tv Squawk on the Street CNBC October 4, 2016 9:00am-11:01am EDT
make sure you join us tomorrow. "squawk on the street" begins right now. good tuesday morning and welcome to "squawk on the street." cramer is live at one market in san francisco. a lot to get to with jim today. a lot to work with, whether that's fed speak, a vp debate tonight, the ftse at an all-time high as the pound hits a 31-year low. first up, the imf lowering its global growth forecast once again to 3.1% this year. that's in part to brexit and
weaker than expected u.s. growth. keeping an eye on deutsche bank as well. the lender yet to reach a settlement with the doj. there's that, there's jamie dimon's comments on banks. jim, it's good to have you back. what are you watching out west, first of all? >> look, i think the dream force is a little more exciting this year than ever because there's so much consolidation or talk of consolidation. i feel like i don't have david to be able to look askance when i make suggestions on what's going to happen. i'm probably more free wheeling. he's probably more free wheeling because of the mets. as you know in your 11:00 show in the east, this is where most of the businesses are not hostage to the imf. these numbers mean nothing to the technology companies out here. >> i can still try and give you looks across the continent here, jim, if you miss it. thank you to that shoutout to my mets, of course. big game tomorrow with the team
that resides where you are, but it will be here at citi field. you know, i'm looking forward to your reporting this week, of course, in terms of salesforce and everything else and so many different questions there. but back to the broader ramifications of sort of this imf, global growth and everything else, jim, any real concerns as we watch oil? by the way, i think off a little bit as people seem to be backing away on the idea that opec is going to really cut back. >> look, i think when you see something like the imf, what you think is, all right, the hawks on the fed are fighting basically worldwide history. perhaps we can buck the downturn. but when we start seeing these earnings over the next two weeks, i think we're going to say, wow, international really didn't pick up, u.s. is not so strong, and there's just kind of an overall sense that we're going to have slow growth forever. so i think that maybe that's a little too negative. but the imf call once again says, boy, it's great that we didn't hike.
i know there's people that want to hike it ideologically but imf numbers clearly say that the world is slowing again and that is not something that we thought should be happening by october. >> part of what they're blaming, of course, is populist uprisings around the world, brexit, our own election, backlash against globalization. speaking of hawkish fed members, lacquer is out this morning saying that the rate should be 1.5 percentage points above where it is right now. mester yesterday probably the biggest talk out there saying that november, there's no reason why the case can't be made for a hike even days before the election. you don't buy that, do you? >> no. look, i think that the idea if they did something days before the election, they're really very much involved with the political environment. they fall right into donald trump's attacks. who would want to do that? and these people who are saying, listen, things are better, what has happened since the fed meeting? what numbers did we get that make you feel much more
confident? that oil went up? i mean really. the economy doesn't work over a two-week, three-week period. so people who were saying that we need rate hikes are broken records at this point. they should rely and be more data dependent. if they are, there are would be nothing to talk about. i think sometimes they should give speeches and say i really have nothing to talk about. let me talk about playoffs, let me talk about the start of the season, but i don't have anything economically. but they have to say something. i don't know why they have to say something, there's nothing to say. >> that's a good point. a nicer way of saying don't say anything at all. we'll watch and talk to the chief economist from the imf at the top of the 10. in the meantime, hillary clinton sounding off about wall street and wells fargo yesterday at a campaign event in ohio. take a listen to this. >> part of the problem is large corporations are amassing so much power in our economy. sometimes it's called market concentration or even old-fashioned monopolies.
but either way, it threatens businesses of all sizes as well as consumers. look at wells fargo. really shocking, isn't it? one of the nation's biggest banks bullying thousands of employees into committing fraud against unsuspecting customers. >> jpmorgan's jamie dimon responded during a phone interview on "power lunch" saying it's wrong to demonize the banking industry as a whole. >> when people blanket a whole class of people by making statements, i think that's just unfair to everybody. i could do the same thing about media, i could do the same thing about politicians or lawyers, and they're just never accurate. you know, this business is full of high quality, qualified, talented, ethical people, smart and ethical as you'll find in institutions almost anywhere. so i wish people would stop doing that and figure out -- people that broke the law should be punished. >> so, jim, we've got dimon's
comments, we've got the political collision, we've got theresa may saying look for -- a.j. going to underweigh on wells. >> i think wells has become really -- it resonates very well with the public because it's individual people and not some big justice department mortgage situation. but it's interesting to have a person, a presidential candidate say that wells fargo -- she's really just saying it's fraudule fraudulent, they committed fraud. it's hard to see john stumpf surviving where a presidential candidate says this bank committed fraud because they're going to say this bank is run by john stumpf, he committed fraud. these are really populous times. and wells fargo poorly timed any time but, boy, did this come
along as a great election issue. >> as for wells specifically, certainly, jim, we've already discussed already, steve sanger has a lot of power there. the man leading the independent committee of directors looking into and examining and having obviously an outside law firm examine exactly what went on. we questioned how long mr. stumpf conceivably can remain at the helm of the bank. but when you hear jamie dimon say we shouldn't be all tarred with the same brush, certainly you agree with it to a certain extent. i work with people in the banking industry all the time, any of them are my sources and i work with them. but when you go through the last few years, whether it's the libor scandal or fx scandals or money laundering at some of the banks that have been charged and back to the crisis itself and all of the different practices that took place, you do have to wonder when it's finally just going to stop. >> well, look, i think we spent a lot of time with deutsche bank
and started realizing it could be a deal with the justice department any day. meantime the british banks, have you looked at those stocks? these are the banks maybe we should be talking about. when you see the pound this low and you get a sense that lloyd's -- if you look at that, you want to talk about a market cap that's shrinking. barclays, royal bank, these companies could all end up being wards of the state and yet here's the government saying, look, we're not going to do anything. so we can focus all we want on germany but it's the british banks that are very large that to me are saying, hey, you know what, wherever the chips fall. it looks like that brexit is happening soon and it looks like these banks are going to lose share. they all may have to raise capital. they act as if they need to raise capital. >> certainly we're on alert for any headlines regarding deutsche today. jim, you're there for dream force. i saw 17 years ago a company
starts in an apartment and today 171,000 employees, customers, partners in san francisco today. >> well, they might as well rename the town dreamforce. if you're not wearing the credentials and walking around town, i don't know, maybe you're jobless. this thing is incredible. i am convinced when dreamforce does a deal yesterday for crocs, this is again without artificial intelligence. dreamforce trying to stay ahead of oracle. oracle trying to stay ahead of google. remember a lot of these involve web services. who's doing what with web services. look, there is just a collision of all these companies, but it's very clear that salesforce wants to do things that sound very much like twitter. this acquisition that they made yesterday is to be able to figure out what you want. if it's what you want, as valla says, it's salesforce. salesforce is going to figure out what you meant, they need twitter. they need everything that you
can get that tells you what a person is going to think about or do. >> the data set we pointed out many times of course is potentially a key in terms of this ongoing process that twitter is involved with, jim. and that data, every tweet ever tweeted, i guess, can give you enormous insights into consumer behavior in a.i. i want you to come back from there and have a lot of information for me on artificial intelligence. as you know, i'm kind of petrified of it. eventually the machines are going to take over, we know that. so maybe it's going to start soon, i don't know, but come back and let me know, okay? >> well, what's amazing is, is between the hacking, where they get your social security and they get your credit card, and artificial intelligence, what they're trying to do is basically anticipate what you want. what businesses want, what individuals want. artificial intelligence turned out to be on top of social and mobile to the point where i've got a company called prove point that i'm interviewed.
