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tv   Squawk on the Street  CNBC  January 5, 2016 9:00am-11:01am EST

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months. you know how i used to study chemistry? >> no. >> periodically. >> that was a joke i heard yesterday. i said that's the nerdiest science joke. >> and you love it. all right, everybody. have a great day. join us tomorrow. right now time for "squawk on the street." good tuesday morning. welcome to "squawk on the street," i'm carl quintanilla with jim cramer, david faber at the new york stock exchange. premarkets struggling again. the dow futures have recovered from being down 100 points earlier this morning. shanghai, another more modest loss overnight as the chinese inject liquidity and firm up ute withinhe yuan. our road map begins with the
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selloff aftermath. what experts expect for 2016. >> shares of eli lilly under a bit of pressure after new guidance announced for the year. >> and amazon saying more than 23 million items were ordered on cybermonday, that's a jump of over 40% from last year. >> futures erasing yesterday's losses. stocks looking to shrug off worries of global growth after monday's 7% slide. the shanghai a slight decline overnight. in addition there were reports that they might go easy on this restriction on insider selling once that ban lifts on the eighth. we'll see. >> at 115 the chinese government came in make it clear again, they rule a country. it's not like there's -- you don't go to the supreme court and say we have to back them.
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they came in aggressively. they don't want the market go below 3,000. people can come on air and say that's ridiculous and say knob is bigger than the market. you are kidding me? hundreds of people are killed, executed for white collar crimes in the last few years in china. if they decide to make short selling a capital crime, are we going to stop them? look for that. >> hundreds of people. >> are executed. >> hundreds. >> the chinese do not necessarily release -- it's not like amnesty international gets in there and says that's a capital crime, that's not. you're dealing with a country that doesn't want the stock market go below 3,000, the shanghai. you saw what happened in august of last year, the market went down, they came in under 3000 and bid it up. there's trial and error going on in china. that gating thing that circuit
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breaker, that didn't work. let's try criminal punishment. people think i'm joking. this is the communist government controlling prices. have they -- they control the country. is it so hard to control prices? >> was some discussion this morning that our futures didn't take a dip until europe got started. do you agree? >> i think europe is in a better place. i think europe is okay. i noticed that once again, when oil turned around and went down yesterday, our market got hammered. we're back in the crazy town thing where we must want global tension to raise the price of oil. the market can be wrong. this market is wrong. it's wrong that the market -- that the dow took a header when oil reversed and went down. counter intuitive nature. i'm looking for clues from everywhere. europe seems okay, not great.
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when two federal is reserve peo come out and say we're fine, that narrative collides with a market that was closed yesterday down 7. and we saw they backed down last august and september. this time they're saying -- these people who do come on air -- >> you mean williams and mester. >> those guys who say it's necessary to be independent of the data, but that's not encouraging. it's different from what used to happen. this four and done thing doesn't jive with the weakness we're seeing. i get up at 3:30 because what the heck else is there do? all i see is people talking about the industrial recession. isn't that a great time to raise rates? which we talked about a good deal last year, certainly as the year was coming to an end, that fourth quarter of 2015. i'm having a hard time completely aligning is this idea that we went down yesterday largely because china is slowing
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and that december manufacturing number was a big surprise. the people i spoke to were not particularly surprised by it. 2015 was the year of chain that slowing. that's why the commodities complex collapsed to a certain extent. you look at things like the consumer demand in china, because yesterday i noticed people were saying auto stocks were down because of china. i'm looking at november. granted they did, very importantly, reduce tax on autos, gm's registration grew 41%. >> listen to that, 41%. >> ford's up 32%. very low fwlas for ford. stifwlas for ford. very low base for ford. >> the chinese government is
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trying to get it to be a more service economy. they want it to be like our economy. howard schultz wants to open starbucks as fast as possible in china. why? numbers are so good. go over the nike conference call. china is the driver. they're buying expensive sneakers. we know tim cook's last comment was cell phones are still good. people hate apple now. there's freeport, moran, apple. we have to keep in mind that the chinese economy is just as bad as it was, not worse. the idea that the stock market -- they made a mistake. they decided to put circuit breakers in. they didn't understand the psychology. they've been wrong so often about what their own people do with stocks, they were wrong again. they'll arrest some people who sell short and put the word out that they'll knock on your door and that's what they do. >> goldman's out with a note
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arguing that the statistical case for weighting chinese gdp to manufacturing is surprisingly weak. when you get down to it, it services a economy. >> great call. i think that's a great call, carl. here's something -- let me dazzle with you this -- or potentially dazzle you. >> yes, please. >> often he's wry. does the eye roll. >> i'm tough to dazzle. >> okay. >> give it a shot. >> what's the average wage in southern china per hour? >> i'll go with 7 bucks. >> 8 bucks. >> what's the average wage of mexico? >> 4. >> 4.5. >> i think i just dazzled you. >> you did. >> coming up with that. >> northern china is fine. so listen, they're paying workers more. sketchers says we can't make our
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shoes in southern china, we have to make them in vietnam. the communists have given their people a raise. >> which should result in consumer demand trying to grow, which shows from the auto numbers in november. granted taxes came down on them and nike and starbucks and others. can we stop worrying about china? >> yes, i think we can. i want to worry about other things. i want to worry about industrial america being shut down when you see a cummings so low, eaton so low. only ge has been hanging in. i'm worry about industrial america. >> are you worried about saudi and iran? >> i was going over it with rbn. the amount of oil ready for export in this company. you saw that -- we sold some oil
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to europe. they gave that away. >> yes. >> that was a loss leader. it's like walmart. every day low-price oil. we cannot give our oil away. we want to get in there and say our crude tastes every bit as good as their crude, light and sweet. like diet coke. >> you drank fracking fluid. >> tasted great, like a mcflurry. giving oil away at a big discount, because we have so much of it here. oil should have been up 10%, but it's just a market opportunity for texas. >> unless you heard this morning that oil is correlated to nothing other than global growth. >> i think it's correlated to supply. we can't find a place to put the stuff. they're sending it out of louisiana, sending it out of houston. every grade we have. please buy our oil.
