Squawk on the Street : CNBC : April 12, 2024 9:00am-11:01am EDT : Free Borrow & Streaming : Internet Archive (2024)

for your perspective on the markets. we will see where things end the day after what is already a pretty volatile morning and what has been a volatile week. thank you very much. have a great weekend. let's take a quick look. the futures have taken a decidedly turn for the worse here. dow futures now by more than 260 points. s&p futures down by 40, the nasdaq down by 162. that does it for us. make sure you join us next week. right now it's time for "squawk on the street." ♪ happy friday, everybody, welcome to "squawk on the street." i'm david faber with sara eisen and mike santoli. we are live from post nine at the new york stock exchange. carl and jim have the morning off. let's give you a look the a futures. you just heard becky say we have taken a bit of a turn lower, at least, it would appear when we open, we're going to be down rather substantially on some of the broader averages. let's get to our road map. it starts with the banks,

jpmorgan, citi, wells fargo, they all reported earnings. all appear to have been fairly strong. we're going to break down the quarters. plus blackrock now managing nearly $10.5 trillion in assets. we're joined exclusively by chairman and ceo larry fink. that will be later this hour. we're also watching the semis this morning. qualcomm, intel, amd and nvidia all moving lower ahead of the open. china reportedly telling its telecom carriers to phase out foreign chips. i want to start with the banks and the downturn in the market as well. earnings season kicks off with the likes of jpmorgan and wells fargo and citi, for example. mike, i'd love to just turn to you quickly, just get a sense on the market as well. >> yeah. >> it's been an interesting day yesterday with that move up in apple shares, particularly, as the day went on. obviously, moved the nasdaq appreciably higher. what do we think is behind some of the weakness we're seeing beyond these bank earnings, which, at the worst, are a mixed picture? >> i don't think it's bank

earnings, necessarily, the catalyst. yesterday, the indexes were rescued by not just apple bouncing on some reports about some a.i. macbooks and whatnot, but nvidia going up 4% becauses this the market we have. when we get nervous about macro and yields and inflation, and we have had a 10% pullback in nvidia and some of the other a.i. stocks, well, the market, when it gets defensive, actually goes into the growthy, secular names. so, i think that was yesterday. what we have now is a market that has been sort of chopping around, very familiar levels, for about four weeks, and i think no matter what you thought heading into this week, the picture did not get any less complicated with what we learned this week. in terms of inflation being sticky, repricing the fed's path, bond yields going up to multi-month highs. i don't think that we have to have a strong, specific rationale for why gold is going vertical to say, maybe when gold is going vertical, things aren't necessarily as settled as we'd

like them to be. going to test the lower end of this s&p range, and geopolitical upset is obviously in the mix. you have oil rising. this has been a feature of this market, especially ahead of weekends where normally you have the volatility index backing off because you're going to be closed for two days, and today, it's popping again, and it's obviously a volatile mix. on a limited basis, at least, but then we had the -- if, you know, hopefully there's no escalation of any sort, monday, you have a relief trade. >> there's the sterno report that israel is preparing for a direct attack from iran on southern or northern israel as soon as friday or saturday, according to a person familiar with the matter. iran's been public with the threats. you have, just to reiterate, mike, you have brent crude oil above $91 a barrel, wti crude oil surging at the same time where the dollar is surging and gold is surging, and usually, those things don't happen together because gold and oil are prices in dollars. they usually go in different

directions. there's definitely a safe haven flight right now, and i would also mention that treasurys are catching a bid today as well. it's not like high rates are spooking the market this morning, because treasurys are getting bid. >> yeah. and of course, as we were sort of kbicombining here, banks ande broader market, i'll come to jpmorgan, not the numbers themselves, more the comments on the media call from jamie dimon. we already got a sense of this from his annual letter, which came out early in the week. but you know, he, once again, is saying, listen, i'm not predicting a recession or no recession. i don't know what the future portends of all the things that we're talking about. but he does continue to say, sara, his own personal belief is things, you know, the price in the markets is probably too happy, and i think the chance of bad outcomes is high -- is higher than other people may think, not projecting them, just saying they may have to -- you have to look for a potential range of outcomes. i'm working here off a transcript that's not exactly word for word accurate. >> he cites exactly what he's

worried about, which are persistent themes he has been worried about. the global landscape is unsettling. terrible wars and violence. he mentions that again. continue to cause suffering. second, he says there seems to be a very large number of inflationary pressures, which may continue. and he says, we've never fully experienced the effect of quantitative tightening on this scale. he has been warning about this for years. so far, the market hasn't really felt it, the move from $9 trillion to -- >> that was from the earnings release, not this media call, but yes, that's right. >> but he sort of highlights the three buckets that i think they're worried about. if you look at the overall earnings numbers, though, i mean, they lifted net interest income forecast. maybe the street was looking for more on that, given how much we've pared back fed interest rate cuts, but that seems to be one of the primary areas of focus here for banks. >> it is. and i think you also have to emphasize how much jpmorgan, the stock, has outperformed

everything else in the group. >> up 15% this year. >> and i mean, over the last two years. >> yeah. >> it's basically, you know, ahead of bank of america. bank of america is the closest comp. it's got, like, i don't know, 75 percentage point outperformance in the stock to that point. double the market cap of b of a with 40% more assets. it tells you the market has decided that perhaps because the ceo is always worried about what could go wrong, even as things look good in the business, they're willing to say that this is the bank that survives almost, you know, any environment, and so that's the context in which you back off 3% when you don't raise net interest margin, you know, guidance as much as people were thinking. >> $89 billion is the new nii forecast, and i guess it was $90 billion in 2023, but that's still better than the $88 billion that they previously expected. >> there was also a reserve release, which means that credit

looked better than they were anticipating, and so that's a part of the story that continues to really support both the banks in general and the overall, you know, economic outlook. i mean, i think the banks -- the reason we have to focus so much on the net interest piece of it is it's really the main swing factor, along with capital markets and deals, and that's been really active. massive corporate bond issuance in the first quarter, jpmorgan gets their share of that. we've got some ipos. that's good, but the market doesn't usually pay a lot in advance for that. >> it's not like it's a growth business overall, banking. it's not a growth business. to your point, they have a return on equity of 17%. i mean, you know, just to put it in perspective as to why, to mike's point, jpmorgan gets such a premium to many other banks, i mean, citi, which is working its way through this massive restructuring, and you've sat down with jane fraser a couple times, sara. we're talking about r.o.e. of 6.6% in the first quarter, not to mention wells fargo at roughly, let's call it, little over 10%.

so, that just does put in perspective why there is a willingness, mike, to pay more for jpmorgan and/or at least the dollar of earnings, more on a multiple basis. >> mike put it well. the bank analyst at wells fargo said, jpmorgan is a call option on a more hawkish fed in the short-term. capital relief from basal iii, and best in class national deposit share, and that's sort of why jpmorgan has gotten a premium, even though you said banking, not a growth business. really strong results from both citi, i noticed up 32% in investment banking and jpmorgan, which was up double digits as well. 27%, the investment banking. >> a year ago, i mean, first quarter of last year was as bad as it gets. you're absolutely right that that's a good swing factor. it's just that the banks no longer participate -- they don't want to have great leverage to a really booming u.s. economy as much as they used to. a lot happens outside. they're overcapitalized. they can't do wild, risky stuff as much as they used to. i think they're just more

steady, which is a good thing for the system, you know? >> you would think so, although something they're arguing about, certainly, the next round of potential capital requirements. >> overshooting. >> they feel like it's overshooting. we talked a lot about private credit as well and the market share it's taken in terms of an area that used to be quite profitable for many of the banks, that they are sort of fighting back on to a certain extent through lower pricing, basically, financing in terms of deals and the like or the large credit needs of so many companies, private credit, obviously, i mean, we've covered it pretty closely this last year. >> taking up a lot of loans. >> alternative asset managers, apollo, on from there. >> aar. ares. h hps. >> it just goes on. >> there's an interesting divergence shaping up between the big banks and the regional banks, and this idea that the more hawkish fed or fewer interest rate cuts is very

