ratings. but ratings agencies, i don't pay a huge amount of attention to that in itself. >> neither do i. you are endorsing the path taken so far in terms of the uk budget and the economy. >> well, what i would actually do is say, it's important, particularly that we keep the investment going for the future. i would probably be taking different decisions if i was in government, but i'm not. it's easy to comment when you're on the outside. >> what do you say to a population that voted for a comedian, for a former prime minister, who is at best complex, as we can describe it? what's your take on what the italian election means for the future of europe? >> what i think the italian election means is that people are prepared to take the pain of very difficult decisions, provided they can see the gain in growth and jobs coming. the problem in europe right now is people don't see it coming. and so if you look at the

culprit earnings in spain, the situation of the banking sector across europe, people worry that the big decisions haven't been taken to stabilize the economy. what the italian election indicates is the anxiety about by people that the mix of policy isn't right. personally, i think that the euro has been, in one sense, stabilized by the actions of the european central bank over the past year or so, but as well as the liquidity problem, we've still got a solvency problem, and above all, we've got a growth problem. if we don't get the growth figures up, we're in trouble. >> thank you for joining us on "squawk box" on cnbc. >> okay. thank you. >> guys, back to you. >> michelle, thank you. that was a great interview. thanks for letting us listen in on that. folks, make sure you join us on monday with warren buffett starting at 6:00 a.m. eastern time. that does it for us today.

right now it's time for "squawk on the street." good friday morning. welcome to "squawk on the street." i'm melissa lee with carl quintanilla, jim cramer and david faber at the new york stock exchange. we are looking at the open, dow indicating lower by about 43 points. we were just 16 points yesterday from a record on the dow. and it looks like it could be a tougher climb today. of course, we got the personal income number this morning, plunging the most in two decades, because of higher taxes. spending, though, was in line. take a look at the picture over in europe. dismal eurozone pmis, particularly out of the uk which went into contraction last month setting the tone there. we have 3/4 of a percent decline over in germany. overnight in asia, china pmi, the weakest in five months. the shanghai composite posted the first decline in three days.

>> the road map in the new age of sequestration, or as some are calling it march madness. how soon will the symptoms show up, and will the market worry. we came within 16 points of that record high. >> the bad boy of american business, andrew mason is now gone. where does that leave group-on as the stock is up 4%. the deadline came and went. still no offer for best buy from founder richard schulze. no guidance for q1. what a week for bill ackman after a credit downgrade last night. carl icahn adds members. once again, dow attempting to march into the history books. the blue chips came within 16 points of that all-time closing high before finishing on the down side. february was still a win for the bulls. the dow rising for a third consecutive month. s&p and nasdaq each up for four months.

meantime, that so-called sequester looms. at some point before midnight, the president is expected to sign the order that will slash $85 billion from the federal budget. about an hour from now, the president and congressional leaders will meet in a last-ditch effort to avoid those cuts, but it's not expected to bear any fruit. a lot of discussion, guys, about, all right, might not feel like an immediate emergency, but is it the frog in the boiling water slowly over time, will this show up in the regionals, jim. will stocks take notice? >> it should. because there's the way that this sequester meets, there's a lot of -- people have to be laid off because they're civilians because they're not allowed to lay off the military. if the civilians are laid off, you'll see an uptick in the employment claims. then the macro guys come in and sell the stocks. my problem has always been throughout this period is the macro has looked dicey on any given day. then you come in gap stores,

great numbers, best buy great number, and try to figure out how to make money in an environment where the top is bad and the bottom's good. >> yeah. and you pair it with the personal income this morning, plunging. the most in two decades. think about the furloughs rolling throughout the u.s. government in the department of justice. my sister works there. and they're going to be furloughed for a number of times every number of weeks. the international trade division. not prosecutor. >> what would they be doing if they were really embracing the sequester. >> $85 billion is nothing in an economy of our size. >> i mean, i think that, remember, anytime you get layoffs from big companies, they do tend to show up these days. this will show up. maybe the claims go to 380, and come in and we do a thursday, woe is me, and we sit and look at the actual companies. and we say, oh, we can buy that on the woe is me. i was listening to steve liesman this morning. you want to slit your wrists because that's apropos of what

happens. i love steve. but the macro's bad. fed were to leave. then suddenly this whole house netflix house of cards, i know you like it. >> you do like it. >> i plan a viewing at some point. >> it's like margin calls. but i end up with the data of the companies, and how does gap stores, a major retailer, report such good numbers. the number is they're executing well, doing some international work. u.s. not that bad. it's just not playing out. this payroll tax, holiday over, did not play out with the retailers. >> if you take a look at the spending and income numbers, spending was pretty much in line with what was expected. >> right. >> incomes plunged the most in two decades. maybe the consumer hadn't felt will the impact and it will show up in next month's data. increase in borrowing that we've seen.

>> these are all -- >> largely the results of mortgages, though, finally people starting to take on. >> what got us here, american express from the bottom, caterpillar, home depot, disney, general electric, the biggest contributors from the dow to the bottom of where we were yesterday when we were up. you check off is american going to be hurt, general electric coming back, i mean, in each case, when you view the components of the dow, the dow's bebeen the strongest index. you can make the strong case we're not done. >> some would say we're not done worrying about the continuing resolution. that's another three weeks, four weeks from now. as we get closer to that, would your level of worry graduate to something bigger. >> it's a fiscal cliff. we could get out, tell people to get out and they get killed. the debt ceiling, debt downgrade, you tell people to get out. i'm just saying, it's so

overwhelmingly negative coming from washington, it's produced a lot of false tales for the stock market. >> ihealth care, we've seen staples, the bunker trade yesterday with the likes of hormel and kellogg hit you new highs day after day. does that tell you something about the nature of this rally, people are willing to buy the markets, but in a defensive way, not putting the money into large cap technology or energy or materials. >> energy, materials, china. people worried about a slowing in china and europe. when you look at clorox, they're a big beneficiary of a raw cost. same thing with kellogg. with the exception of perhaps the actual box, which might be going up in price. they'll tell you that. people love the defenses, technology keeps disappointing. the cloud still works. sales force.com, great numbers.

the conundrum for me is retail. because retail should be the rth, should be the greatest short, and it hasn't complied. >> right. >> no, it hasn't. nor will it today. unless it was largely made up of jcpenney. >> which we'll talk about in a little about. >> andrew mason, i had it all made up. we had to do a major stoppage of our show, because i had to -- >> stop the press? >> yeah, i had andrew mason lined up for the wall of shame. >> the board was working. >> what i suggested he do is spend more time with his family. sure enough, in his release, i'd like to spend more time with my family. just kidding! >> let's get to the details of this story. this is a good one. group-on ousted its 32-year-old

ceo. groupon lost three-quarters of the value in the past year, says co-founder and chairman eric and ted will serve as co-ceos as a replacement is known. mason said in a note to his colleagues, after 4 1/2 intense and wonderful years, i decided i'd like to spend more time with my family. just kidding. i was fired today. that's the reference you're making, jim. >> he wants to go to a fat camp to take off the groupon 40. i've been waiting for a fat camp deal the whole way. i was talking about what he would do is get the mini peddy, slice of pizza in staten island, perhaps the brazilian. maybe a brazilian is to lose 40 pounds and he has some references i find arcane because i'm not 17, like he is. >> i think at this point you have to wonder if mason's

departure signals a buy in the stock. would you buy the stock? now that he is gone? >> anytime someone comes off the wall of shame because they've been fired, the stock goes up. i'm putting him -- this is the shortest wall of shame. there has to be a business beyond revenues. david, i've always wanted to ask you this, because you're a level-headed guy. if you're losing a lot of money, can you indeed make it up with firing? >> no. >> elaborate. >> i don't need to. it normally doesn't work that way. >> my dad is going to say i'm fighting with you. be nice to david, he's a nice boy. >> it's a schtick. but with the entries being so low -- i mean, they had numerous competitors from day one, and they pooh-poohed it all. >> pooh-poohed it? >> as far as i've been able to determine it -- >> weren't they writing a lot of

funny copy, and then it started to deteriorate. i found less and less did i want to use my coupon to go. it was no longer gap stores. remember gap stores is really what made everyone court them. it tended to be the quirky things where you shopped the deal. i think the retailers stopped liking the one-off customers. >> amazon's already in there with local. so other companies are taking their lunch when it comes to the daily deals. it's selling goods, carries inventory. why do you want to get into that sort of -- >> it doesn't like anybody here thinks it -- >> not a priceline. >> do they have a little success

more than this we're giving him credit for? >> he's a creative guy. he's funny. maybe he could be an adult. that may be the single biggest need right now of group-on as an adult. remember when mason -- quirky is a code word. code for really bad ceo. >>. >> there's been a lot of discussion about the whole notion of groupon was really his in the early days. he actually talked to us on "squawk on the street" not too long ago. here's what he had to say about the future of the company. >> groupon has not even celebrated its fourth anniversary. when you really look at the business over the horizon of what it's going to be over 10 or 20 or 30 years, it's still in its infancy. i think the public markets have not been as forgiving as maybe they were historically. >> that's for sure. and you might argue that the longer term broader effect may be companies less likely to go public earlier rather than

later. is that the lesson that we all learned from that? >> it's funny, because we thought the development of this so-called second market, and by that i'm not just talking about second market, but this ability to at least give some currency to your employees, give them a market in which they could realize some of the gains they had, while staying private, would do that. and with facebook, it did. remember, the argument there was maybe they came public a little later than they should have because their growth curve had already turned a bit. so i don't know. we're looking at this class from that era, whatever that was, a year and something ago. we've had one real winner, linkedin. >> linkedin, when you're doing these things online, investment bankers always say, you've got to scale, you've got to blow up -- linkedin has a subscription business that's very good. and the investment bankers don't like it because they can't grow that fast. my hat's off to linkedin. it's much bigger than when it started.

linkedin has moved into everything from google to advertising, additional -- this is a way that people just get the best employees. and high level officers. it's really supplanted a lot of the surfers. the surfers are going to say, our business is better than ever. >> short the search firms? >> none of the -- they tend to be these private search firms that can make those calls. that's a great business. a niche business. obviously you killed monster, right? not monster worldwide. >> they're working on putting the beverage business on its tail. >> are they? >> yes. >> red bull team? when we come back, we get clarity on best buy from david in a moment. a week to forget for bill ackman. we'll explain that. and we'll find out who cramer did induct into his wall of shame last night. what a new record high for the dow, set a bear market trap

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shares of best buy up sharply in the premarket. the electronics retailer posted better than expected results as a .9% rise in comp sales.

best buy says it has not received an offer from richard schulze to acquire the company. the deadline expired at the end of the day yesterday. faber's been working on this for most of the morning. >> well, also, for a long time we've been saying they were not going to be able to buy the company. i think that was even more likely as the stock moved up into the 16, $17 range over the last couple of months. when it was 12 -- when this all began back in august, it was a bit higher. then it came down. then it looked like, well, maybe you could raise it. you know, it was the equity check from private equity then. but interestingly, there was an opportunity here for best buy if it wanted to to raise about $1 billion. i confirmed from three equity firms who had come along with schulze in the effort to cobble together some sort of overall buyout, and then kind of separated from him. and negotiated directly with the company. they wanted down side protection

from what i'm hearing. the company generated $965 million for fiscal year '13. maybe they're not in a position they're saying we absolutely have to take this money on the terms that you want. they were close, apparently, but they didn't get there. so there was that $1 billion possibility. but the whole idea of a whole company buyout, really, again, even with him rolling in the 20%, we said many times, the check was too big. when the stock moved up to 16 and you needed to put a premium on that, forget about it. >> how about the fact that the new thing we see with retail, i had afc on -- afce, which is popeye's, close the bad stores, and then the cash flow does ramp. one of the things that's always bothered me is wall street wants you to open more and more stores. terry lundgren decided i'm not going to open willy-nilly, i'm going to open strategically. i thought the closings of stores here was very significant.

