tv Worldwide Exchange CNBC November 28, 2016 5:00am-6:01am EST
good morning! crude crushed, oil prices dropping on doubts of an opec production freeze. cuba under castro. the world reflects on the passing of the former president and new questions about the future of u.s. relations. a live report for you from havana, straight ahead. and twitter tirade. president-elect trump takes to social media to claim illegal voters cost him the popular vote. it's monday, november 28th, 2016. "worldwide exchange" begins right now. ♪ hey, hey, hey ♪ when i love someone i'm loving
all the way ♪ good morning! happy monday and welcome to "worldwide exchange," i'm sara eisen. >> and i'm wilfred frost. good morning from me as well. let's check in on the markets this morning. after a string of record highs last week sent the major averages up for a third week in a row, friday the equity markets closed near their highs. transports turned in four weeks of gains for the first time since march under a little bit of selling pressure this morning, whether it's profit-taking or correcting off the move we saw, potentially some new risks entering the equation. dow futures are down 32. s&p futures down 6. nasdaq futures down 10. s&p down, nasdaq, russell 2000, small caps, s&p 400 midcaps, which we never talk about, all posting new records last week. check out some of the returns just since the election. big returns, bigger even in the small caps. there's the transports, which i mentioned, they've been particularly strong, the longest run since back in march.
the index gaining 8.6% since election day. as for the 10-year treasury note yield, this has been the other postelection giant mover, sell-off in bonds pushing yields up. there is the chart. as you can see, november, big tick-up, 2.32 on the 10-year yield. bigger on the 2-year and 5-year, multiyear highs. december is full of event risks, including the december 14th-15th fed meeting where there's 100% odds of a rate hike. >> coming back to the main equity moves last week, talking about 1.5% gains for the major indices. the russell was the outperformer, so small caps played catch-up. the russell's up over 2.5%. the other interesting thing is yeah, all broader indexes were higher, but the telecom sector was the best performing, so a bit of a rotation for the first week or two post trump rally, with financials and industrials. one of the laggards in the first couple weeks is what caught up last weekend. and in term of the yield, we did see 2.4% in the middle of the
week and again, that's just come off a little bit. broadly, it's a continuation of the rally, a continuation of those post-trump themes but with some smaller differentiating factors amongst that. >> and i think the question from here is do we start to pay attention to some other big-market catalysts, whether they're political, the italian referendum in less than one week's time, risks heating up. we'll cover that today. the opec meeting this week, the fed meeting, as i mentioned, and a big ecb meeting as well, questions about whether they're going to continue their qe program. >> absolutely right. let's focus in on oil prices. opec meeting is on wednesday. all eyes that. can they deliver that production cut that people have been questioning for the last two or three weeks and oil prices you can see recovering a little bit today, up 0.2%. this was after a drivecline on friday. down 4%. for the whole it was down 0.7% but was down sharply on friday, which is why we're seeing a recovery today, 46.16 for uti.
>> early equities, watching the trade and particularly italy, which has been weak in today's session. the italian stock market down 1.5%. bank stocks there getting hammered, down to an eight-week low if you look at the bank index, "ft" report over the weekend that they are in the crosshairs if this vote goes no, as the polls suggest. >> in the crosshairs in terms of momentum and investor anxiety. as we discussed, no immediate effect on the banks or any other sector for that matter. it's just what investors will start to decide to hit -- >> well, it's the link between the financials and sovereigns in europe, which is yet to be broken. and italy is one prime example of a place where the banks are weak. >> yeah. >> and they have bad loans and it hasn't been fixed. so, if there's a burst of political volatility, that could be a problem. also some general weakness across the continent. the german dax is down 0.5%, but we're really watching italy. overnight the nikkei loses some gains. the japanese yen has been so weak over the last couple weeks, propelling the japanese stock
market, the stock buyers loving the weak yen, taking a pause over the weekend, but the shanghai up 0.5%. >> there's no particular factual catalyst this weekend. i think it's just as we get closer to this referendum, are we likely to see strong gains in europe until then? probably not. today might be a sign of what's to come over the next week or so. broader markets. dollar, we did see a little bit of dollar strength so far this morning, particularly -- sorry, dollar weakness, excuse me, as you can see against the yen. so, just a reversal of that dollar strength we've seen in recent weeks. the euro's up 0.5%, the euro up but the pound is falling itself, down 0.4%. the dollar as a whole last week was a bit softer on friday, but it was higher for the week as a whole, 0.2% against a broad index. oil prices up. back to the markets this
week, shock full of economic data. tomorrow, look out for the second estimate on third-quarter gdp, also the s&p case-shiller home price index and consumer confidence on wednesday. on wednesday, the adp employment report, pending home sales and the fed beige book. thursday, jobless claims, the ism manufacturing index and november auto sales. and topped off by the november jobs report on friday. economists looking for about 165,000 jobs to be added, which has been weaker than we've expected in the current months but continues to point to solid jobs growth, enough for the fed to make the move to raise rates. >> it would have to be wildly outside of forecast, i think -- >> big surprise, sure. >> -- to change people's expectations of hikes. today is cyber monday, a big day for online deals, but so far, consumers aren't too concerned about missing out. the national retail federation reports early holiday promotions and a belief that deals will always be around led to a decrease in spending over the thanksgiving weekend. the nrf says shoppers spent an
