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tv   Squawk on the Street  CNBC  July 26, 2019 9:00am-11:00am EDT

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and the dollar, which after the eu stuff earlier this week, dollar got weaker and weaker -- sorry, euro got weaker and weaker, 111 today. have a fun weekend, good weather. >> i know. it is friday >> not everybody goes east some people go west. she goes south make sure you -- >> "squawk on the street" is next ♪ i just got paid ♪ i just got paid good friday morning. welcome to "squawk on the street." i'm carl quintanilla with sara eisen, david faber at the new york stock exchange. cramer has the morning off this is one summer friday you can't afford to miss earnings from twitter, mcdonald's, amazon, google, intel, starbucks, we'll hear from the ceos of the last two later this morning on cnbc futures do look to bounce off the thursday sell-off. europe is mostly green our first look at q2 gdp up 2.1,
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better than sxiktestimates. road map begins with slowdown concern, tariffs and decelerating global growth weighing on the economy in q2. top white house economic adviser larry kudlow will join us first on cnbc. >> we have investors buoyed this morning by strong earnings from tech giants such as alphabet, twitter, and intel all of those stocks pointing to a higher open. >> and starbucks rallying as well as sales surge. the coffee retailer raising its outlook. kevin johnson joins us first on cnbc this hour >> futures are higher on those upbeat earnings. gdp did slow to 2.1, but beat expectations earnings big picture today google's parent beating big on both the top and the bottom lines. twitter also beat the street, reporting 139 million monetizable daily users, more than the street had been looking for. biggest number in about two years. amazon did miss on earnings, revenue was ahead. first time in five quarters that amazon did not post a record
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profit, taking a hit from shipping costs the thesis on amazon's print is that they really care about one thing and that is increasing gmv and getting it to people quickly. >> so the cost rose 36% on shipping that was a big jump from the 20% in recent quarters moved to one day shipping. they said they saw better customer response. revenue growth of 20% was better than expected. so investors are going to have to decide whether that top line growth was good enough 37% aws, that's the cloud revenue growth was, i guess, a little light, a little lighter than it has been first time under 40% but it still is the dominant player here in cloud. >> by far, doing $8 billion a quarter now what we know from alphabet is $8 billion a year run rate for their web services or cloud-based company that's accelerating, though. listen, the standout thisalphab the standout in the early going here, re-establishing the fact they can do above 20% when you
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adjust for currency in terms of top line growth of the company that was a surprise for a number of investors remember that last quarter was very disappointing along with it this lack of disclosure that continues to frustrate investors. particularly when you report a poor quarter as it did last quarter. this quarter, different. not just because they reported a return to over 20% top line growth, but they did give us a bit more transparency with the first time in five quarters, updating that runrate on the - on the cloud business to now $2 billion a quarter, which, of course, comes to about $8 billion a year last time we heard from them was half that size is some of that coming from the likes of amazon web services unclear. 37% is a growth rate, still not bad. the absolute number, the dollar amount that they're adding is still well above that of anybody else but that's going to be very interesting to watch this morning. alphabet, ruth porat under some criticism for just that lack of disclosure, whether it is
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youtube, whether it is -- that's the case to some extent, but relief today and don't forget a $25 billion addition to the buyback, which is also making investors feel better. >> deutsche this morning, we came away encouraged by the improved quality of disclosures after countless quarters of being dissatisfied by the magnitude of business insights this trend continues if cramer were here, he would say ruth came through. >> i think he tweeted last night it was a good conference call and pleased with the reports the cloud business is about quadruple what google has now. >> double that of microsoft. though, again, law of large numbers as well, but alphabet is growing much more quickly now in terms of a growth rate it would seem more quickly than amazon's amazon, you know, let's step back for a second to the broader stuff, the economy we heard from microsoft, it beat on revenue strong. facebook, alphabet, amazon, all
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of them having top line growth that was better than anticipated. and very strong despite this backlash from washington, not in the case for microsoft, but the other three i just mentioned doesn't seem to be standing in their way. >> starbucks with 7% u.s. comps, mcdonald's with 6% u.s. comps. much better than expected. this is a strong consumer economy. in the gdp report and second quarter, 4.3% consumer growth was the best it has been in years. to be -- any fed meeting, i would love to be inside, i think next week will be super interesting because you have people voting members like eric rosenbrand of boston who say, guys, the numbers are good, the economy is strong. by the way -- >> 7% comp, u.s. for starbucks we'll talk to kevin johnson, that's impressive. >> you haven't seen any major disasters within earnings. industrials are soft, right? saw that in caterpillar. saw it a little bit in 3m and boeing and we know that they are more impacted by trade
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exports were a drag on the gdp the only other thing i would mention, which complicates the fed's life, and especially if it wants to go to cutting rates, inflation is firming the pce, the core measure of inflation that the fed typically looks at firmed up to 1.8%, just below their target so if you want to argue, got to cut rates on the basis of falling inflation, i don't know. creeping back up >> we're going to get it, though going to get your 25, no way you're not. >> already sort of telegraphed to the markets you're going to get a good debate around it as well let's dive into the amazon results and stock decline. deirdre bosa with us at post nine what is your take away here? >> you have been talking about the cloud and i think that's exactly what we have got to look at it is so much bigger than amazon and google -- you got to look at the momentum cloud, amazon cloud is the profit engine. it allows amazon to do all these things like one day shipping, groceries, expansion in india,
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so if that growth is slowing in the margins are getting tougher there, that could affect other parts of amazon's business and there are some trouble spots. we have international e-commerce, still losing half a billion dollars this quarter there are some worrying spots there. but clearly markets and investors, they're willing to give amazon this pass because as the cfo said on the call yesterday, they have been down this road before they have invested profit back into the company and it has certainly paid off making it the powerhouse. >> and to the larger point about the u.s. consumer, their unit growth in the u.s. accelerated and that is important and that also may be, again, you're seeing weakness in the stock price. that may be something that i think not -- i know it because i've talked to some of the investors this morning are seizing on as -- >> that's the focus for the rest of the year. amazon goes back into spending mode, investors want to see that top line revenue growth come back up again. and 20% in the quarter, that was viewed as quite good i wish they gave gmv numbers, i
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wish we knew how much consumers bought on prime day rather than the bigger than ever. >> what stood out to me is they did not get asked, i think maybe it came up on the media call, they didn't get asked about regulation this is very different than facebook for a company that is now under attack by european commission, has an investigation going on, on antitrust, we know the doj and the ftc are looking around on big tech. amazon comes up all the time president trump, senator elizabeth warren, senator bernie -- they're all targeting amazon no mention. >> not only was it not asked on the call, but it was asked on the media call earlier clearly there is a divide between markets and media, investors, media >> media questions is already better than -- >> he was pressed to see if i was pressed on the media call, asked a few times what they're doing to prepare, he declinedt comment, but he did say that their guidance does not take into account any impact from
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regulatory measures, any penalty or any impact. so as you said, you outland a long list of the scrutiny that it is facing you wonder if that could come back and bite it in the -- >> google didn't give any insider reg either for that matter not specific to amazon. >> very different than facebook, which says it is going to be very expensive to fight and it has all these formal investigations deirdre, thank you three big earnings beats to get to besides amazon starting with mcdonald's. sales jumping by 6%, well above expectations intel's traditional pc business, 1% revenue increase, street was expecting a decline, it also raised its full year outlook, saw a nice bump after hours. and starbucks soaring, global same store sales posting 6% increase, the most in three years. we'll talk to the ceo kevin johnson later in the hour. intel, guys, another one that sort of had something to prove going into this report the sentiment downbeat, the
