tv Worldwide Exchange CNBC March 16, 2017 5:00am-6:01am EDT
good morning. ready, set, hike. stocks surge as the federal reserve raises rates and signals more to come, but less than expected. we're all over this rally straight ahead. the budget battle begins. trump expected to roll out his new spending plan. how it impacts your money straight ahead. and we're headed to the netherlands as results from yesterday's contentious election poll roll in. it's thursday, march 16, 2017. "worldwide exchange" begins right now. ♪
>> good morning. welcome to "worldwide exchange" here on cnbc. i'm sara eisen. >> i'm wilfred frost. good morning to you from me as well. it's throw back thursday, in honor of st. patrick's day coming up tomorrow, we're throwing it back to music from irish artists, u2 a great one to start with. >> i agree. >> let's check in on the global markets this morning. after a powerful rally we got after the dovish hike by the federal reserve is how some of the investors and strategists are deeming it. it looks like the rally continues after a more than 100-point gain for the dow. s&p 500 awfully close to a record high. the surprise with the federal reserve came in the fact that not that they hiked, everybody expected that, but they left the word gradual in when it came to the interest rate increases from here. and didn't get overly aggressive when it came to forecasting more
hikes. sort of a goldilocks scenario, where stock investors like it. the fed is in no hurry to raise interest rates, seems to be on the ball when it comes to the recovery and the economy. >> the outlook for the economy was still good. with that in mind it was like net easing relative to where expectations were, particularly what investors took away from the forecasts with how many hikes we will get through the year, we didn't get that four telegraphed by the fed, and the 25 basis point hike was already bought in. >> the ten-year treasury yield, yields lower. the ten-year yield moving away to the lower 2.50 range. saw that in the middle of the curve with the five-year, but now seeing yields tick higher again. we'll see where that shakes out. the effect was weaker dollar,
buying of stocks and treasuries, that dovish reaction we're used to seeing. >> but not buying of treasuries across the board. we saw the two-year treasury note move higher in terms of yield. this was clearly more of a fl t flattening of the yield curve. the pure arbitrary way that a rate hike moves into the market is a flattening of the yield curve, unless accompanied with hopes of reflation, growth to come, of inflation expectations raises. clearly the curve has steepened and moved higher since the election, but yesterday and recently it has been flattening. the reason i bring that up, a flattening of the yield curve is bad for banks. yesterday, good for stocks yoef a overall. one sector was negative, that was financials. banks did suffer yesterday because we saw the slight flattening of the yield curve. something to keep an eye on, because banks have rallied so much. the ten-year german note, we
have seen european yields lead american yields a little bit over the last couple of months with various political pressures. earlier in the week the ten-year german bund made headlines as it was pushed above 0.5%. a marked changearound in that. down to 0.4%. that's worth keeping in mind. lot more fed takeaway talk coming throughout the hour. we'll talk to steve liesman. my question is whether they missed an opportunity. markets are doing well. yes, they have to wait and see what the fiscal plans look like and how they manifest in terms of a better economy, if their goal is better normalization, they have only done three hikes in the last ten years, now may be the time to ramp it up. >> absolutely. i agree. i also wonder why the markets are rallying so significantly
yesterday and today because of essentially net easing of policy versus where the expectation was. are we still relintd ant on loo policy from the fed? i thought we got past that. i thought we were focused on tightening is good. >> let's show you what happened with oil prices. what's happening with them. a bit stronger this morning. almost 1% higher as wti inches back towards that $50 a barrel level. we were below 48 earlier in the week. there has been a bit of a comeback there. brent at 52.23. that's up almost a percent as well. >> the other point i would make with this, with the dollar, that softened yesterday, it highlights how much the dollar might have been having on oil prices. not just the issue of u.s. stockpiles of saudi arabia picking up production perhaps more than expected, but the stronger dollar has hurt oil prices. as the dollar softened
yesterday, we got a rebound in oil prices. >> the dollar is weaker against the euro, 1.0708. the euro had a great day yesterday. the dovish fed helped the dollar, and then you also got the results from the dutch election pointing away from the populist party, anti-eu anti anti-euro party. the dollar is firmer against the yen. better tone to markets now. 113.43. the pound is weaker, the dollar stronger there as well to the tune of a third of a percent. gold on the flip side, weaker dollar helped gold yesterday after the fed. look at that. seeing another 2% bounce there up $23. >> i wouldn't want to underplay the size of the dollar move yesterday. it was a big move off the back of that fed action or less
