tv Squawk Box CNBC August 1, 2018 6:00am-9:00am EDT
live from new york where business never sleeps, this is "squawk box. good morning welcome to "squawk box" on cnbc. we're live from the nasdaq market site in times square. i'm becky quick along with andrew ross sorkin and mike santo santoli. joe is off today looking at the u.s. equity futures. right now a mrixixed board dow down by close to 36 points nasdaq up by 16, s&p off by 2. looking at july, it's been the best month for the dow and the s&p 500 that we've seen since january. we'll continue to watch. first trading day of august. if you check out what happened overnight in asia, the nikkei was up by almost 0.9%. the hang seng was down the shanghai was down by 1.8%. looking at europe and the early
trading. red arrows across the board. these are relatively modest declines the cac is barely down ftse is down by just under 1%. treasury yields, let's look, you will see at this point it looks like the ten-year is yielding 2.978% two-year up to 2.674%. we have some breaking trade news to tell you about the trump administration reportedly planning to propose a 25% tariff on 2$200 billion of imported chinese goods that would be up from a proposed 10% tariff the goods include food products, chemicals, steel, aluminum and consumer goods china saying it will retaliate if the u.s. raises the stakes in the trade war. we'll talk to a china expert, former australian prime minister, kevin rudd
the other big corporate story, apple shares rising after posting a quarterly earnings beat services saw a huge jump that accounted for 9$9.5 billion in revenue that includes subscriptions from the app store, apple music and icloud tim cook said all apple's new iphones grew nicely this quarter. he also said revenue growth in china continued to hold strong despite a trade war. he said he had conversations with president trump, while they don't agree on everything the president listens to his ideas china's huawei becoming the world's number two smartphone seller they shipped 52 million handsets, compared to apple's 41.3 million units they still trail samsung officials in canada and the u.s.
say huawei pose a national security threat because of its connections to the chinese government joining us with reaction -- before that, i want to hear the becky quick and mike santoli reaction on apple. we talked a lot about it yesterday. >> very solid quarter. average selling price for iphones maybe helped out the services stuff is great. it's trending in the right direction. i don't think the market will value this as a services company. >> that's where i think they're undervaluing it. that's the part i've been most impressed by i read a quote about how this is basically a cash register, just getting people to pay, now that you set it up, you're waiting for them to bring the services through. >> that's true, but less than
20% of revenue, and the iphone business is so profitable. it's not as if they're going from a low margin business, now you have this newly profitable business it's great to have it as a compliment eventually the valuation should recognize that but you look at these other companies, oracle, ibm with the slow growth businesses, you say no, no if you look at the cloud business, value us on that the market doesn't do that >> that revenue for services was up 31% huge >> let's continue that debate with timothy lesko you heard that virtually every headline has the word trillion question mark in it that refers to whether apple's market cap will surpass that metric will it happen >> absolutely. i think it will happen whether it happens today or this month or this quarter, who
knows. i don't fear a trillion like a lot of people fear a trillion. the last run up towards these numbers was before the tech wreck. it was companies like sysco who were much more one dimensional at the time they ran to those lofty levels i don't think the law of large numbers affects an apple to the same extent it affected other companies. >> the big question becomes how do you value a company like this this goes to the question of does it ever get a services valuation? a business that is effectively a subscription business as opposed to a hardware business >> i don't think it ever gets the kind of multiple that maybe a google gets or an alphabet or an amazon gets we would be happy with a market multiple this thing has persistently traded at a low pe ratio certainly 14 times earnings is not fair for apple with all of that attention, you would think it's a high flying
tech stock something close to a market multiple would make us happy >> what would it take for the stock to be rerated, if you will >> i think it got rerated a few years ago when it went from being a growth stock to more of a value stock. i'm not sure it will get rerated into that kind of growth multiple unless they show much larger top line growth maybe that top line growth can come when services start to outstrip the hardware as a percentage of revenue. i don't think it deserves the discount it's been getting because people fear the dissolution of the iphone. >> it's unusual for the largest company in the market to be as profitable as it is, but also on some level to be hit driven. it seems like the market doesn't know what to do with a trillion dollar company that every couple of years, whether it's correct
or not, you still have these questions of can they capture the magic again? can they retain and grow the customer base? >> right the services is not services in a bubble but in relation to other products they sell services in relation to the iphone, in relation to the ipad. now you're getting services in relation to home kit, car play, all of these other services that apple wants to sell you. i think it deserves a better multiple when it becomes the operating system of your life, not just of your phone i think that's the thing that people have been missing iphones have not been new hits they're just what i pretty much have to buy when this phone stops working. >> in terms of the stock holding where it is, what is your expectation for the new ipho iphone 11, 11 plus the expectation of these three phones and how much of them need to be hits or not? >> i don't think they need to be
hits it's been incremental improvements for the last four, five iterations. 5g may be the next time you have a real fundamental shift in the cellular industry where people have to go out and get a new phone. other than that it's been more japanese style continuous improvement rather than some sort of new product. apple got rid of the head phone jack, everyone went around screaming. now all other phones are losing the head phone jack. i expect them to be at the forefront. but i don't expect the phone to do something different than it does now >> on the issue of services. there's lots of speculation of what a video service will ultimately look like they've been buying up content producing all sorts of content we have not seen that content yet what do you think that package ultimately looks like and what is the market in terms of price and what kind of margin they can take from it? >> certainly the addressable
market is global most of the people that are pushing into the market maybe other than netflix are regional cable operators. apple has the capacity to start delivering content globally. i think it will be an inexpensive package, though it will be something you pay for monthl monthly. >> do you look at it as a loss leader to keep people kept inside the apple eco center, or -- >> i don't think apple does anything as a loss leader. they'll leave that for amazon. the question is will you go to apple for everything you do. maybe they need spectrum more than content >> you go to the apple device for everything you do for 20% of the world population not everybody who has an iphone
is on this platform. the video service, if it's itunes for video, is that a profitable business that changes the profile of the company or just a nice add-on >> i think they have shown, as they put itunes out on android, they do want to be the content supply really for everybody. whether or not you begin seeing better integration between android devices, apple tv and apple home kit really, to cut to your point, they do a nice job of taking the cream off the top by taking the top 20% of people who are the payers, and they stay away from the low cost, you know, low margin cell phone business huawei may be taking share, but they're probably not taking share from apple they're taking share from other low-end android only raperators if apple has content on a sub
skshgsbasis, it will hav to be content. i long wondered if some assets that maybe dish network has, where they have spectrum, if they're not monetizing or developing apple needs to deliver to you those services whether they're in the automated car, in any screen that you're looking at. so having a more vertical ability to do that seems like that would set them apart from the competition who will be relying on the traditional distribution networks. apple doesn't like to rely on other people >> we'll leave the conversation there. timothy, thank you very much >> thanks for having me. as we kick off a new trading month, let's look back at how stocks closed out july the dow was up by nearly 4.8%. that's the best monthly performance since january. the s&p 500 saw a spike of 3.6%,
and as for the nasdaq, it gained 2% it was a rough month for the energy market. oil saw its biggest monthly drop in two years 68.05 is the latest for wti. we are counting down to today's adp private payroll report that hits at 8:15 a.m and the fed's latest rate decision at 2:00 p.m. today. it leads up to friday's jobs report joining us is the chief economist at steval ae aae aal m sullivan i can't believe it's already time for another jobs report if you were to look at the overall economy now, and pretend you were sitting at the table with the fed today, how would you sum things up? what do you think? >> we're talking about a solid economy. it's not a robust economy. we saw outperformance above 4%
gdp. but the consumer was supposed to spend like gang busters. we saw after a pull back at the start of the year we reverted back to the trend pace of spending that we've seen for the past couple of years we saw business investment positive but losing momentum now the housing market is raising red flags. i do think we're still on solid footing. we're likely to hear that message reiterated from the fed, but we're not talking about a robust economy at this point i think the risk is that we start to lose momentum closer to a 1.5% pace turning the quarter into 2019. >> jim, would you agree with that assessment? >> i would characterize it stronger it's all relative to what i think is sustainable we are are ggetting a little ov% in overall gdp growth, and we're getting 200,000 a month or better in terms of job growth in a world where anything really more than 100,000 a month will
bring down the unemployment rate this is an unsustainable track the unemployment rate is historically low we're seeing bubbling in the inflation and wage numbers it's an easy decision for the fed to keep on tightening here >> today >> not today, but the next move in september >> one thing we have been watching is this potential for a trade war. that's how we started the hour today talking about the idea that we might increase tariffs to 25% on 2$200 billion in trad with china what would that mean >> ultimately a lot depends on how people react to it we have nothing to fear but fear itself if markets and confidence react badly, this all feeds back to the economy. so far markets survey numbers -- >> you don't think there's anything there because the housing weakness, some people are saying maybe because of lumber tariffs and higher prices >> mortgage rates are up a bit as well. housing has flattened out a bit
here overall consumer spending looks good business investment looks good obviously that's a risk. when powell talked two weeks ago, he repeated the phrase that risks look broadly balanced. when he elaborates on that, he suggests downside risks on trade. they're worried about that but there are positive risks out there as well including the risk that fiscal policy is becoming more stimulative right now the economy is chugging along well. >> it seems like an easy kale for the fed. how does it get tougher for next year going back to the longer term trend of slow growth, where does that leave the fed with this one quarter -- one rate hike per quarter? >> also going back to the fed's commentary that we heard from the chairman, he did use an interesting qualifier, he said for now. gradual policy adjustments make sense for now. he's suggesting that in the not so distant future he sees a scenario where gradual may not
be appropriate i do think the fed is concerned -- >> because inflation is bubbling up or relative because we're facing trouble with trade wars you could take that from either direction. >> i think the fed is concerned this recovery is getting long in the tooth. we may not be able to sustain this moderate 2% growth. on the backside he noted a number of down side risks to the economy including trade, taxes, rising budget deficits i do think the fed is concerned about being able to sustain this recovery against the backdrop of waning momentum in the key sectors. >> it sounds like you two disagree which direction we may hit first. you sound like you're more worried about inflation bubbling up, and you're more concerned about a downside >> i think that's fair, but the trade risks are the serious negative risk here for now, that will be the interesting thing today. for the most part the statement will be similar to last time
he did throw in the two words, for now, in terms of gradual tightening two weeks ago i think he was careful to indicate he wasn't signalling dovish or hawkish. it was a reversal of forward guidance they've been on this track already. it could mean stepping it up or slowing it down. >> also sounds data dependent. >> absolutely. it's going in the direction of less forward guidance. they're kind of downplaying any forward guidance and ultimately it depends on the data he was clear on the day in terms of when he talked about risks, he did talk about downside risk on trade, but quickly threw in fiscal policy. that will be the interesting thing out of today's statement does he come with words to that effect does he directly say for now and how do you interpret that? that's open to interpretation for sure >> lindsay, that's what -- back to mike's point, looking at 2019, that's tougher to figure out. >> bsolutely
i think the fed is trying to buy more wiggle room and remind investors that the fed consistently tightens one quarter, 25 basis points, saying it is all about the data it depends on how the data evolves and how inflation evolves. and inflation right now is budding up to 2%, but there's a number of committee members concerned about maintaining that 2% level so there's a lot of question marks regarding policy going forward. >> thank you both for coming in. >> thank you very much. news just crossing the tape as we speak. the "wall street journal" reporting that grocery chain kroger launching a delivery service. it's developing the service inhouse by tapping vidacost.com to health products and the e-commerce site. krogership is the name of it it is expected to begin today. it will be free for orders over $35. it will offer 5% discounts for subscription goods >> talk about a surprise announcement it's open today?