but they're saying, we can't win in this town. >> and the calls are going on. i think they're detailing some of those plans behind future store closings. but what about the future for the company? what about its ability to really generate significant same-store sales off the smaller base? they're generating free cash flow. that's what people are looking at. it did come in at the far lowered estimates. at the end of the year they brought it down to $500 million. now they came in with a number well ahead of it. lowering it to come in well above. >> they talk lovingly about their online efforts. the 360, the omnichannel, they're big online. we know everyone goes to amazon, so to speak. >> and no guidance to the quarter. they spent a lot on super bowl ads. they have to pay amy poehler. what do you think? >> i think it's better than sears.

better than radio shack. >> okay. >> i've been trying to put together a roster -- >> so they've got that going for them. >> they are in the end -- i come back to is, there is room for one. there is room for one. and they're the one. there isn't room to buy a stereo. go buy a tv -- >> you sat here many times and kind of intimated they are going the way of -- >> you said that you go to -- >> the triceratops. >> you see the plasma tvs and all that. >> there's a lot of best buys, and costco tends to be a little more difficult to look at. there are not that many costcos. best buy, when you're in a jam, best buy when you want to have delivery, that delivery matters. because that stuff is heavy. okay? best buy, if you want them to set it up, the geek squad isn't as good as it used to be. have you ever bought anything in your life?

>> we need a screen, a take your daughter to college screen. all those stocks that benefit from that very moment. >> when i took my daughter to college, i said, where's the best buy. target was okay. they didn't really have the selection i wanted. >> great discussion. when we come back, what a week it's been for the markets after monday's trouncing. all the data. how do you end it on a profitable note. one more look at futures. there's been talk that first day of the month, fridays have been generally positive. do we work our way out of this hole. more "squawk on the street" back in a minute. [ male announcer ] i've seen incredible things. otherworldly things. but there are some things i've never seen before. this ge jet engine can understand

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there's discussion the day after this week. >> mark bennyhoff came on and really told the story of taking it to oracle, s.a.p. they got big contracts, including eight-figure contracts. phillips and walmart. he won the walmart. i think what's happening here is the company is taking a lot of share. $3 billion. fastest i've ever seen a company to $3 billion. bennyhoff is friends with steve jobs, friends with larry olson. he is at the epicenter of customer relations/clout. he's doing a good job. >> what's left in terms of value at these prices? >> there's a couple of guys --

merrill lircynch goes to 228 pr target. widely shorted stock, widely regarded as expensive. the revenue was up. that's a good tell for the future. i do not want to short this stock. everybody wants to short it. the overvalue -- look, i've never made a lot of money at my old hedge fund with overvaluation. they tend to like amazon. this is a great quarter. >> which has been your constant critique on valuation. >> valuation, come on. you roll into a company that's doing poorly. i want to go with companies that are growing. that's the problem with an apple. it's not growing the way it was. >> right. a lot more with jim in a moment. when we come back, find out what the man who wrote the boek on groupon has to say about andrew mason leaving that company. will the dow kick off a new month? the bulls have work to do.

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march. you're watching "squawk on the street" live from the financial capital of the world. opening bell in about a minute's time. three months up for the dow. four months up for the s&p and the nasdaq. you know, jim, executives grg to start to get a sense of how the quarter is shaping up, with only four weeks left in it. and the -- >> the january thing, i find that we're doing the -- as january goes, the rest of the year goes. but we'll start hearing all of these things remind me, just look at the components of the dow. there are so many companies that are doing well. think about a cisco, david's interview with hewlett-packard. can you imagine if meg whitman begins to get it together? that stock has been a terrible dip. so i guess i'm saying that -- [ bell ringing ] >> there's the opening bell.

council of foreign relations celebrating their anniversary. and at the nasdaq. a couple of names they've not gotten to yet. >> up by 9%. fourth quarter beat first quarter guidance. but it wasn't as bad as feared. also keep in mind that there's a huge shortage risk in the stock. 39% of shares outstanding or short. this 9% move is partially exacerbated by this cover. what a move on this stock. >> inventories are lean. >> yes. >> people wanted to see that. they're not long a lot of uggs. i still believe, and i will say it again, that eric weissman will one day look at the trend and say that i want it, in the

same he wanted timberland. i know this company used to trade north of $100, gets uggs back together, because it was a couple of bad years, that that brand has some staying power. i really believe that. >> we mentioned at the open the weak pmis across europe. the u.s. financials in today's session, and look at morgan stanley, down .9 of 1%. it has been trading as a proxy for europe of late, which is sort of interesting. back in that old role we had seen morgan stanley in before. missing analysts' expectations by a mile. we're seeing a huge move in the pound. europe today is a big story. >> i'm not sure why morgan would be necessarily reflective any longer. >> i don't know either. >> if you want to get into the return on the equity game, look at what goldman did last quarter. goldman has now exceeded it.

that's a separate story. >> let's quickly get to phil lebeau on auto steals which will start coming out with more and more frequency. >> ford coming in with february auto sales increasing 9.6%. that is a little bit below the street estimate of an increase of 15.6%. again, for the month of february, the thing we're looking for is an annual sales rate of about 15.3% to 15.5 million. if it comes in in that range, people will say that's a good month. one other note, chrysler up 4% last month. guys, back to you. >> all right. thank you, phil lebeau. the stock moving lower there, 1.25% on ford. i like ford domestic. i've not -- waiting for europe to turn. latin america doing a little bit better. but europe has got to turn in order for that stock to be a buy. >> speaking of europe, let's

check out the action and shares of deutsche bank. this is a big move in today's session. goldman sachs saying new capital rules could force deutsche bank to move to the united states, more capital. $13 billion. depleting its nonu.s. capital. and therefore, forcing the bank to do a capital raise. that's looming on deutsche bank. the price action down reflecting this concern. >> this is a very strong bank. it's done a great job. i remember when jpmorgan constantly would have to say, do they have to do a capital -- most banks do. they do the right thing. deutsche bank needs to raise capital, they're going to do it. they're not going to hope and hope and hope. i rel elike these guys. i was surprised to see goldman really slashed it. >> the criticism of the european banks is reluctant to do it.

in the spring of '10 or spring of '09, i forget at this point -- >> tim geithner whacked them. >> that was a key moment, actually, for our financial system. >> wells fargo. remember there was that period that every day you would come in, and bb king would do a secondary. >> they all did them. >> everybody did. you just waited and waited. deutsche bank has to do it, i understand. i'm not a big fan of the european banks. i do like bbva as my preferred stock, only because they're my bank in mexico. they really know what to do. >> bristol-myers, just hearing you say it -- >> bbva are such a strong bank in the southeast and texas part of our country. people forget they made this brilliant acquisition. i don't really like the endless selling of its geographies around the globe. but bbva has done a lot of smart

things. shorting the spanish stocks was a real mistake. >> shares of cablevision down another 2% after a very significant loss yesterday. >> yeah. >> not a great quarter. not a great conference call. significant increases in operating expenses for that cable company, distributor, video services and so many others, broadband. there you look at it. highly leveraged balance sheet. >> who is it -- is it espn? why does it work? there are these other cable companies -- >> the costs are going up. >> those stocks have been unbelievable. what's different from cablevision? >> you've got to add more subscribers. they have not been able to do that. fios is a huge competitor for cablevision. also amongst businesses, they service a lot of businesses. and that also is an area where

there's a good deal of competition on price. cablevision has had a harder time raising prices, passing along price increases. >> could it be service? >> i don't know. >> the disputes, the dish, the hopper, i mean, there's just some bad blood -- >> and it's gotten a lot of attention. the whole idea of the bundle which brings you to a much larger conversation about sports programming, and the expense of it, will it break the bundle apart. what does it mean for disney, espn getting over $5 a sub. we'll see. that will continue to be a conversation that's ongoing. >> let's check in with bob pisani on the floor. >> we've got a secondary for a dpm. there's been a lot of secondaries recently. doesn't get much coverage as the ipo market. we're opening on the down side here. it's certainly going to be a tough morning for those who were hoping for new highs on the dow. we have a few bright spots. some of the retailers reporting earnings. gap up a little bit this

morning. good numbers. best buy up nearly 6%. decker up almost 10% this morning. there's a little bit of a bright spot. overall, sour over in europe. the numbers on manufacturing data, it was disappointing. especially the unemployment numbers there, unemployment falling to its -- raising to the highest rate on record in europe. it's a bit of a problem here. first day of the month traditionally brings in new money. the bulls hoped it might be sufficient to move the market forward. the negative effect we're getting from the european data as well as the disappointing numbers. tough morning overall. let's talk about stocks and the spending cuts or the sequester. the end of the world is officially aligned. my e-mail has been stuffed for the last three days from traders worried about all kinds of things. guys trading home building stocks, health care stocks, travel stocks. everybody's worried about their

own little universe. the guys who trade defense stocks seem the most worried. the cuts may cut at least 13% of the defense market, i find that hard to believe. i get comments from guys trading home building stocks. they're worried about the effect on consumer sentiment. remember back what happened in august of 2011, it did hurt home building. they're worried about the psychological effects of this. the travel and hotel guys who trade those stocks, they're worried that cuts in government travel are going to hurt them. the medicare providers, the hospitals and some of the hmos, they're looking at a 2% cut in medicare rates. here's the problem i've got with the e-mails i keep getting and phone calls. when i actually look at the stock market and home building stocks and what i see is nothing. no effect. i see no decline. i see no big wholesale sell-off days where traders are day by

day trying to lighten up their positions. i see none of that so far. when i ask them that, they say they're not quite understanding. what it seems is going on here is the street believes some kind of deal is going to be done by the end of march. the smart money seems to believe the cash flow is going to be significantly less than the headline or hype numbers actually are. bottom line, guys, i'm still waiting to see the effects in the real market. back to you. >> bob, great perspective. they could come up with a deal. once you go over the cliff, you never come back again, i think bob is right. let's hend to the bond pits. rick santelli at the cme group in chicago. >> we've been talking for weeks and weeks, how the treasury market does follow things like increases in equity values, pushing yields up. and then the next day it relinks from a lower yield level. perfect case in point, look at a couple of days of treasury trading, and you can see we've moved down, we're lower on the

week, lower than 188 close yesterday. we're here at 185. you open the chart up, you can clearly see how we're starting to slip and expand to the down side in yield, the up side in price. a lot of news in the eurozone. bob hit some of it. 11.9% unemployment in the 17 countries in the euro group. not good. worse than expected. even though there was some good news on the german economy. but look at all their stock markets, not doing well. politics in italy still playing out. look at the two-day chart of the euro, you can clearly see the slide. put it in context of year-to-date, futz in perspective. significant. but the big question is why. everybody says, why is the euro doing this? outside of what we just mentioned, march 7th, ecb, may lower rates. they're seeing inflation move a little bit below their targets. this is telling me that the central bank, the ecb may be considering, may be doing, but may be lowering rates. let's look at the pound. look at this 24-hour chart. just sailing lower.

so the euro's going to have a fourth potential lower close on a fourth week. the pound is only on the third week. but the comp goes back, yes, show this last chart to june of 2010. jim, back to you. >> wow. a world of hurt. let's check out the latest in metals. jackie deangelis. >> happy friday. the energy complex down across the board this morning. we're looking at west texas intermediate, above $90 a barrel, but down more than 1%. brent earlier in the session slipping to a six-week low. a couple of reasons for the declines here. we're looking, of course, at concern over the sequester. but also the imf saying potentially these cutbacks could curb not only u.s. but global growth. also the most recent data out of china indicating that domestic and foreign demand slipped a bit. so a bit of a perfect storm here to send energy lower. in the metals complex, gold is regaining some of its lost ground yesterday, seeing a little bit of safe haven buying ahead of the equity session today which is lower.