helpful to the big banks, and while it is helpful to the regionals too, they get hit more with bad loans and bad credit quality and issues with deposits. >> and their deposit costs go up. the longer that the fed stays at 5 3/8, and that's what you're getting in money markets, the harder it is if you're a bank to compete for deposits, and that's been -- it's not so much like a deposit flight issue. it raises your costs. but yeah, the regional banks, the selloff in bonlds, it creats more focus on the ones that have a little bit exposure in terms of unrealized losses. i think it's much more about, you know, if the economy hangs together, they're going to be fine. they're trying to hold these prices that are well above the march 2023 lows. >> yeah. and before we go, just to come back to the broader markets again, to refresh people, we are going to look for a down open here, but you know, mentioned apple at the very top. i mean, that was -- i think that was the biggest move. apple's seen, what, 11 -- i'll

leave it to you. i don't want to say something -- i think it was many years. >> 4% daily move, yeah. and again, it just shows you how the market gets very twitchy on these days when it's decided that it's going to -- >> just since last may. okay. i'm sorry. i thought it was even longer than that. >> it's a pretty good size move in a two-plus trillion dollar company. again, this has been the rotational -- yesterday was a weak day in the markets. you had most stocks down, but the index managed to hang in there. >> alphabet and amazon also, though, as they both sort of -- i mean, amazon in particular was very close to that $2 trillion mark that we sort of follow. you pointed out nvidia as well. do we expect follow-through? yesterday at the end of one of our shows, i forget which one, mike, we were talking about the douring is the word you used as opposed to the broadening theme we've been stressing for the last few months. >> it's definitely flagged quite a bit. that's when higher yields bite

is on the majority of stocks. in fact, if you looked at sort of equal-weighted s&p relative to the market cap weighted, it's back on its lows, more or less, so it's not as if there's been a lot of progress. and you know, if you're an index owner, you kind of don't care. the overall market hangs in there. i think you have to sort of stack up what we know and what we think we know. it's a bull market. the strength and persistence of the bull market in the five-month run we had off the october low is of the sort that usually means it's not the end of it. in other words, it's persistent, 6 to 12 months later, so you know all those things. what you don't know is what happens in between, and there has to be some giveback. we're in one of the top 12 or 13 longest stretches in the last 80 years without the s&p at least touching its 50-day average. all it means is the market is up a lot, hasn't backed off much. >> and there are a few other negative catalysts we didn't even mention. the semis, they're weak, especially intel and amd on this report from "the journal" that china continues to crack down and is trying to wean the

telecom providers off of american chips. >> and they're doing it. >> and they have set a deadline. >> the cpus in particular made by the likes of amd and intel are very important. and it extends beyond telecom as well into the pcs that are made and provided for in china as well. but you can see the weakness in particular, i think, amd, down as much as 3%. >> phase out by 2027 is the headline. and then the only other sort of negative data point from china was the export data. i don't know if you saw. down 7.5%. and that is worse than it has been, and also, it's worse given that there was some optimism lately on china, particularly in terms of exports. this was a downside surprise. imports were also down 2%, so just speaking to the persistent weakness in china's economy, and just when, you know, just when some of the hedge fund managers

get a little bit more bullish on china, we saw outflows in japan for the first week last week, and inflows into china, disappointing data. >> it's kind of the new widowmaker trade is the pick the low in chinese risk assets. >> hard to do. >> we'll see. all right, we've got a big morning on tap here. blackrock's ceo, larry fink, will join us exclusively here at post nine on a big earnings day for him and for financials in general. and in the next hour, nike going for gold. we've got an exclusive interview with ceo john donahoe as they unveil their new olympic kits. taking a look at futures here as we head into the opening bell. as we mentioned, down session, dow down almost 300 points ahead of the open. nasdaq futures, down 1 gin back yesterday's big tech gains. more "squawk on the street" straight ahead.

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blackrock reporting financials and also that it has record assets under management. they've now reached $10.5 trillion as of the first quarter. company also posting a 30% jump in its profits. ceo larry fink will join us and we'll talk about the numbers and the overall economy. $10.5 trillion is a pretty big number. >> it is. >> i can remember when it was below a trillion, i think. i can go back a long way. fixed income, interestingly, was the largest inflows, i think, at $42 billion for the quarter as opposed to equities. >> steady inflows. i think he characterized it as $76 billion net inflows in long-term, so noncash-type funds. yeah, it's moving right along. obviously, the market's helped in terms of getting the overall aum up, and the company is built to be somewhat agnostic as to what asset class, what strategy, active/passive, retail/institutional. i think that's very much by design. they just sort of capture it,

and i think that's by design. they're using their scale to their advantage where there is earnings lefrmg in the model because it doesn't necessarily take more people or costs to manage an extra $60 billion in a given quarter. >> $62 billion inflows for etfs. that's the i-shares business. obviously, that's strong as well. >> strong but lower fee. that's the tradeoff. >> they did benefit, obviously, from performance overall of the market and therefore performance fees fairly strong. although you can see a mixed reaction. a number of the analysts saying, generally, i would say, a positive take on the quarter, a bit better than anticipated. margins came in fairly good on lower expenses. >> it's already at 20 times earnings. it's kind of -- it's certainly got the market's respect in terms of being a quality business, so it's not as if -- there have been times blackrock's traded cheap. when people hate the market and there's outflows, it actually has gotten pretty cheap, and it's not been the case, because

we have had pretty strong markets, and they're right in the middle of it. >> alternatives, also, attracted some money there, $11 billion in alternatives. you know, larry fink has been, i think, way out front on the inflation call. jamie dimon has also been saying sticky inflation, but fink early was talking about fiscal stimulus, just permeating the economy, no recession. i remember when he was on with us last year, talking about, i don't see a recession because we have had so much fiscal spending, and by the way, that's going to make inflation sticky. it's an interesting time to talk to him on a week where cpi surprised to the upside, and has made investors rethink the entire rate view. a number of wall street firms, today, mike, are saying it's not going to be until december that we get a rate cut. >> it could be. >> and that would be one cut for the year. >> exactly. and so, that -- i was sort of dangling that out there, starting a few weeks ago, about this whole, we're in the opposite version of 2015 where the fed wanted to get off zero,

they wanted to punctuate a whole fed cycle, and they couldn't. the economic numbers were weak. inflation was low. they didn't have the basis to do the multiple cuts that year that they anticipated a year earlier, and finally, in december, without the economy telling them they should, they raised rates by a quarter percentage point off of zero. so, i was -- this is now starting to become the chatter out there. >> no landing. >> but they want to get it done. they want to finish up this cycle. i think. we'll see. >> somehow, i think you two are going to be discussing this for some time to come. >> as we have been. >> always. >> i always enjoy it. >> it's better when we disagree, though. >> i particularly enjoy that. >> yeah. >> is there something you guys will disagree about? >> we always disagree on how much rates matter for stocks. >> how much -- >> rates matter for stocks. i think they're everything. he thinks they don't matter. >> all right. we'll dig into that, see what we can do here between mike and sara. but if you haven't noticed, we are on track or at least looking for what will be a significantly lower open.

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>> announcer: the opening bell is brought to you by nuveen, a leader in income, alternatives, and responsible investing. tesla's been the subject of a number of wall street calls this morning, citing -- lowering its price target on the stock from $180 to -- to $180 from $196. maintaining a neutral rating. wedbush reiterated its outperform rating. dan ives. wells fargo lowered its price.

