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tv   Squawk on the Street  CNBC  July 21, 2020 9:00am-11:00am EDT

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right now overall. >> jim, thanks a lot we've got to go. melissa, you should just stay in the stack, stay in the library and research for tomorrow's show is what you should do. >> i'm going to start doing that. >> research for -- >> i'm research for thursday's show, actually. >> we will see you tomorrow. andrew, let us know, write another column that we can talk about tomorrow i don't know thank you. make sure you join us tomorrow. >> i won't be. >> "squawk on the street" is next ♪ good tuesday morning, welcome to "squawk on the street," i'm carl quintanilla with jim cramer, david faber is back after a long weekend. live from separate locations futures are solid after monday's record nasdaq close, s&p green for the year as we enter the heart of earnings season with coke and lockheed, mnuchin and pelosi meet on an extension of benefits today and the eu gets its own historic package, euro four month high this morning jim, you've been going back and
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forth with portnoy on what you say are amazing insane moves that can continue. >> yeah, i mean, understand there is florida has been so much comparison in 1999, 1999 was never like this. you had a lot of crumby companies that would go up a lot but nothing like this. i mean, we have major trillion dollar companies that are going up at a pace that we've obviously never seen because we didn't have trillion dollar companies before but i do think that my friend david portnoy he's got a big cohort saying that stocks only go up and i'm just giving -- this is frightening -- i'm giving a little bit of homage here because, yes, if you got in when davie trade got in, i mean, all you've seen is up. so it's not wrong for him to look at that i mean, the guy got in i think march 23rd when he decided to take the suits on directly i got up this morning, i said, geez, maybe i should wear jeans.
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i don't want to be like wrong. i want to be -- i don't want to be on the other side of the trade of this guy. his timing is exceptional. now, he's not a guru, he is not a joe grandville not some of the big companies, big mock -- unbelievable gurus that came on, but it is just time to admit that these moves are crazy now, that doesn't mean crazy -- crazy may be the last thing you have before something is a great idea, but when you look at these charts you are reminded that these are not $2 stocks going to $4 and that's what i was thinking. >> right jim, some viewers make the point that 99 wasn't just, it was dell and cisco and intel and emc and nokia, i mean, it wasn't -- they weren't all money losing babies on the web >> no, but those companies you just named those were all companies that were going to blow things out because of the dot-comes.
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inn tell was -- people thought that there would be an early run for what turned out to be data centers. if anyone remembers the run in cisco, cisco was the backbone of the internet but i have a run of the companies that became multi-billion dollar companies during that period and a lot of them do not exist and some of them finally got back to where they were but i just think this is animal spirits like i've never seen and those gains that we had with cisco and intel are nothing like this. i think that maybe index money, 60% of the money is indexed in this market, they are not sellers, the insiders are not sellers, the etf buyers are insane, they come in, they blitz stocks and you get people hong that stocks only go up and they attract a lot more money, david. >> yes, they do. listen, your point is well taken, jim we all remember that period having reported on it, you know, every single hour of every day, it was so frantic for years and
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there were plenty of companies that did not have a business model of in i kind other than the word internet in it that went up a great deal there were plenty of ipos that lacked in quality, i mean, the quality of ipos then versus now, you can't really even compare. far higher quality now, it's not even a comparison. but to your point qualcomm, great company, but i don't know that it's ever regained the highs it saw then. i might be wrong cisco was a half a trillion dollar market cap at one point the largest market cap company out there. it has not ever regained that level. so, you know, that's got to be at least some sort of a warning sign and you've got this stuff starting to go around yesterday, guys, i don't know if you noticed, there was a note out that the xpx closed -- or rose more than 50 basis points while eight sectors declined and that's only happened one other time, february 23rd, 2000.
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>> one month -- actually, no, less than that is correct four weeks before the top of which we never did see again. >> march 10th was the top. >> carl, let's understand that the people that did think that stocks only go up back then are not with us. and that doesn't mean that it wasn't a great ride if they took money off the table. i think that some money -- my travel trust took some amazon off, i thought i would never take amazon off but it became 8% of the trust it was 8% of the trust becoming the amazon fund. >> jim, the ndx half 49% of the ndx is six names, apple, microsoft, amazon, facebook, google and tesla. >> murderer's row. >> what's that >> it's murderer's row it was the yankees in '27. they had a better lineup than anybody. portnoy, if people don't know him, barstool, maybe it's the murderer's row anyone who has ever played
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stratamatic knows you could never go against the yankees because they had six guys that represented -- they were better than everybody else on every team and i feel like that's what we have. we have companies like microsoft, no one is -- microsoft is monopoly in itself. >> all right. >> what? >> jim, when do those things get to a level -- actually the other day you were getting somewhat uncomfortable with the 36 times earnings that microsoft was trading at by the way, compare -- now, again, i remember, again, back to '98 what yahoo traded at 50, 60, 80 times revenues. >> right. >> another company that never saw anything close to its highs of course that it reached at that point, but at what point here does valuation start to play a role or is that simply not going to be part of the conversation. >> i think when i say things are insane i feel like that this whole notion of using valuation has somehow gone out the window. what you need to figure out -- >> then that'sthe late '90s
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again. >> for a different reason. you have insiders who don't seem to want to sell, you have index funds that let's just admit rarely sell, you have a lot of new money coming in and you don't have any supply. these pictures that you're seeing are pictures of stocks, carl, where there's just no supply and i don't know where it is and i don't know when we find out. when we do, when there's all sorts of insider selling, if peloton right now came out with -- look at nikola, i mean, they finally got some supply and then coca-cola is better than nikola. >> jim, one last thing because i know david has ebay, but data track this morning says if you want to figure this all out looks to the vix and watch to see if it gets and stays below 20 which it never really did in '99 and years after the fact that became a pretty obvious tell. >> the s&p oscillated, still not
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overbought despite this because it's just a few stocks and a lot of other stocks are not doing well we don't talk about it enough. if you bought american airlines you are not good i mean, the stocks that trade heavily right now are still the cruise stocks, still the airline stocks i mean, but you've got a stock like facebook, coca-cola, disney, they are all pulling out and facebook keeps going up. why? because the small and medium size business continues to advertise on instagram stories i think the biggest thing we have to story about is what happens, how many people are taking that extra $600 for unemployment, giving it to robin hood and buying etfs that include the six, the magnificent six, whatever it is, and i think that that's worrisome to me but that does not mean they go down. it's unbelievable. if we don't admit that it's unbelievable we're crazy and maybe we are crazy
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is portnoy -- people don't know who portnoy is, they just know -- all they know is phillip roth, the guy is a complainer. >> a sane man is judged insane in an insane society you remember that one. >> american pastoral is portnoy, right? until this guy surfaced, i mean, i loved -- i absolutely loved roth, he went to bucknell, he gave the commencement speech before i did there you go put myself in the same sentence as roth. david, how arrogant is that? >> well, you know, you've known few bounds when it comes to arrogance but that's okay, much of it's deserved, jim, much. guys, do we want to talk about the ebay deal this morning i think we should. it's one of the larger deals we've seen you know, headline by the way $9.2 billion but not necessarily the route that some had thought they would go in terms of the sale of the classified business of ebay. you can see the stock is looking up it's had a great run already, it
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has benefited from the pandemic, the platform seeing traffic that it had not previously seen as people more and more shop from home of course the classified sale had been in the process for some time, there had been a number of potential buyers, we thought the bids might come in in the low $8 billion but they got 9.2 but it's more than that already because of the structure of the deal again, that's where i get back to something that i think is a bit of surprise. there had been an expectation that ebay would potentially sell classifieds for cash, simplify the business in a significant way which is what many of their shareholders had been pushing for. instead they go for a deal in which they will get $2.5 billion in cash and 44% ownership of norway's atavinta. take a look at shares of atavinta they are talking about 150 to 180 million and that has captured the imagination of shareholders of that company the overall value of the deal has just got up dramatically
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it would appear that perhaps ebay made the right choice here. i was told there was a private equity bid in the $9 billion change, naspers was also in there but there was a concern that eventually naspers might compete with the core marketplace business of ebay they chose this complex deal of which they will own 44% of adevinta and potentially sell it down over time at least based on that move and that stock perhaps the right deal because this is not a $9.2 billion deal anymore it's closer to an $11 billion deal. >> that was a great deal i thought that business was worth more i thought stub hub was worth more with no games and no concerts -- >> sold it when you did, the timing was great. >> i want to ask you, david, in the running were there any spacs in the running to get this >> no. no spacs in the running that i'm aware of.
