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welcome back to "squawk." we have odd breaking news this morning. we reported earlier today that home depot and -- excuse me, office max and office depot were merging. they've taken that press release back. apparently the negotiations are still ongoing. this according to dealbook. we'll find out more throughout the day. that's where things stand as we speak. robert wolf has been our guest host. thank you for being here. it's been a lot of fun today. we'll see all of you tomorrow. join us tomorrow. "squawk on the street" begins right now. good wednesday morning.

welcome to "squawk on the street." i'm melissa lee, with carl quintanilla, jim cramer and david faber at post 9 here at the new york stock exchange. the day after we broke a lot of records for the u.s. markets, we're looking at an update for the dow. the s&p looking to give back just a little bit, along with the nasdaq. as for the picture over in europe, some comments from germans chancellor angela merkel about the euro saying between 130 and 140 for the u.s. dollar is normal. those are the comments being focused on this morning. a mixed bag in terms of europe and take a look at the picture in asia. the nikkei, the one to focus on, closing at a 4 1/2-year high in yesterday's session. >> fresh five-years for the s&p and dow, fresh 12 years for the nasdaq, helped in part by a renewed appetite for deal making. >> cracks in the housing picture this morning, january starts to decline 8 1/2%.

toll brother earnings sharply miss earnings. >> could demand for the iphone be cooling? fox con pressuring shares this morning. the rally continuing with the dow and s&p having their best day in two weeks. nasdaq closing at 12-year highs. dow less than 130 points from closing at an all-time high. guys, a lot of discussion about how it's a nominal high. but getting back to 14164 would be news. in some form or fashion, jim. >> i think that there is a level of, dare i say, excitement. in other words, we're seeing levels that we haven't seen in some time. it's making people say, geez, maybe i could make a little money. as opposed to saying, i should leave. i believe that is the new view, maybe i can make some money. >> does that build, that momentum continue to build into the spring? >> i think if you were to finalize the office depot/office

max -- the papers are filled with rumors of deals. and when was the last time when there were rumors of deals every day when you come in. >> you have analysts now doing the lbo crunching number, like kohl's. let's call heinz 1, 55% equity check. you never see that. dell was unique because you have the founder rolling in all the stake and putting in additional money. so they didn't call on the pe firms to come up with huge checks. don't get too crazy on doing your big lbo models. >> at the same time, i was on the dell call last night. this is one of the things where half the people are saying, this is nuts. this thing is worth like six. others saying, dell refigured could be worth 13. there is a great schism right now of a lot of professionals who say what a great opportunity to leave the marked. because there's fraud.

and a lot of individuals saying, you know, i knew dell. google, ooh, geez, 800. i've got to get in that before it gets to 1,000. how many people said to me, honestly, jim, google, 800 to 1,000? so you obviously want to take the other side of the yahoo! trading, except you listen to marissa meier and you want to buy it. >> you seem to be suggesting that those who are chasing the market the market doesn't have a lot of intellectual depth. >> because there keep being this discounts. i read through the toll release and i liked it. that will distinguish me as someone who's not rigorous or skeptical enough. i think toll goes to 38. because this market gives you intraday, intrastock pullbacks. i was looking at tiffany. we pronounced tiffany dead, and it's like they got the walking dead show, where you have to

shoot them right through the head, kids love it. this one they obviously missed the head and it comes back. you have to hit it right here to be able to survive in walking dead. they didn't shoot it in the head. >> which means what? >> it's still around. >> it won't die. >> it won't die. >> people reluctantly like this market. they see the markets going to new highs, they don't want to get out of the market, but they don't want to miss it. it's like dying by a thousand paper cuts. that's not the kind of market that drives excitement or drives the volume. but it keeps people in. >> yes. yesterday general mills reported a -- the update, the food conference, i thought, that stock's too high. but then i say to myself, well, wait a second, heinz goes out on a certain level, maybe someone's thinking there's a guy from general mills, then dannon

yogurt is looking good. >> take a look at the defense stocks and some of the consumer staples names. >> staples. >> like staples. >> but you are bringing m & a into your overall market thesis as a driver here. >> i am saying -- >> things like the heinz multiple 14 times what it's taken out at, is something i can start thinking about at least and then it becomes a reality again. which it hasn't been for years. >> yes. i'll give you an example why i wa to mention general mills. in my old fund i would have shorted general mills. conagra. they're not all going to get heinz. and they loved general mills yesterday. the stock is selling at a multiple of -- in excess of google. >> odp, omx thing, i know andrew also, i think he's standing by back at hq. kind of weird, andrew. the press release had this little thing called other matters, which we all saw this

morning, detailing at 269 ratio. but but never got a press release on the deal. we're talking office max/office depot. what do we know at this point? >> the negotiations are ongoing. there are dealmakers furious this morning with what's happening. office max is supposed to report its earnings tomorrow. we thought we'd hear about a transaction by tomorrow. it was buried on the fourth page of this press release under other matters. also in the press release, referring to a 10k which haven't been filed. there's a lot of questions how the release got out. it's now been taken off of the home depot -- or the office depot website. we'll see what this all means. but i imagine 9 terms are not going to change that much. but we might be seeing -- i imagine we'll probably see a statement about all of this, and perhaps a deal in the next 24 hours anyway.

it's a very weird, and as some people were talking about this morning, sloppy way to deal with it. >> it actually makes a foreign deal more interesting. >> how does it work? >> now the entry behind the deal is more exciting than the deal itself. >> did the "times" get it wrong? how does it work? >> ask your colleague. >> but they didn't get it wrong. the companies got it wrong. >> somebody jumped the gun to get an advantage. maybe they wanted 269 out there as a ratio. that could be it. and maybe it's not done. >> jim, no, no, just to clarify, this wasn't about "the new york times" or any other news organization. in fact many news organizations went with the news because office depot put out a press release that included all this information. we, therefore, reported it here on cnbc and "squawk" as a news story, based on the news release that was put out. even as bizarre as the news release appeared to be. then they took it back. now there's a new story broken

effectively in this case by "the new york times" suggesting that the press release was not supposed to go out and the negotiations are ongoing. >> a lot of people are saying the press jumped the gun. >> no, it is not the press jumping the gun. >> the banker was jumping the gun. >> again, they've got a local story. don't you love the local papers, people take these stocks up. david, in your many vast years of covering m & a, how long do they listen to the local paper, listen, we're going to pay 40% more? is that the process? when do you get involved -- >> investors in these days seem to want to take anything anywhere, which gives an opportunity to others do a bit more work. you never know. local management, local paper, management is there, sometimes you might have a member of the

board or two there. you never know. >> the diner. the general store. >> right. exactly. >> cracker barrel? stock's been hitting highs. >> one thing's for sure, it is a very bad day for someone at odp. >> yes. >> our thoughts are with them. >> this is an interesting story. now i want to find out more. >> andrew, thanks for sticking around. >> see you later, carl, thanks. construction on new u.s. homes falling in january. but construction of single-family homes did rise at the highest levels since the financial crisis. toll under pressure after they missed estimates. expanding the operations in an effort to capture a larger portion of the apartment market, pushing into student housing as well. new orders up 49%. cancellations flat. but there's a sense, guys, that

starts have exceeded the market's ability to absorb. >> i listened to the terrific debate this morning on "squawk," and steve liesman said something pretty profound, which is some people think this may be the new normal, but we're so well below how many homes we used to build. i think these are all noise. i trust toll brothers. toll brothers, i remember when things were bad, i wanted bob toll to come on the show and say, come on, he says, you know what, jim, you've been goading me. you're right, there is light at the end of the tunnel. i've had enough. when he goes bullish, i am not about to question him. when he was bearish, he was right. >> i think the bigger issue for this company at this point in terms of the stock reaction, if you read the metrics, they all looked good. i'm with you, jim. you read through the press release and everything looks good. they gained market shares, so they weren't giving up on margins to gain the market share. the problem is, it trades at a 42 forward multiple.

at a 42 forward multiple you need the stock to beat. at least meet, and it didn't, the estimates for the quarter. people are getting hung up on this headline number. we'll get more details from the conference call, of course. >> influenced by weather. >> exactly. >> there's a debate about whether these two months of weak starts are seasonal noise or there's actually a trend developing. >> i think it's a good debate. you go back over pullty, they're still talking about demand out there. toll brothers, obviously, articles about, well, they're affected by the sequester. most people, like sequesters like the "jeopardy!" answer, right? what are the massive cuts? >> that would be a sequester,

yes. >> why would they phrase that in the form of -- >> i can't even do it right. i don't know how i won. >> you would, because you're lucky. better to be lucky than good. >> lucky is the residue of design. >> good one. that's a good one. >> therapists for 500, alex. >> we'll talk to the toll ceo tonight on fast. freezing all hiring as it cuts production of the iphone 5. the company is not hiring at any factories in china, this after a federal judge said green light capital einhorn has a likelihood of success. in this case against apple over the large cash holdings. a couple of issues here in terms of apple. first, let's deal with the fox conn. scaling back, but could that just be that another iphone is in the pipe. >> i think we'll read a story in

the next two hours from the defen defense analysts saying, i've been in touch with foxconn and they've moved the business over. apple does a lot to try to -- like cisco used to do, by the way -- to make it so you can't read the tea leaves. we can trade on every single bit of news. but we've been whip sawed. it's not been a great strategy. >> between the hacking news, einhorn showdown in court, the news flow continues to rain on apple, every single day. it's amazing. >> yeah. an enormous company with interest in so many different places, and so much interest in it. >> you were pointing out an npd number. >> 20% of all consumer spending on technology in 2012 was apple. 20% of all spending on technology. >> on all consumer spending. >> yeah. is apple. >> the numbers are stunning. when you include apple in retail

overall, the numbers are stunning as well. look at retail in america and what percentage it takes up, those apple stores, i mean -- >> remember they topped the -- >> yeah, everybody, hands down. >> the einhorn drama is not done by a long shot. >> could we see a dividend increase or buyback question there. >> i was watching this court scene, and the immortal words of u.s. marshal sam gerrard when confronted by kimball about whether he was innocent, i do not care about this lawsuit one bit. einhorn, like i wish he'd bought the mets. is there a trading deadline? you don't like it -- listen, intel has a preferred. real estate is preferred. go sell it. the court suit, come on, it was like perry mason? what have you got there? like the defenders? is this the defenders, are we

going back that far? >> it's going to be wall-to-wall coverage on that suit. >> i care about the bp suit. >> amendment 6. >> when we come back, marissa meier talking about the latest push to turn the company around. we'll find out what she's doing to keep yahoo! relevant. the president and ceo of marriott international live with his first reaction to earnings and a look at the company's record-breaking hotel in dubai. one more look at futures. can't get much closer to the flatline than that. today is gonna be an important day for us. you ready? we wanna be our brother's keeper. what's number two we wanna do? bring it up to 90 decatherms. how bout ya, joe? let's go ahead and bring it online. attention on site, attention on site.

