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tv   Squawk on the Street  CNBC  January 31, 2018 9:00am-11:00am EST

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liklike like -- right? mom and dad and baby ellie are all healthy and happy. >> yeah! >> yeah, dave and katy on the squawk family. all of us. >> all right, everybody, have a great day today, make sure you join us tomorrow right now it is time for "squawk on the street. ♪ good wednesday morning, welcome to "squawk on the street," i am carl quintanilla and with jim cramer and david faber. futures is up strong as we reclaim some of tuesday's loss a lot to get to. the final day of january, and europe is mostly green adp is strong of 234 oil is on pace on a third day down our road map began of --
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>> president trump calling on congress for $1.5 trillion bill to help fix the country crumbling infrastructure tomorrow's report, apple gets a downgrade, disappointing iphone demand and the s&p 500 the worst day since may of last year despite the sell off though. almost, six decades heading into the trading section of the month, each 5.5. nasdaq is up 7% for the month. 14 record s&p 500 closes is the most since 1955. i have to go back, that's seven years. >> i heard the speech last night, not only the president, he's literally taking credit for
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the stock market and he'sdone lot to make it so that this rally makes sense. you look at the boeing quarter today. you -- everyone is skeptical and some of them is antitrump. come on, this economy is thnot that good. you look at the electricity number, they don't lie and you come back and say listen, what do you want how for real do you want it to be what do you need to see? a 6% gdp number? it is real >> you can make an argument that it is reflected in stock prices which have had a monumental run other than the last couple of years since the year began and not to mention the last 12 months >> yes >> we got a loong bond and 10-y headed to a new high and people
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are standarting to wonder. >> 272 >> that was the time when the economy is smaller and demographics were different. >> right >> yeah, we had inflation obviously. look, the president is the most unpredictable guy. he's incredibly predictable except he raised the infrastructure he talks about defense spending and defense stock is going to go up the boeing quarter, they emphasize defense more than i have seen in a long time that's part of the strengths of the quarter. i mean just not a lot of guess with the president the president maybe, he's a guy that want to reiterate the numbers. >> it is kind of -- yeah, i know >> he's got a strong bond in the economy. >> how do you think he handles
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the first 10% down story change then or not >> i think he comes in and says listen, a lot of these is because of chinese dumping and unfair trading partners. >> i thought he just blames c m chuck schumer. >> reasons for the business cycle. got it >> it is going to be if we have a downdraft. the darn democrats >> literally this stock market is terrific. the rumor around the table is did you succumb? the stock market is good >> that's a factual statement or it has been good >> it is been bad for a long time >> what are you talking about? >> i am saying there are a limited number of stocks that
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are good now other than general electrical almost every stock is good >> in the dow? >> the s&p 500 was moving higher for many years now, many years >> lets take the banks gout the banks at levels it should have been but there is a lot of regulations of that >> okay? they should have been at those levels >> technology was largely fact in terms of what can hurt the market, we have a glum that we have to go to. it will be facebook tonight with the stock going up everyday, thanks for nothing and apple got everyone returning their iphones. of course, we had no idea what apple's orders were but we know they're down 50% >> how do we know this
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suddenly it is like not only can we mention the down 50%, what is it the fight club. >> going into the quarter, the expectations for apple is not particularly high. so there maybe an opportunity for them to surprise people. i would add if they do give you significant language on apple of the call of what they're going to do with the cash, the public will take majority of it back. majority only means 50.1%. will they actually detail increase by back and anything of capital returns, that can help aus wel as well. >> david, that's the trick what these analysts are saying when orders come down 50%, the earnings will come down 50%. rather it being a cheap stock, they think it is going to have $7 >> what if we see a continue uptake there and we get to the key point where people say wait a second, i am willing to pay a
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much higher multiples for that and that's 15 or 16 or 17% total. >> i have been pushing them to do that. >> you break out the service revenue so they broke et out but they have to stop. it is the size of a fortune 100 company. >> they got to stop that its got to be a fortune 80 company. all you do is you look at that life insurance company, 28 billion, it is number 99 >> it is okay. >> we need bigger than 28th billion. by the way, nintendo today, there is an artificial intelligence and gaming aspect of marvelous calls and so many are trying to get it down. >> we are looking at the numbers, too oh my god, this battle front >> ufc three
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>> listen, we did not do a good job. ea, have we shorted and amd have we shorted these are the last of the shorts >> i am assuming that was a last of the bottle. >> these are the last three shorts i don't know what's happening with facebook right now. you know that guy from facebook when the market was down, i was in there buying facebook what's the point step away and let it come in what's that idiotic buy? we got to see what zuckerberg is doing tonight. >> i don't know. >> 6% since the drop remember the day zuckerberg came out and says i am slashing numbers dramatically because people don't like our odds it is now above where he made that comment, should we come out
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again and knock the stock down >> when i speak of people of all the names and the big names here, the one that surprises the most in terms of blows is facebook >> it is not going to be alphabet >> although frankly, samsung spent more on r&d than any company in the world >> david, they announced the super cycle memory chips >> just like the super cycle in coal and fracking sand why did they do that >> why did samsung point out a super cycle. those are the guys who are most after apple. the downgrade today, they said the day of the iphone being great is finished. >> this is going to market reform today >> where were you at 170 now. the iphones is finished.
