it is 5:00 a.m. here at cnbc global headquarters and here's your "five@5." we begin with going for three. wall street comes to grips with the fed's outlook of higher for longer. also activist alert. disney taking issue with nelson peltz and his slate of board nominations as the proxy battle escalates yet again. and a rough day for aerospace after another bad day for boeing and even worse day for spirit airlines. plus, troubling sips out of china as its economy does something for the first time in

more than two decades. we're live in beijing. also energy's wall of worry. it only increases as strikes continue against the houthi rebels and iran denies any involvement with the attacks it's wednesday, january 17th, 2024 you're watching "worldwide exchange" right here on cnbc good morning and welcome to "worldwide exchange. i am frank holland let's get you ready to start your day as always we get a check on the u.s. futures with the nasdaq seeing its first down day in six. you can see right here, red across the board the dow looks like it would open about 140 points lower the nasdaq town more than a half a percent. the s&p down just about half a percent. but the big story for the dow, that remains boeing. under a bit of pressure again after another 8% slide yesterday that accounted for nearly half o the dow industrial's 231-point

slide, this after the company named a new independent adviser. you see shares of boeing for the week down more t12%. we're going to stick with aerospace. a quick check on spirit airlines, hoer this morning after losing nearly half of its value yesterday after a u.s. judge called its deal with jetblue a violation of antitrust laws take a look at the shares this morning. in the red for the week, more than 55% of course, we also have to check the bond market with the 10-year yield holding above 4% we'll talk a lot more about bond moves later in the show. and energy a hot topic you're looking at oil on a decline partly due to the stronger dollar. down more than 2%. similar for brent crude, your international benchmark. let's get a check on our top corporate stories. our bertha coombs joins us with

more good morning. >> good morning, frank disney is rejecting nelson peltz's latest effort to capture board seats at the media giant saying the activist investor lacks new ideas and its former executive, referring to jay rusolo who peltz nominated to the board has been away too long they had a list of their 12 board nominees and the company disclosing it's had no less than 20 meaningful interacts with pelts since last february including the sitdown between iger and peltz, bob iger that is, and a november 21st phone call during which disney said peltz offered no new strategic insights as for ceo bob iger, his compensation came out in just under $32 million last year.

that's down from nearly $46 million in 2021. bp meantime is appointing interim ceo murray auchincloss as its permanent ceo after the former resigned over past relationships with colleagues. the decision marks the end of a period of uncertainty for the london oil giant that's seen its shares fall more than 16% over the past three months. and a temporary spending bill aimed at preventing a partial u.s. government shutdown set for saturday its first procedural passage was in the senate when the chamber voted -- i'm having trouble reading that -- 68-13 to advance the measure. many lawmakers were absent due to weather it keeps the legislation on track to be approved in time to

meet the shutdown deadline and keep the government funded through at least march 1st march 1st, frank i guess we do this a little bit at a time. >> you're going to get by with a little help from your friends, bertha we're going to see you later in the show. switching gears, wall street bracing for a fresh round of fed speak today. they're set to off the latest insight into the policy path forward, those comments coming on the back of those by christopher waller saying while the central banks will likely cut rates this year, a shift in policy doesn't have to be, quote, in his words, rushed. for much more on this, let's bring in gina sanchez and mark ava avallone great to have you both here. good morning gina, i'm going to start with you. waller added in his comments the data is as good as it gets but the data should be lowered

methodically and carefully give us a sense. how did you read this? was this dovish or the data dependent fed we keep hearing about? >> this is the data dependent fed we keep hearing about. here's the thing the fed fund's futures has priced in six fed rate cuts for this year alone. i doubt that the if ed is going to get in three this year. that's a big difference in terms of where rates end up at the end of the year, and thing questionty markets are priced for all six rate cuts. they need them to justify where their rates are right now and the bond market needs to feel it otherwise you're going to feel pain as the yield works itself out this year. every single market is poised for a lot of fed cuts that i don't think are going to happen as quick will i as their price did. >> you don't think a lot of fed rate cuts will happen. where are you at, gina >> i'm probably at two to three. >> a bit of a contrarian