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stock up 11% this year going in. one of the worst performing semis. got that news of the apple deal and then the better than expected numbers and looks like intel will be a winner today. >> some of the commentary surrounding china not very good. the word brutal was involved as they call that pretty much the worst market around the world as -- if you're counting on a second half data center recovery, you got to watch china specifically. >> depends what sector you're in starbucks comp store sales numbers on china and they were very strong despite everything we read about the economic slowdown and seen in the data. consumer in china not slowing down there are parts like semis saurk with r saw with huawei and others feeling the pressure from the chinese slowdown and the trade war. >> intel shares a rally since the low points in the early part of late part of the spring, early part of the summer we look at starbucks, of course,
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which has not let up for over a year at this point it was not the easiest introduction for mr. swan as the permanent ceo. but starting to get perhaps a little bit of momentum. >> right and then mcdonald's, global comps, 6.5, u.s., 5.7. people talking if starbucks and mcdonald's puts together comps like this, who is losing the share. who knows what we'll hear from dunkin or any other qsr companies. >> are people spending more money? there was -- it was a 2% increase in transactions that's important to keep an eye on people, to your point, the consumer strong, may be spending more money. >> i think a bigger share of wallet is going to eating out. chipotle also saw very strong numbers earlier in the week. so it is benefiting. it is the tech players in the restaurant business that are doing especially well. chipotle ramping that up mcdonald's, that's been a -- >> and starbucks
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>> starbucks as well the digital sales, the membership rewards, what they're doing on the tech front to keep it also innovations and menus, beverages and food, that was a common theme with the mcdonald's and starbucks. that's how you drive traffic. >> i sought other day, mcdonald's offering for the month, if you order on the app, register and order on the app, free fries on friday which shows you how much they need to get people ordering somewhere other than the line. that's the thing that really slows down through put. >> they made that acquisition to make the drive throughs faster, a big component of their business and with starbucks, nitro. >> and same with starbucks in terms of management and trying to actually reduce the number of steps that it has taken in a particular store by employees. i think they talked about reducing 12 hours of work time so to speak in terms of trying to make it more efficient, move the line through so people are more inclined to come in, particularly in the afternoons where they saw
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resurgence in traffic. >> i think it is the new drinks. they have the nitro, the -- >> they all go out for their -- bring back their -- that cold brew, whatever it is right? yeah, they do. >> nitro -- >> nitro, is that what it is called >> that's the story of the quarter. >> there you go. brian is giving me a thumbs up >> we'll watch all that. as we mentioned, starbucks is up we'll talk to kevin johnson later on this morning. we'll hear from the ceos of expedia and intel as well on their results. and as we said earlier, national economic counsel director larry kudlow on the gdp number today, trade, we got big meetings in beijing next week. the fed and a lot more coming off the worst day of the month, but futures look okay on this friday. more "squawk on the street" from post nine in a moment.
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gdp out this morning slowing in the second quarter to 2.1%. not as much as the street had been anticipating. tariffs in the global slowdown did weigh on the economy but the u.s. consumer continues to be strong senior economics reporter steve liesman with us now to break it all down good morning, steve. >> good morning, sara. basically what happened is the consumer and the government kind of saved the day for the economy. other parts of the economy had a pretty good reversal
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we had one chart that looks at the first quarter versus the second quarter here and what you see in terms of things that might have been affected by trade or other issues that are out there is a pretty big reversal from the second quarter. i'll give you some of the data here real quick. for example, inventories were up 1% in the first quarter. down 1.1%. sorry, investment. inventory up half point and then down look, the way to think about this, i think you take it all together the 3.1, 2.1, 2.6, you have above average or above trend growth >> so that means the fed will cut rates next week, steve still? >> i hear a certain skepticism in your voice or incredulity it is a weird -- you add a nice
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point in the first block of the hour talking about how inflation is firmed also core pce, 1.8%, just .2 below the fed. but the fed is going to cut, i think that train has left the station. i -- months ago i pegged this day as what should have been incredibly consequential for the fed's decision but the fed already sort of made up his mind and basically said whatever happens with growth, we're going to go and i think that's where it is going to go where i do see some market reaction and it is only modest, sar sar sara, in the outlying months for future rate cuts, those other rate cuts are still built in, some of the percentages have gone down a little bit >> steve, two questions. what did you make of the reverse down in q 4 and what eventually delivered for us to us for the year and then inventories, stockpiling is really starting to taper off due to the strong consumer what does that mean for the next prints >> so, taking them one by one, i
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was very curious to see the fourth quarter revised downward. they revised up the past three first quarters we talked about the weakness in the first quarter and that seems to be -- have been revised the past three years, some of that came away from the fourth quarter. it was not as strong as we thought. on the issue of inventories, getting inventories right will be critical for growth in this quarter, the third quarter and it looks like we're along the way to getting them right. very hard to predict with the pricing and also all of the confusion and i guess the noise put into the data by the trade issue out there. i'm hoping we get that behind us so we can get a cleaner look at what is going on in the economy. >> all right, it is a ton of information here, we haven't cracked it yet we'll talk to you again later on this morning steve liesman. speaking of the gdp and fed, we'll talk to larry kudlow in the next hour. do not miss what larry has to say about all of this.
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because the possibilities of life and investing are greater when we come together. ♪ ♪ eight minutes to the opening, getting ready for the big fed meeting. the market rises on the first fed rate cut of a cycle. but the run-up to next week's cut expected cut has been very different. mike santoli joins us to explain why we are and what next week might begin to bring. >> unusual things about this
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cycle. since the fed tightened, the s&p 500 is up almost exactly 20% usually in the year before you get a first rate cut, when there is not a recession in the offing, which i think is the assumption now, the s&p is usually up about -- flat or down a little bit in the six months ahead of time. it is up about 6% of the 12-month pace. you built in what you normally get right up into a fed rate cut. you have corporate bond yields right back down to multiyear lows if you get any juice from refreshing the liquidity in the corporate market, you already got most of that and the s&p at this cycle's highs, around 17, you take away the spike after the tax cut passed, it is basically the highs for this cycle so the question is we already figured this out, when the bond market is pricing at 100% chance of a 25 basis point cut, for at least three weeks now. what could be the surprise next week i guess it is just, you know, the fed came around to the
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market's way of thinking and then the prevailing trend continues, which is an upward grind, looks like last summer in that way. >> unless it is the beginning of a protracted cut cycle. >> that's the interesting part the economic numbers have been such that it really takes away from that idea this will be the beginning of a long march back to zero for rates. it looks much more like a technical adjustment, looks like, hey, this is a conspicuous weird thing, treasuries are way above everything else in the rest of the world, let's fix that, 50 basis points does that, pretty much. and then we go back to patient and patient now means hawkish, not dovish. >> expect one but commentary says don't expect a whole lot? >> if it is 50, you say, i think they would love to go 50, be done, let's just try to keep it there. i said patience becomes hawkish in this context. in december, patience was dovish. >> i think it is also the
