Squawk on the Street : CNBC : June 21, 2024 9:00am-11:00am EDT : Free Borrow & Streaming : Internet Archive (2024)

represents speculation or not, but thank you, victoria. final check on the markets. all red. red across the board. >> no, wait, the nasdaq is positive. >> nasdaq just turned positive. it's like -- it might as well be monday already. >> no, no, no. >> we're going to enjoy this. soak it up. it's going to be hot. >> live it up. >> join us -- too hot. join us next week. "squawk on the street" is next. ♪ good friday morning, welcome to "squawk on the street." cramer and faber have the morning off. futures relatively steady after thursday's downside s&p reversal. big options expirations today would bring some fireworks. euro zone pmis slow down. our own ten-year yield is down to 4.22%. the nasdaq, ending its string of recent records. plus, nvidia pulling back,

losing the most valuable crown. shares of it and other chip makers down sharply from the highs of the week. we'll get into that action in just a moment. corporate hack attacks, thousands of auto dealers going back to pen-and-paper deals after a cyber breakdown at a key software provider heads into its third day. let's begin with this tech pullback we got yesterday, snapping the nasdaq's seven-day win streak. mike, you were here to see it firsthand. >> yep. >> explanations? >> i would say you could make observations and descriptions more than explanations, but the set-up was obviously there. not just seven days up in the nasdaq 100, but statistically, as stretched to the upside as you've only been a handful of times, a half dozen times in the last decade. so, the makings for an enough for now moment for the momentum sector of the market was absolutely there. nvidia, obviously, embodies everything in an amplified way. that was the case yesterday as well. opens up 3.5%, ends up down 3.5% on the day. very similar action to a day in march, march 8th, opened up

about 3% at a new high, downside reversal. what happened after that? that was a short-term peak for the momentum factor in the market. >> yeah. >> it flattened out relative to the rest of the market. didn't do much. nvidia had like a 15%-plus pullback, ultimately, over the next month or two, but you look at a chart, i guess, a longer term chart, you barely see it. it's like a little stutter step. i think you can be prepared for the, at least, possibility that this could result in rotation, as it did yesterday, or it could create more chop because you do have the expirations it kind of clears the decks. it's like all the accumulated call option buying and the hottest stocks essentially comes due today. the dealers that had to buy the stock to hedge it, they can kind of ease back, and then you have the market you're left with afterwards. >> look at that sideways action right after that outside reverse day that you referred to back in march, we talked about on "fast money," that was one of the best buying opportunities you could

have been presented with. now look at where we are here. >> it did get down to 76, i think, ultimately. >> right. the key is, will the buyers step in at this point in the cycle? it was a very different picture back in march in terms of what has been priced in. i think it's also notable, though, that it's not just nvidia alone with an outside reversal. we saw broadcom first with the outside reversal on tuesday, so it was sort of a bit of foreshadowing in terms of people examining this a.i. semi space, thinking about the stretch that the nasdaq has had and re-evaluating positioning, triple which doesn't help the situation, and so here we are. >> we were on pace for the nasdaq's longest win streak of the year so far. also had this -- the stories on the wires looking at fed fund futures bets, and this idea that one particular trade would get paid well if powell turned the july meeting into a live one. >> yes. >> which got some discussion. >> i guess that's been kicked around. didn't allen blinder say last

week on our air, he thought july, actually, would be a smart time to think about going? >> yes. >> who knows what has to happen between now and then in the next few weeks, really? it's, what is it, five weeks until that meeting for them to have what he needs to either make a cut or at least make that the time when you say, next meeting, we cut. it's interesting. we're talking about the market spon responding to its own mechanics here in a lot of respects, both for the fed funds futures and how it spills into stocks, and you know, these parts of the market that have essentially gotten too big for their shell in a way, and they kind of wag the dog in the absence of macro. i know we're going to talk about a lot of that stuff in terms of the index weightings and the etf flows. as semi etf flows were off the charts for a couple of weeks before this. it's not as if you didn't see the makings of some kind of a gut check. >> yeah. what was notable within the semi sector yesterday, in terms of a potential rotation within the sector, we did see amd.

we just talked about amd yesterday as being a huge laggard, really not doing much for the past month and a half or so. we asked stacy raskin about that yesterday, and he said broadcom is really the main competitor to nvidia at this point, but we did see money going into amd yesterday on nvidia and broadcom's and just the general malaise in the semiconductor s sector. >> you also saw energy up a couple percent. lilly, downside reversal, same moment in the day. chipotle. so, it's the momentum theme that has taken a backseat, and who knows? it could pick up again right now, but this is the mechanics, and we talk about amd getting a bid or the laggards getting picked up. that's a mechanical action. i'm saying, like, oh, the momentum trade is actually long high momentum, short low momentum, so both wings of it kind of moved. >> there is -- it's getting fueled to some degree by news. qualcomm's going to open down almost 2% on this "journal" report that some snap dragon

chips in the samsung galaxy make some computers unable to run various elements of adobe software or "fortnite." as for the rebalancing here, mike, and the -- as history goes, the options expiration today is large. >> very large. the biggest ever. basically, when you have record option volumes on a daily basis now, certainly concentrated in the highest weightings in the s&p and the nasdaq, that's as much open interest as stays in the books and then gets cleared away. you also -- there's all these other -- i want to get into it too deeply, but there's all these other products out there, these insurance-type products, these hedge fund products where everyone kind of knows what they have to do when it gets to these quarterly moments and they have to either take on or rehedge risk, or they have to, you know, have an asset allocation move. a lot of that gets done in advance of the actual expiration, but yes, you know, this is going to be one of those moments where you're starting

with a relatively blank slate on monday. you know, it doesn't say anything directionally, but sometimes, inflections and trends do happen around those points. >> i mean, i think it's, what -- depending on the number, the estimates, 4.5 or $5.5 trillion? >> emotional value. >> does depend on your estimate. >> yeah, and notional is funny. it's like the grand, you know, underlying value of that. but you know, and then, of course, people focusing on the xlk, the s&p, tech spdr rebalance which is part of this and it's not a lot of money in the grand scheme. it's $10 billion, likely, moving from apple to nvidia in terms of the fund. these stocks are worth more than $3 trillion each, let's remember. but it does, again, show that because the products don't want to get too sqkewed in one direction, they have to not be market cap weighted. they have to have these adjustments. even the nasdaq 100 is really ske

sk skewed. if it was just pure market cap weighted, apple, microsoft, and nvidia would be a lot bigger than they are. meta is way overrepresented in the nasdaq 100 and the qqq because they have to shrink down the ones that are bigger than it. so, microsoft is 1.9 times meta's market cap weight in the nasdaq 100. it's 2.6 times actual market cap. so, you go down the list, google's underrepresented, and i think that's an interesting element of it, where it's just, the market's gotten away from the wrappers to a degree. and it brings me back to 2018. remember when they created the communication services sector? part of that is, well, telecom is only 2% of the index. tech is 26%. let's shovel something from tech into something new called communication services. guess what? you got tech down to 20% after that. it's up to 33%. you can't keep beating it back. >> yeah. >> how would you, though, mike, think about expert -- triple

whiching and whether or not there is the start of a down trend? >> i don't know how easy it is to handicap. to me, the big question is, does it result more in an opportunity for rotation given that the vast majority of stocks have been doing not very much. you have the median stock up just a couple, 3% on a year to date basis in the s&p 500. so, in theory, there's room for them to benefit from lower yields, and if we get a kind of tracking toward a soft landing, the question is whether there's an appetite for that or if it's just going on a big profit-taking moment. july is usually a positive month, but we're without catalysts. i think the longer term trends are intact. but valuation is pretty challenging in general for the biggest stocks, and you probably got to fight your way through that a little bit.