i don't know, mike. i don't know who wants to take a shot at this one. >> well, what's going on is the earnings estimates for next year are down 30% so far this year. so, in other words, you keep having to roll forward when this is going to kind of get some relief in terms of pricing and earnings falling to the bottom line. so, as the stock has come down, every analyst has to review, you know, where the valuation is. you talk about 370, earning 370 next year is where the consensus is right now. so, you're well over 40 times the lower of next year's estimates. the stock has actually bounced nicely around $160 a few times, so i don't know if that's where the buyers are sitting. it's just above a half a trillion dollar market cap. >> i mean, the question is on deliveries, and that's why wells fargo took their price target down, expecting fewer deliveries, but they do wonder, again, elon musk, razzle-dazzle investors. that's a quote. full self-driving. he's teased the robo taxi now,

although nbc news did an interesting story about how the california agencies that would regulate robo taxis haven't heard from musk, so he's teasing this is going to come out in august, but the department of motor vehicles and public utilities commission saying they have not applied. >> there you have it, an opening bell for this friday. more red on that board than green. here at the big board, it was ul solutions celebrating its ipo. >> lot of people. >> yeah. over at the nasdaq, european securities and markets, the eu's financial markets regulator. all right, we were looking at the broader markets. we talked about chips. we're talking a bit about tesla. it's funny, on musk and the

magic, i did notice the ex-a.i. effort he has under way, valued at $18 billion with the recent raise they're trying to do of some $4 billion, which would put it far ahead of the value fidelity has the old twitter marked at. >> absolutely. >> it's never been clear to me how the a.i. gets all divided up. tesla's got its a.i. x, the platform, has brock. and then there's xai as well. again, of course, a private company. don't worry, we'll get to tesla as well. its mission is to uncover the nature of the universe. >> right. >> just saying. >> right. there's no doubt about it, that, you know, basically, the next thing is always worth more than the current thing, right, when it comes to the musk-verse. >> and the a.i. story. look, it's a down market, and technology and financials are at the bottom of the market. what's working is energy continues to go up thanks, in

part, to the price of oil, which is up again today. crude oil at $87.20. brent crudealmost to $92 per barrel. morgan stanley publishes on the energy sector this morning. hot summer, they say, expected. they like energy. basically, on the fact that oil is moving higher and that's going to raise the earnings estimates for the entire sector. >> yes. >> they are working off a $94 a barrel price. >> and it's -- i mean, it's part of this general reflation trade. everybody is now observing, well under way. so, mining, materials, chemicals, it's all there. so, you do have this phase of older economy commodity-based stuff is working. we talked about gold as a piece of that. copper's participating as well. honestly, on a two-year chart, nothing looks that crazy in terms of getting out of the range. it's still about rebuilding from relatively low levels. the thing about the energy pricing at this point, too, is

because the economy's so strong, because wage growth has been fine, it's not as if they're destroying a ton of demand with wti near 90 bucks or gasoline prices pushing 4 bucks national average again. it's almost like part of the bull case is, we can afford it, even though the prices are up. >> gold is the number one best sub sector. the gold miners are having another very strong day. gold has been up for several days in a row, despite the strong dollar, whether it's geopolitical concerns, the fact that central banks have been buying gold. >> there's capital flight out of china. and a technical breakout literally to a new all-time high in something that people have been buying for thousands of years. i think it has people excited. i'm nervous at the angle of the chart. but you know, that's just me. i don't -- you know? i don't like things that are too easy in a short period of time. but it looks like it's got plenty of momentum here. >> apple shares actually have continued a bit of that momentum they showed yesterday as, again,

we pointed out it had its biggest up day since may of last year, up 38 cents, but that revaluation -- i'm not sure how to phrase it -- but you know, it's been so beat down in a way in terms of the lack of an a.i. strategy, i guess, in the view of any number of investors. suddenly, that changed yesterday. there was a bloomberg story about the imac, including some new a.i. features, and then just in general, jpmorgan sort of putting out a piece as well yesterday that seemed to capture the imagination of a number of investors, saying, is it right for an a.i. rerating? >> i'm not even sure that it's suddenly something changed or if suddenly we have insight on this. it's, the stock is badly underperforming. anything that looked like it in the market for, you know, a number of weeks, it got down to these levels, around $170, everyone said that seems like a bit of a floor. the valuation comes off the boil, and you know, they can make these gestures to say,

we're part of it. you know, we're going to anticipate the developers' conference. that's coming up. that's now within sight, and that has been magic for all these companies that have one of those with the possible exception of adobe. >> i would note, in a conversation with jim a few days ago, and having spoken to somebody who's bullish on apple, they did talk about the opportunity there perhaps being a lot larger than people were anticipating in terms of what they can do with the coming cycle, what it will mean for the next iteration of the iphone when a.i. is incorporated on that through siri most likely, but they have your location data, your text messages, they have an enormous amount of data they can use to train that would be helpful for them in terms of targeting and information. >> they have the ingredients. to me, the question is, it's almost getting to that point where the fact that iphone has been disappointing in the upgrade cycle to this point becomes the bull case, because now you have all these older phones that need to be upgraded.

>> only other tech darling getting a little love today is netflix. price target increase, morgan stanley, to $700. wedbush, also, $725 price target. they think there's upside on subs ahead of earnings. >> all right. i got something else that -- well, it's down no, blackrock. larry fink is sitting next to me, as promised. >> now it's up. >> it's moving around a lot. but we're taking a look at shares of blackrock. the company did have an earnings beat this morning. assets under management hit a record, they're now $10.5 trillion, and as you probably guessed, you already saw him, joining us exclusively is blackrock's chairman and ceo, larry fink. >> lot of noise. ipos are always a good thing. brings more capital into the market, expands the capital markets. >> i might want to get to that with you, but let's start off with the earnings themselves. you're talking about the uncertain backdrop, but it doesn't mean there's a lack of opportunities. you had decent inflows this

quarter, interestingly more into fixed income than other areas, although maybe that was expected. >> i think in the -- in a period of so much uncertainty, growing fear of more anxiety throughout the world, people are staying a little close, and you know, we have had $9 trillion of money now into money market funds. record levels. and some of that money is going into fixed income. but the alternative, though, if you were fully invested in the equity market, you would have made 25% return, and this is what i try to talk about. it's not about the moment. yes, there's uncertainty, but over the long run, do you believe in american-style capitalism? do you believe in the markets? over the long run, i do believe our markets are going to continue to be driving excess returns above what you can earn in a money market fund. >> and on the call, you talked about what you believe are still great opportunities, your words, for investors across a number of structural trends. i might expect those include the likes of, what, a.i.?

what else? >> the combination -- a.i. cannot truly happen unless there's a huge investment in infrastructure. the amount of energy that is required for a.i. is enormous, and the amount of power generation. we will run out of electricity if we are going to fully adapt a full a.i. world, and so the need to build on -- this is all going to stimulate our economy, by the way, to build out a more a.i. -- which at the backside is that means building out more electricity power. >> for the datacenters, obviously, they consume so much electricity. >> we're going to have to be building out tens and tens of gigawatts. not mega watts, gigawatts, and we're talking trillions of dollars of investing. so, the opportunity is enormous in the coming years, and this is one of the fundamental reasons why i believe the united states is leading this, but let's be clear. i'm talking to political leaders in other countries, and their desire to build out datacenters,

a.i., technology at the same time decarbonization, so i remain a little more constructive, why i believe there's elevated inflation in the world, and i think all of this is playing out. but back to our earnings, you know, we had a record amount of assets, $10.5 trillion. all of it's our clients' money. more than 50% of it is retirement. and we saw flows across the board, worldwide. we had active flows where still, in many cases, active outflows are occurring in the industry. we had inflows. and so, the resiliency of our business is only accelerating. for the first time in a long time, i noted our pipeline has never been stronger of noted wins that are going to fund in the future. and so, what we see is acceleration in our business model. >> i want to ask you about inflation, because i gave you credit earlier for being, i think, one of the first and early ones last year to say,

this is going to be sticky. inflation is going to stick around. we saw it come down at the end of last year, but now, this year, three in a row, hotter reports. >> sara, never came down to the target of the federal reserve. >> i'm saying, you've been right now. >> not yet. >> even when everyone became enthusiastic, it never got to 2%. >> and you don't see it getting there for how long? >> i think 2% is a hard number. we have restructured how we frame our economic policy. we have a trillion dollars of fiscal stimulus in the chips act, the infrastructure act, and the i.r.a. we have very poor legal immigration policies that have restricted, and that is all inflationary in jobs. and then, the bigger issue is how we think about how we spend our incremental dollars as we're spending a lot more money on services. so, if you think about where service inflation is really the main culprit of high, elevated inflation.