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we'll work for oil. people do not understand how badly we wanted to export and nobody wants our oil. we have some pretty good oil. >> yeah. >> lilly issuing current year guidance below forecast due to charges of a previously announced drug acquisition. the non-gaap numbers will remain unchanged. >> yeah. this is one of those -- the headlines come out. people react to the headlines. people should look at the 2016 pages in the key events which people never get to. why? that's page five. way too far along. in it you will see alzheimer's. alzheimer's. we'll see results in alzheimer's. >> when? this year? >> 2016. yeah. key event. what happens when you see alzheimer's is that people recognize this would be -- once again, no one has a cure for alzheimer's. but if they have a drug on the
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market or they can show you positive results in 2016, are you not going to take this drug? i'm 60, give me this drug. >> i'm going to add it to your l lipitor. >> i can't take lipitor. it freezes my hands, i can't type. >> whatever you're taking then. >> why does the stock go down 2 bucks on the headline then -- people don't look at actual presentation, if they did, they will see stronger u.s. dollar, stronger generic, that's the short-term but talking alzheimer's. >> we should note the stock is not down as much as it was. the foreign exchange rates will be an impact here. eur euro/dollar at 1.07 right now. >> we need 1.09. key events 2016, i need camera
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work here. here it is. number one, bace inhibitor for alzheimer's disease. a this is the page. no one gets to this page because the headline says short fall who needs the facts? >> we'll get to a break. hopefully ford numbers on the other side of this commercial. here at the td ameritrade trader group, they work all the time. sup jj, working hard? working 24/7 on mobile trader, rated #1 trading app on the app store. it lets you trade stocks, options, futures... even advanced orders. and it offers more charts than a lot of other competitors do on desktop. you work so late. i guess you don't see your family very much? i see them all the time. did you finish your derivatives pricing model, honey? td ameritrade.
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big day in the car industry as we get auto sales for december. looks like it's ford's turn. for that we go to phil lebeau in vegas. >> we have a rise of 8.4% in december auto sales for ford. that is shy of the edmonds estimate of an increase of 11%. combine that with chrysler coming in shy of estimates as well, it brings up the question as to whether or not december estimates were perhaps a little bit too optimistic in terms of what people were expecting. again, ford an increase of 8.4% for the month. total 2015 sales up 5% to more than 2.6 million vehicles. guys, that's the strongest annual sales from ford since
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2006. coming up in a half hour we will talk with ford ceo, mark fields, he's here at ces, because ford making a number of new announcements including a partnership arrangement with amazon and greater exploration of autonomous driving vehicles. more in a half hour. >> very g phiood, phil, thank y. >> we're still looking for the first four month streak over 18. this gm news yesterday has the big three thinking they are starting to smell the future. >> how can you not. it's interesting. people wait for someone to tie in with alphabet, chi thiwhich owns the technology. you're talking about the internet, ces, consumer electronics show, the internet is one part of it, the car is
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the other. when you see mainstream outfits like gm get involved -- >> that announcement yesterday from gm with a $500 million investment in lyft was a seminal moment, especially talking about fleets of autonomous cars driving through urban areas. if they're talking about it, they got to believe it's not that far away. i didn't get to see the interview yesterday. >> my question was why would you invest in a company that would harm your long-term sales of new cars, he said it was outside urban centers and it would cannibalize them the least. >> i think the concept of 500 million verses what we were thinking about. all we hear about is criticism, short-termism. they buy back stock. they raise dividend, provide nothing new. here's 500 million from a
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company that many people beso f perceived being backwards. they could increase the dividend, but, no, they're investing in this. either way, this is real. it's not tesla selling 17,500 cars. >> no. no. >> what did you think of bara getting the chairman role? >> interesting. it very much is representative of the fact that the board loves her and not the activist campaign that she was a bad allocator of capital. that activist campaign was flawed to certain extent. >> why was that? >> because i came back many t e times about the directors, how that might divide the board. no research says one way is better or not, split them or
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not. i don't knows there a definitive data set that shows stock prices do better when you split them. >> corporate governance is to split them. you need to check on a ceo in an era where ceos have shown excess. >> if you have a lead director, it depends. >> more of an art than a science that upper tier management structure. when we come back, cramer's mad dash and we'll count down to the opening bell as futures continue to recover after being down more than 100 points earlier this morning on the dow.
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welcome back to "squawk on the street." mad dash for this tuesday. eight minutes before the opening bell. at 11:40 we'll hear from the president, introducing some new potential advancements on gun control. very unclear. >> executive order. >> executive orders in terms of background checks. >> one of the lead stories on the "today" show this morning. there's a paragraph, one inch long. smith & wesson updates financial expectations, and they're talking about a reduced inventories indicating the quart ser sharp quarter is better than expected. any time there's the suggestion of gun legislation -- >> any time there's a mass
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shooting, sales go up. >> yes, because people feel this may be the last opportunity to buy a gun. interesting, by the way. colt coming out of bankruptcy doing some work on the bankruptcy. that may be another offering. there's a scarcity. ruger, smith & wesson, not that many gun plays. when you get good news, the group goes up. >> among the best performers we've seen. smith & wesson up 165%. >> great growth market, scarcity. not a lot of ways to play it. people know the sales -- it sells at a multiple equal to -- almost equal to -- a high-growth biotech. investing in irony? i don't know. just pointing out this is a stock -- on "mad money" this is called about constantly.
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people put together two and two and recognize as the government tries to legislate, people go in and rush to buy guns. it's a winning investment. >> not completely clear what exactly the president will be able to accomplish through executive order, given the legislature seems not poised to do a thing when it comes to -- >> always been threats of -- the president is the constitutional lawyer, tries to go as close as he can on this. feels like it's something he should do in his final year this will probably go higher. david, if they can earn 1.50, which is possible, you know, give it a 20 multiple. 20 multiple on guns, david. >> all right. more on "squawk on the street," a lot of stocks to keep an eye on this morning. five minutes until the opening bell.
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you're watching cnbc "squawk on the street," live from the financial capital of the world. opening bell in two minutes time. after stocks stumbled out of the
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block for 2016 yesterday, we managed to close down only 276 points. last close below 17,000, back to october 14th. that's how much damage has been done over the past few months. >> i think people have to go back to very limited group of stocks that created the whatever performance was generated by the s&p it comes down once again to netflix, amazon, activision blizzard. another brilliant acquisition. >> that stock had a heck of a year last year. >> up 90%. why not. like when babe ruth said about hoover, he had a better year than hoover. the most undervalued major ceo in that gaming and entertainment industry. 17 times earnings. call of duty black ops iii,
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david, don't know if you played it. >> i have not. >> what do you did with your spare time? i know you don't shop. >> it's true, i don't. >> it's big. it's big. it's incredible. now, i happen to be a big fan of tank 2 and what that has done with -- >> what about ea? you like that at all? >> like ea, but disappointed by the "star wars" game. >> my son plays madden mobile. it's complicated. it's about buying players, a whole economy on madden mobile. >> real-life coaches could use some practice in that arena. >> totally true. i know some people who destroyed a team for couple years. i want to point out winners of last year that i think will -- the ones that have won in the top five s&p, activision. that king -- that king entertainment. 30% created immediately and a
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cross multiple. >> let's get to the opening bell. s&p at the bottom of your screen. a bit better than this time yesterday. at the big board, trinity place holdings, a real estate investment and asset company. at the nasdaq, nutrisystem. keep your eye on f.i.t. today, reiterating a buy. >> i heard it was a fitbit christmas for many retailers. people keep confusing the notion of the apple watch with the fitbit. the fitbit is a low-priced health and wellness device that will become a dominant player in corporate america in order to be able to lower healthcare bills. james park has been on "mad money" many times and talked over and over again about the
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idea if you want to lower your healthcare bill you have to show you're doing your best to be able to keep your people in shape. this is going to lead to price discounts for companies that give fitbit. that's a good market. that's not some market for fossil. fossil, fitbit, the sun king has done a good job again, bob peck. >> gopro trying to find a floor here. up 8%. back above 20. >> jpmorgan with some positives. all the oversold stocks yesterday whether it's sunedison, chesapeake, console energy, these were january effect stocks. a lot of tax law selling and then the bounce. every dog can have its day or multiple days if selling was really bad.