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sglenchtsz breaking news this morning. we're following office depot, "the new york times" reporting office depot/office max deal was announced prematurely. we'll continue to follow the story and bring you details as we get them. again, just to recap, we did think it was a done deal because of what corporate information was saying on their website. until it disappeared, david. >> other matters. a press release that was the earnings press release from office depot said, hey, we're buying office max for 2.69 shares of common stock of each standing share of office max common stocks. that was the ratio, 269.

that's what you saw. but you never saw a press release. >> it was weird, because it was just buried in the earnings release. >> yeah. >> it did strike us as very odd. >> yeah. >> yahoo! ceo marisa mayer looking for a new look at the home page. the new look will take advantage of people's daily surfing habits and capitalize on the growth of global internet users. >> it's more personalized than ever. people said, give me a reason to come back to yahoo! a few times a day. the content is always updating and refreshing. it gives you all the information you want. and a few things that are a serendipitous surprise. >> is this enough to bring investors back here? >> i think investors are coming back. >> right. or staying in. >> tim armstrong pulled off his deal. yahoo! never lost its core base. i have an apple iphone, i guess that makes me a stone ager.

but i'm not on the samsung galaxy. but it is loaded with yahoo!. the galaxy. i find that yahoo! is still very much intergreat into our society. if they can do a little bit cooler things, it will work. >> how do you prepare for today's market action? "mad dash" is coming up next. we'll take another look at futures as we sit here at five-year highs. it looks like we'll give back a little here at the open. but we can still help you see your big picture. with the fidelity guided portfolio summary, you choose which accounts to track

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there's a lot to watch today. talk hotels, jim. >> well, you have mr. sorenson on at 11:00. marriott, incredibly successful company. why? because he figured out how to divide the company to bring out value. the ceo of starwood recently, i suggested that if he did something like what sorenson did, the stock could be up here. i can't wait to hear your interview. sorenson is a remarkable creator of value. >> knowing about strategic moves as well as operational moves. >> getting rid of starwood here, even though tomorrow they could

do what sorenson did, and you could be up ten points. don't sell this stock. >> how about the secondary out of michael kors? >> this is really important. because we're seeing this particular end of the market, i'm calling it the gatsby end. because it's different from you and me. this stock has been a buy on the secondaries. and people understand, you go back and look at the quarter, it was pretty darn good. this is very different from like a kohl's right now. i'm wearing kohl's socks, and they're like two bucks a throw. this is not two bucks a throw. when my daughter wants to go to the kors outlet, i won't let her. it's too expensive. >> you can afford it. >> none of this kors stuff. even at the outlets. like holy -- i was complaining to steve tanger, i said, the kors outlet is not even like an outlet. >> you're saying don't be afraid? >> don't be afraid.

prada reported great numbers. now, i happen to be wearing a prada. i didn't know they had a good quarter. but prada is another high-end -- the high end is still great. it's nuts. >> you've got that right. no signs of cracking. >> there's no signs -- i keep waiting for it to crack. you should ask sorenson, because marriott has this new label, this super-duper ritz-carlton. and i stayed there. and i got this -- and it's packed. what is it with the rich people? don't they read the papers? >> we'll talk to -- >> they've got to read the papers. >> when we come back, chief technology officer at mcafee weighing in on the latest hacking threats from china. the opening bell just minutes away. i know what you're thinking...

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capital of the world. the opening bell set to ring in a little less than a minute's time. reuters has a fix for the dreamliner battery issue, the stock is moving a bit here. jim, we took notice several times of how it didn't move when the news was still bad. >> isn't that interesting. underrating boeing has been something that has been stuck. i think this time will be no different. >> certainly helps that it's restricted to 52-week highs day in and day out. we're about seven trading days away from sequestration friday. [ bell ringing ] >> there's the opening bell here at the new york stock exchange. mlpa, exchange traded funds. over at the nasdaq, comedy series "the neighbors." that sets us up for a pretty

interesting day. remember what happened when we got the minutes for the december meeting, when it became clear the committee was not thinking uniformly about asset price targets, qe3. i think we might get bounced around this afternoon. >> there was a fabulous note yesterday from jpmorgan, i worship at the altar of this, i own the market. he was talking about, at one point, 55% of the buy out there, treasuries by the government, i mean, at what point does this stuff end? or does it just go on forever? it is such a big reason why the stock market does do well. any sign that this does not go on forever will make us pause. but so far -- >> one of the biggest conversations that take place every day now amongst investors, hopefully, hopefully on the trading desk, is what about the bond market. what about that possibility of some huge backup in rates that occurs very quickly, ala 1994.

more painful than that, what will occur as a result. getting back to the question, of course, carl, of what you raise, well, how do they withdraw qe. can they get us out of it effectively without having rates soar, and having a lot of unintended consequences that we aren't thinking about, not to mention all you people out there who have money in bond funds for any long duration whatsoever, be careful. >> i think it is the big story that people talk about behind the scenes. because it has to end. i mean, one day it has to end. >> we had the conversation last year, and the year before and the year before. >> it's not going to end this year. i mean, the thing is incredible, how many -- they bought so many -- how many trillions of -- couple trillion of bonds? just sitting there, you print them, i'll buy them. i don't know. >> meanwhile, we started the show with the discussion about everybody's got their new

favorite lbo target. bmo last night mentioning kohl's. i think they said $60 a share sounds good to them. >> i see you 60 and raise you 61. hold 'em. >> after amr u.s. air and -- >> i know. you want to short kohl's in the rumor mill? david, i think there's a paper that says -- i mean, it is so pervasive. then bingo. office depot is kind of like, hold it, you were short office depot. for a second you're winning. >> right. >> by the way, i'm sure if that combination does come to pass, as i expect it still will, office max/office depot, there will be a lot of synergies. when it comes to this -- listen, analysts should be out there doing lbo models. let's not forget that the dell

deal was not typical. heinz certainly not typical. and don't expect we're going to see massive -- quite a big number. there's still great resistance on the part of the lps. limited partners in the private equity funds saying, you, you, and you, you have to come together on a check for 2 or 3 or $4 billion. they don't want that. by the way, the funds that have been raised by the private equity firms were not as large as the ones raised years ago. the check represents even a larger percentage. i'm not saying we're not going to see 8, 10. don't look for more than 10 to 12. >> we're not there yet. >> don't pick toggles yet. when we see that, head for the hills. >> head for the hills, yeah. >> in a relatively flat take,

guys, among the big winners today, kohl's, jcpenney, best buy -- >> the price on lbo, if it's 60 or something and trading up 2%, that's not really a vote of confidence that this deal will take place. >> i got a nice pair of slacks at kohl's before i went to mexico. >> how did i know? >> the sonoma brands. good looking brand. better than a pair of trousers i bought at jcpenney. >> by the way, trousers and slacks, any difference? >> aren't they the same? they're synonyms. isn't the material that differentiates trousers and slacks? i don't know. just postulating. >> i once did buy $400 worth of goods at kohl's knowing if you have a credit card you get a big discount. they dk'd me saying they would

not accept -- i didn't have the documentation. ten people lined up behind me. people were booing. i didn't get credit. i was like, wow, this is one of the more embarrassing retail incidents i've had in the last three quarters. >> sorry to hear that. >> there are a lot of retail experiences to pull from, too. that's really saying something. >> yes. >> take a look at shares of caterpillar trading down by 1 1/3%. in the month of january is looked like things worsened tremendously versus december. they saw big declines in north america and asia-pacific. that's a wide swath of the world, jim. >> waiting for china. david, office max/office depot, announcing all stock merger of equals. hold it. did they take it back in? >> holy cow. >> but the cat's important, because everyone's waiting -- i have -- i have hanson tonight, he's waiting for china.

we're all waiting for china. when is china going to speak up? >> we're waiting for them to speak up. >> place some orders. some people say they're placing orders. >> now they're trying to cool the property market. there's talk that they'll start doing price curves in terms of property. look at some of the copper stocks for the last couple of days, while this chatter has been growing. and we've seen the declines in copper over the past couple of sessions. i don't know what we're waiting for at this point. >> yesterday dan fulton, not from queens, but said on judge wapner's show, that he's seen the chinese orders. he's seeing chinese orders. >> there are orders, yeah. >> yes. >> warehousers. >> is it 269? >> what is that all about? that was just something to talk about? >> yeah. >> like the trading deadline was

here and the rumors fly? >> it was weird to have a press release of the earnings, buried down -- it was kind of big. >> yeah. all right. let's check in with bob who's here with more on what's moving this morning. >> considering all the headwinds we're facing today, still got cater pillar and the house be numbers. barclays is lowering their estimates by 0.1% on the decline in the housing starts number. that's now affecting the gdp numbers overall. jim mentioned toll. i spent a lot of time with toll brothers. i used to work for bawleding company. a little below expectations. but you have to look under the hood a little bit here. primarily it was a mix. there was lower average selling prices. remember, they don't sell houses, it's $425,000. there's vast product mixes that

toll brothers has, and they had lower average selling prices because of the particular mix. but if you look at the commentary, the ceo there, doug yearly, we're out enjoying increasing pricing power. that's a very important comment. if the reason they were a little lower on their profits was because the pricing power was lower, that's very important. new order growth, 49%. well above everybody else's 30% to 40%. they went out of their way to say the orders the first few weeks of february were up 40%. two times book value, that's historically where they've been. owens corning, big fiberglass insulation, roof shingles, their numbers were down. the guidance was a little bit weak. i'd like to see what they're saying on the conference call. maybe i can get you some of that at 11:00 eastern time. kit caterpillar's numbers, double-digit falls in asia.

these are rolling three-month numbers. i think they're a little bit of a surprise to the market. this sequester talk is back on the front page. a lot of discussions down here. keeping the sequester talk off the front pages i think has been one of the reasons we've seen the markets very stable. low volatility in the last six months. now that it's back here, march is going to be a preventive fight to keep the government from shutting down. that's not good for the stock market overall. guys, back to you. >> "usa today" had a story, military cutbacks. bonds and dollars. rick santelli in chicago. go ahead, rick. >> all right, jim. i'll tell you what, it might be a bit of a snail's pace, but it's still exciting in its own fixed income way. interday chart of 10s, creeping up. we touched 204. dipped just half a basis point. if you open up the chart, yesterday was the high close going back to about the second week of april. we're splitting hairs, a whisker under 203.

