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tv   Worldwide Exchange  CNBC  January 24, 2017 5:00am-6:01am EST

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breaking news, the uk supreme court rules that the government must get approval from parliament to trigger the brexit. we'll tell you what it means and how markets are reacting. on the home front, the first 100 days, president trump set to meet with the ceos of the big three automakers today as he continues to talk trade and jobs. markets now. the bulls look to bounce back after the dow suffers its sixth negative session in the last seven. it's tuesday, january 24, 2017. "worldwide exchange" begins
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right now. ♪ good morning. welcome to "worldwide exchange." i'm sara eisen with dom chu in for wilfred frost today. good morning. >> good morning. >> busy already. >> already, yes. >> monitoring the wires from the uk. we'll get you there in a moment. a check on global markets after another selloff for wall street. not so sharp. not as sharp as session lows. those stocks look set to bounce back. dow futures higher by about 16 points. s&p is up 2. nasdaq futures up less than 5 points. the ten-year treasury note yield, saw that yield decline by 7 basis points or so. bouncing become a bit this morning. 2.41 is the yield on the ten-year. first we wanted to get you that breaking news out of europe. the supreme court in the uk ruling against the government in
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a key brexit decision. the vote means that prime minister may must get parliament's approval in order to trigger brexit. as for the reaction in the british pound against the dollar. let's show you what's happening you now. it was lower before. it's lower still by about 0.4%. a little twofer in here. >> was 1.2505 before the supreme court ruling. it got as high as 1.2532. it got as low as 1.2436. we're starting to recover some of those losses. yeah. it's been an interesting trade. volatility-wise just in the 10, 15 minutes. >> nancy hungerford is at parliament square. what does the decision mean in terms of the time frame and looklihood of a brexit? >> the uk government remains n confident they can move ahead
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with their timetable to move ahead with article 50 by the end of march. the decision we heard just moments ago at the supreme court behind me upholding a previous ruling that now the government has to get approval in parliament, that may delay the process, but as long as they can get a bill swiftly approved by both houses, authorities say they should still hit that time frame for the end of march to begin the discussions. we expect the uk secretary of state, david davis, to head to parliament later this afternoon, straight across from the square where we are standing now. he will begin talks straight away on what a bill will look like in order to give the government authority to start those brexit talks. yes, symbolically it is a defeat for theresa may and her government but overall not expected to change the course of leaving the european union. no matter the decision behind
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me, brexit means brexit for now. back to you. >> nancy, one quick question for viewers in the united states reading so much about this. there had been chatter, talk about the idea that perhaps scotland or northern ireland may need to be consulted with regard to leaving the european union. some of them favored staying there. the supreme court ruled on that front as well. correct? >> yes. that decision was critical. that one going in favor of the government because they said they will not have to consult the devolved parliaments in scotland, ireland and wales. they want rights to stay within the single market that could have added a complication for the government. already considering that northern ireland is awaiting elections, this is really seen as clearing a hurdle for the uk government.
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all in all you could say it's what the investors and traders expected on the your all upholding of the previous ruling, and a bit of good news when you talk about not having to consult with the other devolved parliaments. back to you. >> end of march for triggering article 50, is that still the plan? two years from then, that is when we'll see a brexit? early 2019? >> that is the hope of the government. i spoke to a legal expert a bit earlier on before this decision. he said the government should still be able to hit that deadline by the end of march. once you trigger article 50 you have two years for negotiations in order for a deal to be reached. that is approved both here in the uk, because, remember, the prime minister has also promised to give parliament a vote on the final deal and a deal approved in europe as well. but the prime minister has said if they do not like the deal, they are exiting no matter what. back to you. >> nancy hungerford, thank you very much.
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live for us this morning outside in london. we'll stick on the other side of the atlantic. breaking economic data out of europe. eurozone flash composite pmi dipping only slightly from december's five-year high to 54.3. that's just shy of forecasts. european equities, at least a bit of a positive picture. the german dax up by a quarter of a percentment sa mepercent. sam with the cac in france. the ftse 100 also up about a quarter of a percent. the ftse mib also up. markets closing in asia, a mixed picture again. the nikkei in japan off by a half percent. the yen playing a part in that story. the shanghai composite up by a quarter of a percent. the hang seng up a quarter of a percent as well.