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>> other research out today, citi raises jcp to neutral saying it's fairly priced after being cut by a third in recent days. they cut jwn to neutral. >> jwn is painful, that downgrade. the stock was at 74 a few months ago. now 50, off the list. hello, is that value added or tfn? >> thanks for nothing. >> exactly. >> is. >> jcpenney is a call, weather is cooperating with we trail. nothing like this cold weather to clear out inventory. i deal with a mail order shop that gives me numbers. it's amazing, yes, indeed, down clothing, warm clothing, it wakes up the consumer. it's true. >> under armour helped, too. >> let's get to ford. auto sales continue to come out. back to phil lebeau in vegas. >> carl, general motors
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reporting december sales increase of 5.7%. that's greater than the estimate of an increase of 4.6%. for the year, general motors delivered more than 3 million vehicles through its dealers to customers. i can't remember the last time that gm had sales totalling more than 3 million for the year. gm estimates the monthly sales pace will come in at 17.8 million, that should be enough to put the u.s. at an all-time high for the year of 17.5 million vehicles are. don't forget, in 15 minutes we'll talk with ford's ceo, mark fields. lots of news here at ces regarding autonomous drive vehicles, new relationship between ford and amazon and december auto sales. back to you. >> phil, thank you very much for that. people still trying -- people still having a raging debate about incentives, about the effect of low rates on cars
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whether this year will be anything like last year. >> peak auto, peak auto, peak auto. that's what you keep hearing. the demographics of it are good. there's been a lot of pent up spending. average car on the road is 12 years. you could argue peak auto is in sight. if you think the fed will raise in lock step four times, that is an impediment to the deals that the automakers can make. people think people doesn't matter. rates don't matter because they're so low. that's nonsense. my rate, because i happen to be a prime person at a bank, i got a little bit of a boost on how much my cash is did the every day regular guy get it? no. your rate is up but the savings rate is not up. >> we were talking retail before we went to phil. amazon out this morning with
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another press release, promotional in nature. worth mentioning. cybermonday they had a 40% increase in terms of items ordered. 23 million items ordered in up with day. 40% up. they give us numbers on fulfillment by amazon. a lot of merchants list their products on amazon, amazon simply has them sold off the platform, sent from the warehouse to your doorstep. for that they charge a percentage of the revenues. 1 billion items shipped to customers worldwide under the fulfillment by amazon program in 2015. sponsored products by sellers worldwide grew more than 10% year over year. amazon also compete against the same sellers, if they do something particularly well, they go, hey, look at that, source it for themselves and sell it for themselves.
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doesn't team to be keeping customers from amazon saying hey, it is an incredible platform. stock down yesterday sharply. retracing a bit. >> it was one of the best performers in the s&p last year along with netflix and acti activision. you have to think about that guaranteed date -- if you order something from a small outfit, they can't guarantee christmas. amazon guaranteed it. it dent cost that much more. that's the edge. i once tried to buy a costume, and if i bought it from the regular guy, they gave me an open-ended date that would have been too late for halloween. amazon delivered it to me the day before halloween. it was great looking. >> third best gainer on the s&p is macy's.
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the real feel in new york today is minus 3. is this about cold weather finally? >> yes, macy's up yesterday. kohl's was up yesterday. macy's was up. i've been waiting for macy's. terry lundgren is not that bad. if you were going in there, it's like a canadian goosehead, but it's meth b it's better. >> 12 degrees matters. >> it's what you do. i got a pair of gloves yesterday, my hands were cold. >> you are going to return the gloves? >> no nice gloves. >> you can get the warmers, the things to stick in the gloves. >> my gloves are cool. >> i'll take a look. >> maybe during the break. i'll show you now. i got j. crew. the j. crew jacket that was a must. >> is that keeping you warm? >> mickey. look at these gloves.
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look at these. >> those are nice. >> discounted. got these for a song. >> did you? >> let me see those. >> but they didn't keep you warm. if it doesn't fit, you must acquit. >> geez. i'm talking about bargains. macy's will clear out that inventory far faster than people realize, does that mean a great quarter? no. but should the stock be at 35? we delivered macy's -- alph alpha, 72. did not split 2 for 1. >> no, it didn't. >> tom brady calls terry lundgren and says what should i give my offensive line for christmas. yeah. >> sweet guy. >> amazing. >> fantastic. >> i'm jealous of tom brady. >> i think a lot of people are. got it made in the shade. >> he does. do you think there are things in his life that are bad?
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>> yes. >> don't be jealous, there's something bad. >> there's something, trust me. >> is there nothing bad? >> something. >> maybe the seahawks. >> bob, the dow up 21 points this morning. good morning. >> good morning. a lot of volatility overseas, china and europe. we're up modestly, but the important thing is oil is not bringing the market down for the moment. over in china, a lot of movement. shenzhen down 1.86%. significant buying going on here, everybody believes the state back funds were intervening to buy shares. more importantly the statements from the securities regulator, the sales ban we talked about yesterday that was to be removed on friday will remain in effect. that's had a calming influence
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on the markets, and even more importantly the regulators will examine the circuit breakers. 5%, 7% halts the market for the day. those bands are too small for a market as volatile as china. they need to be widened. there's already indication that they're looking at that. germany swung in a 2% range from the top to the bottom today. initially they gapped up, sold off immediately. then they rallied in the last hour. our futures rallied at the same time. 2% swing from the top to the bottom. volkswagen did get sued by the department of justice alleging it installed illegal emissions to defeceive devices. practically cut in half in the last year. here in the u.s., not dragged down by oil. not yet at least. healthcare, consumer discretionary up, energy on the down side.
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high beta stocks and sectors doing well. brazil, steel, and biotech stocks on the upside. that's interesting. more risk on today. retailers -- an interesting call from citigroup, nordstrom downgraded by them for high inventory. jcpenney was upgraded, just because it's been down so much. down 30% the last six months or so. hardly a big reason to go out and buy jcpenney. and questions about what we have when we have a big down day yesterday. we asked our partners at ken shaw and the month following is not bad at all. this hangover doesn't last. only five times since 1980 we saw a big down day like yesterday. one month later the nasdaq traded up 80% of the times. the s&p 500 up an average 3.7%.
