tv Squawk on the Street CNBC February 1, 2016 9:00am-11:01am EST
of 154 million. a lot of those charts looked similar financial charts and elsewhere. nothing feels that plush. >> futures still looking at the dow with a decline of 134 points. join us tomorrow. ♪ good morning. welcome to "squawk on the street," i'm david faber along with jim cramer. we are live from the new york stock exchange, carl quintanilla is off today. let's look at futures. you heard becky talking about it. we'll be preparing for a lower open on the broader averages, as you can see there, judging from the futures, 30 minutes before trading begins. european markets not particularly strong. all down, let's call it, around 1% on the major averages in
european. the ten-year note yield continues to hover around -- even below that 2% mark. >> god, i -- i know. shocking. >> japanese negative to nine years out. negative to nine years, you're paying them to take your money in japan. and the all important look at oil. up on friday, down this morning, and we seem to be following on the equity averages. let's get to our road map this morning. it starts with shares of chipotle are up this morning on some anticipated good news from the cdc. perhaps a turning point for the company after that e. coli outbreak? plus what you need to know about the iowa caucuses. we'll take you there live as the area prepares for snow. shares of tesla falling after morgan stanley slashed the price target by $100. what has adam jonas concerned about it. and news on the activism front coming your way. moments from now on alcoa.
let's get to the broader markets to start things off. global growth concerns sends futures and oil prices lower. china manufacturing, pmi for january indicating a sixth consecutive month of contraction. it fell to august 2012 lows. here in the u.s., consumer spending came in flat for december, though incomes did rise 0.3%. year to date the nasdaq down almost 7.9%. the dow a 5.5% decline, the s&p at a 5% decline. it was not in any way a good january if you were long in the market, jim it wasn't quite as bad as it appeared the last few days there gave a little help to those who own stocks. here we are in february, talking about the same set of factors. the journal has a big take on it, everybody is short the yuan. everyone believing the economy is in trouble, banks may be in trouble. you go on and on.
you wonder if it's become too con ksensu consensus. >> in our country that xhchina number would be in line. alcoa deeply related to china you see a lot of countries, a lot of companies so behold deen china that you get the ripple effect. we are beholden to the futures. futures say oil down, europe down, we're down. we did have a very big run on friday. some profit taking, maybe end of the month some aggressive buying. it's ugly again. >> it's ugly again. we should -- let's get to alcoa briefly here. you looked at the stock price, last november elliott took a roughly a 6% stake in alcoa, jim. the company had already announced its intent to split. that said the news this morning is they have named rick schmit,
john plant, and sean mahoney to serve on the board of directors. these are nominees they have gotten from elliott management. elliott at a 7.5% stake in alcoa. they have entered into an agreement that provides elliott will provide the slate of director nominees at the annual meaning. mahoney will be included for election at 2016 annual meeting and will be added to the class of directors as terms expire in '16, and schmidt in '17 and '18 respectively. >> klaus kleinfeld had been thinking about splitting the two companies up. truly a way to play aerospace and outs to. who do they add? rick schmidt from spirit air ro systems. john plant from trw. sean mahoney, not used to his work, but on the board of
delphi. you have all the added parts of alcoa getting these three members. i assume they will be that part, just downstream. elliott came to them with a plan. it was the same plan they were working on, from what i understand. >> that oftentimes. >> many times you will see a company, often they think about almost everything that they can possibly do to enhance value, let's say. doesn't mean they're going to pursue those things, an activist shows up and will oftentimes propose many of the same things the company has thought about, perhaps push them towards it. we are in that time of year, jim, where the windows are starting to open up for nominating directors, and then obviously the possibility of a proxy fight looms. in this case, i don't want to guess too much here, but i would educate a guess that alcoa obviously stopped the possibility of a proxy fight by agreeing to this overall deal, if you will, with elliott where they support these additions to the board of directors. had been going back and forth with alcoa suggesting they
do this. not that i'm some wizard. they kept buying companies that make it so they're a bigger and bigger part of aerospace. boeing did not have a great number. honeywell had a great number. airbus is agnostic. this is the kind of deal, where if you look at the ford f-150, you look at aerospace, all the screws, couple million screws in a big plane, you know that part of alcoa is good. the part i'm worried about is the aluminum business. why? it looks like freeport. it looks like bhp. when you go down and look at them, it has real demand. that lumping in is a false lump in but it's what the street does. >> the stock has not done particularly well. >> no. and by the way, there was a 2.7 million share block done earlier this morning that i've been trying to figure out why that happened. and no one seems to know yet. maybe we can find out more.
>> right. back to the broader market and our concerns here continuing about china and what exactly is going on in that economy. as i mentioned, george soros and many other people lining up against the yuan. don't know if it becomes a foreign relations crisis for the state department when the chinese say what are all these speculators doing in our currency? how much do we play off china or is it still about oil? >> i think it's more about oil. the futures were kind of just midly after the china news came out. then the reversal of oil is what people continue to say is related to chinese demand even though we cannot pin that down one bit. chinese demand year over year is strong. oil goes down, inventories are still too large. i don't see demand at 34, 35 level. at the same time there was demand at 25, 26. the future curve shows you can get all the oil you want out eight, nine years for 45 bucks. i thought it was interesting that dominion did the deal that it did.
dominion sold $11 billion of oil and deal companies to tisch, lowe's company, and now they bought questar. questar maintain a small oil and gas operation in the rockies, but this is the kind of shuffling that the smart companies do. i'll have dominion tonight on "mad money." be aware that oil and natural gas are so low, no one is making money. we continue to think when will these companies cry uncle. exxon reports this week. >> exxon not one of them that cries uncle. >> we're waiting for them -- >> we're waiting for them to start rolling things up, doing some things. they're there are always more levers than you anticipate in terms of a company's ability to string their life along for a longer period than you might have thought. >> and rusty brazil, my expert from rbn saying it's the year of capital. >> year of capital.
>> year of capital. those who have capital can swoop in. we all know the problem here is that they don't die. they're zombie companies. they don't die. they got the stuff people want. >> dead man drilling as we like to say on "squawk on the street." >> exactly right. let's move on to -- let's move on to chipotle. >> why not. >> the cdc expected to declare an end to the chipotle e. coli outbreak as early as today. investigators have not been able to pinpoint the ingredient responsible for the contamination. more than 50 chipotle customers were sickened in nine different states last year. i think in part also people were concerned about their inability to trace it to its source, jim. but they get the cdc, it would seem, to give them a clean bill of health. >> how terrific a day ahead of their earnings. remember, when i had the co-ceos on "mad money," they emphasized that they changed radically the
way they will distribute the vegetables. they will send them to chicago, vacuum pack them and send them to the store. that's so it is uniform. the highest safety possible of any restaurant chain. david, that's going to cost a fortune. let's get the charges in, and see what numbers are tomorrow. maybe the comp stores start coming back. >> this quarter will be ugly. this should be an ugly quarter, my hope is they make it an ugly quarter. ja they can't do the kitchen sink, but there's a tremendous amount of cost involved trying to get to that centralized veggie issue. was it natural or organic that caused the problem? i don't think that was the case. people want to get ahead of this. the company was buying back hundreds of millions of dollars worth of stock during this period. >> it will be interesting to watch that earning report. a lot more coming after the bell
tonight. let's get to google or alphabet later. let's get to politics. after months of polling and debates, iowa caucus day is finally here. chief washington correspondent john harwood is in des moines. he gives us a preview this morning. good morning, john. >> reporter: david, good morning. i've been sprinting around iowa with candidates over the last several days. when you do that, you hear a lot of long policy speeches, you hear proposals on taxes, foreign policy. for voters it often comes down to simple gut level impressions. take a listen to how a few of them described theirs. >> okay. voting for clinton, pragmatic, progressive. >> marco rubio, because he can unite people. >> ted cruz, constitutionalist. >> bush and honesty. >> carly, confident, strong, and she has a blueprint for america. >> trump, wall.
