tha ultamatum. move closer to the company or get another job. it's tuesday, january 30th, 2024 and "squawk box" begins right now. good morning. welcome to "squawk box" here on cnbc. we are live from the nasdaq market site in times square. i'm becky quick with mike santoli. we are watching the equity futures ahead of the earnings flood today. big day not only during the market, but after the market. the dow is off 44 points. s&p futures are down 4. the nasdaq indicated down by 3. that comes after the dow and s&p turned in the sixth record close of the year. s&p closed above 4,900 for the first time. we have more on the big tech earnings a moment.

look at treasury yields. the ten-year note is at 4.06. the two-year note at 4.01. >> the ten-year note started early yesterday. the s&p was up .75%. the rally in stocks and bonds came after the treasury department reduced the estimate for federal borrowing for the quarter. the move was unexpected. treasury expects $760 billion of net borrowing in the first quarter. that is down from $816 billion. the smaller borrowing was due to the net fiscal flows and more cash on hand. when that news came out around 3:00, treasury yields did back off. they are breaking this up trend in yields the last month or so. stocks levitated from here. i have to say i was surprised there was that much at stake with at anthat announcement.

we get the data on exactly what maturities will borrow. this came into relief last fall when everybody was looking at yields melting and saying is it pricing a recession or is it about treasury supply? >> i was thinking the same thing watching oil prices. with the tensions rising in the middle east, we have not seen oil prices pick up. wti today is above $82 a barrel. that's the same story. is this a story where people are ignoring the tensions in the middle east or is this a story where people are focused on the potential decline in demand around the global? you are also talking about high supply. >> the market is acting like it is well supplied. the treasury move, it seems like we were burned or traders did last fall by not paying

attention to it. you had a couple of sloppy treasury auctions. there was excuse with the market acting well. it was not a lot of selling pressure. people are aware that the big tech earnings could be going either way. you don't want to discount the boost after the market. >> it is happening with the back drop of the fed meeting where the expectation is that jay powell and company will have to walk back some ideas or say the next move is probably likely down rather than up. >> for sure. they have to come in line with what the framework says they should be doing. >> based on the data. appliance maker whirl ppool beat estimates, but the company is propjecting sales below

expectations as consumers forego upg upgrades. or they upgraded everything during the pandemic. whirlpool is seeing lower demanded in north america and consumers replacing broken appliances are more price sensitive. take a look at the stock which is down 5% for the six months. down over 21%. >> not too far above the lows from october. u.p.s. reporting adjusted earnings of 2.47 per share. revenue of $24.9 billion which was lower than $25.4 billion that analysts pis expected. full-year revenue came in lower than the street expected. you see the shares at the first reflecti reflex 5%. >> carol tome saying 2023 was a

unique and difficult year. they remained focus on what they can control. acknowledging it was a unique and difficult year. >> the labor issues and everything else with the costs. >> dividend they are declaring is $1.63. i think that is up a penny from $1.62. the outlook and planning for cap ex of $4.5 billion. the tax rate of 23%. revenue is $92 billion. american airlines. you. >> american airlines is laying off 650 employees from the customer relations bag and loyalty groups. the cuts are in phoenix and dallas. the company says those employees do help customers with lost luggage and will be consolidated into other teams.

a smaller team will aid tr travelers instead of passengers contacting multiple teams. one team can help with cancelled flights and lost bags. the laidoff off employees wille the opportunity to reapply. and neurolink implanted the first device in a human on sunday. musk said that the patient is recovering well and initial results show promising detection. the company is developing a brain implant to help with severe paralysis control and external technology. it hopes to help patients with diseases like als and use the impact to communicate by moving

cu cursers. it may help people with spinal cord injuries. >> i can't keep tracks of the developments and musk is running all these companies. it is a little bit dizzying. i don't know how it fits into existing research in this area. >> for the criticism he receives and to do this and pioneer ing evs and front of the rocket launches and satellites. you have to give him credit. >> sure. the chairs of the house committees have asked the biden administration to investigate four chinese companies they say are involved in ford's battery plant. according to a letter, the house members accused the chinese companies of having direct ties to the chinese the military and north korean government and human rights abuses in china mike gallagher and kathy rogers asked the department to impose

export restrictions. the chinese companies were not named in the letter due to confidentiality. and former president trump is stating the stock market is on the rise, but he is claiming credit. he says this is the trump stock market because my polls against biden are so good because investors are projecting i will win. he said everything else is terrible and record setting inflation has taken its toll. you can hear his voice. >> you can. we remember. coming up, the fed kicking off the two-day meeting and another busy day for earnings. "squawk planner" is next. we will have the presidential fund raising efforts for the race. "squawk box" will be right back. ! - nostril! uh-uh... bill! uh-huh... - hip-hop! - limping! mmhmm! medical bills!

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♪ welcome back. openai announcing it is teaming up with the non-profit common sense media on the push to help teens understand how to use artificial intelligence in a safe way. common sense has been developing a ratings and review system for parents and educators to

understand the risks and benefits. microsoft's ceo speaking out with nbc news' lester holt. >> i want to ask about "the new york times" lawsuit against openai and yourself about the idea of using content to train a.i. i know it is a legal open case and you can only say so much about it, but it does open up a thought about where this information comes from and who ultimately benefits. >> i think one of the things that is very, very important is both what is the copyright protection as well as what is fair use in a world where there's transformative new technology. that's where the copyright laws have to essentially now be interpreted for a transformation

technology. we have done this from the past. i'm sure we will come out with the right set of guidelines used for training. and it is clear you can't just use copyright material and regurgitate anything. the courts will opine on it. if you look at what japan is doing and other countries are also doing which is how to think about copyright in an enlightened way with the new technology can be developed and new competitors inn troduced an protect copyright. >> okay. enlightened way of looking at copyrighted material. it no longer applies? >> he is probably saying copyright law means you cannot republish something else or use in a commercial way. if you are using it to train something -- >> that i will then sell to

someone. >> yeah. >> there is a big disdistinctio. it is another thing to say i'm training my a.i. on this and charge you to use it. >> let's figure it out. let's figure out the licensing. >> it comes back to openai's sam altman said he had been in talks with "the new york times" paying for use before this lawsuit came out. this is a strategic plan to see how much you pay for it. >> who gets acknowledgment? >> i love the enlightened view of copyright law. one that no longer applies? >> i'm sure lawyers will influence how he is characterizing it at this point. >> the idea of openai training kids and educators. that's important. every kid i know and the reason

they are using it is to write their papers. that is something the schools have to figure out. it is like when calculators were invested. can you use them for math or not? do you get stupid if you don't learn? >> bring back the blue books. >> no calculators. on today's "squawk planner," the fed is expected to kickoff the two-day meeting. on the earnings front, reports from gm, pfizer and jetblue before the opening bell. we will hear from alphabet and microsoft and amd and starbucks after the bell. to join us now to sort through all that is kari firestone from a aureus.

kari, good morning. microsoft and alphabet in particular with earnings. i was checking on the last earnings report and microsoft up 24%. earnings estimate for the fourth quarter are flat over that period. google thup on 10%. what does that tell you in terms of what the market is expecting and if the companies can deliver? >> hi, mike. thanks for having me. i'm sorry in the age of high tech, we have no internet in our building in downtown boston. the market has high expectations for the companies. higher than for anything else than perhaps the state of interest rates. they have driven the market. google is up at the all-time high. highest since 149 in november of 2021. same is true with microsoft hit the peak and now highest valuation of all companies. it is really about last year

where the stocks were up 58% roughly in 2023. there is an enormous interest in a.i. and what it is going to propel their revenues and earnings forward. these are two of the leaders, microsoft in particular. the google number should be up. estimates are 18% to 20% higher. sales have started to improve. we know there was a slump in digital advertising. search is part of the google business and it is starting to pick up. it is expected to have a decent quarter. through the year, it will have double digit sales growth and higher than that. 18% plus on the earnings side. that's true with microsoft. if we look at where microsoft has been trading, it is now the most valuable company in the world. that is due to believe in a.i. and the fact it continues, but copilot at $30 a month and

talking about how well it is selling and whether the users are adding features and it is extremely important to the sentiment about these companies and the market as a whole because they represent the two of them with 11% of the s&p 500. >> you know, they also are two of the big drivers of overall earnings growth. these big companies led the performance and they are delivering a lot of the dollar value of the profit growth. when it comes to alphabet, you mentioned the good and bad that might be expected here. softness in digital advertising, but the market has gone with alphabet with the position on a.i. on the one hand, the core search business in the history of man and everything else outside that is diffilutive. how are you thinking about the

risk/reward there? >> you make a good point. alphabet trades at a premium to the market. 22.5 times forward earnings. that growth, we believe, is double that of the s&p 500 which sells for 20 times. we think the stock is still attractive. of course, there is a risk that people will use a.i. for search and they won't use google and advertisers won't give them all of the revenue. revenue at google is $306 billion for the year last year. the entire u.s. medical device industry is $200 billion. we are talking one of the largest enterprises in the world and we expect to see, of course, interest in whether they will lose market share. we don't think that will happen now. they have been on a.i. for a

decade. they started making investments years ago in artificial intelligence. >> i guess quickly before we finish up here, you mentioned the s&p 500 at 20 times earnings. up 20% exactly from the low in october. does it feel that makes sense given what we know about the fed and fundamentals or are we ahead of ourselves? >> markets move with momentum and they move ahead of themselves and get behind. this has been a solid market because everything is working. lower interest rates and lower inflation and interest rates peaking and we're seeing pick up in gdp. we don't feel it is out of line. do we think thesecompanies have to perform? yes, they do. they are leading. they are leading the charge. people are bringing their money back the money markets back into the stock market. we have to see results. earnings over the next few days will tell us if that is

warranted or not. >> this is when it begins. kari, i appreciate it. >> thank you, mike. when we come back, ibm's message to managers still working from home. move near an office or find a new job. we have the details on that story next. and later, we will talk middle east tensions and oil and gas prices with white house energy advisor amos hochstein. "squawk box" will be right back. power e*trade's award-winning trading app makes trading easier.