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the past doesn't guide the future, but the important thing is in -- what we've seen in the past is the numbers definitely are on the side of the bulls. guys, back to you. >> thank you very much. let's hop over to the bond pits and rick santelli. good morning, rick. >> good morning, carl. treasuries yesterday may have given the world a clue. they certainly didn't seem to find enough buying to push yields down. look at a one and two-day of tens, keep in mind that this is the 17th session, almost 3 1/2 weeks when we closed in a range of 219 to 230. look at november's start, you can pick it out. look at two etfs, hyg going back to '09, it did have activity yesterday. didn't revisit the lows. lqd, closer to the lows going back to '13. you want to watch these markets during equity volatility to assess what the damage may be
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down the road for credit markets in 2016 two-day of the dollar/yuan, yes, the yuan is higher. the dollar is a bit lower. still in the neighborhood of april 2011 since we were at these relative levels on those two currencies. last chart, dollar index getting ready to test 100, a big technical area. carl, back to you. when we come back, ford's mark fields vegas. dow is up 27.
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ford posting the best monthly sales data since '05, marking the strongest year ever for auto sales. phil lebeau joins us from ces with a special guest. >> thank you very much. i'm joined by mark fields, ceo of the ford motor company. let's talk about december sales before we talk about amazon, autonomous driving.
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strong month. are you seeing resistance from the consumer in terms of pulling back just little bit? >> we are seeing strong demand for our products, particularly new products. we had a strong end to a strong year driven by suvs, pickup trucks, our fusion and commercial van. it's been a strong year for us and allowed us to be the best selling brand for the sixth straight year. look at f series, in december we sold over 85,000. it's a smash hit, we're seeing great response from consumers. >> how much of this is the consumer saying i will pay up for technology and new advancemen advancements, especially with connectivity in their vehicle, because they're used to it with their phones and at home. >> it's a big piece of it, but at the same time consumers want great vehicles, great quality, great safety and fuel efficiency. we're delivering that for them. at the same time they're saying
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i want smart technology. that's why we're investing so heavily on that growing our technological enablers in our vehicle that consumers are willing to pay for. >> you made the announcement last night regarding the deal with amazon, along with different endeavors you're pursuing out here in technology. let's talk about this deal with amazon and what it opens up in terms of amazon echo and what ford owners might be able to do in the future. >> the reason ford did this is to make peoples lives better. we're using ces to show how we're accelerating our transition from an auto company to an auto and mobility company. if you look at internet-enabled devices, smart devices in the home, more and more and are buying them. we want to incorporate ford vehicles to empower people and give them convenience that they
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get in a ford unlike any other. >> so many of the headlines from the last two weeks, the suggestion that you guys were going to strike a deal with google to build autonomous drive vehicles. you're in talks with all of the tech companies. where do things stand regarding ford saying -- whether it's with google, apple or anybody else saying we will build the vehicle, you supply the brains, so to speak? >> our approach is straightforward, we want to grow our core business, designing, manufacturing, selling great cars, trucks, suvs, electric vehicles but also growing in the mobility services market. whether we do that on our own or whether we do it with partners, we'll do it in a way that satisfies consumers, creates value for the company and enhances our brand. >> jim has a question for you. jim, go ahead. >> mark, we've been debating -- happy new year, good to see you. >> happy new year, jim.
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>> we've been debating the notion of china, and how weak it really is. ford is off a low base, but the numbers have been spectacular. you can venture any sort of thesis about why we all think china is slowing so badly and your numbers which were spectacular? >> you have to put china in perspective. they were going from investment led to consumption led. there will be some volatility during that. when you look at their gdp that is services and consumption led, that's growing. that's a good sign. as it relates to the auto business and our business in particular, we launched ten plants since 2010. our share is growing. broadening product line. when you look at the industry this year it will be helped by the consumption tax reduction that the government put in place in the fourth quarter of last year. we're still bullish.
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we have a lot of confidence in the china market but it will go up and down. >> i think you've done a terrific job and keeping the stewardship of how ford has been doing. this week five years ago the stock was at 18. it's dramatically lower, but you've done so many good things. what am i missing? what is the market missing? or is it because of latin america, europe, it doesn't matter what you do in the united states? >> it's an important topic. from our standpoint, jim, we looked at the elements that drive value in the company. it's about revenue growth, about operating margin expansion and about making sure you have a healthy dividend. we're focusing on each one of those things. delivering on each thing, we hope at some point over time the market will realize that. those are the key elements. we'll stay focused on those elements. >> mark, one final question. so much discussion about whether or not we're near the market
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top. in terms of the u.s. auto sales, when you look at 2016, '17, '18, where do you see the industry as a whole? >> this is a big topic. the next couple of years will be pretty good for the auto industry. '16 will look a lot like '15. the elements of that are look at the economic elements, look at the health of the labor market, wage and income growth, even the latest interest rate rise by the federal reserve, very gradual, that's also an indication that the economy is doing well. when you combine that with looking at the inventory of the cars out there it's the owedest it's been. over 11 1/2 years old, in nerve given year the industry is driven by natural replacement demand and housing below peak levels and how that relates to the full-size pickup segment and how old the pickups are, that bodes well barring economic orifice cal policy shock.
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>> ma official policy shock. >> he said i'm overdressed. up dressing on the air because of the ceo. >> thank you very much, phil lebeau out in sin city. we'll get stop trading with jim in a minute. "squawk on the street" will be right back. we are in the age of ageless.
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stop trading. >> ces is always big. what have been the stars? harmon, we'll have them on later. i think apple should buy them. nvidia, yesterday, the chip company for best graphics. i can't believe intel didn't buy them when they had the opportunity. this company was the fourth best performer in the s&p and i think it can do it again. it's already beaten estimates twice and there's two more times coming. >> jim, what's on "mad" tonight? >> i'm reviewing the s&p, i'm going after the worst five and the best five. the worst five is the stuff of -- i don't know, rodney dangerfield group of -- there's no respect.
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but maybe they don't. it's back to school with those. sam kinison, remember that? >> yeah, i do. >> when you said i'm reviewing, reminded me of fagan and oliver. ♪ i am reviewing >> he shocks me. "house of cards" is better than big short. >> i was tweeted something about that. people are asking me about that. >> i will get "house of cards" back on. >> he reads my mind. >> yes. >> it happens. >> "high castle" for amazon, and cnbc does "house of cards." don't pass on jessica. >> i won't. >> we'll see you tonight, "mad money" at 6:00 p.m. when we come back, dallas fed president richard fischer. me, too, but the eulogy that frank's daughter gave was beautiful.
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good tuesday morning. welcome back to "squawk on the street," i'm carl quintanilla with sara eisen, simon hobbs and david faber at the new york stock exchange.