>> it opens today. here we go if you're in the market and kroger is near you, go for it. when we come back, france just banning something that is making parents sit up and take noti notice you know what it is? >> yes >> later, forget your smart scale or measuring your bmi. we'll talk to the founder of a startup who want to bring a 3-d body scanner into your home. it's called naked. all pg but not actually when you're doing it we'll talk about it later. i kind ofwant to try it, not infront oin front of everybody >> thank you >> "squawk box" returns after this
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connected dwievices for childre to 15. french high schools may choose to adopt the ban for students older than 15. the move is aimed to combat screen addiction and protect the children a recent study showed banning smartphones in schools caused a clear improvement in test scores i get banning phones, but the idea of banning internet connected devices. our kids have laptops they give them in classrooms >> i don't want the kids using the phone at school. >> you want them having it in their backpack >> a lot of kids in new york city and other places, they go on the public transportation system in the morning by themselves at 10 years old i like the idea of them having a phone. >> having it but turning it off. >> my middle schooler takes the subway to school yes, you turn it off at school.
you get punished if you have it on >> i don't know if you've been on a bus or subway with kids coming back home from school, they're all on -- >> that's all they're doing. >> they have the phone after school and then playing games on the subway how do you counter that? >> how do you notice when you're reading all your stuff, right? >> touche. >> a little more news for you. a bit of a public service announcement it may be time to look closer at your expected tax bill about 30 million tax payers will owe more money in 2019 due to low withholding trs thes from tr paychecks. earlier this year the irs authored new withholding tables. you don't want to wait under the previous tax law, 27
million taxpayers would have owed more. the tax law added 3 million people to that tally boy, does it hurt when you actually have to then go -- if you're not expecting it. >> you have to write a big check. >> yeah. it's going to make it more difficult for the government, i think, to sell the new tax plan when people are paying these things it was going to be 27 million before this is an addition of 3 million. so 21% of those paying taxes it's a big number. did the tables come out late d >> remember how down to the wire the tax bill passage was the irs was scrambling to get out new guidance for employers >> there is still missing guidance on all sorts of this plan i think the next couple of years will be very interesting
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welcome back you're watching "squawk box" live from the nasdaq market site in times square. ♪ good morning welcome back among the stories front and center, shares of apple are popping after a big earnings beat sales were led by the pricey iphone x pushing quarterly results well boeyond the target apple, they always say this was the quarter that was supposed to be a ho-hum situation it was more than that. china tower reportedly raising 6.9 billion in its ipo
this would be the largest ipo in the world in over two years. china tower is the biggest telecom operator and courts blocked the directions for a 3-d again being printed online the blueprints were available since friday they would allow anyone with access to a 3-d printer to self produce a gun undetepictibltect metal detectors. the plans had been blocked, then the trump administration literally a mnt or twonth or tw said okay, we will not fight this on the grounds it was a first amendment case so it's your first amendment right to tell everybody about this, and to distribute what you will and i would say happily somebody came to their senses
now this has been blocked. blocked across the country the administration lost the case president trump tweeted about it yesterday briefly. seemed to suggest he was talking to the nra and that he didn't think it made sense for the distribution either, though he didn't go that far the trump administration had said that on first amendment grounds and second amendment grounds they were okay with the distribution >> what did the nra say about it >> they've been back and forth they've been on the side of the first amendment, seconds amendment story. >> a former head of state sitting here >> we do kevin rudd. from australia who has some interesting gun laws >> yeah. i think the idea of producing 3-d guns is nuts i would have thought responsible members of the nra would think so as well the manufacturers of regular things that go bang and pop, they won't be too happy with the
idea of people manufacturing it in their own home. it's a nightmare for global law enforcement agencies well done to the judge for stopping this piece of insanity. i hope it holds up >> we'll show you what's going on in the futures. before the market sets itself up of course, we'll see whether apple will help. dow off about 18 points. nasdaq up 22 points. >> let's talk about some other stocks to watch. rio tinto's profit rose by 12% in the first half of the year but that missed forecast the mining giant is adding $1 billion to its stock buyback plan and said it is hiking its dividend by 15%. you have seen higher prices come in it was not able to capture all of that yet because it did have existing contracts you can see the stock is down by 4.4% also shares of cheesecake
factory are lower this morning the second quarter earnings missing forecasts, but not because people didn't like the food its higher health insurance and legal costs offset a jump in same-store sales pandora shares are actually on the rise today. music streaming service posting a smaller second quarter loss and it also added more paid subscribers and said revenue jumped 65% the trump administration is reportedly planning another tariff hike on 2$200 billion of chinese goods, raising the tax from 10% to 25%. joining it's is the aforementioned former australian prime minister, kevin rudd, currently the president of the asia society policy institute. sir, let's talk about the tariffs. this is an area you know well, because australia understands china probably better than just about any other nation out there. what happens this is doubling down. >> i think both sides are
doubling down. you read out the new development, which is of the total 5$500 billion in chinese export to the united states, we now have phase one, which is $3 billion worth of tariffs imposed to 25% phase two, another 16, which is due for conclusion of the review period today or tomorrow and then the third is the one due for determination at the end of august, which is now a proposed 25% hike aon a further 2$200 billion the administration is doubling down what are the chinese doing looking at recent regulatory decisions by the chinese affecting american firms, the decision to not approve the qualcomm deal shows that the chinese are doubling down themselves the only thing i can see in terms of a crack of light are reports in the last 24 hours from mnuchin, not from lighthizer or navarro, that back channel negotiations continue or
discussions about negotiations continue >> what we heard from larry kudlow and others recently is that the chinese have not seemed interested in talking or negotiating. what is the sense you get? >> i'm off to china a few days time i'm a little out of date in terms of let's call it the internal chatter within the chinese system what i sense is that the chinese also have politics within their regime it's not just we in the west have politics or the united states has politics. what that is now about is who loses face at present chinese negotiators, they came here, did a lot of work with the administration thought they had a deal. that collapsed so these guys have lost some face right now the critical next step as of august is the chinese
leadership go to the beach side meetings there is one subject how do we fix this thing or can we fix it? the options are further doubling down or is there a deal somewhere to be had in terms of a number >> that sounds like if there is going to be a deal reached, the chinese have to agree to bend. >> well, so far the president of the united states has come under pressure from the farm lobby the impact on soybeans and american agricultural exports has not been small there's a bunch of angry american farmers out there within the china regime, the hit is deeper and more structural. if you look at the outcome of a meeting two days ago, they're talking about a more creative
approach to fiscal and monetary policy in order to sustain growth levels against pressure what is that code language for we expect a hit, and the pressure is more structural in china and not without political cost here. does that imply the u.s. should keep putting pressure on the chinese if they want to come up with a number? the president wants something that sways the trade deaf tight. deficit others say if we budge that, that's long-term ways of doing business and maybe doesn't impact the trade deficit what might an agreement involve? >> i think so far the application of pressure has focused the chinese attention. as i've said on this program before, the president of the
united states, he's not a graduate of the georgetown school of diplomacy. he does his own thing and achieved attention in beijing as being serious about this matter. the challenge with applying pressure is when to ease off, provide a win-win so that face, political face is preserved with a credible deal that can be sold to both constituencies my criticism is i don't see the machinery of that working at present. final point is in the last 24 hours you've seen the chinese doubling down in an area which they think will hurt america more, applying even more wide ranging review powers for any foreign acquisitions or investments in chinese firms, not just qualcomm but like the chinese equivalent of pfizer and halting m&as
>> i have one m&a question, we were talking yesterday about the sprint transaction with t-mobile sprint's shareholder is softbank, softbank has business with huawei. huawei has been almost a poison pill for a number of companies do you think that will pose a problem in the united states >> i think anything which touches huawei by definition has a problem. i know this from my own term in office, we in australia effectively banned huawei from becoming a provider to our national broadband network the reason was the linkages between huawei and the chinese national security establishment. so what i would say to american firms looking at connectivity with joint shareholders and a firm with huawei is -- >> is the fact that softbank in
that area uses switchers -- >> i think huawei is a problem if you talk about a core piece of infrastructure, national infrastructure requiring huawei software and hardware, you have a separate problem >> i want to finally ask you about a story that was published an hour before we went on air. google is now planning to launch a censored search engine in china, this would bring google back in china if they were to pursue this. these are apparently leaked documents that the intercept got ahold of could you imagine google getting back in china and with the political atmosphere we're living in what people in the united states would say about google doing that and what people in china would think about that
>> we are who we are we are a bunch of believing collectible believers believing in freedom holding up the white flag i don't think is the right step. on the second point if they're trying to negotiate their way back in. our chinese friends are masters as using that as part of the aggregate negotiating leverage against the united states authorities on the whole spread of economic issues currently on the table with the chinese if i was google, not that i'm in position to advise them, stick to your principles, fellas >> very quickly, question risin globe. we heard from starbucks sales were weaker than anticipated apple came out and said sales were strong in china is there a push back against american brands in china >> i cannot honestly answer
that i have not been there for about two months now what i know is when i last visited, the thing i do when i first arrive is sit down and watch three or four hours of chinese television to see what is being screened and how it's been screened. i see a national sentiment across the country gaining traction over time historically that's been focused against one country, not the united states, japan the number of japanese movies for reasons of the war which appear on chinese television is large. i now sense a growing broader nationalist phenomenon i don't see a particular push against american products at a formal level but the chinese public also tend to respond broadly to directions that they sense from the chinese leadership no nationalism, yes. i don't see evidence yet of a don't buy american campaign. it could come. >> you'll have to give us an update after you go in a few
weeks. >> look forward to it. >> mr. prime minister, thank you. coming up, more earnings alerts we'll get quarterly numbers from autonation, america's largest auto retailer. we'll bring you an interview with ceo mike jackson. and we'll talk more about apple. that stock soaring, but the company has been ousted as the second largest smartphone seller. at 8:15, an early read on friday's jobs report from the adp private payroll numbers. stay tun, u'edyore watching "squawk box" on cnbc
time for the executive edge. dan loeb building a stake of 0 $300 million in campbell soup. sours telling us that third point filed for antitrust clearance, which is necessary if it wants to increase its stake and get involved in business decisions. a 30-day waiting period ended earlier this week. it's unclear what loeb's plans are for the stake.