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let's show you what's happening with oil after a decline yesterday. coming back again this morning. up a percent across the board. wti, 53.28. brent is hovering below $56 a barrel. even nat gas is joining the party. as for the u.s. dollar, it's bouncing back after selloff yesterday and after several sessions of declines. dollar a half percent stronger against the japanese yen. this dollar trade seems to be a leader, especially at this time in the morning, 5:00 a.m., 6:00. it was weak yesterday at this time. we saw stocks follow through. that dollar stocks correlation very much intact. >> we'll be talking more about this later on in the show. the idea that interest rates across the world are playing a huge part in that story. that dollar trade always a focus, especially given president -- president trump's
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rhetoric on trade. >> it's been all about trade for the last -- the first day versus maybe some of the trump rally bulls were hoping more stimulus. we'll talk to kit jukes in a moment. gold giving become 0.3% this morning. to the politics front, president trump will have breakfast with the chief executives of general motors, ford and fiat chrysler as he continues his efforts to get american automakers to boost u.s. employment. this will be the first time the ceos of the big three automakers will meet jointly with a u.s. president since 2011. a big day for the automakers. >> a big part of the white house agenda in the first 100 days, the first day, actually, countries responding overnight to president trump's decision to withdraw from the transpacific partnership, the tpp deal. australia and new zealand, who are part of that deal say they are hopeful of pressing ahead
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with the agreement despite america's formal withdrawal. members of the uaw around the country have long rallied against the deeply flawed corporate driven tpp that puts quarterly profits before worker paychecks. this was expected. >> he's not the only -- >> clinton, sanders, trump all rallied against it. he promised he would withdraw on day one. he lived up to his promise. still it is a moment for those that were backing it including many republicans. i put john mccain in there. he tweeted that could be worrisome as it leaves china to step in and fill the void. what are the geopolitical implications of that. for the first move, it was a signal that trump would live up to his promises, trade and protectionism chief among them.
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>> the issue for lawmakers is that the people who step into the void right there as america steps away could be the ones gaining relative influence throughout the region and throughout the world. we're referring to china. as we watch this thing play out, it's no surprise that the uaw and just about every other union in america was for the withdrawal of tpp and looking at nafta to see whether or not they could negotiate terms. >> on the flip side, if they can get these sorts of -- if they can go for one-on-one trade dea deals, as the administration is promising, more fair terms, they just have to move quickly to do that. they say they're not against trade. they just want it more fair. >> of course. we'll see what happens also today on the washington agenda. committee votes scheduled for the nominations of ben carson as secretary of housing and urban
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development. tom price will face his second day of hearings. there are also hearings scheduled for linda mcmahon and the nominee for director of office of the manment and budget, nick mulvaney. two of the longest confirmation hearings so far have been for price and for mnuchin. speak of mnuchin, key comments from trump's treasury secretary pick on combating currency manipulation. he said an excessively strong dollar could have impacts on the u.s. economy. he also accused the imf of not doing enough on currency manipulation. he did not give an answer on
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whether china is manipulating the yuan. i think it really -- it's sort of still jives with the treasury's position, which he reiterated during that hearing, it's in the best interest ultimately to have a strong u.s. dollar, strong economy but short-term these moves can be overdone. >> decades it's been the strong dollar policy. >> jeff gundlach is predicting a weaker dollar and more demain for inflation protected securities now that president trump doubled down on his stance of trade and securing jobs in america. he says weaker dollar adds to inflationary pressures and will make u.s. exports more attractive to foreign markets as other currencies remain strong. this has been a point of contention for quite some time the idea that people at some point or still do use their
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couldn currency as a way to jockey for trade positioning. >> we'll see the ultimate reaction of the dollar. last night the u.s. senate confirmed mike pompeo to run the central intelligence agency marking president trump's third appointment nomination. that vote coming in 66-32 with one republican in opposition of the appointment. that would be senator rand paul. pompeo was sworn in just after 9:00 p.m. eastern time. rex tillerson winning approval from the senate foreign relations committee to become secretary of state. the move paves away for his confirmation of the senate body. he won with a vote of 11-10 after senator marco rubio announced he would reluctantly support tillerson. president trump named a new chairman of the fcc. pai is a republican, and has been a commissioner at the
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agency since 2012. he is expected to roll back net neutrality laws. he is known for being pro merger. last month he said he wanted to take a weed whacker to current fcc rules. pai previously worked at the justice department and verizon. >> now the white house says president trump will announce a supreme court nominee in the next few weeks. at his news briefing yesterday, sean spicer said the president continues to make that a priority. trump plans to pick among 20 candidates suggested to fill the vacancy. president trump has resigned officially from his namesake company and more than 400 affiliated entities.