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stocks trying to get stability after that inaugural drubbing to kick off 2016 yesterday. dow down 11 points. >> here's our road map for the next 60 minutes. stocks strugging to recover from yesterday's selloff, but worries about global markets persist. what you should be doing now with your money. >> and u.s. auto sales are expected to hit an all-time high in 2015. will it happen? we'll break down the numbers. >> and is it the time to buy bank stocks? >> coming up later, former dallas fed president richard fisher will join us live, he'll tell us why yesterday's selloff was not as simple as concerns about china or the middle east. >> a roller coaster session in asian markets. stocks ending the day mixed after huge losses and panic selling in china. cnbc's eunice yune yoon has
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more. >> the central bank injected 20 billion dollars in the banking system, and there was stalk that state funds were in on the action buying up shares. the chinese media had big headlines to calm investors, such as don't over react, this is normal. unfortunately it did not have the desired effect on many stock market investors. speaking to some of the average chinese investors. the thing that came up was that people were worried about another stock market crash. there are several factors they were citing. one was that they become much more sensitive to bad economic data. they're worried about the actual state of the economy. much more so than ever before. also they pointed to the weak currency, equating weak currency with economic weakness. the third point is that people were concerned that the government would withdraw support, what they saw as
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crucial support for the stock market such as a six-month share sale ban which was put in place by the government over the summer. that will expire on friday. a lot of people here are worried about the impact it will have on the stock market. even though the government did say they would manage the exit of any large shareholders or executives. still one thing interesting, sara that came up with one professional that i spoke to, he said global investors should get used to this type of massive volatility. he thinks there will be mini plunges like this every other month. >> that's comforting. thank you. eunice yoon reporting for us from hong kong. for more on the roller coaster markets, let's bring in the head of china research from evercorp. it's not 100% clear what chinese government is doing here in terms of strategy. they stepped in to calm things down. you are well-sourced. how do you see their efforts? >> i think the first priority
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now is to calm the markets. i think they were quite clear they we before the open. they put out an announcement saying we will review in our due time we will change these rules on the insider selling ban. it was a don't call us we'll call you announcement that should have cleared it up to some extent. we knows there not a precipitous avalanche of stocks for sale. we they also said a statement that they were going to review the csi 300 circuit breakers that they put in place beginning monday. both of these things, i think, should put two of those issues aside. there's the question about how well the economy does.
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that's quite frankly a different matter. >> do you get the sense on these efforts to sure up confidence in the stock market that they will be able to effectively use the tools that they have to not let things get out of control, prevent disorder but also not to prop up valuation there's artificially? >> no, they have plenty of tools at their disposal. one of which is to continue to buy selective securities if and when they so choose. that decision was made last july 4th when the market rout was well underway. they have not really changed that. they do more or less as they see fit but you need to realize this is a market dominated by the state. >> donald, let me interrupt you. we're getting auto sales numbers, this time from toyota. we go to phil lebeau once again.
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>> we have an increase of 10.8% in the u.s. that was shy of estimates of 13.3%. what we're seeing now essentially from the automakers, strong sales for december but not quite as strong as analysts were expecting. toyota up 10.8%, shy of the estimate of 13.3%. >> thank you very much, phil lebeau. back with donald straszheim. merrill lynch sees a 30% decline for the chinese stock market this year. what about you? >> i think this will be an up year. last year was a roller, mania until may. complete collapse. intervention on july 4th. pause and then rallying into the
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end of the year. the economy doesn't look great. but it's gone from all bad to mixed. they have done a lot of monetary stimulus, a lot of fiscal stimulus. they weakened the currency to lift the economy. equity interest will return and it will be an up year not a down year. >> at what point did the world change? people used to come on the television and say they believed in free markets. i don't know whether the fed and other central banks killed that off. you talk about china for the last year. for the last two years they're still up 55%. you can argue what's happening with the stock market is almost completely divorced from the economy. there's an argument saying let it go. let the chinese market go, and people here don't worry about it. it's completely disjointed from every other thing we need to deal with here. and arguably we shouldn't have sold off as we did yesterday. what say you?
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>> i would say you're not going to learn much about what you ought to do in terms of u.s. equities, european, japanese equities by watching the china markets. they broke the market, as in broke on july 4th to try to prop up prices. that's not how markets work. it's a government operation now. it's not a market. there's a lot of truth in that part of what you said. >> what about beneath the surface, donald? you brought up the economic question, and eunice said there are concerns, that's why people are watching the currency. and warnings of the massive explosion of debt over the last two years and the fact that may end now that the fed has begun to tighten rates. are you worried about bubbles bursting in china, defaults and that hurting the economy. >> the biggest problem that china what is this ongoing rise in debt and leverage. they have kicked the can down the road to borrow the western
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expression, worrying about to prop up the economy. bigger deficits, bigger debt in order to lift growth in 2016 and we will worry about 2017 and 2018 when they arise. many of these other problems in china, housing, old, inefficient enterprises, those don't have systemic risks associated with them but the debt issue does. >> donald straszheim thanks for weighing in. >> you're welcome. when we come back, the new year not being kind to the markets so far. art cashin will help us navigate it all.
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stocks are struggling to recover today. art cashin is director of floor operations with ubs and joins us at post nine. good morning to you. >> good morning. >> not very pleasant is how you described yesterday's action. >> certainly was not. >> yes. >> i think we'll have a bit of a bumpy road today. watching oil closely. that's back in the catbird see the. we'll be watching some currencies. that will be what i think moves
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things. as i said yesterday, the concern in china as far as i was concerned had more do with this currency than that number that came out. i think chinese government and the authorities tried to settle things back up. i'm not sure. one last minute plug, i had told simon and sara last week that tax strategy would have people wait until the new year to take profit in the f.a.n.g. stocks, and they got hit. >> why wait the extra days? >> if you took profits before new years, you would be paying in april your taxes. if you took it after new years, you're a year away from april. >> your note today argues crude moves back to center stage. is it just like this was? >> i think it will be.
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it will be an interesting testing area. getting some negative on the crude price, actually from the flooding, which is closing down some refineries temporarily. that leads to more of a glut, as they can't be processed. might be a bit of a bumpy road. >> i'm looking at that chart. you don't think that's a similar year-end story about people covering shorts in the oil market which sent it higher towards year end and taking profits on that before year end? >> again, the strategy if you have profits is hopefully to keep them into the next year. if you have losses, you want to take those last year. that's what you saw some of the beaten up areas got punished again. >> watching auto sales trickling out today. they're strong. set to be a record rate. but it is a busy economic data. we get the services numbers tomorrow, the fed minutes and the jobs report on friday. it's a tale of two economies.