looks like we could challenge that and open it up as you see the chart going back towards april. it seems as most of the action continues to be in the technicians market. if you look at a three-month chart of the euro versus the dollar, maybe one of the best patterns. head and shoulders reversal, neckline, 133, 133.50. the most action has been usurped briefly based on the gs. g-7, g-20. it's not the yen so much, but the pound. the pound's getting pounded. if you look at the interday chart of the pound versus the dollar, you can see the massive drop. we are at the lowest levehighes the uk currency in years. >> doing everything wrong in the

uk right now. let's go to sharon epperson at the nymex. >> the big move is in gold. gold prices down about $16. and we are firmly below the 1600 level. a lot of traders are looking at that 1584 level, saying a close below that, or around that level could mean gold prices could fall all the way to 1525 an ounce. we're looking at pressure on gold as we await the minutes from the federal government. keep in mind as well, who needs a store of value when the stock market is on a tear. a big reason why we've seen the fall in gold and silver prices. traders say it's because we're looking at that run-up that we've seen in equities. a lot of funds are rotating out of gold, out of the precious metals, and into the stock market. we're also even seeing a bit of a stall here in the big gainers that have been in the metals markets so far this year. those have been the platinum group metals. platinum and palladium pulling

back a bit. there are still supply issues there. metals lower across the board. back to you, david. >> all right, thanks very much, sharon epperson. haven't talked about dell this morning. the stock still hanging around $13.80 a share. that is above the $13.65 a share that michael dell, the company's founder and ceo, and silver lake partners has agreed to pay for it. you get potentially two dividends along the way before the close. the close itself is still something that is a question mark as you take a look for a fresh on the deal terms of a couple of weeks ago that we got on this management led buyout. which by its very nature has certainly conflicts that come along with it. and that has led to, as we know, opposition from large shareholders, and led by southeastern asset management. we'll see where this ends up. some will point to the quarter, jim, and say, hey, not a bad quarter, actually. some of the analysts coming out and saying, listen, sales $14.3 billion, up 4% quarter over

quarter. large enterprise not bad. consumer not bad. >> a lot of consecutive -- >> they'll also say, about 20% overall, what is it, year over year decline in pc sales, at the end of the day that's made up to a certain extent by higher margin businesses. those are growing faster. >> right. >> it all goes back to just a lot of concern about management led biobios. it was superlative in terms of trying to make it look as though everything was -- everything could possibly have been done, dealing with whether it was the del monte case in delaware, or jay crew. but it still raises issues. do you do your best job when you're trying to take a company private? >> why raise your own price? >> that you're going to introduce down the road. i did want to point out the

noted short seller notes there was an advancing of $250 million in settlement that seemed to aided -- but looks to have helped cash flow, have the appearance of being much stronger than it was. that is worth at least noting at this early stage. these vendor settlements, they say added 10 cents a share after tax. they didn't factor them out from long gap calculations. if you do, the margin comes way down. he's on the other side saying, i don't even know how the banks are lending against this company. cash flow is in free fall. you do have two sides here. >> it wasn't like it was a hidden thing. there were questions about that. this was a call where you could say, if they didn't have bcs, it was pretty good. they are a pc company with a software business, software security. you could see somehow this company coming up with a way to

get rid of all that and being a high margin emc-like player. but it's not evident yet that they can do that. >> $13.65. there's a lot of shares outstanding. even an increase by 30 cents is $700 million to the buyout group. we're still going to get another earnings report before we even see this vote amongst shareholders. we'll be watching it closely. the opposition is certainly formidable, though at this point doesn't look like it's enough. but we'll see. >> thanks, david. want to head to bob who i think is making his way to some parts of the floor where there is some news. yes, bob? >> actually, we're waiting. so this is the crowd for office max. and office depot. pan over here, you can see we're all waiting for them to open here. office depot looks like it's about to open there. remember, they both opened, and then they shut down for news pending. the news is out.

and we are waiting for both of them to open here. office depot opened at $13.42, i believe. and is still held here. office max -- excuse me, $13.42. we're waiting here. we're getting indications -- everybody's got orders. $5.49 last trade. we're still waiting for that to open. indications still $5 to $6 on office depot. office max also waiting for that to open. here's the crowd. we've got the news out. we're still getting the indications right now. i estimate three, five minutes before we open. >> bob, we'll wait for that. staples giving back some of the big gains we saw in yesterday's session. down by 1.7% right now. coming up later, we've got a first look at the ten most overbought stocks in the s&p 500. find out who came in at number one. you can't afford to miss that. the ceo and president of marriott international tells us how the company is making its

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welcome back. we have stocks opening in the merger between office depot and office max. there's a look at office max. waiting for the press release. it will create a very large company with $18 billion in sales. they're expecting significant synergies. this is, again, a merger of equals. the board of the new company will be comprised of board members from both companies equally. and then they are going to set about searching for a new ceo. apparently they're not picking the ceo, either office depot or

office max, but they'll be candidates for the new position. they'll be considering external candidates. and then once they get -- once the board of the combined company decides who the ceo of the combined company will be, then that ceo will decide the name, the marketing brands and the corporate headquarters. so you've got to have a ceo search for a new ceo, you might look at both incumbents, but you might not have them be the ceo. then you come up with a name. we're going with office -- >> office makes the most sense. >> and decides where the headquarters is and everything else. i'm sure this has happened, but i don't remember having seen something like this, where both guys want to be ceo, but they're like -- >> two ceos -- >> no, both ceos, or a lady. >> we don't need another ceo. >> office politics taken to a new heights. >> i was looking for a name. which always becomes an issue. i discovered, well, they haven't

decided on a name. it's way down the road. >> is the scranton office still in the running. it's about time. steve carell, this could be it. >> yeah. >> holy cow, that makes so much sense. >> when we come back, the ceo of spirit airlines will give us his first reaction to the company's blowout quarter. we'll find out what he thinks about the airline merger trend and rising fuel costs. but up next -- coming up, how many stocks can you talk about? and how fast can you do it? see if you can do it better than cramer, 6 stocks in 60 seconds when "squawk on the street" returns. for a final go. this is for real this time. step seven point two one two. verify and lock. command is locked. five seconds. three, two, one.

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let's talk some stocks. "six in sixty." we begin office max. >> maybe in the afr hours. >> pbh. >> you're starting to get people

talking about buying it again. >> terex? >> isn't this interesting. bounces back. doesn't even go down. this is the new forgiving other side of the cheek market. >> buyback accelerating. >> what an unbelievable guy. got the right drugs, the right stock. >> linkedin? >> the market is bigger than we thought. look at this. carl, this is a bull market activity. >> that's a heck of a chart. garmin. >> they make devices like exercise, but the automotive is bad. everybody las a device in their iphone. a couple of specs tonight. this is a very small oil company. used to be a bigger one. herb hanson. and six flags, the theme park business is so great. cedar fare, union verse al,

disney, and six flags. what a great guy he is. >> that's an amazing park. >> the only one i haven't thrown up is a disney. >> they're saying, please, jim, don't talk about us anymore, right? >> yes. >> see you later, jim, 6:00 and 11:00 eastern time. macy's and jcpenney going head-to-head in court today. great, everybody made it. we all work remotely so this is a big deal, our first full team gathering! i wanted to call on a few people. ashley, ashley marshall... here. since we're often all on the move, ashley suggested we use fedex office to hold packages for us. great job.

[ applause ] thank you. and on a protocol note, i'd like to talk to tim hill about his tendency to use all caps in emails. [ shouting ] oh i'm sorry guys. ah sometimes the caps lock gets stuck on my keyboard. hey do you wanna get a drink later? [ male announcer ] hold packages at any fedex office location.

welcome back to news driven "squawk on the street." let's get the road map for the next hour. jcpenney and macy's going to court over martha stewart today. >> a new report says boeing may have a fix for the dreamliner battery problem. is this a sign of hope for the planemaker. the ceo is coming up. but first up, macy's and jcpenney heading to court in new york city today over the right to sell martha stewart home products.

courtney reagan had an interview on "squawk on the street" last month. >> it makes me very unhappy, of course. i don't like to have any arguments with our partners. otherwise our business has been very good at macy's, robust. good christmas sales. >> trial starting right now in lower manhattan. courtney reagan is there live with the latest. good morning, courtney. >> this battle has been brewing for well over a year, today it's just the beginning of the opening arguments in the battle of macy's versus jcpenney with the domestic diva right in the middle. in december of 2011, jcpenney acquired a nearly 17% stake in martha stewart living omnimedia for $38.5 million. with the intention of creating shops featuring stewart's lifestyle brand. macy's who currently sells martha stewart, sued over the

agreement on grounds it had exclusive rights to sell these types of goods. in july, macy's filed a preliminary injunction preventing jcpenney from selling certain product categories, and then in august, macy's sued jcpenney, though the judge did deny at least the action. now, stewart's legal team will begin to argue today that the jcpenney line can work for stewart, because the original contract with macy's does allow certain products to be designed and sold elsewhere within those exclusive categories. if operated by the company itself, and branded prominently with that martha stewart branding. now, the jcpenney ceo told me that the martha stewart products will launch as planned in may. so that includes window treatments and greeting cards, a celebration line. martha stewart is not expected to appear today. but at some point during the course of the trial, we will

hear from her. the ceos of macy's and jcpenney, as well as former jcpenney president michael francis. back to you. >> if you don't blow away first, though, courtney. they must have put you right in a wind tunnel. >> i hope they have their arms around courtney's legs. >> stay safe, i guess. >> and grounded. >> we'll get back to you a little bit later. >> the trooper, courtney reagan today. the company says it will continue normal operations and no taxpayer money will be at risk in the restructuring. opening less than a year ago. at a cost of more than $2 billion. the casino had received more than $300 million in assistance from the state of new jersey. governor chris christie's office filing on it last night.

many efforts under way to bring entertainment to the city. rejuvenated revel will remain a part of that landscape as it continues full operations as a premier hotel, gaming and top flight entertainment hub for the city. is it really what was required for the area. they didn't want smokers. they had to go back on that and have smoking areas. >> it did $8 million in take in january. what were they thinking? what one wonders given that kind of dismal -- >> it never climbed up. it was never the great attraction people hoped for. >> and it hit a difficult time. it ran up against hurricanes, it had superstorm sandy. now the weather in the northeast is very frigid. the coast is the last place you want to go right now. >> also, some design issues. people are writing about the window. it's not your typical closed casino where you focus on the gambling.

maybe there are distractions people didn't stay at the tables long enough. >> the state of jersey had to offer the financing to get the project completed. most of them will be tax credits, two-third of the debt is w here. they've restructured several times. we've asked the ceo to come on. i know the labor unions locally never thought it would succeed because it is a non-unionized place. >> money lost there. $1.25 billion from morgan stanley before this got restructured and they moved on. >> wow. yahoo! ceo marisa mayer announcing a new home page. the new look will be able to follow people's internet usage and customize content though their preferences. >> it's more personalized more dynamic. people said, give me a reason to come back to yahoo! a few times a day. it gives you all the information you want. and a few things that are a nice

serendipitous surprise. >> will this actually work, because if it works they could command higher ad rates for its advertising if people are actually going back again and again throughout the day. >> that's not got a huge moat around it as an idea. >> if they have users that haven't gone away necessarily, they can gain traction with the base they already have. that could mean money for them. >> display advertising, i guess. that's the main -- >> home page numbers in december weren't so bad. it was the finance. we'll see if those come back. in the meantime, boeing may have a fix for the dreamliner. reuters reporting the company is close to fixing the battery problems that have grounded the dreamliner fleet. boeing's latest contract offer authorizing the union to call a strike if needed. we talked about for a long time how the stock wasn't going down so much on the concerns,

definitely going up a little bit today in a relatively quiet take. 1% move is not too shabby. >> it also helps that boeing is a sector that continues to hit all-time highs. defense sector, hitting new all-time high. defense stocks, a lot of them have been huge gainers for the year. united technologies up 11% this year. >> despite the sequester. >> exactly. >> they have locked down the federal government on their contracts as we've heard many times on the show. >> yes. >> exactly. >> although the first responders in the airport security, that was the president's message yesterday. when we come back, it has been nothing but up for gas prices lately. if consumers have to cut back to afford gas, what does that mean for the economy as a whole? the spirit ceo weighs in. we'll get reaction to his big beat on earnings. [ male announcer] surprise -- you're having triplets. [ babies crying ]