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during the president's address last night the president highlighted the economic growth and tax reform and roll back regulations and looking forward, he emphasized in fr infrastructure as jim says it is one of his top priorities. >> today, i am calling on congress for $1.5 trillion for new infrastructure investment that our country so desperately needs. every federal dollar should be hea leveraged by partnering with state and local government and we are appropriate tapping into private sector investments to fix the infrastructure deficit and we can do it >> all right, we got infrastructure at 1.5 million and drug prices and trade, the
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era is over. >> the regulations and environmental impact >> he did use the word generate of 1.5 million >> it is not federal money >> if you take a look at u.s. concrete is the best indicator of large projects. the largest projects are made up of three states that raise taxes and building roads and private seculars apple headquarters, these are relocations for texas. there is little federal involving. states willing to raise tax to pay for it, they'll raise gasoline taxes >> we have not raised the gas tax which is always been -- >> that's how you do it. >> nationally. >> now we are at 24 cents up year on year
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>> you can do 5 cents and have it done. >> the day we'll build the bridge, keeping steel in business, those days are over. but, there is no orders yet. >> as lo-- remember those thing it was huge. >> i have seen the bridge and i have been over it mistakenly >> the empire state building took a year, it took 13 months >> everybody can fight an infrastructure project that's what he has to work on. >> were you surprise of no comment on the national debt and language about mobility and ai >> i wanted moon shot and hear something of in conjunction of great companies, i think my
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money is on boeing would it be great to hear some sort of grand projects no, he's giving us info. and defense spend. stocks of raytheon and lockheed martin these companies are running us over >> we are beating our plow shares >> it is a good statement but it is unfortunate i would like to see it going to other way. >> biblical, i am talking about historical >> new nukes >> these countries that are not at war norway >> love norway >> they not their oil money and their olympic teams and 6 million people >> i will never forget walking up on the mountain and they're all running by me norwegians
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>> were you in norvick >> we'll talk to steve ballmer of last night's state of the union. our first 1% drop for the s&p 500 and 112 days that ties the longest stretch nc19 ckn a minute it's all yours. wow! record time. at cognizant, we're helping today's leading life sciences companies go beyond developing prescriptions to offering subscriptions with personalized, real-time advice for life-long, healthy living. honey? you almost done? nope. get ready, because we're helping leading companies see it- and see it through-with digital. hey ron! they're finally taking down that schwab billboard. oh, not so fast, carl. ♪
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premarket looks solid. dow futures is up 130 or so. boeing we'll get in a bit. bro broadcom, the story that you can cove cover. >> the continued saga of qualcomm and broadcom. you can spend time >> there is some sequel fatigue. >> this morning the news on broadcom, you can see it is up over 5% as it follows. tracking the higher end of our expectatio expectations hoch tan of the company's ceo, demanding for r a wider
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enterprise store products, expected to offset greater than seasonal decline in wireless so they do see second quarter flat with first quarter revenue but it is having a positive impact because the stock has been down and texas instrument and apple's recent downdraft is a concern to them. >> and vmware. >> you know this is again, it drives with the apple slow down. >> now the key thing for broadcom is when are they going to raise the bid for qualcomm. i don't think it will be tonight. tonight you will get earnings from qualcomm. it is wondering well, will they try to screw up our earning release? time is of the essence here.
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march 6th is the meeting you will get assess to that. the question is will it have an 8 in front of it or include language such as the one i written of considering antitrust and certain things that giv give -- help people feel better of the antitrust implications so the investor base will be there to support them. we'll see what we'll get qualcomm and spi continues that's 120 in xp that's what they are basing on that would get you around february 15th. they are not going to announce something prior to that. they are waiting more or less until they get the approval for the chinese an coventtitrust authorities. not going to sign a voting agreement or pulling a lot of different shoulders or getting
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elliott in a room and we'll go to this number, they're going to go best and final in on it >> what does it mean >> they'll put a number out there and if they don't get it, they won't get it >> they seem to be not cognizant at stocks at 120 you got to come up at 117? >> i don't think so. >> do you think they'll walk away >> i think it is a possibility >> it is a possibility they're going to try to make this simple and trying to get it down prior to march 6th in the meeting. >> that is got the whole world tied up and this and the apple orders that's all everybody cares about. we should talk about nvidia and machine learning and intelligence, broadcom >> i agree with you. hoch tan >> still in singapore, they have not made it to the u.s
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maybe amd is trying to spin this quarter as a positive. >> movie references, lets go greek mythologies. david, they did it. they have some really terrific gaming chips this stock, after the bell -- >> i thought after the bell it was down >> that was a short rage and there was a short race saying the margins were good and there is a third where they're saying they're losing cryptocurrency and they gave up and let it live this is the most hated stocks. >> they were lying and lying take these two letters down. >> lisa sue. she holds her on in a great conference call.
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this was a weak quarter and they're still living a great number next up is going to be a challenge. >> you are becoming a believer >> i am. >> david, the balance sheet is going to get better and better, not this quarter but they got to spend to grow. not shrink >> they can fix the balance sheet in the second half and people paying 15 for the stock can they challenge in nvidia you are going against jensen wong can they challenge intel in arguably, yes. >> we were saying that back in 1985, too. >> that was -- jerry sanders that company was kept alive in order to keep antitrust department off of intel. >> apple was using their chips, right? >> yes we got opening belfiore you, a lot of stocks to cover this
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morning in terms of earnings upgrades and downgrades. we'll be back after
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you are watching "squawk on the street," opening bell in just a few minutes busy morning as investors reacted to the state of the you know do-- state of the union. it is getting expensive to hire workers. >> it was funny, there is this rumor wave that came because the numbers are so high. holy cow, this economy, you get tough to get labor >> mark sanders calling it excruciating tight job market and if we don't add 2 million jobs this year like we have done because they cannot find them. >> particularly in the south fchif you go to tennessee, they'll throw out a job out the window
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i cannot believe unemployment rates for some of these states >> we need immigration >> we need immigration >> we need it. >> we need no wall >> what do you favor, like a gateway or a sky way like in minneapolis? >> a monorail that comes right in i think we should protect our border but i don't think we need a wall i am not sure if that's a great appropriation or the capital allocation >> they'll never be able to make enough >> do you not believe given a labor shortage, we'll see a slow down if we don't have enough workers. >> it is an issue for infrastructure and the wall and
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home builders and anything >> yes, if bezos does what he says, we'll have a surf of labor. >> yes, that'll create a lot of openings >> and autonomous. >> and wages are going up there as well. the robots are far off, too. >> new quarters were talking about the number of trucks they need and we'll need training and it is necessary. >> new york care helping new yorkers in need and nasdaq, operators and franchiser of wing restaurants. right around the time of super bowl >> really? >> harder than chick-fil-a >> yes. >> much harder than subway where
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it is salty. >> did you finally -- >> okay, i will just take it too easy to get a franchise. >> wing stop, you have to have a lot of franchise and they would love it if you have a lot of mcdonald's franchise >> mcdonald's, the stock was a horse yesterday. >> they're going to invest more stores >> they have to. it got the store in the future and without a doubt, every time they put the store in the future, they got about 4,000 and the numbers go up. you have the franchisees really like it. it is hard to understand numbers and not choppy that got the stock down, it was down about a buck and a half i was going back and forth with management, when you use the
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word choppy in mcdonald's, don't you ever get that in there >> okay, safe to say the overall industry is not performing nearly, they are out performing competitors by 400 points. >> there is no growth in the sector but happy birthday, 50th birthday, big mac. >> wow, 50 years >> how do you like that? >> no kidding. >> no. >> 50 years for the big mac. boeing are down, it is number two and you mention defense. 815 planes, last year they did 762. >> 737 orders. they got a 1.74 gains already.