>> we love you, donald! >> i love you, too. >> yeah! >> hilly, seniors. >> bernie, approachable. >> hillary! >> i'm still undecided. >> now, here are the key questions we're looking for as they go to caucus in about ten hours from now. you have first of all the question of whether bernie sanders and donald trump can harvest all that energy, which you saw on that tape. we have seen it at wallace. they've had the biggest rallying, the most enthusiasm, and the second question, hillary clinton and ted cruz are believed to have the best organizations in their parties for targeting voters, figuring out who they are, who are the undecided voters and blanketing them were messages? can they deliver. and marco rubio, the stealth candidate in this case, can he
sneak up in the end and catch one of those two republican leaders, trump or cruz for second place? the des moines register poll did not indicate he would do that. some people thought he had a good debate last thursday night. he's got a chance. if he can do that, if he can finish strong third or jump into second, he'll have a slingshot heading into new hampshire, that's february 9th. >> yep, onward to new hampshire. we'll see you throughout the day and into the evening. >> john harwood from des moines, iowa. coming up, more on today's deals as well as why tesla is falling this morning. let's give you another look at futures. we are 17 minutes from the opening bell. a lot more "squawk on the street." we're live from post nine when we come back.
stock. but a good company. if you look at abbott stock, they have not done anything but what they said they would. it has not been enough for wall street. i wonder if this is a recognition that we have to keep growing. this deal is involving that front part that people are very interested in, diagnostics. but abve and abbott were doing fabulously. abve has the competition. >> alere is not a name i've mentioned often. interesting history here. a couple years ago its founder was pushed out. a guy named greg powers is the chairman. they did a nice job, it would seem, of righting the ship. getting rid of some business that's founder was focused on. as for this deal itself, my understanding is, having to spoken people familiar with the situation, is that they were
approached, that being alere. they did do a market check, where your bankers call around and say are you interested? may have gotten other interests, so you do get a price here that is quite a nice premium. to be fair, around the 52-week high, the stock. they missed earnings two quarters in a row, i believe, jim. somewhat typical of this m&a environment. you see something, you go that's a big premium. then you realize the company itself suffered a bit recently. it is nonetheless eye popping to watch it up 45%. >> diagnostics. it's interesting. this quarter of medical device is regarded as growth. diagnostics, i will mention a company often in the news, theranos. theranos had various relationships, people thinking that would be the best way, point of sale diagnostics. ran into trouble with fda. difficult, private company. this is a hot area, point of sale. particularly in africa point of
sale. >> right. >> by the way, remember mosquitos have not been annihilated yet. we do not talk enough about that. >> we're familiar with that because of the rise of zika virus. keep an eye on abbott laboratories. the price of the acquirer's stock over recent weeks has not been performing well on the announcement of a deal. even this one that's all cash. each an eye on that. that's a theme here. as it keeps happening it sends a signal to other ceos that may be considering a deal that the market may not like it much. we've seen a pace in dealmaking so far in 2016. >> to be fair, a lot of it has to do with the sector. dominion does a deal that seems brilliant to me. get more pipe, up a couple bucks on that deal. a lot of these deals -- did you
see the piece on newell rubbermaid jarden? i thought that deal made sense. it's been widely panned. for no reason that i can think of. it's a good deal. but, david, the zeitgeist of m&a -- >> it can change. >> like ipos. we don't talk enough about -- >> ipos? what ipos. none. zero. we have so much more to talk about. coming up next, cramer's mad dash as we count down to the opening bell. give you one more look at futures. a lot more "squawk on the street." i've been called a control freak... i like to think of myself as more of a control... enthusiast. mmm, a perfect 177-degrees. and that's why this road warrior rents from national. i can bypass the counter and go straight to my car. and i don't have to talk to any humans, unless i want to.
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♪ we have a mad dash. disney's ringing the opening bell, i guess miss piggy is. on our mad dash you want to go to disney. >> jeffries has a note today. we know a lot of the reasons why people have been fleeing disney have to deal with espn. this is a note about how theme parks may be maxing out occupancy approaching peak levels. the domestic parks they don't think can be the engine. taking the price target from 112 down to 92. this is a new angle. i have to tell you, i'm a big believer in the theme parks. they're terrific. are people getting too negative about this?
when they report february 9th, will they be too negative? we've seen that happen. we've seen stocks get hit and hit and hit off of different news, then they report and people say, wow. this group has gotten cheap. time warner i think is cheap. i don't want to bet against media here. cbs, we have some numbers about super bowl. pretty big. this is a piece that says, no, it's not tv, it's theme parks. >> stock -- as we pointed out many times, it's into the biggest movie perhaps that there will be of all time, stock has done nothing but go down once "star wars" came out. >> we had electronics art report out last week. it is funny, david, that you could have the biggest movie ever and it's like, well, what you have done for me lately? this is like, okay, you won the super bowl, now it's a new season. and i feel for iger from the sense of this, he's done a lot of things right. theme parks have been absolutely stellar. so this idea that the peak level
theme park -- i don't ever want to bet against theme parks. they've done a lot of technology, pull through in other merchandise. we have the downgraded numbers cut morgan stanley on tesla. want to look at that. some chatter around twitter that may move the stock and so much more. we have five minutes to the opening bell after this.
you're watching "squawk on the street." the opening bell will be ringing in less than two minutes from now. that music is because miss piggie will officiate. that's not her, that's just a picture of her. there she is. you can't quite see her. stand up. >> maybe she got older, she's been losing -- compressing the back or something. >> i know. exactly. kind of like you and i.
