tv Squawk on the Street CNBC May 26, 2022 9:00am-11:00am EDT
at lower multiples than they otherwise should it's fine. stock is only down 60% for the year i hoped it was up. >> appreciate it, man. thank you. >> thanks again. mike and kelly, thanks for being here today kelly, see you at 1:00 p.m. today. mike, see you at 3:00 p.m. in the afternoon. >> thanks for having us. >> thank you we'll see everybody else back here tomorrow too. right now it's time for "squawk on the street. >> good thursday morning welcome to the treat street. i'm carl quintanilla with david faber and leslie picker. cramer has the morning off stocks remain on track finally for a winning week retail puts a few more gainers on the board, snowflake and nvidia raising questions about growth in tech broadcom vmware one of the biggest m&a deals of the year. inflation, supply chain, and the state of the consumer. macy is leading the way. >> and broadcom makes it
official, 60-plus billion-dollar deal to buy vmware we'll dig into the details >> apple under pressure, setting to produce fewer iphones this year than expected the markets looking to extend yesterday's gains interesting action the last few days we mentioned the better mix of retailers. we've had some blowups the last few days but a few more winners today. s&p trading above the midday point of the session, closing above that for four straight days, the longest streak in a few months >> like the market was saying, yeah, i know to you think i'm in this bear market territory, but i'm going to show you wrong this week like my toddler when i tell him you're acting like a bear and he becomes all sweet and kind and cuddly it tries to defy what you think it will be but the curve is steepening rns yields tick down, lowest levels since mid-april. definitely some positive sentiment, at least it feels
that way going into the weekend. you have some seasonality there, but good news. we'll take it. >> sure. we will. listen, we mentioned at the top, carl did snowflake and nvidia. we'll get into that but raising those same questions that may have been raised by snap, maybe less so, be on snowflake's call talking about the consumer facing cloud customers, still growing, but impacted by economic headwinds, their consumption will be impacted, snowflake, we're talking about, consumption patterns that may fluctuate quarter to quarter, raising that question of overall demand and whether things are slowing. >> and supply chain issues, as well, which seems to be particular difficult for tech. retail this morning, though, seems to be weathering supply chain challenges, saying they're able to control and manage them and those stocks have done much better than analysts were
expecting. >> the way it's playing out in retail is the low end apparently working as some kconsumers looking to trade down. dollar tree and dollar general are examples of that nordstrom, constructive comments from chanel this week, the middle ground of the walmarts and targets and kohl's, have where there have been some challenges dollar tree guides in line dollar general boosts their guide. and williams-sonoma is the standout today, comps 9.5. >> a banker pointed out there's this yolo idea of the summer and i think macy's is benefitting from that. one of the bigger benefits to their earnings is higher-margin items, people buying dresses to to g back to weddings. that's part of the reopening trade we've been talking about for a year and a half at this
point, still benefiting companies like macy's that sell into some of these events that people are excited to go out to do again >> gennette says customers are ready to shop. we've been watching numbers but up 17, looks pretty good relative to some of the 40% numbers we've gotten from specialty. >> noticeable shift back to a o case-based apparel and in-store shopping, the strength of sale of luxury goods. when they talk about the rest of the year remaining focused on their customers. that's smart usually you want to stay focused on your customers, leslie. if you're benioff, you're focused on employees made that clear yesterday. customers are important. we'll be hearing from gennette later this morning the stock is moving higher this
morning. 10:30, jeff will join us >> it is amazing how different the tape looks this week than last week. you look at kind of the idiosyncratic challenges that certain retailers face, obviously, carl, you pointed out walmart, target, kohl's kind of in a different category, whereas the barbell of the higher income spender which historically probably wouldn't have put macy's in that category, although they have potentially higher ticket items than walmart and target, benefitting in this current environment as well as the dollars retailers of the world, dollar tree, dollar general. >> adam from morgan stanley had an eye opening report yesterday arguing the bottom quintile of the income spectrum in this country now has less excess cash than they did going into the pandemic he thinks that's why you're seeing an increase in deep subprime auto dlelinquencidelin. he thinks that could make
financial decisions tougher. 90% of cars are financed through an instrument. he thinks that creates a buyer strike condition we'll keep an eye on that, whether those at the bottom end are having to make tough choices with what's happened in energy and food >> that's the discretionary part of it where ultimately higher gas price, people have to make decisions. you know, you've seen that with auto sales, seen that in the housing market i don't know how correlated that is to energy prices specifically, but rates going up has left a lot of buyers on the sidelines. whether that's an inflection point that we'll see ultimately play out in the data remains to be seen. but it's certainly data points worth watching >> guy, wanted to get to the big deal we've been talking about it for a few days and told you many of the details, others reporting them as well, roughly $140, it will be a bit less than that when you see broadcom shares
trade, but again they've had three sessions to react to the possibility of buying vmware to 50/50 split cash and stock. it's an election we'll get deeper into that and it was announced a few hours ago, of course it's one of the biggest deals we've seen rivals, microsoft's activision deal in terms of the size, call it in the $60 billion range. there's the details, though. you can choose, $142.50 in cash or 0.2520 broadcom shares. eventually it's prorata a 50/50 split. michael dell owns 50% of this, so dell may want more stock for being tax efficient. that's something to keep an eye on here and maybe that's one reason there is the election included because he was the main negotiator you have that 40-day go-shop provision. don't usually see that in a strategic deal
financing is there they're talking about $8.5 billion in ebitda three years post close being added by this interesting, 50/50 split why do you get a go-shop this deal came together in a few weeks. they approached michael dell, would you be interested and they took it from there dell owns some 40%, silver lake owns the company, so you have to deal with that a break fee around 1.2%, within the next 40 days until july 5th, you were able to get somebody else coming in over the top, seems unlikely, but we'll see. and 2.5% other way let's talk about antitrust as well because, leslie, that's always a question with the deals out there these days if you go by traditional antitrust thinking, you know, this deal should get done. that doesn't mean that's where the antitrust regulators are
these days conventional theory may say one thing. probably going into at least a year china approval is needed here. that becomes given a state of affairs between our two countries you never know, although they rely on a lot of the product being made by this company as well. then last time people will point to qualcomm and the bid from qualcomm i followed it closely. it died. this is a u.s. company at that point it was based in singapore. it's still, though, perhaps more of a question mark than it otherwise would be and so we'll see but, man, so many of these deal, we'll be talking about them a year from now and they won't be closed >> you said it came together in a few weeks. >> yes the regulatory process will take quite a bit longer but 40% premium here it's half of the combined company will focus on soft warp. >> that's great point because not many years ago, this was largely a hardware company now you're talking about a 50/50