>> thanks very much, jackie deangelis. which ceo has just been added to cramer's wall of shame. plus, macy's versus jcpenney, going head-to-head in open court over domestic diva martha stewart. ron johnson takes the stand. we're live at the courthouse. the dow moves further away from the all-time high in 2007. look how apple was trading that day, $167.86. there today, it is down by almost 2%. what a ride it's been since '07. we'll be right back. (music throughout)

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it has been a double whammy this week for bill ackman. he holds a short position in herbalife which jumped sharply on naming carl icahn's designees

to the board. jcpenney's shares took a hit in weaker sales. ackman is known for being a defender of ron johnson. but cramer has some other thoughts. take a listen. >> ron johnson is joining the "mad money" wall of shame. because he has got to go. ron, either stop being so darned delusional, or better yet, just stop the charade. spend time with your family in california. let somebody else take over. which would, of course, as with all wall of shame entrants, would send the jcpenney stock higher. >> yesterday, you were just talking about both ron johnson and andrew mason, being in neverland. >> yeah. >> when it comes to their quarters. andrew mason is out, ron johnson gets on the wall of shame. >> i am deeply troubled by comps. the numbers are down. down 31%. >> 31.7%.

>> there is a vicious cycle down that i felt was ignored entirely on the conference call, hence the delusional. i think that has to be addressed. you can continue to talk about how se fphora is taking shares. but you've got to take the heart of the matter into, at least address it. >> let's play the opposite side, though. is it a first step towards recovery, admitting that you have a problem? didn't ron johnson essentially admit he had a problem by saying, you know, we're going back to what our customers want? we're going back to sales and promotions? we're going to have a sales and promotions every week? i admit that i made that mistake. >> i think he -- i was on a panel yesterday with ryan saulbin. and they all said, once you cross the rubicon -- >> when they go up, they go up

for a while, right? you put big thought into this. >> vikram pandit on the -- the former ceo of citi, on for a dramatic, i don't know, 70% decline. you get to 2, that's about all she wrote. of course, it's split. >> you do occasionally take people off. mcdonald's, pg&e kresce -- >> bob mcdonald had to come down. we managed to get it before he delivered the quarter, just seemed like he was doing a lot of right things. i think you're right that ron johnson admitted that it was wrong. but retail is a funky business. it can be too late to admit. there is a level where you've lost the old, haven't brought in the new. and i still think that there would have -- this was a good time for him to say, look, my strategy will work. in the interim, i've really got to bring back these old

customers. as opposed to throw in at tail end of his commentary. >> let's get to the question here. as you know andrew mason was ousted. this brings us to the morning's question. what groupon should andrew mason buy with his $378.36 severance package. we will air your responses throughout the morning. >> that's telling. >> you're saying, the mani pedi, slice of pizza in brooklyn and brazilian in midtown. >> it did tend to be that in the end. that tended to be the teeth whitening. there are things on the web that you see that are like, wow, maybe i ought to go do that. look, there are a lot of people who get mani pedis. i'm not denigrating the mani pedi. i don't want the brazilian.

look at the customer, if it's a male name, stop sending me female offers. i'll get right on that. six months later i'm still getting it. >> now he has plenty of time to get on it. >> arrivals in washington, d.c. the president, of course, holding his bipartisan, bicameral meeting at the white house. harry reid, mitch mcconnell, boehner, pelosi. closed press. we may get some comments after they're done. it wasn't long ago they were all there to discuss the fiscal cliff. >> right. >> promising a solution to that by christmas. clearly that barely happened. >> they are short sellers 'dream. when you hear there's a presser, so to speak, you've got to go to the s&p puts. because i can't think of a time when they got together and the

market went up in the last, i don't know, 18 months, two years. unless it was to -- unless it was rg3. even he now is like -- >> we're going to get consumer sentiment. ism on the way, and a lot more, in just a second.

just enough time for "six in sixty." chart indices. >> bountiful natural gas. they make all the equipment to turn it into gas to liquids. >> big data play here spunk. >> this stock is just reported an unbelievable quarter. >> morgan stanley taking wendy's to underweight. >> newfound mcdonald's. doing a lot of good things. >> and entura surgical. >> now, back. herb greenberg is the guy to listen to in this. >> omnivision. >> oh, my. this is apple. this is why apple's down, because they make the cameras for a lot of the apple devices. there's a pause in strength. >> finally, gap. >> look, they're calling out

intermix, calling out china. great story. heavily shorted, mistake. >> all right. on that, let's get to rick santelli, with sentiment numbers in chicago. rick? >> all right. here we go. we have the final read on university of michigan sentiment index coming out at 77.6. not only is that better than our preliminary read of 76.3, but just similar to that read, it goes back to a comp of november of last year. we had 82.7. as a matter of fact, we had back-to-back october, november, that were above 80. but nonetheless, it's an improvement over the preliminary read, and it's pretty solid. the read in the market place, interest rates don't seem to be paying a lot of attention. the equity markets, dow shaved off 6 or 7, and coming off its worst levels. we'll continue to monitor more numbers at the top of the hour. back to you, carl.

>> meantime, jim, what's coming up? >> i slammed the company that was in the, let's call it the hair care cosmetics business. we're going to hear the other side of the trade tonight when i slam a company, carl, it's just -- they put up a fight and they get their way. they get to be heard. >> i'm trying to guess what this might be. >> i can't tell you. >> you're not going to tell me. >> no. and i'm doing a compare of two great retailers. one has the edge on the other. i will reveal, the lawyers don't like me to mention the names of the companies. hence i'm playing coy. i don't like to play coy, but really, this is one that the company sent me the product and said, when you open your eyes, they were very kind about it, but i like to give the other side its due. >> see you tonight. >> thank you. >> 6:00 and 11:00 p.m. eastern time. more data to digest, we'll get ism, construction spending, the sales continue to pour in. we're back in a second. [ kitt ] you know what's impressive?

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and even 76% more plaque than sonicare flexcare in hard to reach areas. oral-b deep sweep 5000 power brush. life opens up when you do. welcome back to "squawk on the street." we are about ten seconds away from a february read of ism. if you recall, 11-month high and headline on chicago pmi yesterday. university of michigan was

better than the mid-month read. takes you back to last fall. the bell rings and the survey says, construction spending for january down 2.1. that's much worse than the -- anywhere from down .3 to 1%. we saw it move up from original release to 1.1. this is not good. this is one of the few numbers related to housing that disappoints. ism, february, 54.2. woo! that's a pretty good number. we were looking for a number with a 52 handle. so how does this stack up? 54.2 is the best read since, going all the way back to june of 2011. june of 2011. so that's a pretty nice number. we did have a 54.1 in april of last year. prices paid, actually moved higher. i bet you there's a little energy, anxiety there. but we have seen some reversals

in some of these commodities. prices pay component at 16.5. well above the january read of 56.5. quickly, we see maybe one basis point higher yield, but 10s still lower on the day, lower on the week. still under 130. the euro versus the dollar, pound still getting pounded. we've sliced the equity losses pretty much in half. carl, back to you. >> all right, rick, a lot of information there. markets trying to work their way off the lows. let's get reaction from steve liesman. something for everyone today, steve. >> yeah. disappointing construction numbers. i'm not quite sure why. they're really sort of strong to the down side, carl. and i'm wondering if there was a negative -- maybe a weather issue related there. i honestly don't know. residential was unchanged. and we've had just other really good housing numbers. that's a little off. and then transportation, manufacturing down, 2.9%.

spending i expect to be down. lodging down 6.1%. that's a little bit of an amomly. on the other side, something for everybody. upside on the ism, with a new orders up, production is up. i haven't seen the employment number, that's down just a little bit. but still at 52.6. unfortunately ism, this cycle has not done a terrific job predicting the outlook for manufacturing. it is a good number to follow. it's one that's done over many decades, excellent job of predicting the company. this would suggest strengthening for the manufacturing sector. puts more strength for gdp. right now it's all up to the private sector. at the end of the day we'll have a decline in government spending. we've had the tax increase and we saw some of that show up in the spending numbers. and maybe more in the months to come. so if the private sector is not going to hire, and not going to increase wages for individual employees, then i'm afraid we'll

have some economic problems. if the private sector does step up here with the government sector stepping down, then we have a chance at maintaining that 2% growth while we do fiscal contraction. melissa? >> thank you very much, steve liesman. a live shot of the white house. president obama meeting with leaders of congress right now to discuss those automatic spending cuts that could go into effect tonight at midnight. let's bring in john harwood for more on this developing story. >> reporter: melissa, we've got nancy pelosi and harry reid have already arrived. i think republicans are in the process of arriving for that meeting, which is supposed to start at 10:05. nobody expects any big result, or resolution of the sequester problem out of this meeting. but it may be the beginning of the attempt of both sides to try to grapple with the impact, and where we go next. we've got 3 1/2 weeks until the march 27th expiration of government funding, through the so-called continuing resolution.