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significance of dissents is the upshot of what you're saying this looks luke a buy the rumor, sell the fact >> i don't know if it is a sell. you have to have another reason for the market to continue higher beyond what the fed gave you. and it could just be that, guess what, the economy was not in need of rescue that's what the numbers tell us. that's what the companies have more or less been telling us >> stay right there. we want to keep you around as we get closer to the opening bell here we got five minutes until we close out the trading week stay with us don't miss your golden opportunity
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you're watching cnbc's "squawk on the street" live from the financial capital of the world. the opening bell in less than two minutes. what a week it has been. we're going out with a bang. a ton of information out of twitter. mcdonald's, starbucks, intel, amazon, google we haven't mentioned twitter a whole lot. but 20 cents beats by a penny. they call it monetizable daily active usage, up 14 is the best in almost two years. and i think according to bespoke, twitter down 10% plus for the past let's see several q2 numbers
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>> 18%, right? adding it to a number of the names we have been talking about with fairly significant top line growth above that that had been anticipated by most of the analysts of all of the companies. >> the quality control changes also were notable. they put out an investor letter, they described some of the changes they have been making and they said, what? they saw the number of fake accounts and -- increase by 18%. >> i like to look at how they work the press releases and start with a quote from jack dorsey and the first word is health health remains our top priority. that's good. i'm glad he's trying to make sure he's healthy. >> interactions are constructive i do think if you dial back a little bit, the takeaway from twitter, snap, facebook is the pie for -- the appetite for social media, eyeball hours is bigger maybe than we thought not a zero sum situation. >> as morgan stanley today says, middle age is the golden age for facebook, google, even
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amazon to some degree despite numbers that were not on record. >> facebook, middle age, 14 years old. >> yes >> there is the opening bell and the s&p 500, the cnbc real time exchange at the big board, oil and gas, based in mexico, celebrating an ipo today at the nasdaq. also celebrating an ipo, wanda sports, a sports events media marketing platform based in china. we'll talk with the ceo on "squawk box. needham coming out and recommending that google break itself into two or three parts, which they believe would be valued at 50% premium compared to the current status. youtube, we calculate on stand alone basis, valued at $200 billion, which is 30% above today. >> even though we don't get youtube numbers still, again, back to that sort of frustration that investors have in terms of the level of disclosure. what we did get more disclosure on was the cloud business of google it is a distant third to
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microsoft, azure and aws and amazon it is having a run rate for revenues of $8 billion that's up significantly from last time we heard from the company which was five quarters ago. to your point, once you get a number like that, you start to do a sum of the parts and say, okay, this should be valued at such and such and the cloud business clearly would garner a higher value than previously the case. >> the only complaint really is then about alphabet anyway is that it was a top line story, not necessarily a cost discipline story we know over the years we had various issues with their spending, their wanton spending. >> it lost the benefit of the doubt with that which they had after the report got in there. last quarter overhang of just not knowing how much you want to pay up valuationwise for alphabet relative to some of the other ones the breakup story is interesting. people say similar things about facebook and i don't know how that plays into the antitrust campaigns that are out there
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if you say, okay, fine, you got us, you got to break us up and wall street says fine, we think it would be worth more in pieces anyway. >> i think the big takeaway is despite the regulatory overhangs and the risk of distraction and, you know, upping expenses when it comes to head count for facebook or legal fees, these companies continue to be profit machines that are growing 20%. >> facebook does everything they can to try and downplay that the fact they have $50 billion in cash after paying out $5 billion and the fact that their business just keeps kind of growing at these alarming rates given the size of the business already. >> and the amount they spend on capex i find amazing as well at google alphabet, excuse me. >> 24 plus billion a year. they do say -- they give more insight to this idea they did give investors a bit more disclosure the majority of the google capex is what they refer to as technical infrastructure, that
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consists of investments for computing storage, networking requirements, data centers, land, construction, servers and network equipment. the second category is facilities they spent enormous amount on that too they spend more on capex than any other company. >> oh, yeah. >> 13% of all capex, i think something like that. a few points from a record high, we're at 3014. can we put to bed today any earnings recession question and any recession recession question >> pretty much i think the earnings recession thing, it was much more a talker than it was a real phenomenon. >> some based entire calls around it. >> i think that -- depends how you want to define it, it is not a real thing we decided two quarters in a row of negative earnings given the historic beat rates, it was not really tracking like it would be outright negative.
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i think the real situation has been earnings have plateaued for three quarters now it looks like next quarter or the one we're in now is exactly the same so we're kind of hovering at this particular earnings level and the market is able to stomach it because it doesn't believe it is a cliff. it just thinks it is a lull before you pick up again so probably first quarter, estimates have to come down, still up near 10%. hard to know we'll accelerate from there, except for the fact you lose the tough comparisons that's maybe the battle you got to fight a few months down the road. >> no shortage of examples of where the consumer is strong and how that's playing out in earnings even mattel, a problematic turn around story, stock down 20% over the last 12 months under new ceo posted better numbers and getting rewarded this morning. the loss was a bit narrower than expected and sales growth was better, 2% barbie does the heavy lifting here for mattel. also i think hot wheels did well, american girl, not so much not going through the best times
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there for american girl. fisher-price continues to struggle they have that big recall of rock and play. it was a good number an we continue to get more on the new strategy of the fairly new ceo, you know, who came from the tv world was a fox executive. they're going to keep making movies and make a movie out of their magic eight ball, a horror movie, i think, coming to theaters >> great level of detail there i wanted to mention shares of charter this morning they're down about 5%. this is one of the larger so-called cable companies. we should rename them broadband companies. that's what they want to be thought of that's the key metric for a company like charter that is where investors may be a bit disappointed both on the inability to deliver what the analysts had anticipated in terms of broadband net editions, they came in at 221,000 for the quarter. but analysts had been higher than that.
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many around 240 or more. and they lost 150,0$150,000 vidb and that was worse than had been anticipated. the stock prior to the open had been looking down more than just 5% but it is -- by the way, pointing out, it is up still for the year charter some 35% so had been up 40% coming in the print this morning but it is pretty simple story in a lot of ways for charter. they don't own networks, don't own cable net works like our parent company or any of those things just about less -- not losing that many video subs and adding a lot of broadband subs. they didn't do either. >> those stocks, charter gets caught up. the market says i want to own some kind of steady platform network effect, free cash flow story, and the clock investors kind of just psyccycle in that direction and that's the charter. it is not pinned on this number of this quarter, it is just like the general dynamics of the
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business that's why sometimes they get a little expensive rellive to wei what they can deliver on a three month basis. >> beyond meat, began at 170 was 240 premarket. on pace for the best week ever, up 35% market cap eclipses conagra and several others we with go down the list. >> wendy's short this thing. >> got to pay 100%. >> there is a mechanical aspect of what is happening right here. >> yeah. >> which is -- >> not a lot of stock. >> not a lot of stock around you have -- from the beginning, just a huge amount of enthusiasm for this general category of consumer behavior and trends running through one stock. 10% of the flow available to trade or whatever, 13%, already very heavily shorted and it becomes a video game. >> they come out with these announcements almost weekly.