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the national average for a gallon of gas has risen every week since the middle of january. $5 is now a reality for part of the country, as consumers feel the pain at the pump. what is the economic impact? and is this market in denial as it continues to hang strong?

good morning to you, diane. >> good morning. >> we're within striking distance here of all-time highs potentially on the cost of a gallon of gas. how do you explain that to people at this time of year? because this is very early to have thirt o rally. >> it is very early to have the rally. and it's a multitude of factors, in addition to, we've seen crude prices go up on brent, which is part of the problem, because that's in the mix, about 68% of the price at the pump is the actual cost of oil. wti and cushing hasn't gone up as much. it gets stuck down in cushing, oklahoma, so we don't get it all in the places we need. frankly, it doesn't really matter, at the end of the day, we're now talking about a rise in the price of gasoline 25 cents in the first two weeks of february alone. a rise in the price of gasoline that is equivalent to the

payroll tax holiday expiring for some households, depending how much they fill up their tank a month. it could be up to $20 a week extra they're paying at this stage of the game. as you pointed out, big differences across the country. >> despite the fact unemployment remains as high as it does. at what point does this start impacting sectors of business and what are the most affected? where would you lead us in terms of warnings? >> there's two things that are happening. one is people actually stopped driving as much. it's not like we have to have this much gasoline. people don't take as men trips. it means curtailing vacations. you see it tacked on to airline costs, to transportation costs, that showed up in the producer price index today. that occur taicurtails all that. and could curtail the spring break travel season. holiday, discretionary spending. we already saw spending at restaurants in january, the

month of january, flatline in response to some extent to the higher payroll taxes people were paying. it was a shock to many households, which i confirmed with many employers who got a the lo of complaints about paychecks. the first paychecks issued in january. you're now compounding that with almost an equal rise for some households in terms of what they're paying in their weekly gas bills. they're cutting back on discretionary spending, stran restaurants, they'll be cutting back on travel. this is particularly an issue when we go into the march 1st sequestration where we could have major cuts to spending which will hurt employment. >> diane, we're out of time. very briefly, do you think the market will suddenly wake up to this gas effect or do you think it can sail higher through it? >> you know, the markets have been amazingly buoy ant. but i think the reality on march 1st with what happens with the sequestration, we could see compounded negative effects as the market has to absorb. we saw late in the game the market absorb the fiscal cliff

issues. i fear at the end of next week we could see reaction as all these factors finally come in to accumulate and affect the market. it's going to be a rocky ride, a roller coaster ride this year on the markets. >> good to see you, diane. thank you very much for joining us. >> thank you, simon. >> thank you. sort of on that topic, spirit airlines reporting a fourth consecutive year with the profitability with the addition of a dozen new routes. how they're getting creative with operating costs and fees. ben, good to have you. >> great to be here, carl. hope you're doing well. >> thanks. we just had the discussion with diane about gas prices. obviously the weather in the northeast has been crazy. you would think this was a nightmare scenario for someone who runs an airline. has it been? >> you know, certainly the higher gas prices as your last guest was saying affects airlines in two ways, costs go up and consumers have less to spend. it is a real issue.

at spirit that's one of the reasons we try to keep our nonfield costs as low as possible so we can make the total price point something consumers can swallow. >> we've got merger activity obviously in the space. does that alter your strategy and do you suddenly see the majors as nimble in ways they haven't been before? >> no, we don't really see it that way. in fact, we see this new -- the newest merger announcement of u.s. airways as a continuation of a friend that started a few years ago, when delta and northwest merged. and so we see it as a good rationalization of overall industry capacity in bringing the industry to a more stable total point. it also means likely that the gap between us and those bigger guys in terms of costs is getting wider. which creates more growth opportunity for us. so we feel quite bullish about our growth. and this merger that's being created just creates a little more room for us to grow, we think.

>> and ben, you just raised your margin guidance. interestingly, if you look at your metrics, the average annual ticket price has gone down 7%, equivalent of about $75. but your ancillary fees have actually gone up by 15%, or $15 or so. so there's an offset there. i'm wondering, ben, how much can you ratchet higher what you get from ancillary fees? are you reaching almost a point at which the consumer is saying, you know what, i'm not going to pay more for luggage or seat assignments? or is that a new frontier to wring more from the consumer? >> the thing we like about the ancillary is it's an optional set of fees, so the consumer can customize the travel that's important for them. maybe on some trips they don't need to take as much luggage so they can save that money. when ticket prices are high because of high oil prices and consumers have a little less money to spend because of the higher taxes we're facing now, being able to customize what you

pay for and only paying for what you use, is really very important. and that's what our pricing structure allows. we tend to do well in that environment. >> and ben, i'm curious what you're seeing amongst your consumers in terms of their willingness to pay these ancillary fees. there's talk about these kinds of consumers hit the hardest because of the higher taxes as well as higher gas prices. are you seeing that those ancillary fees have been feeling that pinch? have you seen that going down recently? >> you know, we've seen a little of that. but in general, we've seen that happen almost as soon as we introduce an ancillary fee. what happens is the economic cost of that, say a bag fee or seat assignment fee or something like that, almost immediately sort of segregates those who are willing to pay and those who aren't. and those who sort of see that value and those who don't. so in reality, we have fewer customers carrying bags now that we charge for bags, than when we

didn't charge for bags. and so we don't see the behavior change that much, once total costs changed all that much. overall, again, the ability to customize the fare and only pay for what you use, that allows it to work for us. if you look at the total price consumers pay on spirit, meaning their fare, plus all the fees they actually pay, the total price they pay is still, in almost every case, less than what they would pay on their next available airline choice. so they're saving money. that's why they fly on spirit. >> well, it's working for now, ben. got to hand it to you. thanks for coming on. see you soon. >> thank you very much. >> ben baldanza joining us from spirit. as the saying go, slow and steady wins the race. but does that go for stocks? how should you be playing this stock now that it is surpassed the $800 mark? [ male announcer ] to hold a patent that has changed the modern world...

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for the first time ever they exceed exceeded soda machines. the company also reporting disappointing quarterly profit as expenses jumped higher. operating expenses for operating, gross margins coming in a bit. down about 5% this morning. melissa, back to you. >> let's take a look at the three-year chart of apple versus google. a slow and steady google, is it better than apple's meteoric rise? google seeing a fresh all-time high in today's session, close to 8.09 adds at this point. scott, in terms of the valuation, compared to itself it's not expensive. it certainly has traded at much higher valuations not long ago. compared to the rest of the sector it looks a little expensive. >> if we look at google, you say this stock is trading at 21

times expect earnings estimates for this year. not inexpensive. but i think people are realizing that some of the risks that people might have seen related to google over the last, say, 6 to 12 months, may have dissipated. so people are looking at google as a proxy for the technology sector. we also think it's benefited to large extent because of people selling out of apple and looking for a home for that capital. >> is that what you've heard with clients? >> you can look at some of the filings that investors have made over the last week, and you've seen a lot of sales in apple and incremental additions in google. that tells you the story. >> we were joking yesterday the asymmetry for the two over the three months is almost exact. that must have something to do with that. >> it definitely has an impact. the capital is finding a home. keep in mind, people want to be in that space. people want exposure to smartphones and tablets. google is a good way to play that, we think. >> at the same time you've got a

hold rating on your stock. 825 is the target which is not far from where we are. you see speed bumps for google over the next few months, at least. >> some of the risks has dissipated, but the reality is, google still faces a lot of e is mobile as it pertains to the core search business. that has had a negative impact. you see the growth continuing at google. it's definitely slowed somewhat. an investment is still pretty substantial. >> what did we learn from our experience on apple, in the way you can have a decaying of the valuation on a stock so rapidly, such a big stock? could that happen to the likes of google further down the line? >> presumably, simon, the way to think about these stocks, which i think is kind of interesting, is, look, everyone was recommending and buying into apple in september when it peaked at over $700. now it seems like it's trying to find a floor. with google, it doesn't seem

like the enthusiasm is quite as great, because people are taking all the capital they had in apple and allocating it to a number of other comparable names, like google. sure, it could happen. sentiment can change very quickly. that's one lesson to be learned. apple is trading at ten times earnings this year and people still don't like it. even with a third of the cap tl in cash. we took it off in november, ahead of the holiday shopping season. and we thought that was being opportunistic. we were definitely early. but we liked the stock here. we think the sentiment is way too negative. we think they're going to do something from a capital allocation perspective sooner rather than later. >> scott, thank you for stopping by. >> you bet. >> releasing the minutes at 2:00 p.m. eastern, an instant qe could be coming to an end. good morning to you. what's the call?

what's the positioning? what are the levels? >> good morning, simon. i think the general trend for the dollar is going to be one for continued appreciation. it depends on the currency payer. if you look at the big currencies, euro and yen, we should see continued dollar strength. dollar/yen it could be because of the fed minutes and general trend for the dollar/yen. for the euro, i think it's a mixture of, yes, the fed could drive it lower in the near term, if more people think that the qe will end more quickly than previously anticipated. don't forget, if you look at european risk markets, peripheral debt, european indexes, they're taking a turn for the worse. that should prove to be a significant driver of the euro/dollar down side. we like the dollar. >> do you have levels for us? >> sure. from our perspective, we would be looking to sell euro/dollar, around 134.

the stop has to be above the previous high at 135.25. the down side could probably run to about 130, 131 area before all is said and done. dollar strength should be with us beyond just this afternoon, because if you look at least the eurozone, eurozone risk assets are taking a turn for the worse. >> that's true. neil, thank you very much for your time. we'll watch with interest what happens this afternoon. for more currency trades, catch "money in motion" fridays at half past 5:00 eastern. if you want more education about currencies, go to currency class at money in motion@cnbc.com. a rough ride for herbalife over the last few months. the latest on the saga and what you can expect to see on the company's earnings conference call a little bit later on. great, everybody made it.

we all work remotely so this is a big deal, our first full team gathering! i wanted to call on a few people. ashley, ashley marshall... here. since we're often all on the move, ashley suggested we use fedex office to hold packages for us. great job. [ applause ] thank you. and on a protocol note, i'd like to talk to tim hill about his tendency to use all caps in emails. [ shouting ] oh i'm sorry guys. ah sometimes the caps lock gets stuck on my keyboard. hey do you wanna get a drink later? [ male announcer ] hold packages at any fedex office location.