there's got to be some extension of that, or we'll have a government shutdown. it's possible that could be a venue for resolving this dispute, averting the sequester with some other kind of deal. you've also got the debt limit coming up in may, which is an occasion that a fight republicans postponed earlier this year, but could renew again. that, again, could be the trigger for negotiations. we just have a stalemate between republicans who want to shrink government by more than they have the ability to make happen in washington, and democrats who want to preserve a level of government beyond their ability to raise the level of taxes to cover it. that's where we are. and the political infrastructure of our country right now makes it more difficult for the two sides to come together than they have in the past, melissa. >> thank you very much, john harwood. all right. market's pulling back with record highs this morning. we want to bring in art cashin from floor operations of ubs

financials. >> friday might be the bulls' best shot because of the first day of the month effect. fridays have been uniformly good all year long. does this turn around here? >> yeah, i think part of the problem was all around the globe, we saw the purchasing managers data coming in weak, weak, weak. it was weak, particularly in london. china weak, a lot of the europeans. here's why we turned here. the ism, which is the equivalent of the bmi data was stronger than expected. that was a sigh of relief even though the rest of the data wasn't that good. i have to give an asterisk to something i wrote yesterday about the beginning of a new month also. and the month of march has been kind of waffly indicator with the first day of the new month. at least in the last ten years or so. >> art, this week started with the italian elections having an unexpected impact on our market, it would argue, given the

unexpected outcome. as the week has gone on, we sort of put it in the rear view mirror. i wonder if you expect that will come back to the fore? >> i think it almost has to. i think what got the markets was that this is -- turned into a rather slow-motion event. they thought you'd begin to see day after day, if not hour after hour, something coming up. beginning to realize that these guys won't even be getting ready to convene and take office until around the 18th. now, that gives the markets, all right, let's not get too excited, we've got a long time to look at this. as i look at it this morning, however, the currency markets are starting to get a little bit more volatile. they may come in and call the tune on these guys while everybody's waiting. >> we saw a big move in the sterling today, 1% move. isn't there an ecb backstop to the european situation now that

mar mario draghi indicated this week that there's a floor in this situation, even with the italian elections? >> i'm not entirely sure. but i think it was interesting to see him almost pridefully say, inflation's not been a problem for us. and hidden underneath that is, maybe deflation is. and they're expected to take a long hard look at cutting rates here, because they do need some stimulus. >> you saw that live shot of washington. i think rathharry reid, mcconne speaker boehner, pelosi as well. hard to believe this is meeting number one on the day where sequestration is -- >> way to go, guys, today is the deadline. nice to meet today on the deadline. >> it's depressing. >> and the house has adjourned already. so this is just a photo-op. >> people are gone. which says a lot about -- i don't know, to you, does it say a lot about their commitment to

make something happen here? does that carry into the 27th and continuing resolution? >> that would be truly scary. this, i think, is normalized posturing that he offered the president the chance to redirect the cuts. he opted out of that because he wants to take the bludgeon effect that it was designed for, and then blame it on the other party. so the finger pointing continues. no one thinks that this will be terribly disruptive. the continuing resolution, however, could turn the country upside down. >> because of a shutdown, in other words? >> a potential shutdown, or a nearly similar effect. >> amazing we're having this same conversation again and again. >> it's like groundhog's day. >> we're almost a banana republ republic. >> it appears to be virtually ineffectual. that we're not getting anything done. you can only hope that they're working up their number one game for the continuing resolution, because that's going to be where the big fight is.

>> is that positive for bonds? because people are worried? or is that negative for bonds because people are worried about government payments? >> in the short run, it will be good for bonds, because you'll get a flight to safety effect. while they think the government may cease working, they do believe it will pay its debts. so it will be safe to own treasury bills. after that, there will be some rethinking. >> all right. >> we should note we're well off our session lows right now, the dow inching towards the flat line at this point. down by about 30 points. the nasdaq has halved its losses at this point, less than a half a percent. >> a bounce off 1500. they bounced off 1500. >> yeah. >> thanks. now we've got general motors out with its february sales numbers just now. we'll send it over to phil lebeau. phil, take it away. >> joining us from gm headquarters, here, you had a month in february, you increased

sales by 7.2%. all of your brands were up on the month. but there's been so much focus on the sequester and whether or not the economy can take a hit. what were you seeing in showrooms from the consumer last month? >> phil, we saw some pretty decent business throughout the month. obviously some of the bad weather had an impact. even in places like the northeast that were particularly hit hard, they came back strong in the back half of the month. so, you know, we feel pretty good about that 7.2%. up over 12 on a selling day adjusted basis. we feel pretty good. >> your full size pickup sales up 28%. you knocked off a number of days. you're down to 97-day supply in terms of your inventory. are you noticing that the small contractor, the construction worker, are they starting to rotate more into the showroom? >> absolutely, phil. with housing, you know, continuing to do well, and the

availability of consumer credit, we are seeing some good business there. our small business piece of our work was up over 40%. so that's consumers that are -- small businesses buying anywhere from one to five trucks, full-sized pickups, vans, that was up about 40%. >> still optimistic we have an industry sales rate in the mid $15.5 million range? >> yes, sir. we think this particular month is going to be in that 15.5 to 15.6, which is on the high end of what we're calling the industry for the year, which is that $15 million to 15.5. so slow, steady, gradual growth. >> and of course, we'll look at this and say, listening, for the first two months of the year, we'll take it. kurt mcneil for general motors joining us from the company headquarters. guys, as i send it back to you, we have one more note regarding

february auto sales. toyota reporting an increase of 4.3%. that is below the street estimate of 5% for an increase. again, toyota increasing february sales by 4.3%. guys, back to you for now. >> phil, thanks so much for that. jcpenney and macy's going head-to-head in a manhattan courtroom over the legal rights to sell martha stewart brand of products. ron johnson is taking the stand. we'll bring you the latest headlines after this break. groupon firing its ceo andrew mason. we'll find out did the stock finally represent a real deal. ♪ ♪ [ male announcer ] how do you engineer a true automotive breakthrough? ♪ you give it bold styling, unsurpassed luxury and nearly 1,000 improvements. the redesigned 2013 glk.

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macy's and jcpenney continuing in their head-to-head battle in court over the rights to martha stewart brand of products. courtney reagan has the latest. >> melissa, this drama continues at new york supreme court. it's a battle hitting retailers against each other, but also big personalities. at times the testimony teaching lessons about the pitfalls of mixing business with friendship. earlier this morning we caught ron johnson, the ceo of jcpenney, talking to photographers on the way into court in the fact that he is wearing a jcpenney suit. terry lundgren testified on monday. now it is jcpenney's turn. in the first 20 minutes of

testimony,ing macy's employers showed in august of 2011 before he was ceo or member of the board saying, quote, i'm feeling awesome about the strategy. i need to pull off martha. she wants to do it. i need to propose a deal she can go to terry l. with and break their agreement. it is the only issue in the way of success at this point. now, on monday, terry lundgren explained his company's anger was actually directed at martha stewart and her company. lundgren thought it was more of a one-way street, martha pushing to get into jcpenney rather than a two-way street. lundgren send a congratulatory e-mail to jcpenney. the e-mail said congratulations to you and your team for telling and selling your vision for the new jcpenney. well done. and the reply, thank you, your note means a ton notice. i consider you a friend.

we're actually on the same side trying to make the department store the favorite place for people to shop. i'm not sure friendship is what everyone is considering at this point, or still believing that is indeed true between the parties here. johnson moments ago revealing 19,000 employees have lost the job since the transformation number. that's a number we haven't heard yet. back to you. >> thanks very much, courtney reagan. best buy shares getting a pop after the company released better than expected earnings. the deadline for richard schulze to offer a buyout has come and gone. here to break it down what could be next for the retailer, managing director of equity research. michael, i would love to start with you taking me through the cash flow numbers, or adjusted cash flow numbers. i assume the market positive in part on that having exceeded the previous expectations that came down a lot. are there a lot of other things that investors should know about that may make the numbers look not quite as good as they are,

or are they a pure number? >> no, there are a couple of one-time things in there. i think in fairness, the cfo explained it crystal clear on the earnings call. but there were a couple of items. but there was accounts payable item they were able to extend payment terms, so accounts payable went up. and they had inventories go down. again, they kind of changed terms, slow-moving inventory, drew down on inventory. the net of those two things is about $325 million. so if you look at the $965 million adjusted number, $640 million of it is the pure number i think you can expect to be reoccurring, if nothing else in the business changes. that's what we should talk about, whether the business will change. >> that's what i wanted to come back to the number for me for. also the fact that they're not giving guidance for the fourth quarter. are things not really changing for the better in the short term?

>> the drivers on whether this business is going to drive, stay the same or go away, are whether they can stabilize their store traffic, and whether they can stabilize margin. in order to stabilize traffic, they have made the decision they're going to price match, which sounds like it's going to knock margins down. in order to continue to drive traffic, they're going to invest. actually, i love that term, invest. they're going to spend more money on sg & a, more money on i.t., build a website and promote products. higher spending, and lower margins, typically means that cash flow number's going to come down. i think that's what we're going to see in the next couple of quarters. the bets investors are making today is they're going to have this ship turned around by christmas. i don't think that's possible. i think it's the "titanic" heading for the iceberg. i think it's probably going to take two or three years to turn the ship around and they'll crash into the iceberg before they can get it turned around. >> does it help, michael, that the comps will be easier?

i'm just trying to think, you're getting into best buy shares at $17 at this point. i mean, there's no scenario in which there is upside as a trade to the stock in the next three quarters? >> it's trading at nine times that real cash flow number, that $640 million cash flow number. that's about an 11% free cash flow yield. what the market is telling you is they think that cash flow number is stable. i'm saying that cash flow number's going to go down. i think the market's overpaying for it. it will keep going up as long as people have confidence in the cfo. she is really good. give her credit. but there's only so much she can do. she can't screw around with working capital anymore. she can cut cost another couple hundred million, but i think the cash numbers come down. >> comes down to $400 million is what we'll see in free cash flow? >> it started at 640, i think it drops probably this year to about $400 million. i think that you should be

valuing it on that, and then wonder if that number goes up or down. we'll see if their initiatives work next year. >> they were closing to taking $1 billion from private equity but felt like the terms were too stringent. not quite sure what the numbers were there. it was a preferred. i know they spoke about it on the call. should they have taken the money? >> private equity is making an investment, if private equity thinks they can make money. probably not. i think it was probably a take under. i doubt it was even at a $17 valuation. >> oh, no, i'm not talking about buying the whole thing, about the $1 billion investment. >> oh, the convert. i would have to see the terms to answer that question. i'm sorry, i don't know. >> that's all right. i don't know them yet either. >> okay. michael, great to speak with you. thanks for your time. >> thank you. take a look at the dow. off the lows from earlier this morning. we were down 89 at the lows. worked their way down 20 or so,

currently looking at a 50-point loss, around 14,000. as cashin pointed out, a bit of a sigh of relief. talking a lot about the sequester. we are now up against it. we'll show you exactly what happens next, if a last-minute deal cannot be reached. plus the new deal for groupon, the company, the stock, now the founder andrew mason has been ousted as ceo. does mason have much more to lose other than his title? whether he should start clipping coupons for real. ♪

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now that groupon's board has fired andrew mason, what is next for the stock. the final tv interview as ceo was with our own julia boorstin. julia? >> well, melissa, mason is out. but the business hasn't actually changed since yesterday. groupon stocks has benefited from this news as investors seem a little bit relieved that the struggling company is making big changes to turn things around and saying good-bye to mason's quirky wild card management style. the stock is still down about

25% since the november 2011 ipo. as the daily deals business has become more crowded, and profit margins are squeezed. now, today, many analysts like jordan rohan are calling it a step in the right direction. but rohan still says groupon's current strategy is, quote, incomplete, that the business model may take a long time to recover. there is still a lot of skepticism. who knows what strategies the new ceo will take. but justin post writes, it does not change our cautious view on groupon's business model shift to gropon goods. groupon's most bullish analyst who had a buy in the stock before mason was fired, said this is a huge opportunity. telling us, quote, they're building a team that's going to be more focused not just on top line growth but how to grow the bottom line. we'll have to see who is selected to lead that groupon team.

ted has plenty of experience with corporate fall from grace. now, there's no question whoever replaces mason faces a tough job that's really going to be in the spotlight. this might be a while before the company finds someone willing to take on that challenge. >> julie, i've got a question. what are the chances of one of the interim co-ceos being the ceo? >> i think wall street would like to see someone new come in. i think the problem is one of the two board members at the company the entire time, taking on the ceo role, the question is do they have a different enough, or new enough perspective to really change things the way wall street would like to see them changed. lekofski probably could have changed things earlier than they were now. it's going to be interesting. mason is quite a character. i've interviewed him a number of times over the years. i'm curious if he surfaces somewhere else next. >> hard to believe someone with

that much ambition is done at this early age. that's for sure. thanks, julia. julia boorstin. when we come back, dwindling cash flow and potential for defaults. the threat of sequestration coming down to the wire today. and the muni markets could get caught in the middle. could we be witnessing the makings of a big bear trap. mark holberg explains his theory. as the dow moves away from the all-time highs on october 9th of '07. a look at how dow component walmart was trading back on that very same day. how do traders using technical analysis streamline their process? at fidelity, we do it by merging two tools into one. combining your customized charts with leading-edge analysis tools from recognia so you can quickly spot key trends and possible entry and exit points. we like this idea so much that we've applied for a patent. i'm colin beck of fidelity investments. our integrated technical analysis is one more innovative reason