i'm already losing height. i don't have much height to lose. put her on something. abc, disney -- >> maybe we should ask her about that situation. >> david, i hate to continually go back to oil. >> you got to. >> what happens is we had -- if you go back and look at the industrial earnings last week, they were good. >> they were pretty good. >> they were good. honeywell, that conference call was excellent. i read through that this weekend. you wouldn't knows there a slowdown. you get to the -- they have a refinery product, it's a bit down verses what i expected. what can you do? you get to this dominion buy of questar, you say they want as much pipe as possible, natural gas is cheap, they can win. at the same time it goes to 30,
we repeal our gain. that's it, right? won't have much -- >> there should be more to life, david. >> there is. >> okay. >> thankfully there is. not for us between 9:00 and 10:00. there it is. there's miss piggy at the big board. celebrating the season premiere of "muppets." over at the nasdaq, the american heart association doing the honors. backs at headquarters, a lot more red than green. as we begin a new month. >> up 6you have a $7 stock. >> that's not good. >> nasdaq down 7.9% in the first month, dow down 5%, s&p 500 don't 5.1%. i don't know what your
expectations are for this month. >> i was thinking about how do i work in the election. i hate talking politics. i really do. it's just another uncertainly. you watch chuck todd this weekend on "meet the press," wow, where do these guys stand on drug pricing? you see trump is trying to negotiate drug pricing. bernie sanders wants to negotiate. the drug stocks are reflecting that. >> yes. you bring up a good point, as much as you may not want to discuss it, because you will always upset somebody, if the conversations i have with people, it does come to the fore primarily for that reason. the uncertainty of what we may end up with in terms of candidates from both parties, and it's having an impact. >> yes. >> not as much perhaps as manufacturing data out of china. certainly not as much as oil prices, but it is having an impact in terms of the way people are perceiving and choosing about investing and not
investing. >> i interview a huge number of bank ceos. almost regionally untouched. these are good. they're good. >> darn good. >> lending is -- lending is strong in the country. the problem with that, david, it's not translating to jobs. the jobs are white collar jobs. and the -- it is interesting that we talk about minimum wage. we talk a lot about minimum wage because people are being hired at minimum wages. in other words, what i'm saying is there's not a lot of wage growth. people are focused on the fed. they can't believe the fed wants to raise rates in an environment where every other country including japan, we didn't talk enough about negative rates. >> no. >> uncertainty is, like, well, i finished honeywell. should have been at 110, it was that good. there is no vacuum. there's no vacuum. there's political, there's fed, dollar. and the dollar has played a huge role in that people are choosing to say, you know what? i don't care.
the dollar, get used to it dollar will be strong. get over it stop giving us these other numbers, man. >> i suppose. at some point it may stop going up. at some point. >> well -- >> that will be a benefit. apple -- those apple numbers would have been a lot better. we've got alphabet after the close tonight, by the way. goog, the symbol. given 53% of alphabet's earnings are overseas. the dollar will play a role there, too. any expectations in terms of what we'll see? >> i think google is an inexpensive stock on 2017 earnings. talking about was market multiple. not as much risk as the netflix number was, or the amazon number, which people forget, amazon was pumped up ahead. to some degree, anyone can look at amazon and say they printed a number that was what they wanted. you know, they didn't -- amazon is in spend mode. when they are in spend mode, they don't play by the rules everyone else plays. i think we have to be careful here that the forces that are
involved in determining stock prices have very little to do with what management is trying. that's important. alphabet, we care more about the cfo than the ceo. we care about how ruth porat will organize the divisions. >> that stock is up. facebook also up. to your point, amazon, which reported what was not a well received number on friday or thursday after the close is down another almost 3%. >> yeah. i always find -- my wife will say why are you going over these numbers? all you do is tell me none of them matter. i keep thinking maybe one day they will the currency will start annualizing better numbers. maybe you look at mcdonald's, where the restructurings are changing the fortunes of the company. i go back and forth and say i'm not going to start deciding that what the companies do, what they
did to procter, a magnificent quarter, i won't say that's a factor. the strongest stocks, smucker, hormel, campbell soup. you know when you buy those stocks? recession. yet i'm not -- that's why i mentioned the banking thing. i'm not seeing recession. but the stocks are screaming recession. spam is a recession stock. alphabet soup is a recession stock. they are getting more natural organic. smuckers did some acquisitions that are more discretionary food. but to see the charts this weekend, to see it was the food stocks, the old was wisconsin electric. i had aep ceo nick aikens on, that stock traded as if it was roaring industrial. that's entirely because of the ten-year. you mentioned banks. we started to see a bit of
consolidation. first niagara, first financial, first merit. did want to note, doug braun steen and jim wool ry, two guys who started this nonactivist fund, bronstein was the cfo at jpmorgan. the fund is not that large. worth noting that they own comerica and cit. >> wow. >> cit has been one of the most disappointing stocks of this period. >> given their history and the fact they have a group of advisers that includes richard kavasovich, one wonders if think want a continuation of these regional banks. cit is not a regional bank, obviously. >> david, you can buy these things in closing and they have more cash. >> comerica trades at 8.5
tangible book. >> that's the year. you pick up the paper, every bank seems to be doing wrong things. when i look at the book value of these, i no that means -- everything has been scrubbed hard by the treasury. these things are just inexpensive. comerica, there was a lot of chatter about comerica not doing as well. no one thought huntington bank would do well, they're doing well. there was a pause in banking, m&a, because people felt it was too concentrated. now you have all these little banks who say we can dance around jpmorgan. >> yeah. while they're prevented from doing anything other than perhaps selling stuff. >> i had first horizon on. a bank doing quite well. bb & t not doing as well. they could be a prospect to be buying. here's something -- you know, bb & t is a very good bank. what's left, the surviving banks of the era are well-managed,
good institutions. these acquisitions are very important to watch. they are -- if the fed were to raise rates four times, they would be magnificent in terms of the prime and what they would make on your dividend. who knows what it would do to the economy. i'm against it from that point of view. wanted to get to tesla. adam jonas lowers his price target to 333. still quite a large way away from here. he also lowers some of his estimates. engineering challenges have delayed the launvolume expectat for model x and model 3, a lower valuation for tesla energy and accelerating competition in mobility business. delaying the launch for the model x by one year, and added hundreds of millions of dollars
to costs, while potentially losing customers. none of that sounds good. again, 333 is the price target. >> why do we remain overweight? three greatest changes in the auto industry, electric, autonomous driving, and many people think it's a cult stock. there are people who love the stock. do you go against the stock? i -- look, you run -- you run into a generation that loves it. and the stock is down a lot. but obviously it's starting to be valued as an auto company. we noticed that gm and ford, ford had a really good number last week. look at this. >> i know. if i want to take a ten-year view that i believe autonomous driving will become -- is going to be here -- let's say 10, 15-year view. but i'm willing to invest right now based on that, is there anything i can do to short the
automakers? >> no, gm are trying to be very fluid. >> they are. >> i think initially i fought you on this. i said, no, it's just really wrong. but the work that google has been doing on driverless cars, alphabet, tells me get ahead of this one. get ahead of this one. a lot of these companies are doing that. the overruns for musk and tesla, surprising. but the car, loved. >> loved. >> we'll be talking about the implications of autonomous driving for years to come before it becomes something we're seeing. wow what it could do to the work force, too. they always say every advance could create more jobs. you put taxi drivers out of work, truck drivers out of work. i don't know. >> i don't know if you saw the mexican bonds selling well. not looking at the peso side, which is a disaster. that's where the employment is. it's too cheap to make everything. it may be the cheapest place on
earth to make things, given the fact it's just a big union pacific line to our country and nafta. so the actual friction -- >> even oreos. >> healthcare system is inexpensive there. environmental controls loser. government pro business. >> let's get to bob pisani now, who is back on the floor with more on what's moving. bob? >> hello, david. good to be back. down open here, but we're off the lows. down about 140 on the dow, now down 115. the weakness, guess what? you have oil down 3% pre-open, that means energy stocks will be leading to the down side. energy weak, telecom, industrials also weak. defensive names, utility staples not down as much. we are continuing to get a mini rally in gold. gold back in december almost dropped below $1,000 an ounce. not quite.