we have an aging housing stock in america. so, our homes have more frequency of leaks from older roofs. we have more frequency of busted pipes. this is now translating into a higher elevated insurance cost. our behavior driving -- we have more frequency of accidents than at any time, and that means we have elevated car insurance. so, if you look at the most recent inflation numbers, so much of it was insurance, and if you overlay what i talked about in terms of my -- in my chairman's letter about elongation of life, the cost of elongation of life is going up. and long-term health care costs are going up. all those numbers were shown in the inflation number. so, central banks have a harder time arresting service inflation. a great statistic that my good friend, rick rieder, uses all the time, the cost of a pair of

nikes or adidas is about the same price for 30 years. so, you would say, product prices are virtually unchanged. but the cost of going to a sporting event, the cost of going to a rock concert to see taylor swift, is so elevated. six, seven times. and so, it's a sign that, okay, prices on goods are pretty stable. but what we're willing to pay to go to a restaurant, to go to a sporting event has been so elevated. >> do you think the fed is going to be able to cut rates? >> look, when everybody said we're going to have six cuts earlier this year from noted economists, i said, maybe two. and i don't -- look -- >> now you're saying maybe two? >> i'm still saying maybe two. the market got crazed over 0.1% difference than the estimates. and the market went crazy over that. we're -- inflation has

moderated, and we've always said inflation's going to moderate. but it's going to moderate to the terminal level that the federal reserve is looking for? i feel doubtful. do i believe we could get a stable inflation between 2.8% and 3%? i'd call it a day and a win. >> look, we should remind folks that the pce number, which is what the target is based on, the like 2.8%. that's basically where we're going. >> is that a real good number for the average consumer? it is not. >> actually -- but why do they prefer it? it's because it's weighted by the amount of money we spend on each thing as opposed to what people say they spend more money on. at least that's the fed's theory. >> but it -- if you use the same statistics, how they measured inflation, in the 1980s, higher w weightings from food and housing costs and interest rates -- >> but household budgets spend so much less on food. regardless of what it means for the fed, throughout the long span of history, inflation, 2.5,

3%, plus or minus, has been okay. >> call it a day. >> exactly. that's what i -- i do believe there's room for one or two more easings, and test it out. there are some segments of the economy that are starting to struggle. i think i said over a year ago, the transmission of elevated interest rates in the united states are muted because most people who have a home have a 30-year mortgage. we do not have that structural problem that so many other places in the world that have floating rate mortgages, adjustable rate mortgages, where that impact is immediate. it is very muted. it's very delayed, because of the structure -- which is a fantastic foundation for the american economy. >> although, it is keeping a lid, to a certain extent, on people selling and/or buying new homes right now. we have an extraordinarily low number. >> it's really bad for those who need to move. and it's really bad for the young home buyers who would like to buy. so, i'm not trying to suggest it's even and perfect.

but it's not as severe. the longer we have elevated interest rates, the more of what you just suggested is going to be a bigger problem for the economy. >> you know, larry, when you mentioned car insurance numbers, and the fact that there's, unfortunately, more crashes and the like right now, in part because of distracted driving, i couldn't help but think about full self-driving when it comes, which gets you to the idea of a.i. and what that's going to mean from both a productivity enhancement and potentially as a sort of a deflationary aspect as well, but i'm curious how you think about the advent, particularly of generative a.i. of late, in your business and throughout the corporate world. >> i think a.i. will be the -- will totally transform the business world, the corporate world. if you intersect a.i. with improved sensor technology in addition to that, to improved robotics, it's not only going to transform the business side, the back office, it's going to transform how we manufacture,

and blackrock started our a.i. lab in 2018 at stanford university. it is really helped us improve some of our active -- active growth is in our systematic equity team that uses a.i. and our performance over ten years is about 93% above the, you know, consistent performance. we believe that a.i. will transform how we think, how we invest, data retrieval, information retrieval will be essential. we are using a.i. to revolutionize our aladdin system that we provide to so many people. i'm so neurotic about a.i. i think a.i. is going to -- >> when you say neurotic, is it both a concern or just that you're not using it as effectively as you could? >> all of the above. >> what does that mean? what's your neurosis based on? >> are we moving fast enough? are we cautious enough? are we making sure we have the

structure in place to make sure we can utilize it properly? are we focusing on how we could use new technologies in a.i. to improve the workforce at blackrock and improve how we work with our clients and how do we build deeper, better relationships? it's a very complex issue. i also believe we're going to be using a.i. to transcend how we live. i mean, elon musk, we were talking about earlier, about robo taxis. i mean, if you think about an automobile, it's a very expensive capital expenditure for something that you use for ten hours a week. and if there is an advancement towards more and more robo taxis in cities, you know, think about that. if you don't have to put all that money down on owning a car, more people probably could own a home. there are so many wonderful transformations in society that technology's going to do to improve most people's quality of life.

i was with a ceo earlier this week, and this ceo said to me, we are going to use more technology than ever before, and it means, as we grow our business, as a percent of our business, we'll have fewer human beings as a percent of our business, but each employee will have higher wages. >> right. >> so, you're going to be able to do that. and look at blackrock and our earnings. we have raised assets over $1.5 trillion in the last 18 months and did not add a job. that is productivity. >> although, man, all those people who may not be working and maybe we have to -- i don't know what we do for them. and by the way, what about their retirement savings, which you spend a lot of time in your letter on recently, talking about, and being concerned about. again, to these transformational changes you're talking about. >> they're going to create new jobs. think about all the needs for building out datacenters and management. it's going to reshape our jobs. let's be clear. think about all the jobs that have been lost in society,

whether telephone operators, even -- you know, there's so many jobs that have been eliminated, but we have 3.7% unemployment. over time, we create new jobs, and you know, unfortunately, there's a timing differential, and in many cases, a geographic differential. but look, between decarbonization, between what we're doing in our own country related to hydrocarbons, think about, we went from 8 million barrels of energy in the united states to 13 million barrels of energy, all on new technology. so, we're not even -- we're not focusing on how technology has reshaped even something like energy extraction, energy identification. and it's going to be the same technological transformation that is going to build other industries. it's a new jobs, new job creations, and so i actually believe we should be enthusiastic and front-centered on it.

and i do believe this is what's going to be leading the united states to be the strongest economy in the world. >> i just want to ask you, finally, about china, because i was there this week, and while you're thinking about big picture investment themes, there are some serious questions about where the geopolitics go between the u.s. and china and where the economic growth comes from in china and whether we've seen the peak. how are you thinking about it? >> so getting back to my chairman's letter i talk about hope and fear. i think the biggest fundamental undiscussed question about china is a fear within china. we're spending so much time talk about imports and exports. china is at a 35% savings rate. highest savings rate in the world. and most of that savings rate because they're frightened of the real estate market, they don't have a retirement system or health care system and so the savings rates are extraordinarily high.

they're not consuming. china knowing they don't have a strong domestic economy, trying to export it ways out of its problem and that remainsby to a problem. if you look at most advanced economies, the domestic consumption is 70 plus percent of gdp. in china it's 30% and more of it is export. there lies the paradigm problem between the world and china and china, and the world. china needs to develop more hope within its country, more opportunity in the country and that's the statistic i look at. what is the savings rate. it's a simple thing to look at, and if the savings rates go lower and starting to consume more, that's a good outcome. during covid, because of the behaviors of the china and the lockdown, savings rate was 50%. that's not a good thing. we need to focus on these simple

concepts of hope and fear and translating that to savings rates, and in china that is the most important statistic to look at. whether they can find different places to export that's going to be a big question, but i think secretary yellen said some very appropriate issues related to if, you know, china is not going to be able to export its problem. it's going to have to advance its own economy, and let's see how that plays out. >> larry, thank you for being here. >> thank you. >> stopping by. appreciate it as always. >> good to be here. >> the chairman and ceo of blackrock. >> speaking of china, a topic for our next conversation, nike ceo john don know who in the next hour. before we head to break the bond report and show you what treasuries are doing. a bid for bonds which is a reverse of what we've seen for the past week, past few weeks. 10-year note yield remains above 4.5%. elevated even though they're getting bought with lower yields today. we'll be right back.