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>> spacs that are about to hit this market. >> i know. >> david, what do we do about that what does it say >> you can do the spac attack report today, jim, if you want to if you've got them. it's incredible. it has generated anonymous amount of fees on the capital market side for citi, credit suisse, a number of banks are active in this area but everybody is and everybody wants to do a spac that said this is not a company that was looking at rolling into a public entity as of course really what spacs are is another alternative to an ipo remember but on this deal, jim, back to ebay for a moment, you know, you are left now with the core marketplace business with the new ceo, jamie inoni who ran e-commerce of course at walmart and we'll see. the stock has done extraordinarily well because they've seen already a significant increase in terms of traffic to the platform, but, you know, i think he's looking for opportunities to sort of
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reimagine the company at this point and there's a hope amongst their shareholders with stub hub out, with at least having monetized classifieds that the focus on organic growth at the core marketplace will actually prove successful. >> so, carl, you look at ebay, you look at that chart and you have to say to yourself, do you know what, ebay, which has gone up huge ahead of this. turned out to be valued much -- valued much more highly than we thought it was and i think that what you might see, when you see something today about amazon and raising numbers, i mean, maybe what's really happening is that there is a moment in capitalism, david is going to hate this, maybe david can step off and make calls, there's a moment in capitalism where we say we undervalue these companies that took over the world, amazon, microsoft took it over and they were just incorrectly valued and that's really your hope. ebay is a little bit more on a microcosm, but look at that.
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when devin was running it we thought it was worth 25, it turned out to be worth a lot more so the bulls have to hope, do you know what, there's a revolution going on and stocks were valued incorrectly and now we have to change the way we view things. >> yeah. maybe questions for bezos who is scheduled to testify, jim, next week we will take a quick break here. we will get to the earnings of the day, coke, lockheed, ibm from last night. tell talk to james quincy and we will highlight tonights snap ual texan use. biden with part three of his economic plan today. a wnade dogrof tesla a lot to get to in a moment.
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coke up 3% premarket despite organic revenue down 26, which as far as our databases go you have to go back almost 30 years to see a number that bad in a quarter. >> i think that james, you speak to james, he's rather upbeat because the quarter as it went on did get better. his company is heavily exposed to restaurants, quick serve better than just the fine dining, heavily exposed to cafeterias and not -- it cannot be made up with supermarket and e com sales, but i have tremendous faith that the worst is over, things can come back
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and i look at the model as he does of china which is starting to do much better and i think that that will carry over. obviously if we reclose it's not good and a very small percentage of his business is just traditional restaurants that are not coming back. so i think the cadence of the quarter as they say on these calls was very positive. >> we will see what quincy says in the next hour sara is going to bring him he did talk about something we see repeatedly from other companies and that the rationalization of the offering, right? sku zombies i think he calls them. >> everybody -- you have to send fewer skus the toughest thing when i talked to james, i said, listen, i ordered a couple cartons of coke zero and it came and i love it and i thought that that would be the beginning -- i thought others would do the same and it
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was done at the beginning, but it's not being done as much now and so while i like that the stock is up, i don't know if it can stay up because these stocks are not the stocks that people love these are unwanted stocks and i just say that pels co had a great quarter, if you look at free low lays where they rash l rationalized the skus. stocks do only go up, i mentioned that this segment, but pepsico is a better stock than coca-cola but right now people are enamored with coca-cola because it's done nothing for so long warren buffett with coca-cola, wells fargo. >> american express. >> american express, david, thank you. >> you're welcome. >> airlines. >> no longer doesn't own the airlines any more, we should point that out. >> that's true i know that david portnoy did say that he's not at the top of the game, warren buffett is not
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at the top of his game. >> do you know what, i heard you say in the last segment something that we used to hear a lot that you were saying it's different this time. that's kind of what i heard you say. >> okay. when trillion dollar stocks, david, go up $50 billion in a couple of sessions am i supposed to just say that that's the same this time is the same? >> no. >> they go up 50 billion a day no >> but are you changing your own assumptions to adjust to the reality as opposed to sticking with them -- >> no, it's insane. >> -- because we've seen this movie before listen, you may be right, maybe the world is going to be dominated by six giant companies, they will never be broken up, never be taken to heed in some way in terms of their market power and their valls louis will continue to go -- i don't know, amazon will be $3 trillion, right? >> it's a virus that's escaped will you give me that? it's a virus that escaped. when did the virus last escape it escaped in the book "the
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stand" and nobody -- everyone die at the lincoln tunnel scene and there was just a few people, 1% of the people managed to survive, even less in "the stand. stephen king tremendous pre cursing of what happened the 1% of the stocks we talked about, the 99, david, they never got through the lincoln tunnel. >> okay. >> all right carl, i think you have to go to novels to understand what this is novels. >> pretty more rows view. >> coca-cola down 28%, amazon might be up 28%. david, you used to talk about amazon web services now you're poo pooing it. >> i'm not poo pooing it amazon is an incredible company in every way >> tesla -- netflix, it's tass nagt to your point. >> yankees. >> bezos' net worth, guys, up
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$13 billion yesterday. one day. $13 billion unbelievable. >> he's having a good year. >> we will take a break and get so some of the other names of the morning whensqwkn e re" mes backth my name is christine payne, i'm an associate here at amazon. step onto the blue line, sir. this device is giving us an accurate temperature check. you're good to go. i have to take care of my coworkers. that's how i am. i have a son, and he said, "one day i'm gonna be like you, i'm gonna help people." you're good to go, ma'am.
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i hope so. this is my passion. if i can take of everyone who is sick out there, i would do it in a heartbeat.
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as jim said on twitter last night very few thought ibm could have this good a quarter 218 beats by 11 cents revenue ahead and it is the top dow gainer ts mohirning. we will get the opening bell in just over six minutes.
