>> no. >> you're right. you're right. okay, i'm sorry. i'm sorry. >> steve, thank you. >> we're out of time. >> it's good to be here. >> it's great to have you here. thank you for the optimistic outlook. >> seems to be fine. >> thank you, steve. >> thank you, steve, we appr appreciate it. that does it for us today, make sure you tune in tomorrow. "squawk on the street" starts right now. ♪ good thursday morning. welcome to "squawk on the street." i'm carl quintanilla with jim cramer and david faber at the new york stock exchange without a doubt the busiest day of this holid holiday-shortened week, earnings from mcdonald's and netflix and ebay whose ceo we'll talk to in a moment about carl icahn and the ten-year yield finally some macro to react to. claims were okay and we'll get existing homes later on and europe's pmi much better than

china's. the roadmap begins with netflix shares up 17% premarket and applesed to poised to open at new highs and subgrowth jumped. >> and mcdonald's beating expectations but revenue in december same store sales missing in what the company calls a challenging year. >> and ebay completing an earnings trifecta beating by a penny as carl icahn announces a stake in the company calls for a paypal spinoff. first up, netflix is poised to open at all-time highs. the company adding more than 2.3 million new u.s. subscribers to its streaming service in the fourth quarter. netflix says it's projecting an additional 2.2 million domestic streaming subs. and handily beating estimates, 79 cents a share. talked about new pricing tests that they're doing when they did the google hang-out of a call,

you said look for 33 million, jim. >> they gave it to us. this is a remarkable conference call. a confluence of things occurring, first things can understand how can a stock go up that much. there were many people coming in with a sell or hold ratings. and second the conference call is masterful. it's well orkes straighted play be that we have all this competition, how great is that. we have all these worries that you have about money, forget it. we don't need to raise any cash. we've got new programming. we are to quote our old friend -- this is my own extrapolation, howard schultz, the third way to entertain, you can watch tv or movies. a charming call so to speak and a charmed company. >> a charmed company. and putting out their growth targets that would seem to meet even the best of cases for the bulls in terms of continued subscriber additions. >> yes. there are so many. the letter itself which is

just -- remember, there's a letter. they do things very differently. this is kind of like when you were growing up you always felt there will be this company one day and send me a nice letter about how i'm doing and have a folksy conference call, kind of an fdr fireside chat here and every single metric is better than expected. and they do things like -- i absolutely love this. it's kind of a tv guide, they got turbo fast. horseman epic series based on the adventures of marco polo. >> i'm probably going to want to watch it. they are exciting in the way that i bet the big screen was when they went from talkie or when we had tv. i mean, they -- they have a sense of greatness about them that isn't arrogance. >> yeah. >> because they screwed up and they came out and said it. i like it. >> and "the journal" today suggesting they probably learned from those lessons when they made missteps on pricing. this move today as we said, what, 17% plus. >> yeah. >> we know it's the most

volatile of s&p names after earnings and an average swing of 14% versus most components around 5%. even though this looks dramatic, this is sort of what they do. >> there's a great headline in terms of -- >> stubborn. stubborn. >> yeah. okay, so, let's just say that he's been incredibly and ridiculously wrong. not to pick on anyone in tick but to pick on him completely. the company continues to delight and entertain investors as q-4 results exceed expectations maintain underperform, raise price target to $175. >> wow. >> it was $60 for a long time. i remember that. >> only around 200 down. >> actually have a $500 target today out of jpmorgan. >> wow. >> the first ever. >> that will top the google 1,400. remember the apple -- people

said, wait a second, apple had a target in 1999 and all i can tell you there's not a lot of shares here so it is still not a gigantic company and it would have been a great way for apple to put its cash to work rather than now face the anxiety of twitter. >> one part of the call real quickly. the idea of net neutrality. >> did you love that? >> we've seen no giveup in netflix stock price since the supreme court ruled that we had a court ruling that essentially your internet provider conceivably can charge you more for getting the big broadband hog in there. netflix, of course, as much as 34% of all the net traffic in prime time. >> right. >> and yet he seems completely unconcerned if i could call it that. >> he's got a great line in here, reminds me how good amazon is basically saying, listen, we have a lot of places that don't have net neutrality and we still