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remember tim cook, you do what boeing did and even though you are not going to sell any iphones in the third quarter, you can do okay. >> you can reduce your outstanding shares by a significant number >> that service revenue, i am glad you brought it up >> it will be a key and you would assume service revenue and cash what are you going to do about it it is key questions. >> people talk about it and they cut the price of the phone and i defer to you and at&t and verizon. >> a thousand bucks, too much or too high >> too much. >> i wonder of the plans where the ips equipment installment plans where everybody pays for your own phones now and your bill goes down by 30 bucks i know my kids -- my older one's phone did that, i want a new
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phone. no, your 7th is just fine and i am not paying the extra 30 bucks or it. you are going to go another year or two >> i like the 10 and i got the 10 and 7 >> you got a 17. >> the problem is the x. that was confusing people did not know what it was. people thought it was a super bowl number. >> it is a different user experience it takes time to get use to it if if you are in the store and you look at it for ten minutes, it is foreign >> yes samsung had decent numbers but not blow out number for fetheir phones you talk about mcdonald's, it is everywhere and india is just getting started. europe, the quarters that i am seeing out of europe is so strong there is so much to like here. >> guys, i want to talk about an upgrade this morning over this
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they upgrade to a buy and they basically say if the department of justice wins and the big trial that's coming up a couple of months from now, even less than that, it won't matter time warner is not going to go down it will benefit from an accelerated share of purchase that they relaunched when they sign this deal up, they did not have a clue on. don't forget and, they see 2018 eps number of 725, put a multiple on that. we don't see a lot of down sigh even if this deal is stopped and not to mention they also believe that it would remain an acquisition target and that in fact they may split themselves in two who knows, we'll see, many people still believe the government still has a tough
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case to prove here and that at&t will succeed in acquisition of time warner. what's interesting is these deals take so long to work their way through the system even when they are not challenged but simply the approvals that you get companies that stop their buy backs and taking in enormous amount of cash that if the deal were to break, they are in the position to buy back a huge amount of stocks and reducing the over flow and not the mention things change. but, it goes back to the other point you made which is how long it takes to get a deal done. and, the fact that the downside in this environment seems to go away from a certain extent of the deal that it breaks. how long these deals take to complete is an issue >> yeah, i find myself saying i wish i had not done these deals because they are capped. >> yeah. if the company keeps ongoing well, you don't want a stock that's capped.
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you cover a lot of deals where it freezes the stock >> yes, it does. >> this keurig and dr. pepper. >> dr. pepper stock. you think the entity that'll remain is being under valued by the market >> i told you. you are seeing that part of the super market doing better and keurig got a great ecommerce channel. ecommerce is so much more important than a lot of these consumer products that companies really get the package good companies, they have to have a good ecommerce strategy they have to >> looks like wynn found some supportive 160 >> people seem to think forget the gaming mission, i was worried of massachusetts by the way, apple is up. they must have sold a phone. >> they probably did this ea is also up i know rereferenwe referenced ad
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of the show. that stock got to be taken out in a big way and there were some concerns of a number of things and those worried about star wars >> we fixed it and now it is really incredible contrite c conference call. >> he's got activism and nvidia is up by 2%. >> last night's conference call tore the forces and tonight there is so much many. tomorrow, of course, it is just a comedy of aaa tomorrow >> yeah, tomorrow and friday you guys are not here. >> david, you are not here >> we are going to minneapolis we are going the show from minneapolis, i don't know where you are going? >> you saw the forecast for sunday >> minus 5 >> it is going to be complicated.
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>> oh, i feel so bad for you guys >> who is favor is that? >> a dome is a dome. i am going to go out there and say the eagles are going to win. >> i would be surprised if you said anything else >> i am shocked. >> i said they're going to win against the vikings. i am making a statement. >> not only that, i think brady better get familiar with his >> lets get to bob pisani. >> i am with jim on that, i think the eagles are going to win, too >> the inflation trade is back again. here is the key point here, lets look at the major sectors, remember that reflation trade. you buy industrial and semiconductor, and biotech is back again and energy is sort of
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having the problem elsewhere, president trump talked about public investment of $200 billion of infrastructure, vague on the numbers overall. you saw a mix reaction here. not much going on. it has moved along the rest of the market new reactions today and not much in the way of details. we have been talking about the earnings i would know there is a lot of over seas going on by and large, they have been better than expected they beat on earnings on revenues and their outlook calls for revenues they beat the consensus a the one that's noticeable is h&m, that's a nine year low for h&m, their profits were down they had fewer customers visiting the stores. they got a lot of issues that's the one stand out on the negative side.
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stock market right now, the risk is on the interest rates side. we'll hear from the feds today and they could move things i want to know one other risk out there. deceleratiing earnings growth. this morning, 2019 estimate and up his 2018 number to 13%. most is around 16% the markets keep ongoing up because there is upward vision the 2019 number that's being introduced are modest, he only has 5% is earnings deceleration. remember when you are paying 18 or 19 times forward earnings, it is going to be hard to argue that you have such a high multiples when earnings are decelerating even if it is some kin kind of growth you are looking at the number at the s&p 500 where they are below where they are now that's a big issue
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january, final day here, pretty good month look at this, nasdaq is leading the way again and looking like december and russell is lagging a little bit january, the reflation, kind of stalled out a little bit many mid january. technology and industrial and materials are still on the upside but sort of under performing in a way. healthcare and biotech strong was the big number one performer. as for february, lets call it mix. but, if you look at the last 15 years, actually it is been up ten of the times and been down five other times that's not bad and actual returns have been positive and slightly 0.6%. >> back in the green here, 232 points up in the dow >> bob, thank you very much.
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>> we'll get chicago pmi in a moment lets get to the bond report with rick santelli, good morning. >> lets do the prologue first. we are down a little bit in yield but we are still at an elevated levels that you see on the one that we chart coming off the important 263 area bund is similar with regarding to 10-yr, we are trading at the level of benchmark now the last trading day of 2013 sue e you see it on the left side of your chart traders are aware of that, it is just how long it takes there dollar yuan, looks like it is going to have the lowest close of the dollar side since august of 2015. lets go to dollar index, look at the chart.