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this week dunkin, partnering with that. we have seen in the numbers that super charges the growth numbers and the revenue. so, yes, it is extremely expensive. >> that also just tells you that people are just looking for an excuse to pull the trigger at ever higher levels look at the volumes in the stock, it is churning over, you know, multiples of the flow in every week so that's what i'm saying, video game, backed by a real long-term, you know, consumer behavior story and, yes, these partnerships that will accelerate their -- >> do you see baskin robbins announcing a plant-based ice cream flavor not to do with ybeyond meat, but -- i can get on board with meatless meat but not nondairy ice cream. >> the flavor -- >> plant-based is going crazy. >> almond milk kind of thing. >> all right mike, thank you. mike santoli back to starbucks. the shares are up this morning
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sales in its top two markets, u.s. and china, climbing at least 6% for the quarter that is same store sales and comps. company increasing the forecast. joining us now first on cnbc is starbucks president and ceo kevin johnson. always nice to have you, kevin we're a long way from that morning you and i shared in boston, i think june of '18, where things were a bit tougher and you really delivered over this last let's call it 14 months i guess given a quarter like this, my question and those of investors is can you keep it going? the 7% comp number in the u.s. seems somewhat extraordinary >> well, david, you're right a year ago we outlined our growth at scale agenda growth at scale for us is all about focusing on the most important things and then executing with discipline. and that's what's driven our results. certainly q3 was a very strong quarter for us
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but growth at scale is more about driving predictable sustainable growth for the long-term. and so much of the work that we have done over the last year has not only delivered results, but laid a foundation for sustainable growth against our growth model >> in the u.s., as i said, up 7% not just people spending more, but a lot more people -- more people coming in and doing more business overall what is behind that? is that because key of the -- after the afternoon and the efficiencies you created, the ability you had in terms of delivering marketing to that our part that has sent more traffic in >> well, we saw transaction growth in all day parks in this last quarter in the u.s. and it is really driven by three things first, it is the experience the customer experience we create in our stores i attribute that to the 400,000 starbucks partners who proudly wear the green apron and all we
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have done to simplify the work for them, automotive, administrative tasks so they can focus more time on the customer. second, about new beverage innovation and the beverage innovation all in our cold platform that is resonated with customers. nitro cold brew, refreshers, and that's helped us lift the afternoon. and then third, it is our digital customer relationships we grew active reward members 14% year on year in the quarter in the u.s. to 7.2 million the combination of great instore experience, beverage innovation and digital reach is fueling the growth in transaction comp and we think that those are the right three things to focus on and we made great progress over the last year in all three of those. >> finally, before i hand it off to sarah and carl, china, somewhat problematic in terms of what we have seen flat comp store sales, for example, not this quarter, up 6%.
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3900 stores at the end of the third quarter. same question, though, can you continue and do you expect to continue to see those kinds of numbers in terms of both comp transaction growth and same store sales? >> certainly china and the u.s. are two targeted long-term markets and i was in china last week and the work that our team has done in china over the last year is also phenomenal. and also sets the foundation for continued long-term growth look, we're committed to the market and china china is a huge stage to perform on, the addressable market for coffee is large and it is growing. and with the work that we're doing to create a great customer experience, beverage innovation in china, they released a set of cold beverages called modern mixology these beverages are based on coffee and tea that were invented in our roastery and they resonated with customers. we enhanced the rewards program in china
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that was launched last december. we now have over 9.1 million active users in china, grew 36% year over year the same three ingredients, great experience in our stores, beverage innovation, and digital, is also fueling china and we're bullish for the long-term in china >> you got a question on the conference call last night, kevin, about delivery. it is something that wall street is excited about you said you guys are in the early days of it you're experimenting with uber eats how do you think about that as a long-term growth opportunity and what does that even look like? do people order drinks, delivery >> yeah, first of all, sara, i think delivery is an example of consumer desire for the need state of convenience and a lot of that is driven by the digital mobile revolution, with the mobile phone, you have convenience for all sorts of things in your life. to be able to order on your phone for starbucks, for pickup in the store or delivery, we are
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enabling that need state of convenience that we think is complimentary to the third place experience that we create in our stores now, the delivery market in china is much more advanced. you think broadly about how the chinese consumer has embraced delivery that's why in china we saw roughly 6% of our total sales was driven by delivery in china. starbucks delivers and we do that in partnership with alibaba here in the united states, we have a great partnership with uber eats that we piloted last year we rolled out to 11 markets. we have announced we'll roll it out nationally in the u.s., i say delivery is still in the early days. we're optimistic about it for the long-term. this last quarter did not contribute meaningfully to our comp results we think in the future it will be a growing part of it. and that's why we're investing in it. >> kevin, i got to ask you about the equity stake in bright loom, the latest in what we have seen in terms of restaurant technology purchases among you
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and some of your competitors what does it bring you and is it the beginning of even more quiz itiveness in the tech space. >> we know the digital customer relationships we create are key part of our strategy it is a key part of any modern day retailer you have to create an experience in your stores that becomes a destination for your customers, and then extend that in store experience it a digital customer relationship now, we have had great success doing that over the last five years. we called that our digital flywheel what we have done with bright loom is we recognized that the digital flywheel we created is servicing our company operated markets. mia u.s., canada, uk, japan most other markets throughout europe, latin america, south asia, are licensed markets they do not have the digital
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flywheel capability. so the first priority with bright loom is for bright loom to focus on a cloud-based software is the service digital flywheel that services the starbucks license partners and the multiple brands that they also operate in their markets, but we're also -- bright loom will offer it to allrestaurant merchants in the industry and have a cloud-based software as a service offering for them. we're excited about the equity stake we have in bright loom we have that equity stake by licensing elements of our digital flywheel to them we got a seat on the board adam bratman, former chief digital officer here at starbucks is now the ceo of bright loom. i think bright loom will do some great things both for the overall industry and as well as the starbucks license partners globally >> if cramer were here, he would be talking about the digital flee whe flywheel, he talks about
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starbucks as a digital company you have digital ordering. what advantage has that given you in practice that you're reaccelerating the growth profile of the company right now? >> well, i think about the overall differentiation that we deliver in the market, it comes from a variety of things first of all, from the coffee that we source from farmers around the world the craft that our partners and our stores practice as they hand craft those beverages for our customers. it comes from our beverage innovation and comes from digital. we're using technology actually to automate administrative tasks in our sthooores to free up our partners we're using technology to extend the customer experience we create in our stores to a digital mobile relationship. the personalization engine that we created now is really providing personalized relevant
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offers to our customers and they're responding so i think at the center of many of the things we're doing, we're using technology really to amplify the inherited differentiators that starbucks has always had and so we're very optimistic about the foundation that we laid over the last year with growth at scale. and how that's go to allow us to deliver predictable consistent growth for the long-term >> kevin, we'll end on a couple of quick macro questions how would you rate the state of the consumer and are you having any trouble in terms of the employment market finding qualified people >> i'd say from a macro perspective, consumer confidence, consumer spending, engagement is very good. we saw all time highs in our customer connection scores and that's a -- that's a tribute to the work our partners in the stores do. but it is also reflection of the attitude of the consumer in the united states. certainly with unemployment so low, you know, we're very
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fortunate because we have been a company that always invests in our partners, providing healthcare to part time workers of 20 hour oz s or more a week, starbucks college achievement program with asu and partners are proud to wear the green apron. we had no trouble attracting partners in fact, just this week we announced we have hired 25,000 veterans and military spouses. and, you know, over the last several years. we'll continue to hire roughly 5,000 veterans and military spouses. it is another example of the fact that people are proud to wear the green apron and proud to be a part of something that is bigger than any one of us. >> kevin, we appreciate as always your willingness to take time with us thank you. >> thank you so much, guys >> kevin johnson, ceo of starbucks. >> to the bond pits, check in with rick santelli on a consequential friday
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hey, rick. >> the market is acting a little strange this morning look at intra oftwos, down after the strong data. 10s are up one look a tens up one. the yield curve, month to date we have had significant flattening this has to depress the federal reserve. steepening is what they want it also underscores how many big institutional panicked on the number only to let it come back down in terms of yield, up in terms of price two day of bunds, showing the same types of issues hovering at minus 40 t the dollar index, up three-quarter. is king dollar now proper dollar i don't understand his recent comments sara, back to you. >> you know we will, rick. dow's up 30 points "squawk on the street" is going to be right back n'gonyere.