what they're trying to do is people don't get your e-mail and don't pretend to be you. because they pretend to be you and there's malicious attacks on mobile and social. all that happens is every time they get more data about you, the bad guys get more data. i think we all take it very matter of fact and i think that's going to prove wrong in the next five years. >> forget the bad guys. i just simply want to know can we build artificial intelligence without losing control over it. that's what i want you to come back and answer for me. >> look, i don't think it's terminator 2, rise of the machines, because i don't think the machines can actually substitute for us, but i do think that the machines know more about us than any individual can. and that means they can program what we want. i just feel like we're kind of dupes of the machines. we are, we're dupes. we obviously can't think for ourselves, they're going to think for us. if they think for us, let's just say they know what kind of shampoo we're going to use, what kind of presents we're going to buy.
they can predict things well ahead of what we want. are we that pattern behavior as huma humans? i guess so. those guys desperately want to know everything about us. salesforce is saying to its customers we'll find out everything about people. you know, i don't know, are there any secrets about what we really like and what we want? >> there's no secrets anymore, carl. >> no. >> if there's a problem, john conner will come back in time and fix it all retroactively. >> i needed you to just let me feel a little bit better because i'm really worried. worried. when we come back this morning, guys, google holding an event in san francisco later today as it looks to take on apple and amazon. take one more look at the premarket as the fourth quarter in october now under way. stocks down two out of three sessions. we're back in just a minute. opportunities aren't always obvious. sometimes they just drop in.
i'm just a guy who wants to buy that tr enis really built into theat foundation of the company. whole foods market is engaged with pg&e on many levels, to really reduce energy and reduce our environmental footprint. for a customer like whole foods, saving energy means helping our environment, and we can be a part of that. helping customers save energy is a very important part of what pg&e does. we can pass those savings on to the environment, the business, and the community. pg&e really is an expert in saving energy, and that partnership is extremely exciting. together, we're building a better california.
chief, it's underperformed this year but it's sitting at 800. >> once again, we get the situation where everybody has got to take everybody's share. augmented reality, virtual reality, like we talk about, artificial intelligence. one of the reasons i'm here is we can't envision what this stuff will do for us. when i talk to virtual reality people, what they're talking about is going to the mall, watching a ball game, all virtual reality. and i get it. i don't know where this phone will come in. i do think that this is something that we don't know yet what we'll do with, but i think that they figured out, like what david was talking about. they figured out why we're going to use this, why virtual reality is important. we haven't figured out why we'll use it but we end up buying it. >> so last week you were talking about f.a. instead of f.a.n.g. are you ready to put google back in and especially netflix after yesterday's action? >> i have to go to david because we have to kill right now or
keep alive this disney to buy netflix story, because it's just endless. disney stock, by the way, has stopped going down. i don't know why they need it. i haven't heard of a thesis yet about why they need it other than people who are long netflix and are hoping to be bailed out. >> jim, obviously you and i weren't working yesterday so i have to admit i'm not sure where this thing came from, but it doesn't seem to make a great deal of sense. you can make an argument certainly that netflix may find itself desired by any number of different companies, but i would not put disney on that list. >> no. no. look, at one point i proposed to apple they should buy it but it was worth a fraction of what it's worth right now. it will kill your earnings. somebody who buys it is not going to be concerned about their earnings because it's a delusion. there are not a lot of companies like that. go back to alphabet, could alphabet buy twitter, move in
against amazon? i think alphabet feels defensive. i think they have to have something that's like echo because echo seems so exciting. i think they have to have virtual reality because virtual reality and augmented reality maybe even more important is something that took america by storm, the world by storm because of pokemon. i think everybody feels like they need everything else. i don't know why. it's certainly not helping alphabet's stock. their stock has been a dog. all right, come up with something new. but it is just this idea that if you've got it, i've got to have it. all i care about is do the customers want it. it does seem like amazon is ahead. i don't think he mentioned amazon in the last 13, 14 hours about how amazon is going to beat the numbers but sure enough he's there. everybody raises numbers because it keeps blowing through the targets. if you notice, alphabet does nothing. the stock is flat lining. >> what's the multiple on that stock right now? >> it's actually below a market
multiple, which is pretty amazing when you talk about it. >> and quite a significant growth rate. it is interesting to see how that's performed given what doesn't appear to be any real diminishment of the underlying business, does it? >> no. look, i think the thing that has hurt alphabet so far is that they went to alphabet. i think people are mystified. i think there's now kind of a revulsion. why did they do this? what were we missing? why did they have to do it? it feels like the company -- the company was doing well. >> you mean the corporate strurstrur structure, not just the name change. >> the corporate structure is starting to bother people. they have killed a lot of projects but i think there's a sense of alphabet, all that they really are is search and search is in the decline. i don't think search is in the decline, but the endless have really -- they love amazon so much they can't resist raising price targets every day.
they're still lukewarm about apple. it really -- i haven't said anything about facebook in the last five minutes, but these are the companies -- i mean we're out here, and i cannot believe that all people do is look at their product introductions and get excited about it. i don't know, i guess we should be excited about it. i can't think about why we use half the stuff they bring out these days. >> there's also that pesky, lingering e.u. fine. this report suggests they could take 10% of annual global revenue, that would hurt. >> alphabet, by the way, has a gigantic business in europe. the eu obviously is out -- the eu is kind of out of nowhere really surprised a lot of companies. i don't think the analysts are having to cut numbers because of eu. we're used to cutting numbers because of stwinventory issues not because a government has dictated that companies can't make as much money. >> we're going to watch that as
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wheelhouse, david. ubs has pretty good reporting about the area that you know better than anyone, media. they go from sell cbs to buy cbs. this is about how les moonves navigates field dynamics. but this indicates basically they have the upper hand in any negotiation. i think ubs wants to get ahead of perhaps a deal that could be brewing right now that may be brewing by the end of the year. >> as we've reported, of course, both companies now have established the independent committees of their board of directors to deal with what may be forthcoming negotiations, jim. to their point at ubs, i think it is an argument to be made at ubs that cbs is in a very strong position negotiatingwise. perhaps mr. moonves is in a strong position in terms of getting certain things to begin negotiations. both sides have to fire financial advisers, they have
their lawyers already working, though, jim, and we'll see. the basic would be, listen, you're going to get enormous potential synergies and cost savings and the question would be what price can you buy viacom at. we'll leave that to them to figure out. they haven't yet begun. >> you know what's also interesting, they have raising numbers, ubs, talking about the scatter market being good. we never talk about abc and disney. is it really possible that what's happened here is that this stock is very undervalued simply because people just believe that broadcast is done. obviously blaroadcast is alive d well or you wouldn't have this upper hand for moonves. >> it's interesting. a recent survey on people unbundling or looking for a skinny bundle. they were asked what are your top networks? hbo was number one and the next three were abc, cbs and nbc, jim. it's interesting, there is still a need seemingly amongst consumers to have them, which is good news for them, i guess. >> yeah.