split in terms of revenues for this company, hardware and software not hard to imagine years from now somebody saying you should split the company up >> we've seen this movie before. >> we have >> a company combined and split up, acquired by emc and -- >> they'll call it the software business now vmware because they feel like it has good brand and they feel they can offer a broad sweet of products to the enterprise including most importantly what vmware has in terms of hyper cloud and virtualization, something they sort of pioneered. again, it will take quite a while. broad com has lived with and on acquisitions they get bigger and bigger you could call it a roll-up, but hock tan is applauded for his ability to cut costs but not necessarily hurt the growth rate of the acquired companies. they don't cut out software engineers but do a lot around
sg&a we'll see if they get there. $8.5 billion is a large number in terms of the initial ebitda >> i haven't seen anything about synergies in the release, cost-cutting to your point, adding to that ebitda number, i think it was three years out, is a pretty significant figure strategically they're bullish on the space overall or to your point to sg&a transactions >> going to be issuing a stock they had $10 billion through a new buyback, $3 billion on the existing buyback, allowing them to buy as much as $13 billion in shares back by the end of next year that will offset some of the shares being issued. but, again, as you say, they are talking about it being fairly accretive or quite accretive we'll see. michael ell, i mean, it will b interesting to see what his election is here, hard to imagine somebody comes in over the top. you never know but that 40-day go-shop is an interesting addition
>> that was my next question, this idea that michael dell owns 40% of vmware and silver lake owns an additional l 10% does that basically get you over the hurdle for vmware shareholder approval >> yes as long as the board is in favor, they will be in favor it gives them the opportunity to say, given how quickly we came to a deal, is there somebody we missed or not out there? there were bilateral talks >> few people can spend the money for a $61 billion takeover >> it is true. >> it's clear the financing is there, which is a supportive sign for the financing markets >> true too. good point >> when we come back, deutsch's chief global strategist on why he thinks the market is pricing an imminent recession. we'll get to nvidia and snow, airline guidance, apple report on production, revised gdp and bitcoin below 29
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did you stick with that target for too long >> i would say, you know, we still see in our baseline view plenty of upside, just given, you know, sort of where we are $52.50 would be a little high if this year but if we don't have a rece recession, plenty of upside for the year and we'd get there sometime next year >> sometime next year. in the event we do slide into a recession, youwrite we see the market sell-off going well beyond average given initial overvaluation. do i have this right 35% to 40% of the historical range? we take you back to 3k >> that's exactly right, carl. if you think about, you know, typical selloffs during recessions, what we basically have seen is that the extent of the selloff in a recession depends, you know, first and foremost of course on how severe the recession is going to be, so
if you think about, you know, decline in earnings, which would be about 20%, 21%, but what also provides the extent of the sell-off during a recession is really the extent of overvaluation and you combine the two things together and you're talking about, you know, well above average sell-off. so if you think about, you know, where we were at the recent low basically down about 18%, 18% compares with sort of, you know, an average or median decline during a recession of 24%. so i'd say, you know, three-quarters of the way there, but it looks pretty binary, you know, beyond that, and i don't think the matter is settled whether we're going into a recession or not i think it takes a couple of months, but, yes, our baseline view is clearly no recession, and i would say there's not any signs yet.
there's a number of reasons to get there, but we are really not there yet. >> we're not there yet initially it spooked the market about the potential for a recession, at least in the next 12 to 18 months at that point in time do you see no recession ever or just no imminent recession i just wanted to clarify that. >> no imminent recession our baseline view is that we would go into a recession late in 2023. it's just way too early right now. >> makes sense i'm curious what you make of this week's market action because we've seen a nice reversal for the broader indexes. of course it's short lived, only a week, we don't know what to make of it is the market catching its breath, seasonality to it, green shoots in the data and earnings, or do you think this is kind of the indications that we have
already reached a bottom and could go higher from here? >> so i would say, you know, this week, coming into this week, we expected the week to be basically supportive of the market, basically on the technical front, basically options expiration that's generally tended to be positive we have basically month end because of the long weekend coming up, month-end rebalancing into equities happening a little earlier, so that's supportive. on the fundamental side, still a bit early but what i would say is, you know, the read from retail earnings appears to be the consumer is not dead or dying, it's just sort of rotating, trying to figure out still exactly how the consumer rotating, but it seems to be a rotation story rather than a completely negative story. so, you know, we've added both technicals and fundamentals, you know, support basically, the market this week, not entirely,
you know, the tech earnings concerns still basically there but i would argue, you know, more like a definitive bottom. i mean, like i said, coming into this week, we expected, you know, the market to be pretty well supported >> yeah. interesting to your point about the consumer, that consumer spending was actually revised higher in the gdp number today even though the headline came down a touch >> yes >> i want to ask you about inflation expectations a lot riding on pce tomorrow why five-year break evens are completely untethered from oil, let's say. why do you think that is which one has to break >> which one has to break? i'm sorry, carl. i didn't follow the question >> between inflation expectations and what energy is telling us >> yeah. i would say broader, bigger picture, yes, you know, there's
been strong correlation historically between break even inflation rates and oil. but if you look at oil prices, you know, we've sort of been going sideways in a rather wide range. so, you know, there's no -- i mean, you wouldn't expect such volatile moves in oil prices to show up in break-even rates over the next ten years so i would say the level is high and, you know, the volatility is high so, you know, it is going to basically make the link much more tenuous, yeah >> obviously, dealing with a lot of curveballs, geopolitically around the world, and that causes models to be kind of squirrely. binky, appreciate it expanding on that note from a couple days ago. good to see you. binky chadha joining us. still to come, macy's a retail bright spot this morning, surging on better-than-expected
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demand is really high and needs come opponents and connectors and cables, just -- it's a complicated system. the network. there are many physical components the supply chain has been problematic. our supply has been increasing we're expecting it to increase in q2 and q3 and q4. >> talking about supply chain that stuff is still difficult to