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>> it is that. you people and others have remarked the atlanta fed projections for the gdp is below single digits now. i think it will be interesting to read those minutes. i think there's going to be real second thinking up at the fed now. >> williams and mester seem cool with what they did, china not going to factor in the decision, neither will stocks. do you buy what you heard over the past few days? >> give it a couple weeks. it's nice to put a brave face out there. we'll see what the payroll numbers look like at the end of the week. >> that's the point. that's one of the two things they target, and payrolls could be strong. >> and they might not be. >> they might not be. >> art, good to see you. >> my pleasure. when we come back, 2015 setting up to a record year for auto sales. find out what it means for auto stocks and if the momentum can
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continue into the new year.
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welcome back to "squawk on the street." first solar shares are higher. goldman upgraded shares to buy from a prior neutral rating saying the stock is one of the top ideas of 2016 citing a best in class balance sheet. the stock asking 70% over the course of the last year tacking on to those gains in early trading today. ford, chrysler and toyota's december sales came in a bit below expectations. gm beat estimates. so were december estimates just too high overall? phil lebeau is live in las vegas. there were high hopes heading into this number. >> very high hopes. i do think those estimates were too optimistic in terms of what we expected them to post for december. toyota up 10.8%. you have ford up 8.4%. gm almost 6%. chrysler up more than 12%. all of those are solid numbers for december.
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the problem is that many of the analysts out there were expecting even greater sales in the month of december. we'll talk about the overall sales pace in a bit. when you look at the month of december, a couple things stand out. first of all, the sales rate will be at 17.7, 17.8, that's the estimate now as we look at numbers coming in. the transaction prices, this is getting a lot of attention, over $33,000 for the month of december. that's about 20% higher than where the industry was in terms of transaction prices back in 2008. so we continue to see growth in terms of what people are paying at a dealership for a new car or truck in terms of annual sales pace, look at this wall here of the annual growth in auto sales. what you see is that we are on pace for 2015 to come in at about 17.5 million vehicles. if that happens it will narrowly eclipse 2000 when the record high was 17.4 million vehicles.
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we'll have the total number a little later on today. as you look at shares of automakers, most of them moving lower today. gm moving down the most of any of the automakers. the bottom line is this, december was a solid month, maybe not as solid as analysts were expecting, but overall a solid month. >> more on that move in the stock. it has been surprising to see in a year in which we saw record sales, both gm and ford finishing the year lower. if you zoom out the chart further they have not gone anywhere. is it all on the idea this is the peak, the fed is raising rates, that will choke off loans. the forecast is that some of the strength should continue. >> it's because of all those factors that you mentioned. you look at the profit margins posted by the automakers. gm is well above 10%. it's expected to stay there.
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you can't ask anything more of these automakers in terms of saying what can you do in terms of returning investment and posting better numbers. they have been doing that in north america. if we are at peak, i investors are saying i don't see it getting better from here, and i'm not optimistic about china. >> let me ask you about volkswagen, vw. the head of the vw brand will address ces and then on to detroit. last night the doj filed this suit, potentially $90 billion in damages. nobody thinks it will get that far, but it's a big number. there's a house in europe today that put volkswagen on the sell recommendation, specifically because they believe that the authorities in this country will use what vw did wrong to weaken its position in the north american automotive market. is that a shared belief among
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executives that you talked to? >> no. >> in an environment where tesla is writing letters suggesting they should be forced to do electric car manufacturing. >> i don't believe the regulators will use volkswagen, what's happened there in order to weaken volkswagen in the north american market. because volkswagen is not really a player in the north american market. their sales here are about 300,000, 400,000. that's in a market of 17.5 million. they never got their act together in north america. that doesn't dismiss what's being alleged in terms of the emissions fraud. i think the reason you'll see this be particularly tough for volkswagen is because the regulators are looking at this saying we want to make them an example of what happens when you deliberately lie about emissions. that's the reason they'll come down hard on them.
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>> phil, thank you very much. straight ahead on the program, financials were one of the hardest hit in yesterday's big selloff. so is now the time to buy the banks? barkleys thinks yes.
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good morning, everyone. i'm sue herera, here is your cnbc news update. french president hollande honoring 17 victims killed in
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islamic extremist attacks on satirical newspaper "charlie hebdo" last year. family members joining hollande near the building. at least 17 people were killed when a bus was set ablaze in a suspected arson attack during morning rush hour in northwest china. 32 people were taken to a local hospital where three later died from their burns. police are hunting for the suspect. in the latest nbc news survey monkey weekly poll, donald trump and hillary clinton maintain their size be leads over their competitors. trump leads ted cruz 35% to 17%. clinton tops bernie sanders 53% to 23% margin. l.a. seems destined to get an nfl franchise for the first time in 21 years.
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owners are expected to vote next week on allowing any one of three teams to move. currently down 53 points on the dow. stocks are stabilizing after the turmoil that china seemed to spark yesterday and the major sell o selloff during the course of the day. let's bring in gina martin adams from wells fargo securities. welcome back to the program. >> thank you so much for having me. >> did anything change yesterday? clearly sentiment is quite fragile for us to have done what we did around the world yesterday. was there any fresh news, something substantive that came out of china that should change our opinion? >> no, not really. we had a tenth consecutive month of contraction in the chinese manufacturing sector, but like i
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said, it's been ten consecutive months. not a huge change there. in the economic data in the u.s., it was a bit weak. a second consecutive month of contraction in the ism manufacturing sector could be more worrisome. i think yesterday was sort of classic confluence of a lot of negative events and the first trading day of the year which tends to be more volatile than the rest of the year any way. >> i ask the question because i think this is an important point for many people about how 2016 will be. with the volatility we will find no real reason we overshoot and that's your buying opportunity, whether it's jpmorgan, expedia, the airlines, the f.a.n.g. stocks, you have to be fast and use yesterday as an example generally in order to make money. would you agree that's the tenor for 2016 as we see it now?
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>> you know, quite frankly that's been the tenor for about the last year. i don't expect that to change. you see panic days occur, then the market bounce backs, makes its way higher after the panic. unfortunately we have not found our next leg higher. it's this longer term trading range. you take advantage of the panic days on the down side to add to some of your core longer term holdings. until we can push back past our spring highs 20615, the market broadly seems to be stuck in a range. you have to play your spots carefully. some are doing very, very well. technology, discretionary are core holding. >> stay with us, laura rosner is joining us now. we were talking about what happened yesterday, why the markets fell out of bed. where are we now, do you believe, on the strength of the economy here? i know the manufacturing data was weak again yesterday.
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what will we learn on friday with payrolls? >> so, great question. we should learn that hiring in the u.s. is holding up. outside of manufacturing the economy remains resilient. i think the sorts of scares in financial markets are something we have to get used to. the rest of the world is going through a transition. the growth outlook is there, so there are moments when we have the rumbles in markets, hiccups, that will cause volatility this year. >> i think the question is how much volatility is going to actually end up hurting the economy? hurting confidence? people say -- strategists say the u.s. stocks will be okay. we're not in a recession. then it becomes a self-fulfilling prophecy where volatility abroad can hurt our markets and dent confidence. >> i agree with you. u.s. equities in particular are really create cal.