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a statement from the trump organization said the president transferred title and management of the authority to those of his sons, don and eric. a resignation letter signed by trump dated january 19th. this looks to be out there and finalized. now to the top corporate stories. yahoo! reporting better than expected results on the top and bottom line. it says the sale of its core internet business to verizon should be completed by the second quarter. the deal was supposed to close originally in the first quarter but delayed because of two huge data breaches over at yahoo! barclays is turning cautious on apple downgrading the iphonemaker. in a note sent out this morning, apple is being cut to equal weight from overweight seeing no meaningful rebound in growth in 2017. he said long-term froth opportunities like india,
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services in the cloud are unlikely to be major needle movers. apple is expected to report first quarter earnings on january 31st. barclays says the downgrade is not a call on the quarter which runs counter to some narratives on apple, ten-year iphone. >> perhaps a redesign. >> apple is one of those consumer companies like nike that could get caught in the cross hairs of trade tensions with china. speaking of corporate stories, earnings will be front and center today. there are five dow components reporting results before the opening bell. 3m, dupont, johnson & johnson, verizon. we'll hear from alibaba, lockheed martin as well. after the close, texas instruments and alcoa. also a few economic numbers to watch. the monthly philly fed survey of
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manufacturing and business conditions, followed by flash manufacturing pmi at 9:45, and existing home sales at 10:00 a.m. when we come back, the stocks to watch. stay tuned, you're watching "worldwide exchange." watching a bit of a bounce in u.s. equity futures. we'll be right back. jnelolo, it♪a.shed
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citi group mortgage units have been fined for the harm the bank
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did to home borrowers. the bank kept borrowers in the dark about options for foreclosures making it difficult for them to get relief. some other stocks to watch today. resmed reporting a second quarter fiscal profit of the 76.6 million. also posting revenue of more than $530 million. the stock having a nice pop. >> mercury systems boeating earnings estimates for q2 earning 5.2 million up from 5 million this time last year. a federal judge fwragranting fi approval to volkswagen settlement to dealers over its diesel emissions scanned the. each dealer will receive an average of $1.58 million. zions bank growth exceearni.
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philips electronics turni inini profit of 626 million euros compared to a loss of 45 million euros this same time last year. shares down by 2.8%. s.a.p. reporting an 18% jump in its fourth quarter profits. raising guidance for 2017 and 2020 driven by expanding cloud business. >> samsung out with results earnings more than doubling on record chip profits, despite costly galaxy noted 7 recalls. the company saying it expects profit growth in 2017 despite challenges from political uncertainty in korea. shares of european telecom giant bt group are having their worst day in eight years. the stock sliding double digits. the company cutting earnings and
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revenue outlook for two years after an accounting scandal at its italian business is bigger than previously thought. reports say staff in italy kol lewded with suppliers to inflate profits. shares of easyjet are down sharply. fuel prices and the weaker pound will weigh on profits this year. those shares down by 7 pn.5%. the pound has fallen about 17% since the brexit vote last yune affecting easyjet and other carriers as they buy fuel in dollars. profits fell 25% last year, the first decline since 2009. coming up, the uk supreme court ruling that the government must get parliamentary approval to trigger that brexit ways. we'll talk about the global market implications with kit
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juckes over at societe generale. >> first, here is the tuesday forecast from jen carfagno. >> today happens to be blue tuesday, one of the most depressing days of the year. it's an equation that factors into weather, debt, the fact we're so many days past christmas and new years, not keeping resolutions. weather is a factor. let's talk weather. this nor'easter in the east. it will be a day with interior snow and sleet. coastal rain, a lot of wind. the south looking good. temperatures warming up again today. the next weather system bringing snow up into the upper midwest. some of that getting to minneapolis by the end of the day. chicago with rain overnight. temperatures are cooling down behind it. warm ahead of it before the return of winter coming back to a good chunk of the country. i'm meteorologist jen carfagno.