get. >> analysts have reiterated it's not necessarily a demand issue but geopolitical forces were at play here. it was russia where they lost out on sales it was the covid shutdowns in china. it was kind of these maybe unforeseen aspects of their global supply chain that really led to these muted forecasts >> it assumes half a billion related to russia and the covid lockdowns. it will affect them by $400 million and the absence of sales to russia having another $100 impact that's how you get to half a bill overall, china being the key one. poor people who are locked in are gaining a lot. it's about new sales >> actually getting the chips
over there interestingly, according to goldman, nvidia has the highest absolute short interest among hedge fund managers, about $800 billion in short interest. [ bell ] >> the opening bell. big board a celebration of getting to the nasdaq, i-80. msg recovery recovering payments for medicare and medicaid just 11 points from s&p 4k, which some technicians have said you need to see to confirm that the overall downtrend is no longer intact. watch apple today. bloomberg's got a report that says they are looking -- telling suppliers they're looking to keep iphone production flat for the year speaking of some of the troubles in china, which is also interesting, david, because there's been more reporting that at least the premier league is privately telling people this
lockdown is not working, web not ask these companies to remain locked down. that's feeding speculation that there is some kind of gridlock or rift among the party elite in china. >> that's fascinating. always so hard to sort of get a real sense as to what's going on there, although our eunice yoon does a great job of that she's attached so much to his credibility for the lockdowns many believe he can't hold back in a sense because it would dent his overall credibility. we know the impact it's having on companies we talked about it with nvidia and heard from chuck robbins last week at cisco, a strong indicator of the broader issues in terms of getting product out of china or the lack thereof for apple as well in terms of sales. we've talked a lot about nobody bought a car in the entire month. >> in shanghai >> in shanghai
tesla's shanghai factory is back up and running but we still don't have the full impact here. >> secretary blinken giving that speech on u.s./china roeelations and how things shape up. a long-awaited speech that was rescheduled due to covid but an important indicator to watch >> there's tesla speaking of china and execution risk jeffries cuts. they keep the buy but cite what they're calling a pileup of negative news. a lot of execution they sasolly depends on musk. speaking of musk, still working through this amended 13d >> more things to tell you about in terms of elon musk and his pending purchase of twitter, but it also relates to tesla because he may be trying to take a little bit of pressure off tesla shares because there's no longer
a margin loan. got to pay for that, right why not get rid of it if he can in terms of what it's costing him interest-wise or would cost him. there's a look at twitter shares they're up generally seen as positive in terms of he's still doing things that indicate he's going to buy the company. but the news was there's no longer a more gin loan he raised the almost $7 billion in equity commitments previously that was going towards reducing the size of the margin loan. now he says, you know what, i'm getting rid of it all together after giving effect to that, margin loan commitment parties, $6.25 billion in margin loan, we're not doing that, i'll provide the same amount in equity, which raises the question, okay, is that just coming out of your pocket? future sales of tesla? or is there ability to raise more equity? what i've been hearing is he
could raise more equity if he wanted to. initially the thought was he would stop the roughly $7 billion. you have ellison in there for as much as a billion, fidelity, jack dorsey still may roll his stake, stepping off the board, as was expected. but leslie, there are a lot of people who want to invest with elon musk. >> a lot >> you can't question why. i mean, the man figures out a way to make a lot of money and for his shareholders as well if you can deepen the ties to him, maybe that helps you as well, with allocations once spacex goes public who knows? but there are any number of people i've heard who would want to invest. i heard he wasn't going to allow for special-purpose vehicles, get a group of high net worth individuals together in an spv that was something is that the mda did not allow for is if you signed on. we'll see if he raises more equity >> what i want to ne is given what twitter shares have done recently and how far away they
are from the price which he's willing to pay, his equity would be contributed at, how many other investors are willing to kind of contribute at that price. jack dorsey and others rolling over, that's price insensitive, but how many keep can you get to pay $52.25 a share given that twitter is trading at $38.88, and then does he buy in the open market are there restrictions there >> there are and that's a great question i've been exploring that he signed an nda, but he's violating it all the time. it would put him in possession of material nonpublic information, which would mean he cannot buy in the open market. your question is a good one. why wouldn't he go about buying another $30 million at $38, bring his cost down 20%, and that takes care of a lot of his equity commitment and he's doing it at a steep discount of course the discount we're seeing to what we would typically imagine the spread might be is because of him
and he doesn't stop. last night, you know, twit ter reached a settlement with regulators, 150 million buck, i want to make sure that's right, about 150 million after federal law enforcement officials accused them of improperly collecting and selling user data to advertisers and then musk tweets, if twitter was not truthful here, what else is not true? this is very concerning news the only thing is this has been disclosed in their annual report since 2019 so, you know, he just keeps doing this >> the bots were disclosed. >> yeah. everything has been discloesed. >> everything. >> he can question the bots and have a genuine question as to what the real number is and if it's impacting revenue, but it's been disclosed there's the tweet. since 2019, elon, it's been from
there and you knew it, but you're using an opportunity to sow discontent and discord i don't know what he's up to very people seem to but he's way smarter than i am. >> when you talk about the equity commitment, the pressure tesla shares have been under as a result of the margin loan and the fact people were worried it was getting close to that level with he could be facing a margin call i think it was about $100 per share above that level and has gone down so much this year as a result of the interconnectivity between these two deals and how he's pledging his collateral here so if he is going to raise more equity, you have to wonder whether that would come from tesla. shares seem to be acting mutually today >> we expect it might be seen as a positive to and takes pressure off, but to your point, if he's got another six-plus billion he's got to raise -- >> and he said he was done selling. >> i know. >> but he's said things --
>> i had a tendency to say things in the past but did the opposite >> people might argue not always man of his word or at least changes his mind with a lot of frequency. i think the bernstein margin call would be in the high 3s >> i don't know the details of the loan commitment. it doesn't matter anymore. it's gone away don't forget you have the $12.5 billion, $13 billion from morgan stanley. discussed that yesterday that remains twit secure, a secured bridge, unsecured bridge, a lot of different components there that is priced fairly high. it's on the proxy. live ware plus 475, then 675 with 50 basis point bumps sort of flex there each month if they don't bridge it out. then the unsecured bridge as well so that's his main financing the rest is up to him.