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>> announcer: the opening bell is brought to you by nuveen. a leader in income, alternatives and responsible investing. all right. carl had mentioned ibm briefly there. let's get into the earnings a bit more on the mad dak. revenue $18.1 billion, down 1.9% when you adjust for divested businesses and currency. cloud seems to be where they want us to focus, it is where the growth is. what stood out to you? >> this was the quarter that we realized the red hat acquisition was everything that people were hoping for red hat had -- just the two or three huge deals each quarter, they are now getting ten deals because the combination of ibm and red hat for companies that want a hybrid cloud, meaning some internal and some external. ver' going to vm but we're also
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going to ibm and ibm when i spoke to after vin christian yesterday this was a confident company that is going to deal with the divisions that have shown these endlesses -- endless 5 and 6 percent declines, global technical services, they're not going to hold this company back anymore. this company may even split up i felt after the conference call, they are going to get out of businesses that are bad. this is still a buy. the balance sheet is wetter than it was 5% yield, red hat paying off instantly, much earlier than a lot of people thought. i like the stock is it alphabet, is it microsoft, amazon no nobody is. nobody is in the 27 yankees except for the '28 yankees. >> ibm less than a tenth. >> it's small. >> go ahead, jim sorry. >> it's a small cap versus what we're talking about because it fell shined. >> that was what i was going to say. it's less than a tenth the size,
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15th the size. by the way, it's still generated over the last 12 months, $11 billion of free cash flow on $110 billion or so market value. that's not -- that's a pretty low multiple on free cash flow or perhaps some would think so. >> i think that arvin krishna has a new attitude new ceos come in and they do things, i just listened to the call and frankly there is a division called out basically as not good on the conference call and that means i don't think it's acceptable to him, but the red hat deal -- look, he is from the cloud, arvin is from the cloud. i thought this was a breakout quarter for them since it's $100 billion, i can't believe i said that, it is an interesting opportunity. a slower growing company for for those who like value it's the best of the value tech stocks. that's saying something. >> okay. and we're going to -- and, carl, we're going to watch it up today
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as we keep an eye on the broader market opening of which will begin in about 20 seconds into a lot to watch we will get to some of the other names moving today, jim. on a policy front we will watch minute chind and pelosi meet mccarthy was on squawk and said don't expect a deal until august which would imply that we are going to see some of these benefits physically run out at least for a short term. >> yeah, i'm going to speak to madam speaker tomorrow i don't think that they can afford to have what the leader said this morning. there's just too much money on the line i know we also get kind of convoluted when you start talking about the payroll tax cut. what's really needed is money in the hands of americans who, remember, 70% of the people are making more with unemployment right now with the additional
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600 than they did at their job the problem is their job probably doesn't exist anymore and i think that we have to start being much more targeted in industries that were closed by the pandemic through no fault of people's own instead of being across the board i know that the republicans believe that speaker pelosi has all these different goodies that have nothing to do with anything having to do specifically with the pandemic, but the fact that they're talking is good, i mean, they are not just standing there saying, you know, dr. fauci, dr. fauci. i mean, that seems to be -- he seems to be the football excuse me, baseball, he's throwing out the first pitch which to me tells me he is a good guy i thought he was a good guy all along. we have to recognize the animosity between the president and the democrats seems not as -- it's just not as vehement with secretary mnuchin it's just not. >> fauci on npr this morning, fauci on npr said he was pleased
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about the president tweeting a picture of him in a mask and said we may have turned the corner in terms of a consistent message on masks, jim. wynn dixie overnight had resisted mask policy, they changed their mind, they said they had evolved and they will require it maybe on the margin, jim, that's what stocks are responding to is a cheaper, easier mitigation method rather than shutdowns 3270 this morning. >> you're going to see a big decline in that happens. you will absolutely see a big decline. a lot of people didn't believe marc benioff when he came on "mad money" and announced the contest to develop the most stylish mask, but mark is talking about if we wore them for three weeks, three weeks in a row it would change things dramatically the leaders are the retailers. i think that those who want to doubt marc on that, look at vietnam, taiwan, look at the countries that were hit badly by
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sars, taiwan did a dry run, it's pretty amazing marc said that japan had very few deaths they do. it's for real. the mask is for real it's cumbersome, i got a mask right now that's kind of like spiderman, i think it's really cool this is the honeywell mask with the filter i mean, you know, i'm just --i put this on last night my daughter said, dad, you're home, i said, no, i like t i like the feel of it. >> i don't >> oh, i don't what are you are you one of those people, david, that live free or die are you one of those >> no, not in any way, shape or form you know that. i wear it when i'm walking on the street in new york city. absolutely certainly would wear it if i ever went inside anywhere which i try not to. >> there you go. okay that's important. >> so, yeah, no, there's no doubt and your point -- listen, we know the numbers from countries like taiwan or japan
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or vietnam, they're stunning and we know our own numbers which are already stunning for a different reason but meanwhile, guys, the threat of further lockdowns, california comes to mind, does not seem to be playing out in the stock market there just does not seem to be that much concern about the economic toll if we were to reverse even more from where we are in those hard hit states right now which have already tried to undertake mitigation efforts, but may have to do more. >> but it is limited, david. it is limited. we're still seeing a concentration in certain stocks. it's not the retailers it's not health care. >> right. >> it's not the banks. it's very few of the industrials. it's not aero space. it's not travel and leisure. let's admit -- let's give those six, ten, let's give the cloud stocks their due, but a lot of other stocks could take off if we just somehow -- if everybody felt that a mask was -- i mean,
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that's why the president was right to wear a mask because it could really, really help us this give me convenience or give me death attitude might be over. >> jim, we are seeing some good action out of energy i wonder if you think that's a chevron halo. >> yeah. >> by the way, gold and silver, jim, we're watching as it does look like whether you think this has any impact, judy shelton will get past senate banking now. >> okay. well, when you have interest rates as low as they are textbook says go buy gold and that's what people are doing go by silver when you don't have an industrial recession and judy shelton will make it so there's even more interest, but i am -- look, i'm just astonished at just that handful of stocks that people just buy and they have -- and then what happens is tomorrow you come in and price targets are bumped again and you keep getting the same stocks over and over. they have to cool off. how about that
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david, do you think -- they have to cool off. no don't they have to cool off? >> i don't know. >> what do you mean you don't know >> i don't know. this is not my area. i loo he have this to you. >> i just punted. >> commentary on the bear market i punt. >> mike worth came in and bought a company for $5 billion, okay, are you with me? >> yes. >> and that company is worth more than anadarco i would rather have -- i saw you yesterday -- >> underestimated the properties in colorado. >> yeah. >> i think that -- what did occidental pay, something like $55 billion? >> it was an enormous sum and of course, yeah, we detailed every single move in that fight with chevron, which chose to walk away very smartly of course in retrospect there had been some speculation they might come back for the entire thing, that's being anadarco your point is a good one you think that this deal is a better deal than they would have
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gotten if they bought all of anadarco previously. >> dramatically underestimated on wall street and the mediterranean may be the largest in the world now they have a pipe to egypt and jordan from israel, next is right to europe and the mediation of gas prom after miracle leaves because miracle from east germany has favored the russian pipeline it can be broken up by lie via than it's a lot of good and it's amazing that you missed yesterday. >> it is amazing that i missed yesterday. you have made the point many times that these stocks are uninvestable in part because of concerns about investors in terms of fossil fuels and the larger environmental impact and the changes that need to be undertaken at many of these companies, some of which they already are in order to change their profile so they become more available to the growing number of asset allocators that won't allocate assets to fossil
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fuel companies, which gets me, by the way, guys, to apple today. you know, again, these are the kinds of things that i think we would have been talking about a lot more perhaps prior to the pandemic, we were, esg, its growth continues and apple saying we're going to be carbon neutral within ten years, by 2030 and they go into a lot of detail about their ten-year roadmap and how it will lower emissions with a series of what they call innovative actions, including recycling innovations, material recovery lab that they have and so many other areas in terms of expanding energy efficiency remember, guys, microsoft also told us something similar earlier this year i think it was when they said in january that they would be carbon negative by 2030 as well two of the largest companies in the world of course saying they're going to remove all -- and microsoft said they would
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remove all historic emissions by 2050. >> yeah. >> i'm not sure i see that in the apple release this morning. >> since the beginning of the company they will wipe it out. you have to be careful today, guys article, october testify is down, z scaler is down, kupa software is down, service now is down, vertex is down. >> zoom. >> amazon is down. this could be -- this could be a day where the portnoy principle does not come into play. >> yeah, i see adobe, auto desk, netflix, jim. >> yeah. >> all lower. >> regeneron. >> at least on the ndx. >> wow, maybe stocks do go down, defying the portnoy analysis. >> microsoft the only red dow component. linkedin is going to cut 6% of its workforce, 960 jobs according to post on the site, that was interesting but a rejection, jim, of what recruitment is like right now in corporate america.