mark, i'm coming over to you the comments from waller, was this the dovish talk everybody was waiting for or was it simply maintaining the data dependent fed that we keep hearing about whether it's jerome powell or other fed speakers. >> we've always said two to three rate hikes in 2024 there were reasons for that. the job market is way too strong wage growth remains -- it's very reasonable there in the 3% to 4% rage hike range that the fed doesn't cut when you have wages close to 4 and 4% on the increase, you're not going to get a fed that's going to rei ignite inflation we said a fed that was wrong on the other side of this movement, that they weren't going to try to skamble and look like they had lost control of it they want to bury the inflation. it's not close to the 2% of its target it's a continuation of what the fed was saying all along, accept

we had a little pillow talk late in the fourth quarter that investors jumped on that we thought was a massive change it was a bit of a hint that they realized inflation was coming down but not beaten, and i think that's where the misconception was. we have to look forward to a stronger economy in 2024 not robust, but just a bit too strong for the fed to get dovish. >> mark avallone calling it pillow talk. gina, i want to come back over to you you're washing the 2-year and 10-year. what does that signal to you what do you think that means about the market going forward at least up till we get the next pc >> i think we need to see where we land in terms of the slowdown there are very, very few economists holding onto recession talk now we're looking at maybe 1.2% growth next year, which is still a slowdown from this year, by the way. and so, you know, we are still, you know, slated to slow down, and these higher interest rates are still working their way

through the economy. they haven't really hit the high yield market they haven't hit -- you know, there's still a lot of segments of the market. they haven't hit kind of the credit card balances that we still see consumers spending on credit cards now, that's starting to slow and at some point that's going to bide as well. so aulg of those slowdowns will have to happen, but i don't think it's going to slow enough for the 10-year to sort of stay where it is. we have to get back to normal. >> a lot of people watching that spread between the 2-year and the 10-year. mark, before we go, i want to come full circle you're talking about the fed cuts and pillow talk at the same time waller says the inflation number is on target and he called the job market noise. you're watching the earnings season closely how does this all factor in with what you're saying is the data dependent fit? >> well, i agree with what gina said in that the fed lags

haven't really kicked into effect i think that earnings going forward are going to be the key. are companies going to be able to continue to live up to this market expectation of double digit earnings growth? i think that's going to be the bottom line. it's been the fed and it's been earnings, and that's what the market is going to look for. we think that earnings estimates are a bit high, and when that happens, we're going to see the multiple, especially in the very highly valued stocks we think we're going to see the pain there that's why we think investors should be broadening out exposure to look for a muddled growth, 2024, and i think that's where we're going to see the real shakeout looking forward. >> all right gina sanchez, mark avallone both believe we're going to see two to three cut this year a little different from consensus. good to see you both. we've got a lot to come on "worldwide exchange" including the one word investors have to know today but first new troubling signs

out of china and its latest economic outlook doing nothing to make sure they go ahead in those regions. and iran's foreign minister, they say they have no connection to houthi rebels and later on "worldwide exchange," much more on the fed's outlook in 2024 and the volatility including central bank commentary. former fed vice chair roger ferguson, he's here on w.e.x we have a very busy hour ahead when "worldwide exchange" returned uh, this lets me adjust the base, add more guitar, maybe some drums. -wow. so many choices. -yeah. like schwab. i can get full service wealth management, advice, invest on my own, and trade on thinkorswim. you know carl is the only front man you need. (phone rings) oh, i gotta take this, carl. it's schwab. schwab. (feedback rings) have a choice in how you invest with schwab. at morgan stanley, old school hard work

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welcome back to "worldwide exchange." right across the board as chinese stocks sunk to their lowest level in five years on the back of more disappointing economic data. our eunice yoon joins us good morning. >> reporter: hey, frank. the gdp for the fourth quarter as well as the year came in at 5.2% the analysts' take is it's not as good as it sounds maybe because this is a year on year comparison coming off a chaotic 2022, which was riddled with covid lockdowns. the december data came in mixed, but there are some points that would suggest lackluster outlook. the home prices fess in dfell, most in five years retails sales mixed and a jiggered youth unemployment figure resurfaced from about a half a year ago which showed

