tv Squawk on the Street CNBC December 15, 2016 9:00am-11:01am EST
repatriated profits, that would be a holiday, and they'd try to extend that into structural tax refoo reform later in the year. the hard thing, there's no metric that can account for confidence, it's fair but also real. animal spirits. >> thank you, sir. >> always great to see you. >> thank you. >> thanks for having me. "squawk on the street" begins now. ♪ good morning. welcome to "squawk on the street." i'm david faber along with sara eisen and wilfred frost. we are live from the new york stock exchange. carl and jim have the morning off. one day after we got that raise from the fed, now we are 50 to
75. 62.5 basis points is where we are in terms of rates right now. you can see where we are in the markets, which did sell off after janet yellen's decision or the fed decision and the european markets, up across the board. i always do like to see spain and italy, thank you very much, control room, for throwing those in there. ten-year note yield the key here. we eclipsed 2.5% yesterday after the fed meeting. where do we stand now? 2.587. crude oil is down on the morning over almost 2%. our road map this morning starts with the step back in the rally. stocks slipping after the fed raised rates for the first time this year. plus more on trump's meeting with big tech, the fallout and the upsides from mega caps in silicon valley. >> and yahoo discloses a new data breach affecting 1 billion
accounts does it put their deal with verizon in jeopardy. >> let's start with the fed raising interest rates by 25 basis points. first time this year, second time since the financial crisis. they also signaled a faster pace of increases next year. at the news conference, janet yellen was asked if the election influences the decision at all. >> all participants recognize that there are considerable uncertainty about how economic policies may change and what effect they will have on the economy. insofar as that will affect monetary poll circumstancicy, w factor those policies along with other things, like the global environment, oil prices, we'll have to factor that into our
outlook and figure out an appropriate response. but we're operating under a cloud of uncertainty at the moment. >> she did her best there not to mention the election, the fact that the fiscal policy outlook changed. wouldn't really go there. it seeps it was the three-rate forecasts on the dot plot -- i don't know why they do the dot plot. seems to give everybody nerves. that's having an impact, and seeing it again with the bond selling off. we're the strongest against the euro in a decade. >> she was asked during the press conference a number of times about the trump economy and whether the fed needed to make accommodations on it. didn't really engage on it. >> yeah. >> that was the biggest negative, she didn't engage on that, and her gdp growth was from 2% to 2.1%, so the positivity the markets have seen
just got a wake-up call. look s this really all going to come to fruition? despite having the three rate hik hikes, she wasn't bullish on the growth. >> she has to go to great lengths -- she was asked about her own tenure, which is set to expire early 2018. by all accounts, it does look like trump will not reappoint here. she just can't there. everybody was watching trump's twitter account all day long. nothing yet about the federal reserve. >> some things about hacking, "vanity fair," "time" magazine again, but nothing on the fed. >> he was busy in a meeting with other folk at same time. the reason markets sold you off yesterday, are we sitting here
confident we'll get all three? this time last year they predicted four, we got one. this confidence today that the fed will step up to the mark next year and deliver all three of the predicted rate hikes, will we really see those? the dollar's reaction, very interesting. the 5 basis point hike expected before yesterday. yesterday the dollar's move afterwards, very strong indeed. we came into this wondering if this would be a buy the rumor sell the fact thing. >> sara, no secret we would get a raise in rates. >> it's a two-part move. seeing the german two-year bund yield going into negative territory, and the u.s. bond yield goes to the highest level since 2009. it's the differential which is the widest spread going back to 2000 that is creating such a big gap, as europe's prospects don't appear much brighter. they are continuing with their
stimulus, we're going the opposite way. that's a classic recipe for the euro to sell off against the dollar. yes, it was expected but also the rate forecast and the general outlook. >> the gap out in forecast very much on the short end of the curve is where we saw the biggest reaction to the bond move, the two-year note to the highest level since 2009. further out, the yield curve was not as steep. that's what we have to remind ourselves about, as we move into next year, the focus won't be on the short end but further out. people raising that question of parity again maybe. >> we are getting close. so many wall street banks are saying euro/dollar parity next weekend. also what does it mean for the rest of the world? chinese currency at an eight-year low versus the dollar. last time around it was hard for emerging markets when the fed
lifted rates. >> a lot of concern about them. they have not performed particularly well. wanted to share news regarding what will be the incoming trump administration in a way. tom wheeler current chairman of the fcc, who has been running that agency aggressively i might add for the last three years will be stepping down and put out the following statement, talking about what he's been able to do during his tenure, saying he intends to leave on the 20th of january. the inauguration day of donald trump. the fcc one of so many agencies where there's a lot of questions among the media and telecommunication companies about what policy will look like, net neutrality part of the overall landscape, the at&t/time warner transaction which mr. trump criticized as a candidate but has not said anything about
since then. overall the feeling given the de-regulatory bent of the incoming administration is that they will be more hands off at whatever or whomever leads the fcc after mr. wheeler steps down. he has been quite aggressive, including on stopping potential transactions. >> what are the expectations from the industry, companies like netflix on net neutrality under a trump administration? >> it's a key point, key concern for some of them as to whether there is more leniency given to those who provide broadband to charge you more for how much band width you're taking up. we'll see. that's one of many key considerations. for example, softbank controls sprint, bringing up the idea could sprint and it mobit-mobil?
>> the less regulation and the roll backs of regulation, with the populous nature of donald trump, if you look at biotech, everyone was so excited after hillary did not get elected, that doesn't mean they'll crack down on high drug prices. then trump said we'll crack down on high drug prices because he has a populist nature. >> you're right. >> is a push/pull there. >> a lot of people think the opposition on the campaign trail to the at&t/time warner deal has been to be populous. in the tech meeting much friendlier to some of those folk than on the pain tracampaign tr. >> most people believe at&t and time warner will go through. let's talk more about the broader market and bring in chief investment strategist at
charles schwab, lizann saunders. give me your take on the equity markets the day after the fed. >> a lot of people wanted to tie what happened in the market yesterday specifically to what may have come out of the fed meeting. i think there were some factors, but it could be the fact that markets don't go straight up forever. slightly more hawkish. several important things. the convergence between the market dots and the fed's dots, the market has had it much more correct. the convergence thinks that tno the fed is not crying wolf, that we will get the move that the fed suggests. something else important happen in the press conference. one question janet yellen was asked is whether the dots we flekt reflected the fiscal stimulus that was expected to come in 2017. she said basically no.
so those projections don't include what we could see as the boost in nick growth. >> we've seen a significant rally in the broader indices since trump won the election. have we pulled forward the expected benefits of lower taxes, spending on infrastructure, lower regulatory environment or is there more to come? >> we may have pulled forward a bit of it. we're in a stroke period, not just in an election year but in general. if we continue at this pace, you have to give back some of those gains. that could happen in 2017. i would be cautious about extrapolating the pace of these gains in 2017. that said, we are clearly shifting from an environment where monetary policy was the only game in town and dealing with at best the law of diminishing return into one where fiscal policy will take on
greater importance. that may mean that trump and the fed may be a bit more in sync than people think at this stage. >> have you been surprised by the extent of the dollar move since yesterday, given the rate hike itself was expected? >> the dollar has a lot of momentum behind it. that's as much a factor as anything else. the difference between now and a year ago when the dollar was moving to its highs of late 2015 is that it was leading to a broad tightening of financial conditions. you saw it translated to weak equity performance, a sharper vix, flatter yield curve. this time around we see the strength in the dollar, which can hurt the export side of the any, you're not seeing if in the credit spreads, you're seeing a steeper yield curve, until yesterday a stronger equity market. i think the fear of the dollar causing a significant tightening of the financial conditions is less than it was a year or so
ago. >> i think a lot of people after listening to janet yellen talk about fiscal policy, the markets, a lot of investors who were worried about a blurred line are breathing a sigh of relief. no tweet from president-elect trump. is she going to be able to walk that line of a central bank independence during a trump administration? >> are you asking me if trump will stay on this band wagon of anti-fed and tweet about it? i have no idea. she was forceful yesterday when they spoke about the fed. with respect to other companies, magazine publishers, the press, might there be some tensions, probably. >> what about his overall position in terms of favoring a hawkish or dovish fed. there's some appointments for him to make next year.