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>> we had dan roth on from linkedin at our terrific town hall that we did and it was a segment where we had four people from the class of 2020 who had great jobs who lost their jobs and he was just giving tips about jobs, but the fact is that there's not a lot of listings for jobs it is a very strange time. at the same time you have the rails on fire. the rails being what's supposed to happen to trigger -- they are a precursor for a boom so we have a lot of situations where it is just very hard to fathom i thought we were going into recessi recession, a lot of stocks are signaling we are going into acceleration that's another thing that's very other worldly about this market. oil making its move. finally breaking out above 40. yes, it's true that there's fossil issues, but i think people are thinking that if we flatten the curve, if we all wear masks, then we're going to
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be like germany not like sweden. it can happen. it can it's not it's a wonderful life it's not. >> we have a lot of kids we have a lot of kids who would like to be attending school in the fall so the sooner the better in germany they are not having the conversation about whether there's going to be school in france, italy, spain, even the uk, they're not having that conversation we are the only ones having that conversation. >> we're having it in spain where my daughter was, she was teaching english, if you went outside at the wrong time you got a 600 euro fine. i mean, david, is that the kind of -- is that the kind of thing you'd like to do to curtail people like that >> i don't know. i mean, there's guys taking people off the streets in portland and putting them into unmarked vans. >> how strong was that guy from the navy wasn't he great? >> yeah. >> do you know who karen is? carl, does he know who karen is? he knows what karens are >> of course we should have --
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>> do you know who karen is? >> yeah. >> what? >> i know what a karen s i know what it is. >> carl, if we all start wearing masks and we rule out the karens look, you have to have a mask to go into the store. think about win dn-dixie they wr making a stand i think it's an oddity in this day and age, but they -- they ate crow real fast >> once again, we're getting led by our corporations. walmart, target, all of these major -- >> yes. >> i mean, that's going to force mask wearing. >> it's a kleptocracy, david costco did this first and were worried their same store sales would not go up and, boom, they went up 11%. people don't want to die shopping it's not worth dying for. >> it's a really good read on consumer behavior. we got a nasdaq record high, s&p
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is having its best july since 2010 and we're really not that car from s&p's record close of 3386 let's get to pa sisani. >> that s&p breakout last night at the close was very significant but let's take a look at the sectors here i think jim has a good point with oil up 42, that's the highest level since early march, finally broke over that $40 range and that's helping lead the market up here energy is strong industrial is strong banks which have been laggards for a long time strong techs a modest laggard, health care slightly positive the s&p positive for the year. almost two-thirds of the s&p is down for the year. who you does that happen, the s&p is positive and two-thirds of the s&p is negative for the year it can happen because you get these mega cap stocks moving that david was talking about earlier with jim amazon is up 70% in the year, no typo there microsoft, apple, facebook, look at those and you will know -- we all know these are close to 20%
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of the s&p 500, it drags them up, alphabet set a new high today, by the way. at the same time you look at the other end of these things, the destruction going on in formerly large sectors like energy, many names down 50% or more, on average down 30% to 40% and i think most disconcerting is what's going on in the regional banks and the decline that we've seen, many regional banks down 30%, but some of them, wells fargo which is really more than a regional bank but key corp., remember, the s&p financial sectors used to be very significant, now it's only 10% into he is sectors get smaller as health care and technology get bigger here a little bit of a concern about a lopsided relationship in the s&p with the various sectors. so we are in the heart of earnings season, unfortunately the reluctance to give guidance we saw in the second quarter is continuing into the third quarter. arvin at krishna, typical of some of the comments here. in april when we said we will
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reevaluate in 90 days, maybe were a little optimistic uncertainty in the economy makes us unwilling to provide guidance, a little disappointing but not surprising where are we in all this corporate guidance 40% of the s&p 500 declined to provide guidance in the second quarter. kind of continuing here. we don't get in i guidance from coca-cola and ibm, two big ones in the dow obviously, although it's not completely devoid of commentary lockheed martin gave better guidance than expected philip morris' guidance appears to be above consensus. even ubs over in europe, this he may resume buy backs and the credit losses in the second half will be lower than the first half they said that's certainly optimistic. knots at you will completely doom and gloom you see everything moving up here that had any kind of earnings or commentary about the future today on the upside finally, i said the s&p is turning positive actually, there's some real global movement. china has turned positive a long time ago for the year, so the
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u.s. is up, but germany turned positive today, the dax index turned positive for the year, a mini rally going on there, they have a deal on providing stimulus that's moving things. korea also turned positive as well and taiwan which has been getting kudos from everybody in the world about their handling of the covid cases also has turned positive for the year there's some mini rallies going on around the world that's giving some hope to investors. guys, back to you. >> okay, bob see you later. bob pisani as bob says the dow jones industrial average eyeing 27 k once again led by coke, we will talk to james quincey in the next hour of "squawk on the street." don't go away.
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adyen. business. not boundaries. we're watching the progress of congress' move to extend benefits in the wake of covid-19 now some news from pelosi, let's get to elon mui. the white house is starting to talk to democrats about that next relief package, a source tells me house speaker nancy pelosi did have a conversation yesterday with the treasury secretary where they discussed housekeeping items as well as a timetable. pelosi apparently telling her democratic caucus this morning that she believes that they can resolve their differences and that she does hope to have a negotiated bill by the end of
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next week. so some news on a timetable there from pelosi, the conversation that she had with the treasury secretary, all of this coming as republicans try to get on the same page themselves and we await the republican package from senate majority leader mitch mcconnell but it does look like the are a starting to get under way even ahead of the meeting this afternoon. guys, back over to you >> thank you for that. important to watch the tick tock on all of that, jim, as we pay some attention to biden today, talking about the third leg of the stool of his economic plan essentially raising taxes on real estate investors to pay for more child care facilities, elderly facilities and that kind of thing >> right, i think that those are relatively painless. i think talking about the breaks for real estate but what is important neither party wants to be seen as not having done anything when these unemployment benefits, the $600 ends.
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so there is a gun to their heads. i have nancy pelosi tomorrow and the speaker does not want to be the person who stands in the way of putting money in people's hands, to have the next in the recession and not in the republicans' interest not to do t printing money anyway and the rates are really low look, we're in, if we can bridge to the vaccine, if that's possible, then we're going to come out okay, particularly if we wear masks. there is an optimistic scenario here bob pisani an amazing stat, two-thirds of the s&p are down you would change that if you got a vaccine within the next six months add masks to bridge it for health care and you had the congress and sec mnuchin giving us extra money in our pockets to get there, particularly secretary mnuchin always wanted to help the businesses where he called it business interruption insurance. i have a bar we were close yesterday because the government closed us yesterday. is that our fault?
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believe me i fortunately can afford it but 15 million who can't afford that to happen in that industry. i feel there's something good will happen there. i really do. >> let's hope so, jim. this report out of the partnership for new york, suggesting that a third of small business in new york city could close forever is a dark, dark report >> that's true >> we hoper this we're not going anywhere near that more "squawk on the street" continues in a moment. experience the adventure of a bigger world in a highly capable lexus suv at the golden opportunity sales event. lease the 2020 nx 300 for $339 a month for 36 months. experience amazing at your lexus dealer.