he has spoke with campbell's interim ceo about a possible course of action campbell soup is at a cross roads in its 150-year history as its canned soup and other processed foods have fallen out of favor with consumers. the former ceo stepped down abruptly in may. the company said it would review its product lineup which could involve selling or spinning off brands management said all options are on the table fueling speculation that a full scale sale could be in the offing. they will discuss that review later this month shares are higher in premarket but have slump eed 20% the past year that may have led to the ceo's resignation. coming up, more to talk about. we'll talk about a scale that you will get on and you have to be naked here's the story it's a new startup that wants to bring 3-d body scans to your home it is called naked labs.
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welcome back to "squawk box. our next guests are launching the world's first home body scanner. it's called the naked 3d fitness tracker. nobody's going to be naked just now, but it monitors your physique and fitness progress at home it measures body fat percentage, body measurements, weight, and much more. i want to bring in the two folks behind this. farabakshian also ed slater. naked labs cofounders. tell us about this i use a smart scale right now which is an internet enabled one. i think i had the fitbit one for awhile this is a totally different situation. you're going to step on it naked, right >> or in tight fitting clothing. >> or tight fitting clothing and you're going to -- it effectively spins you, right >> correct it spins you through 360 degrees in 15 seconds. >> and the lasers are then
trying to take measurements of everything >> so we have three 3d depth sensors embedded behind the mirror they scan your body as you rotate >> i try to get on the scale every day. how often do you do this >> our light recommendation is once a week. >> and what's the price point for this >> $1395 >> and this is comparable to what i can do where? right now if i wanted to do anything like this, where could i do that? >> really, at home there's no way. the only place you can do this, there are industrial scanners out there that cost north of $10,000. so we're bringing that technology into the home with this design. >> and the idea is you can get much more detailed information right now, like, they're shooting electric currents through me when they're trying to figure out my bmi and this and that does this do the same thing? or is this different technology? >> different technology.
so we give you your body fat percentage, your weight, body circumferences but it's the body model that's the star of the show it changes your relationship with your body it makes a much more objective and empowering experience. >> but some people don't want that objective empowering experience right? sometimes it's not empowering to get on a scale it's the opposite. >> i'd great there's not many people that are excited about jumping on a scale. >> but this almost feels like -- if you were in really great shape, i think jumping on this thing would feel fabulous. but i could see if you're not in great shape, the idea of having to stand on this thing in front of a mirror, right this has a mirror that looks at you. >> yes it's a full length mirror. we've done research across the country. we've been in oregon we've been in texas. we've been in new england. and our customers are from
across the spectrum. >> speak to us, though, about the privacy issue. you are effectively taking images of everybody naked every day or every week. >> yeah. so one of the key things we did early on in the product design is we wanted to make sure that all the processing was done on device so we wouldn't upload anything private to the cloud servers. in addition to that, we made a very deliberate decision not to own the data of the users. your data belongs to you you can remove it, delete it at any time you want. our role is to simplify things >> i have a hundred more questions. i'll try to ask them during the commercial break can you buy this thing right now? >> today we are shipping our first orders. >> where do you buy it >> nakedlabs.com >> okay. we're not going to do a test in front of everybody, but maybe at home anyway, thank you. appreciate it. congratulations. when we come back, autonation america's largest auto retailer is set to report weill lk wta to the ceo mike
jackson first right here on cnbc reak a trip. and at expedia, we don't think you should be rushed into booking one. that's why we created expedia's add-on advantage. now after booking your flight, you unlock discounts on select hotels right until the day you leave. ♪ add-on advantage. discounted hotel rates when you add on to your trip. only when you book with expedia.
fireworks for the market investors celebrate the best month for the dow and s&p since january. the nasdaq notching its fourth straight month of gains. we're going to get you ready for the first trading day of august straight ahead apple's big quarter. the tech giant reporting results and investors are cheering on the stock. we'll run you through the numbers and talk tech. plus, do your kids play fortnite >> are you out of your mind! >> well, parents, listen up. you can enlist a tutor details ahead as the second hour of "squawk box" begins right now. ♪
live from the beating heart of business, new york, this is "squawk box. >> good morning. welcome back to "squawk box" right here on cnbc we're live at the nasdaq market site in times square i'm andrew ross sorkin along with becky quick mike santoli in for joe kernen this morning take a look at equity futures at this hour. dow looking like it's going to open up a about 46 points. s&p 500 also off about 2.5 points and the nasdaq looking to open higher about 15 points. big headlines to bring you the biggest, shares of apple are higher in premarket trading. reported profit for the beat consensus. revenue also topping estimates apple just a few dollars shy of the price it would need to top $1 trillion in market cap. we're going to talk a lot more
about that this morning. we're just hours away from july's adp report on employment. 185,000 new private sector jobs are expected and also the federal reserve policy makers are going to be concluding their meeting today with an interest rate decision also, are you wasting time on apps? facebook and instagram are going to roll out a set of features that show how much time they spend on the app so users can be more intentional it features an activity dash board which shows you how long you're spending on them. a daily reminder when you're hitting your total daily time limit if you put one on. and if you want an option to tune out notifications, you can read all about it on cnbc.com. apple building this into its
operating system and google as well so you're not just going to be able to do it on facebook and instagram but on every app and you can say, i want to be -- >> no mas. >> you can >> good idea stick to it. >> that's going to be the hard part sticking to it >> right maybe just have your phone shut off at that point. >> actually if you look at the battery usage on the iphone, i find that constructive not about time but interesting. >> clearly you use too much. a new month, a new record for the markets. the dow closing out the best month for stocks since january meantime, the nasdaq climbing more than 2% in july notching its fourth straight monthly gain mike santoli is here as you know he's got more on the market's moves. >> really just looking at the setup of the market heading into august if you look at the chart year to date, it's been a lot of progress, i think, in july as well but you've had this start/stop feeling to the overall market.
so we nosed above that level the orange line is the all-time high at 2872 then flattening out. so it's not necessarily been a high momentum market but it has been -- we're up 5% year to date it doesn't feel like that in terms of the s&p 500 here are some of the issues going in we have valuation and sentiment which have moderated enough where you're at a five-year average in terms of your forward for the s&p 500. the two-year up trend, you go back to brexit time, it's intact it's defended this long-term uptrend. i would say that momentum in leadership have kind of become a little ragged in the market. obviously we saw the faang stocks fall apart a little bit and financials haven't participated question is this just sector rotation or something bigger then the seasonal issue. right? everyone's going to be talking about august is a weak month for
the market september even weaker. and august even more recently has been a trouble spot. three years ago it was an important topic. i don't think that seasonal stuff dictates where the market goes but it shows you a tendency. it shows an overlay that suggests what we're dealing with >> you mentioned valuation being at around a five-year average right now. where were we in january >> 18.5 forward earnings 18.5 times for the s&p 500 we're down below 16.5 right now. five-year average which in itself is not challenging. the question is are we dealing with the situation we're in 2019 where the growth earnings is questionable want to bring in a couple of guests to talk about this. see if you agree or disagree with mr. santoli good morning to both of you. >> morning >> morning >> you want to take on mr. santoli on any of his great commentary this morning? >> you're spot on. i think you're absolutely right.