>> and other who is potentially want to invest alongside elon musk, which, as you point out, there are plenty of people that are clamoring to invest. i they lot more than perhaps the market may have expected at the outset of this >> yeah. >> guys, we're above 4k for the first time in several sessions dow is up almost 350 here, almost every sector is red travel and leisure with retail definitely leading the charge today. two airlines either saying they're raising guidance in the case of southwest, raising q2 revenue guidance as bookings accelerate top line 12 to 15, prior was 8 to 12. if you take out fuel, cost per available seat mile stays unchanged, which some would take as a positive. jetblue a pretty good guide on booking strength the question is do you want to see that these fares are sticking in a period where so much of the market is pinning their hopes on easing inflation?
and we know air fares have been a huge component to inflation cpi. >> if you're buying those nice outfits from macy's you'll have to get on an airplane and fly to the locations you purchased the outfit for it's interesting where you're seeing price sensitivity and not. car, you're seeing that cool off a little bit, housing seeing that cool off. the middle-tier retail, you're seeing that cool off a little bit. higher end, things that are expensive, like air fares, continue to churn. if you booked flights recently, you know it is -- there are quite a few zeros in those tickets. >> yep i wanted to hit alibaba. there was a time we would have gone right to it it's up and up nicely, 8.4%. this is a stock still down 25% for the year even with the rise today, not to mention last year, which was horrible for it, so many different headwinds, the covid lockdowns being the latest, changes in terms of the
regulation of technology companies with a focus in part on the company's founder, jack ma along the way but it was a better quarter than might have been expected, at least when it comes to ebitda and ebita. a couple notes i'm looking at here from analyst who is follow the company. cloud revenue, up 12% year over ear, unequivocally down 30% year over year but up from -- higher, i should say, than what had been anticipated. and we've talked a lot about the shellacking these shares have taken, a $240 billion market value not long ago, they had a $700 billion market value. and that has impacted softbank, which we've also talked about. they own 25% of alibaba roughly, so softbank in part moves along with baba so you can expect those shares seeing a bump as well carl, given the concerns in
china, perhaps a bit better than anticipated for company. certainly no worse than underlying expectations. overall gmv, by the way, declined at what is a low single-digit rate as you look at softbank shares as well. >> we should probably briefly touch on snowflake >> yes >> mostly the qualitative xhn tear about companies and clients consuming less than the company anticipated. sluman argues a lot of that is unique to the nature of the decline itself, but this is an all-time low on snow i think we'll talk to him tomorrow ipo price $120, on day one, went to $253, so another broken ipo >> and a name jim has talked about a great deal, some affection for mr. sluman speculation in the markets what is it a year and a half ago
at this point? >> yeah. >> specifically, some of our large customer where is we saw decline, we've taken down their forecasts, said snowflake's executives on the call we have others offsetting partially some of that he said in april they saw weakness and total revenue by customer, but the last two weeks of march or may, he said also have been very strong. the market doesn't like it at all. >> not at all. it will be interesting to see the extrapolation and what that says about the enterprise customer themselves if they're reining in that spending >> s&p up a couple hundred points in a week bob pisani. >> we closed at 3,900 on the s&p, carl, and just crossed 4,000 at the open. between today and yesterday,
growth isn't quite as strong as yesterday. tech generally opened weaker, although it strengthened as we've gone on in the last 12 or 13 minutes you see consumer discretionary, the weakest sector in the s&p this year, rebounding. industrials and energy the difference from yesterday is those megacap tech stocks. we had nvidia with i guess you would call it a muted sales outlook. it oemed to the downside still down but better than it was at the open. apple still down, microsoft, down at the open and doing better so coming off the lows. markets a lot more stable in the last few days. largely i think this is on hopes that the fed policy may be moderating in the second half of the year that's still a hope. there are definitely signs the economy is slowing and people are messaging me about the core data on friday. it's expected to come in at 4.9% it was 5.3% in february, so they're trying to create this their they've we've had peak
inflation. if they can put together enough data point, they could make a strong argument. i don't think the fed will change its position on a single data point, but at least there's an attempt to try to say we're near peak inflation. heaven knows if that will actually happen. meantime, there are a lot of signs that things are improving. true car, a car company, new and used cars, but they were moderating, may sales down 17% year over year they talked about a demand adjustment going on, the average used prices down 1.6% in may versus april this supports the narrative peak inflation we're seeing right now. did you see these aai numbers here bearish, 53% these numbers are twice the historic norm. only 19% bullish these are pretty bad numbers and haven't come off the floor in a long time. gary gensler spoke at the ici conferens morning and
yesterday the sec did float new proposals to increase disclosure for esg funds and to broaden the rules on naming funds to prevent these desubpoena tich titles he's concerned a lot of these are fuzzy or indistinct. he wants them to tighten up the rules and say clearly what they're about. he was asked about this very aggressive rules ada, which he's generated and it's generated a lot of pushback from people in the business community he said this was all part of an effort to modernize and update the s.e.c.'s mandate >> we have these two projects right now, cyber risk disclosure, which you didn't mention, and climate risk disclosure for issuers and we've seen literally tens of trillions of dollars of assets under management, some remitted in your room right there of 600 people in the ballroom that say, you know, we'd like some greater consistency because of all this