>> meantime, nice note out of the jpm desk. looking for 9% year on year, and revenue up almost 5%. that would be 15 quarters of revenue growth anyway. >> exactly. and they have been, you know, beating by two three percentage points per quarter pretty consistently, so 9% probably gets you above 10 by the time you're done. still skewed by the biggest names but less so than it has been recently. >> lot to get to this morning, including, when we return, ferrari making this bet on evs. our robert frank is in italy in morning. hey, robert. >> carl, even their factories are gorgeous. ferrari, just minutes ago, opening up this, their most advanced factory yet, and it is where they will build the first all-electric ferrari. we're going to take you inside and hear from the ceo live from marinello when we come back.

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ro robert frank is live in italy where he spoke exclusively with ferrari's ceo. >> good morning, melissa. ferrari, just moments ago, opening up what they're calling the e-building, a 450,000-square-foot plant. what makes this factory unusual is that they will be able to make three kinds of ferraris here. they'll make the traditional combustion engine car. they will make hybrid cars, which now account for half of all ferrari sales, and they will make the first all-electric ferrari. now, the ceo saying demand for all-electric ferraris is strong or it certainly will be by the time they launch. >> i believe that in the future, we will have client that today are buying our car that they will switch to electric. they will add those. they will buy also electric, and they will be clients that will not buy electric. >> ferrari only produced 14,000

cars last year. production was flat in the first quarter, but they can actually continue to make more profits on each car because of customization and higher prices. in fact, if you look at what ferrari makes on a per-car basis, per dollar, they make about $126,000 per car, so you'd have to sell about five porsches, about 15 bmws, just to get to the dollar profit of a ferrari. that's why that stock is up 27% this year, and guys, if you look at the market cap of ferrari, it is about 1.5 times that of ford or gm. they make millions of cars, and on a pe basis, ferrari now trades at 50 times forward earnings, so yes, in fact, they're not just a luxury stock. they're better than any other luxury stock, certainly in terms of valuation right now. >> and nvidia. robert, i'm wondering, are they shutting down another plant, or are they increasing production? because part of the allure is

the rarity, the sort of the -- the you know, the exclusive factor to ferrari. >> and melissa, that is the delicate balance that ferrari is trying to walk. when i asked, this will clearly increase production, they're not shutting anything down, i asked the ceo yesterday, will this get you to 20,000 or 25,000? he refused to say. if they do increase production beyond the 14,000 that they had last year, it will be very incremental because, remember, ferraris are unique in that a preowned ferrari often sells for more than a new ferrari, and in order to maintain those resale values, they have to keep production small, and of course, as you say, they want to keep it as a hard to get, exclusive product, so yes, they will increase production, but they're not telling us by how much or by when. >> that get to what i was interested in. when you see the market put one of these very generous valuations on a company, it's

usually because this is a business that magically scales. and that, you know, essentially all incremental production is profit. not really the case or at least the model for ferrari. why is ferrari so intent on making sure resale values stay so high? do they feel as if they're one of the things they're offering to their new buyers? >> it's one of what makes ferrari an investment and not just another car, but it's also part of why this brand is now one of the most respected brands in the world. nearly 100 years after it started. because of that scarci. they like the idea that even if you can get on the order list for a ferrari, it now takes three years to get one. and that makes it special at a time when, you know, mass luxury and things just aren't that special. so, they're really thinking the long-term, next hundred years, about the brand value and what's interesting is they have been able to do that while also keeping shareholders happy with the increased profits, the

dividend, and the incredible amount that they grow per car, and the fact that they have this waiting list means that even if we have a downturn, they're insulated from that. >> robert, we did get some ev sales figures out of europe just yesterday for the month of may, down 12 year on year. down 30 in germany. and i wonder if the company has a thought on whether this is -- they clearly think it's somewhat of a hiccup, right? >> well, ferrari is almost in a class of its own. we all know ferraris are the roaring, emotional, beasts of the road. does anyone want a silent ferrari? and their point is, to build this factory, they've hedged their bets. this factory, which is very advanced, can make combustion engine cars. they can make hybrid cars, like what you see behind me, or they can make electric cars. so, whatever that balance, carl, if demand is stronger than they expected for evs or less strong,

they can manage it within the factory because it's so flexible. that was part of this design. >> fabulous, robert. look forward to talking a lot more in the course of the day. nice gig, robert frank, in italy. as usual. still to come, a closer look at some of the winners and losers when it comes to a.i. take another look here at the premarket as we approach the opening bell. we'll get to some news on the likes of boeing, starbucks, carmax, united, when we return. ♪♪ citi's industry leading global payments solutions help their clients move money around the world seamlessly in over 180 countries... and help a partner like the world food programme as they provide more than food to people in need. together, citi and the world food programme empower families across the globe. ♪♪ ♪ (alarm sound) ♪ amelia, turn off alarm. amelia, weather. 70 degrees and sunny today.

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i'm coming for my revenge gru. who's the loser now? loser loser. -loser, loser. some portions of tech trying to recover from yesterday's losses. take a look at some nasdaq 100 laggards. you'll see a lot of tech in there, including micron. nvidia going to open down another 3%. we mentioned broadcom and asml. don't forget, you can catch us any time, anywhere. lten to and follow the "squawk on the street: opening bell" podcast.

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>> announcer: the opening bell is brought to you by ncuveen, a leader in income, alternatives, and responsible investing. grappling with a sales slump and a stock down double digits this year, starbucks looking to win back some customers by offering discounts, including buy one, get one free deals. just weeks ago, the company did launch a $5 value menu. according to t"the journal," starbucks ran promotions for about half the month of may. we mentioned mcdonald's

yesterday. "journal's" got a piece about grocers embracing private label. >> i think the question is whether or not starbucks and mcdonald's, for that matter, we were talking about the summer of value. if they waited a long time in order to finally do this, they waited for, really, the tide to turn for same store sales to really be firmly lower, and a consumer to be firmly under pressure, at least through their cohorts, so i don't know. are you going to go back now for a couple weeks, maybe, while they have two for one? >> i don't know. i mean, i feel like it's interesting that the period of pricing power where they were really pushing it and felt like they could get away with it was really the aberration of the last 20 or 30 years of how these companies market themselves. so, i wonder if they could just kind of re-engage the value story, the advertising push, and just, you know, make it a push for efficiency. i don't know what the numbers look like. it does strike me, though, when it comes to the frappuccino thing, that the ceo of dutch

bros, i recall, she was telling jim last week that 80% of their volume is cold. it's iced drinks. they're selling big cups of ice at a premium. >> with a little bit of coffee. >> yeah. so, maybe it's workable on a cost basis, but i don't know. it's sort of interesting that they're moving that way. we said, i wanted to find a chart of calories per dollar that the u.s. consumer enjoys, you know, at, let's say, quick serve. it would have been going to the moon except for the last couple years. >> for starbucks, the proposition to its customers for so long has been a little bit of luxury every morning. you'll cut back on a lot of things but go in and get that coffee because that's your little reward to yourself for that day. now, they're going to compete, do two-for-one. it's a completely different mindset for that customer. >> meantime, the street's obviously on the hunt for any signs of disinflation or deflation. you got lumber, lowest in over a year. mortgage rates, down three straight weeks, lowest since

early april, and then fund strat, last night, with a look at the car market. he sees another double-digit drop in used and new. it is the second largest component to cpi. it's one reason, he thinks,why this discussion of a july meeting going live made some sense yesterday. of course, tom got his 5,500 yesterday on the s&p, and he says, stay constructive in june. >> yeah. you tweeted an interesting chart this morning about disposable income, and i'm wondering if part of that is because of the pullback in prices that we have seen over the past month or so. >> yeah, b of a has been constructive on lots of things for a long time, but they have a big note. u.s. has sustained this soft landing. they see it continuing through the end of '26, and they did point out, disposable income is outpacing inflation. employment growth, they still see 216,000 average this year, 156 next year. they don't see unemployment getting above 4.2% and staying near some five-second lows. >> that disposable income acts as a cushion in large part