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everyone though several sessions, you see we are trading lower than we are now. listen, when it comes to interday, listen, the higher the day is 400 point, you're margined on the close. these are fresh loads going back to december of 2014 on the dollar index, now, january read on chicago pmi should be out here and it is, we are expecting the number 64 and we ended with more and 65.7 and last look which was 67.6, moves to 67.8. boy, the last one first of all, why is that so important because the last one is the highest level going all the way back to march of 2011 and that level is the highest going all the way back to the year 2000s these are really lofty numbers even though 65.7 is a bit down
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last time we had a number around there is wow, all the way of november of last year. i continue to monitor that we are holding the 270 level and everybody is talking about supplying treasury and their announcement for the quarter looks to be more traders have figured it in we'll to see if that dynamic makes any difference carl, jim, and david, back to you. i want to get to a report this morning on exxerox, it was announced over night by this company. can you imagine 60 years joint venture? that'll all end. they'll take 75% which is controlled by fuji and controlled by xerox and merge it into xerox
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fuji film will emerge with xerox itself, 49% will be hold by current xerox holders. dividend payment equals of $9 a share. and then they will be issuing stock worth of $5.5 billion to fuji for that 75% stake that fuji owns in the jointventure and they're saying we are buying that at a discount or said another way that fuji is paying a premium for our shares with that 75 cent stake in the joint venture. and then they go onto talk about the various benefits of the transactions itself, namely as we often do and coming down to $1.7 billion they're talking about an annual
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cost savings opportunity they talk about what they say significant revenue synergy and innovation this is been in the works for quite some time. one would have to believe that the director, three directors all voted in favor in this agreed to back previous battle, all voted in favor carl icahn, it is unclear, i have not reached him remember the two of them have teamed up. they own 17% of the company. last week in a letter, they were saying hey, we want jacobson of the ceo out. they're proposing four new
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directors. i mention all this because this deal requires a vote it is unclear and is it worthy to say no and he hooppose it? that's a story to be determined. what's known is the stock is up on the prospects for the synergy number there fuji is paying by swapping its 75% of its joint venture jeff jacobson firmly opposed will remain as the company's ceo. >> we are getting some breaking news regarding tobacco and the director of the center disease
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control. we'll go to katy taush >> good morning. the press release, this is politico reported that director fitzgerald was trading tobacco stocks while leading an anti-smoking effort. swift action on behalf of the cdc with the resignation of brenda fitzgerald. >> i mean, come on now >> you can't make that up. >> in the original defense from her office was that it was a decision made by a financial adviser. this is a swift resignation after that. >> yeah. maybe it's -- don't trade, good strategy if you're in that job >> focus on the flu. >> tamiflu bad flu season. >> i'm going to name my assistant tamiflu.
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she has been the central northeastern distributor everyone in "mad money", it's kind of like a cell. it's really scary. i'm getting this tamiflu before i go to minneapolis. >> both of you i don't want you coming down with anything. >> enjoy that minus 5. >> i have skyway so i don't have to step outside ever >> dow's up 186 off the initial highs. boeing continues to be the leader of the group. back in a moment is the monolithic view of emerging markets obsolete? at pgim, we see alpa in the trends, driving specific sectors of out performance. where a rising middle class powers a booming auto industry. a leap into the digital era draws youthful populations to mobile banking and e-commerce.
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markets recovering some of the losses for the past several days up 200 points. mostly due to boeing "squawk on the street" continues. don't go away. alerts -- wouldn't you like one from the market
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jim, busy night tonight. >> "mad". >> we have chubb and adp >> car loss rodriguez. >> isn't that something? >> taking a guest right out of the lair. >> won't be the first time, won't be the last. >> keep taking my guests. >> part of my job. >> corporate darwinism. >>ow d's up 217.
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"squawk on the street" is back in a minute.
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increased 0.5% month to month. up the same amount 0.5% year over year. the pending home sales index is a measure of contracts signed so it indicates closings over the next two months. the story continues to be the supply crisis. the realtor's saying buyers are ham strung by record low supply, levels pushing up prices especially at the lower end of the market we saw that in yesterday's schiller report. prices up 6% year over year and mortgage rates rising to the highest level in four years so affordability is going to be tough this spring. we're already seeing spring buyers out earlier trying to get a jump on the market where supply is, again, at record low levels pending home sales from the northeast down 5%. in the midwest down .3%. up 2.6% in the south and up 1.5% in the west. still down 3% year over year in the west supplies are the leanest there
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we'll wait on what the fed has to say about the future. back to you guys. >> diana, thank you very much. good wednesday morning, welcome back to "squawk on the street." sara is off today. dow is up 181. 2/3 is boeing alone. we'll watch that closely as oil inventories are on the way our roadmap bouncing back. dow so i remembares >> a big driver of the dow is boeing they gave up beat guidance for 2018 we're going to dig through those numbers. >> plus, the state of our union. president trump addressing the nation calling for a deal on immigration and infrastructure >> we'll address that. boeing is the story of the morning. we'll turn to phil lebeau for the earnings beat and all kinds of guidance. >> hi. when you look at the boeing earnings, you have a combination of robust demand or robust
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demand as well as strong execution. let's start with the execution which comes through in the fourth quarter numbers which were better than expected. overall boeing earning 3.06 a share. well above the estimate of 2.89 a share. $24.9 billion with revenue stronger than expected when you look at what boeing has been doing, we've talked about this for some time it's driving the cash flow through the commercial airplane division and that's what we saw in the fourth quarter. the profit margin for the company, 11.9% and the backlog has grown in every single division at boeing now let's talk about the forecast for 2018. this is a big reason why the stock is popping today boeing forecasting to earn between $13.80 a share and $14 a share, way above what the analysts were expecting going into today they were at $11.96. revenue also expected at between 96 and $98 billion as you take a look at shares of boeing which are now tickling $360 a share, they pulled back just a little bit from where
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they opened up you have a company that is forcing the execution, especially on the commercial airplane division. that's where we're seeing the strength you've got 737 ramping up production and you have the 787, the farther we get from the launch and all the costs associated with it, the farther we get from that, that's really where you see the cash flow filtering through. that's a big reason why the operating cash flow better than expected in the fourth quarter it's going to be strong in 2018. again, the call starting in 20 minutes. we'll be on it we'll hear what dennis mullenberg has to say. >> market cap crossing 200 billion. phil, thank you very much. phil lebeau watching boeing today. stocks bouncing back for more on this, let's bring in wells fargo paul christopher and fidelity's head of macro good morning to you both >> good morning.