action than expected. as expected the bank of japan left its policy yun chaun. short-term interest rates will stay the same, and ten-year bund yields capped near zero. this comes as the bank of japan fights to increase its inflation objective of 2%. asian markets are higher across the board. that's not bank of japan related, it's the contagion of the positivity that came from wall street late yesterday off the back of the fed move and that move in the hong kong index significantly, up 2%, that is related to the fed move more than anything else. >> you say contagion for a positive effect? >> you can. but it's not quite the right word. >> contagion brings me back to the european debt crisis. >> positivity is infectious. >> rate decisions out of europe. the swiss national bank sticking to its ultra loose monetary
policy keeping the deposit rate at minus 0.75%. >> i'm not sure infectious is the right word. the positivity has run off across the world. >> the swiss national bank says it remains committed to negative rates and currency interventions to rein in the swiss franc which it says is still overly valued. as for the early action in europe, the positive spillover effect continues in europe from asia from the u.s. after the fed this morning. the cac in the lead there. you're seeing bigger moves in places like spain and italy in the periphery up more than 1% across the board. >> i want to talk more about dutch politics, we're being told we have to move on. we have steve sedgwick joining us from the hague in amsterdam after the first break. just to review. the federal reserve boosting interest rates a quarter of a percentage point signaling rate
hikes will keep coming. janet yellen making her message loud and clear to investors. >> the simple message is the economy is doing well. we have confidence in the robustness of the economy and it's resilience to shocks, it performed well over the last several years. we've created since the trough in employment after the financial crisis around 16 million jobs. >> so that was the message from fed chair janet yellen, which was a good question that was asked, which is what message are you sending to consumers today with this rate hike? things are on solid ground. >> we'll discuss that more with steve liesman in about 20 minutes. there are several pieces of economic data. weekly jobless claims, february housing starts out at 8:30 a.m. eastern. at 10:00 a.m., the jobless
claiming. we'll have minutes from the previous monetary policy committee meeting. dollar general reports results before the open, after the close, adobe system. after the xhacompany reports, adobe's chairman will be on closing bell. to politics, lots of developments out of washington overnight from a hawaiian judge blocking the president's revised travel ban to new detailsing pe details expected on the president's budget blueprint. john harwood has the latest. take us through this budget plan. >> washington is always a hot house of contagion. whether it's positive or negative contagion, i'll let you guys judge that. but we have got a -- on top of the healthcare debate which is royali in royalie inine ining roiling and for the president. this is a recommendation to
congress, and congress is likely on the most controversial aspects to say no to the president. here's what he will propose. he tipped this off a few weeks ago. a $5$54 billion increase in defense spending and a corresponding $54 billion cut in domestic spending to avoid adding to the deficit. the pentagon increases will be popular, but the cuts that he's talking about include 28% cut in the state department budget, 31% cut in the environmental protection agency budget. you have got cuts across the board to science spending, basic research, nih, cuts to things like arts and the humanities, which are small in the budget, but frequent targets for political controversy. and the problem for the president's budget is that he doesn't do anything about the major entitlement programs of
medicare and social security. he promised not to touch them. that's precisely where republicans in congress say the attention of the budget should be focused. i had an interview after the election with john thune, the third ranking republican senator who said we've cut all we can on the discretionary side of the budget. well, president trump and his budget director, mick mulvaney toll us yesterday that they went back and looked at the president's rhetoric and translated that into numbers. they have a skeletal team at the administration. they still have not filled out the top-level appointees and they tried to translate that into the ledger of different agencies, and they cut deeply in those discretionary programs that many members of congress value. you can expect, as is often the case, that this budget will not go through the congress, it wwil influence the congress. if you're going to have a priority shift of $54 billions
for defense and away from domestic, that is something you cannot do with simply republican votes. he will have to get democratic cooperation to change the spending caps that now exist in law. and that democratic cooperation will not be forthcoming. >> so, john, overall the net effect of this, will fiscal conservatives like this? >> yes. generally speaking fiscal conservatives will like this. but this is not the priority that fiscal conservatives share. that is to say, it is simply rearranging spending on the side of the budget that members of congress believe they've already cut. it does not touch the spending on medicare an social security which are the big automatic spending programs in the budget. we call them entitlements, they are the principle driver of debt