14.9%. that was a whole lot more consistent than the jobless figures we had seen prior to that the reasons for the change is they don't reflect students looking for part-time work if investors were anticipated we might see some meaningful stimulus, it looks as though the leadership is pretty happy with these figures. the premier in davos had tipped the numbers and had actually said they were able to achieve this figure and target without massive stimulus frank? >> so, eunice, again, chinese markets coming down. i want to ask you about the birkts rate. the birth rate falling to a record low, falling 5%, second year in a row. what was the response to that? is that something chinese officials are very concerned about? >> they're definitely concerned

about it it wasn't so much of a surprise because the demographics have been weighing on the outlook here for quite some time, but as you've pointed out, the birth rate at a record low the death rate actually doubled from last yearing of course, when the pandemic restrictions were suddenly lifted but what people had been anticipating is there might be a pickup in births because of post-covid and that didn't really happen. there's some discussion now here that could be because china is converging with, say, japan or south korea with the development of the economy, but there's also a loud voice of people who are thinking that this might have to do with the outlook and a change in sentiment here about the greater uncertainty about the future. >> our eunice yoon in china. chinese stocks fall to a five-year low. eunice, great reporting as always and great to see you. turning our attention to europe following asia's leads sharply lower, our arabile

gumede good morning. >> good morning, frank so the market across europe has certainly taken that negative lead from asia and also followed through on negativity across the board. you see the likes of puma dropping 4% and the likes of adidas dropping as well with negative movements as well you also have economic data points that have pushed the ftse 100 lower. you had numbers coming out with regard to the aci print. 0.4% for the month on month date both are two percentage points higher than was initially anticipated. that kind of gives a clear sense that things remain a little bit sticky you saw interest rate swaps in the uk point to 114 basis points of cuts this year as opposed to the 122 basis points of cuts that were anticipated for 2024

then as of yesterday so clearly, then, a drawdown in anticipation of the amount of interest rate cuts, kind of the sentiment that follows through as well from davos that we have heard from quite a few central bank officials as well including those from the ecb overall we're seeing the markets head a little lower, treasuries a little higher. >> our arabile gumede in the newsroom always great to see you. coming up on "worldwide exchange," a check on energy se sectors, the wall of worry what's seen as a mid east power play by iran stay with us much more w.e.x. coming up

all right. welcome back to "worldwide exchange." we're now turning to the energy complex and the price of natural gas coming off a 12% drop yesterday, the worst day since march on forecast. temperatures are expected to turn warmer than normal. still prices are hovering at their highest level going back to three months which seems like a wall of worry for natural gas and the entire energy sector it includes the cold arctic air hitting power outages and hitting everything from football games to air travel. yesterday more than 3630 flights were canceled according to flightaware with all flights

from chicago and elsewhere delayed. today we're approaching 2,000 cancellations. this week liquefied natural gas suppliers including russia and qatar, they're starting to avoid the region entirely. it's something that michael wirthwa weighed in on yesterdaya davos. >> last year we had two ships attacked by the navy it was hijacked and taken into an iranian port. we coordinate every vessel movement with the u.s. and other military authorities that are in the region, but it's a very serious situation that seems to be getting worth. >> joining me now is rita. good morning

it's great to have you here this morning. >> good morning. >> the oil prices are in the red, but that's off of a stronger dollar. i want to talk about the houthi rebel attacks, the disruption in the red sea, what appears to be an escalation. how should investors do in all this >> it's a great point that you know the investors have been brushing aside what has been going on in the red sea, and i do feel like there are lots of excuses being given as to the refining maintenance, whether crude will be lower or opec has a lot of capacity. if there were to be an outage, they would be out quickly. we talk about well over $100 there's still a lack of confidence in trading in this market where you are seeing a lot of movement is actually the

physical market, crude differentials in the physical markets. you can see the prices have been going up quite substantially relative trade, one versus the other, that's where the movement has been what we're seeing is the mediterranean in particular will potentially run out of crude in the first half of february because you can't get vessels there in time. that's quite significant. >> i think that's very significant. in fact, i want to talk about some news out of davos so overnight the u.s. launching another air strike against houthi rebels. the biden administration maintains the group is being backed by iran, but speaking exclusively with our dan murphy at davos today, iran's foreign ministry is completely disputin this i want you to listen. >> they're acting through their own interests and experience and they're not receiving any instruction from us.