the campaign trail seemed to suggest interest rates were too low. >> i won't attempt to get into trump's head, but i agree it's a fine line. the fact that the market and fed are largely on the same page as it relates to 2017, that's a good thing. the convergence between market expectations and the fed's maybe lessens the likelihood of a significant surprise. i would assume the trump administration at this stage would be comfortable with what the fed and the market expects. volatility, personality volatility, volatility in the markets could come if you move significantly above those expectations or below those expectations. at this point i think the fact that the market and the fed are in sync is not a bad thing. >> liz ann, thank you. >> thanks, everybody. yahoo suffering another hack. this time involving more than 1
billion user accounts. we'll have more on that developing story after the break. taking a look at futures. a lot calmer than the immediate reaction of the fed. dow futures up 61 1/2, s&p up nearly 6. nasdaq futures up nearly 10. more "squawk on the street" when we come right back. is happening before our eyes. shift in human history sixty to seventy million people are moving to cities every year. at pgim we help investors see the implications of long term megatrends like the prime time of urban expansion, pinpointing opportunities to capture alpha in real estate, infrastructure and emerging markets. partner with pgim the global investment management businesses of prudential.
nbc news reporting that russian president vladimir putin was personally involved in the u.s. election hack. john harwood is back at trump tower with more. what do we know? >> donald trump, even as he celebrates the run up in the stock market has a couple of developing problems, he knows it. first of all, the issue that you just mentioned. nbc news reporting overnight a high level of confidence that vladimir putin was personally involved in directing the results of that election hack this fall. now, donald trump, you can tell he was bothered by the revelation. he tweeted why didn't they complain before the election.
democrats, the intelligence community, the obama white house did complain about russian involvement before the election. but the more vladimir putin is personally tied to this, and we saw today "forbes" magazine put out a statement saying -- or their list of the most powerful people in 2016, vladimir putin was number one. donald trump was number two. the more that perception is out there, the more difficulty for people like rex tillerson who is close to russia, the nomination nor secretary of state. yesterday donald trump tried to stay on a positive economic message. he called in tech leaders for kind of a pep rally. did not hear talk about tariffs or cutting immigration. he said his door was open. take a listen. >> all talking about the bounce, right now everybody has to like me, at least a little bit.
we'll try and have that bounce continue. and perhaps even more importantly we want you to keep going with the incredible innovation. there's nobody like you in the world. in the world. nobody like the people in this room. and anything we can do to help this go along and -- we'll be there for you. you call my people, call me. it doesn't make any difference. we have no formal chain of command around here. >> no formal chain of command. this underscores the second problem for donald trump, three of his children were there as well as his son-in-law raising questions about the mingling of government work and private interests. donald trump was bothered by this, too he sent out a tweet this morning sending out a tweet the media tries hard to make this so complicated. it really isn't. this is an issue that also won't go away as we get into 2017. >> john, thank you very much for that.
john harwood outside of trump tower in new york. rupert murdoch's 21st century fox is taking over the rest of sky, the 61% of sky in the uk that it doesn't already own. more on that deal coming up. just a few minutes from the open. ten minutes to go. the futures board is looking positive. yesterday lost about 0.6% on the dow. closer to a percent for the s&p. today called higher by 55 points. more "squawk on the street" straight ahead. miles per hour.traveling over0 to win, every millisecond matters. both on the track and thousands of miles away. with the help of at&t, red bull racing can share critical information about every inch of the car from virtually anywhere. brakes are getting warm. confirmed, daniel you need to cool your brakes. understood, brake bias back 2 clicks. giving them the agility to have speed & precision. because no one knows & like at&t.
we're drowning in information. where, in all of this, is the stuff that matters? the stakes are so high, your finances, your future. how do you solve this? you don't. you partner with a firm that advises governments and the fortune 500, and, can deliver insight person to person, on what matters to you. morgan stanley. why pause a spontaneous moment? cialis for daily use treats ed and the urinary symptoms of bph. tell your doctor about your medicines, and ask if your heart is healthy enough for sex. do not take cialis if you take nitrates for chest pain, or adempas® for pulmonary hypertension, as this may cause an unsafe drop in blood pressure. do not drink alcohol in excess. to avoid long-term injury, get medical help right away for an erection lasting more than four hours. if you have a sudden decrease or loss of hearing or vision, or an allergic reaction, stop taking cialis and get medical help right away. ask your doctor about cialis.
this is my retirement. retiring retired tires. and i never get tired of it. are you entirely prepared to retire? plan your never tiring retiring retired tires retirement with e*trade. i'm in vests and as a vested investor in vests i invest with e*trade, where investors can investigate and invest in vests... or not in vests. sign up at etrade.com and get up to six hundred dollars. yahoo! disclosing a data
breach of more than a billion user accounts which occurred in august of 2013. talking about names, e-mails, telephone numbers, in some cases encrypted security questions and answers which may have been compromised. this incident is separate from the data breach we learned about back in september, involving a half billion accounts. the company says it has not been able to determine how the data was stolen. from the wall street perspective there's questions about verizon's plan of yahoo's core business. verizon said we still continue to examine it. it's moving forward. the question is would this amount change or affect the deal? would verizon try to exit it? hard to answer. at this point i understand yahoos business has yet to be
affected by these revelations. >> what about a cheaper price? >> that's always possible. you get a negotiation down in price and something that you can't dismiss as a possibility here. i hear there's no panic on the part of verizon. they are reviewing it carefully. the deal itself slated to close perhaps as early as the end of the first quarter, more likely second quarter. i'm hearing the numbers themselves are fine at yahoo, maybe a bit ahead of plans. won't have an impact really on the stock price itself. it's down about 2% right now. alibaba is the key mover of yahoo, given its 15% ownership. certainly would not be a good day for yahoo if verizon was saying no way. >> away from the deal this happened a few years ago. it raises questions about internal governance and picking up on this problem.
you're watching cnbc's "squawk on the street" live from the financial capital of the world. the opening bell will ring about a minute from now. sara, stronger dollar, i know, it has a great amount of importance, particularly if you're a multinational. comes and goes the importance investors ascribes to that rising dollar. >> will be painful for multinationals, it has been all year, and back to levels we haven't seen since 2003. that will hurt if you're doing business overseas. what's interesting to watch is the relationship between the strong dollar and the stock market. since donald trump has won the election, both have been rising in tandem. yesterday after the fed, the dollar shot up and stocks went the other way. is that relationship going to
break? where the stock market can't handle a stronger dollar? doesn't look like that from today's early action. it will be a relationship to watch. >> yesterday, the worst performingi index was the russell, less international exposed. >> you are hearing it and watching it, the opening bell at the nyc. locks like we'll open with more green on that overall board. here at the big board, american water, provider of drinking water and wastewater in the u.s. and canada. can you be a provider of wastewater? at the nasdaq, melco crown entertainment, celebrating their tenth listing anniversary. we are up, of courts, on the broader market after yesterday's downdraft. >> guess what? financials are back in the lead. this has been the best performer since the election. so is the trump rally back on?