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>> yesterday people talked about a lack of sustained down side pressure yields didn't really move a whole lot. you got month end dress up is this buy the dip mentality still intact >> yes i think until the fundamentals change, every dip will be bought because every time the vix spikes to 15 or 20 or 25 there's a whole group of hedge fund guys who are going to short it. so the fundamentals need to change for a dip to no longer be buyable, and obviously earnings are on fire. calendar year 2018 estimates are now at plus 19%. they were plus 12 just last august when tax cuts were deemed sort of dead in the water. and financial conditions are easing and, you know, the economy's sort of getting into the over heating mode. so the fundamentals remain good and that allows this bull market to continue. >> paul, we've gotten some conscious calls out of oak tree renaissance yesterday looking for a bit of a pull back on the thesis of valuations
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being at historic highs. is there something in that that investors should pay serious attention to >> well, when the valuations get that high you have to be more selective so that means for us in particular we are under weight energy right now. we would be taking the opportunity to sell energy the market did a little of that yesterday. we would recycle that cash into sectors that we like we're really in favor of the cyclicals as well as health care we think that the cyclicals will be the best leverage to the economic growth that we're expecting going forward and the earnings growth we see going forward. yeah, high valuations mean recycle cash and be more selective in your buying. >> jurrien, the durability of this rally has put everybody in the position of saying what could possibly get in the way? it seems like there's so much liquidity. the fed is top of that list, perhaps, of maybe things that could go against everyone's expectations what do you think you might hear
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today and will the street be tuning in for any sign that we're going to get, let's say four hikes this year >> yeah. i mean, for 2018 the markets and the fed are exactly on the same page the fed funds curve is exactly at the median dot for 2018 i think the issue's going to be in 2019 and i do think the risk to this bull market is a fed that is going to tighten more than the market is pricing in and the market is pricing it in. you know, we've gone from pricing in three more hikes to pricing in four more hikes just over the last month. the ten year is at 2.7, possibly heading to 3% and that should tighten financial conditions to some degree which, of course, is the goal of fed tightening, is to tighten, you know, things in the economy. the fact that financial conditions have been easing while the fed has now hiked five times and is letting the balance sheet run off is pretty -- pretty unusual so -- but for today i really don't expect anything. it's chair yellen's last meeting as we all know
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it'll probably be a pretty up beat, you know, assessment of the economy, but i don't know that they would guide anything different because it's not one of those quarterly meetings where they would adjust the sep and the dots so i think it will probably be a non-event today, but i do think that is the risk going forward is that financial conditions are going to tighten and against the juxtaposition of a very high pe, over 19 times forward earnings, that's the highest since 1999. that is the risk going forward and that the market will have to grow into its earnings more. >> and, paul, to that point, people still talk about yellen saying that she didn't see anything flashing red or even orange, it wasn't that long ago. i mean, what is the risk every passing day where you see metrics like this continue on this path and she doesn't somehow soften that? >> the real risk here is inflation, and in particular we're watching the guidance, the forward guidance of companies
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that are releasing fourth quarter earnings if they really seem like they're bent on implementing new capital spending programs to increase the amount of capital and equipment available to workers, that should increase efficiency and productivity and help hold inflation in check even as consumers really go to the credit cards and reduce their savings to get that spending in. but if we don't get that kind of capital spending on equipment by the firms, then we may not get those efficiency gains and in that case the spending that consumers are planning an even executing now could turn more inflationary than we think at this moment and especially more so than the fed thinks and this could take you to a 3% plus fed funds rate for 2019. that's where there would be some major repricing. >> got a ways to go before we get there. guys, we'll see what happens this afternoon good to see you both. >> thank you. >> paul and jurrien. breaking news in the media space this morning on the nfl and fox. julia boorstin has that in l.a
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good morning, julia. >> good morning to you, carl fox striking a five year rights agreement with the nfl to broadcast thursday night games which sources tell us the deal is worth about $3 billion. that's up about 30% from what nbc and cbs paid when they split the thursday night games they'll broadcast 11 games between week 4 and week 15 beginning with the 2018 season they'll be broadcast on fox, simulcast via the nfl network and simulcast on fox deportes. they have access to thursday night football and sunday games for fox subscribers over digital platforms including mobile forms. peter rice, president of 21st century fox saying that football continues to be the most valuable commodity for media it's worth noting that ratings in the regular season were down about 10%. the second year of rating decline. live sports are still considered the best place for tv
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advertisers to reach audiences the nfl and fox will work together on the digital partner for thursday night games nfl commissioner roger goodell saying that they have a, quote, tremendous amount of interest. saying there's been unprecedented competition in those bids for digital rights for the thursday night games now that the broadcast package has been formalized, they'll work to secure those partners. they could do a deal of any length carl, that's the next big media deal to watch for those valuable nfl rights back over to you. >> yeah, you know, julia, leslie moonvest from cbs says it is the only way to reach young men. the ratings keep coming down substantially and the prices keep going up. can that just keep happening for the foreseeable future >> well, there aren't that many more of these rights that are going to be available for negotiation for some time, so i think the interesting thing here, david, is that you have to look at the rest of the tv
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landscape. ratings overall are coming down so if sports and football in particular is still a great way to get a bigger audience, they want to go where the biggest audience is. even if overall ratings are down, this is a good place to go you have to wonder how much of the digital component is part of it fox wants to be able to broadcast this not just making it available to people on tv but make sure they also are associated with that big nfl brand on digital as well so it will be interesting to see how the digital piece pans out, but we have to remember, if overall ratings are down, you still want to go with the biggest guy. >> the journal did hint thursday's been difficult from a profit perspective for both nbc and cbs. julia, thanks. we'll see what happens on the digital side julia boorstin when we come back, the president applauds his first year in office a look at the state of the union and what we can expect this year in infrastructure, trade and more we'll talk to jason furman at