because very low financial obligations for borrowing. now, obviously, not across the board. but in aggregate, that's different than other late-cycle environments where you really have those borrowing costs trying to inch up. i just read the market, action and reactions. market's much less on edge about the inflation trend. >> completely. >> than about the growth trend. it's almost like when the fed acknowledges this, the market is going to be like, we've been here. >> yeah, yeah, and that's why we're following all the action in nvidia, because it's all about nvidia. we're also following apple today because bernstein had an interesting note out on apple. >> how about that? >> raise the eps estimates for fiscal year 2025, which is interest, because while he says that he still thinks apple can be a beneficiary and a leader in a.i., it's going to take longer than, perhaps, investors are baking in at this point. still raising the estimates for fiscal year 2025, which does not capture the iphone 16 upgrade cycle. they're raising the estimates with just the 15. i thought that was interesting.

>> to me, that has to be the story. earnings revisions as opposed to the multiple going up. >> tony gets a lot of props from cramer for making a good call on apple a few weeks ago. going to $240 today. he says investors will now -- the leader in a.i., not a laggard. let's get the opening bell. at the big board, it's i.t. consulting company infosys, celebrate the 25th listing anniversary. at the nasdaq, sba, owner and operator of wireless communications infrastructure as the dow tacks on another 70 to open. watching some of the bell ringing reminds me we will get some ipos next week, even though some chatter today about the european ipo market cooling off a bit with golden kgoose. >> it's going to close for summer before too long, so i think whatever deals are teed up is probably the time to try them out. you know, it's interesting, you

want to see the market sponsor new issues and basically be receptive to fresh ideas and have the capital markets, you know, circulatory system start to pump again. on the other hand, the supply-demand imbalance in favor of equities has been a big story, which is, buybacks, retail flows, far outstripping that issuance in equities, and so you have had this, you know, sort of de-equitization of the market for a while. we're a long way from ipos being able to flood the market with significant supply, but the absence of ipos hasn't hurt. by the way, investment bank stocks have been doing very well. the market thinks the environment's right, they can get some deals done. >> yeah, out of the gate, nvidia is down almost 3%. broadcom is down by more than 2%. chips continue under pressure this morning, and we're also watching some standouts in biotech. last night, after the bell, full fda approval for a duch*ene muscular dystrophy treatment.

grand slam, home run, some of the accolades the community had. it's up by about 30%, and this after the conference call happened at 8:30 this morning, so i guess people were pretty satisfied with this. questions about reimbursem*nt because they got approval for ambulatory and nonambulatory. will there be differences in reimbursem*nt levels and will that impact the size of the eventual market for this drug? really good news for sarepta, and we have follow-through from gilead. we have green shoots in the biotech sector and you have to wonder if that's going to help the overall sector, which has been flat this year. whether you want to go market cap weighted or leaning towards the small caps, both have not been performers at all so far this year. >> yeah, it's been a similar story to other areas of growth, which is we know what lilly can deliver. >> right. >> and novo. and there's no reason to necessarily look elsewhere for

fresh ideas. sarepta has doubled since november, but it's doubled and halved so many times, i can't keep track over the years. it's been one of those names that epitomizes what biotech is. >> you mentioned lilly. it is positive today. it did have that sort of signs of a reversal, although the volume wasn't there to be completely concerning, but the price action happened in yesterday's session. i spoke to jared yesterday on "fast money" from mizuho, and i asked him whether he would like to put a dollar in lilly, and he said he thinks the pipeline is better for eli lilly. here we go. into the negative territory. but basically flat right now. >> yeah, and i think, again, it's all about, you know, the fellow travelers with the high momentum stocks. >> yes. >> and i mentioned chipotle was another one. we'll see, you know, chipotle, i said costco, you can kind of go down the list of those names

that seem like, you know, they're all in the same basket, pressed with the same button >> speaking of travelers, a lot of news in the travel space last 24 hours. first, it was aaa yesterday saying they do see a record july 4th weekend, another five million travelers than we got in 2019. then, you had united follow through for themselves. they see a record july 4th. delta with the nice div hike, and then "the journal" today with this piece about americans in europe traveling has turned out to be an economic engine of sorts for the continent over there as we, i guess, leverage our strong dollar? >> yeah. the dollar's quite strong, actually, yeah. in fact, i keep hearing about japan being the destination of the summer for a lot of americans. i know some people who have gone over, maybe for west coasters in particular, but between what the yen has been doing and just the idea that, you know, it felt like europe was crowded with americans the past couple years,

so it is fascinate, plus you got the taylor swift effect as people keep talking about in europe. >> the taylor swift effect. >> some of our colleagues are there right now. >> apparently. >> it's a pull forward, though. i think that's the other thing. >> exactly. >> you have to -- it's not like money comes out of the air and -- >> into taylor swift. >> and goes into the taylor swift gdp. usually, people who buy taylor swift now is doing without something down the road. >> i thought you were going to mention american airlines, too, the flight attendants saying they're ready to walk off the job. they have to get approval to do so, but you know, they have been in talks with american, and they have not been able to come to a deal, so they are saying, we are ready to walk off the job at this point, just waiting for that green light from the nmb. we'll watch that, especially as we get into what will be not just this weekend but summer will be a very busy travel season in general. >> yeah. melissa mentioned the call out of bernstein, regarding apple as they go to $240. the other calls of note today, nike, oppenheimer upping to outperform, and then a couple of

downgrades as well on northrop grumman as bernstein cuts to market perform. but we'll see. nike has -- it's been a tough road for nike last year. >> it's mostly come down to a call of, like, you know, are we down to the core long-term brand value here? you know, not really looking for the particular catalyst, necessarily, of always trying to come back and all the rest of it. i think that, you know, nike was so overlooked for so long by the street, they felt like, oh, you could always pay a huge premium for it, and now i think you've drained a lot of that optimism out of the stock, but it's still not cheap. it still doesn't really seem like it's ready to get up and run fundamentally. >> the olympics have traditionally been a catalyst for nike in the past, and some analysts will cite that, but some of that money and optimism from nike just drained into hoka and on, and so the scenario in which nike makes a "comeback" is very different this time around because of the presence of these

really strong alternative brands, and we've seen them have big gains quarter on quarter, so the question is, can nike bounce back in that competitive environment? some would argue, it just did not exist before. >> and even lulu has been pressured. >> it's been a dog. >> worst of the year. >> a downward-facing dog. >> there you go. did you write that in advance? >> no. that's the most obvious bad joke ever, carl. >> how appropriate. >> we might let you into the dad joke guild with that one. >> i'm trying. >> banks are not performing that well. interesting to see this report out of citi last couple of days, looking at the impact of a.i., the industries in which it might have the most impact, and banks are at the top in terms of the amount you could automate work. i think the auto industry is at the other end of that, but there have been several reports the last few weeks, jpmorgan, wells, talking about a re-rating of the

cost structure in the industry overall. >> right. >> and what that does for return on equity over the long-term. >> yeah, i can see where the math gets you there in terms of, you know, total head count, the functions that a lot of the people are in. but what you'll find is so many of these banks -- i mean, citi getting dinged, perhaps, for its living will, because of data management-type processes, that's because of years and years of single product software things that, through acquisitions and everything else, you just kept everything in parallel, and there's so much compliance, and you have to have approvals. i wonder how fast it happens. there's a built-in inertia to financial services because of all the regulations. >> some will say the same thing about insurance. insurance has the biggest opportunity to automate. think of all the paperwork that is submitted to an insurance company that could be reviewed by a.i., but a lot of these companies are giants. they're big boats that are hard to turn. it's hard to implement that technology. but we'll see how it plays out.