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some serious moves to get workers back to the office. ibm sending a company wide message to managers still working remotely.

move near an office or leave the company according to the memo viewed this month by bloomberg. all mhang mapping managers must near the office. those who don't live close enough to commute are reared to rerequired to relocate by the beginning of august. ibm said last week it expecting to cut an unspecified number of jobs this year. it may be one of the most pointed parts is targeting managers. it is hard to manage people if you are not in the office and tougher for managers who work from home to get employees to work from the office. if you are not in the office, good luck. >> if a company is on a big efficiency push and measure contributions -- what is striking about ibm being the

source of this, i remember 20 plus years ago ibm was early in that hoteling trend. you didn't have a base office. you went where you had to go. also, the kind of no set vacation days and no set sick days. they were trying to be flexible with workplace set up before the pandemic. >> this is something we said for a long time that all the work from home stuff would be great and would be allowed until you had a tighter labor market. if you are looking at layoffs. >> or softer labor market. >> if you are looking at layoffs, those are the first people to target. you don't see them every day. they will be the last ones to be promoted. this may take a long time to work out. i'm not saying everybody will work from home forever. people highly sought after will

still bend the rules or if you are a charitiable foundation and not paying people as much. >> we had the ceo of haines on. some companies will go the other way. >> rather than a pay raise, i'll let you do these things. we want to attract that talent. it's a good way to do it. people have gotten used to the flexibility. particularly with kids at home. >> ibm says move. coming up, earnings alert. we are waiting for gm and jetblue and pfizer. the numbers and market reaction straight ahead. as we head to break, here is a look at the s&p 500 winners and losers from yesterday. >> announcer: executive edge is

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general motors reporting

quarterly reports with phil lebeau. >> mike, this is a beat on the top and bottom line. $1.24 a share. re revenue coming in at $29 billion. in the fourth quarter, you had the uaw strike. keep that in mind as we go through the fourth quarter numbers. free cash flow $1.3 billion. adjusted income at $1.75 billion against the previous year. the adjusted margin at 4.1%. down from 8.8% in the fourth quarter of 2022. north american margin at 5.7% against 10.3% in the fourth quarter of 2022. one note regarding china. the china equity income in the

fourth quarter at $93 the million. we will talk about china as part of the guidance here. for 2024, the company's guidance of $8.50 is above the $9.50. free cash flow for the auto division is $8 billion to $10 billion. the company is expecting to be ev profitable in the second half of this year. that's an important benchmark they are putting out there. they are expecting a loss in the first quarter from operations in china. that speaks to growing inventory and market that is slowing down. the bottom line is this, they are expecting lower pricing and pricing headwinds and higher costs. gm in the fourth quarter beating the street on the top and bottom line. we will talk with gm ceo mary barra coming up on "squawk on

the street." there are a lot of puts and taking with the uaw strike, but the guidance this year and guidance with regard to the certain things china and cruise and expect taugsations will be discussed after 10:00. >> phil, it feels like it is plau plausible. i appreciate that. jetblue just out with the earnings as well. they reporting an adjusted loss per share of 19 cents. that is narrower than the 28 cents the street had expected. revenue better at $2.33 billion. some comments on this where they are looking to 2024 and these are comments from the president and coo, the incoming ceo. she is painting the next year as

an important year of change where they say they are taking aggressive action. they will launch $300 million of revenue initiatives to return to profitability and deliver value. they talk about how the outlook with the balance sheet. they reached agreement to defer aircraft capital expenses from 2024 this year to 2027 and 2028. that will push off the costs. they say it will allow annual aircraft deliveries until the end of the year. they are detferring the costs. cash in short-term investments. she says we are seeing positive momentum in the revenue growth and demand in peak periods is strong. they manage in off-peak areas. i don't see a single word in

here about spirit airlines. if you are looking for a hint of what they will do next. phil talked about this yesterday. they will fight and continue to believe this merger is the right thing. jetblue said we are studying our options on this. there are battles about what happens next after the judge's ruling. for the first quarter and 2024 j outlook, they are talking available seat miles down 3%. revenue year over year down 9% to down 5%. what else? fuel price per gallon. $2.87 to $3.02. adjusted operating margin is flat. capital expense, we talked about that $250 million over $1.6 million. they are not tipping their hand with spirit. the programming note, the incoming ceo will be on "power

lunc lunch" at 2:30 p.m. eastern time. "squawk box" will be right back.

welcome back to "squawk box." the biden administration weighing options on how to respond to the sunday drone attack by the iranian-backed militia group in jordan. joining us is retired admiral james stavirdis. he is the global affairs vice chair and nbc news analyst. admiral, what is the appropriate response? >> i think what the administration will look for, becky, is the goldilocks solution. they have been doing a series of

tit-for-tat precision strikes is not working clearly. on the other hand, they don't want to broaden this into a major regional war. they will try to find something in the middle. the word i would focus on is campaign. it is not a one and done at this point. you will see a week or two heavy attacks, but not in iran itself against iranian proxies. probably iraq, syria and yemen is where you well see the administration lean in over the next week or two. >> you say campaign and i automatically think of the extended war. what are the odds that this does -- we have been talking about this since the beginning with the houthi attacks in the red sea. what are the odds at this point

that this becomes a more protracted war that requires more american boots on the ground? >> i think when we started this conversation before christmas, becky, we had it at about 30% following the big houthi maritime operations that have now effectively closed off portions of the red sea. we were up 40%. with this killing of american service members, we are just under 50/50. here is the good news such as it is. neither side, certainly the biden administration, but also the moulas in tehran are not looking for a broader war. they will fight to the last houthi or last iraqi. they don't want a big, broad regional war with the u.s. and certainly the biden administration doesn't either. look for a campaign over a couple of weeks, not a

full-blown war campaign, but one that is a sustained series of attacks over the next week or two. at that point, i think iran will, in fact, cease and desist on the attacks. >> if the moulas in tehran don't want this, why haven't they stopped it? do they have such little power over these groups they are training and providing weapons for? >> no, they have the power to do this. they have organized, trained and equipped and directing these operations. the reason is they still see opportunity to do three things. number one, demonstrate to the world that they are capable of taking on the super power. number two, in a time in which israel is very much looking in war inwardly, they want to put pressure on israel and pressure and support, if you will, on the

palestinians. number three, and you are showing a lot of internal photography right now. they have a it domestic audience. they he have ave problems insid. they see this as a way to speak to their public to rally and fight the americans. those three things have occurred. they haven't stopped yet because we haven't hit them hard enough is the short answer. >> the idea of not hitting them harder seems like it just tempts them to do more. we always talk about how this is the government in iran that's the problem, not the people. some of those pictures point to a different thought. >> indeed. i think the moulas are effectively mobilizing public opinion here. that's why i think it is unlikely we will strike inside iran, at least in the sho short term. what i'm looking for is strikes against iranian guard outside of

iran that are supporting, training and organizing these proxy groups as well as larger level of strikes against the proxy groups. it is finding that middle path between the pin prick strikes we are doing to downtown tighehran. >> i heard it that one potential solution is to allow the israeli israelis to go strike directly in iran. it won't be us, but we stop telling them to not do it. >> certainly all options are on the table. working with allies in the region is on the table. don't forget the recent strike landed in jordan. one of our closest allies. one other thing we haven't spoken about, becky, u.s. and its allies can use cyber to go

after iran's economy and oil and gas. a lot of options on the table. >> what about saudi arabia? how does it play in all this? >> the crown prince, effectively leading the kingdom, of course, wants this to die down. he is trying to permeate the war that saudi arabia has been involved in yemen against the houthis. he is looking for a solution that includes israeli cease-fire and steps forward a palestinian state and that, in turn, unlocks the door for recognition of israel. to him, iran is an annoyance off stage. as americans are killed, that is ramping up. he will be a force for good in helping solve this over time. >> admiral, thank you. 50/50 odds increasing that this

does wind up in a more complicated situation. we hope that is not the case. thank you for your time. >> indeed. pfizer just reporting. looks like a 60 cents loss. it was anticipated as a 22 cents loss. revenue is $14.2 billion in the quarter. $14.4 billion was the forecast. company reaffirming full year guidance for 2024. that was provided in december of 2023. a month and a half later. revenues of $58.5 billion. >> apparently they are going with adjusted earnings of 10 cents a share. >> yeah. for the quarter just past, 10 cents a share. it includes a lot of the extra

items. >> what you brought up with the guidance for 2024 will be what the street is keying off. stock up 1% right here. they say they are on track for $4 billion in annual cost savings by the end of 2024 from all these cost realignment programs. we will continue to see how it trades. up 1%. >> it is considered a lot of messy charges over the course of last year for pfizer as well as merck. >> vaccines not selling how they expected. that stock down 36% from the last year. when we come back, big technology reports after the closing bell. microsoft and alphabet reporting. and u.p.s. stock getting hit hard after the company reported a disappointing full-year revenue forecast. it is off 7.25% right now. "squawk box" will be right back. tailor-made for trader minds.