and moonves obviously is navigating better than most and also they have the nfl, they have sports, and i think people feel they didn't overpay for it and that really does matter. >> jim, we'll get you on the other side of the opening bell which is just about four and a half minutes away. "squawk on the street" coming right back. prop 64 makes marijuana legal in california for adults 21 and
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you're watching cnbc "squawk on the street" live from the financial capital of the world. the opening bell in less than 60 seconds. busy tuesday morning as the imf has a new forecast out. we've got a vice presidential debate tonight. plenty of fed speak as we work our way through all the macro leading up to the jobs number on friday. jim, crude oil within a dollar now of a five handle. brent is the highest since june 10th. what are your thoughts regarding oil right now? >> i think that when we see inventories, i think that we're going to have to say to ourselves where are they going to put all this oil near term. remember, still supply and demand. i think that supply and demand until november is going to show there's too much supply. and then even -- who knows what's going to happen in
november, but boy, they really got the shorts. the shorts didn't see it coming. they moved it up. it is not real demand. there's no place to put the stuff, there just isn't. [ bell ringing ] >> that's going to be something to watch today. there's the opening bell and a look at the s&p at the bottom of your screen. at the big board today, it's versum materials celebrating its spin-off from air products. over at the nasdaq, axcilis technologies. a lot of research to look at, jim. i know you're watching. you know what, we should do darden which is having a nice reaction to earnings. comps were down, but what they did have, they made up in pricing. >> well, i've got to tell you, this is one of those where they gave you the months. and the last month was better than the previous month and better than the previous month and then they reaffirmed guidance. we have seen restaurant chain
after restaurant chain cutting guide anz and not delivering anything on the price side or the traffic side. the traffic seemed very good here. it does seem to say that if you have the right food and the right price, they still come. remember, sonic kind of blew up last week and this group has been as heavy as i have seen. i don't know, maybe you get people saying that the consumer is spending a little more. i would caution. i think that darden has the right price. and the people, if they're going to go out and not stay at home, they want to see that they get a bargain. david i know hasn't gone to olive garden lately but we went a couple of weeks ago. look, it's just a great bargain and that's what people want or else they'll stay at home and use mccormick spice, which had a fantastic quarter last week. >> comps are up 13 and they guide higher. the street is at the low end of that range. >> cheap stock. cheap stock -- >> this year it has not had a great year in the market, of course, barely up at all. last year, as we know, was a
very strong year once they had replaced the entire board of directors. that highly unusual takeover of the entire board and resetting all of management. but starting to benefit a bit. a positive herd on the street today. >> one of the things i want to caution people, it's only traded 300,000 shares. conference call has historically reverb bratd and people say let's not get to bullish. this thing is dirt cheap. ever since they got rid of red lobster, it shows you that the rest of business is pretty strong. >> jim, pandora is almost at the high for the year. i know you watched goldman goes to conviction buy on that one today. >> yeah, i read through that and it made me feel like what's happened is the end of pricing pressure. i think if you like pandora, you should like sirius, which i think is a very cheap stock.
i kept thinking somewhere there's going to be some sort of notion about takeover. there isn't. this is just literally the margins getting better. it's a little surprising margins can get better, this is such a cutthroat business. look, this stock has never made any ground at all. sirius and this stock are arguably, if things are getting better on a price cut and there's less price cutting, pandora will go up a more heavily shorted stock. people have not believed in this stock at all because everyone believes this business has no margins coming up. this is a very big reprieve situation and i feel like perhaps it is worth looking at. i don't want to buy it but i understand if you short it. i don't get the short case anymore. >> i'm looking at wells fargo, guys, down another half of percent in contrast to the rest of the banking industry, all of whom stock at least the big banks are up, let's call it a roughly similar amount that wells is down. i guess, jim, at what point have you fully discounted from the shares of wells whatever may
come its way in thames of fallout from this scandal? you're talking about a stock that was well above $50 not very long ago, prior to when we got these first revelations. >> well, this is typically a moment where the company who bought back a lot of stock. i don't know what they're doing. it would be a moment warren buffett could buy back a lot of stock but he's over that 10% threshold. do you think illinois is going to be the last state that says they don't want to deal with wells fargo? this is an open sore in an election year. i think that there are people who believe that unless there are indictments that you're not going to be able to buy the stock. they're not doing anything with it. it's now -- by the way, it's losing any premium moatable. i don't think anyone realized at wells fargo that there would be charges of fraud by a presidential candidate. i think they felt like hey, we got past this, we paid the money. we gave the money back to people
that got ripped off and yet they can't put it behind them. they will not put it behind them, i believe, until there's executive change. airline its, jim, outperforming after transports outperformed yesterday on the back of higher oil. once again we're left with that puzzle. >> well, i think people feel if oil is going up, then it must be because things are better so, therefore, the airlines must do better. the airlines i thought got very oversold. they went to five, six times earnings. it's not usual that you can keep up a five, six times earnings when you know the comparisons next year may not be as bad. i do think that the airline stocks are very cheap. they have lacked a champion other than bill miller who's no longer in the game. no longer in a major firm. in the airlines you feel like you have to keep cutting numbers. i don't know if you have to cut numbers. i don't know if united/continental where the numbers aren't down to a base level where they can be increased provided we get a little relief in overseas travel, which has really been
the problem. >> you absolutely got that right. just looking at delta, alaska, american -- >> wow. >> southwest. and then netflix -- >> look, they got -- >> up 2% today. >> i don't know. a buyer -- david and i were joking this weekend. someone always likes to say, oh, they hired a banker. you know, companies hire bankers, companies have bankers. but unless someone surfaces soon, we're going to have to start thinking it's because they did some programming that has reignited subscriptions domestically. without a takeover bid, this thing is ten points too high. >> yeah. again, we could put a list of suitors together for the company but i always have a company, whether reid hastings has any interesting, and he's certainly the key there. it's not as though they face significant headwinds in their business yet, unlike twitter, where as we've reported the board of directors certainly was concerned about the inability to deliver any top-line growth and
what would follow. that's not the case at netflix. i don't know where that rumor came from, but my sense is certainly disney. i'd be surprised, jim, i'd be surprised. >> why would reid hastings want to sell? he's got a situation where he wants to go domestic reigniting. it certainly could happen. i know that netflix is viewed as being another company that is an amazon sites. i don't know how many companies are considered to be amazon sights, but any time you see web services doing better or the retail portion doing better, people don't want to own retailers and don't want to own other companies that are cloud based. and i think that alphabet has been hurt because amazon being so aggressive. i don't know, i can't see anyone buying netflix and i can't see them being a seller, but there is a huge short position in netflix. the hedge funds bet against every single company that is in this segment, and the bets are just not -- they're not turning out.