>> yeah. business full of models and actuaries, right, who have to make difficult calls. meantime, our next guest does think it's unlikely the fed cuts rates this year. remains positive on equities, though, favoring information technology, communication services, consumer depre discretionary. john is here with a target. good to have you. >> good to be here. >> what do you think prevents the fed from cutting? >> i think it's just the stickiness of inflation and a concern by jerome powell that he doesn't want to cut rates and then have to go back. and raise them again. the fed has now, since march of 2022, has raised rates 11 times, paused 8 times without a recession. that's really quite an accomplishment. it's helped by the resilience in labor and other things, you know, and in business and in job

growth, but at the same time, the fed, we believe, has done a really good job, and they don't want to ruin it. >> would you agree that the market is trying to call his bluff? >> oh, you bet. the market represents many different constituencies, and in particular, the highly leveraged crowd has been really hurt by the higher rates. you go from a band of zero to 0.25 to 5.25 to 5.5% on the benchmark rate. that creates -- the vig is a lot more costly, it's all problematic, and so when we look at that, that's an argument that occurs, but overall, you know, it's not a bad situation when bond issuers have to pay for the privilege of borrowing money and people, when they build their models, have to think a little more responsibly than they may have when money was for free. >> we're just about -- we're at your s&p price target, so how are you feeling? do you feel like there's a need to push that higher at this point?

>> melissa, i think we certainly -- once the market closes at 5,500 or above that on any given day, that's when we'll review it, and it would seem now that we are still in very much a bull market that is supported both by iffundamentals on a cyclical basis, as well as secular growth stories that are impacting this. the other side of this is, too, i think the general population tie is more concerned with retirement planning in realization that social security might not be anywhere near what it has meant for people, so whether younger generation is planning for retirement years and years ahead, people who just have retirement a few years ahead or those who are in retirement who want to retain their standard of living for a lifetime that might be a lot longer than they ever expected, equities is a solution, past performance no guarantee of future results. >> yeah. although i guess the question is, if, in fact, you have a

greater propensity of people to buy more stocks, hold more stocks, keep their exposures high, i mean, is there no cost on the back end in terms of return? that's the issue. you're paying today's price. >> yep. you're paying today's price. for people who were in earlier, for instance, if they add more, it increases their cost basis somewhat, but for those who are new to it, the cost basis is going to be higher going in. but that said, a.i. innovation, other innovation that is in what we would call the proxies of a.i., the other sectors that will benefit with greater efficiencies, hopefully from a.i., would give us prospects for improved productivity, improved efficiencies in terms of all kinds of delivery of products and services that may take us to a really fairly good position going ahead. >> some of the sectors you like would ostensibly benefit from a rate cut. why do you still like them?

>> well, they haven't done so badly in consideration of the fed view. the fed has remarkably -- of the ones that we like, only consumer discretionary has really lagged, and within consumer discretionary, if we look at first quarter earnings, season that just ended, there were a lot of consumer discretionary stocks that did very well, even though many of their peers did not. it was a question of management, management, and how they -- what type of products they had. >> do you think industrials hold up, even if the market comes to realist view about cuts? >> i think -- well, i think the market has come much closer to being realistic views about cuts. remember, at the beginning of this year, we were in the camp of, we thought that the fed would probably cut rates only twice. the general market was looking three to five, and there were some -- i heard somebody say 5 to 11 because they thought we were going into a recession. we look at it and think, this is

manageable. if you go back all the way 500 years to the venetians, that's when they discovered that a ten-year yield should be, whether it's sheep or cattle or coffee or pepper, the vig was somewhere between 3.5 to 4.5%, and people survived it. >> in terms of what you -- if you take the fed on its word, based on its framework, where it thinks inflation's going, the fact that we have had a yield curve inverted for two years, it seems like they are looking for the opportunity to, what they call, normalize, even if inflation is not at the target. >> they sure are, very much so, and if anything, we think if they do give us a cut in november, after the election, or in december, or both times, it will be effectively sort of like a down payment for both main street and wall street to say, cuts are coming. don't get too excited now. but you know, we're not going to be living at this band of 5.25

to 5.5%. maybe it will look like, i don't know, 5 to 5.25%, what have you, but it's really normalizing after almost 15 years of most of that period and that band of zero to 0.25%. >> that was crazy. we don't do the vee nnetians ve often. good to see you, john stoltzfus. breaking news on pmis in a few seconds. l let's get to rick santelli. >> indeed. these are s&p global pmis. manufacturing services and then the composite. they're doing preliminary. in a couple weeks, they will change. in the final analysis, we're looking for all numbers to be over 50. 51.7 on manufacturing. 51.7. that means we now have six reads this year all above 50, whereas last year, of course, we finished the year with under 50 reads. 51.7 is the best since march. the services side, maybe the most scrutinized, 55.1, well

ahead of expectations around 54. sequentially following 54.8. 55.1 is the best read going back to april of '22. april of '22. and finally, blend them together in the composite, 54.6. that follows 54.5. 54.6 is the best read also since april of '22, so you do see the interest rate side moving a bit higher preopening. equities should improve somewhat on the week. very fascinating. a 4.72 on week at the ten, we're basically unchanged on the week, down on the session, and at 4.25% for tens, well, now we are about up three or four basis points on the week. prior to this number, we were down one basis point, so we have had a five-basis-point move on the long maturities on this number, something to pay attention to. "squawk on the street" will return after a short break.

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we're staying on top of the cyberattack that impacted car dealerships across the nation. eamon javers joins us with the latest. . >> hey there. today will be the third full day of fallout in the auto dealership sector after a cyber at cd k which makes the software that powers many auto dealers across the country. cd k says this was a two-tiered attack hitting tuesday and wednesday and told reuters it's working to reinstate its services and get dealers' business back to normal soon.

the company says it works with more than 15,000 retail locations across north america. in trading yesterday as you can see auto dealership stocks including carvana, car max and auto nation got clobbered. a mixed picture here. this morning, shares of investment field brookfield business partners got hit. you can see the chart there. cd k global one of their biggest holdings. on cnbc's last call last night, motor company owner tom mayoli describes the problems dealers are facing here. >> it's a disaster. customers are coming n consumers coming in, we're selling cars, but we can't book the deals, can't finance the deals or get them to the banks. >> reporter: no word from the company on who may have been responsible for the attack, whether any ransom has been demanded or when dealers might see their services restored here. guys a lot of questions still up in the air today. >> so, eamon, appears this is a hack that prevents transactions

from happening, as opposed to a hack, for instance, at lending tree experienced, that stock down 1.5%, where the hackers stole the data and are apparently putting that up on the dark web for sell. >> yeah. when they do steal the data you can see it in the dark web. a lot of websites where these guys go to sell the data and they post samples of it publicly and demand pricing. you can see that. we haven't seen that yet in the cd k case. they've preemptively shut down a lot of their systems internally to deal with the problem. but it's not clear when they're going to be able to get the company up and running again. the software up and running again for all those auto dealers. we'll reach out to cd k this morning and see if they can give us much clearer picture of what they're facing as we go into the weekend. the problem for the dealerships they don't control this. if it is a ransomware attack, we don't know that, the dealers don't control the negotiations over whether or not to pay. that would be cd k dealing directly with the bad guys here and figuring out whether to pay them a ransom or not.

not clear what's going on behind the scenes here. we'll have to wait and see what else the company can tell us later on today. >> appreciate that. huge story for those dealers who are having to break out the notepads once again. >> you can only imagine. >> when we come back existing home sales and lei after the break.