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back to you. d.
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welcome back to "worldwide exchange." we are seeing at least some fractional gains, some stability in the markets. dow futures up by 14 points. s&p 500 futures up by 1 point. nasd nasdaq up by 3 points. as for the dollar, a huge move in currencies. euro is 1.0735.
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dollar/yen, 1.2535. a dollar strength, sara. >> coming up, this morning's top stories and a roundup of global markets, plus we'll be joined by kit juckes from soc gen. see how you can prepare for trump's trade moves in the market. i
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breaking global market news. the uk supreme court ruling that the government must get parliamentary approval to trigger the brexit. earnings central, today's big market tests. corporate results, five dow components set to post numbers before the opening bell. and "star wars" fans rejoice. the title for episode 8 has been revealed. it's tuesday january 24, 201, you're watching "worldwide exchange" on cnbc. ♪ good morning. welcome back to "worldwide exchange" on cnbc. i'm sara eisen along with dom chu in for wilfred frost. he has the week off. the front pages, every one, trump takes aim at the trade deal. here's the "washington post." you have it on the "usa today." trade from the "new york post" as well.
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"wall street journal." this was an expected move that he would withdraw from tpp, but still a moment and a signal for the rest of his policies. let's check in on the global markets. some relief in u.s. equity futures after another down day for stocks. the six out of seven sessions for the dow being negative. not giant moves to the downside. >> stability. >> it's been resilient. but pretty much stocks been marching in place since the middle of december since that trump rally post-election. dow futures up 18, s&p up 2.5. nasdaq up more than 5 points. some improvement here in the last half hour partly because of europe, which is a bit higher. the economic data in europe continues to show a better story. >> the pmis were interesting. you had the services pmi weaker than expected. butmaf manufacturing was better. >> a quarter percent rally for
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the dax. ftse 100 up 0.2%. italy 1.2% higher. the overnight action in athsias. the nikkei and japan closing on the back of yesterday's strength, that's starting to reverse today. the topix goes back to the lows seen since early december. shanghai and hong kong finishing higher by 0.2%. >> the broader markets, if you check out the oil trade, we are seeing green. we saw some weakness yesterday at this time. wti crude $53.12. that's up about three quarters of a percent. ice brent crude futures, $55.60. up by two-thirds of a percent. as for the ten-year u.s. treasury note yield, seeing yields move ever so slightly, 2.43% the last trade there for the ten-year u.s. note yield.
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so seeing stability not just on stocks but yields as well. as for the dollar, big story, we are watching a bit of dollar strength now. reversal from what happened over the course of the past couple of days. the euro, 1.0737. that is dollar strength. the dollar/yen, 113.25. pounds versus the u.s. dollar, cable, 1.248 is what it will cost you. we are seeing a bit of movement in the gold prices. 1.213 the last trade there. what we have learned is that a strong dollar and higher treasury yields early in this hour bodes well for u.s. stocks. that trump rally can get back on track. yesterday there was a bit of investor spooked by the trade withdrawal and rhetoric. we heard it again this morning in the meeting of ceos.