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boeing has reportedly found a way to fix battery problems for the grounded 787s. it involves increasing the space between the cells. a source tells reuters the gaps between the cells were wide, and it was overheating. the fbi is looking into alleged insider trading at heinz. they've filed a suit against

unknown traders who they said used an accountant in switzerland. housing construction and new homes, slowing in january. while building permits did edge up. housing starts fell 8.5% from december to an annual rate of 890,000. let's get back to an earnings mover, nutritional and weight loss seller herbalife beating street estimates on both the top and bottom line, raising its four-year guidance. the conference call gets under way in about 29 minutes from now. kate kelly will be monitoring that. what should we look out for here? because the boost in the stock really are almost completely external to what management is doing, aren't they? >> remarkably, simon. today's call should be a victory lap for them who spent the last two months defending them against running a pyramid scheme. fourth quarter net income rose 12% to about $118 million, net sales topped $1 billion.

volume growth was higher in 2012 as well. it prompted herbalife to raise its forecast for today. ironically, that strong quarter came just as hedge fund manager b bill ackman was delivering a short position based on his belief after more than a year-long investigation on his part that herbalife is running a pyramid scheme. they've, of course, denied that they're doing that. despite a simultaneous influx of bullish investors, including dan loeb and carl icahn who has been touting his position and the reasons he thinks ackman is dead wrong on our air as well. today's call will shed more life on where herbalife sees upside in the coming year. and we could hear more about an s.e.c. investigation.

the s.e.c. requested details on herbalife's books and operations after they itself asked for a meeting. it will be interesting to hear more about the back-and-forth that went into that. >> presumably once they've completed that, we might get statements from the other players this afternoon. >> possibly. we'll see. absolutely. ackman and icahn in particular and to a lesser extent dan loeb has used cnbc as a pulpit to share their views, which has been interesting and enjoyable. who knows what will happen today. we'll get more details at 11:00. i would bet the hedge fund managers will be on the call and i'll bring you the update. >> kate, we'll let you get set up for that. the cyber threat is growing. a number of corporations reporting they have been the target of hackers. apple, chrysler, burger king among them. mcafee is out with new cyber threats reports today.

the chief technology officer for mcafee joins us now. great to speak with you. >> thanks for having me. >> not surprisingly, mobile platforms are the greatest new threats for people out there. i'm wondering, for consumers out there, who do a lot of mobile banking, check their facebook on mobile devices, basically do everything on mobile devices these days, how big of a concern is this? what sorts of damages are we talking about? >> well, we're really starting to see the rise of it. to date we haven't seen massive exploitation of this platform. but over the last quarter or two, we've seen it almost double as far as the amount of malware, or viruses and bad programs that are kicking around in the worldwide environment. now, what we have to keep in mind is these are just another computing platform. so the precautions we took with our pcs, and the way we handled

ourselves on the internet to date, we have to extend that same behavior and hygiene. it shouldn't change just because we picked up a mobile device. >> in terms of malware getting on your phone, how do you get users to believe what they're downloading is safe? >> there's just a multitude of tactics, everything from drive-by websites where they try to get you to visit the website. there's malicious applications that they get pushed onto the stores to download. additionally, more and more what we see is they drive your web traffic to an environment where they get to use your information for ill gain. so we had an attack recently called blitzkrieg that we watched. and what that did is get you to log into your banking environment and observe you through that process, then use your credentials to transition money out of your account later. it's not all about getting a piece of bad code onto your

device, often it's about just getting your understanding, getting your passwords, your relationships, your identity, and using that against you. >> michael, is there anything specific to a mobile device that makes it more vulnerable, or more likely to be hacked in this way, than the pc? >> you know, there's nothing that makes it inherently more vulnerable as a device. but as we progress how we're going to use these devices, they become infinitely more vulnerable. the reason why is, when is the last time you walked up to a soda machine with your pc and tried to pay for something. as we progress forward using these things, you're going to start using them for financial transactions. your behaviors are much more casual around them. and the number of sensors, i.e., mechanisms under which you can interact, are significantly greater in a mobile device than they are in a general pc. >> we've reported a lot on this network about chinese cyber

espionage, for example, which is usually focused on intellectual property. with mobile devices is it more likely you get gangs of thieves looking for your credit card numbers as opposed to the other types of cyber espionage that we've heard a good deal about lately? >> you know, it would be nice if we could say this device will be targeted by these types of peems and we could protect ourselves. but as we all have done, we've intertwined our digital lives. and our tablet, our cell phone, our work pc, our home environment, they all crisscross. so what an attacker is looking to do is find one entry point and use that entry point for trusted relationships back in your environment. so if i can get on your tablet, i can probably use that to get credentials to get to your work pc, and from that, i can continue on my exploits. so it's not as simple as categorizing people off to a

given device. >> michael, at the public level, the government level it looks like we're at the very early stages of the security forces talking to business in detail about what each side of that equation is seeing. and in the meantime, if you watch the television, or read the press, it appears as if america is in a state of cyber war with the chinese. where is the fault in that? what has gone wrong that we've reached this state that we're in at the moment where we just seem to all be sitting here, really like sitting ducks? should the industry have done more? should government have been more proactive? what do we have to do to get this right? >> well, i think what we have to do to get it right is take it seriously. it's not doom and gloom, not just taking down power grids, it's the i.d. that we hold near and dear. the massive companies built the unique ip, to have it stolen in a blink of an eye, that can't be a quiet situation.

we have to share how it occurs, we have to educate and we have to get stronger. and i think what we're now seeing is leaders not just in government, but also in the public and private sectors starting to demand information sharing. and stop making this the silent crime that happens to them. you know, it's not just about enemy nation, states going at each other, you see a tax generating from every region of the world at every other region of the world. so you have to start to focus less on who's doing it, and more on what's actually happening. >> right. michael, thank you for your time. michael fey of mcafee. >> thanks for having me. josh? >> hey there, carl. well, we're focusing on malayo media which is taking a beating. the mobile advertising company's fourth quarter sales missed the street's estimates, just as important looking ahead disappointing, forecasting first-quarter revenue below

estimates. citing slower revenue growth and potential share loss. millennial media down 65% since it went public last march. carl, back to you. >> failed to answer a lot of questions we've asked since the moment they went public here. thanks a lot, josh. a sneak peek at the famed hockey jersey that could fetch up to $1 million. ♪

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breaking news on jpmorgan this morning. a group of investors is calling on the bank to strip jamie dimon

of his chairman role. it includes the pension plan, connecticut retirement plans, and trust funds. and the new york city pension funds. the proposal calls on jpmorgan to name an independent board chairman. jamie dimon now holds both the ceo and chairman role. it got what they're calling impressive 40% in favor. going to make another run at it. they said even a master of the universe can be swallowed by a london whale. >> listen, he's under continued pressure. they represent about $820 million worth of stock. not an enormous amount when you consider the market capitalization of jpmorgan. there may be momentum. >> the corporate governance splitting the two roles never gained the traction here in the united states as it has around the rest of the world. people still love to have a single figurehead in america, and someone they can rally

around. it's a very different -- you know, the iconization of american business people is quite unique. >> our next guest actually may have something to say on that topic. one of the biggest names in shareholder activists recently pushing for the proxy fight going on. calling on diversified manufacturer timkin. the founder and principal. always a pleasure to have you. you say in a letter you sent to timkins' board yesterday, the chairman, that the two businesses are congruent. timkins said we've got revenue synergies between our bearing and steel businesses, as well as diversification benefits. why don't you buy that argument? >> well, they've given no detail on that. and the market, with the price

movements with our efforts here, with calsters, tells you that the market doesn't give you that credibility. first of all, all of those things that are pointing out can be preserved in the context of a separation of these companies. they can go up and down the same elevators, use shared services, there's companies all over corporate america that share r & d. they just haven't given any detail on it. all of their competitors on both sides of these businesses operate independently. and have as good or better margins. >> ralph, as i know obviously following it closely, you typically engage with management. you don't come out of the blue. what were the engimagements lik why wasn't it sufficient for you to think, maybe i got a shot at getting what i want here? >> this was an unusual situation.

you're right, david. we started in may, had a meeting with management. then later, in august of '12, we had a meeting with management and representatives of the board. we gave them what we believed was a very compelling case for this split, change in this conglomerate structure. we left the ball in their court, and really haven't heard from them. so they've essentially taken a head-in-the-sand approach to this. other than what they put out yesterday, which was quite vague and lacking in detail, they haven't said much about this. the and their board just can't ignore the growing consensus among the analysts community, the shareholder community, you know, that just doesn't work in this day and age, that you can ignore a, what is now becoming an overwhelming majority of their shareholders who are supporting this initiative.

>> something else that tends to work in this day and age is a proxy fight. are you going to seek board representation? >> well, you know, you wouldn't think that you would need to change out board members to get something done that is this compelling, and this straightforward. this is one of the most straightforward conglomerate structured discounts that we've seen. the stock moved 10% when calstrs put their proposal up that we're supporting, and we have a joint filing with them. it moved just another couple percent just on our sending this letter. we believe there's about a 26% more upside in this, and -- >> you know, on that subject, ralph, they do say that you focused on misleading comps on the bearing side of the business, swedish company, as opposed to a broader index of u.s. bearings companies. how do you respond to that in that it goes to their point that you're using numbers that are

simply too optimistic? >> well, that doesn't -- that's actually not consistent with the facts here. we do look at skf, it is their closest competitor. it's a -- but we use a broader group of peers when we look at both sides of this business. and there are fewer than you would see in some situations, but there's plenty of examples across the market. and i don't understand why a management would be out there trying to talk their stock down. this stock has great potential from here, has more potential as two independent companies. >> ralph, before we let you go, we've got an earnings report from hewlett-packard after the bell tomorrow. you're a board member there. you know, continued murmurings of the idea the board may suppo an idea to try to break the company apart. can you give us any insight at all? are those reports simply not true or is that a conversation that continues?

>> well, listen, as a board member, i'm not going to speculate, of course, or talk offline about anything that the board might be considering, you know, in its deliberations. but you know, this is a completely different situation than the one we were just talking about. it's almost like bananas and plums. so i can just say this, that the board there is working very hard, working very well together, and you know, we're there to increase shareholder value and we're very much focused on that, and right now, we see that primarily coming from improvements in the balance sheet, improvements in their go to market, improvements in their products and innovations and improvements in their cost structure. all of those initiatives are under way. most of that work is below the

surface but i think that the market will start to see the traction that we're beginning to get and the green shoots that we're seeing here in the near future. >> ralph, as always, very much appreciate your time. i'm going to be thinking about plums and bananas. i'm getting a little hungry. need my smoothie. thanks, ralph. still ahead, who better to weigh in on office max, office depot than the co-founder of the competitor brand name staples? he'll join us later in the show. y can be a tough act to follow, but at xerox we've embraced a new role. working behind the scenes to provide companies with services... like helping hr departments manage benefits and pensions for over 11 million employees. reducing document costs by up to 30%... and processing $421 billion dollars in accounts payables each year. helping thousands of companies simplify how work gets done. how's that for an encore?