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on a friday, about an hour into trading, some of the stories we're talking about. the ism coming in better than expected. up more than a point in february to 54.2. the results indicating the fastest pace growth in manufacturing since june of 2011. apple shares falling almost 2%. a new 52-week low. down about 38% from the september high. the vix hovering around 16. in what has been a roller coaster week. harsh federal spending cuts known as the sequester are set

to kick in at midnight tonight. what happens if they cannot reach a deal? steel liesman explains. >> today, a series of across the board federal spending cuts set to take effect that almost no one in washington wants. but they appear powerless to avoid. known as the sequester, the cuts would reduce government spending by $85 billion this year, and by $1.2 trillion over a decade. what nearly everyone hates is the cuts are across the board. programs favored by republicans and democrats. defense gets whacked by 7.3%. domestic programs by more than 5%. now, a few things are exempt, social security, medicare, war funding and other poverty programs. emergency assistance for disaster, prisons, energy, education all take a hit. the sequester exists because washington couldn't agree on spending cuts in 2011, so they

created an ax that would loom over lawmakers and force an agreement on sane esaner, more cuts. some now say the automatic cuts may be the best option that's out there. >> the countdown, the final hours before sequester cuts take effect. we take a closer look at what could be impacted. the cuts representing a little over 2% of the budget. the next guest asks is the danger being overbilled. are we making too much of this? >> well, i think we're making probably a little too much of it. it's certainly a problem and you can't ignore the fact it's going to take a lot off gdp growth. but on the other hand, i think the administration has clearly tried to press their point by exaggerating the impacts, by suggesting the impacts might be more severe than the effect will

be. >> i would imagine that the impact to local governments would be most felt. already their finances are under pressure, chris. what do you foresee of the impacts locally? >> it's a mixed bag. for one thing, all states are going to be influenced differently. the commonwealth of virginia, for instance, is going to be impacted more than any other state in the country. illinois will not be impacted nearly as much. then you have the ways in which they are impacted. vendors, small businesses, that provide services to the federal government, federal government employees. you've got military installations, military expenditures, va hospital. the range in which states and local units of government can be impast is enormous. >> let's take, for instance, the example that you gave up in the commonwealth of virginia. are we seeing this in the bond market, bonds issued by virginia? >> no, we're not seeing it as of yet.

the commonwealth is terrifically strong from a credit perspective. they have great reserves. and they have their balance in pretty good shape. i think if this were to take place, and to go on for an extended period of time, i think investors over time would begin to have some concerns. but i don't see any big push on the part of investors to sell states that are a little bit more exposed and buy other states that are a little less exposed at this point in time anyway. >> everybody's using the metaphor, the frog in the pot of water, you'll feel the effects as they bundle over time. the moment we start to worry about tax receipts at a local level, because of economic hardships within house haldould that is a ways off, right? >> that will happen over a course of time if it persists. which i expect it will be. but you'll gradually see it over

time. you'll see it in terms of sales tax revenue. you'll see it in terms of income tax revenue. and so it will have its impact. and you're going to see it mostly in areas with high concentration. virginia isn't the only one. texas is another state. missouri is another state. so you'll see these disparate impacts across the nation in terms of the revenue. but that will come with a time lag. >> i heard somebody today say that if you want to look at where it might hit the worst, virginia is obviously a good example, but areas like ft. hood, right? where you have a heavy military base of employment, which is -- clearly they'll feel the effects if not worse then at least first, correct? >> that's correct. the problem with the military is they're taking a disproportionate share of the sequestration cuts. there's been a lot of discussion over the fact that over the course of time, military personnel are going to actually have to have cuts in payment,

cuts in compensation. so they're not just going to lose cost of living increases, they're actually going to have compensation cut. that means a lot less spending, it means lower sales tax, it means a variety of very negative economic impact. so you'll see that clustered around military installations, and in states that have more military presence. >> chris, we're going to leave it there. thank you for joining us today. >> thank you very much. we want to take a look at apple today. that is a new 52-week low for apple. we talked all about how much it's been down since the september highs. couple that with what the dow has done interday. we were down 89. we are just below the flat line. >> it is amazing, because we're just off the session lows for apple, which was a 52-week low on the session. on the nasdaq composite we've been inching higher. we compare the losses dramatically, but apple still continues its decline.

we do see the turn in financials for one helping us regain that flat line. >> another stock we're looking at interday is best buy, now actually in negative territory, surprisingly. the stock was up as much as 5%, 5.5% in the early going. conference call perhaps hammering home adjusting free cash flow, maybe closer to $640 million. not bad still. and then some questions about the first quarter. but interesting, because that stock had been looking like it had a big rally behind it. >> what a turn-around. >> a lot of weird. it's a friday. rebalancings going on. a lot of crazy charts interday today. if you're a dow theorist, you should be happy after the transports hit a new all-time high yesterday. which one of the trannies would you add to your portfolio? we'll go through some names. and as we said, groupon's andrew mason is out. and what it means for them going forward. the author of the biggest deal ever joins us live a little

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a closer look at the transport sector on the heels of hitting new highs yesterday. the next guest is neutral on the sector but said there are pockets of opportunity to make money on certain stocks. brandon is an analyst at barclays capital. good morning to you. >> good morning. >> is this about core growth? is it about coal bottoming? is it about oil prices coming down or a combination of all those things? >> i think you hit it on the head here. i think more importantly it was very difficult to make money in transportation stocks last year. they definitely lagged from a

portfolio perspective. a lot of people are looking for opportunities that could be levered to future growth. i think the transports stocks really screamed favorably early this year. >> where is the sweet spot? is it strictly on rails? and if so, which names? >> the rails give you really good characteristics in a slow growth economy which we're definitely in right now. there's really big pockets of opportunity here, and the biggest one we see right now is the shale energy development. we're pumping a lot of oil out of the ground right now in north america, oil that didn't used to be there. there was a lot of urgency to get the oil at $90 a barrel. you know, out to the refiners that are currently locked into brent pricing with global crude prices much closer to $110 today. so a lot of opportunity to move that traffic down to the coast. >> brandon, here's a question, though. can coal bottom and actually recover in terms of volumes, at the same time as shale? can you have those two stories firing on some number of cylinders at the same time?

or is it a black-and-white sort of thing, a give-and-take? >> coal markets have been really challenging the last 18 months. we just had michael ward doing some meetings with us. that company does think that coal markets are near bottom. looking towards maybe a little bit warmer weather this summer, more normalized weather patterns u we could see a little bit of a bounce in coal in 2014. longer term, natural gas prices that are very low do challenge that outlook. but i think the offset here is that with cheap energy prices and cheap oil, we're seeing derivatives from this and more chemical manufacturing, more automotive manufacturing, so a lot of good industrial growth coming off of this that could offset the longer term coal headlines. >> gdp barely positive as we now know. if the sequester, continuing resolution, nightmare unfolds even further, to what degree does your worry about full year

economic growth start to weigh on these individual names? >> well, you know, we've had quite a rally. that's why we're really focusing in on specific stories. the railroads, again, give you the defensive characteristics, a lot of industrial growth. we like union pacific quite a bit. we like csx on the idea that coal could be near a near term bottom. other segments in transports, ecommerce is a big factor, so we like fedex on that basis. but broadly, i think the transportation stocks from a fundamental perspective are going to have a lot of difficulty if we can't get out of the 2% growth environment. >> brandon, thanks for joining us. >> thank you. still ahead, keeping an eye on macy's versus jcpenney. ron johnson about to wrap up after being on the stand this morning on the battle over the rights to martha stewart. we'll take you live to the courthouse with the very latest next. [ lorenzo ] i'm lorenzo.

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take a look at the dow. really struggling to maintain a footing in positive territory. we're at the flat line now, 14,055. take a look at shares of apple, a new 52-week low.

that new low precisely is 431.88. this, of course, as the nasdaq composite is also making signs of a turn-around in today's session. the nasdaq is now down by about 6 points, or .2 of 1%. let's get to the santelli exchange, to rick at the cme in chicago. hello, rick. >> hi, carl. of course, let's see. what topic are we going to talk about. march 1st. not that many hours from 11:59 p.m. i think we have to talk a little bit about the sequester. much of what i'm going to say is just my opinion. but not all of it. i want to start out with somebody else's opinion, who happened to write an op-ed in the journal yesterday. phil graham, before we put it on the screen, graham, rugman, holings, last time we went through this, was in the mid-'80s. i was actually in the 30-year bond. i can quite accurately remember how the interest market paid a whole lot more attention to that issue

but let's read something that phil graham wrote. let's put it on the screen. even after the sequester, the federal government will spend $15 billion more than it did last year and 30% more than it spent in 2007. why is this important? steve liesman did some good work this morning showing a bit of a nuance. and the nuance is, once you had the credit crisis, we saw that spending ramped up rather dramatically. and you'll recall, february of '09 wasn't only the rand, it was home modification, the stimulus. since then, it has moderated a bit. if you look at that moderation, it's a pretty big drop. but no matter what, the absolute level is still higher than when we started which is the point of phil graham's op ed. we now live in a world where if an average family says, i have to cut back on my spending, the

bre bre bre breadwinner isn't making what he used to. but you spend less than you did last year. in government, whatever the growth rate is -- let's say you put in place, we're going to grow education 4% every year and next year, you're talking about a 2% cut. you're still spending 2% more. it's baseline politics. this is totally my opinion. but it's obvious the president and the white house are not big fans of the house republicans and vice versa. but here's the point, some of these stories say that the president doesn't want to agree to certain ways the sequester could be more palatable in terms of how the cuts are divvied up. i understand this is a political issue. he doesn't want a sequester at all. but everybody elected the president. they also elected everybody in the house. they may not like each other, but is it really right to not

mitigate the potential intensity if there is any with the sequester in the betterment of the country? we elected our officials to work with the officials we elected, not the officials they wish were there. i'm sorry, doesn't make a lot of sense to me. and adds phil graham said in that op-ed yesterday, it might have been a little testy in the mid '80s, but there was a whole lot more dialogue about how it was less testy for the country as a whole. come on, guys! work for the country. back to you. >> thanks, rick. >> groupon ceo andrew mason was fired. this morning's "squawk on the tweet," what groupon should mason buy with his search package? we have some of yourens spos straight ahead.