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there is a look at the dow, up 55 on this week s&p up 15. 3019 is not far from a record. we will see if we actually get there. >> better earnings, better economic numbers q2 gdp 2.1% was a bit better we will get the white house's reaction from larry kudlow national economic council director was it better than he expected and does he still want the federal reserve to cut interest rates as they are likely to do next week? odds of 50 are coming way down from the last couple of weeks. also ahead, the ceos of ex di a ielmeumndnt do not go anywhere - did you know that americans that bought gold in 2005
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for the amazing price on your screen. ♪ good friday morning. welcome back to "squawk on the street." i'm carl quintanilla with sara eisen and david faber at the new york stock exchange. a look at the markets. dow up 40, s&p back to 3018. we watch all kinds of cross currents, including earnings, gdp, brexit, the fed, china, and more. >> the roadmap for the hour, the slowing gdp. beatk expectations but down for
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growth larry kudlow joins us in a few minutes to break down the numbers. >> earnings lifting stocks what's driving the results. >> and shares of expedia group are up on its earnings report. the ceo is going to join us later this hour. big tech taking over today's earnings picture alphabet, twitter and intel higher on reports. alphabet leading the charge with profits tripling from a year ago. the company announcing a $25 billion share buy-back on the opposite side, amazon is slumping the company taking a hit from increased shipping costs then starbucks and mcdonald's are up as food stocks continue their strong runs. some of these targets on mcdonald's that looked aggressive a couple of months ago in the 220 range, obviously now have been met essentially. >> because the stock is already at a record high had a nice run up. it benefits from a defensive stock, but also a grower right now. you have seen this reacceleration of growth and
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coco store growth in mcdonald's as we heard from kevin johnson, traffic ticking higher the question is how sustainable it is. what did you get from johnson? >> he wouldn't answer directly i asked him about the u.s. and china in terms of can we expect to continue to see this growth, 7% comp growth in the u.s. 6% in china, which really has reversed what had been some anemic growth for some time. they sort of got their supply chain, if you want to call it that, particularly, because delivery in china is much more prevalent than it is here in the u.s. partnership with alibaba seems to be going fairly well. digital efforts here in the united states. here is what johnson had to say about growth >> growth at scale for us is all about focusing on the most important things and then executing with discipline. and that's what's driven our results. certainly, q3 was a very strong quarter for us growth at scale is more about
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driving predictable sustainable growth for the long term and so much of the work that we have done over this last year has not only delivered results, but laid a foundation, i think, for sustainable growth against our growth model >> so there you have it. sustainable growth against their growth model. >> that's been the tag lane the are continuing to open hundreds of stores. if you look at amazon, yes, the stock is lower yes, the first time that this company missed on the bottom line in eight quarters, but the revenue did beat and it's about 20% revenue growth that stemmed from retail if you want to continue the strong consumer trend, it's in the gdp report all day, you see it in amazon they did credit the one-day shipping for driving sales and more services. aws, their cloud business, the profit engine, slowed down a bit in terms of growth, up 37% so first time under 40, i guess. >> yeah. it's an enormous business at this point doing over 8 billion
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in revenues a quarter. incredibly profitable given the profit margins those positive on amazon we'll point you to the unit growth reacceleration of unit growth here in the u.s., and you can see the stock is done a bit. of course, it had been over a trillion dollars in market cap last year before a significant dip in december. still up dramatically from the december lows. the story of the day is alphabet think we talked about it in the last hour. it's worth mentioning again. they haven't seen this kind of move since i think it was 2015 stock up 11, roughly 11%, let's call it. investors are responding here to a top line when you adjust for currency, it was above 20% after a disappointing quarter last quarter. a little bit more disclosure that they perceive given how much criticism they get for lack of transparency. that disclosure in tiparticular focused on the cloud business
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which has a run rate of $8 billion a year leading some analysts as you pointed out, carl, to start doing some of the parts valuation methodology coming up with far large are numbers there as well. those operating results, particularly up 20%, is what is truly helping investors. >> yes laura martin, who is known for making waves meantime, the president tweets about google there may or may not be national security concerns with regard to google and the relationship to china. if there is a problem, we will find out about it. i sincerely hope there is not. >> this in response to those charges from peter theala few weeks back he offered no real evidence at the time, but it's sort of talk -- very strong terms about t google getting played by the chinese. >> we know about thiel's ties to some of google's chief competitors, namely facebook. >> which he is on the board of.
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>> another avenue they are looking into google though about. national security on top of anti-trust, on top of privacy. i mean, keeping it coming. it's not altering the fundamentals of google, facebook, amazon double-digit growth. >> and microsoft, when new i about the giants of technology, all delivering better than anticipated numbers. facebook is down today, even though many people applauded that quarter, as you know. >> more than 55%. >> 22 times gap earnings. >> and google was cheaper. let's get to the economy and that gdp number out this morning. u.s. economy a health clip growth consumer spending offset a decline in business investment joining us now first on cnbc president trump's top economic advisor director of national economic council larry kudlow. welcome back, larry. nice to see you. >> thank you, sara appreciate it. >> 2.% growth for the second quarter, it's a step down from
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the 3% we saw first quarter, but better than expected how are you guys feeling about it >> pretty good, actually consumers were the hero. they had explosive economic growth i guess better than 4% at an annual rate. we lost some ground. we had an inventory correction, which took a point off that probably bodes very well for the seconds half we are seeing core capex orders really starting to steam up in may and june that's great retail sales also may and june, that's awfully good. look, i think, you know, to keep this thing going in the face of severe monetary tightening in 2017 and '18, seven rate hikes, i think it's almost a miracle that the economy is growing as rapidly as it is it's growing faster, way above the prior trend line, and i think president trump's policies of tax cuts and deregulation and energy opening and trade reform are having a huge impact you know, this has not been easy
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with seven rate hikes. >> so that may very well be true, larry, but a lot of people would say it's a miracle we are growing this fast given president trump's trade policies you call them reform exports were down. that's a drag. business investment was down that was a drag. you have to admit that is weighing on parts of our economy? >> well, you know, i don't think this trade factor is near supportive as a monetary factor. i mean,the global economy is very slow. so that would help explain the slowdown in exports. so i get that. by the way, we have a u.s. mca nafta 2.0 treaty that's spending if we get that through, it will add half a point of gdp with 180,000 jobs that's what our estimates and the international trade commission -- so that's actually from trade reform going to be a huge growth factor we're talking to china
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hopefully, those talks will continue secretary mnuchin, ambassador lighthizer are going to shanghai i believe next week. that seems to be in play we will see if they are going to buy the kind of agriculture goods we asked them to buy and they suggested they would buy. that would be very helpful but, no. look, getting trade barriers down is absolutely essential that's president trump's policy. and if they do, we have such a productive economy, with low tax rates and regulations for business, we will knock the cover aoff the ball in terms of exports. and so job creation -- you know, job creation is part of the consumer story i don't know if people kind of forget that. wages are rising real disposable income rising. unemployment low across the board. i think it's a pretty good picture and i'm hoping monetary policy makes the shift that the markets are expecting. >> larry, the revisions to gdp that were lower for last year
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specifically, does it raise more concern about whether the tax cut gave us the broad macro payoff we were looking for >> well, look, on the yearly basis, 2017-2018, 2.7% that's a good number i know it's almost 3%. and again we had to suffer through the severe monetary tightening i went back and looked at the revisions. the prior eight years, the last administration, 1.9% so we're growing at about a 40, 42% faster pace than that trend line so i think you can see the clear improvement going on and also let me just add to that productivity numbers are now trending above 2%. that's a terrific thing. we haven't seen that in many, many years so, no, i think we are in good shape as, again, we had a lot of monetary headwinds hopefully, that's going to be remedied but i think the economy is