i would look at seasonality here markets are definitely strong. and the economy just looks so good how can you not love the economy and the market right now >> but there are some reasons like the faangs and financials right now which would be scarier to plan. what are you doing >> i think all looks pretty good the financials had a huge move last year. nothing moves in a linear straight line. so i think you're -- you know, it's fair to see a breather right now. >> what about faang? >> faang i think this is a good indicator. >> the whole market has been a faang market that's been the market when people talk about the market, they almost should disregard almost everything else >> except for small cap stocks are at an all-time high right now. it's like we have a bull market that's in plain sight. we're not even talking about it. >> where are you at? >> well, the economy looks good. no question about it i think a little bit of a tug of war between the good economic news and worries about trade and i think the trade stuff has
been weighing on markets >> have you been doing anything? positioning yourself differently from the trade war people talk about it then what are you doing about it they say actually, nothing, i'm just talking about it. >> what are you going to do about it i mean, we don't escalate into anything that's metastasizing. there's a risk that it could right now the stuff that's been enacted, not likely to move the needle too much on the macro economy. we're hopeful this thing doesn't escalate but we have a watch it closely >> everyone kind of says, look this level of tariffs and imports in the u.s. economy really doesn't budge anything. and totally agree. the math works that way. but if the catalyst is going to be -- or the chain reaction is, well, emerging markets much more dependent on exports slow them down a lot oil prices in emerging market currency terms are actually really high right now. so if that kind of spills into -- >> it spills into sentiment,
right? if businesses start to say i don't know where this is headed, i'm going to pull back a little bit. that's when you get bigger things and if it hits financial markets and that starts to adversely effect wealth and sentiment. >> but you think none of those things will happen >> not to that extent, no. >> where do you think the market is at the end of the year? >> much higher. >> what is much higher 5% 10%? >> i think 10%-plus easily i think right now you have everything kind of working in your favor sentiment somewhere in the middle no one's been overly cautious. at some point you're going to be sitting thinking how long am i going to wait as it gets better and better >> the question is does the economic news get better and better from here or was the first quarter the best you're going to get the consumer confidence numbers yesterday were great and so good that historically they're kind of in the contrarian zone >> if the economy's good now, i think it's going to stay good for awhile median term, i think at some
point the economy is going to need to slow down. the labor market can't keep tightening forever it can go on for awhile, but medium term, i think there's going to have to be some slowdown in the labor market tightening >> real quick, you're a bull in the united states, but what do you think of europe right now and asia >> i love it more. valuations are so much cheaper overseas right now they have so much more room for growth than in the u.s talk about valuations being about average for five years in the u.s. you're below average overseas. then you get one thing to go right like the dollar weakens here a little bit or anything, any catalyst, that's going to be awesome for europe and asia and the rest of the world. >> i think the rest of the world looks good, too. again, we've got to see how the trade thing plays out. >> let's leave the conversation there. appreciate it. when we come back, the ceo of autonation mike jackson joins us to talk about quarterly results also the trade war on
the automakers and later, apple reporting a strong earnings report after the bell we're going to dive into the quarter in just a little bit stay tuned you are watching "squawk box" right here on cnbc i think we should do that meeting tomorrow. well wait. what did you think about her? it's definitely a new idea, but there's no business track record. well, have you seen her work? no. is it good? good? at cognizant, we're helping today's leading banks make better lending decisions with new sources of data- so, multiply that by her followers,
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the s&p indicated down just slightly about 2% loss at the moment. the dow down 44. nasdaq looking like it's going to get a pop up 15 points at this hour. apple up 4%. not doing a lot for the broader market at this point autonation quarterly results hitting the wire right now revenue landing just about in line with the street's forecast. joining us now is autonation's chairman, president, and ceo mike jackson thank you for being here today >> becky, it's always a pleasure to see you first thing in the morning. >> all right so let's talk about your numbers revenue about in line. earnings came in a little better than expected. what happened? where was the margin improvement that the street didn't anticipate >> we had excellent revenue. 5$5.4 billion up 2% we had movement in the used business we are in that magic period where we have higher volume plus
5% and we were able to improve gross margin per unit sold when you put that multiplier effect together, the gross profit in our preowned business improved really strong preowned business. and in the financials services business, we continue to lead the industry with our results per unit sold. and we had another 10% improvement on already record levels to a new record level per unit retailed. excellent performance in our customer care. particularly customer pay was up 7% up 4% overall in customer care head wind, though were in our margin on new vehicles that remained very competitive. you put it all together, it's a 24% improvement in eps year over year >> wow
let's talk about some of the specifics you just laid out. new vehicles you've been talking about this for a long time. it's why you've changed the format for autonation and have been relying more on service and different things why do you think it is that new vehicle sales have been so challenging? is the consumer tapped is this a situation where the car prices got so high that they can't go higher? what's really happening? >> so the consumer is still very much in the market place for new vehicles i don't think that's really the issue. and of course you have this massive shift towards trucks which is now approaching 70% of the business so this year will be high $16 million -- 16 million if not 17 million on the volume. i think in the volume market place, though, margins are tough. you have greater transparency
from a digital point of view that really empowers the consumers. and you have incentive programs from the manufacturers that really hyper-competitorize the market place that it's pretty cut throat on margins. you put those two together and there's new vehicle margin pressure per unit sold >> mike, you've also talked to us about higher oil prices, higher prices at the gas pump and what that means. obviously the companies that are manufacturing these cars and trucks are making a lot of money on the trucks and suvs that's been a profit center for them as prices go up, have you seen any reluctance on the consumer's parent to pay f part to pay for those? >> i think the american consumer is firmly in the position of a truck. they like the view it gives them, the empowerment. by trucks i'm counting suvs,
minivans, and pickup trucks. put them together, it's almost 70% of the marketplace and i don't think the american consumer is going to give them up easily. they also like the utility that comes with that and the style that comes with it and by the way, manufacturers have done a fantastic job of improving the fuel economy of everything from pickup trucks to suvs so it's not the issue it once was. so i think the price of gasoline would have to be well over $4 a gallon if not $5 a gallon to change the consumer's preference as to going with a high seating position suv, pickup truck versus going back down into a car. i think it's a structural change for the industry which is very beneficial for the manufacturers and the suppliers. their margins are excellent in that segment not the least of which is, you know, they have a 25% import tariff protecting pickup trucks
which the administration never likes to talk about when we get the tariffs and trade. it's a cash cow for the manufacturers. >> let's talk about those tariffs and trades because obviously that's been a huge issue last week it seemed like we had potentially opened the way to kind of clearing things up with the eu on those. we don't know. but what happens i know you've been someone who's been concerned about these talks. where does it stand right now? and what do you think happens and what would happen if there are big tariffs that are either imposed on some of those european or other cars that are coming in? or as a result of the talks we agree to take all tariffs to zero which is one of the things the president mentioned. >> so we pull back from the brink a week ago which i was very encouraged to see and if, indeed, the
administration and the president's brinksmanship leads to lower tariffs on vehicles on both sides of the atlantic, then that is a great success and it should be saluted and applauded. the stakes are high. i think tariffs on automobiles, the numbers are so big that the impact on the industry and the economy is so quick that you're really bringing recession into play if, indeed, we ever end up with exploding tariffs but if we pull back from the brink and the germans in particular have said they're willing to go tariff free on vehicle sales between the u.s. and europe, that would be a huge plus for the consumer, a huge plus for this huge economy which combined the united states and europe is approaching $35 trillion of economic activity. it would be a huge plus for this transatlantic partnership that exists
so hopefully this is the opening of meaningful discussions that will lead to conclusions and a tariff war with europe is avoided. i think that would be a tremendous benefit to everyone it's very interesting. no one in the automobile industry domestic or anywhere is calling for tariffs, further tariffs to protect the industry. so hopefully we've pulled back from the brink and if the brinkmanship has led to good conclusions then congratulations. an issue that's been sitting there for decades has finally been resolved. that's my hope i will hope they continue the study to give the president ability to implement tariffs if he views it as a threat to national security. i think that's a real stretch to come to that conclusion, but that's what they're working on
hopefully it doesn't come to that >> hey, mike, got to ask you about -- you know it's my favorite topic you know what's happening after the closing of the bell today. tesla. elon musk out with the cash burn and what's actually happened given that you watch this company, i know from afar. you don't sell their cars. but what do you think? >> well, i expect a lot more red ink today. if you look at the extreme measures that took place in the last quarter to try to hit that one-week production target for the model 3, it had to be expensive. i also observe that while the model 3 has been talked about as a $35,000 vehicle for years, they still have yet to produce one at a price point below $50,000. and the ceo said if they were to do that it would put the company out of business.
i'm not sure they've hit that $35,000 target and it's a little bit of a bait and switch you took hundreds of thousands of orders for something you could buy at $35,000 but then they force rank your purchase order and only bill the most expensive ones i expect to see red ink today. >> red ink mike, thank you for that by the way, i don't know if you guys saw on twitter overnight -- i don't know if we can show these posts. but there was a story that said david einhorn of green light was no longer keeping up his tesla lease. elon said tragic, we'll send a box of short shorts to comfort him during this difficult time >> a pun on the shorts >> yes >> mike, thank you when we come back, apple trading higher after last night's great quarterly report an investor will join us to talk about that report right after this plus higher rates and higher
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welcome back to "squawk box" this morning i want to tell you about a closely watched index on china's economic activity hitting an eight-month low. the index came in at 50.8. that's down from 51 in june. matched expectations of economists polled by reuters who had expected the index to hit 50.8 for july even though the raiding was the lowest in months it is still above where it would
signal a lot more to come on "squawk" this morning. this one's -- i don't know if we should be encouraging this or not. if you are bad at fortnite or if your child is bad at fortnite or if you decide you want to get in on the action and need help getting a win, guess what. you can now hire a fortnite tutor. yes, a video game tutor. we will have details coming up a coach for fortnite as we head to a break, take a look at u.s. equity futures right now. nasdaq up about 17 points. we're in the red across the board elsewhere. dow f ouofabt 31 points. back in a moment with a fortnite tutor.
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according to analysts surveyed by edmonds, sales will be down 2.3% for the month compared to a year ago general motors will not be reporting for the month because now it only reports on a quarterly basis. we're just about 45 minutes away from the july adp report on private sector employment. economists are expecting to show the u.s. economy added about 185,000 private sector jobs last month. and of course this all leads up to friday's big jobs report from the government and supermarket operator kroger is launching a grocery delivery service they're looking for better ways to compete with amazon and walmart. service will be free for orders over $35 it will cost $4.99 if the minimum isn't met. surprise announcement, it is available starting today and the weekly mortgage applications data just released moments ago. diana olick has the numbers for us >> good morning. the highest interest rates in about a month combined with high
home prices. slipped 2.5% for the week ending july 27th compared to the previous week. volume was lower by 12% compared to a year ago. now, while home buyers are less sensitive to weekly rate moves, applications to buy a home fell for the third straight week to the lowest level in a month. volume down 3% for the week and just 1% higher than a year ago home sales have been weakening in the past several months as home prices continue to rise and low inventory limits choices with conforming loan balances increased to 4.84% from 4.77%. that's for loans with 20% down payments now, mortgage aptplications thoe are highly sensitive they fell 2% for the week and were nearly 29% lower than the same week one year ago when rates were nearly 0.75% lower.