average of 3.5% less than a year ago. in media news, it was a big weekend at the box office. landon dowdy joins us with a look at some of the winners. good morning, landon. >> hi there, sara. good monday morning. disney's "moana" with a lot to be thankful for over the weekend, the south pacific animated adventure easily taking the top spot over the weekend with more than $81 million, according to studio estimates. the film starring dwayne "the rock" johnson marks another huge thanksgiving one for the mouse house, which released "frozen" the same weekend and remains the biggest holiday weekend with a hall of $96.5 million. "fantastic beasts and where to find them" continuing to win at the box office as well. the sequel to the harry potter franchise bringing in more than $65 million for the holiday weekend for a total of $156.2 million. marvel's "dr. strange" taking third place with a little less than $20 million. and brad pitt's world war ii
adventure "ally" in fourth. it benefited from the highly publicized split of brad pitt and angelina jolie. >> that was a thing? who knew. >> brangelina. >> been really seeing a lot of movies lately. >> i saw that one and "miss sloan." that just opened. >> but you liked it. >> i thought it was excellent. i love a political thriller. switching gears, it's day three of nine of the official mourning period of former cuban president fidel castro. the news comes amidst the obama administration's efforts to improve the relations, of course, between the two countries, and where u.s. companies had been hoping to do business. our chief international correspondent, michelle caruso-cabrera, is in havana with the latest. >> reporter: good morning. the key question is what will happen to the u.s. engagement, corporate engagement that's happened here since the thawing was announced in december of 2014. despite what is estimated to be thousands of u.s. executives
traveling here to cuba to see what business opportunities there are, there have been very, very few deals actually announced. the u.s./cuba trade council estimates -- and they do a very good job of examining all the applications for treasury, which must happen if you're going to try to do business here in cuba because of the embargo -- they estimate that there are roughly 30 u.s. companies involved here. and i use involved, because some may be here doing almost volunteer or charity work, rather than actually garnering any revenue. but let's start with companies that do appear to be garnering revenue. roughly half are in the hospitality sector. the major u.s. airlines just this week, i mean, starting today, have announced that they can begin doing airfare flights to havana from major cities in the united states. that's a big change. it's taken more than a year. starwood has a contract to manage three government-owned hotels. only one appears to be available on their website. carnival's had some cruise lines here. airbnb and booking.com.
u.s. visitors can now book rooms to stay here. there are three banks that are providing mastercards that will work here. if you have a mastercard, that does not mean it will work here. it must be issued from one of the three banks -- stonegate, natbank or bank du popular of puerto rico. travel arrangements, although it will be expensive, most cell phones will work here. doesn't necessarily help cubans, but it helps american visitors. i said involved here. google is here. according to my reporting, google has never confirmed this, but my reporting indicates that google offered to wire this island for free, 100%. the cuban government has turned them down, limited them to a very small spot where they are allowed to offer free high-speed internet access to students. it's on the outskirts of havana. there are literally chickens running through the yard in that location. that's the kind of extent. they're not making any money from that, google isn't, so that's why we say involved. general electric has signed a memorandum of understanding in
order to do big power projects here, infrastructure projects, but historically, that's always gone to cuban allies, from china, for example, from russia. so, there is very limited involvement here. what's going to happen now that fidel castro's dead, and more importantly, what's going to happen now that president-elect trump is going to be coming into office. we've already heard from one of his representatives yesterday, reince priebus, that they were willing to undo a lot of what the obama administration has done since december of 2014. it's not necessarily going to be meaningful for any u.s. corporations when it comes to money, because they haven't been making any money here. that's largely been because the cuban government has been extremely slow or hasn't approved what we believe are at least 100 petitions or applications to do something here. guys, back to you. >> yeah, and congress didn't let the restrictions as well, michelle. i wonder on the president-elect trump question. you know, he's a businessman. he's looked there for opportunity for golf courses. i don't think he has any, but how he will walk the line
between the politics and some in his party who want to roll back those executive orders and the business opportunity from the companies that you just mentioned, and i wonder if they're going to get involved at all in lobbying him for what's at stake. >> reporter: i would say one thing. yeah, so you mentioned that congress hasn't changed their position, but remember, every corporation that's been here was very cognizant of the changes made under president obama, and i can tell you that lobbyists who have worked, and the embargo, who have worked with the cuban government have been very, very frustrated that applications for whatever u.s. corporations would like to do go into a black box, sit on a desk, don't get approved. so, what we are seeing are just a small number of deals of what could have been a much larger possibility, and that has been a great frustration. i think that the way to think about what president-elect will do speaking with people who are involved in trying to influence him about cuba policy, more conditionality. he thinks it was a bad deal.