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kram dcramer did a good piece o protecting your portfolio from protectionism. go for sectors and groups that are not in those trade cross hairs. he looks at cloud companies. he looks at some f.a.n.g., facebook, amazon, netflix and alphabet. earnings will be once again front and center in today's agenda. five dow components reporting results before the opening bell. 3m, dupont, j & j, travelers and verizon. hearing from alibaba and lockheed martin. after the close, numbers from texas instruments and alcoa. also a few economic reports to watch today. the monthly philly fed survey out at 8:30 a.m. eastern, followed by flash manufacturing pmi, 9:45 a.m. december existing home sales at 10:00 a.m. also on the washington agenda, committee votes scheduled for the nominations of ben carson as secretary of housing, betsy devos, jeff
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sessions as well as the attorney general. tom price, nominated for helicopt health and human services secretary, facing his second day of hearings. linda mcmahon, and nick mulvaney will also have their hearings. back to the corporate agenda and what to expect when johnson & johnson reports today. landon dowdy has three things to watch. >> good morning. the street is looking for johnson & johnson to report earnings of 1.56 a share on rev few of about $18 billion. here are the three things to watch. first, competition from bio similar drugs, remicade is set to face competition after losing a patent battle with pfizer to create a similar drug. johnson & johnson is seeing competition in the u.s. and europe for its adhd and
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schizophrenia drugs. second, the device and consumer products market, the other major businesses have experienced subpar growth. so watch to see whether new product launches are helping growth there. and third thing to watch, updates on drug pricing. johnson & johnson plans to issue a report next month outlining how much it has raised u.s. prescription drug prices in an effort to address public concerns about aggressive price hikes. shares of j & j are down 1.5% year to date. >> thank you very much. so much to watch in today's trading. time for top trending stories. stephen colbert will host the prime time emmy awards. cbs saying he is the ultimate master of ceremonies. this will be his first time hosting the emmys. nine of which he has won for work on "the colber report" and "the daily show."
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a sign of more political jokes. >> safe to say many of the late night talk show hosts have used that as fodder. >> the title for the new "star wars" movie is out. "star wars" episode 8 has been revealed as disney and lucas film saying "star wars." it's official, "star wars" "the last jedi" is the next chapter of the skywalker saga. i won't ruin it. by now you should have seen the force awakens, you see the end credits, and the end shots, that luke skywalker is back again. >> there's all sorts of things you can draw from the name, right? >> the idea that luke skywalker is the last jedi -- >> is the force with him? isn't the force strong with rae? >> you're right. he is the one right now, she has to continue training. as we continue to break a look at european stocks.
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italy up a nice percent. germany up a quarter of a percent. the dollar is strong. treasury yields are higher. stay tuned, you're watching "worldwide exchange" on cnbc.
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today's top global market story, the uk supreme court ruling against the british government in a key brexit decision. the vote means that prime minister theresa may must get parliament's approval in order to trigger article 50, which starts the talks of brexit.
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with us now is kit juckes from societe generale. is this a prize at all? does it have market implications? >> not too much. sterling arrived higher yesterday against the dollar in anticipation of this result. so far this morning, we are just washing around a bit below that. so, it hasn't had a huge impact. you know, the next big test, really, for sterling is where the economy goes, rather than where article 50 will be triggered. >> kit, from a standpoint of looking at how corporations will view this move in pounds, the ftse 100 is weighted towards companies with exposure outside the uk borders. what is the forecast for how pounds do react? what does it mean for many of these countries who have revenues outside the uk? >> they had a big boost in terms of their sterling denominated revenues. not all.
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you had some buy oil in dollars, it hits the casts. but, you know, i think the outlook from here, my sense is that sterling is likely to be washing around in a range for a fair amount of time. the uk has got a weakening economy. the biggest current account deficit of the major economies. the lowest real yields, the weakest currency. how much weaker it can get, i think, is uncertain in my mind in terms of boosting those share prices. just because the only catalyst for the pound to fall from here is things get worse for the economy in a material way. let's talk about the dollar. there are so many factors right now influencing the dollar, not to mention trump talking about the dollar, mnuchin talking about the dollar, border taxes, repatriation, corporate tax reform, trade tensions. all of this impacts currencies. what's the upshot? how do you forecast where the dollar goes next? >> it messes around until we get a clearer story.