and deficits in the long rupn. the president said he won't touch them, this budget doesn't. so a lot of priorities individually fiscal conservatives share, but overall this does not go in the direction that fiscal conservatives believe the government ought to go in terms of dealing with debt and deficits long term. >> i'm wondering individual sector reaction, business reaction to this. clearly it's a positive if you're a defense contractor, basically anything tied to defense spending. who gets hurt, which groups do you think will be watching looking for cuts across epa, some other departments? >> you will look at every firm that does business with the federal government, whether it's someone who interacts with the department of housing and urban development on things like housing assistance, people who
develop low-income housing for -- donald trump has developed that in the past. businesses that work with the state department, they have cut severely into foreign assistance. so there are a lot of american firms that sell material and food and other things to countries under the state department budget. if you're involved in scientific research, if you're a company that depends on advances in basic research that you make into commercially applicable products you will be hit under this budget. b b >> 28% cuts to the state department? where does that come from? how does rex tillerson go about that? >> he won't have to deal with that. to underscore the point i was making earlier, these cuts have been floating around the rumor
mill for several weeks now. and mitch mcconnell, the senate republican leader said flatly a couple weeks ago that won't pass the senate. i think that's true of a wide variety of these cuts. these will be expressions of the president's priorities as mick mulvaney told us yesterday at the white house. this is a hard-power budget, not a soft-power budget. state department spending goes to the projection of soft power. this is an america-first budget as the president defines it. it will be a political statement but not be translated into actual policy. >> john, thank you. >> you bet. >> john harwood in washington. moving on to the top global market story, the dutch election, steve sedgwick joins us from the hague with the results. >> reporter: i think the first thing to say is for once the
pollsters got it right. you know how bad the pollsters got it on brexit. sara, you know how bad the pollsters got it on mr. trump and how bad they got it wrong over the renzi constitutional vote. the pollsters got this one right. plus the fact there was a big turnout. it means a much needed victory is in the can for mainstream european politicians. mark rutte will get the first chance to build a government but it will be complicated. because in this country everything is complicated. because he got 36%, he needs other parties, the cda, the d-66 and one other party to get to that magic number of 76 fshg ju which is just half the number of seats in the parliament. so what happens to geert
wilders? he will play the malcontent from the sidelines, and the other question is is this a metaphor for bigger elections to come in germany and france? in france, everyone is looking at marine le pen. they is anti-european as well. i would be cautious about drawing too many parallels, "a," there's more parties in the netherlands and it's a more complicated situation. "b," there's more social issues and unemployment in france, and that feeds into strengths of madam le pen. be careful about drawing too many metaphors from the dutch election to the french one, but for now main strestream europe sigh of relief. back to you. >> steve sedgwick with us from the hague in holland. the other added takeaway, it's not a total victory for traditional politics, but jerome
d diselboom -- >> the head of euro finance. >> he was part of the labour party, his party did very, very poorly. overall there were lots of little small new parties that did well and took share from traditional parties. >> 28 parties, can you imagine? we only have two here, and it's complicated enough. >> a few more than two. >> two major. moving on, in corporate news, wells fargo ceo tim sloan was awarded $13 million in compensation last year. sloan who took over as ceo in the fall received 2.3 million in base pay with a bonus which included shares worth 10$10.5 million. he and serve other executive members did not receive a cash bonus, which follows the fake account scandal which caused the bank to pay a 1$185 million penalty. no indication from the board when they weren't getting the
cash bonus because of the improper activity, but three weeks ago the board saying no cash doe mubonuses for these pe because we want to hold sha shareholder accountability, and then three weeks later he gets a significant pay rise. that's a question people want to know the answer to. i will sit down with tim sloan exclusively tomorrow morning at 8:00 a.m. when we come back, the stocks to watch, i includiclu i gopro, why they're on a tear this morning in the premarket. stay tuned, you're watching "worldwide exchange" on cnbc. re, i have access to the oil markets and gold markets. okay. i'm plugged into equities- trade confirmed- and i have global access 24/7.