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google and microsoft are the two big companies expected to report after the evening bell. joining us, barton, senior analyst. good morning. >> good morning. >> why don't we start with microsoft since everybody seems to love the story, and you give it a $3 trillion market cap and 33 times pe multiple, because you think microsoft will figure it out, and what in particular would you be looking for out of this quarter to figure out if they are on track? >> okay, and to be clear i don't cover microsoft, and i think that microsoft is obviously the table setter for clock computing, and i think you know the defining kind of player in

defining artificial intelligence, and what we are curious about is what is the opportunity for anybody to kind of pick up share in the artificial intelligence computing from microsoft which has been dominant there? obviously all of the noise around open ai just very recently creates a backdrop where if you are going to pick up share if you are google cloud, aws, this is when we should see it. knock on wood i think it would be a great report for alphabet. >> alphabet, which i know you do cover, do you expect you will see net progress there? the market has been reserved in tkpweuing google credit for being able to exploit all this? >> google will figure it out eventually. i think they are in a tough place now where microsoft has

feature, large language model capabilities and that filters down to peoples' usage of the services for cloud computing, and the opportunities there, i think the capabilities are there and they need to put it on the field, and the fourth quarter, i am not sure we will see it, but if we look closely for hopeful signs. >> we are a couple days away, too, from the rest of these. meta has really had a journey in terms of people thinking they couldn't find their way to all the cost enhancements and now they feel as if the momentum on the fundamental side and stock momentum as taken over, and how do they position into their numbers? >> i think we are going through a real seminal change in the market. meta has been really powerful. they are putting revenue growth up in the fourth quarter in the over 20% range like they did in

the third quarter. they have been benefiting from the china-based platforms, and benefiting from investment in ai capabilities that we think have been resonating with marketers driving their performance. for meta, it's not about the fourth quarter, which we think will be great, but what is the sustainability of these going into next year, and is there a political angle that impacts all of that stuff, you know, with trump talking about tariffs? the setup, we think, is great for the fourth quarter. the question mark is as we go into next year. >> if you look across the big ones that you cover, where does it seem as if the market is under appreciating any of these,

if you see that at all, because it feels as if we are giving a lot of credit to these companies for basically being leaders? >> yeah, look, these companies, their stocks have generally done great, and the market understands that these are strong companies. i think you still continue to ride greatness, so i think alphabet tonight should have acceleration and search should have acceleration in easy compares, and i think microsoft has acceleration in cloud that we are not going to see as google but we will see at aws, and those are two players you want to have exposure to in this earning season. >> thank you so much. when we return, we will talk about this week's fe

d e first time you made a sale online with godaddy and then we will talk about the rising threat level in the middle east and crude oil prices. "squawk box" will be right back.

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earnings in the fed in focus for investors after the dow and the s&p six. the top white house energy adviser, amos hockstein. it's going to be a long road for nikki haley.

the second hour of "squawk box" begins right now. good morning and welcome back to "squawk box" here on cnbc live from the nasdaq market sight in sometimes square. joe and andrew are off this morning. equity futures are coming off a strong session yesterday, and s&p up three quarters of 1%, and the nasdaq is right around the flat line. the s&p is now up 20% from the low three months ago, and embracing some of the soft landing evidence that we have out there. take a look at treasuries. ten-year treasury yield is backing off from 4.14 to 4.06.

that has perhaps cheered the stock market a little bit as we sit here and the fed start this meeting today. take a look at oil. it was unable to rally yesterday on further geopolitical tensions. the fed kicking off its two-day meeting today, but steve liesman is here and will give us the latest results on the cnbc fed survey. >> good morning, becky. respondents to the survey see fewer cuts and starting later, just 9% predict a market, and only in june is there a majority of 70% looking for a rate cut by futures markets priced in almost six cuts, and the fed is expected to end the reduction of

the balance sheet by november. meanwhile, the probability of recession remains elevated, 39%, the lowest level since the twinge of 2022. the fed will cut rates at every other meeting pace and that will begin in june, and you can see the up and down there starting in june. and 56% say the bigger risk is the fed cuts too late, while 44% say the risk is going too early. the president of naroff economics said there's little reason to expect major slowdown in the economy. recession probabilities fell for the second month in a row. the probability remains unchanged. it's fairly typical for this

group to be more closely aligned with the fed's own outlook than with the markets. the question remains who has this, right? 2025, tp2026, the market and th fed converge towards the same rate. looks like there will be back and forth along the way. becky? >> you answered my question, and who is right because i assume they listen to the fed more than the market? the final point, the idea that everybody converges in a year or so we are talking about a matter of months before everybody gets to the same place? >> yeah, i mean, look, it's not like it's inconsequential. there are folks now with companies out there with debt that is probably coming due this year and looking at the clock and saying when is the fed going to cut? that's going to be significant to the outcome.

there's also hopes out there, and there's a big bed in the market right now. there you can see that convergence over time, by 2025, not much separates them and a bit more separates them this year. there's also, becky, the lag of affects of the monetary policy coming and a lot of bets on a steepener, and that is that the curve disinverts. on a macro basis, i am not sure if the fed ends up sticking the soft landing. >> here's a wonky question. how does the fed think about quantitative tightening, and if the fed were to look at that and say, okay, we can slow it down a bit, we can speed that up a bit, and does that take away some of

the impetus for needing to cut rates because people are counting on them cutting rates to save them? >> you know, becky, i reported a lot and thought about qt and how much it matters. i think the fed could be in a particularly good place here, and that's because unlike in 2019, the fed has this standing repo facility, and that means if the fed cuts too much, there's a way for the market to get the reserves it needs on an emergency basis. i think that projects it to the down side. on the upside, i don't think it matters that much. i am worried about my conclusion, because there could be a free lunch for the fed here, something that matters a lot when you are doing quantitative easing, but doesn't matter too much if you do quantitative tightening -- >> seems to defy the laws of

physics, right? for every action there must be an equal opposite reaction? >> the idea that they have the safety valve, i think, could potentially change the game. it won't be nondisruptive but won't be necessarily like what happened in 2019. keeping it too tight -- sorry, keeping the balance sheet too big potentially risks asset allocation, but it's hard to draw a line from a balance sheet that is too big to inflation itself. >> right, yes, and it has always been very difficult to try and track the flow there, steve. my point of view on this is placebos work sometimes if you are not sick, and if you are sick, they do not work. that's how i thought about it. let's bring in mohamed el erian.

i know you heard, and as the federal reserve officials get together today, they have to be feeling good in general. the economy is holding up better than they anticipated, and inflation has come down faster than when they projected and if we start talking about rate cuts, it's not an emergency, so how are are you thinking about their job this week? >> you are absolutely right, they will welcome the reduction in inflation, and they will take a lot of comfort from the fact that it didn't come at the cost of growth, and the data today reminded us of this u.s. exceptionism. they will also say that the drop is not done and they will maintain optionality, and most importantly, they are not going to validate the notion that rates are coming down in march.

they will keep their options wide open. that's where they are going to end up. that's the committee. what is interesting is what the chair will do during the press conference, because we have seen in the past the chair does sometimes diverge from the committee, so it's really important to listen very carefully to what the chair said. >> for sure. although i do think the market, to the degree in which we want to make something out of this will perceived gap between how the market is positioned about rate cuts and what the fed has been saying, and if you stack up all the things we know about what the fed has said how it will respond, and you have a 5 3/8 average right now, and there's a six-month average of core inflation being very close to target, and all those things

put together, powell has said of course we will cut before we get to target. the question is how much work do you think he will even try to do to talk the market into a different direction? >> it's hard to tell. even within the same press conference it's tricky. it's hard to tell. you are absolutely right, they have the scope to cut rates, and i don't think it will be as aggressive as the market thinks. we all end up at the same destination in 2025, and we have become a single issue market. our focus on the fed and our focus on the fed loosening liquidity conditions, have allowed us to look at other issues including geopolitical

risks. where this comes in is can we continue to rely on our focus solely on the fed of these mounting issues on the sideline? >> the pacing of the fed cuts, we were at, i don't know, close to 90% after a march rate cut after the previous powell conference and we are down to a 50/50, and risk markets have done well since then and the economy has not missed a beat. in fact, if anything we are getting the impression the economy is resistant to higher rates, and yields were above 5%. you would think this would start to bite but it's not doing it just yet. >> right. and there's a big debate, mike. if you focus on the flow, you would be incredibly optimistic about the economy and the markets. inflation is coming down, and interest rates are coming down,

affordability for consumers is going up, and ample liquidity. the flow side is really encouraging. we just have to manage the stock, and the stock is first, the lag effect of the rate hikes. second, the fact that you have certain asset classes slower moving in acknowledging the change of circumstances, and commercial real estate is one as well as others, and then we have the maturity wall coming up on the corporate side. we will see a tug-of-war between favorable flows and challenging stock. that's how it's going to work out. now, if you can bet on the fed accommodating the situation, which is what the market is saying. the market is saying they will cut early and aggressively so we will be able to deal with the stock. if you can bet on that, then the

outlook becomes much more positive than other ones. >> yeah, and we will see how they do. thank you. >> thank you, mike. still to come this morning, the conflict in the middle east and the biden administration's efforts to prevent a regional war. war. amos a force to be reckon with. hochsteinyou saquon. wil next. next. before we go tly. at this. we'll be right back.