that's one of the questions. a little bit of reality check yesterday from the fed in terms of its forecast. interest rates are coming and maybe not so gradually anymore. there's a lot of focus on what we can expect from congress. >> there is. the move up in financials has been extraordinary. even speaking to some executives who run the companies, they're a bit overwhelmed by how fast they have moved. they will be beneficiaries of deregulation. they are beneficiaries of net interest margin increasing for them. increasingly some have fairly high tax rates, they would be the beneficiary of a lower tax rate. in terms of the reticence, they're not seeing that but the biggest factor is the yield curve. that's just fifiejustified.
the question for the banks is do you believe the yield curve? if they do, that is justified. this is a pent up reaction as suddenly things have gotten more positive towards the sector. >> guess the best performing s&p stock right now? >> don't know. >> mondelez. >> it is. can we look at it? let's talk about that. you know the company well. >> you know the deal story well. can we believe this german language swiss news report that came out yesterday? >> no. >> shares are up a lot. way off of the highs. >> disregard it. bollans, a german language swiss magazine. >> do you have a monthly subscription? >> i do. i do read it in the german. i prefer that. mondelez, as you know, will come up time and again as a potential
takeover candidate for kraft-heinz, which will be an inquisitive company. has already been, of course, first heinz, then the kraft deal itself. 3g raised a new fund recently. maybe 8 billion, 10 billion. w where they end up in the number is not as important. it doesn't mean the presence of that new fund of 3g is connected to what kraft-heinz may do. the two could be separate. 3g guys going after a new vertical. >> so you don't buy this? >> no, i can tell you there's nothing factually going on right now between kraft-heinz and mondelez. doesn't mean they won't be a deal at some point or an ov overture from kraft-heinz to get something done. >> they see a lot of costs that
need to be taken out, productivity, which is happening on a grand scale at mondelez. >> a board member talked about what your friend irene has been able to accomplish there. >> that has been the story. no question about it. 3g-heinz was february 2013. kraft-heinz, march of 2015. some think this is a little fast. >> that's when it closed. >> people suspect if they do something, it might be early next year given the way they do these things. but there's no guarantee that mondelez will be the name. >> the market always latches on to that. sort of the strategic rational is there. mondelez has great international exposure. >> it's the old company. it's putting back together the old kraft. >> also still a lot of cost synergies, brand overlap that would go nicely together.
also not a trust or a family in charge of voting shares, unlike campbells soup and kellogg, some other -- >> or hershey. >> some other targets in question. >> or hershey. >> general mills always comes up as well. >> they have the partnership with nestles which can act as a difficult deal point. >> also more domestic in the u.s. like craft. >> we'll see. stock still up almost 5%. yeah. bollans. now that we mentioned their name, maybe salt also go up for that m sales will go up for that magazine. >> europe was down a half percent, it's up more than that now. erased those losses. to see them bounce back after the losses, that's bullish for the post momentum rally, particularly the banks which have run up hard, yesterday were
down. leading the way, goldman's and jpmorgan. the other one there up over a half percent is apple. doing well this morning. >> you have to wonder after that meeting, there was a more conciliatory tone. big cap tech has been one of the yi underperformers, does the narrative now change? campaigner trump, who went after jeff bezos and tim cook, called them out by name, criticized them. suggested he might make life hard for them in a trump administration, struck a different tone yesterday. i guess we'll have to wait and see. >> we will. not clear the rotation out of those high growth tech names was a result of fears about what the trump administration might do or the point wilfred was making, cyclicals coming to life and getting that vicious rotation
out of some of those growth names. even though they will be beneficiaries of bringing cash back at a lower rate, whether it's apple or google. >> that's another potential boost for the banks. just going back to the tech meeting. apart from the more conciliatory tone. there was one comment i loved. owe said he was very honored by the bounce in the stock market. he's claiming credit, for which i suppose he has a right to do so. he says everyone in this room has, like me, a little bit to be pleased with. this is so front and center this sentiment. and he's claiming credit. this i don't think we can take that away. >> we call it the trump rally. the market is certainly up since the election what other stocks are you watching? healthcare actually making a comeback. healthcare is the only group negative for the s&p this year. some of those drug stocks hit hard. >> very hard. >> also watching facebook after
it announced instagram surpassed 600 million users. >> instagram's success is interesting ahead of the snapchat ipo, and the timing of the ipo when everyone thought they raised enough money. why are they doing it now? instagram has been successful in terms of growing the subscriber base. doesn't seem to be at the expense of snapchat there, but there may be overlap there. >> we mentioned fox briefly, briefly in terms of reaching that deal with sky b. 1075 pounds and pence, about a -- the same price we learned about last week when the board, the independent directors of sky b agreed to the price. now more importantly 21st century fox will communicate with the shareholder base of sky b as well, and perhaps their own
shareholder base which suffered since the deal was announced. the stock was up this week but has been significantly lower. investors recognize the 13 plus percent secretion, but some quizzical about the strategic need for this deelt. t deal, the use of cash and why they chose that. they can start to entertain and answer those questions, perhaps giving help to those shares. they were off rather dramatically after they announced the potential deal. >> it's interesting you say what the strategic deal is, it seems to be murdoch trying to buy an asset he wanted to in 2010 and he was blocked, because he failed to meet the tests and the scandal around the news hacking -- the phone hacking scandal we had in the uk.
since then he missed out on trying to buy time warner, the pound share price has fallen. this could be seen as an opportunistic deal. share holders are a little disappointed to the share price, it's a 19% premium to the average share price in the last 16 months. given the fall of the pound, they feel like they're getting taken advantage of. >> an important one here also. let's send it over to bob pisani who has more on what's moving this morning. >> higher dollar, higher bond yields, lower gold, mixed market here on the open. higher dollar is the problem. look at our sectors now. important thing here, higher dollar hurting things. materials stocks down, energy stocks down.
utilities, real estate, the ran guard reit, down. banks up on the higher yields here. the question is overall what will earnings be like in 2017? for the immediate moment the bigger question is are higher rates and the stronger dollar going to kill the rally. we have several groups at risk. the u.s. exporters and emerging markets. if you look at emerging markets, there's a little damage but now the quite as much. hang seng down 1.8%. hong kong pegged to the u.s. dollar. in china, they depend on external financing. elsewhere emerging markets, this is modest. philippines, malaysia there, the klse. indonesia. i consider that modest. a little effect, but no cascade of negative news.
materials in the u.s., commodities hit across the board on the higher dollar. there's your impact, besides rates, the higher dollar. steel stocks like nucor, rio tinto, bhp billiton, and freeport mcmok mor-mcmoran down bit. we were almost at $55 for oil on monday, and about $50 today. that's an 8%, 10% swing we've had. the he oil markets having trouble figuring out whether this opec deal will go through into 2017. even though we official i will have a deal, a lot of people don't think it will last the entire year. europe is mixed. higher bond yields in germany and france helping the banks in general. the banks have been doing remarkably well.
see bmp paribas, new high. society generale is not. u.s. banks doing better. they've been on the 52-week high lists for the past two weeks. pnc, that's a 52-week high. 52-week high for goldman. not quite for coamerica. just shy of it. it's been a poor ipo market, but trivago going public tomorrow on the nasdaq. back to you. let's head to the bond pits and check in with rick santelli at the cme group in chicago. rick? >> good morning. this is no surprise that the markets are trying to digest some of the changes with regard to the fed.