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really poised for a strong second half as we cross over into the third quarter as i said, the durable goods report yesterday, core capex very strong the last two months. retail sales very strong that looks like we are going to pick up a lot of speed in the second half of this year >> no doubt the consumers seem to be quite strong wanted to move to china. a tweet from the president he just came out and said that apple will not be given tariff waivers or relief from mac pro parts that are made in china make them in the usa no tariffs larry, how do things stand right now between the u.s. and china in terms of the negotiations >> let's see again, as i said, they are going to meet next week in shanghai. secretary mnuchin, ambassador lighthizer i think i wouldn't expect any grand deal i think talking to our negotiators they are going to kind of reset the stage and
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hopefully go back to where the talks left off last may. we were doing well no deal yet, but still on the structural issues regarding ip theft, forced technology, cyber interference, trade and non-trade tariff barriers and so forth. certainly the enforcement mechanisms but if we were 90% there with 10% to go, i call it the seven yard line, i think our negotiators want to go back to that spot. again, let me repeat the very, very important note that we anticipate, we strongly expect the chinese to follow through. goodwill and just helping the trade balance with large-scale purchases of u.s. agriculture products and services. so, you know, i think -- >> larry, have they given any --
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>> sorry >> have they given any indication, the chinese, they are willing to go back to that place that you just discussed where they will consider yet again those key concessions? >> i'm going to let those talks unfold next week i'm not going to predict i'm not going to evaluate. i want to see how it goes. i have been engaged in this issue for a year and a half. sometimes what you hope happens, doesn't happen sometimes your greatest fears are not realized i am going to play this from the optimistic side because it's inbred in my body and soul we will see how those fellows do we will see. >> can you give us any sense of the likelihood of more tariffs, either on chinese imports, on european auto imports? i mean, it's kind of an administration where that could happen at any time so what would you telemarket participants about the likelihood of more tariffs coming >> well, look, the president again, the basic thrust of his policy is to lower trade
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barriers that's always been the basis of his policy in an ideal world, zero tariffs, zero non-tariff barriers, zero subsidies. he has, as you know, been willing to negotiate on a number of fronts, including tariffs where necessary. he is not afraid to use tariffs as part of the negotiations. part of the discussions. most of that economic burden, by the way, in our judgment has fallen on china. now, i'm not going to predict the future i think again, in a common sense way, if the u.s./china talks go well, then we would not expect new tariffs. if they do not go well, the president has indicated that the tariff tool is at his disposal and he might use it. i say might. depends on how the talks about regarding auto tariffs in europe, all of that is on hold for a good many months
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but i will say one thing about europe we are very concerned that our friends in france are going to impose a digital tax on the big american tech companies. we think that's absolutely wrong. treasury secretary mnuchin is engaged in negotiations through the oecd to solve the issue of taxes and the new economy and the new tech economy and so forth. we are unhappy that france is going to go ahead with some kind of digital tax, and ambassador lighthizer has begun at the president's request, he has begun a 301 action we filed the paperwork hearings, i believe, will be held in august and then it will be up to the president to see if he wants to follow through with retaliation. i think the digital tax hike in france is a very, very big miss take i i'm sorry to see it. >> finally, deficit's up
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debt limit is up government spending is up. the sequester has been neutered. when do we hear about fiscal discipline, fiscal responsibility, and entitlement reform which you were talking about as a 2019 story last year? >> well, actually, there was some confusion about that. let's put that aside look, we never seem to get enough spending restraint, but the deal that was passed gets the debt ceiling and any default talk off the table that's terrific. we continue to fund our defense side that is vitally, vitally important. and there is nothing in that deal that would preclude the president's policies regarding border security and related matters. so it wasn't perfect, but at least it's a step in some good directions for our policies. you know, let's see. the deficit in 2019 and 2020 i think is estimated about 4.5% of gdp. i think that's a manageable number and i don't think it's interfering -- you take a look
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at the bond market, david, the ten-year is what hovering around 2% so there is no fear and loathing with respect to all of that. look, once upon a time, oh, about 35 plus years ago, i worked for a president who was determined to increase defense spending for national security and lower tax rates for economic growth here i am 35 years later, some odd, working for a president who wants to shore up our defenses and provide important incentives for economic growth. it worked well for reagan. it's working well for trump. i say we stay the course. >> what's not working well for trump, according to him, is the strength of the u.s. dollar, larry. do we have a weak dollar policy right now? and if so, how far are you willing to take that to please the president and get the dollar down ahead of election >> well, i don't agree with your assertion that the president wants a weak dollar.
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i don't agree with that. >> he tweets about it all the time. >> he tweeted last week that the dollar is the dominant currency in the world and he wants it to stay that way. what the president, and i think this might be your misunderstanding, what the president is concerned about is the foreign countries, they may be manipulating their own currencies lower to try to gain some short-term temporary trade advantage. that we do not like. it's not a question of bringing down the dollar. and i will say this. just in the past week we had a meeting with the president and the economic principals and we have ruled out any currency intervention so i just don't agree with your assertion. the steady, reliable, dependable dollar is attracting money from all over the world, and that along with our incentive policies on taxes and regulations and our hope for trade barrier reduction, that's bringing money to the united states in bundles. we are the hottest economy in
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the world, and i expect us to stay that way. >> i mean, thanks for clarifying, larry, because there are a lot of research notes out there wondering and speculating whether you guys are going to direct the fed to intervene in the currency market because the president has ramped up his complaints about the value of the dollar i am not talking about the stability or whether the dollar is the reserve currency. clearly, he seems bothered by the fact that other countries are doing more stimulus which is weakening their currencies relative to ours. >> we don't want that kind of manipulation. >> it's not manipulation their commission are growing slower. >> well perhaps, but in some cases we think there is manipulation the president's tweet was the dollar is the dominant currency in the world we want it to stay that way. i will reiterate my point that we have, as a matter of policy, ruled out currency intervention. >> larry kudlow, thank you very much for joining us. >> thank you appreciate it. >> from the white house.
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>> when we come back, ptexpedia nice lift on earnings. we will hear from the ceo mark okerstrom about what's next for the company. degradation in some tech names, section 301 regarding france and the digital tax. "squawk on the street" is back in a minute. lower calories. ♪ higher expectations. ♪ the light beer you've been waiting for has arrived. the light beer you've been waiting for dto experiencer gthe luxury you desire on a full line of utility vehicles. at the lexus golden opportunity sales event. lease the 2019 rx 350 for $389 a month, for 36 months, and we'll make your first month's payment. experience amazing.
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expectations joining us expedia's ceo mark okerstrom. thanks for joining us. >> great to be here. >> broad tech trends in travel, because we have been hearing conflicting things from cruise lines, for example, versus airlines >> yeah, listen, from our perspective, it seems broadly healthy both on the global scale and particularly here in the united states. recent study by brand expedia said that about 85% of americans are planning to take a trip between now and september. and so people are traveling. looks broadly healthy to us. >> what effect, if anything, is currency having at scale >> well, listen, currency generally for us generally sees shifts in travel patterns. so in periods like this where you see a u.s. dollar particularly strong, you see more international travel by americans going to pluses like europe, like latin america we see those types of trends generally speaking, it's just a shift in travel patterns for a
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global player like ourselves. >> in terms of acquisitions, fueling growth, is that picture going to change in the year to come >> well, i don't know about the year to come acquisitions have always been a part of our playbook i think if we look forward the next five years versus the last five years, there is probably a little bit less acquisition activity, but we will be opportunistic. one of the things we said on our last earnings call, as we look at the next couple of years, we see the opportunity to really generate strong free cash flow probably better free cash flow characteristics than we have seen the last five we will have an incremental buys towards purchasing our own stock compared to the last five years. >> it looks like the vrbo gross bookings did slow, mark, to 2% from 5% the previous quarter what's going on with the business there as i know you have made a big name change and that has been a big focus of trying to drive growth. >> yeah.