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♪ now for the latest on u.s.

energy policy and geopolitical risks, we have amos hochstein, the senior adviser to the president for energy and investment. amos, thank you for joining us this morning. we have been talking this morning about how surprising it might be to see wti at $76 a barrel given all of the conflict around the globe, and particularly what is happening in the middle east. how do you survey all of this? what is the conclusion you come to as to why this is? >> good morning, becky. it's good to be here. look, i think we have a number of conflicts, right, the russia and ukraine war that has been going on for a couple years, and now the wars in the middle east. but i think at the end of the day the fundamentals are that demand and supply are well balanced. there has been a huge increase of supply in the united states and brazil and et cetera, and

demand is holding. i think the specific issues in the red sea are a logistics concern, a logistics costs, but there are alternatives. first, not that significant amount of oil goes through that particular part of the world. of that, some still continues to go through and some is going around the other direction which costs more but not significantly enough to make it into a price per barrel on a global basis. and the availability of ships is what is making the concern -- marking the concern for most companies. it's this logistics and the costs and a headache of managing it, but there are alternatives and we are working with the industry closely to mitigate the challenges we are seeing and that's why you are seeing that reflected in the price. >> there have been lots of

pieces written and lots of speculation about what this war could potentially mean in the middle east. is this a return to the '70s type of situation where if you were to choke off some of the demand for oil, what would it mean for the inflational spiral, so what are the scenarios that you will plan if something like that were to start? >> let's take that a part a little bit. the scenario we are looking at is what the united states is trying to do together with our allies in the coalition, and that's to do a few things. one, to make sure the conflict in gaza does not expand to other conflicts within the borders of israel, so not expanding to lebanon and syria and so on. there are great efforts to do that and we made clear we think

there's a window for diplomacy here and to prevent that kind of escalation. >> on that point, and we had a former admiral on this morning and we have been talking with him about this before christmas, and he's weighing the odds and the expansion, and when it was just the houthis attacking the red sea, he said maybe 30%, but he said this morning that it's closer to a 50/50 situation based on the turn of events? >> look, i don't know how to put percentages on that, and i will let the admiral do the percentages. i think at the end of the day we saw -- many people thought this would expand further from the beginning and have an affect on markets. the houthis are attacking the

red sea, and that's not an attack on the united states or israel, but it's an attack on the commercial shipping and that's why the response has not been an american response, and it's an american-led response but it's together with a growing coalition of many countries participating both in the sanctions and diplomacy as well as in the military actions against the houthis, and we will continue to do that in order to secure the red sea. >> the attack in jordan was an attack on the american troops, the first troops we lost in this, not only three that were lost but dozens more that were injured pretty severely. >> no doubt, and every american is feeling for the families of those who were killed as well as to the full recovery -- hoping for the full recovery of those who were injured, and we will

respond, as we said yesterday. we will respond to that attack. as far as your original question about the red sea affecting the commercial space, and a ship was under attack and owned by a european company and had russian fuel, and this is not about israel or the united states, and this is a houthis group attacking global shipping. we are making sure there are alternatives to the shipping route and it doesn't expand further in that region. that's why what you are seeing, becky, that so far i don't see the price -- i see the price

reflection in the oil markets as accurate and it has not gone up all that much, just gone up a couple dollars since the beginning, and that's because at the beginning there was a lot of concern about what this means for the availability for crude, and we know now that's entirely manageable. it's just a matter of rerouting the cargos and tankers and not really affecting oil prices or any of the other commodities and other cargo shipping. >> you said in the past pretty frequently the lesson we should take away from the russia situation is to not rely on russia for natural gas or to rely on any single country or any single supply to make sure we are diversified, and the point is the reason the prices has not come up because the

supply is so good, why would the administration order to halt additional plants to be built because that's like cutting off a supply that has been a godsend to the lng market and everywhere we are sending it? >> first, let's really clarify. one, we are the largest -- we just began to be the largest exporter of lng -- >> right, and that's a large amount of pride. >> second, within the next three to four years, becky, we will double our exports from the united states. that's not in question. that is going to happen. these are plants already under construction. so at a time when you are about -- you are the leader and you are about to double within three years, three to four years, it's the right moment to

take stock and say i have to look at three things, i have to look at what are the economic implications, and what is the market need in growing beyond into 2030 and 2035, and we have to look at the environmental impacts this kind of expansion will have, and not to stop the doubling of the expansion under way, but to slow down a process for a while to do a study when we are already marching on in order to get to the doubling of our capacity. qatar is also expanding its capacity to export, so the market will be very well supplied. we will have to see if it's ove oversaw over supplied or not, and we will have to see what the economic impacts in the united states are. i think we are in good shape and not threatening the supply to

our allies or to the rest of the world and making sure we remain a diversified -- well diversified gas market and a diversified energy market. one last thing. becky, we can do two things at the same time. we can accelerate our focus on energy transition while at the same time we can make sure that the world and the united states are well supplied with affordable and available supplies. >> look, i am sure the companies that have already gotten grandfathered with their plans are grateful even if they don't say it out loud, because it will give them the potential to raise prices down the road, too. this is a long conversation, and i truly appreciate your time and hope to see you again soon. >> becky, i will say natural gas prices are down since the decision. great to be with you. >> thank you. we will see you later.

still to come, a look at this morning's premarket movers. we will be right back.

box." i am dominic chu.

we will start with ups, the package and transportation logistics giant is down 7% on nearly 100,000 shares of volume after mixed results, and revenues were a miss. revenue declines were in year over year in each of ups's key operations driven by daily volumes and gave a forecast that fell short of expectations. down 7% for ups. jetblue shares are down roughly a percent or so maybe 1.5% at this stage. revenue growth and stronger demand during peak travel periods, we will get more on that story when jetblue ceo

joins us at 2:30 today. and pfizer, perhaps most known for covid vaccines and treatments reporting mixed results, profits that beat, and the four-year forecast was also below estimates. those shares up about a percent. and then general motors, the automaker easily topping profits and revenues, and its forecast came on stronger. china, its second largest market remains in focus, and that segment continues to see declines. we will get more on that story when ceo, mary barra joins us on "squawk box" this morning. in the meantime, a big night in new york city for billionaire donors and nikki haley. we will preview that event and

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co-hosting a fundraiser for nikki haley. joining us is teddy shiver. she may be able to get money from the billionaire class, but her route and path getting to the nomination looks difficult if she doesn't pull off a huge upset in her home state? >> sure, all of the fundraisers are all based on the premise that money will matter here, which is obviously highly disputable to say the least. her belief is she needs to raise a ton of money to do well in south carolina and to do extraordinary well, or be extraordinary competitive on super tuesday, and these are a bunch of contest across the

country where money could matter, and she will not have time to campaign in texas or other super tuesday state, and her path, as you are pointing out, it's tenuous, and she needs the money to compete but that's not all she needs, obviously. >> she was with us yesterday and said that if the former presidential candidate can't hold 50% or more, if he is losing 50% of the vote that's not good for the top of the ticket, and the koch network is pointing that out, too. they are focusing on the senate race. >> the koch network this past weekend near southern california had hundreds of their donors out

to their kind of semiannual retreat, and they said it's an uphill climb for nikki haley, and focusing on a democratic trifecta, and they don't want them to take the white house, the house and senate. they are saying trump is a loser, and that's a discrepancy with the public polling that shows trump as being competitive, and their argument is if nikki haley is not the nominee, they need to focus on the senate and the house. they are saying, hey, we don't democrats to run washington entirely, but how can we focus on achieving split government? nobody that supports nikki haley at this point honestly thinks she has a strong chance of being the nominee, and that's

ludicrous at this point. but is it 10%, 20%, 30% reasonable for people to disagree? >> you look at the situation this year where most voters say they don't want either former president trump or president biden to be on the ballot this time around, and you will have people from both sides saying, look, something could happen, one or both of these guys could get knocked out or decide to bow out one way or another. is her staying in it through super tuesday kind of a hail mary pass thinking if the law suits catch up with him or indictments catching up, if something weird happens, she will be the nominee? >> well, there's unpredictability between what will happen with trump being the

nomination, and trump accepting the nomination at the convention. i don't think it will matter who is technically who the other candidate in the case, if there's other candidates to begin with. that situation will come down to who has the support of party leaders and who has the support of president trump. i don't think it's a bank shot strategy where you are hoping for something crazy to happen. i think at that point anything would be on the table. >> former president trump has said he will shutout anybody that continues to support nikki haley at this point. i wonder with these billionaires holding the fundraiser today, what the future for business is under either one of the administrations? there has not been a tight relationship of the business community and the oval office

for quite a while, it feels like, and there's not a natural home in either of the parties. what does that mean? >> yeah, you know, one of the hosts of tonight's event, cliff, who was on screen a second agos a major haley supporter, and he saw the truth social post that trump put up the other day where he said these people will be, quote, unquote, barred permanently from the maga movement and oval office, and cliff said on twitter, you know, that he was going to donate more money to nikki haley because he wanted to be barred permanently. look, it's no surprise that the billionaires and the republican party are not in touch with the base voter in the republican party, but it has been clear since 2016 and trump became a candidate despite not having all the support from the wealthy wall street types is these people don't really matter as much as we think they do.

it's depressing for -- >> no, i hear you. >> they were doing it for nikki haley to save the country, and he said it was a capital that had a high chance of waste and a low chance of saving the country, and that's what they believe. the voters of new hampshire disagree, and they decide and not wall street. >> the billionaire class has never been effective of picking the next winner, and their choices really early on don't make their way in, and that proves because you are good at one thing doesn't mean you will be master of the universe in a different field. >> this is not a bush or romney who were establishment favorites, and romney came from the economic stratosphere, and trump sort of showed these

peoples' lack of power, and it has been humbling for lots of people i cover. >> maybe we shouldn't call them masters of the universe but masters of one field potentially. thank you. >> you bet. coming up, we break down pfizer results and what investors need to know. as we head to break, look at the premarkewiert nns and losers in the dow. "squawk box" will be right back. this is "real time

insights." i am here with ey america's risk consulting leader. thank you for joining us. with the technology comes risk and regulation and ai is no exception. how are you talking to leaders about this right now? >> the excitement around ai is contagious as more and more organizations build it into their business prophecies, and there is a strong grasp of design and monitoring, and it will give consumers confidence. >> what do leaders need to consider when developing the ai strategies? >> think about what is the business purpose of ai? how is it being designed and developed? is the data reliable? how is it protected? all of this to drive the confidence and credibility of consumers and regulators will expect. >> you talk about monitoring, is that from a compliance perspective? >> it starts that way but the

landscape is changing drastically. it could help companies drive strategy and top line growth. >> thank you so much for sharing your expertise. >> thank you.

student loan dollars as pair sittic. she has a short position in the stock meaning she's betting that the stock will decline. >> it makes me sad. i feel that everybody should be angry that our money is being abused in such a careless kind of way. what duty executives of the for-profit universities do? they are painting themselves back and buy back plenty of their stock. >> in a statement a spokesman for adtalem said they provide

quality education programs that are a good return on investment for both our students and u.s. taxpayers. the criticisms are focused on several key areas of the company's financials, and she said the walden university yoon it has not disclosed that it's the subject of a department of education investigation. she also notes that the biden administration is reinstating the so-called gainful employment rule that raised student outcomes. she predicts many of the programs will fail that test and also questions the company's accounting, particularly that the school's student loan eligibility and accreditations are nearly half a billion as, quote, intangible assets, and

she noted the education department investigation does not include wallden of any wrong doing. the company expect the vast majority of its programs will pass the gainful employment rule. the company says if a program is unable to meet the ge standards, they will make adjustments to maintain eligibility for federal student dollars. they said we are confident in the accuracy of this attribution. a spokesperson did not respond to our request for comment on their policies. don't miss this today on the "halftime report" today at 12:30 in an exclusive interview.