do quite well or when jeff bezos said we did very well when there's sales tax. and the jpmorgan analyst said and hastings comes back and said you don't need to worry about this because it's a legitimate fear, we're doing quite well. it's just a rebuttal -- this is, like, when i say that they rebut things, they bring up the negatives and rebut them. >> yeah. >> it's not like they're hiding. they'll say, listen, i know you are all worried about apple and itunes, you are worried about amazon, do you know what, they are terrific worries and you are absolutely right, but we continue to execute. >> it was a federal appeals court when i said supreme. i tried to cover it you. >> mcdonald's did beat estimates. revenues a little shy wrapping up what the km called a challenging 2013. december global comps fell more than expected dragged lower by

the u.s. down 3.8 and asia 2.1. comps rose but the problem is the united states. >> i know many people will say, isn't this the sum total of the food chain, that people have turned on mcdonald's or unemployment benefits have been allowed to expire or perhaps the consumer is a little bit more strapped? i come back to no one seems to care if it's bad, if we get a good moment, it's a rocket ship. no one is selling off that europe's a little positive. mcdonald's is teflon. it's teflon. i mean, it doesn't taste like teflon. i happen to like -- >> it was a $100 stock last year. >> it's underperformed but people waiting. you would think when you see this, why doesn't it drop on the 80s? it's always been returning capital. people always want to be -- they're always one step from saying, okay, this is the turn. not a consequential number for mcdonald's, just not. >> the second quarterly drop in

comes for 2013. they do see january relatively flat. and they're going to continue to renovate stores, open some new stores talked about $5 billion in return to shareholders in 2014. where is -- where's the spark, right? where is the spark? >> it's in wendy's, where they reported an excellent quarter. i like wendy's. >> does it give you concern about starbucks tonight? >> i will have to tell you that i think perhaps the most important quarter of this period is goes to be starbucks because we've written the consumer off with the essxception of brinker. >> you mean -- >> hear me out. you like that? >> yeah, i do. >> we're a consumer spending society and we've all felt that the consumer is tapped out, so when we find out how many people are still buying the triple v

vente cappuccino, i think it will be true that the consumer has slowed. >> except they may not have and we made the point while retail has been particularly weak especially mall-based retailers it doesn't necessarily translate that the consumer is weak. look at amazon or many other ways to look at what judges the health of consumers. >> and starbucks the mall traffic. but, look, am i given to hyperbole? >> never, never. i've never known you given to hyperbole. >> such a wallflower. >> indeed. >> never overstate anything. >> we've been bifurcated since the year began, the stocks connected to the consumer, ala coach, it was 5 below this morning, it's not helping the change. but that's been the weakness. if starbucks reports a good number you'll see a short squeeze of magnificent proportions in retail. >> all right. we'll look for that tonight. before that, though, we had an exclusive interview with eba.

we'll hear about his proposal for a paypal spinoff and a lot more. futures are down triple digits. a lot more "squawk on the street" in just a minute.

ebay shares are up this morning after the company announced its earnings release last night and, of course, also included the fact that activist investor carl icahn has taken what we're reporting as roughly

a 1% stake in the company. icahn has nominated two directors to ebay's board and he's filed a nonbinding proposal urging a spinoff of paypal from the company. however, ebay says not interested in breaking up its company. joining us now in an exclusive interview is the ceo of ebay john donahoe. thank you for coming across country to talk to us. >> nice to be here. >> you may have a fight ahead for you. you've come out blazing already. in fact, you were the ones who disclosed mr. icahn's position, his nominations to the board and have said pointedly we are not breaking up this company. why? >> well, i think the proof's in the pudding, david. our company's better off together. there's an enormous change going on in the commerce and e-commerce market. and ebay and paypal together has delivered very strong results over the last three years. 20% revenue growth. 15% earnings growth. 100% shareholder appreciation. and we believe that paypal's competitive position will be stronger as part of ebay over