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the rally in the dollar that started the day off to donald trump won the election last november is based on the idea that the u.s. is going to have more accommodative fiscal policy, stronger growth, more rate hikes, more monetary policy divergence with others. so far we heard an enormous amount about trade policy, about unraveling multilateral trade deals. we have not heard the stuff that would be encouraging for the dollar. so we're -- >> wait. can you clarify that? so, trade barriers and trade tensions, that's negative for the dollar? >> it's more negative for the people who suffer most. so trade barriers with mexico are worse for mexico than the u.s. but the more protectionist you get around the world, the more capitalists tend to stay at home and the u.s. runs big trade deficit, big current account deficit. the bigger winner of all to a really protectionist world is the japanese yen in currencies,
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not the u.s. dollar. the euro would be a big winner if we get past the european elections. what helps the dollar against everything is monetary policy divergence. that's something that people were betting they'd get from the trump presidency, but we've had much less about that so far. >> is it fair to say, what's the most important driver then? are we looking at interest rates? is capital chasing yield? do we look around the world for who has the best interest rate? who has the highest yield out there? >> the real correlation between the yield on u.s. treasuries and other markets and currencies is closer in the last 18 months than at any point in the last 30 years. so anything that gets ten-year yields back up to 3%, but real yields back towards 1% is going to send the dollar much higher. right now the real yield on a
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ten-year treasury is just under 40 basis points. that seems very low compared to where the economy is. but that won't propel the dollar higher unless that number gets bigger. kit, to me t seems like what donald trump needs, what president trump needs is a weaker u.s. dollar. the strong dollar will be the ultimate impediment to some of his campaign promises to bring manufacturing back. manufacturing has been stuck in a recession because of the strong dollar. he wants to bring factories back to this country and sort of create bilateral trade agreements. all of that needs a weaker u.s. dollar. how does he achieve that with pro-u.s. policies? >> in the long run, the dollar will peak around about mid year. you have to get past the french elections a big barrier to a significantly weaker dollar. they'll hold the euro down. when the u.s. generates more inflation with the fed not
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raising rates fast enough, you'll get a weaker dollar naturally. my caution within that is every central bank wants currency in the middle. for an economy like the u.s., just like for the uk, i don't think you get a major manufacturing revival just by making your currency weaker and on price. i'm not sure we can compete with the emerging economies on price in manufacturing and currency moves won't solve that. >> though mexico's weak peso makes it cheaper for automakers to producing down there. >> for some of those jobs to go there. the high-technology jobs, the high value added jobs will go to the high value added economies that have the right work force, right skills, right investment. you can help with the currency up to a point. but i'm saying that, you know, we have such a disadvantage by having higher cost labor, by having better healthcare systems, by having more
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developed economies, we won't compete just with a weaker currency. unless he get miles weaker. >> it's going to be interesting. kit, thank you for joining us on our two big stories. kit juckes of societe generale. we're approaching the top of the hour, the team is getting ready for "squawk box." becky quick has a look at what's coming up. >> good morning. great to see you guys. we are continuing that march of earnings central. we'll talk all things earnings today. we have a few of the top leaders who will be joining us. tom falk from kimberly clark will be joining us, along with dominic caruso, j & j's cfo. and our guest host this morning is greg mafay, the ceo of liberty media. lots of things to talk with him about. how life may be changing under the trump administration. we will also be joined by chase
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carey, the formula one ceo. what they'll be doing that, shaking things up. and mario gabelli will be joining us to talk about what he sees what stocks he likes in this new world with the new administration. it's all coming up in a few minutes. we'll see you at the top of the hour. >> see you then. becky quick in new york with "squawk box" in about ten. coming up, the dow coming off its sixth negative session in the last seven. we'll talk about the key market drivers from here. darrell cronk will join us. stay tuned. you're watching "worldwide exchange" on cnbc. la
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thivar la ve edn n tn. thivar welcome back to "worldwide exchange." futures this morning indicating a slightly higher open. the s&p futures up by 3 points. the dow jones indicated to open up by 20, 21 points.
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the nasdaq looking to open up by 6 points. joining us is darrell cronk. darrell, the idea of seeing six marginally down days for the dow in the last seven is giving at least some investors a moment of pause. what are your clients talking about and asking you about with regard to how to navigate this kind of market? >> it's a good point, dom. i think we're in consolidation mode here, rates consolidating, equities consolidates, for that matter currencies consolidating. certainly a lot of news to digest. this will be the biggest week in earnings. 30% of the s&p reporting earnings this week. we'll see the fourth quarter gdp number on friday. certainly we have all the moment by moment rhetoric coming out of washington about where priorities lie for the new administration in the first 100 days. investors are trying to digest that, take it in we're telling them to stay focused on the
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economy, not just focus on the moment by moment headlines. >> where priorities lie certainly appear to be trade. that keeps with donald trump's campaign promises. his first action to withdraw from tpp, while expected, an important signal. how do you protect your portfolio from some protectionist moves like this? >> that's a great point. i think there's a unique circumstance lining up here. we did hear most of the rhetoric around trade early on, tpp, nafta, border adjustment taxes. when you look at the equity market, you want to be overweight sectors that both the fundamentals have been improves and will enjoy some tailwinds from better policy days that would be things like financials, where the improvement in net interest margins and interest rates is good, plus deregulation, industrials that should continue to get tailwinds from infrastructure.