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welcome back to "squawk on the street." it's wednesday's rendition of the santelli exchange. cat on a hot tin roof. this case, it's caterpillar on a very cold global economic roof. you know, the most recent news from caterpillar is somewhat inline from recent news by ford, recent news by gm, recent news by lots of multinational corporations and that is sequential weakness in many markets, not just north america

but asia, some reaching double digit losses or shrinkage in the business. now, why is this important? we talked about this last week. it's much, much more when you look at multinationals than just an export number regarding trying to look at the metrics of issues like what portion of our gdp is in exports. it's about these assembly plants and these plants in other countries, of course, that contribute to their bottom line and the fact of the matter is they've moved from a tail wind to a head wind. this is important. you know, there's been this constant issue i've tried to bring up regarding the fed. they might have wonderful econometric models but when it comes to human behavior, very difficult to model. the assumptions are that many of the ills, whether it's employment or the slowdown globally, is it cyclical, is it structural? why is it important? because it makes all the difference in the world. we are seeing europe, for

example, make changes that have certainly made a big difference in their funding, but the reason they're so interested in the funding is because they're betting on the growth. if the growth is in the slowdown, that's just cyclical, hey, that's not a bad keyniasan strategy. so we need to pay close attention. a sidebar. we have had james on many times, a lawyer that represented a lot of the m.f. customers. as of about the 23rd of january, guess what, he's now an nfa director, national futures association. this is key. because now he along with another newly elected director is bringing forth the motion to ban jon corzine from any futures in the futures industry. i don't know if it's going to work out that way, i don't know if this will be successful, but everybody down here is talking

about it because people in the department of justice have completely, in their opinions, ignored it. so we will pay attention to this dynamic and have him on once we get this issue resolved one way or the other. simon hobbs, shaken not stirred, back to you. >> interesting situation. thank you, rick. still to come on the program, the former founder and ceo of staples on the office depot/office max deal. remember, he tried to do a very similar deal but was blocked by the regulator. . the battle of bataan, 1942. [ all ] fort benning, georgia, in 1999. [ male announcer ] usaa auto insurance is often handed down from generation to generation because it offers a superior level of protection and because usaa's commitment to serve the military, veterans, and their families is without equal. begin your legacy. get an auto-insurance quote. usaa. we know what it means to serve.

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all right. so the dow is off a big four points but you're still going to have a lot to talk about today. >> we will find things, including the toll earnings report. the stock is under pressure today. also following after-hours action in tesla. how you can invest in it. >> see you in a few minutes. safe travels, david. >> thanks. >> disappointing guidance. what does it mean for the sequester? does he know something we don't? >> guys, thanks. if you're just joining us, here's what you missed earlier on. >> welcome to hour three of "squawk on the street." here's what's happening so far.

>> without question, this is brist bristol -- her most important move since she became ceo. >> give me a reason to come back to yahoo! a few times a day. now the content is always updating and refreshing. >> housing starts up, down 8.5%. producer price index for january up -- i'm sorry. teasing you. up .2 of 1%. >> there is a level of, dare i say, excitement. we're seeing levels that we haven't seen in some time and it's making people say geez, maybe i can make a little money as opposed to saying maybe i should leave. >> here's the opening bell here at the exchange. >> here is something that you don't often see. apparently they're not picking the ceo of either office depot or office max to be the ceo of the combined company but they will both be candidates for the new ceo position.

they will also be considering external candidates. >> we feel quite bullish about our growth and this merger that's being created just creates a little more room for us to grow, we think. >> good wednesday morning, live at post 9 of the new york stock exchange where the markets have been wavering back and forth between the flat line today. currently down about 13 points on the dow, s & p hanging on with a six point loss, essentially. nasdaq's down about 12. yahoo! ceo marissa myers announcing a new look for the home page today, saying the new look will take advantage of people's daily surfing habits with a personalized news feed and capitalize on the growth of mobile internet users. from your computer on the road. shares of garmin reporting earnings well below estimates. earnings fell 21.9% while the navigation company offered weak guidance for the remainder of

the year. apple shares lower on reports of iphone 5 production cuts. we will explore whether that's actually true. and due to slackening demand, are apple's natural production cycle? marriott checking in with better than expected results. we will talk with the ceo in a few moments. one erroneous release and a flurry of paperwork later, office depot and office max officially announce their plans to merge. the founder and former ceo of rival staples joins us with his thoughts on that deal. first up,rbalife beating the street's estimates on both the top and bottom line for the fourth quarter. company's conference call is kicking off right now and kate kelly is monitoring that. >> the call just got under way. i'm told michael johnson is delivering the opening commentary to investors. we can expect an interesting q & a in which questions can come up, its short interest reaching 33% of total shares outstanding at the end of january.

that number, i understand, is a little bit higher for the last couple weeks but in any case, both bill ackman on the short side, dan loeb and carl icahn have been duking it out over what's going on with the company. it's been quite defensive of his company's business model. it's very appropriate. they're in compliance with s.e.c. regulations and ftc regulations among others. they deny they're a pyramid scheme and what's more, they had a fantastic fourth quarter just as this battle among investors was unfolding. i think we're probably likely to hear more on that debate. i will bring you updates. >> if past is prologue, there's going to be more news in the next few minutes. thanks. let's get back to apple for a moment. this statement issued following reports this morning linking a hiring freeze of the company to flagging iphone 5 demand. due to an unprecedented rate of return of employees following the chinese new year holiday, compared to years past, our company has decided to temporarily slow down our recruitment process. this action is not related to

any single customer and any speculation to the contrary is false and inaccurate. want to bring in an analyst to try to make sense of this. good morning to you. >> good morning. >> this all got started with this story at the f.t. that this actually was linked to some iphone production demand. what's real here? >> i don't think we can read into iphone production demand from this. i think the statement is pretty cle clear, they've had more employees come back to the production line and that's why they're not hiring. i don't think we can extrapolate it to what it means for iphone right now, but clearly apple is getting ready to launch new products and it's getting ready to have a refresh in the iphone lineup which we would expect sometime by the summertime frame. >> your most recent note, the headline was moving into value territory, question mark. where are we on that process and

what is the likelihood of them announcing something with the balance sheet and a dividend as we get closer to the shareholder meeting next week? >> yeah. i think if we look at what happened last year, the shareholder meeting was on february 23rd and the dividend announcement came on march 19th. this time, their shareholder meeting is on february 27th so we should expect something more on the balance sheet action-wise sometime towards the mid to end of march. we are expecting them to raise their dividend and do more buy-backs. that's something where we think value guys will definitely step up their holdings of apple but more importantly, they need to create new product categories and that's what will bring back the growth investors. >> right. before we get to the products, what is the over/under on a dividend that moves the name? does it need a forehandle? how aggressive can they be? how aggressive will they be? >> you know, if you look at it

with their $45 billion plan that they laid out last time, they kind of [ inaudible ] to their cash allocation strategy. at this point they can take more of the cash they are currently degrading and add more to that. we can see at least a 20-ish percent dividend growth from the company and more buy-backs. >> when it comes to new products, you mention that is really the magic elixir that will determine if the stock goes up or not. on the list, we keep running through these ideas, a watch, television, a cheap phone for asia. what's first in line? what should we expect next? >> yeah. i think all these three have been talked about. i think a cheaper phone for asia, i'm not sure if that does a whole lot to their numbers on the earnings side but it clearly would help them expand on the top line side. on the bottom line, i'm not sure. it really depends how they

secure it. a watch or tv could kind of create a new category depending on how they executed it. it could be meaningful to the numbers. >> yeah. finally, in your note recently you made the point there are a lot of reasons for growth investors to lose interest in this name. clearly that's what's happened. has it been clear to you that those investors have migrated their funds from apple to other names in your space specifically? >> we are seeing a lot of them migrate over to some of those faster growing technology names and rotating into some of the other sectors. we have seen some of the growth investors get out of the name, yes. >> we'll see if that trend continues. obviously next week will be a big one for the company. abhey, thanks for coming to the screen. appreciate it very much. >> take care. >> see you soon. when we come back after a break, first on cnbc, interview with the president and ceo of marriott, arnie sorenson, on the back of earnings this morning. plus a sneak peek at what's being called the world's tallest hotel. it's a marriott in dubai. you got to see that.

firs first, rick is working on something for later in the hour. >> i was always brave when i was on the other side of a tall fence. maybe the same thing is true for the fed minutes today. we'll talk about dissension and a lot of talk about current policy but it isn't going to change anything, really. we'll talk about that and much more related to the fed, bottom of the hour. [ creaking ] [ male announcer ] trophies and awards lift you up. but they can also hold you back. unless you ask, what's next? [ zapping ] [ clang ] this is the next level of performance. the next level of innovation. the next rx. the f sport. this is the pursuit of perfection. how do traders

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consumer discretionary sector up more than 7% on the year, outperforming the broader s & p. one discretionary stock spiking sharply higher today, laz-e-boy. speaking of which, josh lipton is at the market desk. i'm kidding. kidding. >> absolutely. it is shooting higher this morning. the furniture company saying third quarter earnings popped 14%. analysts telling me a few things going on here. one, solid earnings beat strong sales and laz-e-boy doing better than some rivals. they've had success with ad campaigns explaining they do more than just recliners. also through lean manufacturing, they can deliver custom furniture at a good price and do it quickly. typically hard to do all those things at once. the stock up some 17% right now. at its highest level since june

2004. back to you. >> that is an ancillary housing play, no question about it. thanks. that looming sequester now less than two weeks away and the rhetoric is getting intense. what impact on the overall economy would it have? steve liesman takes a look. currently on wall street it's beginning to believe washington will not avoid the sequester. that's the $85 billion in spending cuts across the board spending cuts that would be put in place beginning in march. here's what we're seeing the consensus on the street for the impact. gdp would be cut by about a half to 0.6 percentage points. the jobs impact, 500,000 to 700,000 jobs depending on whose report you read. unemployment rate would rachet up by a quarter to .3 of a point. macro economic advisors say the sequester effects not by themselves catastrophic but they add that quote, the indiscriminate fiscal restraint would come on the heels of tax increases with the economy still struggling to overcome the

legacy of the great recession and when the fomc is constrained in offsetting the additional fiscal drag. here's the quarterly impact of the sequester as estimated. you would want to average all those up for the impact by year. note that it doesn't hit full force until the second quarter, when actual spending cuts begin -- or the full $85 billion begins to be implemented. many economists agree a far saner approach would be a long term plan that includes revenue increases on the one hand, usually through tax reform and spending cuts and puts the nation on a path to a sustainable deficit over a ten year period. but there's no expectation on wall street that the saner ideas will take hold. >> quickly before i let you go, fed minutes this afternoon. we got thrown for a bit of a loop last time around. you expect fireworks when these come around? >> i don't. i think the message is going to be a little more clear this time around that the fed is in it to win it when it comes to unemployment. i think they're going to stick

to their guns until they hit those marks. i think increasingly, the fed has come to a consensus that somewhere in the 7% range is where the federal reserve would stop quantitative easing. >> that's a few hours away. thanks for raising the curtain on that. toll brothers, the largest luxury home builder in the country, reporting first quarter earnings well below estimates. what could it mean for the home building trade as a whole? plus, who better to talk to on the office depot/office max deal and the co-founder of staples, tom stemberg will join us live in a few minutes.