fragmentation. >> there's lot more going on here than seiber and climate risk, carl he has over 50 proposals on the rules agenda of all sorts, dozens of different items. these are the two generating the most controversy right now we'll keep an eye on this. the rules on climate disclosure, by the way, due june 17th, a commentary from the public community already generating an awful lot of pushback. back to you foop we've talked for a while, bob, about the number of pots he's got boiling -- climate, china, crypto, spax at one point. it's interesting to hear how he ladders those out. what's the priority? >> he keeps saying, i'm just trying to modernize the rules. the world has changed. dramatic changes in electronic trading, dramatic changes in the way people look at the world the s.e.c.'s mandate from the 1930s is to protect the consumer, and there's all i'm trying to do the problem here is that in saying he's trying to modernize
he's also asking for dramatic increases in disclosure around everything, and the business community is starting to say wait a minute, it's one thing to modernize, another to overwhelm us with a lot of regulatory burdens and new disclosure rules. that's where the line gets drawn. where is that line >> bob, appreciate that. >> okay. >> bob pisani. as we go to break, look at the bond report. look how treasuries are faring one reason you're seeing relative strength in equities today. the 10-year back below 2.74% pe the market taking out almost a full hike from late nor the year back in a moment
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begin soon kate rogers has more. >> the shareholder meeting is getting underway in the next hour it's showtime for carl icahn, who launched a proxy fight with the company. it collaborated with the humane society. mcdom's said by the end of the year up to 0% of the pork will come from crate-free pork. icahn has proposed two director nominees to the board to support this mission they have recommended that shareholders vote with mcdonald's on all of its board nominees appeared against icahn. "wall street journal" reported yesterday based on early voting icahn's proposal was set to fail now, the second proposal comes from an investment group on a third-party civil rights audit
regarding practices on the policies for stakeholders. mcdonald's has advised shareholders to vote no on that audit as well, saying in a statement that it's aligned with the proposal's stated goals but shareholders would be better served by our vigilant focus on the robust strategies, assessment and report ing processes that are underway. so a jam-packed meeting. >> my understanding is icahn got roughly 1% so he's no chance, but he raised this issue, though, whether for good on bad, he raised the issue about the gestational crates he doesn't like to lose, but we know more about it than we did previously i don't really know, and i'm asking, how widely used they are, or how important an issue
it is for other companies in the fast-food industry. >> i can tell you mcdonnell's says it sources about 1%, certainly small on their part. about $50,000 stake or so. his nominees have not been backed by these proxy advisory firms or institutional invest offers it's certainly an interesting battle, in that nobody seems to be taking his side, despite raising the issue. kate, thank you. we'll watch that when we come back, an exclusive with jeff gennette the dow is up 400. thinkorswim® by td ameritrade is more than a trading platform. it's an entire trading experience. with innovation that lets you customize interfaces, charts and orders to your style of trading. personalized education to expand your perspective.
welcome back to "squawk on the street." the pending home sales dropped 3.9% in april month to month that is below what the street expected it was looking for a 2% drop sales down 9% from a year ago. this is a measure of signed contracts, not closing, so people out shopping for a home during the month, similar to the
april sales of newly built home. this is the sixth straight month of declines in the index and slowest pace in nearly a decade, citing sharp rise in the interest rates, as with his as sky-high home prices down over 16%, but they rose in the midwest, where the homes are most affordable. sales also down in the south and the west realtor.com put out a release saying they saw the largest jump of supplies since 2017 so that's an increase in both listings and more homes just sitting on the market longer carl >> wow that's quite a number. diana, thank you good thursday morning, everybody. welcome to another hour on "squawk on the street. i'm here with courtney reagan and david faber, live at post 9 in new york stock exchange morgan brennan is off today. got good news in retail.
nasdaq was lagging, despite concerns about nvidia and snow last night >> we are 30 minutes into the trading session. let's start with snowflake warning some of the customers are spending more cautiously, because of uncertain ma macroeconomic environments plus, baba getting a boost stock, however, constituent down over the last 12 months of trading. surgen later this hour, don't miss or exclusive interview with jeff gennette. >> one of the largest deals we have seen in quite some time
here we're talking about broadcom buying vmware, days after news outlets reporting various proposals. many were correct. certainly with a bit of a fall, but there's the terms. you get to elect, but you end up with a 50-50 split owner of vmware. we usually see that in private transactions, oftentimes, but rarely in strategic deals. the reason it's here, i'm told the deal came together quickly tam approached michael dell, and he and his number two, tom kraus
started negotiated together dell and silverlake go the deal done. and sort of as a figure leaf, we'll give you 40 days a break fee would be maybe 1%, but otherwise 2.5% it's going to take a while and there certainly will be some question about antitrust you need china approval. fears of antitrust wouldn't seem to raise the bar to the point where this deal should not get down, but we're in an environment where the ftc and the department of justice right now, you have to at least expect there might be some unconventional few where they may take it to court
of course, when broadcom made a hostile bid from qualcomm, it was prevented from for him through, because the u.s. government said, no, we think there's a national security issue there. and they do add to their buyback as much as 13 million shares of broadcom could be bought back by next year then, they become a 50/50 company. not many years ago this was a hardware company, but with this ding, they'll have this sort of suite of offerings, do you foresee any other bitters interested in this
>> it seems unlikely, but it does give the seller to know we now feel better about the deal we reached. >> what do you think this set about the sentiment for deal flow in this volatile environment. >> it's somewhat surprising to get this deal. from the time it was spun from dell, many believed it would not stay long as a company on its even there's a number of deals out there. in this environment, with this volatility, you wouldn't expect to see too many. ceo confidence is always a component. let's get more on this actual transaction, and stacy rasken, bernstein's senior semi analyst.