and the cuban exiles who voted for president-elect trump, and we see that from the voting data, feel that while they supported the obama administration's initial approach to the cuban government, they feel like the u.s. government has given, given, given, and actually gotten very little in return. so, more conditionality on the part of president-elect donald trump is certainly what is expected, despite the fact that he is a hotelier and obviously would see opportunities here. the question, though, is would the cuban government even allow it? thus far, it's been extremely limited. >> michelle, just quickly, what does this rhetoric from donald trump over the weekend towards cuba imply for some of the other international areas we haven't talked that much about? of course, tpp's had a lot of focus, nafta has. but what also about the deals that president obama did in iran? is that something now that we also have to consider as a possible thing that protect trump will want to roll back, given how strong his rhetoric has been over the weekend with cuba? >> reporter: oh, yeah, i would think so. yeah, i mean, absolutely. i mean, president obama's
statement was antiseptic and an dine, right? donald trump comes out and immediately calls fidel castro a brutal dictator, makes references to shooting squads, firing squads, et cetera. the toneality was completely different. so, the starting point at minimum is going to be very different. now, if you think of him as a business guy, maybe this is his opening position in a negotiation to try to extract more from this government, from the iranian government, et cetera, going forward. but you know, it's all hypothetical at this point. we don't know until he's actually in office. >> yeah. better deals. michelle, thank you. for that live report from havana this morning. >> reporter: thanks. to some corporate news this morning. samsung electronics will reportedly consider splitting itself in two. as you might remember, proposed by activist investor elliott management. "economic daily" says the board will be meeting tomorrow. elliott last month suggested samsung split into a holding and operating company, pay a dividend and return cash to shareholders.
the stock is up about 1.6%. >> it has one of the most complicated ownership structures of any company. >> yes. >> samsung. so many different family ownership things, and that's always been the issue in terms of everyone would want them to return more cash. >> struggling under the recall. >> very, very low pay ratio has always been the issue but it's a hard oil tanker to change direction in terms of the thinking behind that. still to come, this morning's top global news, including a winner in a french presidential primary. plus, italy's prime minister speaks out on his country's upcoming referendum. we'll break down those key upcoming european political stories in just a couple minutes. don't go anywhere. ♪ thanks for doing this, dad. so i thought it might be time to talk about a financial strategy. you mean pay him back? so let's start talking about your long term goals. knowing your future is about more than just you. it's how edward jones makes sense of investing.