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oh, junior! no no no no no no. haha! good job junior. way to go. [ minion language ] good friday morning. welcome to another hour of "squawk on the street." i'm carl quintanilla with mike santoli, melissa lee, live at post nine of the new york stock exchange. david and sara have the morning off. markets trying to come back from the reversal. the s&p down another 12 points but the dow higher by 50 points. interesting macro data print from s&p pmis. services with the best number since april of '22. not that much in the way of inflationary price survey information, which has kept

yields well behaved in the wake of that. we're about where we began at 4.24. >> before we head to break movers we're watching. sarepta therapeutics surging, the gene drug therapy duch*enne muscle dystrophy. the approval expands the market for the treatment that hasn't proved its benefit in clinical trials. the treatment $3.2 million was cleared under an accelerated pathway. tony sacconaghi raising 240 to 195 believing investors can, quote, be a leader not a laggard in ai. and a tough week with gamestop shares losing seems to down double digits since monday and trump meimm media on pace to en week down. >> fresh economic data crossing

the tape. rick santellis that for us. hey, rick. >> yes. leading economic indicators for may are out. we're expecting a number down 0.3%. well, it's down 0.5%. the number. what is interesting about that, mike, is that means that 2 out of the last 27 months, only 2 have been positive and those months were february of this year and going back to february of '22. leading economic indicators is really not let us down an accurate path and last month down 0.6%, that was the worst since october of last year when it was down 0.9. interest ratesreversed off the lows of the session on the strong service sector pmi. also out right now is our may read on existing home sales and head east to diana olick. >> rick, existing home sales in may were essentially flat down

0.7% from april to seasonally adjusted annual nized rate of 4.11 million units that's better than the treat was looking for. sales down 2.8% year over year. the closed sales based on contracts likely signed in march and april. we're still over 7% on the 30-year fixed. the headline in this report inventory is building up 6.7% month to month and up 18.5% from may of last year. now a 3.7 month supply at the current sales. i will caution that despite the gains, supply is lean. the median price of an existing home sold in may 419,300. that is a record high price and up 5.8% year over year, all regions saw price gains. that's a median and skewing higher because the higher priced homes are selling more. there's more supply over there. the ral ealtors did note the

mortgage payment for the average buyer, typical home up over double what it was five years ago. cash is king. 28% of sales and first-time buyers kind of hanging in at 31% of sales, up from 28% the year before and, carl, the chief economist from the realtors said he was surprised at that. >> we were talking about mortgage rates offering relief these last few weeks and next week new and pending. would that be reflected in next week's batch of data? >> so these are based on different stats. so new home sales are based on contracts signed during the month. when we get those for may you're going to see the lower impact rate from rates came off the highs in april and lower in may, same on pending home sales. those are signed contracts. you might see a bump in that. for the builders, you have to remember they are buying down mortgage rates. the mortgage rates do mean something to the new home buyer but they're getting a break on those concessions. we heard from the builders

reporting they are still doing the concessions, the buy down, some of them increases their concessions. >> a busy week. diana olick, this morning. more on the housing outlook this hour when we check in with the co-founder and ceo of compass, robert reffkin. stay with us for that. the nasdaq stand its longest win streak of the year but on pace for eight positive weeks in nine along with the s&p. we are bracing for some volatility with key events ahead today in particular. bob pisani is with us to explain. good morning, bob. >> good morning, carl. good to see you. the s&p 500 is having its usual quarterly rebalancing today, except this time the big moves up in nvidia is causing some rather notable movement in some of theseindices. the technology select spider etf has about $72 billion in assets under management one of the largest tech etfs out there, tracks the s&p technology index, and it with the s&p other sector etfs is rebalanced on a quarterly basis that's today.

fairly routine, but the relentless rise of nvidia up about 40% this quarter is shifting the weighting for two of its top holdings in a major way. nvidia from a roughly 6% weighting in the etf to a roughly 21% weighting in the etf. that's a bigmove. and apple is doing exactly the opposite. it is going from a roughly 21% weighting in the etf to 4.5%. the other major component here microsoft remains at a roughly 22% weather. why is this happening? this is all because of federal rules that were put in place in the 1930s to avoid having too much concept trace of any one stock in an investment fund like a mutual fund or etf. that's ha they are. they're investment funds. index like the s&p 500 weighted by market capitalization has no limits in how big a stock can get in the index. it can get as big as it wants including nvidia. an investment fund like an etf does have limits. that's the distinction.

under these federal rules no stock can be more than 25% of the fund's exposure and the combined weight of all stocks bigger than 5% can't exceed 50% of the fund's holdings. it sounds complicated and normally doesn't matter but here it does. right now the combined weighting of apple and nvidia and microsoft in the index is around 64%. so the etf has to adjust its weightings. it can't have that big of a weighting of those three. microsoft will retain the top position but number two is nvidia and apple a third. that xlk will be selling roughly $11 billion worth of apple and buying roughly $10 billion of nvidia at the close today. this sounds like a lot, but it's not a huge amount of money. nvidia, for example, routinely trades about $50 billion a day. but with about $9 trillion now invested in etfs here's a good example of how concentration can affect investments and guys, this is a problem as the big are getting bigger not just in

technology. for example, exxon is almost a quarter of the s&p energy index. that's bumping up against the limits. amazon is almost a quarter of the discretionary etf, bumping up against the limits. alphabet almost a quarter of the communication services index etf rather and that's bumping up against the limits. as the big get bigger in general, this may be an issue because these etfs may not necessarily track their underlying indices going forward. traditionally they have, but again, big getting bigger. a good example of how it affects investing. >> it's a great reminder there's a tension between being representative of what the market values are and being diversified, at least based on, you know, these packages that the big stocks keep outgrowing. i was pointing out earlier the nasdaq 100 also modified market cap weighted index. we remember back last july, when they had to do a special

rebalancing because all the stocks with a greater than 4.5% weighting were more than 48% of the total. we're not there yet. we're probably not far from that as well. >> and normally this doesn't matter. normally these things do track pretty well, but the huge amount of money now going into etfs, particularly passive etfs, what'scausing people to notice this. we're seeing movement, for example, today, $10 billion, but also, the fact that the numbers now can change and you don't have necessarily the same tracking what the etf with the underlying index can be an issue. it traditionally hasn't been, but this is a really good example of the downside of the big getting bigger. you don't necessarily want to have to look at your etfs separately. for example, the technology etf is only up about 19% this year. but the technology sector of the

s&p is 29%. because of the unequal weather of this quarter. there's actually a little bit of a tracking difference going on here. >> bob, great setup. thank you for that. bob pisani today. we're going to dig deeper into this week's tech pull back with names like nvidia lower today. our next guest does say while ai remains a theme for tech if companies can't deliver they are going to get left behind. citi's head of equity strategy is here on set. great to have you. >> good morning. >> help viewers understand how this rebalancing have affected price action this week? >> as bob mentioned the number of dollars to sell is small relative to the market cap but this is on institutional investors' minds. you would argue might be weighing on nvidia or, you know, weighing on apple a little bit as that weight kind of gets pulled back a little bit. i believe they have five days to also kind of accomplish a reweighting. take that notional amount over five days it shouldn't be too disruptive. sometimes the narrative overpowers the trading which i think is what's going on. >> how concerning to you, if at

all, is the price action in nvidia yesterday in particular in broadcom on tuesday? we saw some outside reversals hitting highs and reversing completely, ending the day on session lows on heavy volume. >> you have to be concerned when the stocks driving the market higher coming under a little bit of pressure. the whole ai theme has been quite concentrated from a price performance as well as a revenue aspect as well. we have a portfolio of ai stocks. revenue system up 12% year to date. 56% of that is nvidia. 80% is nvidia plus microsoft. so, you know, any time the sort of darling in the market or momentum stocks come into pressure you have to mind it and we are paying close attention to it. >> pointing out too if you are an active manager trying to keep up or outperform the index, you almost can't be as concentrated as the index itself. you have to look for other ways, i guess, to try and propel your performance when you have three stocks worth 20% of the market. what are folks doing at this

snoipts. >> point? >> it's a great question. people are looking for ai adjacency how we phrase it. that could be software stocks that have access to the ai theme. power generation. you know, where people are reading that as almost like a second derisk otive of ai. i think you're getting diversification in the chip space and diverse fiing a theme. it hasn't worked great. the ai software are down year to date as a group only up maybe 200 basis points for the year. that hasn't worked great. even within ai winners less than half of our ai portfolio is up on a year-to-date basis. as much as people want to be creative and diversify it hasn't helped you from a return perspective, pushing people back to nvidia. >> are you a buyer of this theory on the software side hardware is starting to eat into software's model? it makes tight e-- it too easy o create a software start-up.