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so the gross bookings slowed down a little bit, optically, largely, the first quarter versus the second, you adjust for things like easter it's broadly a similar trend we are seeing continued healthy growth at the main vrbo brand. this is something we rebranded from vrbo. people with rend a vrbo for weekend. that's the brand that we are putting our weight behind in the u.s. and over the course of the next couple of years we are going to be rolling it out internationally. meantime, we are transitioning some of the other regional brands over to the vrbo platform, rebranding some of those sites vrbo that has put some headwinds on the business that's something that will probably persist the rest of the year, and then by 2020 we should be back into some more normalized growth rates. listen, we are super optimistic about alternative accommodations for vrbo and expedia group we have this inventory on
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expedia and that's going to unlock more opportunities for us in the urban market here in the u.s. and also in all markets internationally. >> we just talked to larry kudlow a moment ago about u.s. tr and possible responses to this france digital services tax. is that material for you >> well, it is something we called out as a factor that could impact our q3 earnings if it is passed into law. listen, i think these digital services taxes are something that should be a concern i think at the end of the day the dbig digital platforms, amazons, googles of the world, these have really put a lot of economic power in the hands of consumers in the way of reducing costs, making prices transparent, and the second that you start taxing these platforms and start putting friction in the system, ultimately the concern is that that ends up landing in the hands of consumers and we don't think that's a good thing. >> it goes back to the long
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standing theory that the europeans are using american invasion and tech to subsidize their economic shortcomings. is that fair >> well, i don't know about economic shortcomings. i think it's natural for nations to try to generate revenue i mean, that's what they do to provide the services that they provide. i think what i can say is that there is a bed of invasion heinn here in america. it is something that is fueling globe growth most american players like ourselves have bigfoot prints in europe and around the world. we are also driving a huge amount of job growth into those economies as well. i think regulators around the world should just be, i think just mindful of the consequences of putting some of these taxation schemes in place around whether economic knock-on impacts they can ultimately have. >> speaking of europe and the u.k., are you seeing any pickup there? is it more or less the same, specifically also in the u.k. in terms of the continued concern about brexit >> so we saw a pretty
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significant impact around the march timeframe when the brexit issue was at, you know, really its hottest when the date got pushed out to the end of october we saw things bounce back a little bit they are not quite at the levels we would expect to see with respect to the rest of europe, q2 things looked pretty darn healthy across the board. france was a highlight spain looked pretty strong to us i think in the summer months, this is peak summer season, so far, so good you look at the news and you have some heat waves i think historical if you look at last year, the heat waves were a factor for travel patterns in europe that's something i would keep our eye on. >> yeah, it's been really hot. >> record heat wilford was complaining yesterday about it so, mark, bottom line, is double-digit growth sustainable in this environment for the company and with the macro outlook? >> we wifeel pretty good about .
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this past quarter, 12% we said on the call that seems like a healthy right for us. we are going to try to do better if you look at our opportunity though, we have so much opportunity to grow outside of the u.s. in places like europe, places like latin america. there are literally millions of properties that are out there in the world that people are staying at that aren't yet on our platform so we think that healthy growth for us is something that we should be able to sustain for a long time to come in good economic times and bad. >> mark, thank you very much covered a lot of ground in a short amount of time appreciate it very much. >> thanks. great talking with you. as we head to break take a look at the markets here higher across the board. adding to gains for the week nasdaq now up more than 2% for the week surging on the back of very strong earnings from google, for instance twitter also having a nice day s&p is up a little less than 0.5% more "squawk on the street" when we come back right
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welcome back everybody i'm sue herera here is your cnbc news update at this hour. north korea says its test of a
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new missile is meant as a quote solemn warning over south korea's weapons development and its plans to hold military drills with the u.s. the north korean statement was carried on state media and directed at south korean military war mongers. the european commission repeated today that the brexit withdrawal agreement will not be reopened british prime minister boris johnson said the current agreement was not good enough and had to be renegotiated. >> yesterday president juncker spoke to prime minister boris johnson on the phone president juncker listened to what he had to say and reiterated the e.u.'s position that withdrawal agreement is the best and only agreement possible in line with the european council guidelines >> brazilian police say eight armed men stole more than 1,600 pounds of gold and other precious metals from the sao paolo international airport. the value placed at $40 million. the thieves apparently fooled security systems by using two
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cars that looked like police patrol vehicles. you are up to date that's the news update this hour sara, back downtown to you. >> thank you. time for our etf spotlight taking a look at energy today. turning to the downside after seeing strong gains earlier this week sector lighting the s&p 500 as yesterday's worst performing sector and continuing its decline this morning take a look at the xle, trading down more than 5% over the last quarter. the oih, xop also sliding into the red as well. gas trades near lowest levels since late june. >> no inflation there. >> no. >> no. >> when we return -- >> plus hot weather. >> yes jim stewart is going to join us to discuss technology's latest anti-trust headwinds ret resqwkn e stet" coming up.
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big tech companies facing anti-trust reviews from the department of justice and the ftc. also throwing the s.e.c. in a different way. now president trump tweeting this morning, quote, there may or may not be national security concerns with regard to google and their relationship with china. if there is a problem, we will find out about it. i sincerely hope there is not. of course, alphabet today released the stock, having very strong gains on unexpectedly strong top-line growth the president also tweet being apple, saying they will not be given tariff waivers or relief from mac pro parts made in china. joining us to discuss not the president's tweets as much as sort of anti-trust in general is pulitzer prize-winning "new york times" columnist cnbc contributor jim stewart. >> good morning. >> good morning. it's funny
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the concern about that headwind didn't come up very much in the conference call with analysts for the likes of alphabet or amazon, but it's a continued concern certainly for many investors, it would seem what's your take at this point as these investigations get underway at the ftc and the doj? >> i'm just totally fascinated by this for several reasons. one is that this is really a sea change in how the federal government is looking at anti-trust enforcement, from the old market-driven university of chicago rigorous economic analysis approach to a much more let's bring back louie brandice. we can't have concentration of powers secondly, the nature of these mond monopolies, if they are monopolies, is completely different from the old trusts that were broken up in the brandice era i think that's because in cases like facebook, google, amazon to some extent, the monopolies do
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not come out of old industry economies of scale, which is like the old steel or oil things it's the network effect. it's like an auction you want to be on the site with the most sellers if you are a buyer, and you want to be on the site with the most buyers if you are a seller ebay is a great example of that. facebook, if you are using it, you want to be where your friends are and your friends want to be on the site where you are. there is going to be a natural monopoly here, and i don't think the structural relief they are looking for breaking up is going to solve that problem. from an investors' point of view, also, i don't think that facebook divided into instagram and the social network is all that much less valuable than it is together. so i don't think -- >> but do you not think there is an anti-trust case to be made? you will be following this closely in the months ahead as
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we get more data if the ftc and doj. do you not think there is a case to be made that innovation is stifled, certain anti-competitive actions are taken by enormous platforms, enormous platforms that prevent others from participating? >> i am interested in seeing whether there is conduct that they can demonstrate has in fact suppressed innovation or harmed consumers in some way. purely from a structural standpoint, my argument would be, if you have facebook controlling instagram an facebook, you break those into two, facebook, instagram instead of one company that owns two monday op plays, you will have two companies with two monopolies you will still have a monopolies maybe snapchat can nip at instagram's heels. i think the problem is the network effect let's say you decide to break facebook into two. so suddenly half your friends are on a different social network than you are then what happens? do you subscribe to two? do you use two i don't think so. >> are you saying this is specific to social media
