates in the haitian but unemployment has ticked above the National Average texas has no individual income tax and no Corporate Tax just a state business Franchise Tax that tops out at threequarters of a percent. The top state and local sales tax is 8. 25 texas largest employer is the supermarket chain, largest industry is mining, including oil and gas drilling so, thats a big deal if youve been following top states over the years. Texas has never finished below second place until this year and it has a great deal to do with the oil industry, even though the state has been very impressively diversifying away from that major industry it cant get totally away from it as things come back, well see if texas can make a comeback next year. Texas, down at number four if its not texas thats the top state for business, where am i another one of our diabolical hints, classic sounds. Topstates my twitter handle i is scottcohntv. Top state revealed later today guys oh, man. Classic sounds . I dont even know what that means. That could be any state im going to think about it. Comes to texas, scott, its interesting. The state and its governor continue the big play about taking jobs with the very low Regulatory Regime and tax regime are they still doing that . Theyre doing it not as aggressively or as high profile as rick perry used to do it. He kind of made a name for himself doing that texas, what weve found over the years, yes, they have no income tax, no sales tax. But they have high property taxes and a lot of other cost issues that came with all the growth so, texas suffered some of those growing pains. Texas has been great at setting aside reserves in its budget process but theyre having a tough time coming up with a budget and theres also the quality of life issue thats plagued in texas we saw it also with number five, north carolina, states that dont have these statewide discrimination protections, suffer in our study and because thats what business is telling us and so that hurts as well. But the economy was the big issue in texas this year. Scott, thank you. Scott cohn in that mystery state, classic sounds. Really misled me with the wide open spaces, yesterday, which is dixie chicks, which is texas. Keeping an eye on shares of snap down 30 since its first day of trading back in march. Blue apron below its ipo price bl two weeks ago on the stock price, its ceo matt salzberg. Were focused on the long term, quite frankly. The stock price, whether its up, down, left or right is the beginning of this new chapter in our companys life that were really excited about. Mike has been looking into all of this. Again, we ask, anomalies or bigger signs of trouble for ipos its not representative of the entire ipo these two, you would have to call, i guess, busted deals. Snap, it did have a pretty good pop off that ipo price of 17 it went up into the 24 area for a little while down significantly off of that, as people have reassessed. I do think those two stocks, though, do represent one bit of whats going on, the higher profile kind of big expectation, consumer ipos. You already know the brand name. Had a little bit of hype in the valuations before they became public theyve not been received very hospitablely thats representative of something thats going on, guys. You have consumer ipos that are lower profile. Canada goose. Another good consumer example. Mule soft not really a Consumer Company but in the Technology Area i would also point to the renaissance ipo etf. An index of new ipos after two years ipos get kicked out. Relatively fresh kind of basket of recent ipos is up 20 year to date about 25 in the first year. Thats not bad it sort of shows you, though, when you have the really ipos that have been built up a lot before theyve become public, i think they have to show right away that theyre ready for prime time. And so would we expect to see the more Technology Related ipos enterprise software. That you have this pipeline of anything with cloud in the name of the Business Description and all the rest of it, its going to happen. Its a very interesting setup we have here. Companies are almost viewed with some suspicion when they decide to go public its so easy lately to stay private. They say why do you need the publics money if things are so great . An unusual situation. Stock price came down and down again and still came out with the offering. Right pshed it out to the low end of the new range and no was not a good signal. No. Its been ugly. Since were talking about snap, our parent company, nbc universal, does own a stake in that company taking a look at shares, jcpenney on the move edward record, the cfo, is leaving the company today. The stock is actually up 1. 25 retail is coming back a little after a very rough day yeery. Stdaquk the street will be right back so we need tablets installed. With the menu app ready to roll. In 12 weeks. Yeah. The world of fast food is being changed by faster networks. Data, applications, customer experience. Which is why comcast business delivers Consistent Network Performance and speed across all your locations. Fast connections everywhere. Thats how you outmaneuver. Welcome back lets get out to the cme group in chicago Rick Santelli is there with the santelli exchange. Good morning, rick. Good morning. My guest this morning is peter thanks for being with me this morning. Good to be here, rick. Called from brexit to fake trade deals, the curse of the confirmation bias. The reason i urge all our viewers to read it is one of the big things that happen this had g20 was get iting under way was the announcement that the japanese and europeans had cut a trade deal the reality is that they might talk about a trade deal. Its far from a done deal. I want to talk about it in the context of global trade and the cross trades and how theyve been moving. Particularly the euro yen. Euro doing great against all the currencies, but especially considering the japanese and germans are kind of in the same business, exporting cars how is it going to turn out with this cross trade, with this pending trade agreement . Any thoughts, peter . That always sort of mucks up a Free Trade Agreement you want free trade at the same time you want staple currencies. The companies that win produce the best product in the most efficient way at the lowest cost that would be ideal. Of course, thats not reality, real life as countries try to protect their best industries. Central banks, unfortunately, are a big influence on the direction of currencies whereas governments