maritime and waterway is very important to us because we trade in export oil. >> amrita, they're de knying an involvement with the houthi rebels what's your take >> the reality is right now on both sides shipshave stalled and no companies are willing to take the risk of crossing the red sea, and i think that's where -- by the way, we do expect u.s. and uk attacks to continue, but we also don't think that's going to deter the houthis from stopping the attacks. going around adds 15 to 20 days. they're hoping for a resolution.

>> tanother spoke at davos the red sea shouldn't be a problem but it could turn into a big problem long term. your reaction to those comments. >> yes, i absolutely agree this is one of the things in the short term people have some storage. they can always draw that down, but if you think about it. we've already locked up russian oil rather than going to europe. it's going all the way to asia now it's 30 days or even further, so you're tying up vessels for longer at the same time now what you're doing from the middle east, you oar going to to take 15 to 20 days much longer routes taken by vessels, which suddenly means there's a shortage of ships available because they're tied up for longer. >> i wanted to add one more. the mayor of davos says he believes it could last several months i want to ask you where do you think oil's going to go?

it's sub 80. in 2024 where do you think oils will go? >> look, i think it willage in the mid-80s this year, but i don't think it's going to happen in q1. sentiment is still very weak i think we see oil prices heading higher. >> amrita sen, thank you for your tomb and your insight. coming up on "worldwide exchange," the chip stock flirting with a fresh record high after a big barclays boost yesterday. if you haven't already, follow our podcast. if you missed "worldwide exchange," check out spotify or other podcast apps much more w.e.x. after this. how am i going to find a doctor when i'm hallucinating? what about zocdoc? so many options. yeah, and dr. xichun even takes your sketchy insurance.

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it is right around 5:30 a&m in the new york city area. there's a lot more on "worldwide exchange." here's what's on deck. the stock is snapping a six-day win streak the bulls may be stepping off to the sidelines. >> top of mind for the investors, the fed and its rate cut prospects. today more water being thrown on homes. roger ferguson, he's here stamtding by to break down the disconnect between the markets and the fed. also warren buffett's berkshire hathaway making it official, taking full control of the travel operators you're watching "worldwide exchange" right here on cnbc.

welcome back to "worldwide exchange." i'm frank holland. as always we take a look at stock futures. more on that in just a moment. first you can see futures in the red. it looks like the dow would open up 150 points lower. take a look at the yield on the 10-year right now,up ping yesterday to its highest level since mid-december, pushing stocks lower, the move coming as another top fed official pushing back on expectations there may be as many as six rate cut this year chris waller says he's confident inflation is on the path of a 2% ta target, but he says there's no need to cut policy waller, the first of roughly half a dozen fed members speaking this week let's talk much more about this with roger ferguson, former fed

vice chairman, and contributor of cnbc as well. good morning >> good morning. nice to be with you. >> i want to get your take on the comments from waller did you believe it's dovish? what's your take on the cuts expected if this year? do you think six is still possible >> first, i think waller's comments were right down the middle and i think we'll hear more of them i don't think it's dovish. it's just a reflection of where he is. in terms of cuts this yearing i think more likely two to three in consistent to what they said in their so-called dot plots i think the market is disconnected from fed thinking. >> you're the third person to say two or three give me a sense. why is the market so disconnected from what the fed is signaling and do you believe there's a possibility there could be no rate cut this year at all >> i think it's unlikely there

would be no rate cuts this year because inflation does seem to be in a downward trend and it's possible that things could weaken further so i think even with a normal fed policy move, they don't want real rates to get into more restrictive territory. so as rates come down, they do have to come down with them. why is there the disconnect? i thid fed officials are focused on risk management that i want to avoid the big mistakes they've made in the past which have primarily been sort of stop/start, fighting inflation, taking your foot off the brake, and then having to speed up i think the natural inclination is to move more slowly markets are listening to the fed to some degree and saying in the last year and a half, the fed has often been wrong about what actually was going to happen and so, you know, why should markets put a great deal of