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continental resources harold ham both with us stocks at the hour happening into a nice 200 point rally on the back of boeing back in a moment
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the president delivering his first state of the union address last night as you know by now our eamon javers is in washington with details. >> that's right, carl. the president said he wanted to move the nation together and move past some of the divisiveness that's been active
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on the american political scene. he told news anchors that he thought the country had been divided since bill clinton, but he wanted to do something to move past that here's how he described the moment in american history >> this, in fact, is our new american moment. there has never been a better time to start living the american dream. >> the president there expecting an optimistic note he talked about the big agenda items he wanted to pass including an immigration deal and infrastructure plan he put the price tag at about $1.5 trillion bringing down drug prices and he also talked about one of the kea chiefments of his year in office so far. >> in our drive to make washington accountable, we have eliminated more regulations in our first year than any administration in the history of our country. >> carl, the speech was r relatively well received around
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the media landscape. the white house feeling good about it today they'd like to keep the good feelings going through the afternoon. the president is going to be meeting with workers who received bonuses as a result of the president's tax bill that's expected at 2:15 this afternoon. >> let's bring in harold hamm, continental resources ceo and jason furman, professor at harvard university's kennedy school of government, former chair of president obama's council of economic advisers what a night harold, i'll begin with you. we've talked to several people this morning kevin brady, wilbur ross, they make the point that secular stagnation, the new normal we had talked about for so long is not our destiny, it's the result of the decisions made by prior administrations. do you agree >> i do. i've said all along there was so much pent up potential in this country that if you released it, you got rid of the regulations,
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let business go to work, not try to put them out of business that there would be a great response. and we're seeing it. we're seeing it with the market, we're seeing it with consumer confidence, we're seeing it all across the spectrum. >> jason, your reaction to that? >> you know, if you look at the economy, the economy is doing pretty well. it's great to see the unemployment rate so low, but part of the problem we have is the growth in 2017 came from an unemployment rate that fell by .6 of a percentage point. we can't keep lowering the unemployment rate at that rate every year for the next decade we're going to need productivity growth if we want to sustain economic growth. we still got very little of that in 2017. so until we see productivity growth, i have a hard time seeing how we get the 3, 4, 5% growth rates that this administration keeps talking about. >> jason, you know what the answer to the current administration in congress would be well, we just passed this big
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tax plan, let's see if that, in fact, is the thing that propels productivity growth. is that not your bet >> i think the tax cut will be a big stimulus this year $200 billion in the economy. that will help keep our growth rate up in 2018, but, no, i don't see very much additional capital deepening or productivity growth out of it. pretty much the nonpartisan experts across the board have put very low numbers in terms of its long run effect on growth after we get past this year's short run boost. >> harold, do you think if we manage to get an infrastructure plan together that we're going to have to start wrangling with an extraordinarily tight labor market >> yeah, i think the president's on the right path, you know, when he talks about taking ten years to get permitting on one piece -- stretch highway, we've seen that in our business as well where permitting took far
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too long getting rid of regulations and cutting through red tape, it's going to make an unbelievable amount of difference so i think he's on the right path i think infrastructure, we're all aware that that needs to be done in america. we can't just continue with the same infrastructure we've always had. >> harold, what did you make about his comments on drug pricing? he's done this before, largely through twitter, where he's raised the spectre of controls on pricing hard to define he wasn't much more clear last night. >> well, i think we're all aware that prescription drugs are over priced for the most part you know, the protectionism that they have from patents i understand the value of patents in that industry, but you have to have research. you have to have development still cutting down on the cost
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that drives health care. and certainly it's a very important aspect of driving down the cost of health care in america. >> jason, on the idea of perhaps kindling some kind of infrastructure plan, not too much i guess investor confidence it's something of consequence is going to come out of it but would that be the sort of thing that you would think would be the next stage of priority setting for this white house on the economics side can anything get done there? >> look, i think doing something big on infrastructure would be terrific there's a lot of democrats that would love to work with president trump on that. the issue is what it is. sure there's a little bit of scope for speeding up the permitting process there's more that we can do there. we need to put some money into it you're not going to get 1.5 trillion of infrastructure without the government investing more in last year's budget the administration actually cut the highway program and reduced
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funding for infrastructure we'll see what they put in this year's budget, what they propose, but if it's some sort of tax credit for developers that is a windfall for developers and doesn't result in much new getting built, i don't think that's something that will pass and i don't think that's something that should pass. >> harold, don't like to miss an opportunity when you come on to talk a little bit about oil. >> i thought you'd do that. >> let's do that briefly here. we have accelerating gdp growth. oil prices have obviously moved up have they moved up enough to account for what conceivably would be that lack of supply >> well, you know, supply and balancing in the world today and certainly would. a long ways from the bottom of the barreling that we saw early last year, so if prices today are what we consider good in this industry and, you know, that's the range that we can work in, you know, the
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president's energy dominance plan here in america, that's working. you know, we're a net exporter of natural gas we've come from 30% dependence on energy in this country to eight and we will be a net exporter of crude oil in 2020. so come a long way he was the first one that saw energy as a driver of the american economy, and certainly it is. we've added a lot of jobs in this industry. >> do you think you've been a little too optimistic on what you wish shale can do? they were pointing to the eagle and deplace rates and say it's not quite up to the task the permean might be a different story although continental doesn't have a lot of acreage there. >> the balkans, the dmies was over exaggerated it was back stronger than ever the technology has worked better than anywhere else