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i would highlight consumer discretionary. we've seen some mixed earnings reports, but the consumer is strong. sentiment is strong. home prices hitting new highs, stock prices are a few points off of highs. that bodes well for consumer spending in q1 and q2. >> the conventional wisdom in many parts of market history have been the idea of when you do have a focus on extraneous things, it's the smaller and mid cap companies that do better they don't generate much outside the u.s. do you feel as though that small and mid cap picture could play out this time around given the trump talk about trade? it's an excellent point. i would tell you, and we look at where we see the fundamentals versus expectations, that small caps and mid caps have gotten ahead of themselves. we think the price has overrun the fundamentals.
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small caps trading at almost 31, 32 times forward earnings next year. we think earnings estimates are still too high. if you look at small cap earnings today, the consensus is pricing in almost 30% earnings growth. in an environment where you have the benefactor of a strong dollar, we think small caps may be overextended. so we're waving the flag of caution a bit here. >> how closely have you looked at the house gop tax reform blueprint, another priority we know of this congress and administration? and you are separating winners and losers by industry there as well? big question i think about the interest rate deductible tax and which sectors that could impact. consumer discretionary has big debt loads as well. >> they do. but i don't know that you'll see a material lift in those sectors on the back of tax reform. all else equal, the higher tax
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sectors would benefit from that. but when you look at the net marginal rate, it's not above 20% today or 25% where the administration is talking about bringing rates down. point being, is it a positive? absolutely. i don't know we'll see this huge tailwind from tax reform directly into earnings, if you will. >> speak of interests and everything else, debt and whatnot, is there still a place for fixed income in investor portfolios right now? how are you advising clients to go about it? is it an opportunity in the corporate bond market or all in treasuries? >> there's for sure opportunities in fixed income. they're getting more acute. i would tell you a couple things. one, we see nice opportunities in the muni space which had strong price dislocation at the end of last year. we want investors to be overweight t.i.p.s. as inflation
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continues to rise. the one area we think is probably cautionary is we went underweight high yield. we think with spreads contracting down to almost cycle lows, high yield looks rich. credit as a whole looks rich. if there's an area that got overextended in the november, december, january time frame, it looks like credit spreads came in tightly. so there's not as much value in that space. we do like munis and t.i.p.s. >> darrell cronk, thank you. less than a minute left what are you watching? >> i want to see what's happening with the big corporate earnings reports. we are seeing a nice growth in first quarter earnings if everything comes to fruition. >> i'm watching the correlations in the trump trade, strong dollar, higher treasury yields, higher oil prices, and stronger stocks. we've got it all working this morning. >> it is firing right now.
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>> hasn't been really enforced since the weeks after the election. that does it for "worldwide exchange." "squawk box" is next.
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good morning. big earnings day. five dow components ready to roll out quarterly results before the opening bell. breaking news out of europe. the uk supreme court ruling that the government must get parliament approval, parliamentary approval to trigger the brexit. plus the first 100 days. a couple under the belt now. president trump tackles trade, jobs and the economy right out of the gate. up next, a meeting with the ceos of the big three automakers. it's tuesday, january 24, 2017, "squawk box" begins right now.
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♪ live from new york where business never sleeps, this is "squawk box." >> good morning. welcome to "squawk box" here on cnbc, live from the nasdaq market site in times square. i'm becky quick along with joe kernen and andrew ross sorkin. you can see the dow futures indicated to open up by 18 points. the s&p looks like it would open up by 2.5 and the nasdaq up by 5. the dow was down for six of the last seven sessions. look at what's happening with the treasuries. the ten-year note is yielding 2.43%. the yield starting to pick back up. crude oil, which was under pressure yesterday, this morning hooks like it's bouncing back slightly. wti up by a half percent to

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