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welcome back to "worldwide exchange." a few stocks to watch today. oracle's q3 earnings beating analyst expectations. the company's cloud business driving growth and offsetting declines in revenue from the legacy software licensing operations lizness. and don't miss oracle's ceo mark hurd on squawk alley at 11:00 a.m. eastern. gopro cutting 270 more jobs and pre-announcing first quarter earnings would come in the high end of the range. the company cutting operating expenses by 2$200 million sayin it will return to profitability on an adjusted basis this year.
controlling what it can when it comes to costs. getting an 8% post. catch ceo nick woodman also on "squawk alley" this morning at 11:20 a.m. >> i'm watching "squawk alley" today. i always watch it, as you know. particularly since you joined the show. >> thank you. tesla planning to raise 1 5 $1.15 billion out of its launch of its model 3 vehicles. according to a filing with the s.e.c. tesla will issue 7$750 million n debt, elon musk participating in this offering and the stock reacting positively. >> but he's not joining "squawk alley." >> he will not be joining "squawk alley." still to come, more freactin to the fed rate hike. steve liesman will break it down. "worldwide exchange" is back in a couple of minutes. ♪ heigh ho heigh ho ♪
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you are watching "worldwide exchange." when we come back, a viral video alert. turns out wilfred is not alone. there's another brit out there having a hard time with this march madness. >> i have read about this. i can't wait to see the video clip. >> he's more famous than you. certainly is. >> more "worldwide exchange" coming up.
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good morning. markets now, stocks point to another rally fueled by the fed. >> washington watch. president trump expected to roll out his new spending plan. how it impacts your money straight ahead. and a gopro turnaround. why shares of the action cameramaker are surging this morning. it's thursday, march 16, 2017. you're watching "worldwide exchange" on cnbc. ♪ >> good morning. welcome back to "worldwide exchange." i'm sara eisen. >> i'm wilfred frost. very good morning to you from me as well.
st. patrick's day tomorrow, of course throwback thursday today. in honor we're throwing it back with some music from irish artists. i don't know who that was. >> we're learning about what -- >> someone tell me who this is. i'm enjoying it. bewitched. do you know bewitched? >> been a long time. >> a long time. >> i think this is their only song. >> let's check in on the global markets. a day after we saw a powerful rally fueled by the fed yesterday, the dow closing higher by 100 points. the nasdaq 100 closing at a fresh all-time high. energy had the best day in terms of the energy stocks in months. dow futures are continuing to party and celebrate the dovish fed hike we got yesterday. they're up about 64 points. s&p futures are up 5. nasdaq is up 18. it's spread around the world. we have seen that in asia overnight. the good feelings from the fed
with the hong kong index popping 2%. shanghai up 1%. nikkei flat to barely positive. it's also happening that rally in europe in early trade. especially on the periphery of europe, you're seeing more than 1% gains for markets like spain and italy. the german dax is up 1%. >> europe had five positive sessions out of six, if you look at the stoxx 600 index. a bit more resilient than the u.s. coming into the meeting and bouncing nicely today. it will be a decent week for european markets. let's look around the other asset classes. oil prices enjoyed a nice pop yesterday. the softer dollar aiding the oil price rally. wti up 2.4%. it broke a seven-day losing streak. up another 1% today. ten-year treasury note, which slipped. we saw a marked flattening of the yield curve. the two-year did, in fact, move
higher. it traded as high as 1.42% during the day on the short end of the curve. the ten-year note well below that 2.6% level. that flattening of the yield curve meant that banks underperformed, the only negative sector on the s&p yesterday. it was the fim senancial sector. there is the shape of the yield curve for you. a bit of a flattening yesterday. if we look at the dollar, it was significantly lower yesterday. down 1%, particularly big moves against the likes of the euro. the euro got a bounce late in the day yesterday as the results of the dutch election started filtering through, and the incumbent mainstream politician, mark rutte doing better than expected. geert wilders doing worse than expected. the euro got a bounce off of that. today the dollar broadly bouncing back against the euro and a bit against the yen. more markedly against the pound.