all of this on cnbc.com. back to you. >> diana, this story of low inventory and rising prices has been with us for awhile. what breaks that log jam >> what normally breaks it is home builders but we're not seeing that. the builders are increasing production very, very slowly but it's mostly in the move up and luxury end of the market not a the entry level. we also just need to see more sellers. but if you're afraid you can't find a home you want or can't afford a home you want to move up to, you're not going to list your home. >> some people wait for the baby boomers en masse to put up their homes. >> very slowly, this generation. >> all right thank you very much. all right. apple posting better than expected results including 41.3 million iphone unit sales and 3.7 million mac sales. joining us right now is vice president and chief operating officer of gerber kawasaki
investment thank you for being here >> good morning. >> i know you own shares of apple not only for the firm but for yourself as well what didyou think when you heard these results yesterday? >> i was very happy. apple had a quarter that, again, they delivered on all metrics. the average selling price was nicely up. it shows that their strategy of launching the iphone x with the 8 was a good strategy. so overall it was a solid quarter. services numbers were amazing. continuing to grow and that's something that a lot of people were watching very closely so i was very happy. >> how long have you been a shareholder? >> it's been a long time apple has been a great stock for our firm i want to say seven-plus years >> so you're going way back. >> we're long-term investors
>> you had a few critical comments before these numbers came out yesterday, before you saw everything in there. if you have one big criticism, i guess it'd be that apple has become predictable and you think they need to find a way to have a bigger presence in the home and in the car >> that's correct. i said it before you know, apple is no longer a revolutionary company. it's an evolutionary company you know, innovation has kind of stalled at apple especially since steve jobs' passing. i would love to see more innovation coming from apple they spend about $18 billion in r&d in the last year you know, we haven't seen much of that yet. so, you know, from innovation standpoint, i would say it's probably their achilles heel at the time -- at the moment. you know, it would be nice to see some new products that we didn't think we need and are ready to buy with that being said, tim cook
has done a phenomenal job of running the company. i think in terms of steve jobs passing the baton, he knew exactly what he was doing. and tim cook has run the company very well. >> do you think that the fact that apple has not made a huge splash in some of those areas you mentioned like the car or the home says more about, you know, apple's inability to see an opportunity there or the fact that those markets maybe don't really lend themselves to something and apple feels if it's a big enough opportunity at a profitable enough level >> you know, tim cook commented on the call yesterday that he does feel he has a presence in the home and that's through the iphone, through the apple tv, through the home pod but also through the air pads and macbooks and all that good stuff. so it's their philosophy i think that apple could do a better job at getting in the home i think apple tv is okay it could be better
i think siri is definitely disappointing. you know, it's kind of become a joke at our office that siri can't pronounce a lot of our names and doesn't do a lot of things right but we feel apple tim cook could be doing more to be a bigger presence at the home and also in cars you know, i think we spend a lot of time driving. we spend a lot of time at home and those are two screens that, you know, apple doesn't necessarily have a monopoly at >> really quickly, just along those lines, if they announce big investment plans -- i mean, big, big r&d plans to try to improve those situations, would you be happy with that it would eat into profits and the margin the question is whether they need to or not >> they spend $18 billion in r&d last year. i don't think they need to be spending more money.
i think they're the fifth largest spender in r&d >> so what do you think the problem is if you're not happy with those services? >> i think the problem is just the lack of innovation maybe they don't have the right people leading those efforts apple is also sitting on a pile of cash and it could be doing bolder acquisitions. they stick to the game plan. they buy $25 billion worth of stock every quarter. which is great don't get me wrong it's propelling the stock higher but there's plenty of opportunities out there. >> so you'd like to see them buy sonos before it goes public? >> i think it's too late i think they've missed on that i'm sure they looked at it they bought beats. i think sonos market cap is $2 billion. it's kind of pocket change at this time for apple.
>> is it fair to say this a coming from the cheap seats and you don't plan on selling any time soon anyway >> absolutely. apple is a hold for us it's been a solid investment for our firm you know, we want to see apple continue to grow and innovate. had their product announcement and everyone will gather around the computer and excitement. we don't have that anymore it's kind of a non-event when apple announces new products coming in the fall i would love to get back to that >> is it fair to say that it's making up quite a bit more of that than you anticipated? or is there something else >> we knew apple had to go into services and diversify its business from just selling hardware they've done a phenomenal job at that they're on track to hit their goals of $50 billion by 2020
they've created a great wide ecosystem that people can't really get out of. so that will -- that trend should continue to grow. >> okay. great. danny, thank you for your time we appreciate it >> absolutely. thanks for having me when we come back, sprint earnings out a few minutes ago we've got reactions to the results right after this break and don't forget, we are counting down to the fed decision on interest rates today. make sure you keep it locked to cnbc for the latest market movers and shakers ahead of that decision "squawk box" will be right back. ♪
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welcome back to "squawk box. take a look at how the futures are setting up right now looking at pretty mild moves at the moment the s&p 500 just slightly down the dow looked to open down 25 points nasdaq is the bright spot up about 21 points. but apple obviously the biggest component there helping out this morning for the nasdaq sprint out with its first quarter results just moments ago. reported profit of 4 cents per share. that compares to expectations of a break even quarter sprint surprised and surpassed analyst expectations adding wireless customers
but average postpaid user came in lower timothy horan, thank you for joining us this morning. what people care about is whether this t-moblie deal is going to happen or not where do you land there? >> we think they can get the transaction completed but with conditions we think at an extreme they structurally split the company in two almost just a network company of the customers they can sell the customers to t-moblie. and in between, there would be versions of that where they sell off the spectrum to the network to ensure we have a fourth network competitor out there a paid transaction would still make sense and they can get it done >> are you even focused on these earnings or are you just waiting for the deal >> pretty much the deal. the earnings look fine no real surprises. everything kind of came in line. a little bit better expense management we're seeing for the whole industry pricing is going up
slightly revenues going up slightly because of a lot more usage. we're still seeing wireless data volumes going through the roof a lot of new add on devices customers are using. the health of the industry are good but sprint and t-moblie are arguing if they get together they can add on a cable tv bundle into their wireless plans. and you can essentially get everything you need from wireless so you won't need a wire line network anymore. and so that is something that the fcc might see favorably and allow the transaction to go through as structured. >> do you expect prices -- if they are to merge or were allowed to merge, do you think that pricing across the board for customers once they build out this 5g network are going to go up or down? do you think the market becomes more competitive or less co competiti competitive? >> if you look at the wireless market, prices are going to go down a lot
what you pay for paid tv will go down what you pay for broadband will go down. i think some bills will go up but primarily from a lot more usage. they're going to look to double, triple the amount of wireless data you use >> let me ask you the question here if you don't allow the companies to merge, does the industry get more or less competitive >> they will be more competitive if they do not >> so you do not buy the market that making a more powerful third player will put pressure on at&t and verizon? >> no. >> fair enough and then the other question to ask is where you think cfius is in all of this and whether you think cfius is going to become a problem for this particular transaction? of course t-moblie parent company is a german company. and then you have softbank which is a japanese company, obviously there have been questions about
its relationships with huawei which has been seen as a national security threat >> to be honest, i don't know. >> okay. we're going to leave the conversation there tim, it's great to talk to you this morning appreciate it. >> thank you >> thank you a lot more to talk about on "squawk" this morning. when we come back, everybody off the bus. fortnite fans are hiring tutors. yes, folks they're hiring tutors. if you or your child you think is not good enough, lousy, you're not winning enough, you can hire a coach we're going to talk about all of that after the break i don't want to encourage any of this >> yeah. forget about getting a tutor for algebra, let's make sure you can do fortnite. >> there are self-esteem issues involved in this as well. >> what? >> well, if you're playing with your friends and constantly losing, i'm -- we're going to get into all of this at the top of the hour, health and human services secretary alex azar is going to join us to
talk about short-term health care what it means for obamacare. "squawk" returns in just a moment introducing e*trade personalized investments professionally managed portfolios customized to help meet your financial goals. you'll know what you're invested in and how it's performing. so you can spend more time floating about on your inflatable swan. [ding] with tripadvisor, finding your perfect hotel at the lowest price... is as easy as dates, deals, done! simply enter your destination and dates... and see all the hotels for your stay! tripadvisor searches over 200 booking sites... to show you the lowest prices... so you can get the best deal on the right hotel for you. dates, deals, done! tripadvisor. visit tripadvisor.com
welcome back to "squawk box. we have been talking about this all morning at least teasing everybody about this we shouldn't be teasing people about this because some people aren't going to believe this. as fortnite the game continues to dominate the world of video games, parents are starting to invest in coaches. yes, coaches that could be described as tutors in the same way they would be for sports or academics. "the wall street journal"
reporting that parents are paying between $10 and $20 an hour -- >> what? >> i know people paying way more than that, by the way. that's nothing nothing compared to what's really going on here in the big city, the big apple. so their kids can level up so they can learn different skills and hopefully get the win. now, one website offering tutoring is called game sense. they can pay for a tutor, pay to win. maker of fortnite said the game had 125 million active players in june. some people think it's crazy but there are kids -- this is affecting their self-esteem. they're on a team. you know, this is the difference between being on the "a" team or "b" team >> i didn't understand this. i was mocking it until you laid it out in those terms. a kid is not getting picked, the last one getting picked for the dodge ball team. i get it i might pay for a tutor at that point too. >> right now consuming so much time and so much of their lives -- >> this is part of their social
life but imagine if you didn't -- if you wanted to get better at basketball or baseball -- >> except for that's a real sport and you're actually doing something. >> but this has become the social construct of what's going on >> okay. i've got greco in my ear saying this is sports this is not sports it's not sports. it's e-sports. that's different >> there's not a great physical payoff >> no, there's not if you're thinking about obesity rates in kids and wanting them to get outside and get away from these things however, i do understand you can make the argument that the social outlet -- >> this is a workout >> what work out their thumbs? >> golfers for a long time didn't work out. now you look at most and they're ripped i'm just -- >> i need to make sure i can hold my bladder for four hours so i don't have to get up from the game this is a stretch. that's a bit too far look i will give you if it's the
social outlet, i am -- you're beating me down. i am thinking i will not say never to this. and maybe i shouldn't mock it. >> $10 to $20 is cheap i've heard the price closer to $90 an hour. >> all right you're winning you're winning you're winning >> i don't need a coach. >> it does show how everything in parenting is so structured now. it's not just go, do it. >> there are no free range kids anymore. mine included. i want to make shower they have stuff they're doing all through the summer so they're not sitting home playing video games. same thing all right. let's look at stocks to watch this morning as well garmin reporting profit of 99 cents per share. that beat the consensus estimate by 12 cents. and by all of the home video games. no, i'm kidding. garmin up by almost 3% pandora posting a loss for the latest quarter one penny smaller