the next period of time as well. >> many would agree that paypal is a strong part of your company and they would argue and mr. icahn perhaps leading the charge amongst your investor base, if you were to spin it out, it would get a higher multiple. it would programs not endanger ebay's core marketplace business because you could still use paypal and eventually paypal might get sold delivering even more returns to your shareholders. why not entertain that notion? >> the first thing i'll say is that our board and i routinely assess all of our alternatives. but what that argument's missing is the very strong synergies between the two businesses. you know, it's noteworthy there has not been anyone else who has created another paypal since paypal was created and that's because commerce and payments are converging into one thing. a payments network needs a commerce network like ebay. it's noteworthy that most of the large commerce companies are getting into payments and some

of the payments companies are getting into commerce. so, ebay makes paypal better. ebay helps accelerate paypal's growth. let me give you a specific example. mobile is the most important platform shift that has happened in the last decade. paypal today is the clear leader in mobile payments volume. 100% of paypal's start in mobile started with ebay mobile. $600 million of mobile payments volume three years ago, 80% of which came from ebay. ebay customer. ebay volume. that's enabled paypal to get going in mobile payments where today $27 billion of mobile payments, 45 times increase. clear leadership position. started on ebay. and then expanded off ebay and that's been the repeated pattern with paypal in across border and global expansion, start on ebay and expand on ebay, we think paypal's competitive position is enhanced being part of ebay.

>> why will that continue to be the case when we consider this was the early days, the incubation if you will of this new way of payment but now it's more mature? consumers are certainly well aware of it, they are using e-commerce in so many different ways and mobile has been its own huge growth area. why is that going to continue to be the case and will it continue to be the case? >> see, what's interesting we see stronger synergies in the new battlefields. mobile, that's a phenomenon that is still alive. going global expansion when paypal enters to market like russia or brazil, they start with a large number of ebay customers which then they build on top of to build a strong domestic business. moving offline, we're moving offline together, ebay and paypal, that's a more powerful position. so, in the key areas of innovation, we actually see strong synergies and i've said all the way along, if and when synergies run their course, we'll be objective just like we were with skype.

>> there may not have been any synergies with skype to begin with. >> what i'm saying when we see paths that will knock shareholder value, we'll pursue them, but for now we think the best value is keeping the businesses together because of the strong synergies. >> jim? >> let's talk about that. because there's a lot of companies that have done quite well of late breaking up and i look at your paypal business and frankly i covet it. i want it. mastercard $96 billion company and 1.2 billion users and visa, $148 billion, 6.5% growth and 6.5 billion users, i would prefer to own paypal to those because of your tremendous growth. unfortunately i've got to own this gross merchandise business, but i've got a third business that i like, the lucrative middleman business that amazon has to be worried about losing because they're competing directly. you don't in your web service business. i see three companies here that are easily worth more than $70 billion and i want them. john, i want all three because i

think they could be worth $150 billion. >> you know, jim, i agree, it's a very valuable set of assets, but they're stronger together. we see that day in and day out. let's take payments. you know the key part of paypal secret sauce is risk, right? our ability to underwrite both sides of the transaction to make consumers completely safe wherever they use paypal around the world. risk is data. big data. and ebay, paypal together gives us $200 billion of closed transaction data which makes paypal's risk model stronger. day in and day out we see the strong synergies and we're capitalizing on those that make both the company stronger and paypal stronger. >> to jim's point i just wonder about, first of all, he's arguing, making that argument that you'll hear from any number of your shareholders who don't agree with the strategy. but specifically to the paypal business, adoption by other users, man would argue it would

benefit from being independent because there are those e-commerce-related businesses that don't do paypal because it's owned by ebay. >> i'm not sure i agree with the characterization. i think there's only one company that won't integrate paypal, one e-commerce provider. paypal has 70% of the top 100. there's not been any hesitation of retailers and american chants integrating paypal because it's part of ebay. >> why, john, i was out to visit you -- thank you for your forthcoming interview. most people wouldn't be sitting here. and thank you for getting john and having the great relationship. i look at it, wife has the stock been stuck in the 50s and disappointing guidance? i mean, i could understand a frustrated ebay shareholder, john. >> an ebay shareholder has had a 300% return over the last five years, 100% return over the last three years and we believe will have strong prospects going