>> speaking of short interest and acquisitions, did you see the susquehanna note on twitter today. their view is 17 to 26 but then they go on to say m & a is not always logical, especially in tech, you see example after example of companies that have other emotional factors in play. >> and there's thinking on twitter, and i want to update my reporting, perhaps they'll have something during the course of this week from people, jim, but the thinking is when you base it on reasonable evaluations of what would be a media company, you have a hard time getting to a price really even approaching this. but if you go down the road that at the top of the show you were discussing, and i'm sure you may have more from dreamforce about salesforce's interest for us, you could get to numbers you don't even know because it's very subjective in terms of valuing that pool of data that seemingly is so vitally
important to those who are developing these engines based on artificial intelligence. >> yes. yes. look, there's -- this krux, salesforce, this is dreamforce about -- it's starting. and they just paid $700 million for a company that basically is able to analyze lightning what you're thinking about doing. but you need all the data in the world to be able to analyze it. the only company that's got social mobile data out there that could be for sale is twitter. so twitter is becoming something like modern art and nfl. you cannot justify on a price basis what it is, but this is the last data mining company out there. we view it as a company that we can make funny insights on. a company like salesforce marries krux with twitter and they're able to offer any of their big clients more data about their customers than the other guy. this is all a war to find out what we're thinking and doing, which only amazon has been
successful on an individual basis. but if you're a corporation, you need help analyzing what twitter would do. this krux for $700 million, which is a startup, married with salesforce given with twitter would be able to tell you what you're thinking of doing. and by the way, you want to go on twitter, according to the chief digital evangelist of salesforce. they are a reason that people get their news, but they give up a lot of information while they get their news. but you can't interpret it without krux. so i don't know, all these companies are coming together just to figure out something to give to korpcorporations to tel them where to put their resources in growth. so this is all so big companies can learn more about their customers so they can put a dollar where there might be growth versus a dollar where there isn't growth. >> good analysis, jim. as we try to weigh the
possibility of twitter going to the crm or anyone else. let's get to bob pisani on the floor. >> sort of a mixed open overall but very interesting things going on over in england. the uk, we're seeing a nice move up in a number of big multi-national companies. may announcing yesterday a timetable for brexit. and you might think that's not good news but the companies are all up on this. primarily because of the weak british pound. so companies that are major exporters, rolls royce, for example, 85% of their revenues are outside the united states. a weak pound helps them out. so pearson, the big publishing company, media company, standard chartered, glencore the big commodities company all trading up in the uk, part of the footsiefoots ftse 100. over here the companies having the most notable revenue gains,
i'll talk about that in a minute, and lagging like utilities are down. and another weak day for gold. gold is at the lowest levels now since going back several months, i believe it's to june. but that's a notable decline there for all the gold miners here. darden, remember when olive garden was in a lot of trouble? not anymore. we're at multi-month highs right now. nice situation for darden. they beat by six cents with revenues missing slightly. olive garden up 2%, same store sales better than expected. longhorn steak house and capital grill a little weaker than anticipated but the key is olive garden. so there's two important points about this report. olive garden is gaining market share. that's very impressive. number two, they have a buy back program that's aggressive. they have already bought back $200 million worth. they announced a new program, $500 million worth. the company only has a $7
billion market cap. they're essentially buying back 10% of the company. this is another one of those buyback monsters that i keep talking about that quietly, slowly, significantly are reducing their overall share count. let's talk about the earnings situation because we're now going to get q3 earnings. we've used this word earnings recession and unfortunately it is continuing. we are right now five consecutive quarters of negative earnings growth. two pieces of good news. the earnings decline in q3 is only 0.8%. we will beat that because companies tend to beat a little bit over their analysts' expectations. so we may be able to end the earnings recession for q3 after four consecutive declines. the other, and i think better news, revenue growth for the first time since the fourth quarter of 2014, right now the estimates are up 2.6%. this is the first revenue growth since the fourth quarter of 2014. why is it important?
because revenue growth leads earnings growth, not the other way around. you want to see revenue growth overall. the leaders, revenue growth leaders for the third quarter, consumer discretionary will be up 9%, health care will be strong, and technology, one of the big, big sectors, up 4.3%. let me emphasize what's going on in technology because stocks had been moving on the expected revenue gains we're going to be seeing. so in technology, internet services and software up over 20%, semi conductors and semi conductor capital equipment up 12%. there is your whole upgrade cycle for virtual reality, augmented reality, all the more powerful smartphones. it's the semis that are really doing well. and what's going to be lagging? it's the old hardware companies, down 6%. guys, that's why you're seeing all these semi conductors do well, because of the expectations of strong revenue growth. right now the dow up 41 points. guys, back to you. >> all right, bob, thanks so much for that. let's get to the bond pits as well. rick santelli is in chicago.
good morning to you, rick. >> good morning, carl. well, the rate creep continues. even though it really is a creep, it's a very counter intuitive one. many are saying, jim, spot on, two weeks doesn't a trend make. and for central bankers, f1c members to be talking about what's changed since the last meeting is kind of crazy, but as counterintuitive as it may seem and probably not for the reasons i just mentioned, we are slightly moving up, most likely for logistics more than fundamentals. look at a two-year -- let's keep everything a july 1st start. a two-year, definitely on the rise. next stop could be testing that 80 that you see at the top of the screen there. let's look at tens, right around 1.75 seems to be it. believe me, we left so much price structure below us, it is a solid floor. forgetting the fundamentals, maybe we're just in a range and about to establish where the top of it is.
is it 1.75 or is it higher? my personal notion after looking at the charts is at some point between now and the end of the year, we're going to trade into the 1.90s. first of all, keep in mind the spread between our tens and bunds around 173 now. this is close to historic highs and especially on this run. if we disengage from the bund, most likely that's an impetus for higher yields all around, but do note the difference on that chart between the minus 9 we're trading at and the positive 7, that 16 basis points is much wider and we need to keep that in mind. jgbs going nowhere, kind of flattish. but it's a flattish plat toe at a time they're trying to target zero. that one is interesting and falls out. many traders don't think that's got the worst power for higher rates. finally one i don't look at much
are the mexican ten-year. look at that one, it's looking the same type of pattern except for, yes, it's at 6%. finally the talk of the day, the pound versus the dollar. even though this is a start for july 1st, keep in mind it's the worst levels for the pound against the dollar since '85 and it does showcase what happens when you start to get the details of the brexit article 50. back to you, carl. >> all right, rick, thanks so much. rick santelli in chicago. when we come back, the imf once again lowering its global growth forecast. we'll talk about it with the group's chief economist in just a few moments. the dow is up 51 points on this tuesday. back in just a moment. the pursuit of healthier.
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sale. facebook has apologized, saying a technical issue prevented the company from identifying posts that violated its policies. meanwhile, ebay, jim, which was under pressure yesterday morning ostensibly because of that announcement finding its legs once again. >> this is an example of the craziness out here, why i'm out here. now, facebook moves into this and obviously it's almost embedded. you've got it right in your app on your phone, makes a lot of sense, works on everybody, whether it be android, whether it be apple. so ebay, first reaction, wow, they're going to eviscerate ebay. second reaction, i've got to deep up with facebook and go at ebay. this is the lunacy that we are seeing right now that all started with linkedin, where microsoft decided it could buy a company and not worry about the consequences of its earnings in order to be able to be social, mobile cloud. so ebay goes from something
being also ram, where etsy is the hot one, by the way. people say i've got to keep up with facebook. maybe i should buy ebay. david, when you talk to bankers, do they sense a defensive nature when one of these companies moves in and does some area that seems interesting? do they then feel like, wait a second, we can pitch ebay. is that what happens? >> not specific to ebay, but certainly when you see a theme or you see something, you can then create a theme around it. and microsoft linkedin is an interesting one particularly because it was not somehow stopped by the four walls of the eps canvas given that the linkedin was so large, microsoft just took it on anyway, which leads us back to twitter, where we also know stock based comp is very large. but to your point, it went beyond just a simple buy in the sense of we're going to do something to increase top line and increase earnings to a much more of a theme that others are probably going to focus on.
>> well, let's take it to its logical extent. now, if you're going to be a company or individual that trades things, obviously not weapons or pets, which is really amazing, maybe you need square. square is the small to medium-sized business company that allows you to be able to sell things and buy things. so we'll start rumoring square by tomorrow at this time. >> i think you already just did. >> by the way, etsy up almost to a 52-week high to 15 and change, a name that jim got in on early, i know, i know. we'll get stock trading with jim in just a moment. >> it's down a block from me.
and, can deliver insight person to person, on what matters to you. morgan stanley. narrator: it wasn't that long ago. years of devastating cutbacks to our schools. 30,000 teachers laid off. class sizes increased. art and music programs cut. we can't ever go back. ryan ruelas: so vote yes on proposition 55. reagan duncan: prop 55 prevents 4 billion in new cuts to our schools. letty muñoz-gonzalez: simply by maintaining the current tax rate on the wealthiest californians. ryan ruelas: no new education cuts, and no new taxes. reagan duncan: vote yes on 55. sarah morgan: to help our children thrive. reagan duncan: vote yes on 55. did you know your business doesn't have to suffer from slow internet? comcast business now offers blazing fast internet speeds up to 250 mbps.