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optionsxpress by charles schwab. take a look at shares of marriott after they came through with fourth quarter results today. the lodging giant beating on the fourth quarter the hotel operator says it expects per room revenue to rise 4% to 7% in 2013 and that is slightly disappointing, which is why the

stock is down. here is arnie sorenson, president and ceo of marriott international. hotfoot, it has to be side oaid the conference call. on that conference call, what was the main message you wanted to get over to the analysts about the fourth quarter? >> well, the fourth quarter was very strong across the board. we had earnings up, we had our revenue per available room, sales numbers were up. we opened a lot of hotels, including the addition of the gaylord hotels early in the fourth quarter. so there was a lot of really good and powerful news about the fourth quarter. i think as with most earnings releases, the primary question was but what about next period, what about 2013 and obviously, i think that's what the market was most interested in our comments on today. >> yes. and that obviously is where the biggest surprise comes from, because you've taken certainly for your outlook for north america, you're taking down the bottom of your estimate by a hundred basis points.

i'm sure you were asked whether that was because you saw weakness in bookings to date, for the future, or whether you imagine that you may have a difficulty further down the line and you did explicitly mention the sequester and the effect that might have on d.c. >> the entire reason for our bringing down the lower end of our range, we were a quarter ago at five to seven for 2013. we're now at four to seven sales growth for 2013. the entire reason for bringing that number down is the sequestration and the budget situation in the united states. so as we sit here today, we're on february 20th, ten days from now the sequestration is going to take effect. we know it will not be good for our business, that government agencies will move first and will cut travel because that is one of the things that they view as being somewhat more discretionary, and beyond that,

we've got not just the sequestration and questions about how long that stays in place, but questions about debt ceiling and other continuing resolution and other aspects of the federal fiscal situation which are very concerning and we think pose not only near-term threats to the travel business, but longer term threats to the economy if our political leaders can't get to an agreement. >> it shouldn't be this way. you are picking up in your industry from the brutality of the 2007-2008 downturn. you don't have supply for hotel rooms coming onstream. you should have really good pricing power at the moment. i see that in your negotiations for corporate customers, you expect to increase your room rates by high single digits. are you happy with that or had you hoped for more? >> no, i think -- the frustrating thing about this political situation in washington is business is really good and there are so many aspects of our economy which are not only good for our business, but show broad recovery.

so our comp sales growth were up 8% in the month of january and we feel really good about the way that the year has started, which makes this doubly frustrating. the sequestration is a sign of the failure of our political process and it's as if that political process is targeting trying to pull back the economic growth which is otherwise under way. it makes it enormously frustrating and hopefully we'll get through it fairly quickly, but it doesn't look like either side is doing the work that needs to be done in order to either avoid it or to give us any optimism it will be resolved quickly. >> as has been self-evident over the last 24 hours. let me allow you briefly to mention the fact that you are about to launch the world's tallest hotel. let me ask you, as we look at that, whether you're watering down your loyalty card system because there is now this new requirement, category 9 requiring 45,000 points per

nights per redemption day. i'm imagining this might be a hotel hit by that higher requirement, higher bar for your loyalty scheme members. >> well, i'll confess i don't know precisely which level this jw marriott marquis in dubai is at. i was there when it was under construction about a year ago. i'm excited to get back there next week for the grand opening. world's tallest dedicated hotel. it's just 25 meters shorter than the empire state building. it's a beautiful asset. the first 800 rooms are opening now. we've got a second 800 rooms which will come about 12 months from now. you talk about the reward levels for a marriott reward program. one thing that's important to keep in mind, we now have ritz-carlton rewards as well. our ritz-carlton rewards or hotels are participating in the rewards program through that system. we obviously got very iconic luxurious hotels that are part of our system and the rewards

levels need to match that. the program is going great guns. we have over a million chinese members, about four or five million in asia. growing great. i think the power of the brands is great. the power of the program is great. >> so the message is the hotels are getting better? >> the hotels are getting better and the program is broadening. yes indeed. >> arne, good to see you. thank you. arne sorenson, ceo of marriott. thank you. i think it's time to take this show on the road, don't you? there's a look at toll brothers. back to an earnings mover this morning. the company trading lower after first quarter results so far did miss estimates. megan mcgrath is a home builder analyst, has a neutral rating on toll, and a $33 price target. welcome back. >> thank you. >> lot of discussion today about whether the whole space has moved too far, too fast and toll is the latest demonstration of that. is that true? >> we think so. that's why we got more conservative on the space a couple months ago. we think the group was pricing

in a lot of beats in 2013, especially on the gross margin side which we weren't convinced were going to happen. i think toll at least is the first one that's proof of that so far. >> you got neutrals on hovnanian, a buy on kbh. what's new about them? >> kbh was a laggard in 2012 in terms of operating metric. we think it's the only builder left that really has upside potential in their order growth and margin growth. that's why we like it for this year. >> is there anything that the market can do to absorb this new construction faster and justify the moves that we've seen really since the beginning of 2012 here? >> well, you know, we've seen demand really relatively flat since the middle of the summer. if you look at new home sales and we'll get new numbers next week on new homes sales so demand could pick up. obviously we need jobs to pick up as well. inventory is very, very low. i think actually the key going

forward is does inventory grow in the spring, then lessen pricing power, or does inventory stay very low. that would be good for the builders. >> yeah. do you think it's that americans, you've got mortgage rates still very low, existing, there's still a lot of distressed property. is it really a new home buyer or anyone in the market is just automatically gravitating toward an existing home instead of a new one? >> well, no, i don't think they're automaticly but the prices are a little bit lower on existing homes. there's a little premium you pay for a new home so there is a trade-off there. but look, the new home builders, it's not a problem with volume. toll's orders were up 41% year over year so it's not necessarily a problem with units they're selling. it's just the market had priced in much, much better numbers on the margin side and the profit side and there are some head winds there. there's cost increases, there's shortages of land and we're starting to see the impact of that. >> yeah. we keep watching the usgs, the

whirlpools, someone mentioned la-z-boy today. do you think the housing weakness will bleed out into the ancillary sectors? >> i think 2013 will be a story of who has the most pricing power. if the ancillary ones still get the volume and they can also get the pricing and the margins up, they can do better than the home builders who are feeling the head winds of those cost increases that they didn't feel last year. >> thanks so much. have a great one. our friends across the pond about to pack it up for the day. we'll get the european close in just a moment. [ male announcer ] at his current pace, bob will retire when he's 153, which would be fine if bob were a vampire. but he's not. ♪ he's an architect with two kids and a mortgage.

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european markets are closing now. >> they'll still keep one eye on the fed this evening. very important for world market action. remember yesterday we had a very good day on european markets with the french and german markets up 1.5%, 2% from that high, we're falling a bit. that underperformance still from spain and italy. don't forget, italian elections are looming at the weekend. for the moment, many people are caught in european markets because the rise has been so strong. they need to keep their performance but there is nervousness. where you see disappointment particularly on dividends, the outcome can be quite brutal. let me show you three companies today. rsa is the biggest general insuror in the uk, cutting its dividend. look at the result. lufthansa cutting its dividend in order to preserve cash. look at the result.

kpn, a big dutch telecom operator. we thought they might attempt to rejig management but they're just sitting on their losses saying i'll commit to the capital raising. stock down over 10%. we're keeping an eye on the political jockeying. in athens today, thousands of people marched on parliament again as part of a general strike. the main labor union there is warning that a social explosion is very close. i don't know if that's true or not but we watch because it's important for austerity and holding together the european markets. and in madrid, tight security outside parliament today where the prime minister was talking to the need to avoid austerity, saying actually our gdp, our deficit to gdp ratio last year was below 7%, we may attempt to cap the regions. and angela merkel in germany attempting to talk away the possibility that there might be some action on the euro. she suggested that the normal

rates for the euro since its creation is $1.30 to $1.40. this is $1.30 to $1.40. forgive me turning my back on you. more or less there, as you can see. does that look like the normal rate the euro is traded at? i think not. but what do i know. back to you. >> interesting. pound really got smacked today, too. >> yeah. because the bank of england is clearly considering even greater qe despite the fact it clearly hasn't worked for the uk economy. though the vote didn't go through. >> big sell-off in the morning. let's find out what's going on with west texas. big move here in the past few minutes. >> big move in wti oil prices and a lot of action behind me here in the oil options pit. we saw this big move as the dollar reached a six-week high. lot of traders are saying there was profit taking going on as well as going through some key technical levels. the break below $95 a barrel now sends oil prices potentially to

$93.50. a lot of stop losses going off here as we are looking at prices continuing to fall in the oil market but it's across the board where we're seeing this sell-off in commodities. the dollar definitely having an impact, whether we're talking about the energy markets or about the metals markets. even platinum and palladium have been selling off. keep in mind what traders are really talking about is what's happened in the gold market and the fact that gold is below $1600 again. that happened on friday, but now there's the threat of the death cross. what is this? this is when the short term average, the 50 day moving average, will drop below the 200 day moving average. you're looking at that green line going below the orange line. this is something that could cause prices to potentially drop much further. some traders are saying $1550 for gold, $1525. others are saying is the target for gold and the last time we saw a death cross in gold, we saw gold sell-off in the next month, 9%. we're looking for perhaps a steep sell-off across the board in commodities. the rotation out of commodities and into equities is another

factor. >> that graphic says golden cross but i think they do mean death cross instead. sharon, thanks so much for that. the commodities discussion even taking over equity talk today. >> i'm a little suspicious of what's going on. the commodity complex and commodity stock complex is notably weaker than the rest of the market. the dollar is up and you often see pressure on commodities but it is a little strange. put up the commodity etfs. it's interesting that right across the board, whether talking about copper miners, whether talking about coal miners or gold miners, whether you're talking about oil service names even in a slightly different space but all commodities, down considerably more than the overall market. i'm interested to see a little more about what's going on here. i would like to make some more phone calls but i'm a little suspicious of this. the overall market isn't even down a little bit more. housing starts disappointing. housing starts from caterpillar, owens corning, the month of

march is turning into a sequester battle to keep the government operating. all this weighs on the stock market today, particularly sequestration being back on the front page. remember it was gone for six weeks, we didn't see it and the markets did very well, thank you very much. the s & p up over 7%. great start to the year. now it's starting to face a little bit of resistance. let me show you the housing numbers. housing stocks have been weak throughout the day. toll brothers, a little disappointing. the key point is the numbers were weaker than expected because the home price sales that they had were a little lower than expected. the mix was different. not sure that's a big concern. owens corning also a little disappointing. guidance very weak. the whole housing stock complex is on the weak side. what do we see in housing starts numbers today? here's the key point here. multi-family down 24%. single family was up. so in theory, this should not be that much of an effect on the home builders but i think the headline number kind of spooked people. building permits had a pretty good month, up overall. finally, just want to point out a couple other things. we charted the housing starts.