weight on what they say? let's watch and see what unfolds. i think you have two different forces at working the fed being focused history and avoiding some mistakes and the market being focused on their expectations >> waller alluded the that in his comments, avoiding mistakes of the past. the markets are truming the odds that we're going to see a cut at the march meeting from a 61%% chance of a quarter move, down rough friday from 65% a week ago. do you think very slowly the bull wes we said in our tease ae moving to the sideline and rational people are tempering our expectations are >> i think that i are. i think the market and the fed will gradually get back into sync you know, obviously march will come, and i think the talk for the rest of this week and before they go into blackout period will be very much around pushing

back on this scenario that exists in the market at the end of the day, you know, the data will prove it but i would say yes. i would expect the expectations of march will start to recede from the market. >> one thing waller remarked on is they're anticipating it rolling off the balance sheet every month. your take on his comments. i. >> i think he's taking into account the consensus of the view it was interesting to hear lorie logan who's perhaps the most experienced force the other day who expressed the need to slow things down. that's more the debate at the table than the pace of the cuts. it's more the pace of the so-called quantitative tightening and allowing the balance sheet to shrink. >> roger ferguson, thank you as always. time for a check of some of this morning's top corporate stories.

our bertha coombs has those. good morning. >> good morning, frank warren buffett's berkshire hathaway officially taking full hold of pilot travel centers, buying a 20% stake in the north american truck operator from the family which owns the cleveland browns terms of the sale were not disc disclosed. it comes over a week after they settled a $2 billion lawsuit over an accounts method that the family claimed would artificially depress the state. meantime sam altman is opening up about being fired from openai last year. he said the night he was pushed out by the board was, quote, wild, adding that he felt, quote, super confused and was super caught off guard the openai founder and ceo says it wasn't until some board members called him the following day that he even weighed the

idea of returning to the company. speaking of ai, amazon is looking to further tap into the red-hot technology to help its customers. the company is rolling out a generative ai tool that can answer shoppers' questions about a product. the feature in amazon's mobile app prompts users to ask questions about a specific item before giving an answer based off of information collected from product reviews and the listing itself because why should you have to read through those reviews yourself, frank? it should do it for you. >> you know, we had another company that had its own ai shopping tool. i'll be curious to see if this catches on i think i want to look through and read the things myself but we'll have to wait and see. >> i don't know. i've seen some of them already it's a little bit helpful to get a little bit of a review at the top. >> innovation, we'll have to see how it all plays out. turning our attention now to d.c., the supreme court is set

to hear arguments today on a pair of cases that are testing the power and scope of federal government regulations and those powers our eamon javers is joining us with how big of an impact those cases could have good morning. >> good morning, frank this is a battle conservative legal analysts have been spoiling over for decades. at stake is something called the chevron dom turin which is a supreme court precedent from back in 1984 that says in essence courts should defer to federal agencies when they're interpreting the gray areas of laws passed by congress. over the past certainly decades that has given grant toorders that congress is usually silent on now that very precedent is under attack in two cases that are going to be argued on today. now, in looper, the central

debate is between fishermen. that i required vessels to carry fishing monitors aboard, collecting details of how much fishing is done. but the government required the industry to pay for the cost of those monitors which the fishermen and their lawyers say was just unfair. now the lawyers are asking the court to overturn the chevron desuggest, which could have sweeping implications for thousands of other regulationings with a 6-3 conservative majority in the court conservatives expect the government to have a difficult time maintained chevron, and that could open up a huge window for businesses to push back on federal regulations of all kinds, frank but first we have to see what the court does here later or tonight. we'll be monitoring all that and bringing it to you. >> as you mentioned, what's at question is what you call the chevron document that's where courts give deference to federal agencies and their agents