than the street anticipated. revenue beat forecast. and the company also says it has 6 million paid subscribers to the paid premium service then check out restaurant brands international. it beat estimates with 66 cents a share. however they did see revenue fall short of the street's forecast same store sales coming in flat. that stock is down by 2.5% in the meantime, heinz does not want its classic ketchup pact to become the next environmental target like the drinking straw has. they pledged to make 100% of its packaging reusable or compostable or recyclable by the year 2025. a lot of its packaging is already there. but those packets are made of foil and plastic together which can't be separated easily for recycling. kraft heinz isn't sure yet what kind of packaging could match in
terms of convenience and still be recyclable. they say if they can't find one, they will invent one not like what you saw with the paper straws tougher problem. and a federal judge in seattle -- we talked about this before but it's still such a strange story. barring a promoter of 3d plastic guns from releasing the downloads. which had been available since friday were banned it would allow anyone with access to a 3d printer to self-produce a gun that would be undetectable by metal detecters and untraceable by law enforcement. this is a continuation of a long legal battle going back to 2012 when the company began posting blueprints online. they were then blocked from posting those. and literally within the last couple of months, the trump
administration said actually we're not going to try to block this from taking place on first amendment grounds and second amendment grounds then a judge stepping in yesterday to say this doesn't make sense we should also say president trump tweeted out yesterday that he'd been in discussions with the nra, that he didn't think it made sense the nra has been on all sides of this mocking people who think that somehow 3d guns are a problem. then yesterday sort of back tracking a little bit. but sort of unclear where everybody stands >> isn't it also unclear for the most part if they're even effective? >> which >> an operational 3d printed gun? >> unclear >> all right when we come back this morning, the health and human services secretary is going to join us to talk about changes to short-term health care this is a big story. it's very important. you need to make sure you listen in this is the news maker of this morning. also take a look at the futures board. you're going to see right now it looks like the s&p is indicated up just barely nasdaq indicated up about 24
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upping the ante. the trump administration planning to propose higher tariffs on chinese goods meantime, tim cook speaks out or the trade war >> we're sort of encouraging dialogue breaking jobs news the adp employment report minutes away we're going to bring you the numbers and what they could tell us about this week's payroll release. plus the future of health care hhs secretary alan azar joins us for an interview the final hour of "squawk box" begins right now ♪ live from the most powerful city in the world, new york, this is "squawk box. >> good morning. welcome back to "squawk box" here on cnbc we're live in times square i'm andrew ross sorkin with becky quick and mike santoli in
for joe. take a look at futures at this hour we'll also be getting the adp employment report in just about 15 minutes which could move this around a little bit. dow would open off about 28 points the s&p 500 looking to open off we'll call it marginally for now. let's show you treasury yields the 10-year right now is at 2.988% all right. our top story this morning, the trump administration is reportedly planning to propose a 25% tariff on about $200 billion of imported chinese goods. that would be up from the proposed 10% tariff. the affected goods would include food products, chemicals, and consumer goods they said they will retaliate. apple ceo tim cook speaking out on president trump's trade war on the company's earnings call
listen to what he had to say >> the trade relationships and agreements the u.s. has between the u.s. and other major economies, they're very complex. it's clear that several are in need of modernizing. but we think that in the vast majority of situations that tariffs are not the approach to doing that and so we're sort of encouraging dialogue >> cook also said that revenue growth in china continued to hold strong despite that trade war or at least the potential for one. he said he'd had conversations with president trump about it. and while they don't agree on everything, the president listens to his ideas meantime, apple posting a third quarter earnings beat sales led by its pricey iphone x pushing quarterly results well beyond wall street targets. we'll talk to an apple shareholder about the quarter and where it's headed in the next half hour let's get to our news maker this half hour the department of health and
human services unveiling details to sign up for short-term coverage plans those new plans will go on sale on october 1st it's the same day obamacare enrollment begins. joining us right now is health and human services secretary alex azar. thanks for being with us today >> great to be with you. >> let's talk about these plans, what they are and why they're necessary. >> the affordable care act left about 28 million americans without insurance even though it promised to provide affordable insurance to everybody for those who have it, premiums doubled over the course of president obama's tenure and what president trump is trying to do is make more affordable options available to people so these short-term limited duration plans are ones that are individually underwritten meaning that the individual works with an insurance company to qualify for the insurance and the insurance company decides what to cover and at what price
to cover but these can be very affordable options. they may be as much as 50% to 80% cheaper than the obamacare exchange plans so this is a really important option for millions of american who is have been forgotten or left behind by obamacare >> i understand your points and certainly the idea there were a lot of people who couldn't afford some of the obamacare premiums is a good one but critics of this say that this is an issue where the plans you might be getting are what they call junk plans they say that because coverage won't include a lot of different issues it's cheaper, they say, for a reason what do you respond? what do you say back >> well, you know, the funny thing is the same people who often criticize these are the same people who wrote the affordable care act that expressly provides for short-term limited duration plans. and these plans existed allowing coverage for up to 12 months under president obama's entire term right up until the end when they crammed them down to being
available only for three months to try to force people into the unaffordable obamacare exchanges. so what we're doing is we're restoring those plans to be available for up to 12 months exactly like president obama had. and we're adding the possibility of renewability up to three years coverage for individuals depending on their negotiations with their insurance company and of course subject to state law >> sure. let's talk about the plans though if you look at them, the medical loss ratio on these plans, these new plans that are going to be offered for longer than just three months, a lot of times it's about half what the medical loss ratio is for others offered by the obamacare exchanges and others when we say medical loss ratios, we mean the number of dollars in the premium that go towards medical coverage if you look at the largest one it would be united health. under obamacare, you have to pay
back at least 80% of the premium dollars you're making into medical care that's the big differentiator there too. there may be people who need these for short-term, but is this is a buyer beware situation where you should realize there's a lot of things that won't be covered as a result and while it may be good news for the insurance companies offering them, it may not be great news for people signing up for it unless they understand that going in >> as with all insurance, people should go in with their eyes open and know what they're buying that's why we've enhanced the notices and cautions to individuals on these plans beyond what the obama administration had making sure people understand that not every health condition may be covered, that there may be caps on coverage, et cetera but we believe in options. you know, we've had now many years of the central government here under obamacare telling people what they should choose and what they could afford to buy. this is instead giving many millions of americans an additional option. you know, for those individuals who are independent contractors,
for those individuals who may have three part-time jobs and not get employer insurance, people transitions between jobs. for the kid who left school and is headed for a job but doesn't have insurance for those in rural america who don't have access to an affordab affordable obamacare plan. this could be an option for them but absolutely people need to go in with their eyes open. that's why we've launched that in your regulation today >> how will this be advertised to people? you're coming on trying to get the word out are there plans for advertising to make sure people understand what it is because all the signups will be at the same time in october >> these are private market options. these will be available with the legal requirement so 60 days from today subject to state insurance commissioners and state laws making plans available. these plans may be available as
soon as then they're not an an annual plan cycle. they're not subject to the annual enrollment periods. they're really just going to be available. as soon as 60 days from now, people may be able to have these affordable 50% to 80% more affordable cheaper options than obamacare plans on the marketplace. >> do you anticipate that an end result of this might be that fewer people go into the obamacare plans and that as a result there are fewer of those plans offered? we've seen a lot of insurance companies that have stepped away from the obamacare exchanges what does this mean for the blue cross options that are already existing in obamacare? >> you know, i really don't think that that's a concern here because what we've found is that the obamacare individual market on the exchanges is largely drawn to the tune of 87%, people who are getting subsidies from the taxpayers to buy their insurance. people are not likely to walk away from insurance that they're
getting for free or heavily subsidized by taxpayers in order to go out to the market, go through individual underwriting, and buy a package out of their own pocket instead of that so i think this is a bit of a canard, this notion that somebody will leave that and move to these plans. these are options for the 28 million forgotten men and women left behind by the false promises of the affordable care act. there are other options for other individuals. >> mr. secretary, 87% of the folks in the obamacare exchanges are subsidized well, 13% not subsidized i mean, it doesn't take a lot of some of the choice members of an insurance pool to drain away to maybe cause that insurance pool not to function as well. you don't think that's a possible risk? >> no, we really think it's quite small. our actuaries have approximated 200,000 people may move from the obamacare exchanges over to over into the short-term limited duration plans but they may also move for reasons unrelated to the availability of these plans.
those might have been individualed who would drop out of the exchanges because of affordabili affordability, of access of coverage, of provider networks where they live. any number of reasons. let's not glorify these obamacare exchange plans many of which might be -- you might be paying $8,000 for an insurance plan that has a $7,000 deductible that made the title of the act may be the affordable care act, but for many millions of americans that has been far from affordable >> i will say that trying to figure out health care and look at the landscape whether you're a consumer or insurance company or doctor or hospital has been an incredibly confusing landscape for many years because of the introduction of obamacare trying to get ramped up to that and now because of the dismantling of it. i guess i wonder, mr. secretary, where you think we'll be a year or two from now. will there be more clarity or will we still be in this phase of trying to figure things out and maneuver around to see where we stand when it comes to health
care >> well, becky, the affordable care act is flawed at its core its foundation and how it was written. it is what it is there we will continue to work to repeal and replace obamacare with a system that is more rational, more state based, more free market, that has more affordable options for individuals. but while it remains the law of the land, the president is committed as he's doing this morning to make more affordable options available to people. we did that through our association health plans letting individuals and small businesses band together to create additional market power. we've freed people from the individual mandate tax that would tax people for the privilege of not buying insurance that they can't afford and don't want now we're offering these short-term plans on a longer term basis up to 12 months renewable to 36 months as just another affordable option that may be right for people and, you know, we just believe that individuals and states ought to be in the driver's seat not us if at all possible.
we believe in the power of individuals to make these decisions for themselves not bureaucrats or ivory tower people in d.c. >> the chipping at the edges, sit a look at not getting what you wanted >> we're still very much repeal and replace. we're looking forward to having that happen in terms of votes. in the interim, i've got a duty to make affordable insurance options as available as possible and the president wants that to happen >> thank you very much, mr. secretary. > en wl see you soon >>whe come back, we have the adp employment report. back in a moment there's this. a bit of this. why not? your hotel should make it easy to do all the things you do. which is what we do. crowne plaza. we're all business, mostly.