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distribution centers owned by amazon. >> i was going to say, they have i think 750,000 robots and 1.5 million people. that jives with what he says. >> right. >> it takes away jobs from specific people, but look the auto plants, you know, integrated robotics decades ago. it's sort of a supplement. >> yeah. curious to see what it looks like. they are adding more robotics all the time. positive takes at least on the coming of advanced technology. larry fink saying ai won't take jobs. >> productivity. people make more and do more things. >> want to be on the right side of the robots when they take over. >> i'm all with you. i know. i don't know where i'm going. >> once they have general artificial intelligence in the robots that exceeds our own. >> can they have your hair? >> still a concern. >> we know what our edge is. >> no. >> mine. >> she went with the hair not the mind. coming up an exclusive nike ceo

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good friday morning. welcome to another hour of "squawk on the street." i'm sara eisen here with david faber live as always at post nine of the new york stock exchange. carl is on assignment. take a look at stocks. we are lower today, but we've paired some of the early losses. the dow is down about 228 points. the s&p down 0.6%. we're negative week, down 0.7% for the week but the nasdaq up for the week .5%. even though today's fall is sharp, a lot of tech winners giving back their games. all lagging today. apple up again after a 4% up day. alphabet higher in today's session. treasuries are also going the other way. it's been a trend of hire

yields. today lower yields. 10-year above 4.5%. there's buying today potentially on this jump in crude oil. brent crude 91.73. geopolitical tensions front and center. gold is higher again. it's been up for several weeks there a row. we're 30 minutes into the trading session, we're going to get to the banks in a moment. here are other movers we're watching. semiconductors under pressure following reports china is telling the country's biggest telecom carriers to phase out foreign chips that are important to their networks. the move could impact the likes of intel and amd in particular. apple is trying to build on yesterday's gains as mentioned coming off its best day in nearly a year but shares are enough for the year. goldman out with a new note reiterating a buy rating, expecting the company to deliver on upcoming earnings. tesla another tech stock struggling this year. citigroup lowering its price target to 180 per share from 196, saying analysts there still see more downside than upside ahead due to demand headwinds.

we have some breaking economic data crossing the tape. university of michigan consumer sentiment data and it is a miss. 77.9. the estimate was around 79.9. breaking it out a little bit, year ahead inflation expectations, which we know the fed watches, they ticked up to 2.9% last month -- excuse me from 2.9% to 3.1% this morning. you never want to see that number go in a higher direction. although when it comes to consumer inflation expectations, a lot of is influenced by energy prices and oil prices have been moving up. you see it at the gas pumps and that's been a problem and has fed into the inflationary worry lately. that's where we begin. this is a week where, you know, january and february hotter inflation numbers were taken as okay, there's some seasonal issues. let's wait for march. we got the march cpi and it was disappointingly high, and that has led to a complete rethink on wall street about how many fed cuts we're going to get, whether

we're even going to get cuts this year. you heard from larry fink head of blackrock on with us, he's been saying for a while inflation will remain sticky and here's what he says about the prospect of getting back to the fed's target. >> i think 2 is a hard number. we have restructured how we frame our economic policy. we have a trillion dollars of fiscal stimulus in the chips act, structure act and ira. we have very poor legal immigration policies that have restricted and that is all inflationary in jobs. the bigger issue is how we think about how we spend our incremental dollars. we're spending a lot more money on services. if you think about where service inflation is really the main culprit of high elevated inflation. we have an aging housing stock in america. our homes have more free

constit frequency of older roofs, busted pipes, this is translating into a higher elevated insurance costs. >> we did see the insurance costs rise significantly in the cpi. >> he hit that and auto insurance as well, talking that. one day you can imagine that will start going down. i didn't think we would goat busted pipes when talking to larry fink there, but that's where he went. >> brought it home. 22% rise in car insurance was what we saw for the month of march and he attributes that to increased crashes and safety issues. some would say the fed can't do anything about that, so why not cut rates. interestingly, fink said that he saw the ability of the fed to cut rates about two times. now the market is wondering are we going to get one, two, three? boston fed president susan collins was on the wires, made some news. she's not a voter this year but said i am still expecting we're going to see slowing in demand start and continue too 2024, and that will help bring inflation

down later in the year. i am in the range of two expected rate cuts. there's still plenty of members of the fed, david, worried about the economy and want to get out in front of any slowdowns. >> 2%, you know, why is that always the perfect number for inflation? given what larry was saying, is there a day that we could imagine that at some point, inflation and/or that number is moved up a bit? >> it's a good debate to have, especially when you're talking about structural factors in the economy, like esg, for instance, when everybody was esg, they should raise the inflation target because that's going to drive prices up across the board. the problem is and the fed can think about this but can't talk about it because it will hurt their credibility on getting back to their inflation target, and, you know, as mike pointed out, we're not too far away if you look at their preferred measure of the pce, it's in the 2.8 range, so it's not too far off. the fed is talking about cutting rates before it gets to 2%, so

it's basically accepting that it doesn't have to be all the way there. it doesn't really matter if they raise their inflation target in the long term because of structural factors as long as they don't end up in a situation where they're cutting rates and then inflation flairs back up and goes back say above 3%. that would be the worst from a credibility stand point. so all the banks are weighing in. bank of america says don't expect anything now until december following another upside surprise to inflation in march. fed cuts will start in december, rather than june. furthermore we expect four 25 cuts in 2025 and another two in 2026, risks skewed towards a later start to rate cuts if housing reflation remains sticky. deutsche bank goes to december. one rate cut this year at the december meeting followed by reductions in 2025. beyond next year we expect the fed to guide the policy rate back to a neutral level likely

below 4% by the end of 2026. now we're into 2025 rate cut expectations. the question is, is the market going to be okay with it because can the economy hold up without rate cuts? >> right. as for the broader equity markets, of course, trying to weigh this, to the point of your debate with mike in terms of the influence of rate policy on equities. it would prove your point this week perhaps given the weakness we've seen to a certain extent, but the economy is strong and, therefore, as we move into earnings season, the expectations are we will see fairly strong reports and/or the possibility of decent guidance, although then i come back to so many things you share with us from the conference call from last quarter. >> uncertainty. >> it's a lot of uncertainty. >> depends what industry you're in. the economy is not strong if you're in some parts of retail that cater to the low income consumer or in electronics or, you know, these categories if you're in housing, household products. these are deflationary goods categories.

it really is in the services sector that has been strong. you know, it also, we get into now we're talking about rate cut timing. we get into the election and bank of america i thought had a great chart. it's a flow chart, so it shows probabilities based on current readings of cpi that i decided to make for us because it showed that we could be on trend for 4 to 5% inflation year over year by the election time if we continue to get readings like we have gotten. the 0.3% monthly gains on inflation. that could be a big problem for president biden. even with the disinflation last year people were still feeling the cumulative impact. if we start to go back up and see these stickier prices what's happening with gas prices, not great. also not a great look for the fed to start cutting in september. >> right before an election. all good points. all right. we've started earnings season, in fact. it does kick off with the banks. leslie picker is monitoring the conference calls. if i can exacome to you on

jpmorgan. i did note that stock is down almost 5%. not sure exactly what it is they said on the call, but certainly curious to hear your reporting. >> david, i saw a headline that that's the worst open for jpmorgan shares since march of 2023, which i would imagine was dragged down due to the regional bank turmoil and kearns about contagion therein. notable, 4.6% decline right now. those shares under pressure after the firm guidance showed slightly higher expenses and net interest income for the year. the firm saying the profitability metric for loan making will be $89 billion, boosted by $1 billion from prior guidance given in january. analysts call that a moderate disappointment given the rate environment, appeared to have grown more favorable for some of the large banks, including jpmorgan. now chairman and ceo jamie dimon addressing the macro environment on the firm's analyst call which ended a short while ago in

response to a question about the health of the commercial real estate environment, a subject very well covered on this show. dimon said rising rates, particularly if the 10-year were to go up to 2% more, assets would be worth about one-fifth less and that could put strain on the system. >> interest rates are important. the recession is important. if things stay where they are today we have kind of the soft landing that seems to be embedded in the marketplace, you know, the real estate will muddle through. you know, obviously, it will be idiosyncratic in different types, a versus b buildings and all hat, but people will muddle through. they won't muddle through under higher rates with a recession. that will be tougher for a lot of folks, not just real estate f that happens. >> jpmorgan's cfo addressing commercial real estate on a media call where he said, quote, there's no light at the end of the tunnel there. the firm reported $144 billion in commercial real estate loans