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energy is the standout this morning, exxon and chevron lead the dow and the s&p gainers are all in the space with occi and
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devit at the top we're back in a moment
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let's get to jim and stop trading. >> omi makes ppe, the stuff you need to be able to fight this, front line people and i am surprised, the stock, the company was on "mad money" and they told a story that basically they are at the front lines. they are doing everything, and you know what? nobody cared
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that gain is not done. the company got too indebted in medical surge supplies in short supply and doing terrifically. by the way this and opco a bioreference level are the picks and pans like gold mines. you don't bet on the gold mirns. you bet on the companies that supply them. and opco bioreference lab announced last night on "mad money" they got the nfl contract so these are the small cap stocks people should be buying, not just the ones four letters and nobody knows what they mean. >> hmm, interesting, jim a lot of discussion as we await basketball, the bubbles are working, right >> yes >> we're keeping caseloads to a minimum virtually across all sports in these bubbles. >> bioreference doing testing of nfl players constant ly there's no lead time, just in there, you get the hour test, five-hour test, tests right
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before the game. i think this is amazing and it's this bioreference lab which is owned by opk what a stock that is becoming. it was a bad stock for a long time, but not anymore. one of the best there is opco health. wow, that chart is daunting but i've got the other one i've got octa, tie with a passport identification and logitech the company that makes a lot of the equipment to be able to do gaming. we see the gaming stocks pretty much every day and then a popular speculative stock, one that david can remember because it always picks its head up right about now, plug power, hydrogen power, david. you've always been a believer, i know well tonight is your night >> don't drag me into this oh, man, that one i remember that name. yes, there's a lot on both sides
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of that one. >> every time plug power finds its way on this show, doesn't it i don't know, carl, i'm a fuddy duddy, going up $50 a day is not the same. >> it's not the same but accepting it and making it -- >> special filter, you look like sp spider-man i like to have it on walking around the house that's what mask you need. >> can i get one >> i'll give you listerine first and then you can have one. they're available. amazon look, we got to go, okay i'll talk to you late per >> we gotta go >> jim, see you at 6:00, "mad money" of course on cnbc tonight 6:00 p.m. eastern time jim, thanks. good mornieryone welcome to "squawk on the street." i'm carl quintanilla with morgan brennan and david faber. dow is up 300 even as mega cap
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tech takes a bit of a breather coke, lockheed on the tape, novartis, phillip morris, tonight we'll get snap, texan and united after the bell, and something good to chat about with mike santoli, early priced action, the markets well along in converting rampant skepticism so overconfidence. >> that's what we've been doing, the market continued to benefit from the fact people were cautionly positioned not believing the rally, very focused on the perception of a disconnect between the markets and the economy and now it does seem as if you have it in pockets initially, you have tech and some of the spectate clave stuff work and i think that this breakout from a six-week range that we've had in the s&p 500, it's tentative nothing is decisive happened yet yesterday was a narrow rally as everybody's been talking about that did bring the s&p finally to a new high for this recovery move but it seems like that's
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what we're doing here, is maybe a little more upside, maybe the earnings season that seems as if corporate america has had a few months to basically get its arms around the issue, control what it can control, preserve profit margins or send the message they know how to do that and we can get some attention for something besides the big five tech stocks during this earnings season and i think after that, if people feel as if maybe we haven't all cleared, that's the moment when sentiment sta, sentiment starts to become a bigger headwind. they haven't believed to this point in a broad way >> you talk about corporate america getting their arms around at least the ability to see near-term into the future, mike, i wonder is that what you think the commentary reflected so far in earnings season? a lot of the david solomon, jam jamie dimon, coke's inability to provide guidance >> they're pulling the levers
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they have at their disposal and i also think the market has given every company a pass for this quarter, maybe next quarter, and you know, you're basically seeing rock bottom baseline profitability for all companies right now. okay i don't think it's the financial and the industrials that will take the lead of this market but they can come off out of the penalty box and be able to play a little bit that's more what i see at this point. i think corporate america when they talk about productivity, creating a caption curb on the balance sheet, something the market has given them credit for already having been able to figure out >> mike, i wonder how much the moves we're seeing today is also centered around stimulus, whether it's what we've seen in the deal that come out of the european union or the fact that you have stimulus talks, fiscal
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talks here continuing in the u.s. as well if we don't get a large maybe trillion-dollar-plus deal by the end of july here in the u.s., how much does that affect the market >> morgan, i'm not sure it has to be by the end of july the markets has been correct in assuming the next package was coming $1 trillion if that's the white house's starting point it's hard to see it smaller than that. people are penciling in something bigger once you talk the house. one unique aspect of this entire phase is that the fiscal authorities along with the fed have just short-circuited a devastating recession to some degree, and they've bridged many households to the other shore at least right now. we don't know if that's going to continue the market hasn't had to act up in order to get that and i don't know if that's going to change i don't know if it goes deep into august if this ends up
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being a standoff the market is not positioned for that scenario, but right now, it's kind of like we'll assume that the pattern holds, that they get some deal out there, and that more trillions enter this market and i also wonder what it means longer term. people are talking about how now you've shown that you have the fiscal appetite in a crisis to cushion the economy in a way that was never done before, so maybe that's also making people a little more bold about paying up for stocks. >> oh, all right i get to thank you mike, thank you, mike santoli. >> all right >> mike was talking about ceo confidence and the lack thereof. it plays such an important as well in merger and acquisition activity, something we track fairlyclosely here at cnbc as you might imagine, m&a follow in the first half of the year driven down, especially in march
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and april, was as low as it was in 2004. june and july though, brought a bit more activity in deal-making, so of course the question becomes what does the trend signal and will there be a comeback in the second half of the year as you look at the top deals for the first half joining me is mark schaeffer, cohead of global mergers and acquisitions at citigroup. mark, back in that period early in the pandemic, senior deal makers like yourself seemingly wanted to talk to me more about restructures and debt and equity capital markets than they did deals. lately the conversation shifted, people seem busier is it going to actually bring more deals what are your expectations for the rest of the year >> well, look, at this point, it's pretty clear, after as you pointed out second quarter was the worst since 2004 we saw a nice improvement in june, and july will exceed those numbers. we're seeing return of some of the mega deals
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right now dialogue is better people are busy and at this point, it looks pretty good going forward. the big question, david, you talked a lot about it on the show with jim earlier is what happens in the equity market, and generally other markets if we get another lockdown or if we see reversal openings and what kind of economic damage do we see? that uncertainty plus the election lead to a dampening of activity and it's an interesting question i think >> yes well, you know what? you mentioned the election we don't talk about it that much but my guess is we're going to be speaking about it more in the weeks and months to come how important is it in terms of when you're advising a company on whether to do a deal at this point. anti-trust i would think also figures into that if you do get a bite in the administration >> as a general matter, the issues around sort of regulatory enforcement, whether it be anti-trust, cfius, and generally with the change of regime, which leads to more uncertainty so if you're going to announce a
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transaction in the second half that's going to close, particularly if it's got a long tail of closing, you know, into a new administration with perhaps different priorities around enforcement, that can definitely need to so lly lead n the part of corporate clients and the financial sponsors >> and yet there does seem to be more of a willingness now to engage in discussions, mark, at least you reference that why? why has that happened, what, four months into the pandemic? >> well, look, i think as a general matter, those that, we spent a lot of time in march and april shoring up balance sheets, right, and people were able to access the capital markets, they were able to borrow more money they were able to issue equity the haves are in a pretty good position to play here to the extent they feel you know, that they feel some comfort level i think that the general improvement in the equity market, i mean the fact that
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your equity -- look, this market is dominated by stock deal 60% of the transactions near to date are stock it's a relative value argument as you know. there are a number of things there is a belief if you're a ceo and managing a company on a board that you've got to look through this, and think about what you're going to do out through covid and post-covid and to a certain extent pursuing strategy in this environment is something some have said i'll stay the course, others have taken a different approach but i do think the markets being as wide open as they are, the equity market being good and at least some hope that we could see the end of this at some point, although the statistics right now don't appear to suggest that i think those that have the wherewithal are more willing to engage, certainly much more so than they were in march. >> yes mark, a question on sort of the nature of work at this point early on in the pandemic, what i was hearing from people like yourself is it's not that easy to do a deal virtually
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there is still a need for two parties to sit town face to face i've been hearing that's starting to go away, resistance to that is fading. the ana log devices deal for example was done virtually is that the case that you're seeing a willingness to go through all the steps of a deal without actually ever having a face-to-face meeting >> look, i think there is an increasing comfort with the technology and to a certain extent necessity is the mother of invention here we are obviously in a very different, you know, with offices closed, and so forth, that you got to sort of adapt. you cannot transact or you can do the best you can. certain types of transactions where you're not necessarily touring physical facilities, lend themselves to that, if you think about a fabless design shop in the semiconductor world is an example. we used to get, david with a law firm with 40 of us in a room overnight hammer out a deal.