remember, we were at two million housing starts way back in 2005, and the bottom line is it's upward but it's a long, long way. we are trying to get to one million. that's still less than half where it was seven years ago. it's a long move back. >> you made this point again and again. that's important. we're still healing but at this rate, it's going to take a long, long time even to get back to 1.1, 1.2, 1.3 million, some of the more longer term averages we've had. rick santelli is in chicago for us today. hey, rick. >> my guest today, art nolan. we used to work together several companies ago that don't exist anymore. i think we're the flying dutchmen of the financial service industry. but artie's a big fed watcher so today, we have the minutes of the january 29th and 30th meeting. i just heard steve liesman about

ten minutes ago. he knows a lot about the fed. he said the fed is in it to win it. i'm sorry, i think the fed is in it to spin it when it comes to employment and making a difference. your thoughts on that notion and the minutes in particular. >> well, the minutes are coming out. i wonder if they're really going to have any effect at all. the effect is not what they're saying so much as what they're doing. the $85 billion a month, mortgages and bonds they're buying, is an overwhelming number. >> you know what, it's a number that keeps showing up. i find it fascinating. $85 billion is what the fed's purchasing every month. $85 billion is the number the sequester wants to cut once in a year. yet the one number everybody ignores and the other number is the end of the world. >> yeah. i think the economy as a whole, the fed is producing misallocation of resources.

when all governments get involved too heavily in one thing, no one's talking exit strategy anymore. you have $85 billion coming in a month, the fed balance sheet ballooning. i think everybody at this point realizes that the effect on jobs is marginal. >> well, whether past, present or future, when you look at some of the fed fomc members that have been vocal on the dissenting or not agreeing with some of the programs, hearing that is interesting for us because we like two-sided debates but in practicality, it doesn't matter, really, does it? >> the core seems to be bent on this path. i really don't know. they put the employment numbers so far away, they're not going to come up very soon. stocks are almost back to their highs. >> did you happen to catch mort zuckerman's op-ed in the "wall street journal" weekend edition?

he talked about, you and i are guilty of this but that's the way it's always been, we look at 157,000 jobs created and it's all seasonally adjusted and the point he was making is the wrong numbers are way worse. but i try to stick apples to apples but it's a different time now. >> i also wonder, you know, quantitative easing and all these other things, a lot of times i think the perception actually on the street is that the fed expects things to be worse for a longer period of time so they're listening to the concept of quantitative easing like we need it so therefore it's not better. i'm not sure the people doing the hiring, especially when you talk about small business, understand that he's trying to -- >> i like your idea of misallocation of resources. when i was watching lebeau yesterday in the tesla i wanted to practice when i get my electric car, see how good we can do being plugged in. carl, back to you. >> rick, thanks so much. don't go too far. you're still tethered to that

cord. when we come back after the break, we've got the list of the ten most overbought stocks in the s & p. and you'll never guess some of the highbrow names rounding out the top five, including at least one name that's not on that list. plus, tom stemberg, co-founder of staples, is here to weigh in on office max and office depot. how will his former company be affected? we'll be right back. but we can still help you see your big picture. with the fidelity guided portfolio summary, you choose which accounts to track and use fidelity's analytics to spot trends, gain insights, and figure out what you want to do next. all in one place. i'm meredith stoddard and i helped create the fidelity guided portfolio summary. it's one more innovative reason serious investors are choosing fidelity. now get 200 free trades when you open an account. all stations come over to mithis is for real this time. step seven point two one two.

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coming up, why shouldn't follow the flow into the market. gold's golden opportunity, why one market watcher says the slide is about to reverse. and toll brothers drops after missing estimates. is it time to bail on the housing recovery train? the big debate at the top of the hour. markets seem to be hitting new milestones today. today is one exception. dow and s & p trading near five-year highs. there are some stocks at levels they're trading at that might suggest they're too high to support the fundamentals. we have a list of the most overbought stocks. tell me where we are in general. >> back in november, as the s & p crossed 1355 on a weekly basis, we told our clients to go long the s & p. our algorithms accelerated that buy to a strong buy back on december 7th at 1418. even at this point, this extension that we've had over the past six or seven weeks, we're not extremely overbought.

we're overbought and starting to hone in on certain names that we think you should start to take profits off but right now, from a macro point of view, we're not overbought. what we did was we went back and looked at the s & p over 18 years. there were six periods where from our algorithm from a reading of 70 to 90 on a countertrend basis, that is where you really have to start to look at the market as overbought. the s & p is only 67 right now which means even though we're two or three weeks into the this acceleration, it could go for another month or two. regardless, we want to be prudent about certain stocks that we think you should start to take profits on. >> when the countertrend numbers got high enough, the subsequent 30 days, you're looking at losses of, what, 3%? >> exactly right. it could be 3% to 5% is actually the range we've been in on those losses. what we did, we have to look at sectors. i think we'll put up a graphic here on certain sectors that we looked at. if you look over the last couple of months, really what has led

is financials and health care. they've really been at the top of the sector chart. what we tried to do is identify within those two sectors a certain amount of stocks that we felt were overbought within there. now, you also have consumer goods, you've got some others, but those two areas were areas that we thought they were really shorting opportunities or to at least take profits on. so as we drilled down, we looked at cigna as one of the names and we had within our algorithm a countertrend indicator that was telling us that cigna was slightly overbought. >> she was the canary in the coal mine, so to speak? >> exactly right. if you look at what took place in cigna over the last few days, we had a dramatic sell-off in cigna, below the moving average lines. it kind of came back a little bit but we went from over 61 back down to 56, now it's starting to stabilize. but we started to take profits off when we went to the marketplace last thursday with our article. >> let's get to the list. the bottom ten, hormel,

thermofisher, valero, goldman. black rock, tyson, tenet health care, h & r block and marathon. themes here? or is it random based on their valuation? >> it's based on our algorithm, 20 years of price action. we have a proprietary system that we look at. no real theme in mind at all. we're looking at each individual stock and the 500 and we're ranking them. those are the ones we have on the watch list to start to take profits on. >> great screen. please come back. >> thank you. after a slip-up this morning, office depot and office max finally got their files in order. they officially announced that long-awaited deal. rival staples founder and former ceo tom stemberg has thoughts on that and will talk to us on the phone in just a moment. [ lorenzo ] i'm lorenzo. i work for 47 different companies. well, technically i work for one.

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news of the morning is obviously office max and office depot announcing that it will merge under one roof in an all stock deal with the transaction valued at around $1.2 billion. how will the merger shape the office supply space? tom stemberg is the co-founder and former ceo of staples, currently managing general partner of the hyland consumer fund. tom, always good to have you. welcome back. >> thanks for having me. >> wanted to get your broad thoughts first. how does this change the game? >> well, i think you've got two companies, both of whom have been struggling quite a bit, if

they can successfully merge their operations and form one entity, it will be good for the consumer and good for the industry. of course, it's not a good sign when you announce the merger and can't decide who the board or the ceo is. or even if the deal got done or not. but if they could, i think it would be very good for the industry and the consumer. >> we were joking this morning that it takes the phrase merger of equals to an extreme. the given, the succession planning, it will be interesting to watch. as far as staples goes, citi has a note out today, they're upgrading it to a neutral from a sell, saying that if the two companies, the merge company closes say 500 doors, about 24% of total doors, staples could capture maybe half of that. >> there's a couple things i think that help staples in this. this is a very good thing for staples. one is in overlapping markets,

they're going to close stores and in some cases, staples will pick up market positions in different markets around the country where they're not represented or underrepresented. secondly, in the case of doors closing, so you have a $4 million office max store that ends up being across the street from an office depot store and they close it. now that $4 million, $2 million or $2.5 million will go to the merged company store across the street but another million and a half will flow out into the marketplace and staples i'm sure will get their fair share of that. >> there still are skeptics out there who say the showrooming effect continues and that instead of three companies who have no business being alive, there are now two companies that have no business being alive. what do you say to those skeptics? >> as the founder of staples, i obviously don't like to hear that. having said that, down the road, once you've got the mainstream -- main street fairness act passed and amazon

and other internet sellers have to collect sales taxes, you will generally find that the terrestrial retail, in this case staples, ends up being the leader on the internet. staples is the second largest internet retailer in the world on its own. so i think they'll do just fine on the internet. just got to get a level playing field. >> i don't need to tell you the environment is rife with potential targets, people argue, for an lbo. the list of gainers today, the kohls of the world, how close to done do you think we are in this trend that has gained some steam in the past few weeks? >> the capital markets are very favorable to doing buy-outs. you have extreme liquidity out there. the big deal debt markets. my sense is you are going to see an active environment for transactions. >> because there was so much

debt issued last year and, what, there's still a lot of discussion -- >> there's a lot of debt available to the private, big private equity firms. we don't play in that game. but for the big private equity firms who play in that space, they can get debt almost like before the crash again to fund some of these deals. that puts a lot of companies within range and, too, i think the power of being a private company and not having to answer to shareholders every quarter is a strong inducement for management to go private. >> obviously retail continues to be the sweet spot to a large degree as that happens, tom. really appreciate your insight today on a big story. thanks for coming to the phone. >> thanks for having me. >> tom stemberg talking office max/office de mopot. when we come back, the fbi reportedly examining some suspicious trades made before the $23 billion acquisition of heinz by warren buffett.

the fbi is aware of the trading anomalies that occurred the day before the announcement and is working with the s.e.c. to determine if a crime occurred. the two regulators have different abilities here. the fbi can throw an offender in jail for criminal actions. the s.e.c. can access detailed transaction data as well as recover profits made illegally and also freeze those accounts in question as it's done in this case. regulators have traced the trade, timely purchase of 2500 call options for heinz stock when previous activity was near zero. they traced it to an account in switzerland under the custody of goldman sachs. while they don't typically are jurisdiction abroad, they do when trading in u.s. securities or via a u.s. firm is involved. to prove a crime is committed the individual must have traded with the intent to make a profit. that is always difficult to prove. we should note the account remains frozen by the s.e.c. and a hearing is scheduled for friday to determine the next course of action for those funds but no doubt regulators are combing the situation. who knew catsup could be so

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