does this make sense >> sure. yeah i look broadcom's m&a strategy in general i want to see them buy stuff they're good at it they have grown free cash flow organically, something like a 40%-plus through this this is transformational to the software business maybe in the same as the -- it triples the size of their software business, makes it almost 50% of their revenue. it giving them more of an attack in the longer tail of enterprise customers. vmware is a large channel they can leverage i think it's very, very accretive, i tend to trust their performance. it's going to be easily double
on cash return i like it a lot. >> do you ever worry, you know, the history of serial acquirers, you have to keep doing bigger and bigger deals when the music stops, suddenly, you know, margins aren't what they once seemed to be, and stocks often fall. >> it's happened before. i've done work in the past they're not growing oarically, so they're trying to plug the holes. and all the semi growth since they pretty much bought broadcom has been organic same on the software business. they're running these things differently. remember, tam does not care about growth he cares about cash flow and return, and the way he returns these businesses and the types of things he's with
mission-critical enterprise software, i think you can built sustaina aable franchises on the back of that i don't worry about that some do, but i don't >> you brought up some possible pitfalls when it comes to getting this deal through regulators obviously the trump administration had blocked the purchase of qualcomm there's certainly a lot of volatility in the world and other reasons. what do you think the risks are to this being completed? >> there's no fundamental reason why it shouldn't, but to your point earlier, we may not be in that kind of regime anymore. they just settled an ftc case a that point broadcom was still a domicile for tax reasons they were actually in the process of re-domiciling back to
the united states, and i think that was one of tam's mistakes because they were still in singapore, they were technically a foreign company. they're a u.s. company right now. we'll see about the rest of it, you know, with the ftc, there's a fundamental reason why it shouldn't happen we'll see. we'll see. i think it will be okay. >> stacy, did you cut your numbers on nvidia. what do you make of your turnaround both on nvidia, and by extension on amd? >> we cut our numbers earlier in the week lots of incoming questions, long term on data center and lots of short-term questions on gaming
so we covered or gaming numbers. those barely changed because of that we did actually get a cutting game now, they're blaming china covid lockdowns in russia, but there was a fairly sizable gaming cut. so investors looking for a reset got that the data center business was really strong. the data center came in great and next quarter expectations was well above the street. so looking for a strong data center story to own, i think that's why the stock is responding, though i think the street numbers are coming down i want them to come down >> stacy, there is a 40-day go shop in the deal could you imagine anybody else stepping in there? >> the usual names, you mention the cisco, but i'm not
speculated here, but some of the names that have been tossed out, cisco is certainly one oracle, even some of the cloud guys are tossed out as, like, potential like maybe we'll see. at the same time vm reported -- the quarter was not super. >> right >> maybe it's clearer, you know, why -- i don't know, just in general, like the dynamics, just based on today's results were not super. >> actually, i'm glad you pointed that out stacy, thank you. >> you never know. we'll see. as we head to a quick break, let's look at our road map for the rest of the hour it includes elon musk increasing his commitment to the takeover of twitter we'll give you some details. stocks are trying for their best week since march. and macy's stocks surges
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>> you're still a little carb until you get a good series of data that says that. >> yeah, that's exactly right. i think there's no doubt there's some stability coming through in the bond market. obviously the sell-off in bond markets and interest rates generally have been one of the key factors behind the bare market, but it's not the only story. we think the markets will remain choppy in the near term with high volatility, until we get more clarity on both those factors, normally a peak in inflation is a positive sign for equities we are starting to see better valuation, but i think it's a bit early to be that definitive in the near term, though we're seeing good prospects from
investors taking a 6 to 12-month view >> where does the u.s. fit in all of this? the outsized risks, for example, in europe versus the u.s is it that simple? >> not really, i think almost the other way there are bigger risks in? sense in europe, of course, because of the approximate i to the war in ukraine and the vulnerability to surging energy and food prices, certainly but there are some offsets as well private sector balance sheets are pretty strong, but importantly from an equity market perspective, there are two important factors, one is that europe, which suffered for years because it had a lot of values, growth and technology is now a fit on the front as the market has shifted towards favors some of these resources, even banks of course, technology and other long duration stocks have fallen
ahead of this correction of course there's been a valuation gap, but the fundamentals in terms of earnings forward means we should see moderately higher returns, not just in europe, but outside the u.s. for the next few months. >> you recently published an article talking about the post-modern cycle. i'm curious if you could explain for our viewers exactly what is central to that thesis and what post-modernism looks like in an economic cycle >> sure. very briefly, we call a traditional cycle really what happened for most of the 19th and 20th century a lot of volatility. relative short and -- the modern cycle really appeared to have had started in the late 80s all the way through really to the
pandemic it had some unique feat stirs, longer economic cycles, and very good returns, in equities and other financial assets deregulation and supply-side performance, which boosted profit margins, and also, of course, the big surge in world trade and globalization. we think the cycle we're going into will have some differences. we do think returns will be lower in africa, because you won't have the benefit of falling rates and rising valuations we think that higher inflation is one factor. secondly we are seeing a pushback on uncontested globalization, a bit more regionalization, and that will have an effect two other points to make
we think we're in an era of instead of plentiful commodities and labor, we're getting more scarcity in labor, and that will have an effect we also believe we'll see more cap ex spending after years of lower spending, and driven by anything from increased defense spending to renewable energy so there's some differences in terms of characteristics and drivers. >> that is quite fascinating if we can pull you in to where we are closer today. of course, we got some positive results from retailers in the last 12 hours, but for the month, down 13%, the worst performer of the month do you think some of the commentary from executives that the first quarter has been pretty good, even if they're
also expressing caution ahead, is that some of that helping to lift sentiment, as the average continues the march higher >> it is as you say quite rightly, we've been underweighted in that space, and it's borne is the brunt of the downturn. in the u.s. in particular, of course, goods demand, goods consumption has surged in the last year, above levels we have seen before the pandemic i think this rally is a bit of a function of this rebalance we're seeing generally, as people are looking to sort of take advantage of some of the better value that's come there. again, this is an area where we think there will be more downside risk. we see some risk coming through the labor market as well
of course, there's a question of margins. this is an area where we think investors will focus a lot on over the coming months few are able to keep and sustained margins, and may see some pressure. >> exactly on point we've been talking about the last couple days peter, we appreciate it. peter oppenheimer dollar tree and dollar general beating on their earnings, as shoppers turn to discounted stores. we'll be right back. stay with us
this morning saying their fry cash flow burn was $496 million in fiscal 21 just saying. first, though, as we go to break, a message from cnbc contributor, as cnbc celebrates asian american and pacific islander heritage. >> when i moved from india at 12, i was raging at the world. as i slowly assimilated, i came to under it was important to understand other people's views, cultures, but yet also maintain your own in today's environment, it's important to make sure you keep your own identity. you don't always have to assimilate that doesn't necessarily mean you have to disagree it means be your own person, have your own ideas.