but it's been rallying ever since then. we're close, this is up a good 11%, 12% since then. continuing today. highest level in a few months there for gold here. meantime, naturally all the big energy names are down. the drillers are weak today. so, rig, diamond off shore, ensco down. we have about 40% of the s&p 500 reporting so far. very interesting on the stays that they have been reporting, we've seen some stocks rally here. on days when energy stocks have reported numbers, they have had notable rallies, materials have as well. this is interesting. this is from our friends at bespoke. most people think this is an unlikely start of a new bull market here and a lot of this is short covering. there have been companies with nice pops on the day their earnings have been reported or
the next day when the main impact occurs. as for the overall earnings, q4, we are negative on earnings in revenues. i'm more worried about q1. this is for first quarter, one month into it, the numbers have already turned negative. earnings now down 1.7%. this is the s&p 500. revenues down 2%. this is a little early in the season to see negative numbers. this would be the fourth straight quarter for negative earnings that we've seen. a bit of a concern there. the good news is short-term we ought to get a bounce, we had an extraordinary day friday. s&p 500 up 2.4%. we asked our friends over at kenshow what happens, the numbers are good here. this happened six times since 2012. a day when the s&p was up 2.4% or more, 100% of the time in the following week, all the major indices had been up, particularly the s&p 500, up an average 2.6%. this happened all six times since 2012.
finally a long-running fight over dark pools has been settled -- let me show you february. one reason i don't like february, you can't say much about it. it's a choppy month unlike december and january which are up months, february does not have a lot of trends. last 15 years, up nine, down six, and the average change 0.4%. finally want to note, we have a long running fight over dark pool that appears to have been settled. barclays and credit suisse settled a dispute with the s.e.c. and new york attorneys general, they are paying barkleys a $70 million fine. the s.e.c. suggesting they misrepresented efforts to police their dark pool there and mislead clients with the high frequency of trading in the dark
pool and about data feeds. credit suisse paying an $84 million fine, also split between the s.e.c. and new york attorney general for failing to operate the dark pool as advertised. this was a big dispute between barclays and the new york attorney general. barclays actually went to court over there arguing they had done nothing wrong. the settlement today, paying a substantial fine and agreeing to have some procedures changed there. david, back to you. >> all right, thank you very much, bob pisani. let's head to the bond pits and rick santelli joins us from the cme group in chicago. rick? >> good morning, david. what do you think you'll get in a dark pool? transparency? come on. it's appropriately named. something you should be aware of. this is not a peter sellers movie, but kazakhstan they raised their rates 100 basis points. their benchmark is 17%.
the only reason i point it out is to show how crazy some of this stuff is around the globe. as for fields, we are up a bit on the day. that's not the issue. that's why we will use two-day charts. tense up a bit today. ten-day chart shows you friday was a dramatic move down in yield, up in price. bank of japan really the culprit. two-day of bunds, same dynamic. one-year chart there is enlightening just like in treasuries, comping back to april of last year. the comp back to bunds is basically single digits. dollar index, same thing but a little different. the dollar is a little bit lower today, boy, did it fly on friday. two-day chart there. one-year chart reveals the dollar index is hovering below a breakout -- big breakout f you're a technician nothing gets better than a daily close, weekly close and monthly close.
if you get all three above 100, zoom, zoom, zoom. let's look at euro/yen. this will give you an idea of the cross trade and some of the management that goes into currency trading. this morning a good story in the "journal" about south korea, hong kong, watching all of their export numbers. doesn't paint a pretty picture. the euro and yen is something to pay attention to. if you look at it from the last day of trading from 2014, you can see it's a lot lower. that's not the point. look at year to date this year. the euro is zooming against that currency. there's the chart you want to watch, especially if it gets above 132.5. david, back to you. >> thank you very much, mr. santelli. a 51-month streak has come to an end on wall street. find out what we're talking about when "squawk on the street" comes right back.
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a difficult start for the year ends a 51-month streak of ipo activity that dates back to 2011, four biotech companies are expected to price initial public offeri offerings, jim this week. we mentioned the absence of ipos during the month of january quite a few times. >> i went over the performance of the ipos last year. they were so dismal. >> dismal performance for ipos that were priced in 2015. >> yes, just a tsunami of losses. very few of them having big gains. the largest ones doing poorly. first data, really got dinged. in general, if you bought one of these biotechs, you were just annihilated. >> you were crushed. you were crushed in part because the sector got crushed towards the end of last year. >> there's no demand because
people lost so much money. you get what you pay for. i just think that very, very strongly you have to be so careful. the ones out of the chute after a big dry spell, the bankers usually try to make the customers work. we'll stay close to those. first data was the one that was the straw that broke the camel's back. >> i had not even looked to notice. >> don't look. >> i got to now. >> no. >> no? >> no. it's the making of the loss. it's like a netflix movie there. >> oh. that's ugly. >> yeah. up next, we'll have stop trading with jim. i don't know what he'll be doing, neither do you. you'll have to stay tuned to find out.
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it is that time. time for jim and stop trading. what have you got? >> the probes into ackman and herbalife, looks like there's no conclusive evidence that anyone has done anything wrong. i questioned, david, going back and forth wi, the pyramid schems no longer in play. >> okay. >> does ackman, you know, drop
it? he said it would never happen. does herbalife go on the offensive? you don't want to go on the offensive while the feds are investigating it. but if the feds say, listen, there's nothing here, what's to keep herbalife from throwing everything it has at ackman? >> though, i feel like they have become much more aggressive. >> but they haven't been on tv, they've said things that would indicate that how well the business -- they've been kind of closed. i know that -- i used to have -- herbalife used to come on air. the management there is -- you know, they cleaned up the company. but let's see if they don't go on the offensive. that's something worth watching. >> something ellsworth watching is "mad money," whether it is from here or from the west coast. tonight from here. >> yes. >> we should point out you will be in our bureau in san francisco on the show and doing your show from there as well. >> red eye tonight.
tonight will not be a night where i'm sleeping. tomorrow -- i have dominion on tonight. tom farrell, sold assets at 11 billion, buys them back at 4 billion. we have fitbit, under armour, yum, pay pal, wells fargo, sales force. >> that's quite a lineup. >> those are the once i'm willing to talk about now. >> and you'll be here with us in the morning. >> and lyft in the middle. why do i want lyft? ub uber. >> 3:00 in the morning doesn't matter. >> it's called visine and monster beverage.