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they influence confidence. we can't see a large correction, but i think it's to be expected that we see some deflation in asset prices as the fed is tightening monetary policy and against this back drop of slower global growth. the question is really how quickly does this occur? is this a soft landing or a more pronounced slowdown? our expectation is more of a soft landing. we have the fed hiking three times in 2016. particularly because of these pi hiccups. >> let me ask you about u.s. equities in particular. overnight citi has gone under with u.s. equities, saying the global bull market is tired, old, but not finished. but you would make more money in europe and japan. where you are on this equity market in particular?
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>> you can still be fairly constructive on u.s. equities. you do have to pick your spots carefully. it's clear that the u.s. is the most advanced in their cycle. european equities outperformed, evenequities outperformed u.s. markets. that doesn't mean, though, that you want to underweight u.s. equities. you don't want to stave the strongest growing economy in the developing world, just pick your spots more kaurfully and find quality companies that are fairly sheltered from rising interest costs, can produce some degree of growth and have reasonable valuation. it's the rising tide of no longer lifting all boats but there are still some quality fast running boats out there. we want to link our story to those. >> i guess the fundamental
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question is whether we can see earnings growth return in 2016 to see stocks rebound. can we see respectable growth as many wall street strategists do predict which is why they see modest gains for the s&p? >> we expect moderate growth. we are about 2% in 2016. the consensus expects much higher growth, 2.5%, some people above. we think consumer spending is likely to slow as real income growth slows. we're a little bit more conservative, but 2% is still enough to really make gains in the labor market. and it's enough for the fed to continue hiking gradually. not a stellar year, not a sunny year, but good enough for this hiking cycle to continue and for the expansion to continued. >> sounds if you might be underweight u.s. equities, laura, to the point we're making. okay.
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let's leave it there. thank you. when we come back, former dallas fed president richard fisher weighs in on why he thinks it's more than just china worrying investors right now. "squawk on the street" will be right back.
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welcome back to "squawk on the street." as the markets struggles to hold on to gains, utilities and energy stocks weighing the most on the s&p 500. the two worst performing sectors. utilities lost more than 8% last year as a sector. took the number three spot for worst performing sector after energy and materials. today the sector is down nearly 1%, dragging it down names like
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energy, exelon, entergy and fir firstenerg firstenergy. >> thank you, dom. broadly u.s. stocks are lower after yesterday's brutal start to the year. a muted open after a dramatic plunge yesterday. while much of the blame is being placed on china, our next guest says it may not be quite that sim. . richard fisher is former dallas fed president and a cnbc contributor. good to see you again. you think this has do with the fed? >> part of this has do with concerns about growth, whether china is leading indicator or not. i think we have to bear in mind that what the fed did, i was part of that group, we frontloaded a tremendous market rally starting in 2009, march of 2009. it's sort of what i recall the reverse whimpy factor, two hamburgers today for one tomorrow. i'm not surprised that almost
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every single index that you look at unweighted was down significantly. all the other indices were down. in terms of the ten-year bond there was almost no movement for the year. basically we had a tremendous rally. i think there's a great digestive period that is likely to take place now. it may continue. again, we front-loaded at the federal reserve an enormous rally in order to accomplish a wealth effect. i wouldn't be surprised at what's happening. i wouldn't blame it on china. we're always looking for excuses. china is going through a transition. what is new there? there's no news there. >> well, a 7% plunge in their market is a scary thing to wake up to. >> but bear in mind, i've been going to china since 1979, i negotiated for the normalization of our commercial claims against each other and closed that deal march 1, 1979. i think i have a bit of
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experience in china. i invested in china for a period of time. the shenzhen and shanghai are basically domestic markets. they're trying to manipulate those markets as much as possible. jim cramer was right on this morning in terms of the force they use to prevent real animal spirits from emerging. the real issue there is their underlying economic transition, the markets are not correlated with that in china. they're achieving it. takes a while to transition from poorly run enterprises, bad credit system to quality in consumerism and profitabilitypr. this will take some time. i don't think there's news there whatsoever. again, analysts are always looking for a tripwire. the fact is we had a great market movement since 2009. it will take a while to digest this. i wasn't surprised last year and i wouldn't be surprised for a
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fallow performance this year as well. >> how ugly will it get? yesterday the dow was down 467, everyone was trying to figure out why? does the chinese stock market really affect us? if you see this as a big unwind from fed policy which fueled a 6 1/2 year bull market, what does it look like on the way down? >> i was warning my colleagues don't go wobbly if we have a 10%, 20% correction at some point. the market is still overpriced. everybody you talked to all morning long from byron on had been warning that the markets are heavily priced. not having the kind of top line growth we would like to have. late in the cycle. things are not cheap. all the managers i talk to in my role at barclays, it's quite a few across the world, a lot of people are building cash positions. the race traders are different, but i'm talking about the long investors, those taking a longer term view are being extremely
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cautious here, raising cash levels, are nervous about the valuations in the market and they realize the old dictum from warren buffett, price is what you pay, and the values are richly priced here. i could see significant downside. i could see just a flat market for quite some time. again, digesting that enormous return that the fed engineered for almost six years. >> richard, this digestive period, does it usher in an era where assets can't perform in the absence of accommodation? is there something new about this or the same old cycle regarding equities and range? >> i don't think there can be much more accommodation. the federal reserve is a giant weapon that doesn't have ammunition left. what i do worry about, it was the fed, the fed, the fed, the fed for half of my tenure which was a decade there. everybody was looking for the fed to float all boats.
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in my opinion, they got lazy. now we go back to fundamental analysis, the kind of work that used to be done, analyzing whether or not a company truly on its own is going to grow its bottom line and grow its shareholder value and price accordingly. not just expect the tide to lift all boats. we will find out indeed when the died recedes, we'll see who is wearing a bathing suit and who is not. we're beginning to see that. you saw that in junk last year. even in the mid caps, you saw it in the s&p stripped of dividends. on an unweighted basis you had a negative return. the only asset that returned anything last year, if you take away dividends, believe it or not, was cash. 0.1%. that's an unusual circumstance. this has been an absolutely extraordinary interview, for you to come on here and for you to say i was one of the central bankers who engineered the frontloading of the banks, we did it to create a wealth effect, then go on and tell us with a big smile on your face
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that we're overpriced, which is the word that you used in the market that there would be digestive problems. you are guys going to take the wrath if there is a serious correction? will you say i'm sorry, we overweighted the market which is a logical conclusion from what you said in the interview. >> i wouldn't say that. i voted against qe3. there is a reason for doing this. let's be fair to the central bank. we had a horrible crisis. we had to pull it out. all of us unanimously supported that initiative under ben bernanke. but in my opinion we went one step too far with qe3. by march of '09 we had bought a billion in securities. the market changed that first week in march. to me, that was sufficient. we launched the rocket, yet we piled on with qe3, understandably worrying -- the majority at least, that we might slide backwards.