not necessarily the xwauquarter point but the other issues, how janet yellen approached some activity in the market since the november 8th election. to many she hardly scratched the surface. maybe didn't notice. but investors gun shy by that. look how markets extended, are regrouping. 24-year chart of two-year note yields, yes before we traded at 1.30. now 1.26. tens extended to 2.64. here they sit at about 2.58, 2.57. the next chart should be revealing. from september of 2014. on the far left, 2.62 close, significant from the september of 2014. more to the right, between june and july of 2015, three major tops all between 248 and 2the r
here. four-year chart of the euro versus the dollar, the penetration at 1.05 is huge, but we need to close below it. that's what traders will be looking at. back to you. >> thank you. that stronger dollar certainly is not helping the price of oil. jackie deangelis is at nymex with more. good morning. >> that's right. we've been pointing out the slow, steady rise in the dollar as a risk to crude oil futures. today it's taking an impact. 49.95 has been the session low. it's been that opec euphoria creating a deal with nonopec produpr producers bringing that up to the $54 range, but now we are
below the critical point here, $50, psychologically point. a close under 50 would be paramount, even though we're trading at that level right now. this should be something you're watching, dollar index. back to you. >> thank you very much. when we come back, markets higher a day after the fed's decision to raise rates, will increasing those interest rates derail the rally? not if today's moves are anything to go back. art cashin's take after the short break.
the dow is up about 52 points, recovering a bit of lost ground after yesterday's fed-fueled selloff. the fed deciding to raise rates for the first time this year. second time since the financial crisis. joining to us talk about what it all means for the markets, ubs director of floor operations, art cashin. good morning. >> good morning. >> you digested the fed rate hike, the dot plot, news conference, do you think it will be a risk to the rally? >> i think you have to put it into perspective. last december, the last time
they hiked, the dot plot predicted four rate hikes for this year. >> completely wrong. >> completely wrong. >> they say they're data dependent. i don't know why they have the dot forecast. >> not only are they deadly wrong, they're data-dependent. i think they went this time because the market gave them a free pass. and that's where they wanted to go. we're beginning to see a little bit of the fallout. many of the central banks in the gulf states raised their rates to fall in line. going to want to see what happens with the currencies in particular in china. >> eight-year low. >> yeah. >> the yuan. >> so we'll see when that begins to spill out. recall it was the emerging markets that dragged us down after last december's hike. so that will be a danger. and finally for today, the wti trading below 50. if that becomes a more persistent level, it's going to be a problem because that will turn the chart around to some
degree. >> how bullish is it for the momentum behind this post election rally that we've only as it appears have one day of declines as the fed hikes rates and we're back off to the races again. banks on a terror this morning. >> i think it's good because this is the sign as we call them buy the dippers. the people who said, my goodness, the rally started without me, i can't get in, i need a pullback. and this was their first sign of the pullback. i want to see how long it persists however. i think we are going to see the market come under some pressure in the coming days. hopefully santa claus gets here first. >> why do you think that? >> i think that some of the sentiment indicators are reaching extremes. the fear and greed indicator that's out is one of the highest levels it's been at in a while. the number of market letter writers who are bullish very close to 60 some odd percent. and we tend to get pullbacks after that.
so, again, i think it may come as it did last year from the emerging markets. that's where you want to keep an eye on. >> we will do so. art, thank you. >> my pleasure. >> nice to talk to you as always. more behind instagram's monthly user numbers. brand new numbers just out, how does it compare to the peers? "squawk on the street" will be right back with that.
facebook out with some updated numbers on instagram's monthly users. our own julia boorstin has more on that story. julia. >> hey, david. that's right. instagram growth is accelerating. the company just announcing 600 million monthly active users which means it's added its latest 100 million users in six months. which would be its fastest growth rate ever. and the company has doubled its user base in just two years. now, this remarkable growth means that snapchat's growing popularity is not eating into instagram's growth. it also has new features such as instagram's stories, which is awfully similar to snapchat. the company has also taken steps in the past six months to crackdown on abuse on the platform. now, instagram's accelerating growth is particularly striking in contrast to twitter, which has struggled with stagnating user growth stuck at around 300 million users since the first quarter of 2015. that means twitter's half
instagram's size. guys, back to you. >> julia, thank you. you know what else snapchat has that instagram doesn't? secret weapon? >> what? >> deejay kalid. majorly. he has helped -- >> i have the same reaction, david, as you when sara told me for the first time. >> you don't follow him on snap? >> i do know. minute by minute of his son's birth. every aspect of his life. >> certainly something i want to see. >> he's the influencer and he has so many fans. help lead to the popularity. if you want to learn how to use snapchat, which you probably should do. >> i know. i should. potentially. >> you should follow. >> okay. i'm going to put all that on my to-do list. >> there we go. >> for the new year. >> you're lucky to have us. the dollar's surging, banks are surging. >> i need you young people. i need you. >> and we teach you about deejay. >> meantime in the next hour of
"squawk on the street," david has the big interview goldman sachs co-head of investment banking john waldron on the future of the investment bank, potential impact on trump deal making and the fact banks are soaring this morning, bank of america leading the pack up 2.5%. "squawk on the street" will be right back. hey gary, what are you doing? oh hey john, i'm connecting our brains so we can share our amazing trading knowledge. that's a great idea, but why don't you just go to thinkorswim's chat rooms where you can share strategies, ideas, even actual trades with market professionals and thousands of other traders? i know. your brain told my brain before you told my face. mmm, blueberry? tap into the knowledge of other traders on thinkorswim. only at td ameritrade.
♪ good morning. and welcome back to "squawk on the street." i'm sara eisen along with david faber and wilfred frost today. we are live from post nine at the new york stock exchange. carl has the day off. let's take a look at where we are on the markets and oil at this hour. half an hour in and it looks like stocks are rebounding. the dow's up half a percent. goldman sachs is the big gainer in the dow. s&p 500 up a little more than half a percent. financials and technology are leading. and the nasdaq is up a little over half a percent as well. crude though just went below $50 a barrel. it's hovering above there right now. energy is lagging. we've got some economic data crossing the tape. let's go to diana olick for those numbers.
diana. >> sara, home builders sentiment in september spiked seven points to 70 on the national association of home builders monthly index. the street was looking for flat. that is the highest level on this index since the middle of 2005 before the housing crash. it's the first read since the election. and the builders say it's all about trump. quote, a post election bounce as builders are hopeful that president-elect trump will follow through on his pledge to cut burdensome regulations that are harming small businesses and housing affordability. that from nahb chairman ed brady. this survey is weighted towards smaller custom builders, not the big public. the seven-point move is the largest one-month gain in 20 years. last year at this time the index was ten points lower. of the index's three components, current sales conditions increase seven points to 76. sales expectations in the next six months jumped nine points to 78. and buyer traffic rose six points to 53. and that's the first time buyer
traffic topped 50, which is the crossover to positive territory. that since october 2005. builder sentiment was the highest in the west at 79. lowest in the northeast at 51. for more reaction and all the numbers, it's all on cnbc.com right now. big number, guys. >> yeah, big -- well, little pop, i guess. more than 1% for some of the home builders there. diana, thank you. the federal reserve hiking interest rates for the first and only time this year forecasting three more increases coming next year up from two in september. steve liesman joins us with more on some analysis behind the fed move and that big prediction, steve. >> yeah, sara, i want to pick up on what diana was reporting, which was that surge in home builder sentiment. we have a theme developing here, which is everybody's excited and optimistic except over at the fed. i want to show you some of the data from this morning. ignore for the moment the cpi data came in 1.7 year over year, quarter 2.1, not a lot happening there, jobless claims another
good number by the way speaking to perhaps a decent december jobs number. but look at the philly fed survey, which by the way our managing editor nick dunn is very excited about surging 13.9 points. empire state also surging as well. the whole point is the confidence of the guys answering those surveys, the ceos and everybody else in there. and what you have there is this incredible optimism we see in all the ceo surveys, cfo surveys, other surveys out there. also this morning the market rebounding a bit from yesterday's selloff maybe realizing, you know what, maybe it wasn't about a strong dollar in higher rates before, why worry now? the fed of course surprised some in the market by saying it would hike three times next year. we had it in our cnbc fed survey distinct possibility average number of hikes pegged at 2.5. here's where the market outlook is right now versus the fed, pretty much on top of each other. previously the market was below the fed and the fed ended up there. you can see the significance is the market had it right last year and the fed had it wrong.