at quarter end, guys, but david to your question about why the stock is falling of course i think it's largely on the guidance, which disappointed wall street, which was expecting more of an increase to the full-year net interest income outlook for 2024. >> all right. we're going to find out even more about that, leslie. thank you. leslie picker. let's continue the conversation with ubs bank analyst erica na jar yan who has a buy on jpmorgan and wells fargo and neutral on citi. let's start there. it's unusual to see jpmorgan shares down 5% after earnings, erica. >> yeah. absolutely. the street really went there in terms of how they were thinking about the revisions to net interest income or nii. you know, keep in mind that jpmorgan and the other money center banks are asset sensitive, so the more cuts you take out of the forward curve, the more they theoretically

earn, so the $89 billion number mentioned in the earlier bid, i think the street was already above 90 for that metric, and so the 89 was a bit of a disappointment and also when asked, you know, if we took out the three rate cuts that were embedded in, you know, their guidance for the 89, what difference would that make, and we didn't really get a strong answer, firm answer, from jpmorgan. i think that's really a big part of the disappointment. >> so part of it is simply the fact that we very well may not get three rate cuts this year and not getting a clearer answer, i guess n terms of what impact that's going to have on the sfwhank. >> yeah. absolutely. and the other thing, too, is, you know, the provision is going to go up from consensus estimates. those are, you know, those credit costs related to better credit card growth. the tax rate was higher. expenses were a little bit higher because of the fdic. net, net the stock is ripped into the print and now you're not going to get a consequent

epps upgrade. i think that's why the stock is taking a breather here today. >> what about wells fargo? you seem more impressed with the number, although i don't think they upgraded net interest income based on fed path either? >> they didn't. but their fee number was quite the blowout. so, you know, you're looking closely to see if there were any sort of one-time idiosyncrasies in terms of what caused that blowout to consensus, but what was happening there, they earned more in trading, more in investment banking, and they just had overall strength in that line. i think that's really, really important for the long only narrative. the long-term shareholder narrative to the stock, right, because, you know, clearly wells fargo is a fixer upper so to speak, as they deal with the regulatory issues, and i think that beat in the fee revenue item essentially told the street look, they were not just cutting costs, but they were cutting costs overall, but using some of

those cost savings to invest back into the business. and as for net interest income, sara, i think it's too early for wells fargo to upgrade their nii guidance, so i think it's still potentially on the come but jpmorgan not upgrading their nii guidance today makes me less confidence it is to come for wells fargo in the future. >> we will have the wells fargo ceo on in the next hour, but on the expense side i think it was a miss on wells fargo and they reiterated the long-term expense guide that's been important for investors long this stock. what did we learn about expenses there be and at some of the competitors? >> yeah. i think there's not really anything to report. usually the first quarter is seasonally higher, and for jpmorgan, for -- which was impacted by the fdic, but for wells and citi, they're reiterating the core expense run rate. nothing to report other than the quarter is typically seasonally

higher. >> finally to citi which as a stock at least has outperformed many of its peers. something i can't remember having done for years, at least during the first quarter. did this quarter report do enough to continue that momentum? >> i think for now, yeah, sure. i'm a little bit of a citi skeptic in the history and many of us analysts have been burned having buy ratings on that stock, being in love with just the multiple, but i'll tell you what, i think that, you know, citi is truly making good progress. like sara mentioned expenses are still in line with what they're guiding for the year and becoming a more efficient company is critical for that stock to continue to do well. looking forward from here there's a lot of skepticism about whether or not they can hit the revenue target of 80 to $81 billion which they did reiterate today, which it's impossible for me to believe you can cut expenses as a bank and

grow revenues without rate tailwinds. that being said, i think a critical, critical catalyst beyond today for citigroup, are the stress test results in june. you can buy back more than 500 million, what they did this quarter, then that stock can maybe really start working for real and get long only investors from the sidelines because buying back the stock at that kind of discount to tangible book value, is very, very powerful in terms of what that could mean for tangible book value accretion. >> great. something for us to keep in mind as we lead to june. erica, always appreciate it. thank you. >> thank you. as we head to break, here's our road map for you for the rest of the hour. wild week for stocks and bonds, how to position your portfolio from here as we head into next week's flood of earnings. >> plus, always some big moves in technology. apple, for example, shares coming off the best day in almost a year. amazon at all-time highs. we got a number of street calls that you need to know about.

and a rare exclusive with nike ceo john donahoe on his preparations for the paris olympics, the health of retail and the consumer and much more. big show still ahead. "squawk on the street" will be right back after a quick break. at pgim, finding opportunity in fixed income today, helps secure tomorrow. our time-tested fixed income suite, backed by over 145 years of risk experience, helps investors meet their goals. pgim investments. shaping tomorrow today. investment professionals know the importance of keeping their clients on track. sometimes they need help cutting through the noise, to ensure fresh investment ideas keep flowing,

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their second negative week in a row. the 10-year shy of its highest levels. joining us now is cross mark global investment ceo and cio bob dahl. i wonder if there's some sort of gold is up, oil is up, dollar is up and commodities and tech and what that tells you happened this week. >> what it's saying, sara, the economy is okay, inflation is not. that it's too stubborn and you covered that well in the first two minutes. less rate cuts, that's not good for valuations. stocks selling at 21.5 times are assuming that [ inaudible ] cut rates in the year six times and then four and then three and now it's two, maybe not at all, i think we will also have fresh [ inaudible ] sara, 11% this year, 13 consecutive year, they're big numbers without coming off some depressed level

from a recession, and first quarter analysts are only expecting 5% gain, probably going to get 11 for the full year. i'm concerned with all the cross currents. >> you've been pretty cautious. you've been cautious coming into this year, right? >> cautious, yes. >> the gains we've had so far this year, i guess you still think that we're heading for a challenging period? >> yeah. you know, when the p/es are over 20, things better be nearly perfect, and when you're not getting the rate cuts, you can't sustain the p/e, and then if -- if earnings become a question mark, that will cause a lot more people to ask questions. >> why do you think earnings will become a question mark if the economic data continues to surprise mostly in a better place? >> well, let's look at the evidence. first quarter prereleases, the percentage that were negative were the highest in five years. companies are struggling to raise prices as much as they

were earlier. consumers are beginning to balk at that. they're still having cost pressures, whether it's labor or, as you mentioned, raw materials, so i think we'll have some profit issues as the year transpires. >> what do you like, if anything, bob, given the rest of the year is ahead of us? >> right. a lot of portfolios my long onlies are fully invested. i'm focusing on common factors, companies with high earnings predictability, high earnings persistence, strong free cash flow. those stocks ahave done just fie as the markets have gone up. they will show defensive characters if the market has further slippage here in the next weeks. >> okay. bob, thanks for checking in. appreciate it. after a bumpy ride this week. we're down 0.75%, almost a full% for the week. bob dahl. as we head to break let's give you a look at the biggest

gainers on the s&p for the week. there's that ge vernova, the spinoff from ge aerospace. everything trades independently. you can see it's had a very strong week. joined there by at the bottom palo alto and first solar. we're back in two. when it comes to investing, we live in uncertain times. some assets can evaporate at the click of a button. others can deflate with a single policy change. savvy investors know that gold has stood the test of time as a reliable real asset. so how do you invest in gold? sandstorm gold royalties is a publicly traded company offering a diversified portfolio of mining royalties in one simple investment. learn more about a brighter way to invest in gold at sandstormgold.com.