1%. crude down as well. excuse me, they are moving in the same direction, that being down across the board. >> lockstep. >> just as we did in january, we are following through so far the first trading day of february. we have breaking economic data. ism manufacturing and construction data. let's get over to rick santelli in chicago. >> i tell you, we're getting close to some interesting comps. 48.2 on ism, that's january. so obviously it's below 50. 48.2 takes us back to june 2009 to find a lower number. but this is now the third below 50 read. we had 48.8 in november. last look at -- what was the last unrevised here? looking at 48.2. so, to have all of these numbers, i take that back -- this equals our last look. you have go now to a read of 5 under 50, which was february
through june of 2008. so, third one we want to keep an eye on it. let's go december construction spending. up 0.1%. fraction of the 0.6% we were expecting. is that 0.1 read last look was down 0.4. that was revised to down 0.6. that's your comp on the minus side. prior to that, october at 6.3. this is not a good number on construction spending. it goes a long way to explain the drab first look at fourth quarter gdp we had up 0.7. >> thank you very much, rick. the dow has dropped within the last few seconds by about 30 points. stocks kicking off the month in the red as oil continues to drop. for more on the markets let's bring in the chief u.s. economist at deutsche bank and steve wood from russell
investments. joe, do you want to react to that data? >> as rick said, sub 50 is bad. three months in a row. manufacturing in a recession. from what rick was saying on the construction data, q4 numbers could be closer now to zero the construction numbers were not used in last friday's report. to the back drop is pretty lousy. >> that would be a cool factor within the economy. >> the inventories are flexible, but inventories in most downturns are a key driver of downturns. the fact that this might just be in inventories, you don't take much comfort from that. also we have to revise inventory -- inventories have to go lower. >> steve, let me come back to the rally that we had on friday which basically cut one-third of the losses for the year to date. that seemed very powerful at the time. what do you think of that rally?
what did that rally mean to the market overall given that we're now raising almost half of it again? >> i think what that speaks to is one of your favorite topics, the central banker's world. the tone and the background is significant. the bank of japan going to negative rates was not trivial. that says the european central bank and the bank of the japan, very soon the peoples bank of china will be stimulative in terms of monetary policy, which is one of the few remaining policy tools they have left. in a world where the federal reserve is considering how many rate hikes for 2016, not if they will raise rates in 2016. so i think this is the backdrop for a while longer. >> the question is is it a backdrop or a main motivating factor. aren't we witnessing here, given the losses year to date, that whatever the central banks are doing or might do, it's not having the same effect on asset prices as it would have done
two, three years ago. that's the main lesson here, isn't it? >> i think that's a reasonable assessment. the initial stage of the quantitative easing was asset price inflation or stabilization. that's been by in large achieved. now we're into the tougher yards. the tougher yards is what was referred to earlier. this is real growth. output. we're getting into the blocking and tackling the basics. russell, we don't see a recession as being our base case for 2016, but we don't see strong growth either. it's this long-term sub growth trend that we're in now. that's why we think a global perspective is more appropriate, looking at europe at the beginning of the economic cycle where the united states might be in a more mature part of that. it doesn't have to be u.s. equities or the false choice of cash or u.s. equities, it can be in a global difference portfolio, where do you like the opportunities and the risks that
present themselves. like it or not, the ecb and bank of japan will be stimulative and that could be better for risk assets. >> as steve said, joe, there is a consensus view that things will bounce back in the first quarter, the first three months of the year, even if we get zero percent growth in the last quarter. are you confident in that fact? is the fed confident? >> the fed might be confident or not confident, they won't tell us. in a month, thway, you are not grow corporate profits much or wage growth. there might be a bounce back, but the proof should be on those thinking that things will turn around here. >> joe, i listened to you for quite some time. i don't often ask questions. you changed your opinion in the last couple of months. why? what has been the key reason? >> the key reason is when we got the benchmark gdp data in july,
it showed significant downward revisions to 2012, '13, no revision for '14. all of a sudden i looked at the economy as being half empty, that was a big change in what i thought the economy could do. for example, the best growth we've had in this cycle was 2010. it was 2.7 post revision. how will you get anywhere close to 3% when now this is what the revised data shows. >> one of the major trends that arose is this talk of recession over the last two, three weeks. the new commentary that is emerging is what the fed will do. not just whether it holds off rates, but when it returns to qe and the brief that the fed has sticky fingers, desperate to get in there any way it can or so people that sell asset products would have other people believe. do you think they will move into an environment where they can again boost asset prices from where we are here? >> if there's a recession,
simon, or they think there's a recession, they will try to do more qe and/or negotiate sieve rates. >> can it work? >> of course not. for there to be growth, there's got to be incentives and structural changes. monetary policy reached its practical limitations months ago, which is when the fed should have started normalizing. you don't start normalizing this late into a business cycle. >> joe and steven, thank you both. of course as we mentioned, oil is down rather sharply yet again. for more on that let's getie de. >> oil dropping once again. last week it was the opec headlines having us up, now we're worried about china. >> a market like this is news driven. like there was a blip up last week, this is a blip down right
now. again, you take that in the big picture, look at the peck cal part of it, this market has not broken down yet. >> that's the thing. we're staying over $30 a barrett what do you anticipate to be the new technical range we should be watching? >> probably 31 1/2 to about 33 1/2 seems to be where we should work in in the next week or two. the news could break in the next day or so. inventory reports later in the week. things can change quickly here. >> last week, we got bearish numbers. the headlines seemed to outweigh what we saw in the markets, but the story is oversupply. >> that's given. that's a situation for the next three, six months regardless. that market can work within those parameters. i see interest in the upside calls. there are people who think this market has more to the upside than down. >> back to china, how worried are you about demand? >> somewhat. they're not the only player.
they have been the swing consumer for the last several years. their impact economically has a big effect on us. >> there's a currency piece to this story. boj going negative on rates, having an impact with what we're seeing on the dollar. all eyes on the fed. what happens to the dollar index and how does that impact crude? >> the dollar will back off a bit, i think. that will be helpful to oil prices. but you have to wait. there's more news that can could break on this. right now i'm thinking the index goes down. i'm waiting another day or two. >> where do you think we go, down before up again? >> not much further down. i'm thinking we'll hold these chart points. the market may retrace now, back to about $33. >> guys, back to you for more "squawk on the street." >> when we come back, it's decision day in iowa. after months of polling and debates, the iowans are finally casting their votes tonight who will come out on top?
the one and only larry kudlow will join us live from des moines when "squawk on the street" comes back. or across the globe in under an hour. whole communities are living on mars and solar satellites provide earth with unlimited clean power. in less than a century, boeing took the world from seaplanes to space planes, across the universe and beyond. and if you thought that was amazing, you just wait. ♪ at ally bank, no branches equals great rates. it's a fact. kind of like bill splitting equals nitpicking. but i only had a salad. it was a buffalo chicken salad. salad. go to ziprecruiter.com and post your job to over one hundred of the web's leading job boards with a single click. then simply select the best candidates from one easy to review list. and now you can use zip recruiter for free.