fed looking for four rate hikes in december 2015. our cnbc survey had two, the actual was just one. the next hike looks to be priced in around june, possibly another one being priced in for september. but it's all in that famous phrase data dependent. for yellen and company, they want to see what the president actually proposes, what congress actually passes, and then we have to figure out, sara, what impact it all really has on the economy to know how that's going to influence rates. wilfred. >> steve, thank you very much for that. we're going to discuss this in more detail now with chief economist and kevin karen, washington crosses advisors portfolio manager. good morning to you both. dean, let me start with you. we saw the market selloff yesterday in reaction to the fed meeting. why did it react in that way? and why are we shrugging off that negativity today? >> well, certainly we had a hawkish surprise from the fed yesterday. most people were expecting the fed to stay at two hikes for next year. and it was surprising because
chair yellen said they hadn't even accounted for the fiscal stimulus possibility yet when they moved to three hikes. so that was a surprise to the markets. and i think that's really ultimately why we had that reaction. >> can we just go to this number that was just reported? diana mentioned it was a big number. highest home builder confidence since back in 2005. to steve's point, dean, what sort of boost can we see from the economy alone without getting any policy from washington just this confidence boost that is spreading across corporate america, across investors and now into the home builder? >> we're certainly seeing the economy turn stronger. we saw it in the third quarter. we're seeing it globally as well. and that's quite important. the global economy is shaking off the deflationary shock that it had a year and a half or so ago. now things are turning stronger everywhere. and that's really ultimately i think what's driving things. there's a bit of a rally in some things like this after the election, but most of the data
we're already get -- were already getting stronger. >> getting behind the curve with the gdp forecast yesterday only moving from 2% to 2.1%? >> yeah, i think so. i think something in the mid to high 2s makes sense, particularly if you get a tax cut and some more stimulus in the next year or two. but i think that the fed when they came into the year they were confronted with -- '16 i'm talking about, they were confronted with plunging energy prices, they had very weak data with the economy's headed basically south with the growth rate headed on a trajectory toward zero at the start of this year. it clearly changed mid year. and i think the fed is now playing catchup. that's why they had to be a little more aggressive on their forward look. >> you mentioned january, february and the scare we got this time early this year from the likes of china, absent of that kind of international shock, do you think this year they will deliver on the promises or the forecasts of three hikes? of course this time last year they suggested four, we only got
one. it's important to question how many we'll actually see from the current predictions. >> well, you never know. it's really ultimately up to them what they want to do. i would say if you look at the output gap, if you look at the slack in the economy, no matter how you want to measure it, the slack is greatly reduced. and at the same time you've got real rates, which is i think to me it's a very good measure of how easy monetary conditions are. you've got reduced slack and very easy monetary conditions. you're seven years into a recovery, and i would think they would be getting a little bit anxious to get back to at least sort of a neutral policy stance. so, you know, three rates next year -- rate increases next year, as long as the economy keeps moving, i think that's very much in the cards. >> so we're seeing a sort of sharper reaction after the economic data. the dow's now up triple digits 111 points. we're also seeing, dean, bond yields tick higher and the dollar now up more than a full percent going back to levels we haven't seen since 2002.
is there a point at which those higher bond yields and that stronger dollar stand in the way of this equity rally? or is it everyone's going to go together for awhile? >> it could happen at some point. i think right now there's not a big risk of that because all of this is being driven by better expectations for the economy. so as long as that's the case, these are relatively favorable moves. i think what happens is if those moves get out of whack, if they really get much faster than the economic data would imply they should, that's when the danger zone is. >> kevin, does the increase in yields derail the hope of a serious fiscal expansion from donald trump? >> no, but it would provide a little bit of a headwind. if you think about mortgage financing and those kinds of things, rates that are tied to the long end certainly that will have a little bit of a dampening effect. and of course if short rates rise, anything tied to the short end is going to be loans for example tied to the short end might get a little more expensive. i agree with dean 100%.
i'd much rather be looking at a stronger economy with rates moving up because of that than the opposite. so i'm happy to see it. i would think that the pro -- more pro growth kind of agenda coming out of washington would support the improvement in growth that we began to see at the middle part of this year and continues as we look to wrap up the year. >> and, dean, in terms of sector performance, we've got the banks taking off again. has that rally gone far enough already? what are your sort of most favored sector ss what are your sort of most favored sector sectors? >> my view is that interest rates are going to go significantly higher here. if you step back, we're putting fiscal stimulus into an economy that's already at or close to full employment. and that's not usually the way things work. so i do think that things that are tied to higher rates are going to do quite well. >> dean, thank you very much for joining us. kevin also. thank you very much. >> thank you. well, a new set of tweets from the president-elect this morning. this time commenting on russian hacking during the election. our john harwood joins us with
more from outside trump tower in the snow, i guess, john. >> yeah, we had a little winter wonderland here outside trump tower, david. but you can always tell what is going on in donald trump's head when you see a tweet storm from him. we had a burst this morning on three different subjects. and i just want to run through them. first of all, you saw donald trump tweet, going after "vanity fair" magazine. he's had a long-time feud with the publisher of "vanity fair." this tweet followed a story in "vanity fair" calling the trump grill, which is located in the basement of trump tower as a bad restaurant. and also a critical "vanity fair" article about that technology meeting yesterday. now, second trump tweet he criticized the media for making the issues of business and governmental overlap conflict of interest too complicated.
what caused that to happen? well, part of the way the coverage of the meeting on technology yesterday was the fact that three of his children and son-in-law were in the meeting. that clearly got under his skin. and he indicated that he is going to tell us in january, but he hasn't told us yet. and finally, you had a donald trump tweet saying that the white house should have complained about russian hacking before the election rather than after. well, in fact the white house did complain, but what prompted this tweet? well, you had an nbc news story last night saying that there's a high confidence among u.s. intelligence officials that vladimir putin personally directed the release of information from that election hack. so that clearly is a problem for donald trump. it's something that makes members of congress uneasy. and he's going to have to deal with that.