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with one login... to easily move my money when i need to. plus, when i call my local scottrade office, i can talk to someone who knows how i trade. because i don't trade like everybody. i trade like me. i'm with scottrade. (announcer) scottrade. awarded five-stars from smartmoney magazine. andrew mason ousted as ceo of groupon. but does mason have even more to worry about besides losing that corner office at the company he co-founded? robert frank takes a deeper look at mason's wealth. >> good morning. andrew mason was a very unusual ceo, including his retirement package. company filings say he will only

get his salary for six months after he leaves. that salary was $756.72 for an entire year. so his severance package is around $376. i guess we call that a lead rather than a golden parachute. it's been a rapid fall in wealth for mason who just over a year ago was a papered billionaire. let's look at the numbers. before groupon's ipo, he sold around $28 million in stock. so he'll be fine, or at least he'll still be a millionaire but not like he was before. just after the ipo in november of 2011, his shares were worth more than $1.3 billion. mason was celebrated as the tech world's latest billionaire. then came the long slide. today his shares are worth around only $200 million. an 85% drop in wealth, losing more than $1 billion. and that remaining $200 million only on paper so it could rise or fall, depending on what

happens with the company next. the big lesson here, take money off the table as fast as you can, especially when your severance is only $376. could you even buy a gold watch for that? >> no. that's the reasons, robert. >> melissa speaks from experience. >> how much gold can you buy if it's 1,600 bucks an ounce? >> certainly not a rolex. and you look at the co-ceo, he used to be worth at one point more than $3 billion. now he's down to around $500 million. so his loss was more than $2.5 billion in wealth. we look at these stock prices and chart them every day. but we don't realize what it means for the personal wealth -- losing $1 billion or $2.5 billion, pretty soon you're talking real money. for these people, it's an astounding, rapid loss in a short period of time. >> right. as long as they haven't pledged something against it, though,

it's still an enormous amount of money. that's when they really get into trouble, taking your stock and put it up security against a loan of some kind. >> absolutely. and the big blow-ups we saw during the crisis were people who margined their stock. we don't really see that with these guys. what's interesting about this latest wave of social media entrepreneurs is they took money off the table early, cashed out either before they went public or during the time of the early days of going public. >> we're always complaining about executives who run a company into the ground and exit with a very large parachute. in this case, you might say -- i'm not saying the punishment fits the crime but it is appropriate to where he led the stock, fair? >> i find andrew mason so refreshing. the candor of his letter and this compensation package that says, i screwed up and i'm not getting bailed out with a golden parachute. another reason why we should respect him and we all look forward to seeing what he's

going to do next. >> robert, good numbers. thanks for that. speaking of groupon, our "squawk on the tweet" today, as we said, ousted from the helm of the site after another earnings loss. brings us to this morning's "squawk on the tweet" question. what should mason buy with that $378.36 severance package? john writes, mason should take a 50% discount on a carnival cruise and half off a resume update on linkedin. andre writes, andrew should take out ron johnson for dinner and celebrate their wall of shame appearance. the two of them really -- >> andrew mason could have made it onto that wall. >> yeah. >> but he's out. >> we'll see you tonight. >> yeah, a lot to talk about in "options action." big market moves, especially in the british pound. >> yeah. >> we'll talk about that

tonight. >> good weekend to all. see you monday. here's what you missed if you're just joining us this morning. >> welcome to hour three of "squawk on the street." here's what's happening so far. >> the political system is broken. we have a republic not representative of or responsive to the public. we need redistricting reform. we need integrated and open primaries. we need campaign finance reform. we need lob being referral and we need term limits. >> as well as the liquidity problem, we still have a solvency problem and above all, we have a growth problem. unless we are getting the growth figures up, then we're in probably. >> is american express going to get hurt by this? on. in each case, when you do the components of the dow, you can make a strong case that we're not done. >> would you buy the stock? >> anytime somebody comes off

the wall of shame -- this was the shortest time ever on the wall of shame. i still worry there has to bea a business beyond revenues. >> hard to believe this is meeting number one on the day where sequestration is scheduled -- >> way to go, guys. >> it's depressing. >> and the house is adjourned already. so this is just a photo op. >> the bet investors are making today is they're going to have this ship turned around by christmas. i don't think that's possible. i think that it's the titanic heading for the iceberg. >> good morning. we're lye here at post 9 at the new york stock exchange on the friday. want to get a check on the markets which had been around the block and back. down 89, slowly have worked our way back to the flatline, 25 on the dow right now. if you're keeping track on whether we're going to end the week positive, the flatline for the dow is right at 14,000, we

are in the black for the week. s&p up almost 3.5. nasdaq up almost 5. shares of target upgraded. firm says that canada dilution is beginning to peak. apple, not a good day. 52-week low despite the turnaround in the broader markets, stock losing more than $8 a share earlier in the session. down more than 30% in the last six months. the dow, as we said, inching toward those highs once again. might not be a good thing. that's what one market expert says. we'll find out why he says there's a bear market trap waiting for investors. andrew mason is out at groupon. we'll find out what the man who wrote the book on groupon has to say about the firing. and ron johnson, the newest addition to cramer's wall of shame, taking the stand. find out what he had to say in today's testimony. first up, help wanted at

groupon. the stocks rallying today after if board fired mason late yesterday. still far from that ipo price of $20 back in 2011. eric lefkofsky is one of the ceos. listen to what he told us a few months about the company's performance. >> when the company was growing and growing quickly -- again, this is a business that has over 12,000 employees. it's in nearly 50 countries and it's not even four years old. i think when a business is growing that fast, it's hard to know at any point whether you should sell or double down your investment. >> frank senate is the editor-in-chief of "time-out chicago." good to have him back on the show. >> good morning. >> i wondered for a long time about whether this day would come. it's finally here. what does it mean? >> i think the last time we

talked, we were talking about how it was the last bullet in groupon's gun to change the story for investors. gives them a little bit of time. we were asking the question, is it the man or is it the model? and groupon has to be hoping it's not both. they'll get a chance to answer that question. they need to innovate like crazy with all that money they're investing in palo alto, berlin and their third innovation center and get a story for investors that's coherent, that makes sense, what are we as a company, where are we going? if we can get on track and start turning a profit, can we grow it so the stock price can get near the strike price. >> for so long, the discussion was about tactical moves, right? how fast do we grow internationally? with the model itself essentially staying the same. now we're asking much more strategic questions. some of the upgrades and downgrades, to be fair, revolve around what is this company? do you know what it is?

what it wants to be? >> no. that's the problem. every quarterly earnings call they miss the numbers and they have a different story. now it's daily deals. now it's good. the one thing they do have in their back pocket that they can capitalize on is that big penetration with mobile. consumers are buying on cell phones at a rate that no other e-commerce company does have. if they can pull themselves out of the tailspin with that, they have a story to tell. i don't think they're interviewing me to run the company. but that's what i would focus on. >> would you be trying to take a smaller cut in order to get retailers to play this game or would you be trying to bring all of your metrics up as quickly as you could by grabbing money wherever you can? >> i think one of the things you have to do first is cut costs. they're way over cost structure in europe as compared to the u.s. you need to get the international under control on the cost side. and i think you do have to get some high-profile people in to

give consumers the idea that this brand still matters, that it can still deliver value for them. things like the nordstrom deal, if they can get big deals like that to say we're still we're, we're still potent, giving you things that you want, that helps them. but ultimately, they have to innovate their way out of this. i don't know -- remains to be seen if they can. >> jeff bezos has had his own challenges. but you have to feel like he at least won some battle here today. >> yeah. all he needed to do was make sure they didn't take this new space away from him. he made a tactical move to try to take market share away from them, keep them from running away with it. living social is in rough shape. but mission accomplished for him. if you think about bezos, at the beginning of amazon, investors were slamming him. but the one thing about him is he maintained a very consistent story for years. he would come on cnbc and any network and say, look, we're

investing for long term, we don't care about -- he had a story that he was consistent on and it paid off. groupon's story has been all over the map. they need to figure out the core story and stick with it. >> one of the long-term lessons about the story, if google offers you almost $6 billion for a company that's two years old, think about it? >> yeah. i think i was saying, take it every day and twice on sundays. the question that in writing the book, the question i got asked the most, do you think they should have taken the money? and i think my answer is always, i would have taken the money. and i think your answer is you would have. i don't know anybody outside of that office that wouldn't have taken the money. there are questions around, could they clear d.o.j. and all this stuff? but at the end of the day, that would have been a nice payday and they wouldn't have had to deal with this tailspin. >> everybody loves a comeback.

we might be entering a new chapter for groupon. always good to talk to you. thanks again. >> thanks, carl. macy's and jcpenney continuing their courtroom brawl with ceo ron johnson taking the stand today. our courtney reagan is outside the courthouse in lower manhattan with the latest on that and what he's telling photographers, too. good morning. >> reporter: good morning to you, carl. we're taking a brief break right now, at least the court is, from jcpenney ceo ron johnson's testimony. as he testifies in macy's's case against both jcpenney and martha stewart living on new media. macy's's lawyer ted grossman is doing the questioning right now of johnson. when he arrived at the courthouse earlier today, he was in a good mood, joking with photographers, telling them he was wearing a jcpenney stafford shirt and tie. but once he got inside, the mood turned serious. his e-mail correspondence began to be uncovered. jcpenney was well aware of martha stewart's deal with macy's.

in august of 2011, steven roth wrote to ron johnson saying, quote, lunched with your new best friend martha. he loves you. she has an exclusive with macy's which will be a major impediment. lots of issues but lots of desire. johnson remrid to roth, macy's's deal is key. we need to find a way to break the renewal right in spring of 2013. then the deal was announced that jcpenney would take a 17% take in martha stewart living omni media. johnson wrote an e-mail to bill ackman saying, i think the idea of an investment has made this a much more significant event, a mere licensing agreement might have been greeted with a yawn. the combination truly created news. we putter ri in a corner. normally when that happens, you get someone on the defensive and they make bad decisions. this is good. and this case is getting very good. we'll bring you more throughout the day as we get more. johnson will be cross-examined

later in the day by his team. i have to get back inside. i don't want to miss a thing. >> thanks, courtney reagan. when we come back, why investors should be wary of the markets reaching all-time highs. but first, rick santelli is watching the treasuries. >> the currency markets are unreal. we're going to talk a little fx and we're going to talk a little bit about a topic i've talked about a dozen times -- austerity with matt maley, miller dayback. 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.