welcome back to "worldwide exchange." if you're just getting up, let's get you up to speed on the market action. we're looking at around 0.25% of declines in the futures markets or about 47 points pore the dow. last week we saw about 1.5% of gains for the week as a whole for all three indices. as a matter of fact, the smaller caps were the outperformer. the russell 2000 gained 2.5% for the week as a whole. the best sector last week was telco, so a little sector rotation from the other sectors that had been strong performers since the trump rally. year to date, the best sector still very comfortably is energy. oil prices, let's have a look at them. they did decline, in fact, sharply on friday, which is why we're seeing a bit of a rebound today to the tune of 0.2%, but for the week as a whole, last week they were still in positive territory. all focus, of course, on wednesday's opec meeting. will that production cut be
delivered? at the moment, we're just above flat after a decline on friday of 4%, 46.1 for wti. european politics takes center stage for the politics, and in global political news there, former prime minister francois fillon winning the french conservative primary runoff this weekend in a landslide victory. it brings him one step closer to the presidency next year. partial results showing fillon received more than 66% of the vote. he's a hardline reformist who wants to raise the retirement age, cut back social security and get rid of the 35-hour workweek. fillon is now the favorite to face and beat far-right front national leader marine le pen in next year's french presidential race. it's early, right? >> very early. >> don't the first votes come in april next year? >> long way to go. and as you say, assuming nobody gets over 50%, which would be hugely unlikely, which two candidates go into the runoff. others, like mr. maccarone, the
economy minister as an independent and we still don't know who the socialist candidate will be. we have to hear whether or not fillon will be standing as the socialist candidate. but his approval ratings so low, people expect someone else to be. meantime, the italians will vote on a referendum to overhaul the makeup of the government. prime minister renzi has proposed reducing the amount of lawmakers appointed versus elected. he says he'll step down if voters say no, albeit not necessarily immediately. in an interview on "60 minutes" last night, renzi said the reason is because there are too many politicians and nothing gets done. >> this referendum is not a referendum to change democracy in italy. it is a referendum to reduce bureaucracy in italy. italy is the worst country for bureaucracy around the world. and this is very important. if we have a system with a lot of politicians, the consequence
is 63 government changes in 70 years. >> renzi says a yes vote is a vote for the future, that the past is not efficient and that italy is not only a museum. >> it was very colorful, as he is. as he is known to be. >> he is, and his english is actually much improved in the last years. >> quite improved. >> he's worked on it a lot and it comes across well in these interviews. this is the big news. we talked about it earlier, italy's down almost 2%, the rest of europe suffering about 0.6%. hard to see really how europe catches an impetus until this is behind it. it's not make-or-break for the future of the eurozone. it's a big marker, though, and i think until we get through to the results -- >> i think a lot of people don't understand what this referendum is about. he's framed it, matteo renzi, as a vote on himself, as a vote of confidence on himself. what it's really about is this wonky structure of consolidating power within the italian government. the risk, though, i think that investors have sniffed out is that because he has threatened to leave if there is a no vote,
that could send the country into political chaos again, even if a technocrat government comes in. you could have the more populist parties with that whiff of change gain power, gain steam, and then you have questions about whether italy will stay in the euro, which is considered a breaking point. they are all against, all the far sort of extreme parties are against italy staying in the euro. >> yeah, well, the only tweak i'd mention to that is not so much that renzi has framed it on a vote as himself, his opponents have framed it on a vote as the current status quo of the government that has continued to deliver lackluster growth. so, when he made that promise to resign, everyone jumped on that and said, look, we've got to get rid of this government. look at the status quo, it's not really working. but yeah, certainly lots of hurdles -- >> that was all about him last night on "60 minutes." when we come back, president-elect donald trump says millions of people voted illegally in an election that he won. we'll have the details on this developing story straight ahead. you get used to sweaty odors in your car, you think it smells
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welcome back to "worldwide exchange." donald trump taking to ftwitter last night to bash recount efforts, claiming that millions of americans voted in the election illegally, which cost him the popular vote. tracie potts is in washington with all the details. tracie, good morning. >> reporter: good morning. he's also talking a lot about this push for a recount, particularly in those blue states in the midwest, across the midwest that he won.
today we're going to hear from one of those states. wisconsin's election commission weighing in on whether they can actually get a recount done by the federal deadline, december 13th. the green party is requesting recounts in wisconsin, michigan and pennsylvania. >> this is not about helping one guy and hurting another guy. this is about providing a system that we the voters can believe in. >> reporter: president-elect trump's denouncing the effort on twitter, alleging voter fraud in states hillary clinton won, claiming without proof that he won the popular vote because millions voted illegally. he calls the recount a fund-raising scam. the green party denies that. >> this is a total and complete distraction and a fraud and something that they should drop. >> reporter: hillary clinton's campaign lawyer says they found no evidence of hacking. they're not behind the recount but will participate. meantime, there is descension inside the trump transition over possibly appointing mitt romney
as secretary of state. >> people feel betrayed to think that governor romney would be given the most significant cabinet post of all. we don't even know if he voted for donald trump. >> reporter: and after the death of fidel castro, there are questions this morning about whether mr. trump will embrace or reverse president obama's renewed relationship with cuba. his senior adviser, kellyanne conway, says he's open to doing business with cuba if there's something in it for the u.s. >> tracie, great stuff. thank you so much. tracie potts live in washington. still to come on "worldwide exchange," this morning's top story, including oil prices and the global equity markets. plus, it's cyber monday, and that means big business for online retailers. a live report from inside an amazon fulfillment center. that comes up in just a couple minutes. don't go anywhere.