and vladimir putin or a terrorist could cause them all to self-destruct... a cyber 9-11 that would destroy our country. i'm dan o'dowd and i wrote the software that keeps our air defenses secure. i approved this message because i need your vote for u.s. senate to send a message... congress needs to fix this.
here is your news update this hour, as tex mourns the death of 21 students and teachers, there are questions around police accounts initially it was said that a school resource officer fired, but now a top texas law enforcement official says he approached the gunman, but shots were not exchanged last night ted cruz was asked if it's time to reform gun laws. >> they just cannot fathom why only in america, why is this american exceptionalism so awful? >> you know, i'm sorry you think
american exceptionalism is awful -- >> reporter: i think this aspect. >> you have your political agenda got love you in ukraine, a top official says russia has an advantages in the region, and we're in a different long stage of that struggle. >> seema mody, thank you the tech sector is still down for the year, nasdaq leading today, looking to claw back some of the heavy losses, though not as much as the dow. -- great to be here. it sounds like the discounting we have seen is still not enough >> well, i think it remains to be seen, carl. it's possible the market bottomed two days ago, but it's entirely possible we aren't, and
cnbc already posted a list of what -- that were down 74%, and the thing that's really shocking about that list is that most of them still sell at a multiple of seven or more. what it really says is the valuations at the peak i think were probably way too high, and that even now for the ones losing a lot of money, they're still very high. now, the way i view this, carl i think our job now is to recognize that for a lot of tech, we're in a bear market all that matters is what we own coming out so you want to look at your portfolio, and not worry about your cost basis. look at the things that are the greatest growth opportunity from here i do think there are things that are starting to perk up that deserve way more attention, because they're down 60, 70, 80%. >> okay. those things would be?
>> well, when i look at the list, there's a few that still have profitability zoom is still profitable docusign is profitable pinterest is profitable. when you have companies that have really strong profits that are down 75% or more, as all three are, they're worth a look. the key point i'm trying to make here is i have notty whether we're at the bottom or not i think all of those things are legitimate if it's restructuring, we'll have a different winter coming occupy some of those will actually merge as great stocks. it's super hard to tell where the entry points will be. >> it seems the paradigm for what we value is shifting when it comes to technology
no longer growth at all costs. how do you identify the winners if the metrics are changing? >> look at the ones where the business models have not yet -- and where a changing economy may make it even harder for them to grow there was a stock on ari's list that is distributed, it using algorithms the problem with algorithms, they look backwards. it's possibly we're in a fundamental change, and then the algorithms break and you need new ones to come out of it i don't know how long that take, but though kind of business where this they're still bleeding cash last crazy, those are the most dangerous businesses i think there's a lot of those on ari's list. when i looked at it, the things that took out to me were, you
know ridesharing companies we're still, in spite of a lot of positives, you know, they don't yet have the math working. there are a lot of companies that are, you know in security, like cloudflare, where they still don't have the math working. i don't know how big they have to be to get the math to work, so i would be cautious of things that look like that. >> >> you may have talked about this, but twitter and musk, you know, just give me your thoughts when i say those two things? the problem with twitter and musk, twitter is one of the most incredible product designs yet, if you look at the results, it's failed to live up to the
possibility it had the question was, can elon musk transform this company into what it really should have been all along? i've always been i do think it really is incredible , i don't know how it works for him, but it was pretty specific. it's hard for him to get out of this deal, but if you're a shareholder at today's price, the odds are pretty reasonable you're going to get paid >> if anybody can change the business model, it would
certainly seem to be elon musk. >> i'm with you, about you he has every incentive to tell you if he has a plan, and you've he's talked about things that clearly aren't going to work with bots. i just don't know. i think he has the opportunity he certainly has every incentive, and i hope he does. i truly hope he does >> it's incredibly disappointing the way he's interacted with -- such that a ton of people have left, now, it maybe be that those people should go in the
long run. >> would you expect to start to hear things like that from much larger players >> well, isn't that what your guests for the last half hour have been talking about? i do think there's issues going on that we have as to watch out for. the buy now/pay later models that have don't well, have resulted in a lot of young people accumulating a lot of debt at a point in time where there's job uncertainty. the knock-on effects from that are going to be really large, and they're going to go right after all of the internet platforms that are advertising-dependent. will it be enough to undermine a
google or facebook, i have no idea, but i doubt it we'll see. >> thank you, roger. i look forward to next time. >> thanks for having me. macy's stocks are surging. the ceo will be with us next aflac! paul is about to suffer a shelf-inflicted injury. luckily, aflac will help cover his unexpected medical bills. aflac! maybe you could use the money to buy a step stool. i have a step stool. so why are you climbing a shelf? the stool's on top of the shelf, isn't it paul... (shelf crashing) yeah... ♪ ♪ aflac!
macy's a retail bright spot, higher by 14.5%. the ceo jeff gennette joins us i want to start with your outlook. we're trying to figure out what is happening with the consumer right here right now, and what it could mean for the future it looks as if macy's has confidence you can handle the cost pressures, but less sure about how the consumer will react. what are you thinking and seeing right now? how did that factor into the
guidance >> what we're seeing now is the consumer is healthy, and that's across all the value a customer that makes 75,000 and below, 75,000 to 150, as well as 150 and above. the customer spend is up, the customer count is up, and that's what we're watching. what we are clearly seeing is a shift? categories they're buying. they're stalling when you look at the pandemic categories of casual, active, and those are have slowed. convertly the back to office, back to occasion, special occasion, travel businesses are hot. that trendline is up tenfold that serves us well at bloomingdale's and macy's. we expect those to continue. my team is looking at that very
carefully, but there's a lot of macro conditions we are watching carefully when we look at it, we're expecting our business will be flat to up 1%, clearly different from what we did in the first quarter, but it's prudent based on all the economic uncertainty >> what about the way that you're able to foresee and then manage the costs of doing business the cost of fuel, freight and wages? what do you anticipate there >> first, i'm very proud of my team and how they reacted. we pivoted quickly, the po lari strategy has been provable when you look at inventory, that's a great example we clearly saw a slowdown in receipts that were coming in that was the opportunity for us to change what we did on order that started to come in
differently. now that we have more of that, that's starting to build we have great pricing signs. we clearly worked on those cat torrie that have stalled and ramped up. when i looked at the cost base of making sure we spent years of delayering the organization, increasing the spans of control, pushing the empowerment to those folks facing the customer every day. that is really helping us. it's just quite an agile organizations. we've kept costs down, improved our balance sheet. we now have a cost structure that is fit to be very agile, and we're ready to do that >> you speak about the agility what if consumer prempss change again in the next two, three months how quickly can you shift that inventory? >> first, being a department store, we have an opportunity to shift across all of our categories the idea of a customer who is
very high on dresses and men's clothing we can do that we have great relationships with suppliers. so whatever our needs are, we've been able to tap into that you know, whatever the trends are, we can react to it. that said, courtney, we are looking at the same sort of supply chain delays we had in 2021 we have moved up ship dates. we're not goods to miss back to school or holiday. we're building that in >> you alluded to some of the data analytics and pricing you have obviously we're dealing with inflationary pressures, both you as a company trying to do business and the consumer and what we're facing with prices at the pump and the grocery store how are you able to pass along the price increases? on the lower end you were having time raising prices, but on the higher end, you could do it.