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we're still in the third innings of the balkan development. our country's drilled 1600 wells. we have 4500 more to go. we're going to be developing an awfully long time. the permit is a wonderful story. sure, these wells fall off the first year, but let me tell you, they will make a lot of oil. so 1.1 million barrels per oil isn't bad in the balkans those are great recovery numbers. >> we're going to find out in a few moments if the u.s. can cross some milestones in terms of domestic production finally, jason, we talked about the speech last night and no reference to the national debt when is a good time to have that conversation especially when the economy appears to be on the tear >> look, next year we're going to have a deficit of about $1 trillion that will be the share of our economy. the largest deficit we've ever had in our country outside of a
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major war or the aftermath of a major recession so the right time to start having this conversation was last year, the year before, the year before that and instead of starting the conversation, we've actually stopped it washington was more focused on the deficit when it was coming down than it is now that it is rapidly going back up and, you know, a year from now, two years from now we're going to be talking a lot about that we'd be better off starting it now rather than then >> a lot to process from last night, guys. thanks so much for your time harold, jason, good to see you both. >> good to see you, thank you. >> good to see you. as we take you to break, take a look at shares of apple as you can see, it's getting a bit of a lift today despite a downgrade. the company also reportedly under investigation by the doj and sec over its slowing of older phones apple says it is in the process of answering questions from the government about that issue. we have a lot more "squawk on
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home building and construction trades cooling off a bit after being one of the best trump trades coming in this year dominic chu is back at hq. with more on the etf spotlight >> mike, it was one of the hottest trades last year plus stocks tied to the housing market have shot higher since the election of president donald trump. they do stand out as one of the best industry beneficiaries as that so-called trump trade that hot trade, yes, it has cooled off one of the places you're seeing is in the ishares u.s. home construction exchange traded fund it's a mouth full. the ticker itv has $2.5 billion in total assets. the etf enters with a six day losing streak behind it. a bigger part of the story has been the sharper move and longer term treasury yields and tied to the mortgage rates nearly every stock held by the fund has moved lower ranging from smaller cap home
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builders like vizer homes and all the way to the fund's bigger holdings as measured by market cap which are home depot and lowe's it's worth noting that the etf has seen a surge in trading volume over the last couple of days trading 6.2 million shares just yesterday versus average volume of closer to 2.5 million. while it did close lower, yesterday, yes, it did, it did manage to bounce off the interday lows and slowly gain ground interest rates no doubt a huge part of the housing story in the coming weeks, but the housing industry overall could also become another measure, a barometer, a tea leaf, if you will, whether that trump trade remains intact today we are seeing some strength in the home trades and this etf back over to you >> okay. thank you. let's send it over now to morgan brennan for a cnbc news update morgan. >> hey, david. british prime minister theresa may in china on a three-day
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trade visit. she attended the inaugural trade in chinese premiere. she sought to soothe concerns over brittain's exit from the european union. >> brittain has long been a country that does business with the world and that's only going to increase as we leave the european union because the goal we're working towards is a new era of cooperation and partnership between the u.k. and the eu. >> french authorities meanwhile have deployed boats and helicopters off the coast of southwestern france to search for the chief executive of quicksilver, pierre anyer, this after his empty boat was found washed ashore. the area is known for dangerous waved prized by surfers. the moon is syncing up with a super moon and a total lunar eclipse. nasa is calling it a lunar trifecta this won't happen again until
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2037 i got a glimpse of it again. it was out of this world that's our cnbc update i'll send it over to jackie deangeles. >> good morning, everyone. the eia just reporting that we got a build in crude oil inventories of 6.8 million barrels. this is a substantial build although it is in line with the averages that we've seen in past years. we've seen declines in our building process here. this is the first build starting that seasonal slow period, but we were expecting a much smaller number you can see that crisis went from about 64.30 to $64 on this. gasoline, a draw down of about 2 million barrels. what was key inside this report, the u.s. production number, 9.9 million barrels a day. that is up from last week. some analysts were expecting to see us cross that 10 million mark it didn't happen this week but it may possibly happen in the coming weeks as well traders telling me the key relationships to watch right now, yes, the fundamentals do matter
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watch stocks closely and also watch the relationship to the dollar back over to you at post nine. >> couldn't quite get to ten jackie deangeles thank you. when we come back, larry kudlow is with us on set talk about the president's first state of the union address with the dow up 192 don't go away. [ click, keyboard clacking ] [ click, keyboard clacking ] [ keyboard clacking ]
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positive tone during his first official state of the union last evening. stocks are rallying today, this after what we saw the worst two-day decline since september of 2016. joining us at post nine cnbc contributor larry kudlow hello, larry. >> david, how are you? >> we had jason furman on the other side of the oil from you. >> they always are. >> i like that about you >> goodman. >> always keep things civil. trillion dollar deficit. obviously i know where you come from are you worried at all about that why isn't it discussed >> well, look. i know my pal jason makes that case now in his administration they doubled the debt from 10 to $20 trillion look, the key to deficits in my view, you've got to limit government, yes, but you also must grow the economy. and the model of growth we had in the prior administration was 2% with a lot of spending and health care and so forth that's not the way -- if you are worried about balancing the budget, that won't do it
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what you need to do to move towards balance or reduce deficits is grow the economy it's the single biggest factor so in my view, because of trump's policies, particularly on the economy and taxes and so forth, we can have 3, 4% growth for a whole bunch of years, and this will do more than anything else to lower the budget deficit. i think that's what's going to happen we were with the president monday, he had a bunch of us in. he was loose, he was easy, he was confident coming off the davos speech this speech last night had the same positive, cooperative tone as davos he basically -- he basic sially wanted to be upbeat and optimistic before we get down to specifics, i wanted to note this, my wife, saintly wife, judy, the artist, painter, he was -- did you notice -- he was extending his arms and palms up -- >> to the right -- >> to his right.