>> i think what market told you over the last four to six weeks unless you can demonstrate ai revenues either directly or in a forecastable way, investors will be skeptical about owning those stocks. the concept makes sense, but from a price sperspective it hasn't worked that well. if you're software ai stock instead of getting revenues you'ring may an investment. that's a tough thing to hold. medium term the story makes sense. there's two challenges. picking winners and losers have been difficult. things you thought were losers became winners and vice versa. secondly a small number of stocks are demonstrating revenues, and i would say the cost cuts are quarters in the future. you're in like a weird pivot point. >> tech goes through another sort of adjustment on costs, kind of like we saw with big hyper scalers last year? >> it's tech and outside of tech. nvidia and ai is read as a macro

theme. it's not just stock specific. it's going to lower employment expenses and operational expenses. that stuff you go believe it is not happening here and now, right. actually right now we're still in the capex cycle why nvidia is doing well and accenture put up yesterday. it's a little bit of a pivot point here as we kind of transition from the let's be excited about it to show me revenues to what i see long term from an efish shepsy perspective. >> creative ways people can outperform. they have to investment in the other big stocks especially nvidia, but listen to these alternative, ai adjacency, and how they haven't performed well, and go back to nvidia. we've come full circle. nvidia is it. it can't be just it, can it? >> i think nvidia in the here and now, unless you have a really high conviction on which software stocks are going to win. if you take a stock like adobe, at the beginning of the ai craze

that was considered a loser from ai. then they became a winner and then a wloser and a winner. equate this back to crypto, if you believe in crypto or not, what you did was invested in the pipes. the pipes were nvidia, ironically, but you were investing in the power and the pipes. i think that's what people are doing now. they're staying close to home where they can see revs or have a high conviction. >> the other mode would be broaden it out, step back and say mega cap versus equal weight is off the charts. growth versus value, huge extremes. all of these kind of longer term trending style things look if you believe it all in the mean reversion over the long term, you can hit them where they about. >> i think that's right. small cap particularly. a ton from small cap from clients recently. if you told me growth remains strong, the fed would cut if they could. we should be in a smaller cap stock. unfortunately they're small and don't have the growth and not momentum right now.

you're sort of in a spot where the macro environment saying buy them. the price action saying be careful. people are a little bit caught between two there. >> we tonight envy you. we talk about how hard it is all the time. stewart, thank you. >> thank you. >> as we head to break our road map for the hour. the health of housing. the ceo of compass joins us with his read on the sector. >> ferrari making its biggest bet on an ev future. live to italy for an exclusive look inside ferrari. nike one of the worst stocks in the dow, down about 12%. the bullish new note forecasting a rally from here. we'll talk to the analyst who made the call as "squawk on the street" continues after this.

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switch to comcast business and get started for $49.99 a month. plus, ask how to get up to an $800 prepaid card. call today! welcome back to "squawk on the street." mort mortgage rates dropping below 7% as existing home sales in may came in flat this morning, down 0.7% from april a few minutes ago. robert reffkin, co-founder and ceo of compass joins us to discuss it all. good to see you. >> thank you. glad to be here. >> is there a magic mortgage rate threshold to free up some supply and all the rest? >> 6.5% i would feel good about. we would be in 4.5, 4.6 seasonally adjusted rated homes. the magic number is 5.999. >> okay. . >> that would be marketing magic and would tell the world that mortgage rates are at a level

where they should go and you can grab a property. >> that's more than a three quarters of a percentage point below where we are right now. >> yeah. >> got you. >> last week we did have three days below seven, not that i look multiple times a day, but i think somewhere around 7% we continue to be at low 4 million adjusted rated home sales. >> i guess this question of supply, i mean you have the new home sales building permits missing on the downside yesterday, and it feels as if, you know, higher rates to restrain inflation is keeping us from creating supply, which could restrain inflation. >> it's a tricky issue. we have overall there's affordability. the real news of today is that prices last month were the highest in recorded history. and the reason they're the highest because there's not enough supply as you mentioned. to help with supply, we need policies that encourage more development more permits. it would be great if we could figure out how to make mortgages

assumable so people feel like they won't lose their low mortgage rate if they sell their home and we could also benefit from six rate cuts to help bring mortgage rates down. >> i'm wondering, i know the new york market is different from any other markets in the country, maybe unique, but it does seem like prices are really coming down. i've noticed a lot of price cuts in the market. i'm wondering if that's what you're seeing and if sellers are really reflecting the idea that, perhaps, in new york, there might be inventory that people don't necessarily want or they have to adjust their prices to reflect the mortgage reality? >> it is somewhat of a confusing market because there are mixed signals. on one hand you have prices at the high nest recorded history. on the other hand you have more homes today on the market with price dops than any time in the last ten years which reflects buyers are pushing back. right now it's 36.1% of all homes on the market have had a

price drop. that's 16% more than it was this time last year. this time last year 31.4. we are seeing these confusing signals. i would expect prices to be flat on a month-over-month basis. it's the year over year where they're -- the prices are up. >> the town that gets a lot of attention on the inventory side is austin. i wonder what you think about areas that had explosive growth. did they get over their skis in the way of supply? >> no doubt about it. austin last year had the negative impact of, as you say, getting over its skis, being overbuilt and a lot of influx people from across the country, particularly california, moving to austin. they took the pain last year and the pain isn't there as much anymore. last year prices were down very meaningfully as well as transactions. but we've seen a pretty significant recovery relative to last year so far this year.

>> when you think about msas, an echo of that this year? >> i think florida. >> really. >> jacksonville we put on the screen. >> more inventory being built up in florida than any other market, and we're seeing more price drops in florida than any other market. i think that's the market may deal with the pain. >> is it single family or multias well? single family, condos as well. >> appreciate it. >> ferrari revving up higher or outperforming ford, gm, stellantis, and the s&p over the last year. today the luxury car maker revealing the next chapter in its future. robert frank is live in italy. hey, robert. >> carl, this is the famous ferrari v-12 the beast of engineering powered ferrari for nearly 100 years. today ferrari launching this factory that will make cars with this engine and the first all electric ferrari. we'll tell you what an all electric ferrari might cost and look like and drive like