good morning. market alert. u.s. stocks set to pull back from record highs, as hopes of an opec deal fade. holiday central. consumers return to work today, but will they still keep shopping online? a live report from an amazon fulfillment center on this cyber monday, straight ahead. plus, working for a living. jobs in focus this week. we'll gets you ready with morgan stanley's chief u.s. economist. it's monday, november 28th, 2016, and you're watching "worldwide exchange" on cnbc. ♪ this is no big deal this is how we do
♪ >> good morning and welcome back to "worldwide exchange" on cnbc. i'm sara eisen. >> and i'm wilfred frost. very good morning from me as well. let's check in on the global markets this morning after record highs last week. a third weekly gain for major stocks. the nasdaq finished higher by 1.5%. all the major indices gained more than a percent. the small caps and midcaps were really strong, outperformance on the trump rally. dow futures are under a little pressure this morning, not much, though. it's improved over the last half hour or so, down 23. s&p futures down nearly 5. and nasdaq futures down 5 as well. will we see a correction to the three-week rally we've seen since the election, or will the strength continue? we do have some key event risk coming up. opec this week as well as the u.s. jobs report. early action in europe -- some declines across the board. italy getting particularly hard as the focus turns to this weekend's referendum vote. italy down 1%. that's also improved lately.
but the banks are getting hit especially hard. they're considered in the crosshairs if this vote goes no, as the polls suggest. german dax is down about 0.5% this early hour. as for asia overnight, some strength in china and hong kong, weakness in japan by just less than 0.2%, though. japan's nikkei has been on a roll, thanks to the weaker japanese yen and stronger dollar, which is taking a pause this morning. will the dollar rally continue? we'll see how strong that jobs report looks this week. and we'll see about the politics in europe. >> big time. i think politics in europe focus -- >> and the euro. >> also the opec meeting on wednesday. oil prices are a little higher this morning, but bear in mind, this comes after a 4% slide on friday. so, we are up 0.33%. oil prices certainly will react if there is no deal on wednesday to cut production, and one would say that the downside risk is higher than the upside risks, as in we are priced in for some kind of deal, so if it does not
materialize, prices could fall further. let's look at the 10-year treasury note. we've just eased back over the raise on wednesday over the last couple trading sessions, 2.33 is the yield at the moment. so still significantly higher than, of course, election night, but just coming off the highs over the last couple of days. the dollar, let's have a look at that. it's been soft against some of the major pairs today, particularly the euro and yen, around about 0.5% moves to the downside there. it is, however, higher against the pound. and gold prices just to round things off quickly, are a little bit higher today by about 0.9%, 1,188. making news this morning, cuban americans in little havana celebrating following the death of fidel castro. our bertha coombs joins us live from miami with a peek. good morning, bertha. >> reporter: good morning, sara. you know, they are just getting the coffee machines rolling again here at versailles in the heart of little havana.
it has been busy here all weekend. if you take a look, the crowds have been out all weekend celebrating. folks who are selling t-shirts and flags doing a very brisk business over the weekend as a lot of folks mark the end of fidel, but they also looked ahead. and the ceo of the greater miami brickell chamber of commerce, a second-generation cuban-american, says he hopes that president-elect donald trump renegotiates contracts with cuba right now, trade negotiations, in order to really unleash democracy there. >> the second generation and the third generation, we understand what rule of law is, what the institutions are all about, so we get that, and it's important for us to work that and try to not implement it, but try to influence the way that business is done. >> reporter: you know, we spoke to a young restauranteur about whether he might go back.