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cnbc and the nrf out with data on the consumer. steve liesman has the exclusive results. >> good morning, david. consumers continue moderately strong spending in march, spending that looks a little bit better when you consider that inflation in the consumer goods sector apart from the overall number is flat and even negative. the cnbc-nrf retail monitor for march powered by real credit card spending data shows retail sales ex-auto and gas up 0.04 in february, a february by the way where we removed the leap day for comparison purposes, taking out, look at year over year 2.7 versus 2.7. take out restaurants for the core retail number 0.2, down

less than 0.1 at 0.23 versus 0.27. the rounding. 0.1 decline 2.9 versus 3% in february, adjusted to remove the leap day. the history shows volatility over the past several months. spending has bounced back in the positive territory for two months in a row after the january decline. some wondering whether we were seeing the long awaited consumer slowdown. still waiting for that. evenly mixed result, six up, six down, the top and bottom three. nonstore retailers, that's your internet number up strong, food and beverages up strong and sporting goods and hobbies up almost a percentage point, that's a discretionary area. the two next sector, the negative, connected with what we've seen to the home buildings sectors and appliances also. those prices have come down. there could be deflation in the

electronics and appliances as well as an impact on the housing market, despite higher overall inflation which we reported in the market and rocked the market earlier this week. goods inflation has been flat to negative in eight of the past 12 months. consumers are looking for value and it's a competitive market according to the nrf. government reported that prices for consumer goods imports, autos, fell in march and yesterday's wholesale price report showed 0.1% increase for consumer goods prices that should be good news for retail margins even with a consumer looking for value and a competitive market, but, of course, there are the challenges, guys, from high labor costs that we have to watch out for when it comes to margins. i don't know what you're hearing from your retail contacts when it comes to the margins, but at least the input costs seems to be well controlled on the goods side. >> they're getting the tailwind from lower input and freight costs on one hand, but apparel prices not getting a ton of

pricing power. a weaker category. >> yeah. actually it was up in the last report, kind of like an eye popper on this. 0.7 increase. we'll have to see if that's a trend. i am interested in how the minimum wage increases feed through to the bottom line. it -- i did get a note from matt shay from the nrf, there is not price gouging not going on in the retail business and that may be accurate given what's happened. we'll see if the profit margins remain relatively stable or if they come down even a little bit, given they had increased during the prior two years. >> and everybody is doing a little productivity savings too which could help margins. thank you, steve liesman, interesting take on the consumer. after the break, our exclusive with the ceo of nike, live from paris, unveiling new uniforms for the summer olympics. we'll be right back.

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welcome back to "squawk on the street." i'm bertha coombs with your cnbc news update. the u.s. is restricting travel for its staff in israel as tel aviv reportedly prepares for an iranian attack this weekend. the security alert restricts u.s. employees and their family members from personal travel in certain parts of israel out of an abundance of caution. india, france and other countries have issued similar warnings to their citizens. russia is reviewing a peace proposal from 2022 that ukraine had previously rejected. the kremlin said today that the draft agreement could serve as a starting point for talks to end the war. russia has dismissed ukraine's proposal which demands for moscow to pull back its troops, compensate ukraine and face an international tribunal. president biden announced another round of student debt forgiveness this morning. he said today his administration

will cancel $7.4 billion in loans for 277,000 borrowers in certain low income programs. with this latest move the white house says it has now canceled $153 billion in loans for 4.3 million americans. sara, back over to you. >> thank you very much. we're about an hour into trading just want to show you what's happening in the market. we've turned south again. the dow down 321 points. the banks are definitely part of that story with jpmorgan the biggest drag off earnings. goldman sachs right down there with it. microsoft is getting hit. technology giving back a lot of yesterday's gains. the only two sectors working today are energy and utilities. oil prices marching higher on these increased geopolitical fears around potential iranian attack on israel. brent crude above $91 per barrel. gold is higher again. the geopolitical tension reflected there.

the u.s. dollar continues to march higher and had a very strong week up almost 1.7% on stickier inflation. the summer olympics are just over three months away. while paris is preparing for the games, so are major sponsors like nike. unveiling its new uniforms for teams and athletes. team usa and others from running to break dancing. ceo john donahoe joins me now to discuss his outlook for the summer games and the company as a whole. john, welcome, good to see you in paris this morning. >> great to see you, sara. >> tell us what's new and different about this olympics unveil. >> well, as you mentioned, i'm here in paris where in this very venue last night we unveiled a major multiyear innovation cycle. we did it in a way only nike can, with the world's greatest athletes, what is the biggest stage in sport, the summer games. i'll tell you, i wish you could

have been here, sara. it was remarkable. we had 40 of the greatest athletes in the world ranging from four-time medalist elliott, sha'carri richardson, serena williams, dawn staley, they were showcasing an unprecedented array of disruptive innovation from nike. they are the models in the show. and that just portends what is coming this summer on the track, on the court, on the pitch, in the summer olympics. >> i wish i could have been there, too, because it's paris in part. how do you take this momentum and use it to reignite growth on a bigger scale in mass market? >> well, what nike has always done, sara is take bold moments of disruptive innovation, combine them with major moments in sport, and then use that as a launching pad for delivering that same innovation to

consumers. so an example would be, we are launching the fastest shoe in the world. the alphafly 3, the super show, broke the marathon world record last year. it is incredible demand. it will be on the feet of many marathoners this summer. that's for the elite runner. at the same time, we're cascading that same disruptive technology down for everyday runners so we'll be launching the peg 41 in the summer for consumers. our most significant advancement in the pegasus yet. and we'll be announcing and launching a disruptive shoe for everyday a runners in the pegasus premium, a first time we've taken full length zoom air and put it in a shoe that delivers great performance and comfort, and cushioning for consumers, which what is they want. so our experience has been when we launch these big moments in sport, we then cascade them down to consumers all over the world. >> some investors do see the olympics as a catalyst for you.

i wonder how much of a sales bump you anticipate from the games themselves and then how sustainable that is to future quarters? >> well, the way, sara, we think about innovation is, it's got to come season after season after season. that's why we're so excited about this multiyear innovation cycle. it's not just one product or one platform. it's going to be continuous. so we started two weeks ago by launching the air max dn. our most innovative air max in years. it's got dynamic air technology. it's a lifestyle shoe that's been very well received worldwide. then this spring, we'll be launching, as i mentioned, the peg 41 through the channels our most advanced football kits and soccer kits in football. the way we drive our growth is have the innovation coming season after season and that's what drives our growth over time. >> so why has that not been

happening, john? because you mentioned on recent earnings calls that there's been a lack of newness and that's what investors have been concerned about. so what happened that you're doing differently now? >> yeah. there's -- i'll reiterate a huge amount of innovation going on at nike, sara, in this multiyear pipeline, the innovation engine is running at full speed. over the last four years, we've grown. we've grown from $39 billion to $52 billion last year, $39 billion in 2019 to 52. we've been growing at a 9% growth rate on a constant currency basis over the last four years. growth hasn't been the issue. what's driven that growth is what i would characterize as iterative innovation. we still have the best basketball shoes in the world. launching new shoes like the sabrina 1, the best football shoes, the best fitness, and the

best iterative innovation in lifestyle and that's what's driven our growth. what's been missing is the kind of bold disruptive innovation that nike is known for. and when we look back, the reasons are fairly straightforward. i think lorain mentioned this yesterday, but our industry has gone through an awful lot of operational challenges with supply chain, all the footwear factories in vietnam closed for 12 weeks a couple years ago, so 25% of the world's sneakers didn't get made, and so we were navigating through that. but even more importantly our employees were working from home for two and a half years. in hindsight it turns out it's really hard to do bold disruptive innovation, to develop a boldly disruptive shoe, on zoom. and so our teams came back together, 18 months ago in person, and we recognize this, and so we realigned our company and over the last year we have been ruthlessly focused on

rebuilding our disruptive innovation pipeline with our iterative pipeline. the pipeline is as strong as ever, and we're going into the period where we'll see season after season, great innovator product from nike along with the kind of story telling we're known for and we'll drive growth. >> is that why brands like hoka and on were able to capture market share, specifically in running, which is such a core category for you and what do you expect going forward there? >> well, as you know, nike was fo founded as a running company and done more to advance running than any other brand in the world over the last 50 years. we continue to lead with elite runners, but innovation has always been what's marked nike in running as another category. we're not just going to copy what other people do. we're going to bring innovation. the kind of disruptive innovation i mentioned a minute

ago with updating the pegasus family, so we'll be bringing new, fresh, bold innovation to running, and we'll be getting back to where the runners are, the everyday runners are, in the local races, the marathons, at the retail running shops. so our innovative product, plus our presence in the running community, is what will drive our continued leadership in running. >> you mentioned lorain hutchinson who upgraded your stock yesterday at bank of america because she sees a turn in the cycle. a number of analysts have downgraded the stock in recent months and ones said it appears if consultants rather than nike experts are leading strategy decisions. i wonder how you can respond to that and what you can tell us about the new team, because you have made a lot of executive changes. >> well, there's nothing further from the truth than that statement. we have a great team of seasoned veterans who are leading this project innovation cycle.