donald trump an edge, on the democratic side, it's hillary clinton over bernie sanders. let's go to larry kudlow in des moines, iowa. >> good morning, sara. thank you. we talked a while ago to dr. ben carson because i'm complaining, nobody in these candidates is talking about the economy, the economic decline, the lousy stock market. i asked ben carson which is more important, doctor, inequality or poverty? here's what he said? >> people have no clue what's going on. people come and take advantage of them and say the reason you're not doing well is because of those rich people if we take their money, everything will be fine. no, then everybody will be poor. that doesn't work. solving poverty takes care of inequality. boy, do i love that, right after my own free market capitalist heart. dr. carson and i talked about his corporate tax cut plan,
talked about deregulation and he said a president carson would immediately formally declare war on isis, sara. he just went there. >> you know, it was a good interview, i saw it on "squawk box." my question is for someone like dr. ben carson and maybe rand paul and others who are not polling one, two, three, what does a loss in iowa mean to them? when do we start seeing people drop out of the race? >> just to give carson his due, this is one of the surprising things and why we wanted to get ahold of him, he's in fourth place with 10%. he's not far. trump and cruz are the clear leaders. rubio has got 15%. carson is in double digits. nobody else is near him. if he did a third or a fourth, he will go to new hampshire. i think personally, this is just me speculating, i think the guy with a lot to lose today is ted
cruz, if he doesn't win. i think the guy with a lot to win today is donald trump if he does, and marco rubio if he finishes a close second. i think that's a gop story. the democratic story is even more interesting. i'm dying for you to ask me questions. >> okay. here's my question on the democrats. sanders has been a surprise. just in the last few weeks here. some were surprised to see the iowa register poll so closely behind hillary clinton. if he does win, then what do we expect from the clinton campaign? >> i think you'll hear sobbing and wailing and they'll put their heads under the desk. it will be a catastrophe. sanders has momentum, you're right on that. it depends on the turnout. so, it's true in the gop, with a good turnout a stronger turnout, trump is a winner and sanders is a winner.
those two will get the bulk of the so-called new voters. the new caucus goers. mrs. clinton has a great ground game, that's what everybody says. she has other vulnerabilities. sanders is getting all the speeches, has thousands of people, kind of like a mini version of trump. i would expect to hear massive shakespearean wailing and crying if mrs. clinton loses. >> larry, as far as the turnout is concerned, i think the governor of iowa said it would benefit trump the more people turned out. can you remind us physically of what people who turn out for the gop caucus have to go through and the time it takes? >> it's much easier on the republican side than the democratic side. republican side, you walk in, you go to your station, you know, there's a trump station,
there's a carson station, all the rest of it. you really just pick up a small paper ballot and put it in a box. that's really all you do. it's a very simple process. you have to have 15% in the caucuses to have your candidate established. the democratic process is more complicated. if you don't get your 15%, they can shop around other candidates. i knows there only three. nonetheless, it just takes longer on the democratic side. >> and, larry, they physically move around the room. it's like groups of people moving to this corner or that corner. >> yes. yes. particularly in democratic -- it's a bit true for the gop, more the democrats. i'm not putting it down, it's just their process. there's speech making by the leaders. by the way, you know, this is why the governor of maryland, malloy -- what's his name? o'malley.
malloy is connecticut. >> he's a republican. >> i know, i get all those guys mixed up. >> larry, it's david -- >> o'malley could be a spoil er in that race. >> getting back to republican candidates, what is your take on trump for criticizing nabisco for moving nabisco to mexico -- whi >> which is not true. >> yes, which is not true. when you talk about free markets, is he somebody you would support? >> look, i have endorsed his business tax cut plan. i also like his personal plan. but mostly i like his 15% corporate tax rate, david. i think that's a home run.
see, jeb bush has 20, that's good, today. donald is at 15. i think that will take care of a lot of the unfair trading. the capital flows back to the united states. i've said that to him. he believes he's got to negotiate tough, particularly with china. also japan and mexico. more so china. i've said to him on the radio interview, i said, donald f you're 15%, all the money will come here. you don't need a tariff. you don't need to punish it, you're only hurting american consumers. i'm a free trader. his response is he's going to use it as a negotiating tool, not as policy, but as a negotiating point of view. i said, well, i'm not there. he said to me, you'll come around. >> finally, larry, just remind us of your thoughts on the importance of the iowa caucus. it doesn't necessarily mean that
will be the candidate, though it gives them momentum. >> it does, and you're right, it does not necessarily mean -- in this circumstance, if donald trump wins iowa, take that. he's really, really rolling. he's going to take new hampshire more than likely. the whole thing could be done if trump takes iowa. i would go that far. on the other hand fsh, if senat cruz takes iowa, he is weak in new hampshire but gets stronger in the south. you have yourself a horse race. also if marco rubio comes out of iowa, a strong third, quote, unquote, his game is very much alive. i'll tell you, the big thing here, trump versus cruz. if you have a larger than expected turnout, look for donald trump to take it. if donald trump takes iowa, it's pretty close to game, set, match. >> wow. all right. some predictions there, larry. thank you very much. larry kudlow live in des moines,
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today after the bell alphabet reports results as two separate segments. will it drive the stock higher? josh lipton has what we can expect from what we used to call simply google. >> that's right, simon. analysts note that alphabet's leadership has delivered consistent revenue growth, margin stabilization and cash back. today after the close, larry page will deliver on a fourth hope of his shareholders, greater disclosure. the company is going to report data for two segments rather than one. so investors will see results for a slimmed down core google which includes search, ads and youtube. the metrics will include,
expenditures, and operating revenue. there will also be fiber, nest, going ventures and the moon shots like self-driving cars. there will be no revenue number for each specific business line. still, bulls do think this new reporting structure will excite and investors and send the stock higher, just like it did when amazon began breaking out the performance of its cloud business. that stock already up more than 30% in just the past 12 months. in fact, it is hard to find anybody on the street who is not a bull, 90% of analysts rate alphabet a buy, according to factset. we will find out if that optimism is warranted after the close. >> the only problem about that and liking it to amazon is the cloud services operation was hugely profitable. more profitable than retail. when google breaks out the moon bets, it will have lost 1.5
billion? how does that encourage investors. >> the greatest disclosure bulls are hoping for is on core google. when they break that out, you'll get a cleaner read on the profitability of core google and the trends of that business. not weighed down by the other bets. it will be your first clean, simple look at that business. the hope for the bulls is that it is more profitable than the street. >> we'll see what happens after the bell today. straight ahead, it's ban rough year for the markets. all three major indices are down more than 5% in 2016. art cashin will join us live at post nine with his take on what we can expect in the new month when we come right back. so what else is new? how's your mother?