he's a second-generation person as well, and he expressed really some reticence. he says this is going to take time. he doesn't know if really now is the time to go back. and a lot of people are saying with castro gone, this is the time to push the cubans to make more change, now that he no longer looms as that big figure, but they're still fairly cautious. >> i think that we should definitely have a more open relationship with cuba, because it's been already too many years of a system not working. >> the thing is, with these people, you cannot trust them. if you sign a contract with them, they might say, we're not going follow this. >> reporter: it's certainly a huge transition, guys, between the death of castro and the move towards a new administration. a lot of folks, though, taking the old ronald reagan approach -- trust but verify, when it comes to cuba and business in the future. back to you. >> bertha, thank you very much
for that report live from miami. switching gears, back to the u.s. economy and markets. the consumer, of course, in focus. it's cyber monday, a key day for online retailers in particular. courtney reagan joins us from inside an amazon fulfillment center in new jersey. court, good morning. >> reporter: hi, good morning to you, will. even though the internet is like a store that never closes, much like this amazon fulfillment center, consumers still look forward to big event days like cyber monday to fill their carts. black friday, however, online sales grew 22%, topping adobe's even very bullish expectations, which may steal some thunder from today. still, the national retail federation expects 36% of americans will shop today. that's up slightly from last year. prices, though, are lower than last year on many items. that's a combination of some price deflation and deeper discounts. so volume will have to be higher than last year to make it up. adobe thinks americans will buy
9% more this cyber monday than last year, meaning online sales could top $3.4 billion, again making today the biggest online sales day in the u.s. history. we'll see what happens. the biggest task for retailers, of course, is to convert that very heavy traffic into sales and make sure their sites can handle it 37 last cyber monday was target.com's biggest day ever and its site crashed. this thanksgiving became target.com's new biggest day ever, and its site held up. but macys.com was jammed for many shoppers. walmart says its web traffic is ten times normal thanksgiving through cyber monday. the retailer has been stress testing its website under even higher traffic levels. it's increased its page load time by 33% and it's doubled the number of mega fulfillment centers since last year. cyber monday is
to help those robots. so, it's a combination of both human labor and robotics. but this fulfillment center has been very busy filling some of those orders from this weekend and then again doing more today once those cyber monday orders start rolling in. but it is still pretty early. >> court, good stuff. courtney reagan for us in new jersey. with more on the early shopping day returns, we're joined by an equity analyst at mkm partners. patri patrick, good morning and thank you for joining us. of course, as we're debating
whether the black friday weekend and cyber monday week would be good for retailers or not, there's one key factor that everyone was united on, that inventories were lower, thus it was going to be easier to beat this year than perhaps last year and prior years. is that still a theme that we're focused on at the moment, that estimates are easier to beat? >> probably, probably a bit, yeah. inventories are down, you know, are in pretty good shape, i guess, going into the holiday season. that was, inventories were a source of upside earnings for a number of retailers in the third quarter, particularly the department stores. you saw some pretty strong gross margins. the sales were weak. most had negative same-store sales. a few retailers had positive same-store sales. most were negative. but yeah, inventories were in better shape, and that was a plus. >> on this cyber monday, patrick, how much of it belongs to amazon and how much of it goes this year to everyone else?
>> i mean, certainly a good chunk belongs to amazon, but we're seeing some better performance from some of the bricks and mortar, traditional bricks and mortar retailers that do have e-commerce businesses. target, for example, grew its e-commerce sales, its digital channel sales by mid-20% range in the third quarter. walmart has seen some acceleration in its e-commerce business with the acquisition of jet.com. so, i would say it's looking a bit better this year for the big, traditional retailers on the e-commerce side. they're starting to, i think, defend their turf a bit better against amazon. >> we've seen initial reports from some of the likes of walmart and kohl's, some of the discount guys being quite positive. are we looking at the last week or so of retail being more focused towards some of the smaller ticket items? >> oh, gosh, more positive? i mean, target released a statement on friday morning.
actually, it was pretty upbeat. they used words like "thrilled" with the response to thanksgiving. walmart's statement on black friday morning i thought was a little bit more subdued than target's. on the big-ticket versus small-ticket, i mean, that's where some of the growth -- if we've seen same-store sales growth, it has come more in average ticket as opposed to traffic. traffic has been negative. but i think it will be certainly kind of a mixed bag as it relates to price points. >> so, on this all-important sales season for some of these retailers, patrick, we have seen some of these companies rally hard after the election. kohl's this month is up 25%. macy's is up 20%. ralph lauren, some of these other companies. maybe it's the hope of lower corporate taxes from a trump administration, but would you still be a buyer of some of these retailers which had been so beaten down before the election came? >> no, it's a great point and question, sara.
no, i'm a little bit more, just overall i'm still a little bit cautious toward retail. i've got some names that i really do like -- five below, ali, some smaller names, good story stocks within retail. but i think as it relates to some of the bigger names like walmart, target, kohl's, i do think that the stocks have run a little bit too fast, too quickly here, and a lot of it is on hopes for a better consumer dynamic in the back half of, you know, the very tail end of this year and then into next year. i don't know that that much has changed. actually, it's been a pretty tough year overall for retail just fundamentally. >> patrick, thank you very much for joining us this morning. patrick mckeever of mkm partners. still to come, today's must-reads. before break, here's a look at equities in the red, although recovered a little bit from the declines. we're down about 0.5%. italy down almost 1%. we're back in a couple minutes.