>> for-profit education going back a bunch of years has been a controversial area, and there have been some blowups in that area. i am interested in if you can lay out background on her and why people are listening to her. i think she has been sure, -- short. >> she earned the nickname the assassin for her short selling. she's somebody that is just 33 years old, and she's an up and coming player in the space and really making a name for herself. she was featured in a netflix documentary about this, and this is her next big play. she gave it to us exclusively. what she's arguing here is that this particular university is facing a funding crunch as it

gets closer and closer to the razor wire to the department of education rules about access to federal student loan dollars and if they are not able to get over those hurdles over the next year or two access to that could be restricted and they may have to go to the market for letters of credit and have to raise money, and that could indicate they are in a funding squeeze. the company denies that and says they are in a solid position. >> for anybody who is listening on the radio, adtalem shares are down. pfizer reporting this morning, and we will run through the numbers and talk about that sector. the futures this morning are in the red. shares of pfizer up about a third of a percent, and the

futures erl e okg r ovalarloinfo a slightly weaker open. the nasdaq down by about 15. "squawk box" will be right back. ♪♪ ♪♪ ♪♪ ♪ voya ♪ there are some things that work better together. like your workplace benefits and retirement savings. presentation looks great. thanks. voya provides tools that help you make the right investment and benefit choices. so you can reach today's financial goals. that one. and look forward to a more confident future. that is one dynamic duo. voya, well planned, well invested, well protected.

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pfizer reported earnings this morning of an adjusted ten cents a share. the street was expecting a loss of 22 cents. that was on revenues of $14.25 billion. that missed estimates. pfizer also reaffirming its guidance for the full year. joining us to break down the results is jeff meacham, bank of america securities, senior pharmaceuticals analyst. jeff, it's great to have you on here. it seems as if, obviously, braced for kind of a messy quarter. the company had more or less indicated where things would come out. what'd you see in the numbers, there's some detailing of some expected cost savings and the company did reaffirm 2024 guidance. >> thanks for having me, mike. you're right. i would say pfizer beat what i would call sort of a lower bar. there were a couple of main products that missed, for example, you know, prevnar,

ivance, but overall, the story is still about covid contraction and whether that matters to investors going forward. >> and what's your take on whether it should matter to investors going forward? it feels as if the market is not really valuing that business all that aggressively at this point, if at all. it's obviously the valuation's depressed. what do investors want to look ahead to in terms of what the earnings power of the company is going to be? >> yeah, great question. i would say for sure, the new launch portfolio, there are a number of new products, including the rsv vaccine, that i think are pretty exciting. also, pfizer just closed the cgen deal, and i think going forward, you know, that product, those -- that portfolio, i suspect, will lead to some pretty nice upside going forward. but i think for covid, though, really it's about, you know, life cycle management. you know, it's going to be a continued erosion, i suspect, but there are ways to, you know, to help stabilize that business.

just with respect to including, you know, a flu vaccine together with, you know, with the covid product portfolio. but really, it's all about new products and new launches. >> and in terms of pfizer's product portfolio right now and things that are in development, is there enough to latch on to, or will they have to do more m&a? how would you assess it? >> i suspect there's going to be marginally more m&a going forward. they have some interesting product categories. they just rolled out an oncology segment or sort of restated their business, so that's going to be the main focus going forward, you know, products for blood cancers and solid tumors. i suspect that is going to be a main focus for investors, and then there are some assets they acquired through various deals and inflammation. there are some exciting therapeutic categories to come, but really, it's about commercial execution going

forward. >> you know, big pharma, obviously, kind of a rough year last year, outside of lily, i mean, outside of anything related to the weight loss drugs. how are things set up right now based on what we've heard, either from j&j, now pfizer. what's your preferred play in the group? >> yeah, i would say nominally better backdrop for this year, for major pharma and big cap biotech. you know, the inflation reduction act was really in the headlines a ton over the past couple of years, and this year, there's not a lot of, you know, of headwinds from that perspective. from a growth perspective, you know, our favorites are lily and merck, and big pharma, and you know, vertext and gilead. we're sticking with mostly the growthier names for this year, but in an election year, though, no one really loves the space. so i think it's better to stick with kind of the faster growers that have their own fundamental story and not are slowly

dependent on kind of the macro. >> fair enough, jeff, thanks for the time this morning. jeff meacham. >> thank you. >> still to come this morning, what investors need to watch as the fed gets ready for a two-day meeting that begins today. we will talk rates and when the fed may cut. and later, ways and means committee chair jason smith on the latest tax bill that's making its way touhrgh congress. "squawk box" will be right back.

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good morning. earnings alert! new reports flooding in from america's biggest companies, u.p.s., pfizer, general motors, and more. highlights straight ahead. the fed in focus. the u.s. central bank kicks off its latest policy meeting today. we'll talk investor expectations and what the market wants to hear from jay powell and company. and a milestone for another one of elon musk' companies. this one having to do with the human brain. we'll bring you the details on this news as the final hour of "squawk box" begins right now.

good morning, everybody. and welcome to "squawk box" right here on cnbc. we're live from the nasdaq market site in times square. i'm becky quick, along with mike santoli. joe and andrew are out today. we've been watching what's happening with the markets, and there's a little bit of weakness this morning for those u.s. equity futures. dow indicated down by about 55 points. s&p futures are down by about 7. you have the nasdaq indicated off by about 20. also been keeping a close eye on treasury yields. this has been a pretty interesting 24 hours, less than that. it was 3:00 yesterday afternoon, mike was pointing out, when we first got this news, that the treasury department may need to sell fewer treasuries than had been anticipated. you can see the ten-year yielding 4.07%, and crude oil prices have continued to stay down. wti is at 76.25. brent's below $82 a barrel now. this is coming despite all of that tension in the middle east.

and concerns about what happened next. we'll continue to watch it. it's also a big morning, though, for corporate earnings. and dom chu has a look at some of the highlights. we had a lot of reports that came out in the 6:00 a.m. hour, dom. >> yes, ma'am, we have. here are some of the big earnings headlights and headlines so far this morning. we'll start with the big gain in shares of general motors, which are right now up over 7%, almost 7.5%. that's off the pre-market highs. over 700,000 shares of trading volume. the auto maker reporting quarterly profits and revenues that both beat consensus estimates and gave a full-year outlook that pointed to continued strength in 2024 and generally came in better than forecast, as well. though weakness in gm's second largest market, which is china, continues to be a focal point for management, so gm shares up 7.5%. next up, on the drug side, we have pfizer, which is higher by just about half a percent right now, just over half a million shares of volume. the company perhaps best known these days for its covid vaccines and treatments, actually reported mixed results.

surprise profit per share on slightly worse than expected revenues, and its forecast came in below consensus estimates. but, the positivity resulted in its covid treatment business, which is still declining year over year, actually came in better than expectations, hence the marginal positivity, up about nearly one-half of 1%. and we'll end with the big drop in shares of u.p.s., which are down at this point roughly 7%, just around 130,000 shares of volume. the package delivery and transportation logistics giant reporting mixed results as well. profits topping estimates while revenues were a miss. revenues declined year over year in each one of u.p.s.' key operating divisions, driven largely by lower average daily volumes and gave a full-year forecast that fell short of expectations. but on the positive side, u.p.s. did announce a modest increase to its quarterly dividend payment, becky, so those shares down 6.5%, roughly. i'll send things back over to you. >> dom, thank you. see you a little later. among today's other top business stories, elon musk says

his start-up neuralink implanted a device in a human for the first time this weekend and the patient is recovering well. they're developing a brain implant aimed at helping paralyzed patients use neural signals to control external technologies. it raises the possibility that people with severe degenerative diseases like als could somehow communicate more effectively. meantime, boeing says it's withdrawing a request to the faa from an exemption for a safety standard on its 737 max-7 plane. in a statement, boeing said it was confident the exemption related to a deicing system would have followed established faa processes, but it said instead it will work on an engineering solution. last week, senator tammy duckworth, who chairs an aviation subcommittee in congress came out against boeing's exemption request. and netflix's cofounder reed hastings giving away 2 million shares in the streaming giant currently worth more than $1 billion. that's according to a regulatory filing. the gift was made to an undisclosed entity, though it is

known that hastings has several philanthropic ties. for example, in 2020, he announced he would donate $120 million to two historically black colleges and universities to the united negro college fund. >> that's been his real focus, is turning to philanthropy side of things. this has been a big issue, to hear the money that he's starting to give away. that's a big deal. seven-time super bowl champion tom brady agreeing to merge his nutrition and apparel companies tb12 and the brady brand with the company no bull. brady will welcome the number two shareholder. no bull was a fitness brand bought in july by former beverage giant, mike reapply. the new company will serve as a footwear, apparel, and wellness brand. brady says he plans to build on the no bull brand with his own loyal fan base. >> i was very fortunate in my own career to impact different communities of people in a way that was really authentic to me,

and speaking with mike and getting to know mike over the years, we share so many similar beliefs and values and i thought it was the best opportunity for myself and the brands that i've been a part of to make a huge difference. >> tom pabrady speaking there. it was mike on the other side of him. let's get back to the markets and talk fixed income with the fed kicking off its latest policy meeting today. our next guest says we're in a soft landing right now. she says she still sees about a 30% chance of a hard landing, but that the market thinks that that situation is much less likely. let's bring in pria misra, a fixed income portfolio management at jpmorgan asset management. let's just start with this idea that you think that there's a larger shot of a hard landing than the market is really pricing in. why is that? >> it's because i would argue that fed policy is failure restrictive. if you look at real rates, we're getting close to 2%. the fed is letting the balance

sheet run off, and there's a big question about when do they start to cut, how much do they cut, and if they're a little bit slow, when policy is restrictive, the lags are kicking in. every recession starts looking like a soft landing. we're in this very critical juncture. if the fed is able to start to normalize quickly. and i would argue they could start in march, may, something in that time frame, start normalizing the balance sheet, start normalizing interest rates. maybe we can stay in the soft landing. >> so 4% isn't normal? that sounds like we're locked into these next-to-nothing interest rates for forever. >> i would say real rates, close to zero to 1% makes sense, but look at how much inflation has come down. if inflation is running around 2%, i would say normal is closer to 2.5 to 3%. there's still room for rates to go down. we're not going to zero. >> inflation has come down, but there are some pretty inflationary pressures that are out there on the global scene that people worry could come back in.