gold prices to round things off were up yesterday, 11 negative sessions -- they were down again yesterday. 0.1%, bouncing up today, 2% to end what has been a bad run for gold. gold really bouncing in face of that softer dollar yesterday. >> to today's top story, those big market moves. the federal reserve boosting rates a quarter percentage point signaling more rate hikes to come. but not as aggressively as some might have expected. steve liesman joins us from the nasdaq with more on the decision and market reaction. are you surprised by the market reaction? >> i am. the market ticking away definitively dovish sense from the quarter point hike and suggestion of two more to come. i'm not sure that's what the fed intended, neither does goldman sachs. they wrote yesterday we feel quite confident the fed were not aiming for a large easing in
financial conditions. the primary point of hiking rates is to tighten financial conditions, perhaps not suddenly but gradually overtime. how is the fed misunderstood? the market rallied on the idea of a few rate hikes this year. here's what janet yellen said when i asked if they had incorporated any fiscal stimulus. >> i want to emphasize that while some participants have pencilled in some fiscal policy changes into their projections, the basis for today's decision is simply our assessment of the progress of the economy against our long established goals of maximum employment and price stability. from so what happens when and if the trump administration gets some of its policies through congress? here's what jim oh sullivo'sull says will happen, enactment of fiscal stimulus could be a
trigger for raising dproetd ain funds projections later. the coming hikes could come at june, 54%. december, this is my gauge of reading of reuters data, 55% for that third hike. whether you think the fed does three hikes or more is related to your belief of does the trump administration get through stimulative policies. >> we sort of framed the outlook, the economic outlook as being positive, of course that's one of the reasons as well why markets have rallied. that doesn't tally in total with the fact that the yield curve flattened. what is your read on the economic outlook and in terms of how positive that was. >> i think the economic outlook is decent. the long run rate of growth for the federal reserve is 1.8%. they gave you 2.1 over the next couple of years. that's positive. and the inflation rate around 2%. so 4% nominal. i think no matter what you think
about the coming policies from the trump administration, you have to believe it means higher nominal growth. it could be higher real growth as well, but certainly higher nominal growth. in that context you're looking at higher fed funds target rate here. i would also add that over time you have to see these policies get enacted. there's a question as to timing, this year or next year. >> steve, just thinking about for the fed strategy and what they were or weren't hoping for, the market clearly is applauding this move. i just wonder if it's a missed opportunity. not that they should get too trigger happy, but things are going well now. the market is incredibly resilient. there's a lot of optimism, it's starting to show and manifest itself in data. if they want to get to normality in interest rates, now is the time. >> yeah. it's a delicate balancing act. if they push too hard on the short end, what will happen is the market will begin -- the
yield curve will flatten more. if they think the fed is being too aggressive and depressing yields on the long end. i think they're aiming for that sweet spot trying to get back to normality. i'm impressed at this point the fed can announce three rate hikes and the market can take it quite as well as it has. not just stay the same and keep it at the current level, but rally in the face of that. the bond market rally. so they clearly like the growth outlook coming from the trump administration. that is clearly offsetting any concerns they have about fed policy. >> steve, you and i were talking off camera the other week about real yield differentials and where the dollar -- >> glad you're talking about that part of our off-camera conversation. not the other one. >> shh. just a serious point. on the dollar, a massive reaction to the dollar. the broader index down a percent on a day the fed hikes rates. does that suggest we can't have more dollar bullishness from here? >> you know what? i wanted to ask you a question.
when was the dutch news out in the market. i wonder if that played at all. >> came after 4:00 p.m. so the market was already rallying on that. it didn't have that news, i think that's positive. what about the exit polls? were they out during the day? >> they came at 4:00 p.m. >> still at 4:00 p.m. i can't factor that in. but, look, i have to think in this context, they think europe will come along a little bit. as i said from the last draghi press conference, i thought maybe it was the end of the beginning when it came to the massive european stimulus programs coming from the european central bank. i thought he was signaling the first positive steps away from that massive program. that's part of it. they have to believe at this rate that europe's got to catch up a bit with the u.s. >> steve, great stuff. thank you very much. right to point out the dutch election had a big impact on the euro pairing. >> took it to another level higher.