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outperformer on the year as the company bets on electric future. robert frank live from the factory in maranello, italy, and joins us with an inside look. robert? >> melissa, ferrari opening this 200 million euro factory today calling it technology neutral. that means they can build any kind of ferrari, a combustion engine car like the one behind me, a hybrid car and yes, they will build the new all electric ev. that car won't launch until the end of next year but already, there is a huge debate in the car community and among wealthy buyers about whether ferrari should be building an ev, what it will be like. we talked to the ceo who said, he's driven in it, and he said he is confident that demand will be strong. >> i tried it and i had this kind of emotion, you know, the final will be the client. several people, more people, start to see, to try, our

electric ferrari and they have good feeling. >> reporter: now this is ferrari so the most debated issue about the ev ferrari will be the sound. ferraris famous for the roaring rumble engine. the question what will an ev ferrari sound like. now the ceo said all the sounds will always be authentic so they won't try to recreate a combustion engine with an electric car but said that electric motors do have a sound. it's possible they would somehow amplify the natural sound of electric mortars to create an all new ferrari experience. meanwhile, just like the rest of the auto industry the fastest growing portion of ferrari right now are hybrids. these are cars that aren't just fuel efficient but like the blue car behind me, they go 0 to 60 in under two seconds and hybrids now account for nearly half of all of ferrari's production. they're moving toward electric whether they fully get there in

terms of demand, share of market, et cetera, that remains to be seen, guys. >> robert, what's the battery life like? what is the range? i would imagine if you're driving a ferrari you want to drive fast and that would consume a lot of electricity. >> reporter: we have no idea, melissa, what technology they're going to use, what the range will be, what it will look like, but if we look at some of the other super cars with electronic, that has been the issue with electric super cars, yes, they do really fast and accelerate 0 to 60 in 1 point something second, but you can't go that fast for very long and that will be the question of how ferrari solves that and whether even if it's shooter time whether that will be enough for people that like to drive these cars very fast, especially around tracks, for a long time. >> i also wonder about, you know, all the intangibles that you're buying if you do acquire a ferrari, not just a pure performance and how fast can it go and how quickly can it get to

top speed but the complexity, engineering, the tradition of it, and, you know, electric motors one thing about them, simple and, you know, you can, obviously, have them be efficient and all the rest of it. it's different. like a digital watch versus a mechanical one or something. >> that's a great analogy. what the ceo told me is that what makes ferrari a luxury brand and a luxury product is that emotion and we all know electric vehicles for all their attributes don't give you an emotional experience. he says having driven this car, you look at the braig system and acceleration and handling, all of those things aside from sound can give you an emotion. he's confident all those other pieces of the ferrari emotional experience will be there with an electric vehicle. clearly like you say it's going to be very different and i think even for people that love ferraris and love that badge, it's going to take some getting

used to. >> finally, robert, there's chatter on the wires today about this new building where you are and what it means for production and development cycles, night that cycle will shorten? >> reporter: people hope. they hope that production cycles will shorten. ferrari is coming out i think with 14 new models in the next year or two, which is a record for them. they're already increasing that cycle. what the street and investors really hope for is an increase in production. there's reports that say they'll go from 14,000 cars a year, maybe to 20. ceo telling me he's not going to give a number. they probably won't get to that number for years. but in the meantime, wall street investors seem happy with the fact that they can make more profit per car and until they get to a higher production that's keeping investors happy for now. this will always be a low production car company. >> right. fascinating. great interesting look at the car business.

robert frank. we'll come back later today. still to come the countdown to cnbc's top states for business is on. we'll get a closer look at the battleground taking shape this year when we're back after a quick break. the road to opportunity. is often the road overlooked. (♪♪) at enterprise mobility, we guide companies to unique solutions, from our team of mobility experts. because we believe the more ways we all have to move forward. the further we'll all go.

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welcome back. i'm pippa stevens with your cnbc news update. the judge in donald trump's florida classified documents case is holding a hearing this morning on a motion to dismiss the indictment. the former president's legal team is arguing special counsel jack smith's appointment -- senate confirmation is unconstitutional. today's proceedings are the first of three hearings that judge aileen cannon is holding with the others set for monday and tuesday. chinese officials say nearly 50 people have died in historic flooding in a southern province in the country. the heavy rains have caused landslides and mudslides and destroyed roads according to state tv. authorities have warned of more extreme weather ahead in other

parts of the country. hawaii agreed to a climate change settlement with 13 young people. they accused the state of violating their rights by prioritizing infrastructure that contributes to greenhouse gas emissions. as part of the settlement hawaii has agreed to develop a road map to achieve zero emissions for its transportation systems by 2045. melissa? >> thank you. pippa stevens. tech is pulling back but driving the s&p and nasdaq higher. the next guest warns the ai boom is masking underlying weaknesses. breakout capital founder and ceo risher sharma, the author of "what went wrong with capitalism." >> thanks for having me. >> let's talk about the market composition. sounds like you're concerned about the handful of companies earning what you call super normal profits, this should not be the case and these companies should have more competition. so in the case of, for instance,

nvidia does it symbolize what's wrong with capitalism? t in the u.s. >> nvidia is capitalizing from the ai boom but the fact that you have a cohort of companies in the u.s. earning the super profits and the strength that we have seen in the last couple decades, industriy after industy you see them earning profits and traded in a handful of companies. tech being an example of that. there's something dysfunctional about capitalism in general. this is now how capitalism is supposed to function. capitalism is about getting new companies to be out there, with a number of startups in america right up until the pandemic has been declining and you find these companies are bubbling up either new companies coming up or just simply not allowing new companies to be formed throughout. and i think a lot of this has to do with also the regulatory

environment we have where these companies are able to get regulations in their favor or just the costs have become so high new companies aren't being able to set up or keep going. >> so do you think that the -- i mean the remedy for this, though, seems anti-capitalistic in that you would have to have government intervention and have to have you know these rules and regulations in place to stop the large companies from getting larger and earning more, create an environment in which smaller companies can thrive, and all of that spells intervention into a capitalistic system. >> yes. but i think the intervention is what's caused the problems in the first place. as i argue in my book, the number of new regulations introduced by america and, in fact, around the western world has exploded in the last couple decades. america has introduced 3,000 new regulations a year, and they've withdrawn only 20 in total over the last 20 years. and i think that it's that sort

of environment that regulatory captures that is stifling growth. at this stage the excess es may have become so big you need intervention to curb the further growth of these companies and earning these enormous profits. how you create the environment when this doesn't happen in the future. otherwise you can do something now, but five to ten years later, the same dysfunctionalty will keep repeating itself. it's a harder look about how we got here and what can we do to create a more fertile ground where the small and mid-sized businesses don't feel they've been squeezed out with the increased concentration. i know we want to celebrate the rise of these companies and the way that they are dominating the landscape, but i think the fact that they're earning enormous profit with this long a period tells us it's dysfunctional and deeper than the platform companies, a lot of this has to do with the regulated capture of

these companies and they've just become too big now to be stopped on their own. >> i guess the question i would have is, what specifically about the current huge companies that are earning these outsized profits do you believe is symbiotic with the regulators right now? right now, you know, at least the antitrust folks want to break these companies up. they've tried to essentially keep them from having like an industry standard, whether it be in, you know, social media, internet, anything like that. when it comes to something like nvidia, arguably, the seeds for, you know, reducing its profits are planted right now with over building of these data centers. >> yeah. nvidia, it's early to tell but if you look at the other companies they've been around much too long. what i mean here, i've cited extensive research in the book to show that the new congratulations regulations, which are created to increase the cost of a new business to come, like, for example, i know

that setting up a fund -- this will be different today -- ten times more expensive than the cost was 20 years ago. because you have to comply with so many regulations. i think the cost has become so onerous, they have new regulations out there, typically the big companies with their incredible lobbying party in washington that is able to get regulations written which are favorable to them. something needs to be done about that as well, rather than antitrust. as i said you do that and five, ten years later you have new -- which would have -- you can't keep doing that every five or ten years. look at what's the ground here. why is it so fertile for the same companies to keep making so much profit and -- at the top has reduced in the s&p 500 over the last couple decades. >> thanks.