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you have to be careful here and frank about what drove the markets. look at ul the interviews you had over the last many years since we started the qe program, quantitative easing, and it was the fed, the fed, the fed. the european central bank, the japanese central bank, what are the chinese doing, all quantitatively driven by central bank activity. that's not the way markets should be working. they should be working on their own animal spirits but they were juiced up by the central banks, i including the federal reserve. you have to acknowledge reality. >> we're totally out of time. one word answer. the fed forecast for rate hikes this year. the market says it will be half of that who will be right? >> i thought john williams interview was right yesterday. i'll bank on that. >> if the fed goes through with their forecasts. richard fisher, always a pleasure. thanks for joining us. >> thanks so much. with that, let's send it over to rick santelli at the cme group in chicago for the
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santelli exchange who i'm sure enjoyed that interview. >> i like simon. simon, you go, guy. that was a good interview. one of the big topics on this trading floor outside of china yesterday was puerto rico. i have jim spioto here, he is my muni guy. let's talk puerto rico. we had governor padilla on yesterday, you are using the same words he used, resolution. litigation takes dollars away from puerto rico and investors. they're in quite a pickle what type of resolution do you see on the horizon? >> they need a solution, a recovery plan, they need to reinvest in puerto rico to make sure the services and infrastructure will attract business, jobs, create new employment opportunities for their people. the real problem for governments in financial distress is that they need more revenue. more revenue means more jobs, more business stimulation.
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so you're saying paying off their obligations is important. but if it takes all the juice out of the economy, rawhat's th point. you gave me a statistic that blew my mind. the participation rate in puerto rico is about 40%. what does that mean when you ponder that relevant to the resolution? >> the solution has to be in creating new jobs, increasing participation in the work force to the 62% that the u.s. enjoys. that will help them help themselves. >> now, d.c. is -- has been in the past in a similar circumstance. maybe you can tell our audience about the situation. >> we have had in the past other troubled situations. >> that weren't states. >> right. such as d.c. in 1995. what they did was they set up a
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financial control board that provided supervision and encouragement for doing the right things, making sure your budget practices are that which you can afford, not that which you hope for. to make sure that dreams don't exceed realities of the circumstances and that they create a situation of recovery. they also refinance the debt. if you refinance the debt at a lower cost you can significantly reduce the ongoing cost of debt. the issue of we have to reduce debt, that's not necessarily meaning that you have to take a principal here. if you look at the sovereign debt restructurings over the last 60 years, those with private debt, not intergovernment debt, the reductions were only 30% of them. 70% were stretching them out or finding terms or a payment that would work. >> jim, it's been a pleasure. as this continues to wave through and congress votes to see whether they can go through
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bankruptcy, i want you to come back and explain some of these outcomes. >> my pleasure, rick. >> up next on the program, it was a rough end to the year for some of the large cap bank stocks, all
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voila. remotes, come out from the cushions, you are back. the x1 voice remote is here. >> big banks still reeling after the epicenter of the selloff. jp morgan leading the pack. down almost 5% for the week. some analysts are saying now is the time to buy large cap bank stocks. swrason goldberg is amongst the senior analysts of barclay's. welcome to the program. >> thank you. >> some of these banks have done really badly over the last month. morgan stanley down 10%. bac, citi, down 7% or 8%. what changed? what was the fear? that the fed couldn't raise rates and the margin wouldn't rise? >> banks trade with the global economic environment so, clearly there's uncertainty where's, china is in the news of late and that tends to weigh on the stock. i think looking out for the course of 2016, the fed raise in
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december, it's going to raise, we think, several more times throughout 2016. i've been covering banks in the for 20 years now. margin advisory only gaub up in three of those years. if the fed continues to raise rates, market should expand in 2016 and 2017, and they think that will accelerate revenue growth and earnings growth. >> that's the big if. you know, this network is now full of people saying the next big conversation will be whether the fed can actually hike, what is it, four times during the course of the we're. maybe they'll get one. maybe they'll get two. does that not undermine your call? >> no, not really. i mean, banks have been operating at a low interest rate environment for several, several years now, and against that back drop you see them control cost which is we think they'll continue to do. you've seen decent growth which continues in 2016 as well. even on only a couple of hikes we'll get more and the user operating environment for margins go down. additionally, we feel like we're a lot further along in terms of
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adapt i adapting we think both the case for earnings growth to accelerate as well for multiple to expand as the environment becomes more conducive towards large cap financials. >> citigroup is your top pick. by how much do you think you'll outperform the other large cap bank stocks? >> we do see it outperforming. clearly it's levered to the global macroeconomic back drop, but against that they've done a great job in terms of winding down and holdings of bad banks. that will be basically gone by the end of the year on the good job managing expenses. >> can banks rally in that environment? >> we're at the point in the cycle where higher interest rates on the short end really matter more. if you look at citigroup, for example, you know, on 100 basis point parallel shift, it will pick up $2.2 billion to take home the next 12 hoz.
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if just as short it creates rise, and long where they are, they'll make $2.1 billion more. >> coming up, president obama preparing to deliver a statement about gun control. squawk alley will take it live. the gunmakers, by the way, in a sharp rally. smith & wesson up 12.5% ahead of that space. squawk on the street is back after a quick break. what are you working on? let me show you. okay. our thinkorswim trading platform aggregates all the options data you need in one place and lets you visualize that information for any options series. okay, cool. hang on a second. you can even see the anticipated range of a stock expecting earnings. impressive... what's up, tim. td ameritrade.
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>> good morning. cle a.m. atta hue headquarters in sunny vail, california. it's 11:00 a.m. on wall street, and "squawk alley" is live. ♪ welcome to "squawk alley" for a tuesday. joining us here kayla. john fort is out west, or
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heading out west at least to ces. we'll see him later in the week. joining us from palo alto, roger macnamee. it's great to have you once again. let's start with the markets rsh relatively stable session. especially in light of yesterday. that day after all the major averages fell by more than 1.5%. the worst start of the year for the dow since 2008. the worst start for the nasdaq and s&p since 2001. roger, we know you've been, i would argue, net cautious for at least the back half of 2015. how are you entering 2016? >> well, i think the market did us a huge favor, yesterday, right? it was a wake-up call. just, hey, make sure we're paying attention. i mean, to me the u.s. economy still looks like the strongest of all the developed economies around the world, but we have this headwind and the slowing down of china, the fact that our interest rates are now going to be rising as opposed to being steady at zero. the fact that many emerging


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