perhaps this is what janet yellen wants, to stay out of the politcmril political pot spotlight. >> i don't think janet yellen ever seeks specifically the spotlight, but she knows she can be in it. moving on to the top political headlines. expecting new details on the president's spending plans later this morning. president trump is expected to hike defense by 54 billion dollars while cutting the same amount from non-defense programs. to achieve that goal, budget director mitch mulvaney says they will request cuts of 28% in state department spending and 25% in the epa. overnight a federal judge in hawaii issuing a sweeping freeze of the president's new executive travel ban order just hours before it would have gone into effect. trump criticizing the block last night in nashville. >> the order he blocked was a watered down version of the
first order. that was also blocked by another judge. and should have never been blocked to start with. >> president trump, of course, last night. in corporate news, another stock to watch today, cameramaker gopro jumping into action as it tries to turn the company around. landon dowdy joins us with more on what these announcements mean. good morning. >> good morning. gopro pre-announcing earnings yesterday, sending shares on a tear. the wearable action cameramaker estimating a first quarter revenue at the high end of the previous forecast. gopro saying it would cut 200 jobs including current employees as well as open positions in what would be the third reduction to its work force since the beginning of 2016. no word on which areas would be affected by the new round of cuts. the firm citing the move as a way to reduce costs by 2$200 million in an effort to return to profitability in 2017. shares of gopro cheering the
news. the stock soaring more than 10% in after-hours trading. this after the stock hit an all-time low earlier in the day before the announcement. the news comes as go pro has been struggling, plagued by numerous issues like slowing sales, a delayed launch of the karma drone, production issues. since the ipo, shares have tanked more than 75%. gopro is still selling cameras thanks to the new hero 5 and the new hero 5 session. last quarter was the best session ever for revenue. catch nick woodman in an exclusive cnbc interview today on "squawk alley" at 11:20 a.m. eastern time. >> that is one ugly chart. >> slightly good looking, better than it was. >> getting a little pop. top trending stories. viral video alert. james corden, the host of the popular late, late show filling out his first ncaa bracket.
cord corden, who is fairly unfamiliar with the sport, enlisting the help of a magic eight ball and some tarot cards. >> for the first time ever i will fill out a bracket. who better to fill out a bracket than someone from britain who never went to university. too many teams, i is the first thing. why is there florida state and florida gulf coast? wisconsin playing virginia tech, virginia also playing here. i feel i should go with duke. sounds british. their point guard should be benedict cumberbatch. will it be northwestern? will it be northwestern? don't count on it. gonzaga it is. >> northwestern, i love that. >> he said don't count on it. >> nobody is betting on northwestern, except this is their first time playing. >> interesting he mentioned duke as well, similar to me yesterday, partly because it
sounded british. >> that sounds like a good strategy. >> we are very, very similar, james corden and i. hardly. i enjoyed that. we'll tune in for the rest of it. still to come, the must reads. first we head to break and a look at where european equities are trading. the positive spillover effects of the fed gains from yesterday have infected the markets around the rest of the world. >> no contagion. >> positive contagion. we had this debate too many times. back in a couple minutes. ♪ oh!
welcome back to "worldwide exchange." time for our must read stories. my pick in the "wall street journal" titled three criteria for health reform. every republican has an idea this is from senator ted cruz and mark meadows writing if we leave these mandates in place or delay their repeal premiums will remain too high for too long. if premiums continue to skyrocket we will have failed and republicans will rightly direct their frustration at the ballot box towards the republican majority. i picked this because it highlights the divisions within the republican party. cruz is someone notable and recognizable and influential. he has problems with the current version of the gop healthcare plan. can they all come to rally around it? there's some real specific policy issues in this op-ed. i would highly recommend reading
it. can they use that, work with what they have to come to a comprehensive bill that will pass the senate? that is going to be the question. >> my pick today is from cnbc.com, sorry, jamie dimon's theory about how companies can boost the economy is wrong. it's off the back of his comments to the business roundtable that he felt it could be like qe 4 if we get tax reform and repatriation of overseas tax refunding. william gale writes encouraging repatriation now would not stimulate the economy. companies already are sitting on tremendous amounts, roughly $2 trillion of cash domestically that they could use to invest or pay out to shareholders. no shortage of ready cash is preventing them from investing more or creating jobs. the firms with the largest stocks of profit held overseas also pay the most to the shareholders. an offsetting opinion. certainly one worth noting.
>> we've heard this debate over an over again, but if there is incentive to bring back that money overseas whether it goes into the market or building plants or hiring workers, it has to be stimulative to bring money back to the united states. just sitting there as the ceos have said, because the corporate tax rate in this country is too high to bring it back. >> the argument here, if you take apple, they could be doing either returning cash to shareholders or building new plans, because they can borrow at a half percent and they're not doing that already. in an accounting term because the money moves from overseas to the u.s. does not change their able to return the cash to share holders or build a new plant because they can build it so easily. >> we will see what kind of thing happens f there's a tax holiday or a lower rate. it doesn't get enough bang for the buck if you buy back stock.
that helps jamie dimon and others who are paid relative to stock prices, but if you want to build the economy, build plans in the u.s., use it on capex. kayla tausche's write up of jamie dimon two days ago and this write up from late yet. still to come, rich clarida will join us. we will get his thoughts on the fed, the economy and what washington is up to.