now, finally, it is in irony here that donald trump is expressing those views over twitter, which was not invited to the technology meeting. donald trump had a previous feud with twitter over the use of emojis during the fall campaign. he wanted to use them and twitter did not permit that. when i asked the transition official why twitter wasn't invited, the answer was, they're not big enough. we'll see if jack dorsey has anything to say about that today, guys. >> yeah, that was sort of an odd one given how much he seems to like the technology. john, thank you. john harwood outside of trump tower. coming up, another big data breach at yahoo. this time we're talking about 1 billion users that were hacked. we'll speak with the co-founder and cto of proud strike on that. later, the co-head of goldman sachs investment banking john waldron. and take a look at markets right now. we are taking off, and that means we are back on dow 20,000 watch. just a little more than 100
the investment managers at pgim take a long term view, teaming specialized active investing with risk-management rigor, to seek out global opportunities. we manage over a trillion dollars this way, attracting many of the world's leading investors. partner with pgim. the global investment management businesses of prudential
in fact be president-elect trump's pick for interior secretary. this has been reported a few days ago. and now it looks like that congressman from montana, a self-described outdoorsman will be the pick out of the president-elect for that job. wilfred. let's have a quick look on the financial stocks which again are leading the charge near the top of all of the indices today. some of the share prices for you decent almost 2% gains for all of the big universal banks, goldman sachs at 1.8. bank of america leading the charge again up 2.4%. guys, i'd say the reason we did see the banks selloff along with the rest of the market was that general riskoff sentiment. we also saw the short trend of the yield curve pick up more than the rest. so taking the edge off the steepening of the yield curve we've seen more recently. interesting again to see bank of america up the most of course of the big universal banks it's up the most since the election, up the most today and underperformed the least yesterday and the reason for that of course is it is geared to this interest rate hike cycle. its deposit base seen as being
the most sticky therefore the least price sensitive. less price sensitive therefore they can make the most of this interest rate cycle. >> on a tear up 2.3%. cyber security threats making some big headlines this morning. nbc news reporting that russian president vladimir putin was personally involved in the u.s. election hack. president-elect donald trump responding to that on twitter saying if russia or some other entity was hacking, why did the white house wait so long to act? why did they only complain after hillary lost? and at the same time yahoo disclosing a 2013 data breach of more than 1 billion user accounts. joining us on the phone to discuss all of these stories the fallout, we've got the right guest for you, dmitri alperovitch, thank you for calling in. on the yahoo hack, a billion users on top of that other hack
back in 2014. is this a yahoo-specific problem? or is it just a wider problem across all of these internet companies? >> it really is not. i coined a phrase six years ago when i said there are only two types of organizations, those that know they've been hacked and those that don't yet know they've been hacked. the reality is every organization for numerous other companies we have seen breached over the years, they're all facing these incredibly sophisticated targeted attacks from nation states, from organized criminal groups and really underscores how seriously we need to start taking cyber security. >> dmitri, it's david. you know, you taught me some time back of course these infiltrators can hang out, for lack of a better term, in their systems for years in fact. i mean, and i guess that goes to the yahoo hack. what took them in so long in terms of determining they'd been breached? and finally telling us about a hack that took place in 2013 where they may have actually also taken the source code from
the company. >> well, we don't know when yahoo exactly found out. in general what i can tell you is it is not uncommon for the attackers to be inside these networks for months and sometimes even years. we've worked some cases at crowd strike where the attackers were in the system for over five years. so this is actually pretty routine. really underscores if you don't have full viz nlt to what's happening in your network, if you don't use next generation host base technology to identify what's going on in your computers, you'll be breached for many, many years and not know that your data's just going out the door continuously. >> dmitri, the scale of the issue here, 1 billion users, also the fact that it's the second biggest for yahoo in the space of a few months, how damaging is that for the company as a whole? the share price reaction relatively muted given the scale of these numbers just down a couple percent so far. >> well, i think the market does take into account that all these companies are getting
compromised. no one is immune. you've had most of these web facing internet companies breached at one point or another. you've had of course, you know, credit cards stolen from companies like target and numerous hotel chains and retail stores. so people are now realizing that this is happening to everyone, this is not specific to any one company. >> dmitri, did you work at all on trying to understand the hacking that took place during the election by the russians? >> well, not only did we, but i was the one that came out and actually produced a full report on what happened to the dnc. the dnc hired us back in may of this year to determine if they'd been hacked and crowdstrike came in and identified two russian hacking groups affiliated with the russian government that had been inside their networks. >> so with these new revelations putin was personally involved in that hack, do you know that to be the case? is there anything else that we have yet to learn about what took place during that period that we will learn?
>> i think a lot more information needs to come out. i'm very pleased that the obama administration ordered a whole review of what happened. the intelligence community has of course significant capabilities in terms of human sources and intelligence they can collect and intercept phone calls kp figure out in great detail these types of attacks who were involved. at crowdstrike we focus on the digital evidence the hackers leave. so we're able to determine these were hackers affiliated with the russian government, but i couldn't tell you who exactly in the russian government ordered t the. >> we'll be talking about many of these issues with you many more times. still to come, trump's business conflicts set to take center stage with just 37 days until inauguration. we'll discuss with ambassador
the president-elect meeting with the biggest names in technology yesterday. also present in that meeting, his children. for more on donald trump's business conflicts we are joined now by the former special counsel and special assistant to president obama ambassador norman eisen, who led the administration's ethics initiatives. no relation to me that i know of. ambassador eisen, welcome. >> thank you, thanks for having me. >> so, i know you've been quite critical calling out some of the conflicts of interests within trump's organization and now his administration, how about the fact that 25 people in that room we calculated more than $3 trillion worth in terms of the technology market cap of the company, and he had two sons plus his daughter ivanka and her husband jared. the two sons in particular set
to take over the business, is that a conflict? >> it is a conflict. i want to be very clear that like most americans i am ready to help. i'm hoping for the best for the president-elect. but part of that willingness to help, and i've even been over to the transition to talk to them, part of that willingness to help is to speak out when something is amiss. so the president-elect hears that. and having your children in official meetings of the transition, mixing the trump family business and the official business of the united states is a terrible idea. it does create an appearance of a conflict. and it started when the president-elect in his first official meeting with a head of
state with japanese prime minister shinzo abe the pictures come out and ivanka is sitting right there in the meeting. when she's doing business in japan, that sends a signal that the government doors are going to be open for private business. and that is a recipe for disaster. we see all over the world serious allegations of corruption when the so-called princelings, when the kids are involved. so for the sake of the president-elect, for the sake of the country and for all of our sakes he's going to be all our president. he ought to build a big beautiful wall separating the official business of the united states from his family business. and the kids do not belong in that room. >> i was just going to ask, so how do you do that? so he should not have family members running the business? is this what you are telling them inside trump tower? and would you say that the president-elect is receptive? the fact that you've been over
there talking to him that he has been tweeting there will be no deals made during his administration. i mean clearly they're trying to tackle this issue. >> we did find a receptive, polite audience when we traveled. before the election i represented a bipartisan group. everything that i'm doing is bipartisan. it's supported by democrats and republicans alike. in fact, the plan that i've articulated with my republican bush administration counterpart, the bush ethics czar for a blind trust has been embraced by "the wall street journal" and editorial in "new york post." what we said to transition headquarters over on pennsylvania avenue a few blocks from the white house before the election we presented them with a basket of ideas to build this wall, not a border wall, an
ethics firewall, separating a good practice from trouble. and having these kids mixed up in things is nothing but a recipe for trouble. now, i will say that the president-elect -- i'm ready to go to trump tower in a bipartisan fashion. i'll bring a republican with me. i will say that the president-elect has taken some baby steps in admitting -- first he said he had no conflict. then he said in a tweet, well, maybe i have a visual. i don't want to have any visual conflicts. so he admits that there's the appearance of a conflict. most recently he said no new deals. but that only means brand new projects. there's a constant deal flow in his existing deals. so we've seen some twitter baby steps. >> right. >> but what we need is a giant leap into what every president has done for the past four decades, independent trustee and a true blind trust and a strong
wall between the family business and the business of the united states. >> well, ambassador, we'll see whether we in fact get that. you know, there are a lot of incoming cabinet members who have strong ties to corporate america. ceos and the like, i'm just curious, apart from the trump -- the president-elect himself, do you see that posing any issues during the confirmation process as well? >> great question, and part of the reason that myself and my democratic and republican counterparts alike are so outspoken is we want the president-elect to set the right tone so his cabinet members get the message. tone at the top is critical in organizational ethics. so we do have serious issues. take perhaps the most important cabinet appointment, i'm bias because i was ambassador,
secretary of state. mr. tillerson, fantastic ceo, incredible life story up from the bottom to the top of exxon mobil. but he's got a tremendously deep financial ties, hundreds of millions of dollars in exxon mobil stock and options. that's a potential conflict. he has issue conflicts arising out of exxon like exxon's opposition to russia's sanctions. and he has another set of potential conflicts, to me the most troubling of all as the cia is reported to say that there was a russian attack on our electio elections. and that's mr. tillerson's ties to russia and to putin. and we've seen the picture of putin gazing at him, adoringly and pinning a medal -- a russian medal on mr. tillerson's chest.