fascinating. >> thank you. still to come oppenheimer moves off the sidelines when it comes to nike. why with the analyst behind that call in a moment. i think from a career perspective it's really important that you find a place that also nurtures and understand and while that may mite be a difference, it's really celebrated as a strength. what can you really bring using the experience whether it be customers or media and how you can use that as a strength because it's part of who you are. kground sounds] this healthcare network uses crowdstrike to defend against cyber attacks and protect patient information. but what if they didn't? [ominous background sounds] this is what it feels like when cyber criminals breach your network. don't risk the health of your business. crowdstrike. we stop breaches. do you have a life insurance policy you no longer need? now

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oppenheimer upgrading nike to outperform raising the target to 120 from 110 that implies a 25% rally from here. shares have been an under performeron year as you know and

one of the biggest laggards in the dow. brian covers retail and joins us to discuss why he's reinstating nike as a top pick. thanks for joining us. >> thanks for having me. >> you point out you think expectations have been derisked and they're bound to -- they're set to rebound gradually. what makes you think so? >> look, stepping back, what a nike has struggled for a while here and i think it's -- i think what's the positive is you have a senior management team now that is admitting its mistakes and putting in place significant repositioning efforts. as i think about nike as a company going forward i think we are at the cusp of a significant repositioning effort that is going to re-establish nike as the dominant athleisure brand on the planet. that's a company. from a stock perspective, with the purchase today, we're talking to our investors, i think sentiment has gotten to a

point where the market is now discounted for near term choppiness. the market knows things will be tough here a bit longer but as you look out over the next several quarters you start seeing better results at nike and going to drive the stock higher. >> sounds like you think the story is about supply, innovation and management, as opposed to demand changing in any way in the near term? >> well look, i think we do have a demand issue. i've been talking -- we got off our oppenheimer consumer call, spent a lot of time talking to a number of consumer companies. i think there is consumer squishiness out there. what we're hearing consistently now is particularly within lower shoppers, there is more sort of says he ten stoi make discretionary purchases. for nike i think the primary issue has been internal and i think the company for a variety of reasons got off its innovation and i think that allowed other competitors asto

s -- to step up and take market share. i think nike has an opportunity to get back in product innovation, develop great products and spur better demand. >> the scenario you laid out which nike reclaims the mantle as the best top selling athletic in the universe, does hoka and an go away? how does the competitive landscape factor into that? >> it's a great question. the one -- whenever i ask like that question or questions similar to it, i remind our clients this is a very, very big market and frankly market is expanding. i make a joke a lot when i'm with clients and colleagues at work, we're all wearing athletic shoes. you don't see us buying loafers anymore. the market is expanding. the point i think there's plenty of room for multiple successful players. in my piece today my associates did a nice job digging into this, we don't follow ahn and hoka. we did look at the businesses.

the take away, those brands are getting a lot of -- they're creating a lot of buzz, there's a lot of demand for them, but still very small. they're very, very small. small relative to nike. but again, to answer your question i think the real point is, the athleisure, footwear market is big to support multiple successful companies. >> do olympics act as a catalyst this year or is that generally overstated, do you think? >> no. look, i think that's a big deal and another -- you ask me why now, why upgrade nike now. the timing of the olympics were in my thought process. nike always are a big player around the olympics. i think they're looking at this games in paris as a real opportunity to showcase a reinvigorated brand. starting to get product launches coming out around the olympics. i think the products look good. i think the olympics are a catalyst here. >> they have been great story tellers and the olympics a great avenue to tell stories. we'll see what happens this

summer. talk soon. thanks. >> thanks for having me. appreciate it. >> as we head to break the biggest gainers on the s&p 500 for the week. gilead topping that up by about 9% followed by caesars, corning, globe life and fleetcor, up 7 or 8%. the countdown to cnbc's top states for business under way. that's let's get to scott who is in baltimore. scott? >> hey, melissa. we came to baltimore because everything that they're doing in the wake of that bridge collapse back in march is a fast motion version of processes that are going on in every state. 54,000 projects under the bipartisan infrastructure law, $1.5 -- half a trillion in new spending and pete buttigieg says it's not enough and we'll see what it means for the top state study every year coming up on "squawk on the street."

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it is that time of year again with less than a month to go from the big reveal of cnbc's annual top states for business. and this year for the first time, the most important category is one you might not expect. and it may be like this for a while. our scott is here to explain in a city coming face to face with

a lot of questions about infrastructure. that would be baltimore, scott. >> yeah, that would, mike. behind me the site of what used to be the francis scott key bridge until it collapsed back on march 26th. last week a big milestone when they got the navigation channel open faster than pretty much anybody initially expected. now they want to get a new bridge built within four years. they hope to have contractors hired by this summer. and they also want to take the opportunity to take a look at the infrastructure around here, the roads, bridges, items, everything. the first step is to sl public meetings. that process in baltimore is going at a fast pace, but transportation secretary pete buttigieg told me this is going on in every city in the country. half a trillion in new spending under the bipartisan infrastructure law. he told me even that is not

enough to get ahead of the backlog of infrastructure needs across the country. >> irngs think it's not too soo start thinking about what the next five-year package should look like. >> what does it need to look like? >> i think we'll continue doing robust investments in traditional infrastructure and newer forms of infrastructure. we're doing resilience funding. we're finding huge demand for that. things weren't in the picture the last time we had an infrastructure moment in this country, half a century ago. >> no wonder infrastructure looms so large. in our top states for business study this year, and why it may be that way for a while, particularly if there's bipartisan infrastructure law, too. part of it is all the government money. buttigieg acknowledged there is that, but there are also some real needs. you can see how we score state infrastructures and read all about competitiveness at topstates.cnbc.com. the top states revealed on july

11th. >> when it comes to figuring out what states might be better or worse on infrastructure, nobody is opposed to fixing a bridge that needs to be fixed. but i guess, how fast projects can get done and the general receptivity to doing big infrastructure projects, i assume, varies massively by state. >> it does. that's one of the things we look at. we also look at business-friendliness. this year because it's such a big deal to do infrastructure, we're incorporating land use rules. how fast does it take to get a permit done? we're looking at that in terms of sites that states are offering companies for development. companies want to work fast, particularly with all this money at stake, particularly with all this demand. it really has transformed things a lot of ways this year. for a long time we were talking about taxes and incentives and the workforce the last ten years. all of those still important. infrastructure really has a new

place now because of things like this and just everything else going on less dramatically across the country. >> we love the franchise every year, scott, but it's going to be interesting to see how that federal money rolling downhill to states and cities changes your model and maybe the outcome, which we don't know yet. we'll start getting those clues soon. misbiggest on "fast". >> the ceo of sarepta therapeutics, with muscular dystrophy drug therapy. a lot of talk on the huge gainer on the s&p, up 38%. >> to your point, pharma making news. new entrants to the glp race, according to the wires. we talked about lilly's reversal. xai, that's one space we can look too. >> for sure. the reversals are continuing for a sending day, i would say, in

terms of leaders giving back. we've sustained a six, seven-day drop. overall market is hanging in there, thanks to other stuff picking up the slack. >> mike, thank you. we'll see you tonight. "fast money" at 5:00 p.m. eastern. give. (man 2) i have people i can count on. (grandma) and a million stories to share. (vo) the key to being rich is knowing what counts.

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good friday morning. welcome to "money movers," carl quintanilla with leslie picker. today some calls on nike, palo alto networks and more. the bull and bear takes on today's "money movers" is coming up. new fund-raising numbers for president biden and former president trump. where the war chest lines up. a rare look from italy with the ceo of ferrari as they make a huge investment into the production of evs. >> stocks somewhat of a mixed picture. those with exposure to nvidia feeling a bit more pressure. s&p 500 down about, let's

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