is it a sku by sku conversation? >> we serve 50 different categories where we're out of wack, our gross margin expectations anticipate that, but when you look at the categories that the customer is signaling high interest in, and you are looking at the dressup category for churn, or travel, frankly for customers, the supply is not keeping up with full demand, you can get higher aurs that is covering some of the gluts of the inventory we have to liquidate. there's a big category in the middle -- gifting. we saw that on mother's day. we did not see a slowdown in spread across all income levels for gifting for mom. we expect the same for father's day, and we're planning
accordingly. >> before we let you go, jeff, we started by talking about the consumer when i look at the results, i see bloomingdale's division comps up 26% does this suggest to you that that high-end consumer is still holding up well despite the volatility they may be feeling are they holding up the rest of the consumer base? >> certainly a strong consumer right now. tony, the ceo of bloomingdale's we look at this ever week, looking at signs what's going to go on with interest rates, consumer sentiment and particularly stock portfolios the blum bloomle dale's and blue mercury teams are doing great. when you look at the more of the commodities in the casual businesses, i do expect
tightening there it's going to be lower margins we're anticipating that. i think the industry -- we're in for that over the next six months. >> thank you for joining us on this very busy day, i'm sure, for you. >> thanks, courtney. coming up on "techcheck," more on the deal of the day, as broadcom buys vmairware nvidia up. re coming up at the top of the hour don't go away. 're two times mory to invest in companies that have social and environmental goals. ♪ ♪ there are so many more young investors coming in and participating in the financial marketplaces today, and that's really due to advancements in technology. there's a proliferation of innovative technology solutions to be able to interact and invest in the financial markets. younger investors today are engaging in social media
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these customers and in the first round against icon, mcdonald's has prevailed. we did reach out to his team mcdonald said he had the opportunity the o speak about his nominees but he with drew todays ago he did pot speak at the meeting today. back over the you guys >> the other headline regards this potential law in rush sla that would make it easier for russia to seize western assets e with know mcdonald's announced pull out of the country a few days ago i wonder how sticky the could become in the weeks to come. >> that russia situation is still shaking out. >> still shares near session high kate rogers, thanks. check out the top gainers on
the s&p for the week dollar tree higher by 22%. dollar general, best buy, look at those retailers we'll be right back. stay with us your shipping manager left to “find themself.” leaving you lost. you need to hire. i need indeed. indeed you do. indeed instant match instantly delivers quality candidates matching your job description. visit indeed.com/hire
riding energy costs are hitting everything brian sullivan is live from iowa he's got a closer look at the i fl -- inflation impact in the heart land >> we don't talk about this inland empire which feeds us, helps clothe us, helps refine our products and the mississippi river behind us carries a lot of it i think today is fantastic day to be here the stock market is up but oil and gas are up again the price of crude oil is nearing $114 a again natural gas is higher as well. the gdp number coming out confirming what we knew.
inflation is major problem it is the number one problem cited by american households in a new survey, 70% of american families said they are anxious about the effect of inflation. that trumps health care cost it trumps violent crime. it trumps covid-19 inflation is the major problem as i've said in past, energy is not part of the economy. in many ways, energy is the economy. not just throwing gas in your tank but manufacturing anything from steel to aluminum and even renewables here on the mississippi river, we don't talk a lot about it but this is kind of the i-95 of the midwest. barge traffic kwcarrying grain, fertilizer, even jet fuel up and down this river. we are on a tug boat or a push boat, they have 10,000 gallon
fuel tanks 6 to 7 bucks a gallon. you're talking hundreds of thousands of dollars a week in diesel fuel cost for many of these. the ceo of american commercial barge lines had us on one of their boat and said these costs are just crushing them >> 25 to 30% of our cost to move a ton one mile is fuel our cost, 25 to 30% of our total cost has over doubled. you can imagine what that does on for us the try to price that out to the market. with steel cost up so much, n builds are down. the supply and demand are tightening as well >> the price of diesel fuel has doubled in just 12 months. we've never seen that before it's 30% of his cost that could spread out in everything we buy. import, export tonight we'll talk more about
it 6:00 p.m. eastern time jim is off we have inflation usa. you'll hear from one of the biggest farm equipment managers and locally owned restaurants right across the river in rock island, illinois how they may have to sthuthut down because t can't afford things like frying oil to make their food >> quad city you are in the heartland you mentioned grain. we know wheat is not coming out of ukraine the way it had been food prices will figure as well. >> here is the bad part, we were with the investing club but they wanted ed talk about farming. they have family farms the food inflation hasn't really hit yet because the high fertilizer cost that kicked in last fall are going to grow the
crops now that we're going to buy a few months out i don't want to be the bearer of bad news but food inflation may get worse. we'll talk about it tonight. >> looking forward to it >> my husband was born in rock island >> that's going to do it for us. the market is up nicely. let's send it over to tech check which starts now >> good thursday morning today forecast show white snow high gross tech takes another leg lower. both revealing disappointing outlooks