chris stapleton, jason aldean, luke bryan and one of a kind rocking duets thomas rhett and kelsea ballerini host... let's get this started! cma fest wednesday august 8th 8/7 central on abc. xfinity gives you more of the cma fest with an encore performance from old dominion right after the show. only with xfinity on demand. and watch it live on abc wednesday august 8th. adp coming out with 19,000 expectations for the june payroll -- i'm sorry, for the july payrolls. and june was revised up by 4,000 to 181,000 so another strong report or expectations from the government, from the private payroll company adp. let's look at some of the numbers here 185 was the expectation. so kind of in the realm of
edging up. revised up to 181,000. goods up 42,000. services shows good employment numbers. and there's the nonfarm payroll estimate for the government's numb number let's take a look. medium 119 and large 81,000. that's good in the medium sized businesses and again, good distribution across the types of industries education and health office at the top. but leisure/hospitality. manufacturing strong 23,000. that has been a hallmark of the trump economy. better employment in the manufacturing sector trade and transport, 21,000. construction again strong. 17,000 amid reports it's difficult to find workers in the
construction industry. let's bring in mark zandi from moody's analytics. he puts it together for adp. mark, one of the big things i think when i see these numbers is everybody said we were going to run out of workers. that there weren't the workers to fuel this kind of job growth. that underlying population growth, 60,000, 80,000, maybe 100,000. we keep doing 200,000 or near there every month. where are these people coming from >> we're drawing them from the unemployed and the underemployed. the employment rate is 4%. at the current rate of job growth, given all the fiscal stimulus in the economy, the deficit finance tax cuts and government spending increases, this will be sustained unemployment is going to go into the low threes underemployment, if you throw in the folk who is are part-timers who want more hours or people who stepped out of the workforce not looking for work and thus not counted as unemployed.
about as low as it gets in business cycles. so we're drawing from the unemployed and underemployed >> i would note there's a story from "the wall street journal" saying some employers are lowering their standards certainly compared to the immediate post-recession period. the standards are somewhat lower. but what i think is interesting when you look at the trajectory of the numbers, it doesn't show any sign of weakening. there's no sign that we're reaching some cap or constraint period how far can it go? when you say it can fall, are you talking throw threes, high twos >> yeah. i think we can go into the low threes i don't think it's sustainable you know, i don't think even 4% is sustainable in the long run wage and price pressures will develop. you'll see businesses doing all kinds of things to try to gerrymander as much -- many hours they can get out of their workforce. so we can go into the low threes but we've only been there twice in history
once in world war ii the other time was in the korean war when, you know, 10% of the workforce was overseas this is rarefied territory it's not sustainable at some point there's a dark side to this that will be coming on the other side of the fiscal stimulus. >> you said in the press release there was an initial sign of the effects of tariffs in the hiring of large businesses. they're at 48,000. i didn't see it. what are you looking at? >> you now, i was looking at a little bit more detail at the very high -- very large companies with well over a thousand employees and there was an unusual decline in unemployment. it's one data point. but if you were going to see the impact of the tariffs and the escalating trade war on the job market, it would probably show up there something we have to keep our eye on it's also consistent -- we run a survey off of our website and confidence of businesses, particularly large companies has
weakened considerably. there are some data points coming together suggesting that the escalating trade war may be starting to have impact on the job market >> one of the sources of this idea that underlying growth in the labor force is 60,000 or 80,000 comes from the fed. so what we're watching here is we're watching employment grow at twice or three times what the fed thinks is the sustainable rate so does the fed just sit by at this current gradual rate while we add 200,000 a month and see that unemployment rate shrink? or do you think it has to accelerate its rate hikes in order to respond >> well, at the very least, they have to stick to their script. they say they're going to normalize rates in a consistent way. two more rate hikes this year. quarter point each time. three probably four next year. i think that's at minimum what they will need to do
but if they stick to that script by the end of 2019 going into 2020, the funds rate target will be close to 3% which is the k l equilibrium rate which is where they would expect it to be in the long run you know, at the very least i think they got to stick to their script my own view is they'll probably be under some pressure between now and then to press on the brakes even more -- in a more significant way. >> mark, thanks for joining us mark zandi from moody's analytics. and back to andrew another strong jobs report looks like it's on the way friday going to be an interesting august morning there >> we will see you, steve, on friday if not before thank you for bringing us the number and that interview. meantime, we want to get you caught up with a few earnings reports coming out this morning. the cheesecake factory falling 16 cents short of forecasts with 65 cents per share revenue in line with forecasts
same store restaurant sales did increase during the quarter but higher medical insurance and legal costs hurt the bottom line you're looking at that stock down almost 10% premarket also amc entertainment doubled the 8 cent consensus estimate. revenue also beating forecast. record quarter for food and beverage sales that stock up 1% movie pass clearly not impacting at least amc's business. >> no. amc has its own version at a higher price point >> they do but there were questions about what would happen there. and then sprint reported 4 cents per share above estimates of a break even quarter and they added wireless customers but average postpaid revenue per user came in below estimates. of course most folks looking at that stock up more in the context of whether the sprint/t-moblie merger takes place or not meantime, coming up when we return, google reportedly planning a censored version of
its search engine for china. we're going to tell you the details when we return are you done yet? does it look like i'm done? shouldn't you be at work? [ mockingly ] "shouldn't you be at work?" todd. hold on. [ engine revs ] arcade game: fist pump! your real bike's all fixed. man, you guys are good! well, we are the number-one motorcycle insurer in the country. -wait. you have a real motorcycle? and real insurance, with 24-hour customer support. arcade game: wipeout! oh! well... i retire as champion.
according to internal documents leaked to the intercept, google has been developing a version of its search engine that will reportedly blacklist sensitive searches and filter out all websites blocked by china's web sensors. the country shut down the search engine in 2010 citing the attempts to limit free speech on the web. also check out shares of baidu following that report. right now down 5.3%. >> it's interesting they would do this given both the approach. sergei was one of the most outspoken on this. and also has been outspoken on political issues here in the united states. we'll see whether this really happens or not i could definitely imagine -- i believe the report they're thinking about, whether they do it will be a different story also in the political context of what's going on with this potential trade war with china should be interesting. when we come back, a lot
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♪ good morning, everybody. welcome back to "squawk box" here on cnbc we are live from the nasdaq market site in times square. among the stories front and center this morning, the july adp report showed that the u.s. economy added 219,000 private sector jobs last month that was more than the 185,000 economists were anticipating additional the june number was revised higher maybe this tells us a little bit about what to expect from the government number come this friday also mortgage applications fell by 2.6% last week.
both new purchase applications and refinancing activity were down and the federal reserve is set to issue its latest interest rate decision and policy statement. that's going to happen at 2:00 p.m. eastern time today. it comes after the conclusion of a two-day fed meeting. the fed is not expected to raise interest rates this time around. apple out with its third quarter results. josh lipton has more on the big report out in san francisco. good morning, josh >> andrew, apple shipped 41.3 million iphones in the quarter, just shy of estimates. though the average sales price of those phones surged to a much stronger than expected $724. thanks to the popularity of its high end devices tim cook telling me in an interview if you look at the iphones that most recently launched so that includes the x, the 8, and the 8 plus grew very
nicely we also took channel inventories down on the iphone by 3. nt 5 million units and so the underlying demand is even stronger than the units imply. i also talked to cook about china where he said the x was the most popular smartphone in urban china for the second quarter in a row on the call he addressed trade tensions with china and other nations making it clear he is no fan of tariffs >> our view on tariffs is they show up as a tax on the consumer and wind up resulting in lower economic growth. and sometimes can bring about risk of underintended consequences >> revenue swelling to nearly $10 billion of services. cook saying we've got a agreement momentum there and hit a number of records.
it's a broad based result in terms of geography and in terms of the services themselves apple says it's on track for some $50 billion by 2020 guys, back to you. >> okay, josh. thank you. stick around for a minute. joining us right now is jason ware, chief investment officer at albion group. good morning to you. >> good morning. >> third quarter is usually -- i don't want to say mundane, but people aren't usually as focused on them. this is a heck of a beat >> it is it really checked all the boxes. we have a stable iphone business we have growing asps as josh mentioned. it was quite a number at 19% year over year services business growing over 30%. almost a $40 billion run rate. you know, we have nice capital returns program and a good outlook. yeah, a lot to like in the quarter. >> in terms of what you need to see in the next quarter, that's going to be where we're going to really try to understand what's happening, i assume. maybe not.
but when it comes to these three new phones that people expect when it comes to potentially the rollout of other services around content in terms of subscriptions, what are you looking for? >> sure. so the guidance was actually fairly good. and apple's been known over the years to sandbag guidance and to bring down expectations to beat them and again, they're guiding around 17% growth which is similar to what we saw inthis quarter. for them to come in at or above that, of course, is going to be important. but we're coming into a new iphone launch, 12th generation as you mentioned and some content creation with oprah coming down the pike at some point here with a new subscription service so number of things to be watching i think obviously asps is still on everyone's mind and services still on everyone's mind it's becoming a growing feature to the story now with apple. >> we keep asking the question, does the story ever get rerated? the apple story was once a growth store then a value story in term of who the investor base is and what they're thinking
about what the multiple should be applied on this company. >> that's a great point. it was something that was not getting much conversation two years ago when apple stock was under $100 something like a dell that deserves maybe a ten pe cash which never really made much sense to us. now what we're seeing is to your point a rerating upwards because growth has been reaccelerating and because if apple's going to become more of a software and services business that have higher margins and revenue and they don't have to continue to keep people on the hardware treadmill, then maybe a pe in the high teens is more appropriate opposed to below double digits. that is in effect and it's a lot of the reason we've seen apple more than our view >> josh has a question in san francisco. josh >> one thing i'm thinking about
is how well those high end devices performed. you guys mentioned the iphone isp notable there. what do you think they can charge for that next generation of devices is there a ceiling do you think $1,000 is the top here >> no. that's a really great question it's something that people are really starting to pay more attention to as we've pierced that thousand dollar ceiling i don't really have a good answer there for you i would have said a couple years ago a thousand dollars is a psychological level on a phone and most people aren't going to pay for that i would have been proven wrong despite my bullishness on apple. $1200, $1500 i don't know apple is such an aspirational brand, it seems people will pay whatever they ask them to. of course the rational part of me says that can't be true what's more important, though, is moving people up that pricing curve. right now i want to say a quarter of apple twices are at over $900.