will try to maneuver through that through Free Trade Agreements even with the eu and japanese agreement, its obviously only in concept it could take years before it becomes reality. Exactly now, lets take it to the next level. If i had to pick two Central Banks that had the biggest thumbs on the scale, it would be the japanese and the europeans how are their central banking activities that are always going on behind the scene going to impact this trade deal as well it seems pretty ironic that they kt out donald trump and tried to embarrass him with these trade deals when, in essence, arent they trying to do the same thing, protect the home turf right at the end of the day thats certainly the case the whole politics of free trade sounds good when a politician sade says it, sounds great on paper. What they actually deliver is obviously much different because of those protections if theres one thing a politician cant necessarily control as opposed to a central banker is where the currency goes thats the constant gain were in when we have zero Interest Rates and negative Interest Rates and quantitative easing. Who the heck knows where currencies go in those different scenarios and where global trade goes because of that. I got you final thought, peter, were going to be looking at the first look at Second Quarter gdp at the end of the month are we going to learn anything is there any momentum in this economy . Are we just going along quarter to quarter, a bit below or a bit above 2 and the Sustainable Growth just isnt here yet whats your final thought . Its really stuck its important this year to start to see a little bit better than two were coming off 1. 6 last year the challenge is that growth is mediocre at the same time that Monetary Policy is tightening. So its going to make it very difficult to see an acceleration of growth. Its just a we slow down if here and whether we have a second year in a row of a one handle in growth which i think is becoming very likely oh, i think so, too always a pleasure to talk to you. Thanks. David, back to you. Thank you, Rick Santelli. Lets send it over to john fort. Get a look at what is coming up on squawk alley. Mate be amazons made up holiday, walmart and best buy are not taking it lying down well dig into what has become a retail bonanza today also, the ipo market not doing so hot were not just talking about snap and blue apron. Were going to take a look at how some of the newer stocks are doing and then finally, another hint in the top state for business and were going to find out who is number re athe,ll that and more coming up on squawk alley. Should investors be buying up airline talks well get a bullish call on the group. More squawk on the street coming up. Pepsi co out with an earnings beat this morning on the top and bottom lines they raised the full year forecast on better outlook for currencies we had 3 Revenue Growth, 13 eps growth maybe most encouraging is our balance model of growth and productivity continues to work so were driving productivity to expand margins and at the same time using the portion of that productivity to invest in innovation you know, we really ramped that up over the last couple of years. Were running about 8. 5 of our revenues are coming from products over the last couple introduced within the last three years. And that those products typically are not big on the volume side. They typically are premium oriented as a result, were getting higher dollars prosecute ounce or higher dollars per pound. And thats why you see a bit of the muted volume growth relative to the Revenue Growth. Because that is something that Analysts Investors have picked out as a weak spot. That is lack of volume growth both on the food and beverage side we also talked to Hugh Johnston about the amazonwhole foods deal and about what the impact would be on margins and ecommerce sales for his company. Listen over time, i actually see the move to digital from a consumer perspective as being very favorable to pepsico and other impulse products more broadly regarding our Customer Base, we have a big brickandmortar setup of customers. We have a cure play customers. All of these channels seem to be converging anyway. My expectation is from a margin perspective, it will net out about neutral. And it represents opportunities for us to sell our innovation more effectively neutral margins which is an interesting answer a lot of investors are worried that this is just going to pressure food margins even more with amazon getting more scale and more scope in the grocery business the stock, pepsi he could is down just a bit. You think jim made the right point which was 3 organic Revenue Growth looks okay it looks a lot better when all the other Food Companies report. Were just at the beginning of the season and on that note, we get the 52week highs and lows list every day from our assignment desk the Food Companies are making new lows by the day. Im talking General Mills, hormel, conagra. Were looking at lows since 2015 dr pepper snapple was a standout for years has also broken down. Pepsi is giving back some of the outperformance had it against the Consumer Staples and food and Beverage Group they built up over the years not necessarily the market saying something bad is going on. Yeah. But 6 Profit Growth in 2 Revenue Growth, a lot of the foot companies would be enviable. All right when we come back, more on amazons prime day the deals and what it means for the companys bottom line strahtheig aad think again. This is the new new york. We are building new airports all across the state. New roads and bridges. New mass transit. New business friendly environment. New lower taxes. And new University Partnerships to grow the businesses of tomorrow today. Learn more at esd. Ny. Gov welcome back tech and energy, the biggest gainers in the sector side so far this morning real estate, telecom and financials the biggest laggers each down. 5 . Big moves in two biotech names check out Arena Pharmaceuticals jumping 50 on positive mid stage trial results and amicus up over 25 after the fda cleared to submit a new drug application or nda several additions to the all time high list, boeing, comerica and thermofisher watch those names in todays trading. Thats ut fit for this hour lets send it downtown back over to you. Thank you good morning it is 8 00 a. M. At snap headquarters in venice, california 11 00 a. M. Here on wall street and squawk alley is live good morning welcome to squawk alley here at post nine our own sarah and mike