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wide-ranging discussion about pretty much everything tech. we've got work days and akneel b bhu bhusri. we've got to find out about the yahoo! e-mail issue. proofpoint is the primary stopper of threats against your e-mail. maybe they know something about wells fargo too. >> you've got a long day ahead. nobody covers dreamforce like jim cramer. we'll see you tonight, 6:00 p.m. eastern time. when we come back, the imf chief economists on lowering its global economic outlook in just a moment.
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that will be here for you now - and down the road. i have a lifetime of experience. so i know how important that is. ♪ good tuesday morning and weeke welcome back to "squawk on the street." dow is up about 50 points on this tuesday as we weigh a bunch of different factors. a vp debate tonight, plenty of fed speak on the table, oil getting closer and closer to 50. waiting and waiting for deutsche headlines. we'll keep you updated. let's get to our road map
this morning and it tarstarts w that imf report that's projecting slow to about 3% this year. we'll speak with the chief economists straight ahead. plus clinton goes after wall street and what jpmorgan ceo jamie dimon has to say about it. and the vice presidential candidates get ready to square off in their only debate. and facebook says sorry after marketplace users start selling items that have the company apologizing. first up, the imf lowering its global growth forecast once again to 3.1 this year in part to brexit. also watching for deutsche bank headlines. the lender jet to reach a settlement with the doj. balance that with various other headlines today, mike. bill gross equating the markets to a modern day casino and the like.
>> he remains obviously very frustrated with the landscape in terms of interest rates and central bank policies and the rest of it. it's a world if you've grown up 30 years investing in safe yield instruments and can make a return on them and this is not that one. i think we already got some fed speak. i think it's been interpreted as i incrementally hawkish. so it seems as if that story is gathering up, even as we're talking about downgrading 2017 growth forecasts. that imf for the u.s. is down to 1.8 for next year. >> and the november odds up to 13. december a little bit better at 63. meanwhile goldman is out with a note saying that mutual funds might be a net seller for the year. we'll see how that plays out in a quarter that's seasonally strong. >> the funds themselves being net sellers, but also citigroup institutional investors said 70%
cash positions. so you have cash out there. another survey said the fourth quarter rally if we get one is going to be less than the average. so i don't know that people are necessarily building in the idea that we're going to have a ramp into the year end. >> is that money moving out of actively managed funds and into passively managed funds? we mentioned janice and bill gross. i have to mention the deal to sell the company, that is janis. as you pointed out, not exactly a great business these days. >> the business itself is top. you've got these awkwardly sized firms based on stock-picking funds or bond-picking funds. it seems like there has to be a rationization of that part of the industry. everyone says there has to be an opportunity. there has to be distortions but nobody says what that threshold is when it becomes easier for active managers to make money. >> i don't know where the number is but apparently we haven't hit
it yet. meanwhile gold is having its worst day since may, as the narratives being written already that you're selling the pound. you're buying the ftse. as a result, gold. >> and the dollar is strong. the dollar is seeing a lift right now. i think one of the story lines going on right now is not just the dollar being strong against a lot of different currencies, maybe with the exception of the japanese yen, but this aush trauj between u.s. rates and foreign rates is falling apart because if you're hedging the currency, you're not getting that much of -- it seems that's doing things to the dollar, the cost of borrowing dollars and things like that, so that's the issue. let's take a look at darden which had results this morning. stock was up over 5%. cramer said be careful on this one. shares are barely positive after an initial pop. they are reported stronger than expected earnings helped by strong sales at olive garden. they reported a profit of $110
million compared to $86 million a year earlier. the company boosted its earnings forecast for the year and announced a $500 million share buyback program j. >> comps up 1.3. visits were down. what they did perform in comps was pricing. lots and lots being written about how much cheaper it is to eat at home than it is to go out. that's why some of these comps, whether it's fast casual or qsr not coming in well. >> no. historics between eating home and eating out. every restaurant wants to try to push through pricing because their labor costs are going up and i guess darden was successful on some level. but if you look at other areas of fast casual or fast food, it's nothing but value pricing. everyone is racing to the bottom. >> but we've had far lower gasoline prices now over the last two years almost at this point than we had for the previous long period of time. there had always been an
expectation that kind of thing winds up in people's pocketbooks, they're more willing to go out and spend it. have we seen any good research on what's happened to that savings? >> at the end of last year you might have seen that lift. the casual dining stocks benefited but i don't know that it's continued. now that we're at that year over year comparison point, it just seems like to me the value pricing and basically compression of margins -- you're also seeing bankruptcy filings around private restaurant companies. we still have too many restaurants, obviously. >> the last question before we get to the imf, alaska air is the top performer this morning followed by united, delta, american and other airlines on a day where crude is getting closer to 50. so again we ask, why would transports outperform as oil is getting more expensive? >> now there's a story as to why that happens, because cheap oil allows you to engage in price wars. and so if fuel costs are going up, maybe that enforces some kind of pricing discipline.
that's the story line right now. i would also point out the rail stocks have been relatively strong. they're relatively outperformers recently. it seems like the market has that feel to it where it's going toward a cyclical move right now. it's not just transportation stocks if you look at certain industrials. take g.e. out of the industrials and that's been a good outperformer as well. >> we'll see if that holds going into year end. getting back to the imf, downgrading global growth forecast once again, the world economic outlook shows growth slowing to 3.1% this year. joining us from washington, d.c. is the chief economist who authored that report. it's great to have you back, good morning to you. >> good morning. >> the numbers we can see pretty plainly, but walk us through what is driving your adjusted forecast. >> well, this is a downgrade relative to last april, but we updated that in july shortly after the brexit vote.
things have been pretty much constant since then. the same forecast with the world economy pretty much moving sideways. >> so then is brexit considered a global risk? and if so, what explains global investors piling into the ftse today, for instance? >> well, the ftse 100 is dominated by companies with earnings mostly in nonsterling currencies. and when the pound depreciates, as it has been doing the last couple of days, that raises the value of those earnings in terms of sterling. so i think that is what explains the ftse. in terms of global risk, we were quite worried back in june before the vote, as were the main central banks who prepared for this, we were lucky in that the financial market reaction was fairly benign. and so going forward, what we're
mostly concerned about is just the lingering effects of the uncertainty over the negotiations, which we've now learned will begin in earnest in march. >> do you expect or is it in your forecast that there will be any kind of fiscal response among the governments of the world, the developed world, that's been an expectation of investors right now that that will be perhaps the next phase of this cycle? >> well, it's clear that monetary policy can't be the only game in town. while there is certainly room for further monetary actions to support inflation targets, we are seeing side effects in terms of bank profitability, pension funds, insurance companies. so i think world leaders may be coming to more of a realization that monitor policy needs some support from fiscal. we've seen this approach in canada. we've seen korea taking it.