a lot of that has to do with the red sea and the shutdowns that you're seeing, longer shipping times. you haven't really seen it show up in oil prices yet, but that could happen, if things escalate from here. and the one thing the fed has said, when you talk to any of these fmoc members, is the last thing they want to do is lower rates and then have to raise them again. >> agreed. i think as i sort of think about the balance of risks here, it's a lot more balanced. but you know, you look at the labor market. even there, we are seeing slowing. wages have started to slow down. if you get a red sea related shipping destruction, that's more negative for the corporate sector. that's more negative for the household sector. so i think the fed then can still continue to lower rates. they have to be vigilant. but as long as the labor market is slowing, i think they feel more comfortable that service inflation, which is still high. that most of the disinflation we've seen has been goods related disinflation. i think that's largely run its course. but if service inflation starts to continue to calm down, we're seeing housing disinflation,

we're seeing wages. i think that gives the fed some comfort that they can start to normalize. we're only talking normalizing. we're not still talking about fed easing policy. >> and the fed certainly has centered itself on that message. that it would just be normalizing. this is not a rescue operation. but you do frame it as a bit of a race against time, right? that you have to make sure that rates are, they fit with the current macro backdrop as opposed to passively just becoming more restrictive. >> exactly. i think it's a very tough message for chair powell tomorrow, because at one level, the economy looks great, inflation is back to normal, the unemployment rate is, you know, below 4%. why should the fed even cut rates. i think they have to give this normalizing message. they have to realize that monetary policy is restrictive. but i think where the race against time comes, if those long-awaited lags start to impact conconsumption, start to impact consumers as well as corporate confidence, that's when the fed can speed it up. it's easier -- the first basis

points of rate cuts is much easier for the fed. it's still normalizing. when do they get into the easing, but that's really a 2025 story. >> and i think this real estate does get to this perceived, you know, disagreementbetween the fed funds futures market and -- i mean, human beings, we have a plan, we have intentions, we have models, we have a framework. we can say what we expect. three to four rate cuts, maybe, if conditions are correct. the market realizes, things happen. and there's a moment to inflection points in the economy. so the fed funds future encapsulates a what-if scenario if you get the hard landing. >> a little bit of risk management. >> exactly. exactly. the fed will always give you their model outcomes. the market will price in this variety of outcomes. and there is that hard landing scenario. i know we don't like to talk about it, but recessions do happen. there's been a reasonable amount of time. we don't have that much policy space on the fiscal, as well as monetary side. so i think if things start to slow down, that's when it can

actually spire into a hard landing and the market can absolutely have that probability. >> do you think a hard landing is something that would happen later this year, something that holds off to 2025? >> right now, it feels like it's a '25 story, but if things can slow down faster, i think it could be a second half of this year story. >> and what does that mean from an investment point of view? does it mean you think bonds still look good here, because, you know, the risks seem to be skewed towards more slowing? >> so i might be the only one saying this, but i think treasury bonds do make sense. the hedging property of treasury bonds that has not been prevalent for the last many years, as fed was taking rates higher, that hedging property is here. i would say owning risk assets makes sense. we're in a soft landing. do your credit work, understand business models, understand balance sheets, but own those treasuries. if the fed has to cut rates a lot more, those five-year treasuries have a lot more room to decline. owning some duration five-year treasuries is a good way to balance the fact that we're in

this tenuous moment. it feels very soft landing, but you have to keep an eye out for that hard landing. >> we were also talking a little bit about the balance sheet. you know, it seems that the fed has gotten lucky. it hasn't hit a critical point. the market seems to be able to absorb what's going on right now. is it just steady as you go, do you expect them to just essentially have them find a level plateau? >> we're a lot more humble about quantitative tightening this time around. so i think they're already talking about tapering quantitative tightening. >> they did it last year during the mini banking crisis that took place in the spring, too. >> significantly through that btfe program. i think starting to taper quantitative tightening as it's overnight levels, i think it starts by march, april time frame. they start to taper just because

now they are finessing when does quantitative tightening become a problem. >> if you're in a situation of putting the brakes on quantitative tightening or cutting rates. my guess is and they don't want to get caught in a situation where they have to change their minds. after you cut rates, and they've been saying they would like you to cut before you stop qt. but i would argue, cutting from 5 1/2 to 5 or even 4 1/2 or 3, is still within the restrictive realm. you're just reducing the level of restrictiveness, because inflation has come down. as long as they can spin the normalizing, and that's consistent with, you know, getting at least sort of slowing down the balance sheet

tightening, as well. >> pria, thanks for coming in. >> thank you. coming up, much more on general motor' fourth results. the automaker beating expectations on the top and bottom line this morning. and after a break, we're going to speak with a top analyst. but first, as we head to that break, here are a few more properties that reported this morning. jetblue a smaller than expected loss. meantime, homebuilder pultegroup posting a mixed quarter. stay tuned. you're watching "squawk box" on cnbc.

general motors reporting fourth quarter results earlier this morning. the automaker topping profit and revenue estimates and 2024 eps guidance was well above street expectations. here to help us break down the numbers, garrett nelson, senior analyst at cfra. garrett, good morning. this was a huge revenue beat in the trailing quarter. i'm not sure whether people got overzealous in terms of cutting those estimates after the company gave some guidance previously, but how does the overall picture shape up going into 2024, based on this

morning's numbers? >> thanks for having me. no question, this was a very solid release from gm. they did a very good job navigating headwinds from the uaw strike last fall, adjusted eps came in ten cents above consensus, mainly driven by the top line, as revenue came in 3.5 billion above consensus at 43 billion. the guidance was also much better than expected. you know, adjusted eps of 850 to 950 for 2024. consensus is only at $7.76. however, if you take a closer look at the guidance, you'll see that it's mainly driven by the share repurchases that they announced this november, falling resolution of the uaw strike. that's $1.45 of the higher year over year eps that they're expecting. so on the surface, this looks like an incredible release, but you look a little bit closer, not quite as positive, because

the higher eps that they're expecting this year is not driven by fundamental earnings improvement. >> i was wondering about that, although, the company did say it was a $10 billion accelerated repurchase plan. was that not just fully in the estimates for per-share earnings for 2024? >> no, it doesn't appear that analyst estimates were updated for that. so that was the primary driver of the higher guidance. >> what about trends in the underlying business and then, of course, the company also saying that they're going to move toward ev profitability or break even later this year. >> we remain skeptical on the ev business. you know, gm has been the most aggressive in investing in pure battery evs. and a lot of those new models are coming to market, in the next 12 months or so. the chevy blazer ev, the silverado, the equinox. what we found from our

researchers is that these evs, really most of the non-tesla evs just aren't selling particularly well. and so, we remain skeptical of, you know, and there's still a lot of uncertainty related to their pivot towards evs. what consumers are saying, is they want to see more hybrid models, not necessarily pure play battery evs. >> and that has been a big theme. and you know, i guess, conventional wisdom is that gm in particular is kind of caught offside by the demand for hybrids, right? they don't necessarily have much in that way? >> that's right. they've really made a big bet on the future of pure battery evs and so, you know, if you take a longer term view of the story, you know, gm has been losing market share for several years in the u.s., which is where the vast majority of their profits come from. if you look at 2023, their market share in the u.s. was about 16%. but that's down from 22% in 2008

and 28% back in 2000. so while the stocks had a big move since the november lows when it bottomed around $26, we still think that investors should stay on the sidelines here. >> how hard would it be to retool, to try to go after the hybrid market? that seems like a pretty big deal, but those seem to have a little more favor with consumers right now. >> i think that's the big question, is this -- how are they going to pivot from making this big bet on evs to offering more hybrid models? we're hearing that dealerships are demanding that they produce more hybrid models, because the evs that they have out there just aren't selling particularly well. so, you know, it's one of the big challenges that mary barra and her team face heading into the new year. >> yeah, i mean, you mentioned, you think investors should stay on the sidelines and don't necessarily buy into the idea that they've got this

sustainable earnings model at the 2024 levels, perhaps. but we are trading below five times the new 2024 guidance. i know these stocks tend to trade at very depressed multiples, but is there a chance that something goes right, even in the macro, that can make that a decent bet? >> sure, absolutely. but what we'd be looking for is more improvement in the underlying earnings of the company, and not eps growth being driven by share repurchases. so, obviously, that's not sustainable. they can't continue to buy back stock forever. so, you know, until we see that, but what we've seen so far from detroit three automakers and other traditional automakers, is that evs are money losers. and they're a significant drag on the overall earnings of the company. and there are very few companies who are making evs profitably. tesla being one of them. and that's our top pick. >> yeah, i guess the question is, can they move toward a place, just because of volume

growth or scale, to where they can kind of outrun the losses in evs or become a little bit more agnostic about what types of vehicles commerce want? >> yeah, we think they're on the pathway to doing that. but again, you know, this is not a company who's been gaining market share. and we're not optimistic on their ability to recover market share that's been lost in past years. the auto industry is just, it's just too competitive. there's too many companies and there's too many new ev models coming to market that gm's new models are going to be competing with. so the ev market is in a state of oversaturation, and you know, we think it's going to remain so for at least the near-term. >> yeah. all right, fair point. garrett, appreciate the time this morning. thank you. >> thank you. and a programming note, don't miss a big interview today with gm ceo mary barra at 10:00 a.m. eastern time on "squawk on

the street." when we return, we'll go inside the latest tax fight on capitol hill with representative jason smith. he's the chairman of the house ways and means committee. first, a reminder as we head to a break, you can get the best of "squawk box" on your favorite podcast app. just follow squawk pod on your app and you can listen name. we'll be right back. icy hot. ice works fast. ♪♪ heat makes it last. feel the power of contrast therapy. ♪♪ so you can rise from pain. icy hot.