i think the average tenure of the top 40 people in the company is close to 20 years. these are people that have had huge history, they're incredibly talented, most creative innovator, shoe designer, apparel creators,brand marketers and merchandisers in the world, and so we have a very strong seasoned team that's leading this innovation cycle. nike has been here before. nike has a history of having periods of significant growth like we've had over the past four years, and then re-establishing the next wave of growth on the backs of innovative products. our team has everything that it takes and performing in extraordinary ways. >> i want to ask about china, john, because, obviously, that is a key story for you for growth, and it has been growing, but not as much as we've seen in recent years. what are you seeing there? is it macro related spending factors? is it brand or competition? what's happening on the ground? >> well, what we see, sara, is

sport is strong in china. and nike is strong if china. we're the number one sports brand, and we've always taken a long-term view. we entered china 40 years ago and that's what a enabled us to have a leadership position today. what a we're doing is continuing to do what has gotten us to this stage. the china consumer wants global innovation, and wants it hyper localized. it wants global brand and getting its hyper localized. that's exactly what we'll do. we'll take the air max dn, a bold disruptive global innovation, but hyper localize it in colors and ways of bringing it to the china market. we're doing the same with our story telling. hyper localizing the china consumer. the china consumer feels like nike is their brand, and if we bring innovation, they respond. we're a very -- we're very optimistic about growth over the long term.

there's macro economic headwinds right now, but we're -- you know we face those like anyone else and we're gaining share and we'll continue to lean into china. we're investing in china and continue to lean in for the long term. >> you're leaning into wholesale which is a bit of a change from nike. it's been about direct to consumer, sellen your website and -- sell on your website and stores, now there's a shift and what does that strategy look like going forward? >> well, sara, our marketplace approach has always been starting with the consumer. in simple terms, consumers today want to get what they want, when they want it, how they want it. that's true in consuming media as you know. sometimes watch you on my mobile device, sometimes on my ipad, sometimes on my tv. the same thing is true of shoppers. shoppers, there's not digital shoppers versus physical retail shoppers. there's not shoppers who only shop in mono brand stores versus multibrand stores. shoppers shop across --

consumers want to get what they want across multiple channels. now it almost always these days starts with a mobile device, where consumers are doing their homework, investigating and we're blessed to have two of the biggest mobile apps in our industry, the nike mobile app and sneakers mobile app and doubled down in growing our mobile business and digital business which has grown remarkably, tripled in the last four years from roughly 10% to now almost 30, over $10 billion. we also offer consumers the choice of coming into one of our doors like our house of innovation here in paris, but retail come out of covid, it was clear that consumers were also coming back into physical retail and we recognize in our movement towards digital we overrotated away from wholesale more than we intended. we've corrected that. we're investing heavily with our retail partners. they were all here over the last couple days. they're very excited about the innovation pipeline leaning in, and so working together we'll do

what only nike and the world's leading retailers can do, to both elevate the marketplace and grow the marketplace. that's what's driven nike's growth over the years. we grow the market, we grow the market of sport, lifestyle, off of sport, and that's what we'll be doing. consumer will have a choice to come to nike directly, to come to a nike door or to one of our wholesale or one of our retail partners, we call them wholesale partners. the key for us is to be where the consumer is at all times. >> i got to ask you about what the whole country is talking about, women's basketball. you sponsor caitlin clark and angel reese and it's having a moment right now and i wonder if that's translating into a sales bump for you, and whether it's sustainable and how you plan to leverage that? >> well, it was an incredible ncaa tournament, incredible season for caitlin clark and angel and so many athletes, but what a tournament.

yo you're right, women's sports is on fire. that's true in basketball. i went to the women's world cup last summer in australia and new zealand, women's soccer around the world is on fire. it's an exciting moment for women's sports, and we're right there. our women's is an important business for us and opportunity for us. over the last four years we've doubled our investment in innovation, in our women products. that's showing results. we grew double digits in women's last year. we have more women who are joining our membership program than even men, and here's an interesting thing, sara. it's no longer separate women's and men's. there's a lot of crossover. we launched the sabrina 1, her hallmark shoe last year. it got enormous reception. both from women, elite basketball players in the wnba, from young girls, but also nba players. many nba players and ncaa

players wearing the sa written na 1 on the court, young boys, it's the number one basketball shoe in beijing for boys. there's crossover appeal when you innovate for one gender, it can apply across the board. that's one of the, citing things that sports does. sports connects people. >> when is the caitlin shoe coming? that's what i want to know, the caitlin 1. >> we'll see. we'll see. >> maybe when she goes -- >> keep watching. >> you know i will. thank you for the time and for taking on all the topics. appreciate it. from paris, john donahoe, ceo of nike. a programming note, cnbc's coverage of the summer olympics live from paris does begin friday, july 26th. of course, our carl quintanilla will be there to cover it as he always does. and i think the important headline there, david, was that he looks at the olympics as kicking off what donahoe called a multiyear cycle of innovation. and that's something that investors have been hungry for.

it's why the stock has underperformed this year and over the last few. >> i thought the headline was work from home doesn't work. >> true. that's part of the reason why. >> those were interesting comments. disruptive innovation. disruptive innovation does not happen on zoom. >> it's an excuse. it's valid, right? we know that. we're better in person together, anchoring a tv show. >> that's the only way i would have it. unfortunately, we're not in person with dom, but we're watching a market that's a good deal lower right now. apple, though, coming off what was its best day in almost a year. there he is, dom chu, watching things back at hq. what have you got? >> david, sara, i'm with you in spirit always. to your point, it's been a roller coaster ride of a week. it led to a full recovery in certain parts of the market by certain measures to the hotter than expected cpi selloff happening on wednesday. that recovery has specifically been led by mega cap technology,

indicating muscle memory of buying these stocks is still very much intact. you take the biggest of the big, $2 trillion, microsoft holding relatively steady over the course of the last week. notable upside moves, apple and nvidia to close out the week, as you can see on the bottom end of this chart. especially in apple, more optimism around its a.i. ambitions. analysts at goldman reiteratedr. the $2 trillion club, google, meta, alphabet, finally hitting amazon, joining new peers. apple mega cap around $9.9 trillion. amazon's market cap around $1.96 trillion, each higher for the week as well. more broadly speaking, there's a little more optimism around that rally in energy stocks and it could have more upside. analysts at morgan stanley are upping it to attractive, giving a number of factor, including

stronger oil, more buybacks in the future, compelling valuations. so, that plays into this whole market rally broadening theme, sara. sara, david, keep a close eye on that equal weighted s&p. we'll see what happens. next hour on "money movers," don't miss the cfo of wells fargo breaking down his bank's earnings beat at the top of the hour. thheowbe right back. wi t d down 400 points. banks are the biggest weight there.

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that's like $20 a month per unlimited line... i don't want to miss that. that's amazing doc. mobile savings are calling. visit xfinitymobile.com to learn more. doc? welcome back to "squawk on the street." we're monitoring the wells fargo conference call after that bank q1 earnings. shares bouncing back somewhat after initial disappointment when wells first reported earlier this morning. wells fargo opted not to adjust its net interest income guidance for the year and nii for q1 missed expectations and decline 8% year over year. in the higher for longer interest rate environment, which the street expected to bolster that metric for loan making, such muted performance initially pressured shares. executives on the call urging analysts to look at the bigger picture on how higher for longer rates impact nii.

>> and when you look at the impact of that in isolation, you certainly would see a benefit from less rate cuts, but i do think you have to put that in context of, okay, now what's going to happen with, you know, client behavior and mixed shifts as we look for the rest of the year. i mean, it's certainly clear. we feel better today than we did in january about, you know, our guidance and our forecast there, but i do think we have to let some more time play out to see how people react to what's happening. >> wells executives say they now see three rate cuts this year, which is down from earlier in the year, guys. >> leslie, thank you. we'll keep an eye on that. of course, we'll have the cfo coming up in the next hour. and our coverage of a market that is at the lows of the session continues right after this. trading at schwab is now powered by ameritrade, giving traders even more ways to sharpen their skills with tailored education. get an expanding library filled with new online videos,

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