japan has introduced a fiscal package and postponed its consumption tax. you know, it will be important in all of this, however, that countries do worry about how they will maintain fiscal solvency going forward, so it's not enough to just expand. you really need a medium term framework to ensure a sound balance sheet. >> you're expecting growth to rebound at 3.4% in 2017. what is sort of the underpinning for that expectation that we will see at least a little bit of a bounce in growth? >> yeah, well that's mostly an emerging market phenomenon. we have a couple of large emerging markets, russia and brazil come to mind which have been growing at negative rates. we foresee them returning to positive growth in 2017 and that will be one factor that brings up the global -- the global
average. we also foresee somewhat stronger growth in the u.s. next year. this year has been unusually weak. >> how much of the forecast revolves around the backlash to globalization, populist uprising around the world. what needs to happen to improve the sales job, so to speak, of the benefits of global trade? >> well, aside from just talking about the benefits, which we are doing more and those are substantial, we have not done a great job in the advanced countries of paying attention to those who lose from trade. and as data has emerged, particularly from the last 10 or 15 years, we can see more clearly the results in terms of
income distribution. trade is not the only factor by any means in influencing the income distribution, but it is a factor. in terms of dislocations. and again, dislocations, it's not all trade that is causing manufacturing to decline, it's also higher productivity. so we need to be more sensitive to those concerns and to importantly put in place policies to ameliorate them and these could involve retraining, educational investments, product market reforms that enable new industries to spring up. but that's got to be a priority for us. and these types of reforms are needed just for growth. in terms of our forecast, i wouldn't say that the backlash against trade is at this time a major factor. it is causing some uncertainty, i believe, and that uncertainty may be contributing to lower
investment worldwide. but, you know, until we see a much more major upparticular ti protectionist measures than we have seen so far, i wouldn't say it's a huge factor. but again, trade has been slowing down. that's a big element in our new world economic outlook report, and that certainly is affecting productivity going forward. >> but it's still too early to put a number on how much skepticism about trade is subtracting from global growth? >> i would be -- i would hesitate to put a number on that at this point. but if things continue on their current track, certainly will have a measurable impact. >> maybe we'll talk about that next year, maybe not. maury, it's great to have you. thanks for filling us in on the report from the imf from washington, d.c. >> thank you. coming up, your money, vote. hillary clinton calling out
wauwall street and specifically wells fargo yesterday and what jamie dam dimon has to say about it. facebook offers marketplace but is the company apologizing? stay with us. across new york state, from long island to buffalo, from rochester to the hudson valley, from albany to utica, creative business incentives, infrastructure investment, university partnerships, and the lowest taxes in decades are creating a stronger economy and the right environment in new york state for business to thrive. let us help grow your company's tomorrow- today at business.ny.gov
>> reporter: good morning, carl. when you've got hillary clinton and donald trump on the top of the ticket it's not easy to draw attention to the vice presidential debate but the republican national committee pulled it off yesterday by sending out a tweet announcing a willie horton-style attack on democratic vice presidential nominee tim kaine with this ad. >> long before tim kaine was in office, he consistently protected the worst kinds of people. lem tuggle, raped, sodomized and murdered jesse havens. tim kaine defended him. >> now willie horton ever since he figured in a 1988 campaign ad has become associated with racial appeals, so the republican national committee aide who sent out that tweet later deleted it. on the other hand, democrats have their own wedge issues to use against mike pence, the governor of indiana. in particular, his opposition to abortion and gay rights.
>> cities and states are joining businesses this morning in boycotting indiana over its controversial religious freedom law. protesters say it allows businesses to discriminate against gay people. the indianapolis star newspaper urges governor mike pence to fix this now. at least nine top indiana business executives have criticized the legislation. >> now, as sexy as those issues are, it is likely that we will have a considerable focus at tonight's debate on the tax issue that came out with donald trump over the weekend. hillary clinton was out yesterday and previewing some of the things that tim kaine might be saying tonight. >> in the debate he said it was smart to avoid paying taxes. yesterday his campaign was bragging it makes him a genius. here's my question. what kind of genius loses a billion dollars in a single year?
>> now, donald trump has his own spin on that story. he offered it yesterday when he was in colorado. >> honestly, i have brilliantly -- i have brilliantly used those laws. i have often said on the campaign trail that i have a fiduciary responsibility to pay no more tax than is legally required. >> so was it genius, was it failure? we will get an extended long form version of that discussion tonight, and who knows, we might end up with higher television ratings than everybody is forecasting for mike pence and tim kaine, guys. >> all right, john, even going up against postseason baseball. we'll see how that works out. well, for more on what to expect tonight and just what impact it might have when voters head to the polls in a short, maybe long 35 days, we'll see, we're joined by former obama campaign press secretary and senior advisor ben lebolt and former romney advisor and advisor to governor mike
pence, phil musser. phil, is there a chance that tonight's debate has something like a third of the public says they could not identify either of these vice presidential candidates, is there a chance it opens up a new front on the conversation here in terms of policy, in terms of social issues, or are we going to be talking about what we've been talking about since the presidential debate? >> i hope so. i hope it does open a new front. you rightly point out that a lot of americans don't know much about tim kaine or mike pence, so this is a chance for them to learn about governor pence. governor pence and donald trump are the change agents in this campaign. this is a chance for governor pence to talk about his credentials in foreign policy, the work he's done to make indiana the leader in the midwest with respect to job growth and opportunity. it's a chance for people to get a better sense of his character. i work with a lot of candidates and talk about how to prepare for debates. he's an authentic, grounded, likeable human being who's been a great leader for his state and he's accomplished a lot in the
congress. so this is an opportunity i think for the trump campaign to put a little focus on mike pence and that's i think good for the trump campaign at this point in time. >> ben, i would imagine that tim kaine's brief tonight is to prevent this conversation from being about the vice presidential candidates? >> well, i think that will be a portion of the conversation, but donald trump has had the worst week of the campaign. between the revelation about the fact that he didn't pay taxes for 18 years when he was trying to convince average americans that the system is rigged against them, he's case study number one for that. normally vice presidential debates are about are the vice presidential candidates qualified to be a heartbeat away from the presidency. in this campaign, i don't think donald trump is qualified to be president of the united states and i think that will be a big focus tonight. >> yeah, it will be the game of the big pivot, i think, guys. you guys have moderated debates before. you do it on your air all the time. this will be about the pivot. i suspect tim kaine will come out there tonight and want to talk about nothing but donald
trump. i think that mike pence is ready to litigate the case against hillary clinton. i think you especially can expect to see bona fides around his knowledge of foreign policy and his experience of getting things done. getting things done in the congress and in the state of indiana where he's been a really effective chief executive. so if that happens, i think that would be a good outcome for america because as ben rightly points out, five of our last 20 presidents have ascended to the presidency from the vice presidency either due to death or resignation. so it's an important debate and matters for our country. >> ben, i'm curious, when you guys do prep, especially on the vp side, where's the mix, the balance between asking the candidate to ask the other candidate to defend the top of the ticket versus asking them to explain the differences in their positions regarding different policies. >> well, i think it's got to be about 50-50. you know, i think senator kaine will make the affirmative case for hillary clinton tonight and
as phil pointed out, both candidates are relatively unknown. he'll introduce himself to the country and talk about his experience as a mayor, as a governor, as a senator, on the armed services committee, and that's in contrast to governor pence who was at a 40% approval rating in the state of indiana when donald trump tapped him to be vice president, largely because he didn't follow mitch daniels just pro-business record. he really became ideological as governor. he discriminated against gay people and told businesses in the state that they could do that. and he worked to defund planned parenthood and women's health care. and so i think you'll hear senator kaine bring up governor pence's record as well. >> phil, if that does happen, how important is it for governor pence to explain maybe where his policies and record might differ from donald trump's kind of expressed views on various issues? >> well, look, i think the trump campaign has -- there have been a nice ability for pence to
differentiate a little bit on the campaign, obviously with respect to to trump. he's got his own record as a governor, he's going to defend that record. i'm sure he'll come well prepared and clearly prepared to talk about those issues with the american people as a solid conservative leader for his state who's focused on jobs and has delivered success. but, you know, obviously he is going to be there to defend the top of the ticket and talk about why donald trump represents change for this country that a lot of americans want to see happen. and so he's going to put a finer point on some of the policy ideas and show that the team has got the depth of ideas and the readiness to go on day one. mike pence, if trump wins, pence would be an enormously consequential vice president in this country. if clinton wins, then you've got president hillary clinton, you've got first gentleman bill clinton, you know, kaine may be doing funerals around the world. so it's an important moment for pence. >> ben, phil, thanks a lot. actually you can see some research that the vice
president's job has gotten a little more prominent and important the last several years. thanks for joining us. forbes is releasing its 35th annual forbes 400 ranking of the wealthiest americans. in the top spot, bill gates and then jeff bezos, warren buffett, mark zuckerberg and larry ellison. falling in the ranking this year, donald trump. he's down 35 spots to number 156. forbes calculate trump is worth $3.7 billion. new information about his holdings. forbes said trump's fortune is real but is no means approaching the $10 billion that trump continues to maintain he is worth. there's always questions about his net worth. we may never see those taxes to get a better sense of it, but i'm more interested at the top of that list. bezos moves firmly into number two as a result of that enormous move up in amazon stock price. not to mention, everybody else self made on that list, where
it's zuckerberg, gates. >> and it's impossible for anybody to keep up with the public markets and what they're doing with these massive bellwether type companies. >> i saw a statistic yesterday, if there were 100 people living on planet earth, one of those 100 would have 50% of the money. that's literally how skewed the dispersion is of wealth around the world. as for amazon, 837.5, i just can't keep up with it lately. >> the thousand dollar price target is actually kind of unremarkable at this point, right, if you talk about a percentage move. >> i think it's 1015, right? moving well above it. >> those are big numbers, though, on that forbes list now. >> you always hear the forbes editors have talked about how donald trump is one of the very few people to argue with the editors about the numbers and he wants to be higher on the list. when we come back, marketplace mistakes. facebook saying sorry after
users began selling some very questionable items. the dow has gone quickly into the red. we're back in a minute. rsuit of. it begins from the second we're born. because, healthier doesn't happen all by itself. it needs to be earned every day. using wellness to keep away illness. and believing a sing life can be made better by millions of others. as a health services and innovation company optum powers modern healthcare by connecting every part of it. so while the world keeps searching for healthier we're here to make healthier happen.