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i'm morgan brennan, here's your cnbc news update. a suicide bombing near a police facility in kabul has killed at least ten. at least 20 more have been wounded. witnesses report the bomber walked up to a line of visitors at a security check gate near the national order civil police and detonated his explosives. the taliban has claimed responsibility. back over to you. >> all right, morgan brennan, thank you very much. keeping an eye on the stock market right now. we are off session lows here. the dow down about 110 points.
broad-based selloff. s&p 500 down 0.75%. the only groups in the green are telecoms and utilities. art cashin is with us from ubs. art, good morning to you. >> good morning. >> a lot of talk about the january barometer, as goes january so goes the rest of the year, which has a strikingly high percentage rate. >> yeah, it does. it's up in it the high 70s. the point is that we're behind the 8 ball. we will start out -- oil back at center stage. you came off the lows when wti began to circle the wagons at 32. drahi is speaking at 11:00. not expected to say anything big. but you can always get a surprise out of him. far more importantly, stanley fischer at 1:00. we'll see if he talks about multiple rate hikes this year, or whether he backs off it.
that could be important. then the possibility surprise tomorrow out of iowa. not to disagree with larry kudlow, iowa's history is not in making a candidate, it's in breaking a candidate. you have people who were leaders in the national polls, howard dean, rudy giuliani, newt gingrich, even hillary against obama, and they all did not do well in iowa, and with the exception of hillary, all the other campaigns collapsed. >> good point. >> trump has a bit on the line here. >> when does it start becoming an issue that you think investors will pay attention to, can trade off of? when does that point happen? >> i think probably after south carolina, when we start to see the field dwindle down, then they can begin to look at what the economic plans of this one or tax plans of that one. then they can begin to get a better feel. on the democratic side, depends
on how far they go. obviously the pharmaceutical area will be under some pressure there. remains to be seen how big a campaign issue it remains. >> what would the markets do if we have a trump versus sanders ticket? >> that would bring bloomberg in, but he's too smart to run. he knows that if he gets into the field, no one will get the required number, and that will put it in the hands of the house. >> people get emotional about this, we have access to kenshow. what the data shows is that it was a good predictor from 1950 to 1985. but actually more recently in the world in which central banks dominate, the last three decades, it has not been good, about as useful as the toss of a
coin. what would you say to those people who are more skeptical? >> you have certainly the central banks and oil rigs running the market today. if the central banks can get their act together, which seems to be unlikely -- >> or more likely they can cut into negative territory and no one cares. >> it would appear. i have said again and again i don't think the fed tightens anymore. i think the other central banks are tightening for them by bringing their rates down and raising the contrast with the u.s. rates and there fourth u.s. dollar going higher. >> what effect does that have on earnings? >> it's driven earnings down. we've reduced our targets in earnings, and about 62% of the companies have met them, well over 50% have failed to meet revenues. so, it's -- the currency is beginning to be a big factor. >> the question, is it already baked in? have we overshot to the down side given the market action so far this year? >> i'm not entirely sure.
you look at the number of quarters in a row where the earnings have been disappointing -- well, down from the previous quarter, let's put it that way. we're three or four quarters in a row now. >> don't you sniff opportunity here? don't you look at it and go, when so many people are negative, there's got to be a trading bounsz. >> i -- >> friday was good. friday was really good. >> friday was a massive short squeeze. it was amazing. a short squeeze on three continents. so the bank of japan surprise the everyone. >> art, speaking of consensus trades, just real quick, the currency, the yuan, all these hedge funds lining up to short this thing, it's become a de facto go-to, if you will. where do you see that? >> well, i -- i tend to lean with them a little bit, but the -- here's the big risk. the further into the year we get, the more likely they will
be included in the imf basket. when that happens, several people have to buy it to bring it on. there's future strength out there. next week is lunar new year, golden week in china. people are speculating, if they're going to do anything, they might do it in the middle of that week with their markets shut closed so they won't see disruptions. >> year of the monkey. >> yes. >> thank you, art cashin. how fears about the zika virus are affecting travel stocks, and shares of twitter surging this morning. private equity may be circling for a buyout. that's coming up on "squawk alley," twitter shares up about 8% on that report.
dow down 101. let's get over to the cme group and rick santelli with the santelli exchange. >> i would like to welcome ira harris. we always try to cover a lot of ground. the big story today, all the big hedgies, not talking central bankers, are all basically in the same position regarding china. will the peoples bank of china or some of the communist leaders let this get under their skin? is this a mosquito they may act on? >> okay. let's -- let's have a little fun. let's call this the best trade. the best trade. bass, einhorn soros and tapper. is this the b.e.s.t. trade out
there? people say this is another bank of england trade. if it is -- >> will be a whole gaggle of black swans. if the yuan were to drop 25%, 30%, i don't think that's at all possible, the world will be in a deflationary spiral because of this. if this is the case, i don't have to be short yuan, i will be long gold and be long bonds. >> let me stop you there. the reason i never believed wholeheartedly in the ian rand perspective of buy gold, the end of the financial eras as we know it, that's your trade, after watchi watchi watching central banks and central governors doing this over the past seven years, that they would let that happen. this rhymes with that trade. >> of course. i laughed at people who said there is no inflation, gold -- gold is not the hedge against
inflation. it's a hedge against central banks losing control of the whole game. that's the deflationary spiral. >> a hedge against tyranny is what it is. >> it's the ultimate hedge. you've seen the move logically from 2013 to now that people have moved out of gold and into equities because they saw the world as being saved. but if you're going to push that yuan down, if they're successful and it drops 25%, 30% as they're talking, there will be -- china will export all that deflation. deflation will be okay. japan can live through two decades, but not with the debt overhang. >> that's what i bring up. i don't know what exact numbers are. the cap stones for '15 are not done. i'm suggesting they are well on the road to 300%. on the road. probably somewhere between 235 and 260% right now. this is an issue. somebody has to think about that. >> but it's not -- it's the world.