welcome back to "worldwide exchange" and good morning. it's time for our must-read stories, what stands out to us in the papers and across the websites. italian columnist mario margioco? writing a piece titled "the stakes of italy's referendum." you can find it on project syndicate, which is always good for some sharp economic takes. this one is very pro yes vote in italy this weekend. he writes, "the opposition, as usual, benefits considerably from its simple message to vote
no is to vote against the system and all of its corruption. who is not against corruption? add that to rising euro skepticism and the result is an intoxicating political brew. opinion polls now indicate a 5-6-point majority for no with 20% of voters still undecided." very familiar in a year of brexit, trump, surprising, anticorruption, antiestablishment, anti the system, and that's how this vote is being framed, even though it's not necessarily just about that. >> no, but what he's correctly saying is that the opposition have jumped on it, made it into a very populist thing, perhaps making promises that they can't keep themselves, but clearly, we've seen as well voters disenfranchised with the status quo and willing to try something new, potentially. >> and the warning in this piece is that it could create a domino effect. if there is a no vote, then the parties that could get power from this are euroskeptics, and that could be seen as a breaking point for italy's membership in the euro, which is huge. >> absolutely. that's clearly the big event
risk of the week ahead in europe. the big event risk for commodity markets and for the middle east and also for the u.s., of course, as well, is the opec meeting. and my must-read from "financial times" is from nick butler titled "the saudis are playing with fire if they raise oil output further." clearly focused on whether we get a cut or not. and this is what it could mean for the middle east if they don't come through with the cut, particularly with the fact that donald trump is now president-elect. he writes -- "an unhappy u.s. government could do any number of things in response to threats to new york jobs. it could start by publishing in full the inquiry into the 9/11 attacks, including any involvement of saudi arabia, and intelligence on other conflicts which american lives have been lost. mr. trump could also withdraw backing for the saudis in yemen and renegotiate or remove some defense guarantees." so it's a detailed look focusing on the political aspects, saying it's not just about where the oil price could go if opec
members failed to cut, it's about ramifications and bringing into question whether the next president of the united states will have enough strategic support for the saudis which has been sort of de facto assumed for the last 20 years. a more detailed look at the political ramifications of this opec deal on wednesday. >> it's a good read, especially as we consider president-elect donald trump's policies in places like cuba, like iran, china. add saudi arabia to the list. when we come back, it is the start of a big trading week with the jobs report looming on friday. can stocks stay here at record highs? we'll get thoughts from morgan stanley's chief u.s. economist, ellen resentnzentner next.
here's what's on tap. we're talking cuba, cuba, cuba, cuba, and of course, what it means to the markets and what it means to trump and to the economy. we'll also be talking retail. i spent a little time with people like jan niffen and others who have scoured the malls this weekend to get a gauge of what's happening in the world. then as you can imagine, i have not talked to my good friend, joe kernen, yet about this, but we will talk a lot, i imagine, about donald trump. so, that's what's on tap today. >> all right, see you at the top of the hour. thank you. the trump rally taking stocks to record highs. check out some of the returns just since the election. and the big winner is the small caps, the russell 2000 up double digits. look at that, almost 13%. 15 days i think straight, every day up since the election. with us now is ellen zentner, chief u.s. economist at morgan stanley. does the economic outlook justify some of these returns we're seeing for the domestically focused small caps? >> i think that this is definitely the key question of the day, right, have markets
gotten ahead of themselves with expectations? we can see that as economists, we do expect increased government spending, so we expect a better growth outlook next year. that's also going to come with a bigger monetary policy response. you can't get one without the other. the key question here is all of these assumptions that we've made of what kind of tax cuts can you get done, corporate tax reform, infrastructure spending, at what point do we start getting confirmation of that or a denial that that's going to happen, right? and so, that's what can roil markets. we've been digesting trump's picks here and there of who he's going to pepper his cabinet with, but we haven't gotten a real indication yet of what can happen on the tax side. i will tell you that the government has already passed a continuation resolution through to march of next year and does lay out some room for that in that budget for tax reform. >> either way, even if we do get a great fiscal package and that