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that doesn't happen anymore. that's generally done by exchanging of contracts and so on and so forth. parts of it are pretty straightforward. ultimately culture and being able to understand what you're buying that there is still a strong need and hopefully we'll see it again for people to be able to get together but i think we're managing through it as best we can. >> yes, you mentioned financial sponsors which is what they call themselves we call them used to be called the lbo guys but private ek with i equity they want to be activity, mark, they have a lot of money sit there. at the same time valuations are varl high. what do you see there in terms of expectations for their ability to get some deals done >> you know, look, i think one of the things we're seeing is any time you see, there's a lot of capital on the sidelines. we see this in private equity. we see it with basically the coming of age of the spac market and the fact is the high yield market improved dramatically and
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we're seeing traditional lbo financing papers again, so all of that suggests this will be a positive again, assuming the uncertainty factor doesn't, you know, or the confidence level around for example forecasts, very tough in a lot of cases to standalone forecast on a company so to a certain extent, parties are relying on synergies so they don't make you'd argue a big mistake so you don't misforecast of a panel on a standalone basis. i think there are a lot of, any time you have this capital looking for a home and a better environment this is helpful. the other thing we haven't talked about is activism, which has been sort of relatively nascent at this point, not in all cases but i think there's plenty of money and i do think we'll see an increase of that. these are some positives for the market, again, if you can get over uncertainty around the pandemic >> yes, which is not going to
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necessarily be easy. finally, you mentioned spac, mark citigroup has been active in underwriting a number of them. every day i can talk about a new spac or a spac that did a deal is that sustainable? >> look, it really looks like it is now i think you got better sponsors. you've got better alignment of the sponsors' interests. you've got better investors. you've got sources of, you know, we did multiplan for churchill and michael klein, where we did over a $2.5 billion pipe in addition to raising the capital. if you look at alternatives sell side ipos to direct investments it's here to stay it looks like and you're right, we've been fortunate to be a big part of that >> yes, we have. citigroup doing its part mark, always appreciate your updates and insights >> good to see you, david. >> good to see you, too. mark shafir, at citigroup. morgan >> all right, thanks, david. we've got a big hour of
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"squawk on the street" still ahead. at the bottom of the hour, coke ceo james quincey and ceo of philip morris. don't go anywhere with the s&p hitting its highest level since february 20th, the day after the index hit its most recent record high stay with us apps are used everywhere... except work. why is that? is it because people love filling out forms? maybe they like checking with their supervisor to see how much vacation time they have. or sending corporate their expense reports. i'll let you in on a little secret. they don't. by empowering employees to manage their own tasks, paycom frees you to focus on the business of business.
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. welcome back to "squawk on the street." it is time now for our etf spotlight. looking at the consumer staples select spdr fund ticker xlp up 20% since late march, up almost 2% today helped along by coca-cola, holding a weighting of just under 10% in that etf. that stock specifically 20% on its own in the same period, as you can see right there, it's up 3% today on the heels of earnings we'll ask coca-cola's ceo james quincey about it in a few minutes. stay with us n minutes until we . n minutes until we . oh yeah, we gotta take off. you downloaded the td ameritrade mobile app so you can quickly check the markets? yeah, actually i'm taking one last look at my dashboard before we board. excellent. and you have thinkorswim mobile- -so i can finish analyzing the risk on this position. you two are all set. have a great flight. thanks. we'll see ya.
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this is a pretty special time, though, because of the unknown, and the unknown right now is really how big is the spread of this virus, and how quickly is it going to move forward, and that's really why testing is so important, and that's, quite frankly, a very big frustration that we have >> they don't have enough tests. >> well, you know, this test, we can do a flu test in 45 to 06 minute60 minutes and have an answer for our doctors and clinicians and the patients this test right now on average takes three to five days from the time it's requested to the time the result is delivered, and that's just unacceptable >> that was our next guest, just a few weeks ago, a few months ago and the frustration of testing and how long it takes to get results now saying the
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resurgence of covid cases in the sun belt states could be headed north if the testing time doesn't speed up a factor critical to successfully reopening in this country. bray an gragnolati is president and ceo of the atlantic health system and former chairman of the american hospital association. thanks for being with us today >> thank you >> i look back on that exchange, mid march, four months ago but kind of feels like a life titime ago. just to start with the testing piece of this, we've seen cases come down in the northeast and states like new jersey but as we've seen the surge of covid in other parts of the country, particularly the sun belt and get more of these reports that are testing backlogs, how concerned are you and is atlantic already being affected by it? >> we're very concerned about the testing situation. i had said to you before, it was a problem. it currently is a problem and
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will be a problem, and that hasn't changed the average time right now here in new jersey to get a result is about five days. now, if we're fortunate at the atlantic health system, we made a lot of investments in different testing platforms, so we're able to do some of our patient activity, particularly those that are very high priority like inpatients or team members and get results within a day, but generally speaking, it's a big problem, and this is going to get in the way of reopening businesses if we don't get it right >> so you think it's going to get in the way of reopening businesses that's my next question for you is, as we are starting to see these phased reopenings in parts of the new york metro area proceed and move forward right now, and as you do start to see more people migrate around the country in general, is it inevitable are you preparing for another uptick in cases here in the
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northeast? >> you know, at our peak, when we spoke in actually april, we were seeing 900 inpatients a day in our hospital, taking care of over 11,000 covid patients today we have 20 so i am hoping that we stay at that level, but i'm realistic enough to know that the surges we're seeing across the country are problematic, for two reasons. one is, transportation, because if you recall, the migration of this virus into northern new jersey came right out of new york city ala the transit lines. we'll see that crossing borders coming in. that's why the work the governors have done to try to restrict travel here into the tri-state area and sit in quarantine for two weeks if you're coming from certain areas is important but we also know that as we open up a bit and people are interacting more, we're going to see transmissions.
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the most important thing that we can do as a partnership with our state governments is get on the outbreaks quickly, and that requires testing, which is why it's so very important >> brian, it's david faber let me come back to that, because you've mentioned it any number of times. we watched the march 12th clip of you saying it's a big problem and i just heard you now say it's a big problem, more than four months later. what gives you the confidence, given our inability to get on top of this over the last four months that we'll be able to do any better >> so there are a lot of efforts under way by a number of the testing companies to try to create more platforms, to try to create more supplies, like reagents and transfer media and things like that but the fundamental problem we have is we have a patchwork of systems that exist across this country and across the globe
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imagine in your kitchen if every device you had, had a different plug and you were trying to figure out which outlet you had to plug that appliance into. that's the situation we have with testing right now one of the most important things that we can do is to begin to consolidate the supply chain in a way that we can have an adequate element of the different supplies that are required around the journey here, and that get those in place. and i think that's a role that government can play, beginning to put some standards on this, but to date, we haven't seen that activity, so short of creating our own supplies, short of working deliberately with the manufacturers, which is what we're doing, we're going to continue to suffer from this, and i think that that is our achilles tendon in this country. >> all right, but there it is.