if this gets rolled back, what comes next >> that's the question we haven't seen that since 1984. it's unclear it would appear one of the things that could happen is you could have the regulatory agencies simply stop issuing regulation ms. the gaps between congressional lawmakering and waiting for congress to write much more detailed laws up on capitol hill whether congress is capable of that, writing the technical specs for things is an open question of course t open question is how many existing regulations could be targeted by industry groups in saying, look, that was overreach on the part of the regulatory agency, we want that one rolled back with the new supreme court precedent. they might have real legal ammunition to go back and do that it could be a field day on regulations with the lawyers we'll have to wait and see. >> our eamon javers with the latest on the supreme court. coming up on "worldwide exchange," more turbulence set for shares of spirit airlines after a federal judge delivers a major blow to its jetblue merger

hopes, but first we have some of your top trending stories. getting a $1 hot dog or 5 buck rotisserie chicken becoming a bit more difficult costco cracking down on shopper verification having shoppers scan their cards instead of flashing the cards at employees and showing their photo i.d.s. and irish whiskey gift set, the most expensive whiskey sold at auction a bottle one of seven in the entire world selling at $2.7 million. it comes with a decanter, wristwatch, and customized jewelry. you get a whole thought. who would have thought there would be a reunion other confirmed headliners include doja cat aggwen stefani back. "worldwide exchange" back in a moment

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lowering its price target to 80 bucks a share. it sees limited catalysts for its fellow bank. and a cathie wood favorite tell a dock moving to $22 a share. it cites the stalling of the bus business shares of teledoc down almost 2.5%. time for your global briefing in yemen, new launches against houthis for a third time this in response to attacks by the hue the rebels on a cargo ship and u.s. ship on monday. john kirby says the u.s. is not looking for a war but that the houthis have a choice to make. also on cnbc this morning iran's foreign minister denying any association between tehran and the houthis adding, quote, maritime security is of paramount importance to us because we export oil.

that's the end of the quote. uk inflation rises to 4% this marks an uptick in inflation since last february. higher alcohol and tobacco prices the drivers for that increase. and china misses the q4 gdp estimates. the country's statistics bureau out with employment figures after temporarily suspending them last summer showing youth unemployment figures remain high also china's property sector which makes up 20% of its economy selling off on the news andhitting an all-time low. ahead on "worldwide exchange," we have the one word every investor needs to know plus the signals that our next guest says the options market may be taking as the bulls take a bit of a breather. we'll be right back with "worldwide exchange. stay with us

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back to "worldwide exchange." spirit airlines' stock plummets. the judge blocked the carrier's trading saying it will impact stocks. boeing's down. it accounted for half of the dow's drop this is after it named a new independent adviser to help with its quality control issues amd closing at an all-time high. the upside move on the back of a barclays upgrade that predicted there would be an increase in chip sale this year. the stock now 2% below its all-time high. disney rejecting nelson peltz's latest suggestion for a board seat shares of doesny down just about a half a percent ja bp

appointing its interim ceo as its permanent excessive after the prior resigned due to personalrelationships with colleagues it ends uncertain for for bp whose shars are down over the last month, now down 1%. and the spending bill passed its first test in the senate with a 68-13 vote. it keeps the government on track for funding through at least march 1st. here's what to watch today the january nahb survey and the fed's beige book earnings from u.s. bancorp, charles schwab, citizen's financial and others as well as a pair of fed speakers on tap from michelle bowman and fed president john williams. markets, they're looking to extend yesterday's losses. take look at futures right now we see they a are in the red the dow hitting its lows in the morning. our bob pisani has more on the

signals that are key to watch. >> fourth quarter earning season is mikicking off with a mix of good and bad 11% was expected on october 1st. only 4.4% today led by the big declines in health care, industrials, and banks. well, there's only a handful of companies that have reported so far, but most are beating earnings estimates many are reporting lower than expected including nike, fedex, general mills, carmax, ka neigh rah. because of this, analysts have started lowering first quarter estimates for many of these companies. guidances have been off to a disappointing start. we saw delta cutting guidance. samsung electronics reported lower operating profit due to subdued consumer demand. so there's ooh a lot riding on these earnings in 2020 for the s&p to start increasing in 2024, earnings have to