does get delivered, could we also see markets derailed by this rising dollar, by rising interest rates? what kind of level would you start to get worried about in terms of 10-year yields? >> well, i think that when i talk to policymakers, they view the backup in yields as normal, that yields were depressed, very little risk premium built in there, and now risk premium, term premium is starting to come back to normal, and they see this as a normal shift in yields. i would imagine if you start to go well beyond, say the 2.70 level, that becomes a dampening effect on growth, especially coupled with a racing dollar. for monetary policymakers, they have no idea where the dollar is going or if this pace of appreciation will be sustained, and that's the key for policymakers, is it sustained? at some point, they're going to assume that the adjustment, right, to a trump-elect presidency, or what that means for the economy, that at some point, that effect is absorbed,
and they wouldn't expect it to appreciate further. but to the extent that it does, we've seen that derail policymakers in the past. >> well, one factor that could determine whether yields and the dollar go higher, inflation. and haven't seen much of it over the last few years, but there is this story, at least from the economic data looking at durable goods last week, for instance, that the economy was starting to improve and take shape before the election, and that if we do get this stimulative growth policies, inflation could really start to be a story. do you see that? >> it could. so, i think we have to weigh both sides of the coin, right? you're going to have an appreciating dollar, which we think will continue, right? we're only questioning at what pace. but a higher dollar depresses inflation because we import a lot of disinflation when the dollar rises. as you have to weigh that against the domestic economy, which was already facing a very low unemployment rate. now we're getting some fiscal stimulus, so you're going to boost domestic pressures on prices. and we think it's going to be this continual tug-of-war that
keeps inflation right around the fed's goal next year and in 2018. >> is the consumer strong enough to deal with that slight pickup in inflation, and of course, with it, pickup in borrowing rates and mortgage rates as well? >> well, in our forecast, the fiscal stimulus helps push the unemployment rate a bit lower than we had expected before, which should continue to support wage growth, so that might keep real wages afloat so we can absorb the higher inflation. also, the consumer balance sheet looks really good in this environment. very little of it exposed to a variable interest rate. so as the fed raises rates, there's not a lot of big interest expenses incurred by households. >> you mentioned there are political risks, but if trump gets his way and some of the various stimulative and optimistic forecasts for his policies come to fruition, what kind of growth bump are we talking about? >> so, we think about, for us, we've raised our forecast for 2017 by half a percentage point. we're still below consensus
because we've always been below consensus, so we're expecting on a q-4 over q-4 basis 1.9% in 2017. that's a little below the fed, a little below consensus. >> and do we go a few points higher after that? >> no, i think you have to build in that monetary policy response, which is going to be the great moderator. and of course, our assumptions are that no one writes donald trump a blank check, even factions of his own party are budget hawks, right? so, he gets some of the tax reform done, but it's a much more dumbed-down version, much smaller than his promises on the campaign trail. and that's probably where we're going to differ from consensus. some might be maybe a little more overreaching in how much they expect he can deliver. >> ellen, thank you very much for joining us. we're going to have to leave it there. we could go on for ages, but the block has beaten us. ellen zentner from morgan stanley. what are you watching? >> the 10-year yield. that's become a risk point here. there's little in the way of economic data, but we have jobs at the end of the week. >> and oil prices ahead of
wednesday's opec meeting, a little positive today after declines of 4% on friday. that's it for "worldwide exchange." "squawk box" is coming next. when they don't tell you how much something costs and you have to ask? maybe that's why i always make sure to... ... "bring up the costs associated with your services." i know. transparency about costs. just one way edward jones makes sense of investing.
good morning. crude prices are rebounding and it's been a volatile session on concerns over wednesday's big opec meeting. we're going to talk about cuba after castro. the world reflects on the passing of the former president and focusing now to the future of cuban relations with all of our corporations thinking of doing business there. a live report from havana straight ahead. and it's cyber monday. we'll have a rundown of the winners and losers of the holiday shopping season so far and the best retail bets for what you put in your stock portfolio. it is monday, november 28th,
2016, and "squawk box" begins right now. ♪ live from new york, where business never sleeps, this is "squawk box." >> good morning. welcome to "squawk box" here on cnbc. andrew ross sorkin along with joe kernen and melissa lee. our guest host, peter bokvart from the lindsey group and a cnbc contributor. look at u.s. equity futures at this hour. let's tell you what's going on now. dow looks to open off 33 points down, s&p 500 looking to open down as well, off about six points and the nasdaq off about, we'll call it 11 points after a sort of holiday weekend. the markets were open on friday, of course. and overnight in asia, let's take a look at what happened over there. hang seng up a little bit, shanghai up a little bit, and the nikkei off but only marginally. and finally, a quick look at european equities. you're looking at red arrows across the board, but again,