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so i mean, the federal government has said states, you're in charge you seem to be saying we need a coordinated response, but we're not going to get one >> right, which is why the governors are so important in this matter in trying to push on that we've been very fortunate here in the state of new jersey to have a governor that has done a couple of things that have really helped us thread this needle and keep the virus where we are right now the first thing he did was accept it for science, and followed the rules of science moving forward the second thing that he did is work with the governors in contiguous states. those types of activities are going to help this and at the same time working collaboratively on supply chain areas, and working collaboratively with those manufacturers to continue to move this issue forward. so the states really matter here, in the absence of true
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federal plan through testing >> given the fact that you oversee a number of hospitals and certainly right now we're talking about lessons learned or lessones that still need to be learned when it comes to tests and it comes to the supply chain side of things, i'm curious how things have changed and what that process looks like for folks that are testing positive for coronavirus, maybe getting admitted to the hospital certainly we unfortunately in some parts of the country are seeing the death rate tick up but not nearly to the same extent as say the caseload, and so i'm wondering with all of the medical breakthroughs and tests and everything that are under way right now how that hospitalization process has changed, and what that means in terms of if we do, heaven forbid, see an uptick in cases in new jersey, for example, what that will mean in terms of how your hospitals are handling it >> yes, we've seen enormous progress in clinical innovation over the past, and you got to
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remember, five months, and a lot of it was led out of the new york/new jersey area, and as i round in our hospitals today, i ask that question. what's clinically. there's important learnings that occurred one is that we immediately would try to put patients on vents who are in the icu that were really needing assistance in breathing, and we realized that while that worked in many of the diseases and surgeries and things that we do, in this particular instance, it wasn't working as well. pronating patients worked a lot, in other words flipping them on their bellies but also using high concentration of oxygen through cpap and bipap machines which people know about for sleep apnea, that really had great results and because of
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that, the sequellae associated with long time ventilator use has really changed and that's driven down dramatically both the mortality, but also the length of stay in our icus that was a single breakthrough that i think was really important and we learned that early on in the virus process, and that's why you see those rates decline. the second thing is, we learned how to treat the symptoms of the virus during different periods that patients were experiencing it, and things like remdesivir as an example. initially we were using it once patients were on ventilators now we're using it a little earlier in the process, and that has had some very positive results. so we continue to learn. we continue to share those ideas, and that really has made a big, big difference. >> brian gragnolati, atlantic health systems ceo, thank you so much for joining us today.
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>> thank you dow is coming off of the highs and as you can see the nasdaq is slightly red let's get a news update with our sue herera >> hello, carl good morning, everyone here is what's happening at this hour european leaders have agreed to create an $860 billion pandemic recovery plan. a little more than half will be outright grants with the rest in the form of loans. recipients of those funds however will have to get approval for their spending plans from other eu nations. astronauts at the international space station are finishing up their work to replace batteries and prepare the station for a new airlock. today's spacewalk is expected to be the last of 12 to upgrade the station's power system back here on earth, apple says it will become carbon neutral across its supply chain and the manufacturing of its products within ten years. the tech giant says its corporate operations are already carbon neutral and apple plans to reduce carbon emissions by 75% and develop carbon removal
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processes to eliminate the rest. you are up to date i will see you back here in an hour carl, back to you. >> all right, sue, thank you very much. take a look at shares of walmart this morning, the company just announcing moments ago it's unveiling another round of bonuses to its associates bringing the total to more than $1 billion so far this year stocks not too far from an all-time high. we're back in a moment
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coke one of the stories of the morning post earnings. sara eisen is back with james quincey. >> good morning, carl and we are seeing shares of coca-cola rising this morning after the company reported a 28% decline in sales james quincey, good to have you here thanks for joining us first on cnbc, good morning >> good morning, good morning.
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>> so clearly the stock is up. sounds like you're cautiously optimistic that we've seen the worst of it in terms of the sales decline and the loss of business, given the shutdowns. are you confident in telling investors that >> it's certainly our expectation that q2 will have been the worst quarter in this crisis i think going forward there's a lot of uncertainty as to the exact nature of the recovery and the direction, but we feel pretty good about saying that q2 was the bottom, and we'll see recovery from here forward although not necessarily a straight line. >> wanted to ask you what you're seeing particularly now in the u.s., in those surge states like florida and texas, and georgia and arizona, where the states have not fully reclosed, it's piecemeal between restaurants and bars what is the consumer doing in
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those places right now >> the predominant nent in those states as well as globally is the degree of actual lockdown and that has been the biggest effect in q2 and what we see going forward into q3. we certainly see when comprehensive lockdowns have been put in place, obviously the business has been affected and when there are resurgences of the virus, some of the other states of the u.s., other parts of the world, too, the lockdowns have been less stringent, more targeted or less stringent, and the business hasn't been affected and of course you get even when they are open there is a segment of the population of people still wary of going out, so yes, business is still struggling to recover to pre-covid levels neap those places where there's no real
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transmission of the virus and the large majority of locations are allowed to open, yet there is still, we're still not quite back to those levels, even where it's been most under control >> how do you plan for this sort of environment, where we still don't have a vaccine are you thinking we could get anything resembling normal levels of activity in bars and restaurants and movie theaters and stadiums everywhere that sells coca-cola beverages until that point that we have a vaccine? >> i think it's going to be difficult to return to pre-covid level of sale particularly in outlets where people need to be. ultimately we are social creatures as humans. we want to go out. we want to see people. we want to experience it, so there's a lot of pent up pressure and interest in being able to go back to that, but it's going to be difficult between the health restrictions, whether they be lockdown or any
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other form of restriction and a certain segment of the population are more nervous than other segments it's hard to imagine we'll go back to normal levels of business until there is a vaccine or some comprehensive solution to the virus. >> so half of your business is away from home the other half is at home. what sort of trends are you seeing there after the initial stock-ups to the grocery store that we saw in the onset of this pandemic >> yes, clearly the away from home business was heavily affected but we've pivoted and focussed in and as a business what we said to ourselves is look, if we focus in on serving consumers and being super robust on the supply chain for those customers that are open and aim at winning share where the world is, and where the market is open, then we'll do welcoming out of that and yes, we saw an initial large burst of activity of stock-up but then a much more
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normalized level of business going forward. we saw changes in the categories, everyone, a lot of people are more at home than they used to be so we saw the kind of resurgence of breakfast and orange juice and other categories but fundamentally, the at-home channels, those type of channels post the stock-up the level of business in aggregate essentially normalized so we're looking for the recovery to come in the away from home and that's where we'll focus on helping those businesses reopen so they can get back to serving their consumers. >> and i know you and i were talking a little bit earlier how this crisis has led you to take a look at a fresh look at the portfolio, and perhaps make some changes there, the zombie scus you call it. what sort of brands are on the chopping block
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>> the sorts of brands we need to focus on it was something that was building up anyway. when sales were good pre-covid and we've been pro cussed on a lot of innovation, a lot of experimentation. of course it's not surprising that not everything works and you have brands that aren't growing that don't have, that aren't generating the sorts of sales of consumer engagement that give you the confidence they have a future role in the stable of leader brands with scale and profitability. so what we're going to do is take the opportunity to accelerate the implementation what have we really need to do okay, this brand, do we have confidence that it can make it to the next stage of growth and if not, let's bring forward the decision to retire it, and those brands probably will be particularly concentrated on brands that haven't managed to expand from one country so they are kind of not regional or global brands, and that they had