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welcome back to "squawk box." the futures showing a little bit of weakness before the open. the s&p 500 indicated down about ten points, giving back its three quarters of a percent gain yesterday. nasdaq just turned negative, too, indicated down 33.

>> ibm has a message for employees still clinging to that work-from-home lifestyle. that's according to a memo that was sent earlier this month and reviewed by bloomberg. ibm senior vice president is now telling all u.s. managers whiteout exemptions that they have to immediately report to an office or a client location at least three days a week. they say that is regardless of current work location status or their other alternative is to leave the company. appliance maker whirlpool out with a new warning about the consumer. the company which owns the maytag and kitchenaid brands beat estimates for revenue in the quarter, but the guidance is weighing on the stock. the company is projecting 2024 sales below wall street expectations as consumers forego appliance upgrades. they're already seeing lower demand for appliances in north america and consumers replacing broken appliances have been more price sensitive. the stock has been on a downward trajectory for a while now.

another 5% lower. >> i think the biggest news is the people who are replacing are very much looking at price. that's kind of the new part of all of this. >> and you mentioned earlier, we don't know how much of this is, we had the pandemic effect, people had to pay up for home improvement products and new homes and things like that, but right now, there's no more scarcity, no more supply chain, you have to be pretty careful on price. coming up, new data on china's economy. plus, what the slowdown in that country could mean for the global economy. and insights into china's troubled property market. and a programming note. as we head to a break, don't massive an exclusive interview with citadel ceo, ken griffin, in the 10:00 a.m. eastern hour of "squawk on the street." that's live from the mfa network amnfen.rce stay tuned, you're watching "squawk box" on cnbc.

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welcome back to "squawk box," everybody. this is cnbc and we are watching the futures this morning, under some continuing pressure. dow futures at this point down by over 70 points. the nasdaq indicated down by 30. you've got the s&p futuresdown by about 9. treasuries, those yields, i believe, are continuing under pressure, too. the ten-year is at 4.06.

the two-year sitting at 4.31. microsoft set to report fiscal second quarter earnings after the closing bell this afternoon. ahead of that, ceo satya nadella sat down with lester holt from "nbc nightly news." ai, of course, one of the big topics that they've talked about. here's an exchange the two had on how the technology could impact this year's race for the white house. >> we're marching down the road to the first ai election. you holding your breath, to see how ai can help and how it may be weaponized? >> in fact, it goes back again. this is not the first election where we dealt with disinformation or propaganda campaigns by adversaries and election interference and all of those things. so therefore, i think what we have to go back again is, for example, i think we're doing all the work across the tech industry, around what water marking, detecting deep fakes, there's going to be enough in

technology, quite frankly, in order to be able to identify the issues around disinformation and misinformation. then the question again comes back to, how do we build consensus between parties, candidates, and the norms around what is acceptable and not acceptable. >> that interview between lester holt and satya nadella will roll out tonight on nbc news. you can see right now, the stock chart has been really good to that company over the last year, up 70%. but there are so many big questions around ai and what the future of regulation will be for that, that this is probably why a bigger audience is paying attention than normally would be. >> sure. the market loves the idea that you can actually quantify, they're going to charge 35 bucks or $35 per subscriber, per seat. you can do price times volume and you're going to get that search or co-pilot capability. but what does that mean. what does that buy you and how does that achieve the product that you're going to be buying the rights to. so, yeah, it's interesting that he's willing to get out there a $3 trillion market cap.

you can't hide when you're that big. >> we had lina khan on the program yesterday from the ftc. and her point is you have to look at these companies and see what they are doing. all of the things that happened a couple of months ago with sam altman on that crazy weekend, when it looked like he might actually leave with the entire team and go to microsoft, microsoft as a return, when things did go back to this, gets a couple of seats on the board there. it raises real questions about how companies are gaining control, whether it be through mergers and acquisitions or, you know, self-mergers, gaining control over this new technology that is so important not only here, but around the globe, and the race for all of this. and lester did ask him, in a clip that we ran earlier, asked him about the implications, what this means for copyright protections. and these are huge decisions that washington is going to be playing a role in. >> yeah, it's unusual to some degree to have the very largest companies perceived to be on the absolute cutting edge of the

disruption, right? usually, they're the ones that are supposed to be disrupted. i know that's part of what khan was talking about yesterday, you want to preserve this idea that these huge companies can't just perpetually protect themselves. >> but this in particular, the computing power that is required for ai is so expensive, and that's why the deep pockets are definitely in the pole position. >> for sure. >> yeah. all right. the slowing chinese economy very much in focus since the start of the year. hong kong led losses in asia pacific markets today as investors try to deal with the fallout from the liquidation order from property giant evergrant. our next guest has exclusive new data on china's economy. he says it's critical that authorities put a floor under the property market. let's bring in china beige book ceo, leland miller. leland, it's great to have you. you know, "the wall street journal" today pointing out 20-year lows in chinese ten-year government bonds. what does that tell us about the state of the economic growth story in china and what might have to happen from the

authorities to try to restart it? >> well, the story is that there's very little confidence in china right now. there's not confidence in corporates. there's not confidence with consumers. so the question is, how little can the chinese government get away with in terms of policy support to keep people in the game, to avoid some sort of doom loop in the stock market and the property market, in terms of consumption. but also not reverse course in the last three years of the painful medicine they've served up in terms of property deleveraging. i think with disappointing markets, is that things have been bad, but they haven't been bad enough for big stimulus, and that's a great frustration. >> a lot of it, what we hear coming out of the country about stimulus efforts, even small around the edges-type measures, like trying to clamp down on short selling and, you know, finding an excuse for the chinese stock market to catch a bid. it feels very familiar. it feels like a previous

playbook. what do you think specifically ought to be done, if anything? you just have to let the market kind of sort it out? >> i know i'm going to get a lot of tomatoes thrown at me for this, but i would say they're doing mostly the right thing. there's an expectation by people who are playing the market that they're going to get the chinese government at their back, and then they're going to be able to hit the big bounce and get big stimulus and things are going to go back and everyone's going to be smiling. this is not what xi jinping wants to do with his economy. they moved away three, four years ago from the current economic growth model. they don't care about high levels of growth. what they would like to do is set a floor on growth. they don't want a disaster to happen, but they have their priorities set far away from the idea just growing fast. what they want to do is make sure there's not a doom loop of confidence, just enough stimulus policy support in order to keep things going, keep things c chugging forward, but not enough to juice investor returns, not enough to juice the stock market, not enough to send growth skyward. >> and what about, you know, those measures, if it's just

enough, as you characterize it, should apply to the property market? i mean, how do we restart confidence when there's been the recognition that, you know, the whole sector was sort of operating in a bit of a false economy for a long period of time, baused on expectations of being able to spleculate in housing and based on a lot of government incentives to essentially do so? >> well, the little secret no one wants to say out loud is, you can't. you cannot get confidence back in the chinese property market, because they don't really want to do that. they want to set a floor. they don't want a disaster to happen. but you know, they've spent the last several years deleveraging the property sector. they want it to go from 25% of the economy and as a major growth driver to something far, far less, and far, far reliant on endless streams of credit. as a result, what you have to do is you have to have your hands off. you have to let the weak firms fail, you have to allow for the market to slow down. you have to allow for prices to slow and sometimes contract. what does that do?

that scares people a lot. so they don't want something bad to come of this, but they also don't want to restore confidence enough to return to the status quo. this is a very difficult policy challenge, because they're going to have to do just enough to make sure people aren't panicking, but not enough to really let the market recover. because that's not what they want to happen. >> it wasn't terribly long ago that the story line was, you know, this was an economy that was turning more toward domestic consumption, and it was more of a consumer-led, and maybe income-growth led story. you obviously have population, you know, declines in some respects and aging of the population. so is that not the case anymore, that it's just kind of going to be a little more of a self-contained type economy? >> that was never the case. that was a bunch of nonsense that was being fed to us by people who had a vested interest in having flows directed into china. they were making money off the

story, so they were telling the story. china's never been a domestic consumption story. there's never been the rise of the chinese consumer. structurally speaking, the economy suppresses consumption. it suppresses household savings. so you're never going to have an explosion of consumption in china, because structurely it won't allow it. it was a great story, made a lot of people a lot of money, it was never true. now we have to be a little bit more realistic with our portfolios. >> it's interesting. i do keep an eye on a lot of commentary among investors, domestic investors in the u.s. here who will try to make the case that while sentiment towards china, the chinese market, the chinese economy feels like it's washed out. no one expects anything of it. they feel like they can safely ignore it. then you talk about how chinaist doesn't really want overseas investment flows. how do you square those two things? is it possible that it could be an undervalued market, and underappreciated at the same time that the chinese authorities aren't really doing much to try to make it a shiny growth story again.