forward. in fact, yesterday we announced a $5 billion share buyback authorization which is evidence of the board's and management's confidence in our future altogether. >> some shareholders would say you have 8$8.8 billion of cash and generating $4 billion in free cash flow this year. $5 billion is nothing you could return a lot more capital to shareholders if you wanted to. >> if you look underneath the facts of that the benefit of the company is we're truly global. 60% of our businesses is outside the united states. that also means a large portion of our cash and cash flow is outside the united states, so i think if you look at our domestic cash -- >> $3.2 billion. >> announcing a $5 billion share buyback. >> you may do a billion and a half a year, again, people saying it's not enough. those are the ones who may very well also would say they like to see the company separated but you feel comfortable with their capital allocation. >> yes. we feel it's intelligent and we invest organically within our

business and we've been really inquisitive and we believe a $5 billion return to shareholders over time communicates our confidence in our future. >> what about the core business that being marketplace i should say which is still larger than paypal? yesterday's guidance was lower than anticipated at least previous guidance. what are you seeing in your business and why did you lower guidance? >> well, we think the marketplace business is having a strong momentum. we guided to roughly 10% to 12% growth, double digit growth globally with strong margins in the low 40s. so, this is a strong, healthy business that generates strong cash flows which paypal benefits from. and it's a business that's expanding globally. it's a different business today as you well know than it was three, four years ago. three-quarters fixed price, growing both domestically and international, cross-border trades strong in this global economy. the marketplace business is a new ebay, mobile business. $22 billion of mobile volume, so

mobile commerce. ebay's a real leader and will continue to expand globally. >> to put a period on icahn, you said the board has considered this already. is there a point at which the board would reconsider it? >> well, we've got a great board to begin with. a world class board and every year we reassess our strategies. it's just good business. and so every year we'll look at what strategy do we think is the most shareholder value creating and positions the company best for the future. >> i don't understand why are germany and korea, these are areas -- germany's the strongest area in europe. they remain challenged. i see that every quarter. why are they challenged? >> here's the funny part about this, jim, the different part of germany -- germany is our second largest market. we have 25% to 30% of the e-commerce market. we're huge. what's different is payments. payments, paypal has less history in germany because the way germans have historically

paid on e-commerce and so our ability to drive growth in the ebay business is also tied to paypal penetration on ebay. this is a synergy paypal to ebay and as we drive up paypal's penetration, that allows us to offer money-back guarantee to all ebay users that's the key next step that we need in germany that we have in all the other markets that have paypal. >> demographically do you have numbers on ages of paypal versus mastercard, visa? it seems much younger. >> paypal has a strong mobile following, a strong commerce following. yes, i haven't looked at the stats but i our demographic is quite strong. >> john, part of icahn's move here, in which he puts this up for a vote actually in your proxy. if, in fact, more than 50% of your shareholders vote in favor of a split of paypal from the

business, will you listen to those share holders? >> we listen to shareholders all the time. >> but if it's more than 50% even if it's nonbinding, does it put pressure on you to say okay? >> we'll confront that set of facts when we get it. the thing you would say about our board and our management team is we're rational and we want to do what's best for the company, what's best for customers and what's best for shareholders. i think we've demonstrated that over the past five years. >> you have and you've delivered. although this last year has been a more difficult one for the stock price. mr. icahn is no picnic. he can be a distraction. you've nmet with him, correct? >> i talked to him over the phone. >> you think you'll meet with him again? you think you might go and say, come on, carl, give us a break? >> what i do is listen to shareholders all the time. but the most important thing i and our management team need to do now is capitalizing on the opportunities, innovating and executing and that's the message i'm delivering to my organization and that's what we're going to stay focused on in the coming weeks and months. >> john, we'll be following things, of course, in the coming

weeks and months. i know you don't have a date for the annual meeting, is that correct? >> that's correct. >> but it will be sometime in the late spring. >> in late spring. >> thank you for making the trip. john donahoe, ceo of ebay. we count down to the opening bell and the futures are challenged here. we'll get to the dozen or so major earnings we've not gotten to yet. "squawk on the street's" back in a minute. mine was earned in korea in 1953.