futures building on the celebration that followed the fed meeting -- >> what's happening around the rest of the world. >> it's catching on, like contagion but in a good way. >> s&p is up 6 points. nasdaq is up 18. this after the nasdaq 100 closed at a fresh all-time high and the dow surged more than 100 points. with us now is rich clarida from
pimco. do you understand the market reaction? we got a hike from the fed as expected. i guess it was interpreted to not be so aggressive or hawkish when it came to what comes next. what's your take? >> that's a good point. obviously the hike itself was telegraphed. i think the reason why you got the market reaction is that the markets had been concerned that at this meeting the fed might indicate four hikes this year or four hikes next year through the dot plot, they actually didn't do that. so we got a well telegraphed hike, but no increase in the liftoff pass. so markets took that as a net dovish hike. you saw the em and risk in equity assets responding. >> do you think we'll see the yield curve flatten from here? >> i think in your earlier segment you talked about that. typically in rate hike cycles we do get a flattening as short rates move up more than long rates. we had that yesterday. i think it will depend upon what we see coming out of fiscal
policy in the u.s. yellen yesterday basically said they have not started to factor that in yet. if we do get a big fiscal package later this year, even if it's back-loaded, that could put steepening in the curve, as could inflation. >> when you say if we do get a fiscal policy package whiplashi, what exactly are you referring to? we know the secret is healthcare, which there is a standoff in the republican party about, and corporate tax reform. there's still a lot of work to be done. what is your expectation? >> that's right. i think there was some views after election day in the fall that everything you mentioned could get done in 2017. i never thought that. the healthcare repeal and replace is taking a lot longer than i think people had hoped or expected. though can't even start on either tax reform. you mentioned the border
adjustment tax. i think we will get a corporate tax package, we need a corporate tax package. we will get infrastructure, we need infrastructure, but the impact on the economy will probably be 2018 and beyond. >> rich, did we see yesterday how undervalued the euro is against the dollar just purely on economic terms? if you take the political risk out of the pbargain, the euro could be due a bounce. >> we did see that yesterday. the euro is at a weak level. it's declined more than 25% in the last couple of years, largely on draghi doing qe and negative interest rates abroad. i think as long as the fed is in a rate hike mode, which it is, as long as the ecb is doing massive quantitative easing and negative rates, that will keep the euro at a weak level. >> i just wonder, rich, if the fed is missing an opportunity here to get more aggressive when it comes to raising interest rates. they want, as i've been saying, they want to be back to normal.
the unemployment rate is 4.7%. the market is incredibly calm and hopeful for fiscal policy. why not pull the trigger a bit harder? promise that more is coming and that they want to get back to normal. >> i think that's a good point. i think in part the reason why we got this hike at march meeting is precisely because markets, stocks were way up. markets did give the fed that opportunity. they may well take that opportunity even at the june meeting. the markets now see a 50% chance. to get a more aggressive rate hike path you have to start going at every other meeting or potentially faster. again, they don't want to do that until they have a lot more detail on the -- >> unless investors started saying they're behind the curve. >> exactly. on the inflation front. as you know, headline cpi inflation is above 2, the core measure is creeping up to 2. >> rich, thank you very much for joining us. that's it for "worldwide exchange." we have positive markets all over the world.
good morning, the fed raising rates and there are more to come. janet yellen sending a message to the markets. >> the budget blueprints, president trump's plans for cuts and spending emerge. details straight ahead. and you better get those brackets in this morning. the country about to lose a whole bunch of productivity as march madness kicks off in a few hours. i got a really good bracket this year. i always feel good before the games start. thursday, march 16, 2017, "squawk box" begins right now. ♪
live from new york where business never sleeps, this is "squawk box." good morning, everybody. welcome to "squawk box" on cnbc. we are live from the nasdaq market site in times square. i'm becky quick along with joe kernen and andrew ross sorkin. the federal reserve boosting rates bay quarter point and signaling more hikes this year. the fed indicating two more rate hikes this year. we'll have more on what fed chair gel season tejanet yellen the markets about the economy. all of this idea of three rate hikes for the year are on the table, not four as markets had been anticipating, we'll see, that rally was sparked yesterday in the equity markets with the dow up by 112 points. the nasdaq now just 100 points away from the 6,000 level, closing at 5,900. the gains we saw yesterday put the s&p 500 and the dow at