let's get over to dominic chu and get a quick market flash here. gold sliding about 2%, pacing for its worst day since may, its lowest level since that brexit vote. it's send shares of gold miners lower. that ticker gdx falling more than 5% in the early going here. big components buyer barrick gold, newmont, all sharply lower, so gold certainly one to watch what's giving with the currency markets, dollars always an important part of that story. back to you. within an hour of launching facebook marketplace, the site encountered a major issue. julia joins us this morning with more on that. hey, julia. >> mhey, carl. facebook marketplace quickly turned into a black market. this is designed for facebook's 1.7 billion users to sell items to each other within the app. facebook is saying that 450 million people already visit buy and sell groups every month, but
within hours of its launch, people started selling everything from drugs and guns to animals and sex. criticism of the types -- these types of postings in marketplace exploding on twitter and on facebook itself. now, facebook apologizing saying a technical issue prevented the identification of posts that violated company policies, saying, quote, we are working to fix the problem and will be closely monitoring our systems to ensure we are properly identifying and removing violations before giving more people access to marketplace. security experts are warning that marketplace has a number of potential risks because it doesn't have a secure payment system or star ratings like ebay does. it also doesn't facilitate delivery, which would lead to in-person meetings with unvetted sellers. now, if this looks many fan, it's because it is. facebook first launched a marketplace feature back in 2007. never really gained traction, so facebook shut it down seven years later when it launched a
for sale post option for groups. we'll have to see if this one takes off. guys, back over to you. >> all right, julia, yeah. glitches along the way when you let a billion people sell whatever they want i guess. thanks very much. as we head to break here, let's take a look at where oil is trading. the dollar has been strong, oil reversed lower. could be one of the reasons the broad market has sold off. we'll break it down with bank of america's head of commodity research. much more ahead on "squawk on the street."
that's why comcast business doesn't leave you there. when you call, a small business expert will answer you in about 30 seconds. no annoying hold music. just a real person, real fast. whenever you need them. great, that's what i said. so your business can get back to business. sounds like my ride's ready. don't get stuck on hold. reach an expert fast. comcast business. built for business. i'm michelle caruso-cabrera. here's your cnbc news update. the eye of hurricane matthew passing over haiti right now. the powerful category 4 storm making landfall this morning, bringing with it winds of 145
miles per hour. matthew expected to dump up to 40 inches of rain in some areas before heading north toward florida. pope francis making a surprise visit to the site of a devastating august earthquake in central italy. the pontiff photographed a meeting with first responders and praying before the rubble. secretary of state john kerry says the u.s. is not abandoning plans for peace in syria. >> we will continue, as we have before, to pursue a meaningful, sustainable, enforceable, cessation of hostilities throughout the country, and that includes the grounding of syrian and russian combat aircraft in designated areas. >> yesterday the u.s. suspended its diplomatic talks with russia saying it failed to comply with the cease-fire agreement in syria. move over tooth fairy, those baby teeth may be worth a lot more than a dollar. parents can now store their parents' teeth and the stem cells inside them for use for treatment in future health issues.
it's our cnbc news update. carl, back to you. >> michelle, thank you very much. markets in a relatively narrow range today, waiting for headlines out of deutsche. while oil continues rallying after the surprise opec decision to cut output. samantha is global market strategist and jpmorgan funds. good morning to you both. >> good morning. >> as we quick off the quarter, i wonder what your playbook looks like. >> well, until the end of the year we think there might be a change in market leadership from defensives to cyclicals. if the fed starts to raise rates, which we think they will by the end of the year and if we get some good growth numbers through the end of the year. >> you're looking for earnings to come back from recession? >> we do. the earnings recession, we think the bottom really was q1. q2 looked better. we're positive on equities in general. i think the need to be selective is more relevant than ever. >> what about inspect terms of
across the world. you've seen internationally exposed stocks, cyclical stocks doing better. is it time to rotate out of the u.s.? >> i think the u.s. is still a quality play. so if you look globally, the u.s. tends to be higher quality than those international stocks. that being said, they're cheaper, so we're looking at europe right now. we think they're cheap and we think it's a good time to get in if you think europe is five years behind the u.s. from a business cycle perspective. >> francisco, oil is definitely trending your way. i think your target for 17 on brent is 61. is that going to continue? >> we think so. certainly opec has given us a little more confidence on our provisions for next year. we're looking for $61 on average a barrel. we think we'll see a high point of $70 by the middle of the year as we head into the 2017 driving season. so i think opec has kind of cleared a path, and assuming that the november meeting is fruitful and there is a certain
allocation of quotas or some degree of cohesion, we will see a nice pickup in prices throughout the next six to nine months in our view. >> after so many false hopes, false headlines, why is this particular decision and move by opec, why does this one stick? >> well, remember opec and particularly saudi arabia, the leader of the cartel, has been guiding the market lower for the last couple of years trying to force capex out of the industry. there's $340 million globally of capex cuts but i think the pressure is building in saudi arabia as well. we are seeing a large deficit for two years running in saudi of $100 billion or so. we are also seeing their fx position being challenged with the central bank losing about a quarter of a trillion in reserves and i think they have
had enough at this point. they have really cut a lot of capex around the world and forced a tremendous reduction in investment and are looking for marginal barrels on the supply side to come from outside the cartel and that simply requires a higher price. >> samantha, i wonder what the impact of that you think might be? i mean globally if we do in fact get oil trending above the recent range. is it still in a comfortable zone if it's between $50 and $60 a barrel say? >> the 40 to 60 range we thought was helpful for u.s. producers and still support for the consumer in terms of low gas prices. i do think opec has become symbolic. how much they can cut, right, it's hard to wait and see, but the u.s. is the swing producer. so i think from a sentiment perspective, the opec cut is good news. i'm not sure it's actually going to sustain higher prices. >> are you looking for things to go on sale again, another biddable 5% retrenchment, 10% in
the fourth quarter? if not, when do you think that would come? >> i think it could very well happen in the fourth quarter. volatility is rearing its head. we would expect that given where we are in the business cycle. you tend to see more volatility in the second half of the business cycle. volatilities mean reverting so it was going to come back at some point. if the market retrenches at 5%, 10%, we would think of that as the market being on sale. >> i guess my question is where that kind of lurking risk is for something a little scarier than that. is it in european bank issues? is it in -- we're seeing a rally in the dollar. could we get another one of those world dollar shortage scares like we had early part of this year? >> i think the big scare is actually a little bit more benign and just subtrend growth. we can never break above this subtrend growth because central banks for everything they try, they can't change weak aggregate demand and low commodity prices. not even fiscal stimulus can fix that, so that's more of wait and see and i think that's a little
bit scarier. >> how do you handicap the likelihood of fiscal stimulus going into the next cycle? how much depends on who wins in november? >> both candidates look like they're making the case for fiscal stimulus. fiscal stimulus has been low, monetary policy has been the main driver. but at the same time if you look at debt levels, there is not room to do a ton of fiscal stimulus by any of these developed countries. i don't think it would be enough to make the market happy compared to what central banks were able to do. >> francisco, gold today, is this going to be an important day if we look back six months from now? >> look, i think it's a challenging environment for gold right now heading into a fed hike. remember that the fed is likely to hike in december, and the market is catching up to that. so we are seeing simultaneous rates while at the same time we're getting a rally in the u.s. dollar.