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take a look at the sector we don't get to very often, the s&p footwear sector, relatively flat today. up nearly 6% this year. one stock helping the sector is deckers after an interesting call last night. josh lipton at the flash desk with more on that. >> deckers outdoor ripping higher this morning. the footwear maker best known for its uggs brand forecast a surprise first-quarter loss but offered investors a stronger full-year outlook. analysts say the reason can be chalked up to the fact that inventories guided lower. and deckers outdoor up about 14% right now. down about 40% in the past 12 months. the dow and the s&p continue

to flirt with some of these record levels. what happens if, in fact, we hit this new high? is it a bear market trap? mark jolbert is with market watch digest and joins us this morning. >> good morning. >> we have some people writing in saying, please, please do not hit a record high if we can end the week flat, we'll be happy. how dangerous is it if we go over 14,164? >> first, looking at the data, they looked at all occasions in the last 70 years in which the stock market reached a new high following a bear market. when it retains its previous high and breaks out into new all-time high territory, how much longer does the bull market last? >> speaker boehner is speaking outside the oval office. >> the president got his tax hikes on january 1st.

this discussion about revenue, in my view, is over. it's about taking on the spending problem here in washington. i did lay out that the house is going to move a continuing resolution next week to fund the government past march 27th. and i'm hopeful that we won't have to deal with the threat of a government shutdown while we're dealing with the sequester at the same time. the house will act next week and i hope the senate will follow suit. thanks. >> as expected, a brief comment from the speaker after the meeting with pelosi, mcconnell, the president, harry reid today. there had been some hopes among bulls that some sort of rough outline of a deal might come as a result of that meeting. clearly the two sides entrenched on the entitlements of the democratic side, taxes on the republican side. john harwood has some insight as to what those statements meant. >> reporter: carl, i think those

bulls who were expecting a deal today need to lay off the stimulants and think about where we are right now. we are at a fundamental disagreement that john boehner just outlined, republican believing they've done all the tax increases they can or they're willing to, say it's all about cuts now. and the president is saying, we need more deficit reduction but it has to be a mix of tax revenue and spending cuts. that could change and the white house is counting on beating down republican opposition as the impact of these cuts becomes clear over the next several weeks. i think their hope is that john boehner will come to a microphone at some future point and say, we said we weren't going to increase taxes but what we're doing is tax reform and we're not raising rates. it might raise a little revenue. that's one potential way out. the other way out, of course, is for the administration simply to be unable to get the republicans

to move, in which case we're going to be in budget trench warfare for quite a long time. >> is there a sense, john, that the white house is using these municipalities who will suffer as a result of all that as some sort of human target? and is that fair -- to what degree do republican leaders eventually feel that pain throughs and reach a compromise, as the white house would hope? >> reporter: i wouldn't say it's human target. but the white house view -- many republicans agree with this -- is that we have reached, if not the end of the road, close to the end of the road on what you can do on the smaller discretionary parts of the budget. there are some more that can be gotten. but nobody wants defense cuts of this magnitude or domestic discretionary cuts of this magnitude. that became the fallback then they couldn't make the big deal. and i think the white house is happy and that's what their two-week p.r. campaign has been about, to make plain to the

american public that belief, that is that real people are going to be hurt by this, it's not just fat that's going to be cut or foreign aid that's going to be cut. and then try to use that reality and that pain to produce a deal which they think is more sensible, which would involve some cuts in the big entitlement programs which have been sacred cows for a long time in both parties, really. and not just cut them to the exclusion of everything else but cut them in combination with some loophole closing that raises more revenue. but we have a ways to go before this plays out. march 27th, which is john boehner referred to, is when the government funding runs out. and he was trying to send a pre-emptory signal that republicans aren't going to be put in the box of being accused of a government shutdown. and then we have the debt limit in may. >> john, thank you for being there with that. mark, it doesn't seem fazed by it in the short term.

still mildly positive. getting back to mark hulbert. i apologize for that, mark. you were citing some research out of ned davis, which tells you essentially, hit a new high is not necessarily a bad thing, at least in the short term? >> well, that's right. they looked at all instances over the last 70 years and came up with 13 in which the market recovered and reached a new all-time high after the bear market that preceded them. the market continues going higher for a year more on average. there's a wide variability in the data. the shortest period of time came in 2007 -- in may of that year, the market reached a new high. the final high came only 2% later in october of that year. that's the statistics on the one hand. the other thing i was pointing out is that the sentiment is a greater source of worry about what would happen.

there's already an excessive amount of bullishness among the advisers we track. and the thought is that -- at least the worry from a contrarian point of view is that a new high might bring in those few remaining skeptics who are on the sidelines and that would be the final gasp of that euphor euphoria, that huge billishness you'll see at a top, at least according to contrarian theory. >> you always have great, broad outlines and then you say in your words, don't get carried away by a certain mention, you mentioned the wide variability in the data. this is only looking at 13 instances, right? >> that's right. your statistics professor would say any conclusion based on a sample of 13 is probably tentative at best anyway. but nonetheless it does suggest that we haven't had any instance in which -- i guess you could say over those 13 instances, you've never had a case where the market rolled over and died the moment it hit a new all-time high.

so i suppose from a short-term point of view you wouldn't have to be all that worried. but if that was your only basis for putting your money in a market where the market reached a new high, i'd sigh that was on relatively thin ground. >> let's hope no investors are going by that alone. it's a great piece, mark. thanks for your time. >> thank you. best buy shares surging more than 40% since it was reported the company is trying to be taken private. what's next for the company? here's a look at where dell was trading back on october 9th of 2007. we'll be right back. [ male announcer ] you are a business pro.

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most likely on the sequester, no word on whether he'll take q & a. but when he speaks, we'll take it live as it happens. best buy, up sharply, then in the red, now positive again after the fourth-quarter numbers. mary thompson was on the conference call this morning and is here with all the highlights. >> in addition to reporting those better-than-expected results, the struggling electronics chain says a hucbuy offer never materialized though it did reject an offer to take a minority take in the firm. here's the company's ceo, hubert joly. >> during the process, dick introduced to the company several impressive private equity sponsors who all

expressed interest in an investment in best buy. if cost of these investments, however, were determined to be excessive and dilutive to our existing shareholders. therefore the company concluded to not accept these offers. >> he went on to say management is now solely focused on transforming best buy. the turnaround's two primary goals, increase same-store sales and improve profitability across all its platforms. profitability did not improve in the fourth quarter as adjusted earnings declined from last year. best buy managing to beat estimates by a dime on stronger-than-expected revenue even as same-store sales declined. in the u.s., helped by strength and mobile phones, tablets, offsetting strength that it saw in europe. joly outlined a six-point plan aimed at improving sales at its

stores even as the firm seeks to take out additional costs. back to you. >> a few minutes left in the trading day in europe. we'll get the close there. you should see some of the action on euro/yen in the past couple of hours. that's a live shot of the white house briefing room. the president will speak in about 11 minutes. ♪ ♪ [ male announcer ] how do you engineer a true automotive breakthrough? ♪ you give it bold styling, unsurpassed luxury and nearly 1,000 improvements. the redesigned 2013 glk.

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the european markets closing now.

>> and closing for the week, a little bit of red around the continent. the data showed eurozone unemployment once again, a record high, 11.9% in january. manufacturing in the region contracting in february as well. take a look at the major european markets, london, paris, germany, spain, italy. the euro falling to its lowest levels of the year against the dollar. back below 1.30. some say that's an important level psychologically. euro against the yen, that's a crazy intraday chart as well. 121.13. the pound dipped below 1.50 for the first time since july of 2010 on the uk pmi which was abysmal. disappointing chinese manufacturing data weighing on the miners. let's get to bob pisani who's watching not just europe but our own markets too.

>> that was a major problem. we were lower and then things turned around with our own data. take a look at the dow jones industrial average. the magic if you remember, 14,164 would be a new historic closing high. we have to close above that. you see the drop there early on. we are so desperate to get to new highs, you can almost feel it. my concern is we're all going to be so exhausted by the time we get there, there's not going to be much left once we get there. carl mentioned the pluses and minuses here. earlier in the day, the weaknesses put up helping and hurting for the markets here. new money for the month was a big help overall. better ism and consumer confidence numbers were a major factor. but hurting, personal income numbers and the european manufacturing and unemployment numbers hurt us. in terms of the market movers, very impressed with the financials today. in a week or two, we'll get the results of the yearly stress test, this is a yearly result. some of the banks are moving nicely to the upside here.

bank of america, citigroup, the important thing is if you pass these stress tests, you might be able to redeploy some capital. guys like wells fargo are already about 2% dividend yield. but bank of america, citigroup, they're not. regions financial, suntrust, these guys are at sub-1% dividend yields. maybe these guys, if they pass the test, will be able to raise their dividends. i think that's maybe a factor in why some of these stocks are moving. downside leaders, everybody's worried about the sequester but i keep saying where is the evidence that the market is freaking out? i don't see any stock movement. again, this is the group that would be affected the most, the ones that are going to get the 2% cut in medicare, universal health, health management. these are the big hospital, humana. these are small declines compared to what the worry is out there, the end of the world e-mails that i keep getting.

i keep saying, let's see real evidence that investors are actually dumping them. i still don't see them right now. finally, i think one of the major problems we're having right now is the marginal buyer is really heavily invested. hedge funds are heavily invested in stocks and the marginal retail buyer has been very bullish in buying. here's something very interesting. i look at the american association of individual investors sentiment surveys. big change this week. only 28% of all their members were bullish. last week, almost 42% -- this is a 14-point change. that's very heavy. i think it's a good piece of news because all of a sudden there's a dip in bullishness by people who are bullish -- the retail investors most invested in the market. these are more active investors overall. 50i6 be i've been concerned aft people that are active in the market, they're all into stocks right now. we need additional buyers to come in and move the market forward.

i think it's good that there's a little bit of skepticism that's emerged and this survey ended on wednesday. >> timely data. thanks, bob. let's get to rick santelli in chicago with a discussion about austerity and growth. rick? >> absolutely. before we get to our guest, i'm going to read and put on the screen something he recently wrote. austerity is not supposed to create growth. it's supposed to lay groundwork that will let them grow later. talking about world economies. welcome, matt maley from miller tabak. >> great to be here. >> let's start with -- explain to our audience, radio and tv exactly what you meant because i really agree with you. and it's a hard concept. everybody looks at austerity as horrible. they say it needs to be followed by growth. austerity by its very quote in nature needs to hit a level of -- you can't bounce if you're not bouncing off something

solid. give me your take. >> i just think that it really stood out to me this week because we heard some of the senators asking the question of chairman bernanke saying -- asking him, didn't austerity not work in trying to create growth in europe? and my thought was, of course it didn't. why would anybody think austerity would create growth? as you read in my comment, it lays the groundwork. and it is a painful time, it's a painful period and a painful process. but it's something that needs to be done and it's something that our people or our leaders in washington aren't willing to even scratch the surface on. >> now let's look towards europe. we've had a lot of economic news and we've had a lot of foreign exchange movement in the last 24 hours, which is an issue you brought up midweek saying, i'm looking at the equity markets but i'm not really seeing this thing play out in the currencies. that's changed a bit. tell me your thoughts. >> well, the currency markets

first -- a lot of people focus on the change in the yen in the last two weeks. but really the other currency markets like the euro, that started changing its trend back in the beginning of february, four or five weeks ago, same with the dollar, the euro going down and the dollar going up. and they've both broken key resistance levels in the case of the dollar and support level today in the euro. and that's such an important part -- because of the carry trade, such an important indicator of net liquidity in the system. that's been showing that it's not been as plentiful as it had been for a couple of months. and so that -- >> when i look -- let me interrupt you there a minute, matt. when i look at the euro, all of my fx traders on the floor are tapping me and whispering in my ear, they wanted to short the euro because they do think the ecb is going to make some policy shifts regarding the interest rate potentially lowering it. your thoughts?