so there's very serious conflicts there. and that runs through all the cabinet. i'm not saying they're insurmountable, but they must be addressed. >> just a question very quickly, we don't have much time, ambassad ambassador, on the stock question for rex tillerson. he's eligible for about $175 million in stock when he retires turning 65 march of next year, should they give it all to him immediately or let it vest over several years? it seems like there's not really an easy answer because if they let him just cash out, it looks like a gift. >> it is a devilishly tricky problem. the exxon board is going to meet, they're going to wrangle with it. i know that very smart lawyers in trump tower are helping mr. tillerson think it through. i hope that they'll also call on the good offices of the -- there's government specialist
office of government ethics. but they need to come up with a solution that assures the american people that mr. tillerson has ended his financial contacts with exxon mobil. and any decisions he makes as secretary of state are in the interest of the united states. that may involve some financial sacrifice by the secretary of state nominee. >> well, we did see that with deck cheney. he sold them during office, but donated it to charity. ambassador norman eisen, we have to leave it there. thank you. >> thank you for having me. meantime over to sue herera for a cnbc news update at this hour. sue. hi, wilf. here's what's happening at this hour. syrian state tv showing a convoy of buses starting to evacuate civilians from eastern aleppo. it is part of a cease-fire deal reached this week to have the opposition surrender their last foothold in the district to the syrian government. russian president vladimir putin meeting with japanese prime minister shinzo abe in western japan. they are expected to discuss the future of the islands which is a
long standing sore spot in japan/russia relations. amazon announcing that it's partnering with wynn las vegas hotels to outfit all of its 4,700 rooms with the amazon echo by the summer of 2017. hotel guests will be able to talk to echo's alexa to control the room's lighting, temperature, television and draperies. and tiger woods signed a new multi-year deal with bridgestone golf to exclusively play and promote its golf balls. financial terms not disclosed. bridgestone is the sport's number three golf ball brand. that's the news update this hour. i will send it back down -- actually, i'm going to send it to jackie for the eia inventory report. >> good morning, sue. a big drawdown in natural gas inventories reported by the department of energy. 147 bcf, this is one of the largest drawdowns we've seen since the colder temperatures have arrived. and it's going to set the stage now for the kind of draws that you should see when cold weather comes. one month nat gas prices are up
about 20%. 3.75 was the high we saw earlier this month. earlier this morning we were trading at negative territory. this report took us into positive territory all the way up to 3.57. if we continue to see draws like this, you can expect these prices to go higher from here. still on a relative basis, while we're over that $3 mark, these are lower prices than we saw at the peak when they were over $6 a couple of years ago. so nat gas prices are in pretty good shape when it comes to how the consumer should view this. but of course we've seen this spike over the last month or so that people have been talking about. part of that is the story that we're exporting more natural gas, and that could potentially impact the market as well. guys, back over to you at post nine. jackie, thank you very much for that. when we come back, goldman sachs co-head of investment banking division john waldron is with us. we'll get his take on markets, the deal making environment under president-elect trump and those recent changes at the top at goldman sachs. stay with us. back in just a couple minutes.
well, as we head into year end 2016 marks one of the better years in m&a, about $1.7 trillion in deals. not quite as good as the year that proceeded it. optimism in the market certainly is it pointing to another big year for deals as we head into 2017? and is optimism shared by ceos? well, let's ask no other than john waldron, the co-head of investment banking at goldman sachs. knows his way around a deal or two. john, nice to have you. >> thank you, david. thank you for having me. >> optimism we're certainly seeing reflected. what are you hearing in boardrooms as people start to suggest what may be coming under a trump presidency? >> not unlike what you're seeing in the equity markets. boardrooms are watching and evaluating the administration's policies and the potential for growth that could come into the marketplace and into the economy. we've been since the financial crisis we've been in a modest
growth fairly anemic recovery by all accounts over the last handful of years and that's dominated the environment. that's led to some m&a activity for sure, more in my opinion out of defensiveness. now ceos and boards are feeling more offensive and thinking about the opportunity to be more on the front foot. if we get a bigger growth opportunity, we get tax reform, we get infrastructure spending package passed in washington. you may see a more offensive mindset. so we're pretty optimistic about the deal. >> are you? i guess based on the conversations you're having. i mean, we talk often about end game consolidation. meaning certain industries really only have the one last big deal to do. do we get to that kind of a point in 2017? >> well, my view would be the forces of consolidation in many of these industries a-- whether
it's deepening penetration in certain markets, so those forces to me are continuing to move forward. there were very act in 2015, in 2016 it was a more subdued period for the first four, five, six months of the year. but you can see that pick up in the first half of the year and obviously post election we're seeing more animal spirits starting to come back into the marketplace. i think that will continue. >> you do? >> we believe they'll be real consolidati consolidation, some industries maybe more active than others, but that basic trend will continue. >> this was not a bad year for m&a, just by comparison to 2015, which was the strongest year, it doesn't look quite as good. but do you think '17, i mean, given your predictions? >> m&a volumes were down roughly 20% this year. >> right. >> they were at real high levels in 2015, really record levels in 2015. down 20%. interestingly if you look at big deals, there were 64 deals done in 2015 for $1.5 trillion of volume above $10 billion of enterprise value. there were only 40 deals done
for less than $1 trillion of value in 2016. so actually the big spread between '15 and '16 was in the big deal environment. >> so do we get the big deals again? >> i expect '17 you'll see more big deals. >> you do? >> we've already seen att/time warner, reynolds b.a.t., not completed yet. you saw this morning fox sky situation announced. we're seeing a number of transactions sizable, qualcomm/nxp. there are bigger transactions that have happened and more on the runway and we expect to see a continuation of that trend. >> do you think this optimism may be a bit overflown e blown? i ask that because we really don't know some things. you talk about end game consolidation and efficiencies, that's job cuts. thoo he's been a populist to a certain extent. i don't know when a deal gets done talking about people losing their jobs. trade figures prominently into a lot of plans for companies. taxes, we are probably going to get it, but we don't know exactly what we're going to get. are we getting ahead of ourselves? >> i think the equity market is
pretty savvy about discounting positive elements of what's going on. so it may be a little ahead of what the reality is at the moment, but if you think about the risks weighted coming into the election, there were a lot of risks you could weight to the downside. now you can weight a lot of risk to the upside. if we get a tax reform deal, almost regardless of how rates get set one way or the other it's a significant positive versus what we've seen. >> do companies need to wait until they know what the fine print is before they do a deal? >> i don't think so. i think broadly from a sentiment standpoint the notion that the tax reform bill looks like it may happen with reasonable certainty will help the environment. >> and capital markets we haven't really talked about that's also under you as investment banking co-head. there haven't been many ipos here at the nyse. you think next year we're going so see more? >> so equity volumes were down 25% in 2015. ipo volumes down more than that. ipo volumes in the united states down 50%. very few large scale ipos.