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because we have competition in cloud along the big players and we have competition in streaming, or getting it among big media players. >> i think it's true of any business where you have this network effect and the network effect is -- has risen with the internet. i mean, it has made it possible to create these businesses that depend on scale and where both sides of a transaction want to be at the platform with the biggest distribution, the biggest exposure it's true for advertisers to some extent as well. that's sort of a numbers game. so i think it is, it's a unique phenomenon to the digital age, and it is one that i'm going to be very curious to see how these economists and anti-trust experts address it because it's going to be very tough, i think, for any kind of regulation to overcome the powerful social and economic forces that are driving people into a common site here. >> they are all different. >> they are very different. >> totally different so is there one more than the
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other that you think is vulnerable to these types of question questions and ultimate action? >> the traditional way of looking at monopoly power is profit margin. you should have very high profit margin amazon has very low profit margins. you could maybe argue they are using profits in the cloud to subsidize their retail business. that's a tough argument to make because, you know, who benefits from all that? like the consumers, you know are you really going to say they should be paying higher prices on amazon? not getting free delivery? amazon from that standpoint is the safest and the others you will see facebook, alphabet just had good earnings. they have got margins in the 20s and 30s. so does coca-cola. it's like this isn't like off the charts you are not looking at 70%, 100% margins, which would truly indicate some serious monopoly
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power. so i don't know. i mean, i wouldn't be that worried at this point. i would be monitoring this closely. another interesting issue with this enforcement set of actions is the white house and trump he is tweeting all the time about it the traditional view is the chief executive should not be commenting on companies under investigation by the justice department he doesn't like big tech he thinks google is, you know, unfair he doesn't like jeff bezos he went after the time warner deal after saying all kinds of bad things about cnn the problem with the old anti-trust thing, big is bad, which big is bad it leaves plenty of room for purely political picking of favorites, which is one of the reasons that the brandice thing went away in the first place. >> jim, thank you. >> sure. >> always appreciate it. jim stewart. >> trump just tweeting gdp he said q2 gdp up 2.1% not bad considering we have the very heavyweight of the federal reserve anchor wrapped around
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our neck almost no inflation. usa is set to zoom, echoing what larry kudlow - >> repeating almost verbatim. >> he said a miracle that we saw this after tightening from the federal reserve. >> the president says not bad. kudlow's line was it was a miracle the economy is performing the way it is - >> let's see what happens when the fed cuts rates next week. >> does the pressure come off? >> right. >> as we go break, the dow has gone negative. down about six points. s&p hanging on to 12.5 some today's big earnings movers, alphabet leading the charge best day in a few years. rurn e re" enthstetwh weetn.
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one expert says if tesla breaks its rooecent low there could be problems straight ahead for the stock. find out more on more "squawk on the street" coming up.
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we asked larry kudlow about president trump's complaints lately that the dollar is too weak here's what he said. >> what the president is concerned about is foreign countries may be manipulating their own currencies lower to try to gain some short-term temporary trade advantage. >> well, tell you what - >> the white house has decided not to intervene in the currency market, rick, and that the president actually does want a strong dollar. over to you. >> yeah, just makes me scratch my head. i'd like to welcome my guest doug, let's pick up with sara's question it's twofold, actually maybe threefoed. we all have years. strong dollar has not been a favorite of this administration. many people in the administration associated with -- who have histories of
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lo liking it have fallen silent i would like to hear what larry said if there is manipulation, two things go after it or maybe think about they are not ending up any better their economies are suffering from whatever they are doing so just leave it alone your thought >> i think they are making a mistake and they should leave it alone. i mean, look, he said they are going to get some short-term temporary advantage. the notion that somehow those m monetary authorities can fine-tune their economies and guide them in a sophisticated way, we know that's not possible of the idea that somehow a quarter point last december is disaster, cutting a quarter point in july is going to save everything that's beyond tscope of reality we need to get away from this idea, get back to doing the blocking, tackling on budgetary, regular dear
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inventories. tell me what that means for the next quarter, the quarter we're in >> well, it's going to mean some inventory build for the consumers finished goods look, the best thing about this report was the household sector. the household sector was rock solid from 2016 through 2018 and it went awol in the first quarter. i don't know why a great mystery. good to see numbers back, good foundation for the next quarter. i think on the whole this is a big sigh of relief and honestly, if you're the fed and looking at these data, what's to change let it go. >> yeah, no, i completely agree and i guess the last topic we must cut on is the inflation or lack thereof
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i personally think all the cal brake and ire about where it is is misguided having said that whether it was core personal consumption expenditure, all of it looked rather firm if you blur your eyes finish it up >> oh, i think that the concern about, you know, soft inflation is really just an excuse to make the cut to satisfy the market and the president. both are mistakes. i think the fed should stick to its guns and long-term monetary policy and look at the fundamentals and guide on that, not this day-to-day stuff. >> yeah, i think we should quit complaining about other economies and just hope they keep doing what they're doing and have the capital flows here. doug holtz-eakin, thanks for joining me david, back to you. >> let's send it over to jon fortt to look at what's coming up on "squawk alley. >> intel's ceo bob swan coming up on "squawk alley. big deal
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that stock had a big beat on the top and bottom lines last night but this morning, it's way off the highs. near the lows, actually in the red. we're going to fige urout what's next for intel and that's coming up on "squawk alley. hobbs & shaw.
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this week national hire a vet day encouraged companies to consider veterans for open positions. the kind of outreach may be important for women veterans fastest growing segment of the vet population contessa brewer live in syracuse, new york, for more good morning, contessa >> reporter: hi there, sara. syracuse university is tackling a well-documented challenge, military veterans get the experience and the skills they need in the armed forces, but may have trouble translating those to a civilian business world. and women vets spend longer looking for a job on average make 30% less than their male counterparts and may struggle to fit into a corporate environment. >> i did have difficulties finding jobs for what my skills were in the military that's ultimately why i don't dough that now, the engineering. >> instead dereka is 1 of 32 vets attending an entrepreneur
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boot camp giving them the tools they need to launch and run a business another program that focuses specifically on small business training forwomen vets has graduated more than 3,000 since 2011 65% of those started a business and more than 90% of those businesses are still in operation. >> we have seen an uptick in the number of women drawn to entrepreneurship programs running counter to the trend where we've seen a decrease in veterans going into entrepreneurship interestingly we've seen just the opposite for women veterans. there's been ang increase. >> reporter: she testified to congress about it and the bottom line is more resources for veterans and need to know the resources are there, sara. >> very interesting with the female vet outreach. contessa, thank you. contessa brewer. later we'll take a deep dive
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into tech now that all the f.a.n.g. reports have come out mostly better if you're looking at facebook and alphabet in particular, which ones are a buy and which are a sell and look ahead to monday's beyond meat quarter. the stock only up a few hundred percent since the ipo so should you buy it the results. >> guy, have a good weekend. when we come back the ceo of intel on his company's results "squawk alley" starts in three minutes. there's a lot that needs to get done today. small things. big things. too hard to do alone things. day after day, you need to get it all done. and here to listen and help you through it all is bank of america. with the expertise and know-how you need to reach that blissful state of done-ness. so let's get after it. ♪ everything is all right what would you like the power to do?® ♪ all right
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good morning, it is 78 a.m. at intel headquarters in santa clara, california. 11:00 a.m. on wall street and "squawk alley" is live ♪ ♪ put me in and turn me on ♪ here it come ♪ got hot licks on your guitar strings turn me on and turn me loose ♪ ♪ turn me on and turn me up and turn me loose ♪ ♪ turn me and turn me up and turn me loose ♪ good frida


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