>> well, that's going to be a major problem. and it goes back and forth because it's a major problem for the markets near term but it's the right thing to do longer term because these austerity programs -- some of these problems they need to face, they're actually looking at them. unlike what we're doing in the united states. not trying to make any headway on those at all. >> bob pisani, we only have 20 seconds left, i love what he said a few minutes left. everybody's telling me how horrible this may or may not be or they're woirried about this. but the markets aren't showing anything. to me that's the saddest thing of all. my interpretation is because they've wallpapered over the termites. ben bernanke helping put his thumb on the scale of low interest rates. they don't show up in the markets because the markets aren't really the markets. your final thought on that, sir? >> yes, the market is being run by liquidity. and the problem is that the liquidity is like -- the underlying structural problem is too much debt and too much leverage.

until we cut out that tumor, the chemotherapy the fed is helping the market with can only last so long. at some point if you don't cut out the tumor, that chemotherapy does more harm than good down the road. >> matt, have a great weekend. thanks for being a guest on the "santelli exchange." carl, back to you. >> thank you very much. let's get a quick check on energy from jackie deangelis. >> reporter: wti seeing a more than 1% decline, under $91 a barrel. brent crude seeing about a 1% decline as well. the rise in the dollar traders telling me having a lot to do with this. if you look at the dollar index, 8 2 handle. this rise in dollar momentum slowly creeping up on us and taking its toll on crude. also traders watching the equity markets very closely saying if we end up in the red, it's the first day of the month.

that's going to be a significant factor in terms of trade next week. the metals are lower as well, particularly copper. bob mentioned the data out of europe but also weak data out of china, taking its toll on copper. and gold was higher. but changing directions now. back over to you. >> here is the president on the sequester. >> as you know, i just met with the leaders of both parties to discuss a way forward in light of the severe budget cuts that start to take effect today. i told them these cuts will hurt our economy, they'll cost us jobs and to set it right, both sides need to be willing to compromise. the good news is the american people are strong and resilient. they fought hard to recover from the worst economic crisis since the great depression and we will get through this as well. even with these cuts in place, folks all across this country will work hard to make sure that we keep the recovery going. but washington sure isn't making

it easy. at a time when our businesses have finally begun to get some traction, hiring new workers, bringing jobs back to america, we shouldn't be making a series of dumb, arbitrary cuts to things that businesses depend on and workers depend on, like education and research and infrastructure and defense. it's unnecessary and at a time when too many americans are still looking for work, it's inexcusable. now, what's important to understand is that not everyone will feel the pain of these cuts right away. the pain, though, will be real. beginning this week, many middle class families will have their lives disrupted in significant ways. businesses that work with the military, like the virginia shipbuilder that i visited on tuesday, may have to lay folks off. communities near military bases will take a serious blow. hundreds of thousands of

americans who serve their country, border patrol agents, fbi agents, civilians who work at the pentagon, all will suffer significant paycuts and furloughs. all of this will cause a ripple effect throughout our economy. layoffs and pay cuts means people have less money in their pockets and that means they have less money to spend at local businesses. that means lower profit, that means fewer hires. the longer these cuts remain in place, the greater the damage to our economy. slow grind that will intensify with each passing day. so economists are estimating that as a consequence of this sequester, we could see growth cut by over .5%. it will cost about 750,000 jobs at a time when we should be growing jobs more quickly. so every time that we get a piece of economic news over the next month, next two months,

next six months, as long as the sequester's in place, we'll know that that economic news could have been better if congress had not failed to act. and let's be clear. none of this is necessary. it's happening because a choice that republicans in congress have made. they've allowed these cuts to happen because they refuse to budge on closing a single wasteful loophole to help reduce the deficit. as recently as yesterday, they decided to protect special interest tax breaks for the well-off and the well-connected and they think that that's apparently more important than protecting our military or middle class families from the pain of these cuts. i do believe that we can and must replace these cuts with a more balanced approach that ask something from everybody. smart spending cuts, entitlement reform, tax reform that makes

the tax code more fair for families and businesses without raising tax rates. also that we can responsibly lower the deficit without laying off workers or forcing parents to scramble for child care or slashing financial aid for college students. i don't think that's too much to ask. i don't think that is partisan. it's the kind of approach that i've proposed for two years. it's what i ran on last year. the majority of the american people agree with me in this approach, including, by the way, a majority of republicans. we just need republicans in congress to catch up with their own party and their country on this. and if they did so, we could make a lot of progress. i do know that there are republicans in congress who privately, at least, say that they would rather close tax loopholes than let these cuts go through. i know that there are democrats who'd rather do smart entitlement reform than let these cuts go through. so there is a caucus of common

sense up on capitol hill. it's just it's a silent group right now. and we want to make sure that their voices start getting heard. in the coming days and the coming weeks, i'm going to keep on reaching out to them, both individually and as groups of senators or members of the house and say to them, let's fix this. not just for a month or two. the greatest nation on earth does not conduct its business in month-to-month increments or by careening from crisis to crisis. and america's got a lot more work to do. in the meantime, we can't let political gridlock around the budget stand in the way of other areas where we can make progress. i was pleased to see that the house passed the violence against women act yesterday. that is a big win for not just women but for families and for the american people. it's a law that's going to save lives and help more americans

live free from fear. it's something that we've been pushing on for a long time. i was glad to see that done. and it's an example of how we can still get some important bipartisan ledgelation through this congress even though there are fiscal arguments still taking place. and there are other places we can make progress. i'm going to keep pushing for initiatives and high-quality preschool for every thacfamily wants it. i'm going to keep pushing on the minimum wage and imadministration reform and improvements on our transportation sector and pushing for sensible gun reforms because i still think they deserve a vote. this is the agenda the american people voted for. these are america's priorities. they're too important to go unaddressed. and i'm going to keep pushing to make sure that we see them through.

with that, i'm going to take some questions. i'll start with julie. >> how much responsibility do you feel that you bear for these cuts taking effect? and is the only way to offset them for republicans depend on revenue or do you see any alternatives? >> look, we've already cut $2.5 trillion in our deficit. everybody says we need to cut $4 trillion. which means we have to come up with another $1.5 trillion. the vast majority of economists agree that the problem, when it comes to deficits, is not discretionary spending. it's not that we're spending too much money on education. it's not that we're spending too much money on job training or that we're spending too much money rebuilding our roads and our bridges. we're not. the problem that we have is a long-term problem in terms of our health care costs and programs like medicare.

and what i've said very specifically, very detailed is that i'm prepared to take on the problem where it exists, on entitlements and do some things that my own party really doesn't like, if it's part of a broader package of sensible deficit reduction. so the deal that i've put forward over the last two years, the deal that i've put forward as recently as december is still on the table. i am prepared to do hard things and to push my democratic friends to do hard things. but what i can't do is ask middle class families, ask seniors, ask students to bear the entire burden of deficit reduction when we know we've got a bunch of tax loopholes that are benefiting the well-off and the well-connected, aren't contributing to growth, aren't contributing to our economy.

it's not fair. it's not right. the american people don't think it's fair and don't think it's right. i recognize that speaker boehner's got challenges in his caucus. i recognize that it's very hard for republican leaders to be perceived as making concessions to me. sometimes i reflect, is there something else i could do to make these guys -- i'm not talking about the leaders now. but maybe some of the house republican caucus members -- not paint horns on my head. and i genuinely believe that there's an opportunity for us to cooperate. but what doesn't make sense -- and the only thing that we've seen from republicans so far in terms of proposals is, to replace this set of arbitrary

cuts with even worse arbitrary cuts. that's not going to help the economy. that's not going to help growth and it's not going to create jobs. and as a number of economists have noted, ironically it doesn't even reduce our deficit in the smartest way possible or the fastest way possible. so in terms of going forward, my hope is that after some reflecti reflection, as members of congress start hearing from constituents who are being negatively impacted, as we start seeing the impact that the sequester is having, that they step back and say, all right, is there a way for us to move forward on a package of

entitlement reforms, tax reform, not raising tax rates, identifying programs that don't work, coming up with a plan that's comprehensive and that makes sense? and it may take a couple of weeks. it may take a couple of months. but i'm just going to keep on pushing on it and my view is that ultimately common sense prevails. but what is true right now is that the republicans have made a choice that maintaining an ironclad rule that we will not accept an extra dime's worth of revenue makes it very difficult for us to get any larger comprehensive deal. and that's a choice they're making. they're saying that it's more important to preserve these tax loopholes than it is to prevent these arbitrary cuts.

and what's interesting is speaker boehner just a couple of months ago identified these tax loopholes and tax breaks and said we should close them and raise revenue. so it's not as if it's not possible to do. they themselves have suggested that it's possible to do. and if they believe that, in fact, these tax loopholes and these tax breaks for the well-off and the well-connected aren't contributing to growth, aren't good for our economy, aren't particularly fair and can raise revenue, why don't we get started? why don't we do that? it may be that because of the politics within the republican party, they can't do it right now. i understand that. my hope is that they can do it later. and i just want to repeat, julie, i think it's very important to understand, it's not as if democrats aren't being

asked to do anything either to compromise. there are members of my party who violently disagree with the notion that we should do anything on medicare. and i'm willing to say to them, i disagree with you because i want to preserve medicare for the long haul. and we're going to have some tough politics within my party to get this done. this is not a situation where i'm only asking for concessions from republicans and asking nothing from democrats. aim saying everybody's going to have to do something. and the one key to this whole thing is trying to make sure we keep in mind who we're here for. we are not here for ourselves. we're not here for our parties. we're not here to advance our electoral prospects. we're here for american families who have been getting battered

pretty good over the last four years, are just starting to see the economy improve. businesses are just starting to see some confidence coming back. and this is not a win for anybody. this is a loss for the american people. and, again, if we step back and just remind ourselves what it is we're supposed to be doing here, then hopefully common sense will -- >> sounds like you're saying this is a republican problem and not one that you bear any responsibility for? >> julie, give me an example of what i might do. i'm trying to clarify the question. what i'm suggesting is i've put forward a plan that calls for serious spending cuts, serious entitlement reforms, goes right at the problem that is at the heart of our long-term deficit problem. i've offered negotiations around

that kind of balanced approach. and so far we've gotten rebuffed because what speaker boehner and the republicans have said is, we cannot do any revenue, we can't do a dime's worth of revenue. what more do you think i should do? i just want to clarify. if people have a suggestion, i'm happy to -- this is a room full of smart folks. zach? >> mr. president, the next focal point seems to be the continuing resolution that expires at the end of the month. would you sign a c.r. that continues the sequester that continues to fund the government? and have you truly reached the limits of your persuasive power? is there any other leverage you have to convince the republicans, convince folks that this isn't the way to go? >> well, i'd like to think i've still got some persuasive power left. let me check.

no, look, the issue is not my persuasive power. the american people agree with me approach, that we should have a balanced approach to deficit reduction. the question is, can the american people help persuade their members of congress to do the right thing. and i have a lot of confidence that over time, if the american people express their displeasure about how something's working, that eventually congress responds. t sometimes there's a little gap between what the american think and what congress thinks. but eventually congress catches on. with respect to the budget and keeping the government open, for our viewing audience, to make sure that we're not talking in washington gobbledygook, the

extension of last year's budget into this year's budget, to make sure that basic government functions continue, i think it's the right thing to do to ensure that we don't have a government shutdown. that's preventable. we have a budget control act. we agreed to a certain amount of money that was going to be spent each year. and certain funding levels for our military, our education system and so forth. if we stick to that deal, then i will be supportive of us sticking to that deal. it's a deal that i made. the sequester are additional cuts on top of that. and by law, until congress takes the sequester away, we'd have to abide by those additional cuts. but there's no reason why we should have another crisis by shutting the government down in addition to these arbitrary spending cuts.

>> you would sign a budget that continues to fund the government even if you don't -- >> zach, i'm not going to -- i never want to make myself 100% clear with you guys. but i think it's fair to say that i made a deal for a certain budget, certain numbers, there's no reason why that deal needs to be reopened. it was a deal that speaker boehner made as well and all the leadership made. and if the bill that arrives on my desk is reflective of the commitments that we previously made, then obviously i would sign it because i want to make sure that we keep on doing what we need to do for the american people. jessica? >> mr. president, to your question, what could you do -- couldn't you just have them down here and refuse to let them leave the room until you have a deal?