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>> to the democratic side which didn't really feel like getting out of their seat, but he did it several times. i don't know that i've ever seen that before. he's kind of saying join me, these are good ideas these are -- infrastructure, immigration and so forth we can do this let's do it. i'm willing to compromise. "the new york times" headline was unity speaks "new york times. i'm not accustomed to quoting the times but i give them credit for that i'm just saying, he hit the key points by the way, the trade point was very important he did not cause trade war he was not harsh he said free, fair, reciprocal trade, not walking away from that, which i think was worrying the stock market i just think he got it right i agree with jason furman in the long run deficits matter i don't agree with his modus operandi, we need growth and we're getting growth i told the president -- he asked me a question on monday, i don't
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recall what the actual question was. basically he wanted to know about investment i said, sir, in my view, we are on the front end of the biggest investment boom of 30 years and that's going to help productivity because, for example, greg comes on our air, last week i think said 5 to 10% chance he sees ten years average gdp 3%. >> yes. >> unless you get productivity growth and increase in the work force. those are the two things, right, le larry? are those going to happen? >> the supply theory is those things should happen if you put up the capital and the investment and really the heart of the trump program that we worked on with many others during the campaign, new incentives for businesses and investment that is the heart of the program. we're already seeing some very positive developments in the last three quarters about business equipment spending, which is key if we're right, you'll have more capital per worker, you know,
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for training, for example, the best tools and machines. that's productivity. productivity leads to realwage gains, which we have not really seen, just beginning to. investment is demand for labor and higher wages so apple, to go back to that one, which trump quotes all the time, i might add, including in our meeting on monday, my pal, former colleague jim cramer put it very well the other day on this show. he said apple is $350 billion investment plan, which is remarkable -- >> contribution to the economy is how they put it >> he said -- jimmy said, this is a marshall plan for america and i tweeted it last night. jimmy tweeted me back. that's just, in my opinion, a poapocraful of what's going to happen as far as the deficit goes, i
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believe growth will go a long way towards solving it i really do. as a percentage of gdp rates are going to go up loan rates should go up for the right reasons and that may cause corrections in the stock market, i get that, but that's a positive sign, not a negative sign. >> you know, if you actually dial back big picture, there was so much of we did it, look how great the economy is, you wonder if there is really anything more to the economic program here it's more going from american waste land to american renn renaissan renaissance. now the tax man has to do his work. >> well, listen, the tax plan has to do its work. >> as i argued, i'm being honest, with jason furman on "squawk" a couple of times, you had your chance. you did it your way. we're coming in with a new way, all right? i believe it's the right way i believe it's going to work if it doesn't work after four or five years, then we're going to have to sit down and look at the whole thing over again i'm being very honest here i will say this, michael
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couple of positives on that. first of all, the trade story. very important to growth i'm basically a free trader, like a tax cut his rhetoric last night was as modest as it does in davos he didn't say i'm pulling out. he didn't say i'm going to war with china he said i want free, fair, reciprocal there are issues that need to be solved, but i didn't hear hard line protectionism trade war the other point i want to make, one of the most moving moments of that speech was the terrible tragedy of the ms-13 illegal immigrant gangs. we have it here, long island particularly it's all over the place. >> yes. >> that couple, they were crying it was an incredible moment, okay very kind of them to come and share america's grief but also share america's hope i think the immigration reforms, which are designed for american security and safety, and i know sometimes his rhetoric has not
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stayed on that track, but when you look at what he's saying, if we can keep the bad guys out, if we can have a merit system instead of just a family change system, if we can stop these diversity lotteries, you've got to go through certain tests to become an american and he even said he would provide citizenship, which is a concession to the democrats. i'm saying to you, i know you may not agree, but i believe safety and security on the immigration front is pro growth and also the merit-based system bringing in the best and the brightest. maybe we wish they'd stay home and help their own country, but if they want to come here, we want the best and brightest to come here. that is also pro growth. michael, i don't know if you get everything, but his speech last night, you know what, it was almost nonpolitical. he's just saying, look, we all agree. we all agree on infrastructure that's another pro growth thing that can be worked out he wants reforms he wants the public/private
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split, not just the public -- you get your infrastructure, trade, you continue to let the tax cuts roll. i mean, i think it's there i think there's hard work and heavy lifting. >> okay, larry >> i just think the middle of the two parties, you know, look, i said it -- >> we've got to go, larry. >> i love susan collins. one last point the republican party under mr. trump, this may surprise people, has become the reform party of ideas. the democrats right now are not. obama had ideas, i didn't agree with him, but i give him credit for ideas. right now the pendulum has swung. the gop is the party of ideas fwmpt it works, it's going to be great for the country. it's the american moment, david. >> oh, my lord larry, thank you as always larry kudlow. >> thank you. >> it's like a state of the union echo over here. >> it alrely is. when we come back, more "squawk on the street. dow is up 166.
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the biggest names in tech report their earnings this week. find out at trading nation.cnbc.com. more "squawk on the street" coming up.
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as you know by now, it's janet yellen's last policy meeting. steve liesman is in d.c. hey, steve. >> the fed ex pekted to leave interest rates unchanged for the last meeting but they'll likely upgrade their assessment of the economy and continue to signal graduate rate hikes coming as jerome powell takes office in the next several days. yellen leaves his successor a pretty solid economic record to start on there were 9.7 million jobs created. unemployment falling by 1.4 percentage points. gdp averaging 2.5%
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inflation 1.17 on headline year over year. how to get inflation back up to the fed's 2% goal. how much rates should rise if inflation remains low. another challenge, how powell should think about the lofty market levels and process all of the stimulus coming from the tax stimulus the markets went up five times to 1.25 to 1.5%. ten year yield didn't move much. started off high and went low but came back to being 2.70. there it is, 70% on the dow up to 26.076. you can debate at home on who is responsible for that here's yellen when she became the first chair in nine years to engineer a rate hike >> this action marks the end of an extraordinary seven-year period during which the federal funds rate was held near zero. it also recognizes the considerable progress that has
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been made towards restoring jobs, raising incomes and easing the economic hardship of millions of americans. and it reflects the committee's confidence that the economy will continue to
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okay iwatch
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iphone apple. the complex in the yield curve it steep ened recently, it is flat my question to you is if we don't see more inflation or don't hear more inflation talk from the fed, is it a concern, should traders be worried that four increases could cause the middle of the curve to in vermoninvert we moved away from inflationary expectations if the fed says inflation is a problem, we go back to the greenspan could n greenspan conundrum. >> somebody bought me wine called cou conundrum. high deficits don't bring high rates any more. >> not in the same way what we are seeing is the elements that tend to bring
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inflationary pressure. if that changes, then it may move more aggressively >> let's go in the world of fantasy, herecy. prices go down sometimes on technologies and can really effect the overall outlook of generalized inflation in the country. my question to you, if that dynamic stays for a long time, does that change what they tag their policy to? because in essence, maybe they're trying to protect against something as a negative that isn't such a negative. >> called chain weight pricing that's exactly what the fed spends a lot of time doing, looking at what a computer would be worth at the same value, what an automobile would be worth
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and that's the most complex component of inflation because as that changes, spending power for the american, any american or the whole world for that matter adjusts so that's the most difficult part of inflation. that's why i don't think having a specific number that's a target has the same meaning it has over the years. >> mark olson, what an absolute pleasure i could talk to you for like a week >> look forward to it. >> david forba tav, cko you. a lot more straight ahead on "squawk on the street. you know what's awesome? gig-speed internet.
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you know what's not awesome? when only certain people can get it. let's fix that. let's give this guy gig- really? and these kids, and these guys, him, ah. oh hello. that lady, these houses! yes, yes and yes. and don't forget about them. uh huh, sure. still yes! xfinity delivers gig speed to more homes than anyone. now you can get it, too. welcome to the party.
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when we come back, former microsoft ceo and owner of the clippers steve ballmer is with us
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hey. pass please. i'm here to fix the elevator. nothing's wrong with the elevator. right. but you want to fix it. right. so who sent you? new guy. what new guy? watson. my analysis of sensor and maintenance data indicates elevator 3 will malfunction in 2 days. there you go. you still need a pass.
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