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declining sales in the last couple of years and not gaining share. they're too small, they're not working for us we need to take those resources, take that energy of innovation and focus it on those things that are most in tune with what consumers want and that help reset the platform for growth so we can really emerge stronger from this crisis >> you've also pulled back on marketing spend, as so many consumer companies have but notably taken a pause on social media spending amid questions about hate speech and how these companies have responded would you have pulled back anyway on some of the social spending and how should we be thinking about whether and when you're looking to add that back? >> yes, two different dynamics here the marketing spend of dynamic was the realization that in the second quarter, we need to focus on the safety of our people, on helping them ensure continuity of supply to our customers, and
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for our community actions in supporting real crisis situations, and in that context, the market spend was not really appropriate and certainly was not going to have any substantive return on investment so we pull back a lot of the marketing spend in the second quarter and looking forward into q3, q4 and 2021, clearly we'll be intending to come back and spend that, and really drive the momentum of our brands our actions on social media didn didn't obey the first tdynamic. it was an intersection of the public trends on social media, on the platforms we didn't feel were a great fit with what we were looking for that there have been ongoing issues from a value point of view, from an advertiser's point of view and to be perfectly frank, also i'm not sure our policies as much like we have
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policies for many other aspects of our supply chain i'm not sure we were fully up to date on where we should have been so we decided let's take a pause let's really look at what's happening in the social media world to make sure we have a clear view of what's going on and what is it we really want and based on that, we will come back and spend or not spend with different platforms, and if we choose not to spend for some reason, of course we'll be engaged and say look, here is what would work for us and the things that don't work for us. >> well, keep us posted on that. obviously a huge story especially around facebook finally, james, you didn't provide guidance so i'm trying to get a clear picture of what you're expecting, given what you know and what you don't know at this point clearly the reopening is going to be key. what about the economy, also into recession what are you planning there and what are you seeing from consumers in terms of how they're thinking about money, with double-digit unemployment in this country and in many
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parts of the world >> yes i mean obviously we've got a perspective that we're expecting to see sequential improvement in the business, as we come back to working with customers, the reopenings and we start investing. we're very clear as well we don't think this is going to be a straight line and it could even go backwards because there are a set of unknowns, one set around the dynamic of the virus, its evolution, the evolution of the vaccines, and treatment options, but also the consequence, the economic consequence of the shutdown, obviously there's a large amount of unemployment in the u.s., and we have yet to see what will happen when some of that government support through the unemployment funding drops off in the coming months, but similarly in europe, where there was a lot of government support to furloughs to keep workers plead. everyone is hoping that the reopening intersects with the tapering off of these supports so the maximum number of jobs
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are preserved but clearly there's a lot of nervousness among consumers exactly how that's going to play out and of course that affects prospects for business, so we're very conscious that there's a number of variables out there, and very important variables that is very hard to predict exactly how they'll turn out so we have, it's going to get better perspective, but we are going to maintain flexibility and agility so we can respond and do the right thing in the circumstances as we face them. >> well we certainly appreciate you joining us to talk through it james quincey, thank you >> thank you sara, great to see you, great stuff and shares of coca-cola are up 3%, helping the dow move higher by 212 points right now next hour on "squawk alley" wolfgang puck, world famous chef, and why a quarter, 25% of
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small restaurants may never reopen due to the coronavirus. he's going to explain that at 11:00 eastern. don't go anywhere. we're back in a moment experience the joy of a bigger world in a highly-connected lexus vehicle at the golden opportunity sales event. lease the 2020 es 350 for $359 a month for 36 months. experience amazing at your lexus dealer.
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jim bianco top market researcher says a vaccine may not be in for the fresh market highs. more "squawk on the street" coming up.
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two more earnings names, shares of ibm are hiver and lockheed martin after both posted beats on the top and bottom lines and lockheed also boosted its revenue eps and free cash flow guidance for the full year setting a more upbeat sentiment for defense earnings since it was the first of the major names to start reporting the reason aerospace and defense stocks are jumping today as for big blue, cloud software sales and mainframe revenue drove its results. can did not provide guidance as you can see the stocks are trading higher, and ibm is helping propel theowigr wellheas we're pack in a moment just for healthcare workers fighting covid-19. apply today at ♪
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some headlines on tapestry may have you raising some eyebrows, we have more on that the company declined to detail any more than that. cnbc lauren thomas learned from a source they brought an outside council to look into concerned that had been raised by one woman regarding his personal conduct. the wall street journal first reported zeitlin pretended to be a photographer to leuer a woman into a relationship. according to cnbc sources the board accepted tapestry traded higher on the news of his resignation. carl >> thank you for that. a beat on the top and the bottom, powering shares of phillip morris this morning and a full-year outlook coming back
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and exceeding expectations we'll talk to the ceo about at jt montth
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a big beat on earnings revenue beating the street as well the tobacco producer also producing some guidance. andre collins joins us this morning on a cnbc earnings exclusive. andre, welcome back. >> thank you for having me, good morning. >> we want to talk about the quarter but in an era in which the market is starved for corporate guidance it seems like the return of guidance from you guys is a big piece of news. what gave you the confidence to issue any kind of outlook?
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>> well, we all understand we have been through unprecedented times. especially in the last quarter and i'm very pleased with the results coming back better than what we initially communicated and expected i'm also very pleased that a tobacco product has performed better than weer anticipated and has continued growing despite the fact that we have all of our stores closed essentially. and many of our sales force is out of the ground. and the consumer conversion from smoking into adecisional products clearly there is uncertainly remaining for the year, but i think we're starting to have better visibility, still strong
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out there, i would say, but we tried to precisely, to your point, if to the market our best estimate today based on a number of assumptions including an assumption that they may close down in various countries, but we're not going to face another major lock down as we did in the months of april and may. so we think that we will end up between 2% and 5% shared growth that given the circumstances i think is a very good performance and testimony to the resilience of our products and most importantly the flagship product that is now growing everywhere in the country >> is there a sense that the trajectory that was well under way prior to covid was altered
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up or down, accelerating or deaccelerating because of the pan determine snick. >> during the pandemic clearly consumer acquisition, new people was more difficult most oaf our assets, the physical assets, were shut down and it took forces off of the ground we shifted very rapidly to remotech and contact and compared to our initial estimate of the year, we only had 35% less which i think is enormous in the confinement period and it outlines that there is strong consumer interest so that is what we need to
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retain, clearly we're lower than what we thought at the beginning of the year. and better than i would have personally have anticipated. and that is going very well for the remaining of the year and the years to come. given objectives to our shareholders that next year we think we can reach 90 to 100 billion units on this product. and i think everything we're seeing makes us feel very confident. and an important item in the quarter is that the usfda authorized the market under the modified tobacco product avenue, and i think that this is important news for the consumers in the united states first of all. because now the decision of the fda, of reduced exposure to
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toxic substances, in a nutshell, can be communicated to the u.s. smokers. and that will help their decision to switch out of cigarettes nap is good news for the u.s. and the rest of the world, i would say the whole scientific review of the fda, ipers is a very very different product. so i hope that governments around the world will follow the example of the fda introducing corporate regulations and accelerate this re john. >> an dra, congratulations on the quarter and your confidence, and no more huge shut down social security something that we want all to see some fate in. >> thank you, everyone >> thank you very much
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>> yes, thank you. good tuesday morning, everybody. welcome to squawk alley. now new headlines from leader mcconnell on what the republicans in the senate are looking for in terms of covid 5 stimlouse. >> that's right the senate majority leader laid out a outline of what republicans inextend to propose on his steech this morning. he talked about $105 billion for education that would be separate from additional childcare incentives he says he supports another round of direct payments and a targeted round of ppe. he wants to see incentives to hire and retain workers as well as additional money for testing. just as important as what he talked about is what he did not mention. that


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