expand 2023 earnings are expected to be up a paltry 2.9% that's not much. the s&p was up 20% last year on a price basis. you can't keep having prices go up if the earnings don't go up as well. that doesn't work long term. current expectations are for an earnings gain of 11% in 2024 led by what else, technology so far wall street doesn't seem concerned about it, but it's early. the estimate is only slightly lower than the 12% estimate for the entire year. the biggest risk to higher earnings is lower revenue growth without higher revenues companies are going to be forced to cut the cost to get to a growing bottom line, so watch for this double whammy of deteriorating pricing pressure and lower demand some companies are going to demand we have lower prices and that will stimulate the sales volumes, but for a lot of these companies, weaker demand and lower sales prices are going to be a serious problem

back to you, frank. >> thanks to our bob pisani. joining us now is the head of derivatives strategy amy, good morning. always great to see you. >> good morning, frank. >> bob gave us a lot to digest just in general, i want to get your take on earnings seasons so far and how it impacts the earnings markets we have to keep in mind some of the declines in future is due to pressures from boeing and the jetblue deal being blocked. >> yeah. the great thing about earnings season, frank, there's always earnings dispersions meaning there's a lot of idiosyncratic earnings when we look at volatility around this time, the first thing we know is january is not a great time volatility tends to spike up and seasonally it's a draw-down time in the market. the second part of that is the first few weeks of earnings are important for volatility because you're getting a all the new information. it's actually a good time to own it and obviously given the

environment, it's a good time to consider it. >> with that in mind, what's your w.e.x. word of the day? >> my w.e.x. word of the day is "escalation. i managed to keep it to one word this time. look, you think about the geopolitical risks that are i a cross the globe right now. we had taiwan elections, middle east tensions rising, elections coming in the u.s. the one thing i want to say in the options market, tail hedging is incredible. it ooh benz the case for the past few months, and from my perspective, it a is the cost of your insurance that's really attractive not necessarily does it mean your house will get set on fire, but it means fire insurance is really cheap. >> right so rbc really making a call. your colleague helima croft says there's a 40% to 50% chance that

the war or conflict escalates with iran, and that's leading you to make a call when it comes to energy market walk us through what the market is saying and why there might be an upside for energy. >> yeah. it's a great point from helima i'll just say helima was one of the first people who was quite early on calling russia/ukraine. a lot of folks didn't think that was going to happen. she called that as well. what we're looking at is energy call spread. when you look at the related spreads, xle, these energies that from a prop, we think the call spreads are relatively attractive, it gives you a high playout, and plays the risk that plagues the middle east. you're looking at chinese equities right now, specifically fxi, that etf. what's the options market telling you when it comes to sentiment about chinese equities

and that exposure to china >> you know, frank, most of the time i would say it's a good come plea management, but sometimes the options market is very contrarian. this is the case where the options market is extremely bullish. you're seeing a lot of upsides being purchased, call options, call spreads which are going to get that china rebounding which if you remember we didn't get last year. it was the consensus we would get it last year we didn't get it a lot of people are initiating trades in china despite escalating tensions potentially with tie ran. >> one other thing we've got to get to this one really quickly the small caps have been outperforming the broader market of the last three months they're looking at the market. very quick, what are the options market what is it telling us? >> it's a little bit over the small caps to be honest. it was calling for that widening of breadth we've seen that pretty

dramatically. >> we've got to leave it there amy, thank you. that does it for us. "squawk box" in davos coming up next have a great day

good morning again from the world economic forum in davos. futures sliding once again following tuesday's decline. the markets now focusing on more s fedspeak great. uber riding with tesla the two are going to share data to work on charging infrastructure and maybe sell a few more evs. and ukraine's president volodymyr zelenskyy asking business leaders for more support in ukraine's war with russia on wednesday, january 17th, 2024

"squawk box" begins right now. ♪ good morning, everybody, and welcome to "squawk box" right here on cnbc we're live from the world economic forum in davos, switzerland. i'm becky quick along with joe kernen and andrew ross sorkin. we've got fed governor michelle bowman and john. they're looking for any comments the fed might make about future interest rates, how many cuts you might get, or hikes. that would be something that would catch their attention. if you watch the futures markets