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[ male announcer ] now the world is your trading floor. get real-time market scanning wherever you are with the mobile trader app. from td ameritrade. a few minutes before the bell. in lieu of the "mad dash" as we normally would, jim, david, we want to revisit what we heard from donahoe talking about icahn and ebay. >> one of the things people aren't used to tim cook doesn't come here when carl icahn tweets it's a disgraceful situation. what does it mean he flew clear across the country to address the concerns in a forceful way and did it make sense to you? >> it made sense to me. i've heard it from a number of shareholders not just mr. icahn in terms of splitting this business, and as you said it's not a new argument, not new for

mr. donahoe or for anybody who has thought about ebay. the idea simply being that this is a faster-growing business embedded within ebay, not quite the size of the marketplace business but getting closer. it might become a takeover play and deliver a lot more value to ebay shareholders and not to mention frustration with their capital allocation at the company. i think we heard from mr. donahoe some of the answers as to why it makes sense staying within the company no doubt about it. >> but what i run in to because i do a lot of valuation on ebay, okay, let's say all that is true. what the heck is the stock still doing at $55? carl icahn acts out of frustration that the company isn't doing enough to create that value. why? yes, i know that breaking this up could be different scpuicult stock has been a disappointment over the last year. >> no doubt. but the marketplace business has had a bit of a tougher time over the last year and the multiple, therefore, i guess reflects that

getting back to the frustration you talk about. >> do we get to a point where we ask how many of these plates icahn can spin at the same time? >> i think you can do a lot. >> more than he's doing right now? >> i don't know. but it may be. i'm shocked at it, but it's just amazing when you talk to him now, there's so many different things to ask him about, of course, none of which he wants to actually give you a real answer about. >> but he's the lion in summer. he's supposed to be in winter. he's got a different shakespearean thing going on there. netflix, don't forget that. and pacter will be on. there's a little fodder. >> yes. there's a look at the s&p at the top of your screen and negative action at the get-go. and down at the big board, the nasdaq ceo bob grifeld and the

omx group ringing the bell remotely from davos, switzerland, at the world economic forum. we'll look to see where the leadership comes from today. a bunch of big mac crow tells like union pacific which returned a volume growth for the first time in six quarters. >> union pacific this is a company that not long ago preannounced weakness, but when we go over again trying to figure out what's going on with america away from the consumer, what do we see? agriculture plus 19% and industrial products plus 14%, chemical plus 3%, and coal minus one. natural gas has gotten so expensive that there are utilities that can flick a switch and start using coal again. >> a lot of talk that csx may have been the outlier with their weak quarter. >> and it lowered the bar. they have a different product mix and union pacific has the cleaner coal. but, you're right. we got to stay focused on the fact that the consumer not doing well. industrial doing well. and that's the consumer doing

well if it's amazon. >> right. >> consumer related stocks not doing particularly well. >> no, they're not. >> but consumer i don't know that i want to say they're not doing well. >> that's why i want to hear from starbucks because i want to hear mall traffic combined with international combined with whether the continuation of the 7% comp is possible. >> given the success that starbucks has had in recent quarters, it would be hard to imagine that they would slip up. >> the stock's been weaker. a lot of people are concerned about higher prices of coffee. i'm with you. this to me is a fulcrum name. i go back to ebay, you got the guy, if he sticks -- if stays to his guns, his stock would have been -- let me point out the stock would have been at $48 this morning if icahn hadn't -- $48. >> we should make the point it was ebay that told us with mr. icahn essentially. it was not one of the tweets from carl and he's continuing to build the position in the stock and remarked yesterday when we were bringing the story to you

that it was a small position relatively speaking at 0.8. it may not be at 1%, but nonetheless still relatively small considering the economic power that he's put to work in apple. but in the new world of activism, jim, a small percentage ownerships don't really make a big difference. we talked about it so often. it started perhaps with p & g. but dan loeb his letter to dow chemical and a large dollar position but a small percentagewise for a $50 billion market cap company. here a 1% of a $70 billion market cap company and yet he's coming with the fight and i think oit interesting also of the suddenly of the nonbinding shareholder proposals to put it to shareholders. donahoe for his part wouldn't say one way or the other what they'll do if, in fact, that vote goes against them.