the world is carrying so much -- >> since the credit crisis we expanded close to 58 trillion in debt. >> if you get into a deflationary place, where will janet yellen get her wage increases from? it's not going to be there. that's why the fed models are flawed. they don't pick up on this. you know what? we're in a globalization, a period of great globalization s when the chinese do that will spill over. everything is going to spill over. you cannot stop it unless, of course, you put up barriers. the interesting thing is what car to a put out in davos, capital controls. malaysia from '98 to -- when there were three years, you have to keep this capital here for three years. will we see that? >> you have to keep the record playing or the dvd nowadays, simon hobbs, back to you. >> even the download, thank you very much. up next, the world health organization is holding an emergency meeting on the zika virus today what needs to be
consider whether to designate the mosquito-borne zika virus a level one emergency. the number of babies born with birth defects continues to soar in before sail. dr. william schaffner joins us now. welcome back to the program. this is obviously a very frightening time for an awful lot of people. given the symptoms for most people are not evident, you can't tell that women have the zika virus, do we have -- does the w.h.o. have any idea how serious this is. >> actually at the moment we don't have an idea of how serious it is, but we know it's serious. those numbers are now being assembled, and interventions are now being done to get at the mosquito that is transmitting
this virus, we're trying to reduce the concentration of breeding sites in south and central america and the caribbean and instituting a number of other mosquito-control measures. >> dr. schaffner, we know some cases have been brought to the u.s. by travelers to those regions. how likely is it to spread in this country? >> i think this virus will be introduced by travelers. there may actually be even some limited spread, but it will be limited. i do not think there's any chance that it will be widespread in the united states because we have such a robust public health response that will find those cases and institute control measures including mosquito abatement activities around those cases. we've had similar success with dengue and chikungunya visits and mosquito transmitted viruss
from central and south america. >> it comes at a very problematic time, does it not, mr. schaffner as far as the mosquito is concerned given that el nino has meant that the populations are exploding. i was in florida yesterday, people at this time of year never had the number of mosquitos that they were witnessing. this is a confluence of factors that might prove more difficult to deal with. >> i think this is likely to be a more difficult problem than dengue and chikungunya but the public health system is alert. in the united states we spent much more of our time in screened and air conditioned environments. we have ready access to insect repellent. we can educate our population, and so i think it is a noteworthy problem for the united states. we have to be ready to respond but i don't think it will be widespread. >> what is the updated advice to
women pregnant or trying to get pregnant and traveling to south america? >> i would think they would be extremely cautious, talk with their partners and their doctors. if they indoors as much as possible. obviously, use insectcide and appropriate caution to avoid contact with mosquitoes. >> doctor, last time we had you on the program, we actually had you on to talk about the e coli outbreak with chipotle. and the cdc is expected to declare an end to the outbreak, even though they still don't know where it came from. how significant is that? is this the all-clear? >> i think it will be the all-clear. i know that chipotle has been working hard, the cdc with local and state health departments have been working. and we've been waiting to hear that this outbreak is now over. so let's look at things going forward and take a deep breath. >> it's good to talk to you, sir. thank you for your time. dr. william schaffner joining us
from vanderbilt university. in the meantime, it's a rough start to the year for some travel-related stocks. in particular, the cruise lines, which sell cruises to the caribbean. norwegian cruise line, carnival, all down double digits in just a month. and norwegian having its worst month ever. and there you can see, the extent of the losses. and in fairness, it should be pointed out that rcl, for example, has doubled in value over the last two-and-a-half years. so that's the broader position. however, it is clearly a concern for investors. let's bring in patrick skols, an analyst at sun trust. welcome to the program. >> morning. >> remind us how important the caribbean is to these operators. >> absolutely. it's the number one market for all three of the major cruise companies. and of those three, norwegian cruise lines, not coincidentally, has the largest exposure there. >> so what do you say to investors here? i mean, we had a statement from
carnival earlier where they're saying, look, if you're a pregnant woman, you can reschedule, we'll allow you to shift the times that you travel. and at the same time, carnival said i think last week that so far there have been no material effect on bookings. is the market overdoing this? >> yeah. and history has shown us that the market does overdo these types of things. we saw that with sars and ebola. you look at how quickly the stocks fell but how quickly the stocks bounce back. and assuming, you know, this disease kind of gets -- i'm not going to downplay the disease, but kind of gets moved on in the headlines or the media. you know, the stocks quickly bounce back. just to challenge this year, though, the stocks have, as you mentioned, had a great run going into the year. expectations are pretty high. and everything has to be pretty much perfect for these stocks to continue their upward trajectory. any time you get sort of this fear of nonperfection, well, you get a week like we did last
week. with these stocks. >> but we are in the middle of the booking season, aren't we? this is the point of year where 40% of all cruises are sold. so at the margin, i guess there's a lot of young women or men and women who decide that maybe the caribbean and therefore cruise is not appropriate this year-round. >> it's actually a very small percentage of people who are pregnant that go on cruises. in fact, they've done a search, and talking with the companies, i think there's been less than ten cancellations so far of folks who are women who are currently pregnant. >> but at the same time, you do have momentum within the people that hold these stocks. so, for example, as you know better than i, the lodging industry has a lot of concerns about whether they're hitting the brick wall for want of a better expression. therefore, money came out of lodging, and went into cruise lines. >> right. >> and now it's coming out momentum style out of the cruise lines. it's like water in a pool. >> right. well, you know, as i do a lot of research on the various customer
segments, and you know, what we clearly see in our research is very strong pricing power with the cruise lines. and, you know, we didn't -- haven't seen any noticeable pullback or anything i see as sustainable. you know, so far this year. i think the lodging stocks are doing worse for different reasons, but cruise stocks are leaisur leisure, and that seems to be doing well at the moment. >> and the commentary, even with the data last week, the consumer continues to be the strongest part of the economy. how do you make money in your sector this year? what is the standout, as far as you're concerned? >> it continues to be the cruise line. and actually, i like it on this pullback here. you know, i cover the hotel sector, and certainly the u.s. -- u.s. hotel stocks are most impacted by corporate and business travel. and for various reasons with u.s. economy and global economy. you know, things slowing down. whereas the cruise lines tend to
be middle class america that has more discretionary income, solely because of gas prices and a little bit of improving employment picture. we see that in our channel checks. >> good to see you, patrick. >> thank you, simon. >> patrick scholes joining us from sun trust, the analyst. >> i want to show what's happening in the broader markets now. we are cutting our losses, the dow down 84 points, s&p 500 down a half percent. we got that number at the top of the hour that showed u.s. manufacturing came in worse than expected. it's going to be a heavy week of data with the friday jobs report coming out as well. and we're still knee-deep in earning season. >> we are. speaking of earnings, facebook last week applauded by many, and that stock continues to move higher, up 2%. it will be interesting to see the follow-through. we have talked already about alphabet, and google in particular, the search business. you know, what is the advertising share take between facebook and google, and what does it mean for the old, if you will? i've been using that a lot lately, getting on twitter.
i'm going to stop using that. no more if you will for me. >> it's your favorite expression. >> i've got to stop that and move on. i've had so many through the years. what does it mean for the additional players. >> twitter and yahoo! which also reports this week. should be interesting. >> it will be. hopefully the advertising pie is expanding that quickly. >> more importantly, whether private secretary equity is going to take out twitter. >> oh, yes. and crude oil just hit below $32 a barrel. let's head over to john fortt with a look at what's mechanics next on "squawk alley." >> we'll be talking about twitter, if you will. the stock is up this morning on rumors of private equity. we'll dig into that. also, alphabet, also known as google, reporting after the bell. going to break out alphabet and other bets. the core business and other bets. is that going to cheer investors or make them worry about how much google spending on stuff
not making money. and finally, iowa caucuses, we'll dig into that and more all coming up on "squawk alley." ohh ah ah aflac! aaaaf-lac! ta-daa! he's not a very good magician. he paid my claim in just one day. one day?! shh! how does he do it? in just one day, we process, approve and pay. one day pay, only from aflac.
and "squawk alley" is live. ♪ chi good monday morning. thanks for joining us here on "squawk alley." with us as always, john fortt. and ceo john steinberg. good monday to both of you. we'll get to tech news in a second, but first to dominic chu at headquarters. >> we're watching shares of lumber liquidators, the company halted for trading volatility and reopened, up 5%. it was up about 9%,