those two are not really helping gold at all for the time being. so it's hard for gold to rally in this environment. having said that, if we do get one of those environments that you were describing, where the market starts selling off on equities and the dollar rallies into december as the fed hikes, we will see gold stabilizing and eventually trending higher because gold is really thriving on a certainty and frankly on the end of the u.s. upward rate cycle, whenever that happens. >> definitely gets your attention today, that's for sure. francisco, good to see you again. samantha with jpmorgan funds, thanks so much. let's give you a quick look at shares of amazon. it's up ever so slightly as well as priceline and electronic arts are also up a bit. three stocks hitting highs, all-time highs this morning. much more ahead on "squawk on the street."
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welcome back to "squawk on the street." markets right now getting fractionally higher, but they're wavering between gains and losses. the tech sector is holding on to some gains today. it's getting a boost by 1% gain in apple stock. apple also the biggest gainer on the dow jones industrial average as well. skyworks, juniper, gorvo all up. the sector is also the second best performer this year after telecom. we'll see if those gains can hold into those afternoon session, back over to you. >> all right, dom, we'll be watching. let's get out to rick santelli with the santelli
exchange. hi, rick. >> hi, good morning, and thank you, mike. i'd like to welcome my special guest, professor from harvard, robert barrow. robert, thanks for taking the time. >> my pleasure. >> all right. you wrote a wonderful paper based on another paper you wrote, an op-ed i'm referring to but it's called "rare events and long-run risks." i've been watching this recovery and all i can think of is everybody tells me that it's not a great recovery except for when you go to the political side, where it's a great recovery, talking about lots of jobs created. but what i see, one piece of evidence on the recovery is that march of '09 the s&p was, what, 666. where is it now? 2158. that's the only real recovery i see. can you tell me how you'd rate the recovery, and in that statement tell me how you factor in all the jobs that we've created. >> well, the usual way to rank a
recovery is to think about the growth of the real gross domestic product which is the measure of the overall production in the economy. there really has been no recovery based on that standard metric. in order to recover, you have to grow at a rate faster than average for some period and we've been growing below average since 2007. the employment situation is then surprising. the labor market has actually been doing pretty well in terms of employment growth, drop in the unemployment rate. you put the two things together, it shows very slow productivity growth. it's the slow growth of labor productivity that intervenes between those two facts, the nonrecovery of gdp and the strong recovery of the labor market. >> you know, professor, robert, when i was young we used to try to bounce a basketball as high as we could to see if on the bounce we could put it in the net. of course the harder you throw it, the harder it hits the ground, the better chance you
have. isn't a recovery the same thing? the best way to bounce recovery is to hit the bottom. did the government program, the fed program, the world central plan of programs, did they prevent us from being able to have that ball hit the ground? >> you know, i agree with your analogy. history shows that the worse the depression, recession, the bigger the recovery. that's why it makes no sense to say we haven't had a good recovery because the recession was severe. the evidence is completely in the opposite direction. and that was even true of the great depression in the 1930s. there was actually a very strong recovery from 1933 to 1940 following that event, and that event also included a big financial crisis, much bigger than the financial crisis that we had during the great recession. so on all of those grounds, you would have predicted a strong recovery, and it's not a good excuse to say it's because the severity of the great recession, that's really the opposite
direction. >> professor, robert, thank you so much for taking the time. it's important to do the forensics because many of the candidates running are either for or against status quo, so i think we ought to know what the status quo go to cnbc.com/cyber summit and do so. a lot more ahead on "squawk on the street" after this.
the conference call. the ultimate arena for business. hour after hour of diving deep, touching base, and putting ducks in rows. the only problem with conference calls: eventually they have to end. unless you have the comcast business voiceedge mobile app. it lets you switch seamlessly from your desk phone to your mobile with no interruptions. i've never felt so alive. get the future of phone and the phones are free. comcast business. built for business. a possible rate hike and an upcoming election don't seem to be scaring away the u.s. consumer just yet. courtney reagan joins us now. >> santa is feeling pretty bullish. holiday sales forecast, you're hearing it here first, projecting a 3.6% increase over
last year. now, 2015 holiday sales grew over the 2.5% two-year average. steady job growth and income gains throughout 2016 bode well for holiday spending but does note geopolitical uncertainty, the election and weather still have the biggest potential to upend confidence and shopping patterns. internet forecast is the most widely cited. not alone in its optimistic forecast. total holiday sales are expected to improve somewhere between 2.2 and 4%. international shopping centers is looking for 3.3% at physical sales only, more than a percent higher than last year. four of five consumers say they'll participate in nonshopping activities when they visit malls, like santa visits, dining or seeing movies.
but the survey also indicates 59% of shoppers will spend on amazon.com this season. while the majority of purchases will be made in stores, e-marketer predicts online sales will eclipse 10% of all sales this year. requiring free, fast shipping and returns. many economists think some consumers will hold back spending until the election angst subsides. a third of americans will be done by black friday. a million americans won't finish shopping until christmas eve. >> i think you can find americans having quirky behavior. >> being done with shopping, i can't imagine that already. >> are they positioned for strong sales? >> one is to make sure they don't have too much inventory on the floor, particularly after last year. christmas eve temperatures
around 65 degrees. i know we laugh when we say weather is an excuse, but it is really hard to sell hats and coats and mittens when it's that warm. they're being very conservative with their inventory. that being said, it could come back to bite them. if it's very strong, what happens if they're in very short supply? >> opportunity. >> delicate balance. >> online 10%. >> i know. >> that seems like it's going to go nothing but up. >> exactly. exactly. that's where the growth s that's why i think it's interesting that they're predicting that in-store sales will grow more than 3% with so much muof shoppg is shifting online. even though traffic is down, conversion is up because they've done a lot of research online. they know what they want and may visit fewer stores because they know exactly what they're looking for when they get there. >> courtney, thank you very much. appreciate it.
>> thanks. >> now let's send it over to john ford. he will give us a look at what's coming up on "squawk alley." john? >> a streaming box coming from the u.s. also, phones that have an interesting year there. speaking of phones, google, big hardware announcements coming today. is the company really going to dive back into phone this is time? all that and more coming up on "squawk alley." the pursuit of healthier.
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