>> they have to split the company and the company management is very, very upset. there are people openly agitating that alcoa should split. but they said over and over again, look, that aluminum business doesn't stand alone. leading up to a key point here when you are trying to look at what a stock will do you look at earnings and expectations and now activism. >> the dow not a single component is in the green. is it pmi? >> i was going over china and china is plain out disturbing. what is really going on in china? it's not just the pmi after six months of going up, it's all about credit equals gold number one collective trust. this is a piece of $500 million paper from a chinese bank that people are worried is going to default on january 31st. china credit trust issued this piece of paper issued gold number one collective trust is very reminiscent of our mortgage

bonds but this is someone everyone is possessed about. it would involve the chinese government letting individuals get hurt by the collapse of a piece of paper for the first time. in order to be able to have discipline over the state-owned enterprises. it's why the mineral stocks have been weak. it's why a lot of the chatter off the desk is about you're not focusing enough on china, you guys missed europe now, it's china. i just pointed it out because our country is much stronger. steve schwarzman is sanguine about china. and people say it can do plus seven. but this january 31st date for this piece of paper must be kept in front of us because no one's talking about it. >> interesting. a lot of talk about the pmi potentially being altered by the lunar new year where some of the seasonality factors that come up but it's the worst in six months. >> and we have sandanter, the consumer part, but the euro zone

pmi was good, it's the shoe on the other foot. two years ago we wouldn't be discussing point-blank the euro pmi and how about. and spain how bad. i don't want to get caught up in the idea that china is really horrible, because we have to recognize it's a command economy. if they want that piece of paper to collapse, they will let it collapse. but it's always with the idea they don't want the steroidal growth, they don't want a-rod growth but jeter growth. i was looking at the guy that got all the money. >> growth? >> jeter didn't juice. >> no, he did not juice. >> let's make that clear. >> although he did have a heck of a year. >> you want richard sherman-like in your face growth? no, but i do like him. >> we're seeing some pretty nice action out of f-5. >> i was going offer f-5 and trying to determine if it was the single best technology beat so far. someone downgraded f-5 saying it's already had the quarter.

telco equipment spent by -- worldwide, f-5, remember, that's the gatekeeper to get on the internet itself, just extraordinary. xilinx on last night, talking about huge spend telco, juniper, activism, it remains a bright spot in an otherwise nasty-looking market. >> are you watching something, david? >> you said a nasty-looking market other than netflix and ebay, we don't have a lot of green on the screen. >> no. >> i did note that goldman shacs is down. gs more than any of the big large financials at 2.3%. >> china. china, people might think there's -- remember how we had that interlocking with europe. you remember, a lot of the -- of course, the banks have sold their chinese positions but people feel there may be cross border issues. i don't want to go there because

our banks are much better than they were during the last period. but people hear china trust bank and they think, oh, trust, bank. i'll go regional. >> right. goldman is in that dispute with the libyans but i don't think that would be impacting the stock price. >> get on the goldman sachs elevator and find out. >> i think one of the more interesting ones before we toss it to pisani, facebook down 3%. this research out of -- a bunch of researchers out of harvard and princeton arguing by 2017 facebook will lose 80% of their users in the next three years. >> well, that's terrific and that's based on -- >> they base it on the number of times facebook has entered into a google search which apparently peaked in december of 2012 and has fallen ever since. >> so it's algorithmic. >> as it should be. >> i was working on the pricing in the restaurant and a guy calls me, listen, there's an algorithmn for margaritas, so you don't have to worry about it. >> algorithm for margarita?