we just did an ipo, second biggest of the year went very well, bodes exceptionally well for the ipo market coming. >> we're going to get snapchat next year. >> we've got snap coming, a series of other transactions backlogged. i think you'll see a significant pickup. >> it's all going your way at goldman sachs. it's going to be a big year. >> well, we're set up for a good year, but we need things to play out the way the market is certainly expecting them to. >> and specific to the firm itself, of course, gary leaves to become the head of the nec, what are your expectations? you worked with him for many years. what are your expectations gary is going to bring to that job? >> well, i think gary did a tremendous job at goldman sachs. he was really a stallworth through the financial crisis and beyond. i think it's great he's going to washington to really sit in the middle of economic policymaking. if you listen to gary and his public comments over the years, he's been focused on growth and the lack of growth in the
economy and u.s. and globally. i expect most of his focus will be on thinking about policy that can really help get growth going in the united states and really driving more job creation and more opportunity for the broader base of the american population. so tax reform will certainly be very much in his mind. i think infrastructure spending will be something he'll spend a lot of time on. i'm sure he'll weigh on the trade dynamic. he's got very strong ties globally. he understands how global markets work. he understands the importance of global trade. so i expect he'll have a strong voice on the trade side as well. and energy. you know, we haven't really had in my mind a broad energy policy in this country with any real substance. i think you'll see gary weigh in there as well. i'm sure he'll have a broad and be focused on growth. >> does it help goldman sachs that you've got people leaving again as they did for so many years but -- does it help the firm itself? >> well, i think it's a continuation of a trend at the firm towards public service. which i still believe is one of the great hallmarks of goldman sachs is the notion that somebody who has something to
add to the public arena can take the time to go do that. and i think it's a great thing that gary's doing it. it's a great thing that it's a continuation of that trend at the firm. >> and you're staying to run investment banking? >> i have no intentions to leave or go anywhere. >> john, thank you. we look forward to you coming back then. >> thanks. >> john waldron, co-head of investment banking. sara. i just wanted to point out shares of valeant currently down almost 7%. morgan stanley downgraded valeant today, and "closing bell" will be speaking with the ceo joe papa in an exclusive interview. that's coming up later, a timely one. much more ahead on "squawk on the street." the dow is back above 19,900. stay with us.
here. we're back in rally mode. almost erasing all of yesterday's losses when the dow fell 118 after the fed, goldman sachs and american express are leading higher. 19,966 would be a new record high. and of course we're on dow 20,000 watch, which would be the first time ever now that we are just about 100 points away. one notable piece of economic data that we got at the top of the hour, home builder confidence surging to levels that we have not seen in 2005, confidence is up, investors have it, home builders have it, ceos have it, s&p's up half a percent. let's send it over to jon fortt for a look at what's coming up in "squawk alley." >> hey, sara. a new yahoo breach of a billion accounts, but there are some reasons you need to pay attention to the details in this. also, we're going to dig in on trump's big tech meeting yesterday. some details that are important in this, not just the conflicts but also the possibilities.
all that and more coming up on "squawk alley." ♪ we're drowning in information. where, in all of this, is the stuff that matters? the stakes are so high, your finances, your future. how do you solve this? you don't. you partner with a firm that advises governments and the fortune 500, and, can deliver insight person to person, on what matters to you. morgan stanley. ♪ ♪ get up to $2500 customer cash on select 2016 and 2017 models for these terms. see your lexus dealer.
boockvar, no stranger to cnbc viewers and listeners. thanks, peter. >> thanks for having me. >> all right. listen, if you were king, before the election, the end of october this year, you could peg funds where you thought they would be appropriately placed, where would you have put that level? >> 1.75% to 2%, historically it's been 200 to 300 basis points above the rate of inflation. let's not get ahead of ourselves. let's call it around the rate of inflation, 1.75% to 2%. >> coming into 2016, what did janet yellin and her committee through all the various connect my dots, what did they peg as a number for rate hikes for 2016 at the end of 2015? >> in their crystal billion ball, they expected four rate hikes in 2016. >> and of course we received one. >> correct. >> is there any way we'll see more adversarial coverage of this really poor track record of predicting and giving us any
type of significant forward guidance? the only way we'll get more adversarial coverage of this is, what, to have a donald trump when he becomes president, when he puts forward his head of the federal reserve? i don't understand it. okay? what do you think of the bounce now that we're back within striking distance of 20,000 after yesterday where janet yellin hardly acknowledged what has transpired in the market since november 8 snth. >> well, because i think the markets realized this whole concept of secular stagnation is a bunch of bull and if you incentivize the economy in the proper way it can grow faster than this 2% level. you listen to the fed yesterday and they're still stuck with this low neutral rate, which is an econometric academia-type philosophy and a demand-side look at the world. and we just saw a major supply side-type election in that tax and regulatory policy is going to do a lot more to goose growth than monetary policy. >> you know, peter, we all would wish we could buy a ferrari.
if you had a ferrari and it wasn't running right, would you let somebody work on it who's never really touched one but has looked at all the schematics? >> i get where you're going and i'm happy that hopefully growth will be driven more by the private sector and not monetary policy and academia. >> quickly, before we finish up, in a nutshell, how do you think the fed should proceed with regard to how the markets moved after the election and how it's moving after yesterday? >> well, unfortunately, the fed is in a no-win situation because if they continue to go gradually in raising interest rates, even if they raise three times, if that's not enough relative to where inflation and growth is going, the bond market will do it for them. if they get too aggressive in raising interest rates, which we need to get this over with anyway, then they risk putting us into recession and tweets from donald trump. >> peter, thank you as always. it's going to be one fascinating 2017. that trump elevator gives
transparency a whole new meaning as to what's going on in the government. and i for one think it's a bit refreshing. sarah, back to you. >> all right. we will be glued to it. rick, thank you. the dew is um 125 points. we'll hit the markets when "squawk on the street" comes back. yeah, chevy was great in that. who played the wife? beverly d'angelo! juliette lewis costarred as the daughter. oh, i think it was um... chris columbus was the director... it's called claymation... narwhals really exist... actually guys, it was the ghost of christmas past... never stick your tongue on a frozen flag pole... yukon cornelius...
"die hard" is considered a christmas movie! that's the unlimited effect. stream your entertainment with unlimited data when you switch to at&t and have directv. when a moment turns romantic, why pause to take a pill? or stop to find a bathroom? cialis for daily use is approved to treat both erectile dysfunction and the urinary symptoms of bph, like needing to go frequently, day or night. tell your doctor about all your medical conditions and medicines, and ask if your heart is healthy enough for sex. do not take cialis if you take nitrates for chest pain, or adempas for pulmonary hypertension, as it may cause an unsafe drop in blood pressure. do not drink alcohol in excess. side effects may include headache, upset stomach, delayed backache or muscle ache. to avoid long-term injury, get medical help right away for an erection lasting more than four hours. if you have any sudden decrease or loss in hearing or vision, or any symptoms of an allergic reaction, stop taking cialis and get medical help right away. ask your doctor about cialis and a $200 savings card. stop taking cialis and get mand the returns i get out are i'vemeasured in reps,n this game
high differential. i'm wearing 3 1/2-inch heels and i can't possibly get up to your level. >> i'll do this for the rest. >> the dow is up 116. we've got a nice little rally going on here. s&p 500 up about a little more than half a percent. it's the banks leading the charge again. >> nice little rally, particularly encouraging that it's got rid of yesterday's losses straight away. but also the banks. as we said, yesterday they were negative, already they're on a tear again. bank of america leading the pack. it's the most geared to this. very encouraging we stamped out yesterday's losses quickly. >> wells fargo, the largest lender, that surge in home builder confidence at the top of the hour so we'll be watching the banks. the tech stocks are also doing quite well. that news out of instagram that it surpassed 600 million monthly
average users perhaps a friendlier time toward tech in general after the election. depends where this rotation sort of ends up. >> now we wait to see if we can hit dow 20 k. we are about 90 points away, up 115 points today. on that note, we'll send it over the kayla for the 11:00 a.m. hour. kayla? >> thank you, guys. i will point out sarah is wearing heels in that shot too. good morning, everybody. it is 8:00 a.m. at yahoo! headquarters in sunnyvale, california, 11:00 a.m. on wall street, and "squawk alley" is live. ♪