>> it depends what kind of investor you are. if you're a sophisticated investor who trades on volatility and really knows what they're doing in terms of the china story, you can make money in china. it's not uninvestable from that perspective. but the old way of investing in china was to sink your money in, check it every three to six months, you know, cash the dividends, with the expectation that china had drawn a mote around his tech champions and other national champions, and you could just cash your dividends and smile at the quarterly meetings. that story is over. it's not impossible to trade china right now, but you can't trade it like you used to, because there's just too much going on. and too much of the sentiment is based around the idea that there's going to be some sort of rocket ship of stimulus that's going to save everybody. that is not going to happen. no matter how many times and how many years we tell people, they still tried to trade on it. >> you're right, the muscle memory is pretty strong in that regard. leland, thank you very much. >> pleasure. when we come back, the latest flare-up over taxes on

capitol hill. our next guest is trying to get a bipartisan plan through congress, but that deal is reportedly dividing members of his own party. we will speak with the house ways and means committee chairman, gop representative jason smith. stay tuned. you're watching "squawk box" and iss bc th icn. ♪♪ sofi is helping me get my money right to achieve my ambitions. wanna see? ♪♪ ♪♪ like earning more money on my money as a head chef. ready for service? yes, chef! and saving. to give back to local producers. sofi can help fund any ambition you're hungry to achieve. like investing in everyone's dinner table. bank with sofi to earn a higher apy and an epic welcome bonus. sofi. get your money right.

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members of congress fighting over a new bipartisan tax deal put together by our next guest. particularly sticking points include a child tax credit and the cap on state and local tax deductions. last night, axios reported on a heated exchange centering on the later topic that latter topic between new york republican representative mike lawler and our next guest. joining us right now is missouri congressman, jason smith. he is the chairman of the ways and means committee and mr. chairman, thank you for being here. why don't we start on the bill itself and the problems that it is trying to address. big issues here, concerning depreciation for businesses and

the child tax credit. those are big, big issues that without some sort of legislation, i think we'll be be pretty troubled. >>you know, this bill has pro-growth, pro-worker, pro-american tax policies that support families and small businesses and it sharpens our competitive edge with china, and it boosts innovation right here in the united states. there's three very important business provisions that have been expired from trump's tax cuts of 2017. one is research and development. that allows immediate expensing. if we pass this provision, it will help invest more than $70 billion into the economy, affecting $21 million jobs. when you look at the 100% expensing provision, it started to phase out. it was 80% last year, it's 60% this year. it will go to 40% next year. we're making it at 100% once again, that will create more than $400 billion of investment

and create 73,000 new jobs. >> chairman smith, let me just stop you before we continue you on this. part of the problem that's been pointed out is something like $110 billion in the revenue cost of this is applied retroactively to deductions that were made for 2022 and 2023. that is not going to put more incentives to investing more, because that's already coming past. >> i don't know where you get that number. the entire tax bill -- >> from the tax foundation. >> -- alone is $78 billion. well, it's only $78 billion, the entire -- >> it's over ten years? >> well, i'm talking about what the bill does. and you can't go back ten years. that's not what it does. this bill provides for small businesses -- >> there's not anything retroactive for tax investments already made for '22 and '23? >> there's retroactive for r&d -- >> correct, but why is that

incentivizing additional business incentives? i understand your point, but let's cut through some of the big talking points and really get down to the issues here. i agree that r&d being fully expensed will help with future issues, but not retroactively. that's already been done and paid for. >> there's a lot of discussion in regards to whether you'll do retroactive activity or not. we're in a very divided government. democrats control the senate, republicans control the house. sometimes those are things that have to be within a bill to help get it passed. it passed out of the ways and means committee 40-3. there has not been a bipartisan tax package pass congress since my first year in the committee, back in 2015. in order to make law in regards to tax policy, you have to make sure that republicans and democrats will agree on it. and you'll see a very high vote, when this is taken to the floor. >> so let me ask, the kind of sound and fury around this that's been reported on this are

some gop critics who say that they weren't consulted on the negotiations. one person was pretty vocal in what he said to axios, saying, i don't know who the "f" he's dealing with. how does jason smith announce the deal before the speaker knows about it. he negotiated this with the senate and the dems. is this more of the same of what we've seen with just the more t seen by the overall speaker of the house having so many problems, trying to deal with a very thin majority. >> those are just distracters, in appalachia and peach tree city, georgia, we heard from real small businesses, working families. we developed that tax package in june, passed it out of the committee in june. what was passed out of the committee in june is what we used to negotiate. we had 171 republicans in our conference that asked for these provisions to be included into a bill. that's why we negotiated. we moved forward. the speaker's office was

included in our negotiations for months. he was quite well aware of everything going on. that is just simply not true. >> okay. is this anything that will stall getting it through, and are you going to bring it to the floor this week? >> well, of course it's up to the speaker and the leader whenever it comes to the floor. i expect it will be this week. i expect it will be in the next couple days. whenever we have the votes, you're going to see a very large number of republicans and democrats that will be voting for this pro family, pro worker, pro business, pro growth tax policy. >> there have been people who have complained about the child tax provisions. my understanding is this brings it higher because of inflationary aspects. there have been some people who have claimed that this is going to be a giveaway to lots of people out there. what's your response to that? >> my response is the republicans started the tax credit in the '90s.

we doubled it with trump's tax cuts in 2017. what we're doing here is enhancing it, indexing it for inflation, for families crushed by the cost of goods going up. we're making sure there's no longer a penalty for families that have multiple children, things that are pro family, pro growth. that's the policies within this bill. >> i think part of the issue is the refundability. it would increase that $1600 limit on a credit refund based on your earned income formula to $1800. the "wall street journal" has been critical -- "wall street journal" opinion page, i should say, has been critical of the language around that saying it could be a giveaway for people who shouldn't qualify for this. >> trump's tax cuts in 2017 increased refundability to $1400 indexed to inflation. it is currently, as we stand, $1700. it's not $1600. it's $1700.

this bill increases $100 every year over the next three years, just like what trump's tax package did as well. of course the "wall street journal" is not going to be favorable because this tax policy is focused on working families, small businesses and main street, not wall street. >> your opinion is that this will pass when and if it's brought to the floor? >> it will pass with the largest number of votes of any tax package in recent memory. >> chairman smith, thank you for your time today. we appreatcie it. >> of course. "squawk on the street" will be right back. they collect hundreds of data points like hrv and rem sleep, so you know all you need for recovery. and you are? i'm an investor...in invesco qqq, a fund that gives me access to... nasdaq 100 innovations like... wearable training optimization tech. uh, how long are you... i'm done. i'm okay.

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headlines out of the ups conference call. the company announcing plans to cut 12,000 jobs, seeing a $1 billion cost reduction. ups is also requiring all employees to be back in the office five days per week this year. in other headlines the company says it's exploring strategic options for coyote trucking brokerage. a busy few days ahead for the markets as investors brace for big tech earnings and the ed's biggest policy decision. john mowery is executive managing director and cio at nfj investment group. john, what do you want to hear from the fed? what's front and center for you this week. >> good to see you, becky.

when i look at earnings, i'm expected those to be pretty sang ginn. i think i'm looking at what is the fed going to say. the 13th month where the two-year yield has been below the fed funds rate. why is that important? because the two-year bond rate is telling the fed it's time to cut. if you go back historically we're in the second longest yield curve inversion. those things can be problematic. i'm looking for the fed to use language that could give investors some relief there. that's going to be a boom for real estate, banks and smaller mid cap stocks. >> okay. if you don't get that, then what? >> if you don't get that, what's interesting becky is you've been played for more defensive areas

with higher interest rates. if you look at utilities, staples, health care, all these higher yielding areas have been hollowed out. everyone has been chasing the mag seven. that's created a real opportunity in the real defensive areas. so should you get a bumpier period in the market, i think you'll get paid to be in those other areas. i like some of the more defensive areas. in fact, becky, if you look at the spread between the cyclicals and semis and the more defensive areas, you've surpassed where we were in '21 when those spreads got very stretched before challenging year '22. i think investors would be wise to rebound out of some of these areas that have run and move to some of the areas where you've got much more traffic valuations, very healthy dividends and dividend growth. no one talks about dividend growth. that's a key way to ward off inflation. >> it's interesting, john. it seems like the market has decided the biggest tech stocks are defense as well as being

offense. so the traditional defenses have not worked as well. consumer staples in particular, their valuations relative to history, do you need a story fundmentry for why things are going to work? people don't think there's pricing power, et cetera. >> well, i always start with valuations should shape investor expectations. the mag seven got tremendously cheap. nvidia down 67%, meta was down 50. those names got really attractive. i think you always should start with valuations. i expect that as inflation begins to moderate, that's going to be a way these staples have some aleve asian on pricing power. in addition to that, if you look overseas, a lot of these staples have exposure from china. should you see a bottom there, i think that will also alleviate pressure on the staples. they're not as exciting.

the heir won the race last year. it might be turtle time. >> the hair. john, thank you, great to see you. >> thank you oovps. let's take a final checks on the markets quickly. the futures will continue to be under pressure, dow futures off close to 80 points. s&p down by 10. mike, thank you. >> thank you. we'll see you back here soon, too. right now it's time for "squawk on the street." good tuesday morning. welcome to "squawk on the street." i'm carl quintailla with jim cramer. david faber has the morning off. futures a bit soft as several industrials guide lower, including ups. market awaiting microsoft and google tonight. the fed decision tomorrow. a slew of corporate results today. gm, ups, pfizer all crossing the tape. amazon, alphabet, am