the they can get that up to 50% over the next couple of years as people move up that curve and buy the x and the next generation coming out, then that continues to move the needle and grow so what we know is you don't need to sell as many $1,000 phones to continue to grow apple as a company that's a good thing. >> and i guess arguably having so many people paying monthly for the phone kind of interrupts that psychological of the list price, right you don't necessarily feel as if you're shelling out for the whole thing? >> yeah. i think that's a very good point. >> finally, you mentioned the capital return story, jason. obviously it's a big part of the case here. but a lot of stocks don't really respond to huge buyback programs but when it comes to apple, you have buffett sitting on 5% of the company at least apple itself is now buying back something like 10% of the shares buffett's not selling them it's almost as if -- apple's a tremendous source of demand for its own stock. i wonder how far that gets you
in the way of believing that that can translate into higher share prices >> yeah. another really great question. you know, how much of that is really driving the stock higher is anybody's guess i mean, clearly when you have 19% growth in average selling price and a stable business in a growing higher margin business probably those fundamentals are more important than the buyback. when you have a buy back at this level, you obviously have to assume that there is some fuel being added with that. what that actually looks like, i couldn't tell you. what i do think is apple could go to their bloomberg terminal and push to a trillion dollars if they wanted to. we'll see how that goes. >> before we let you go, we've had a number of investors and analysts come on and say apple needs to be buying stuff they need to be acquiring stuff. rather than buying back their stock, use it to go out and do something that might be potentially more interesting
is there anything out there more interesting to you >>. >> hard to say they're doing both right? that's the news with apple in cash flow during the nature of doing business coming in. they're spending billions on r&d. they're not doing anything big -- you know, transformative there with regards to m&a. i can't think of any one company or spot where i would look to and say i know more than tim cook at the folks at apple and they need to be spending money here i think they're doing all the right things they're in the right spaces. they're starting to sniff around original content they have the resources both the capital -- financial capital and human capital to do that so we'll let them drive the ship >> okay. thank you. appreciate your time and perspective. josh, thanks for waking up early for us this morning. when we come back, an
earnings call many are bracing for. tesla. the electric car maker out with its quarterly results today. we'll tell you what to expect. including whether there could be another fiery call with ceo elon musk it doesn't seem like he's quieting down any time soon. by the way, check out the 10-year yield this morning it touched 3% for the first time since june 13th a little earlier this morning .9%.t now sitting at 297 "squawk box" will be right back. this is not a cloud. this is a car protected from storms by an insurance company that knows the weather down to the square block. this is a diamond tracked on a blockchain - protected against fraud, theft and trafficking. this is a financial transaction secure from hacks and threats others can't see. this is a patient's medical history made secure - while still available to their doctor at their fingertips. this is an asteroid live-streamed to millions of viewers from 220 miles above earth.
welcome back to "squawk box" this morning david einhorn taking a big hit last quarter the fund lost nearly 5.5% in q2. in a letter to clients obtained by cnbc, einhorn had a lot to say. specifically said that green light's performance has been, quote, far worse than we could have imagined. the fund is now down more than 18% this year. in that letter, green light capital also took a shot at the firm's second biggest loser last quarter. tesla. saying einhorn was happy the lease on his model s had ended they cited growing problems with the touch screen and power windows. elon musk not one to just let that go. responded tweeting, tragic we'll send einhorn a box of short shorts to comfort him during this difficult time of course talking about einhorn's short positions in other places
tesla will have results after the bell everyone interested to see what musk has to say given some of the choice comments he had for the analysts last conference call phil lebeau is in chicago with a little bit of detail about what we might expect. phil >> it'll be a fun afternoon for me and for everybody else who's listening in on this call. when tesla reports its second quarter earnings after the bell, don't get too caught up in what the loss is for the quarter. the estimates are all over the place. the consensus right now is about $2.81 a share as a loss for the quarter. but there are three things the people will be focusing on let's start with cash burn this is how much money the company went through in the second quarter i think they went into the second quarter at $3.3 billion in cash on hand. how much of that have they trained away i does that mean they need to raise capital? either through a debt ufring or an equity offering remember he referred to one of the analyst questions last
quarter as a bone head question. let's move along we're not going to take that question let's see if this is a far more tame conference call after the bell today in terms of the model 3, this will also get a fair amount of attention. the focus here, two things first of all, what's the production rate? have they been able to sustain at 5,000 vehicles per week once they got past july 1st? is that still the case right now? there have been reports that they're having to bring in staff, fly them in from other locations in order to help with the surge production there also what are the reservations are they still well over 400,000? a bunch of wild reports out there saying there's been a big drop no there's been an increase. let's see if we get any clarity. on the reservations front, you usually don't hear much from them collin earlier this week said our sell thesis -- he's one of the few in the last weeks has been negative on tesla our sell thesis remains focused
on cash burn, sustainable profitability, and quality concerns take a look at shares of tesla remember it's all after the bell today. don't get caught up in the q2 loss it's hard to pinpoint where is an accurate estimate at this point. i've seen everything from a loss of $4 down to maybe a lot of only 30 cents. so they're all over the place. >> okay. phil, appreciate that. stick around joining this conversation collin langen is here what are you expecting >> i'm cautious. we expect a $3 loss. and i do agree with phil i think cash burn is a very important factor in the quarter. if they're burning at a billion dollar rate, it will be about $900 million for this point. >> do you think that they are producing 5,000 model 3 cars a
week right now >> i mean, i think if you look at the exit rate, last quarter it wasn't sustainable. i'm skeptical they maintain they rate i also don't know if that's the question we should be totally focused on it's important to realize what is the price point which is what helps skew profits in q3 also the quality issues and the profitability that's sustainable of the vehicle are far more important than getting more out. >> how concerned are you about these reports even the most recent ones about them bringing in extra hands, what that's done on the other side with their ability to service current tesla customers, et cetera >> i think it's, you know, extremely concerns it's going to be a factor in the quarter. it's hard when you bring all that cost in to actually report profitable results there's one reason we're cautious in the quarter. and i think from a servicing side which hopefully is a different group of people.
if you're not getting your vehicle serviced and you're paying a plus-50,000 price point, that's going to disappoint customers >> what do you make of the fact people are talking about how you can go online right now, put in an order, you don't have to wait in line. what happened to that kind of big queue that was set up there of people who put in deposits? have a lot of them been canceled >> this is something we recently talked about in a recent report. you know, i think there's a strategy into the third quarter. we actually do believe that they'll have a profit in the third quarter because when you go online today, you can only configure a model that's $49,000 or more. the most expensive is $80,000 for this vehicle at that price point, at that very high price point which we don't think is sustainable, i think they'll temporarily generate a profit before things correct and normalize in the fourth and probably into 2019 it gets rough because you've pulled forward some high paying customers. but i think that's the -- part of the strategy. they are definitely cutting
people who wanted a $35,000 model. those people are not going to be able to get the $7,500 credit because they will start to expire that's disappointing for those customers. >> just tonally and i only mention because the last conference call with investors and analysts turned out into what -- turned into the news event in terms of what elon musk said it wasn't even about the numbers. it was about the outburst. how important is that going to be >> i think it's very important i mean, this company is going through a very important transition it's going to its first, you know, close to mass market price vehicle. this is supposed to be the volume vehicle they've had significant production ramp issues and they want to see a ceo who's more level headed. and i think that's what he needs to portray today >> okay. we appreciate your time and your perspective this morning thanks >> thanks for having me on when we come back, jim cramer is going to join us live from the new york stock exchange he's the father of the faang
trade. we're going to ask him all about it now that we've heard from those faang stocks, what they've got to say about earnings. meantime, check out the 10-year. you see the treasury sitting right at 2.999% yield. touched just above 3% today. touched just above 3% today. we'll keep hawaii is the first state in the u.s. to have 100% renewable energy goal. we're a very small electric utility. but, if we don't make this move we're going to have changes in our environment, and have a negative impact to hawaii's economy. ♪ verizon provided us a solution using smart sensors on their network that lets us collect near real time data on our power grid. (colton) this technology is helping us integrate rooftop solar, which is a very important element
let's get down to the new york stock exchange jim cramer joins us now. jim is the father of the faang trade. he called it years ago we heard from the companies and while there have been some big misses by the likes of facebook or netflix, the rest of these guys are going pretty strong is the faang trade alive and well >> yes, it is. i think facebook did an underpromise and overdelivered they got down to 20% growth in the third quarter. i think the stock is overvalued. i think they're going to do better than that people will bid the stock up into the fourth quarter. netflix were mad at themselves but they don't want to play the game and they're the small guy i'm okay with the faang trade. you want it to be faang today because apple which was tour deforce. apple belongs against proctor and gamble
apple is a 17 and they're both consumers products company. >> you're right. >> i want to try to change that. >> you're right. i want to cram it in there but it's a consumer products company. >> who taught us that? >> buffet. you're right you're right you're right. >> he knows more than we do sometimes. >> he knows more than i do all the time let's talk about the yield on the 10 year today. we hit the 3% for the first time in a long time this morning. we're under that right now which way do we go from here >> there we are again. >> i think we're front running which will be a strong employment ad p i think you have to get ahead of that i think governments can sell long-term which they're doing and i think that's a little bit of an inflection we didn't like it when it was 2.8. now we get inflection. i'm for it. >> i'm stealing for a page for you. lightning round. one more at you today, too
how about tesla after the bell >> the ultimate battle ground. not great number and come up with a new investor we never dreamed would be there and say this guy is here to bust the shirts >> wow okay that's the quarter we can anticipate. >> yeah. it's going to be all about the -- all right you can't figure out how he does it. he's good at it. >> this is the opposite of the kitchen sink quarter >> thank you watch for jim in a few minutes. >> i like that programming note for you don't miss a first on bccn interview mark frissora.
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intentional. it shows how long you're spending on facebook and instagram. and also give you daily reminder when you're hitting your total daily time limit you can override the limit, too, by the way and an option to tune out informatinotifications. you can read about it on cnbc.com a quick final check on the markets this morning show you where things stand now. about a half hour when the market opens, nasdaq looks like 25 points higher dow jones down about two points. s&p 500 up close to three points. >> you know this is interesting 3% the first time since middle of june. cramer said probably based on what we expect will be a strong jobs number. >> it should be based on adp but also based on the fact that the week where we take the unemployment survey is strong. age lot of people are geared up for that strong number.
>> awe. >> it shows you the more time passes with the stronger economy. you have a buffer pressure on rates. it's not at all happening. >> i'm shocked we haven't seen more definitive move above 3%. >> and alleviates the goal. >> thank you for hanging out, mike. >> becky is back that's great make sure you join us tomorrow "squawk on the street" begins now. ♪ >> that's a tough way to start out. good wednesday morning welcome to squa"squawk on the street." welcome to august! we start the month with dow futures slightly red but they have improved as adp employment beats