>> it takes the margarita prices in your zip code and spits it back out. >> why are you worried about it, it's algorithmic. >> if everything is algorithmic, i'll have to go back to school because i didn't take that class. >> i need an algorithm on my phone that will tell me someone who is way out of line and i'll go there. the same way that amazon is constantly look iing at all of s third party vendors. >> amazon, like carnac, what am i going to order tonight? the answer, the new world war i book. 100th anniversary. i didn't give them a chance but they probably already told me. let's get to bob pisani on the floor. >> we're waiting for santand er to come out here. it's been a rough open this morning and you can blame a lot on china. i want to put up the s&p futures, they went up yesterday on the netflix news.

and about 8:30 you see the drop in the futures, that was china. the china pmi came out showing contraction. that was a bit of a surprise to everybody. so, we saw markets all across asia come down, hong kong, korea, taiwan, japan also were down. and i don't know if it's the slowing lunar new year that traditionally happens. and that's definitely moving things and there's another thing happening around china. put up the chinese internet stocks. you see all of them? you see how much they're down today? there was a ruling late yesterday, s.e.c. administrative law judge ruled that the chinese accounting arms of the big four firms here in the u.s. should be suspended in the u.s. for six months. the s.e.c. is asking for audit documents of these chinese firms and the auditing companies are saying we can't give you them, they are investigating fraud, we can't give them to you because the chinese authorities won't allow us there's a conflict and yesterday the s.e.c. judge said, forget it, you should be suspended for six months and

they aare appealing this rule, but it puts a damper on chinese stocks and the ipos and two news from china affecting the markets today. let's talk about the other things that are moving. southwest air, united had very good numbers. very positive comments from southwest. you are looking for economic comments, traffic impacted the beginning of the quarter by the federal government shutdowns the ceos talking but we saw healthy rebound in traffic and revenue trends. we see strong demand for travel and year over year and levels continued into january thus far. that's the ceo of southwest air. the railroads still good. union pacific another good railroad with good earnings. the ceo there says we see signs that the economy is slowly strengthening in 2014 and we're well positioned for the expected economic growth. and you guys spent some time on mcdonald's here. december comparable store sales globally down 1.2%, u.s. down 3.8%, that is just very

disappointing. i don't see what's going to make the turnaround in same-store sales. i called a couple of people and they don't see big sales drivers and that's the issue. the expectations are low. the dividend 3.4% dividend yield on mcdonald's, a lot of people love that one. ebay i loved listening to the interview, great interview with the ceo, but i don't know about what's going on over there with the whole issue of paypal, but i do know they're now more expensive than they were yesterday. they took down the numbers overall and the number of firms downgraded the stock. susquehanna downgraded them and everybody took down their numbers for 2014. the bottom line for me, forget about spin off paypal, the fundamentals are what mattered and they showed weaker fundamentals and they'll have to pick up spending and that will limit the potential for higher earnings for them. back to you. >> i'll take it from there. we'll keep it on the subject of ebay and lowering guidance and as jim alluded to earlier the

stock most likely would be down perhaps a decent amount of percentage points if it were not for the fact that ebay yesterday in the earnings release also alerted us to presence of carl icahn because he's nominated two directors for the board. a meeting of which will be the annual meeting which has not yet been scheduled but will be sometime in the spring and is also going to a nonbinding shareholder proposal pushing the company to split off its faster-growing paypal unit from the marketplace business. earlier on cnbc we spoke with john donahoe the ceo of ebay who explained why the company is adamantly opposed to that idea. >> our company's better off together. there's an enormous change going on in the commerce and e-commerce market. and ebay and paypal together has delivered very strong results over the last three years. 20% revenue growth. 15% earnings growth. 100% shareholder appreciation. and we believe that paypal's competitive position will be stronger as part of ebay over

the next period of time as well. >> of course, how long that period of time is, is something shareholders have been wondering for some time. it is not new that there are those amongst the investor base at ebay who are not just buying it or -- because they believe in the growth of the marketplace business or in paypal but hopes that the company would split out the faster-growing paypal unit, donahoe explaining again and again why it's better off to be integrated and how one helps the other's business and vice versa. jim, we'll see where this goes. >> yeah. >> this fight is for icahn maybe taking place over the next few months and as i reported, he's bigger than 0.8. 2% although probably not much past a 1% position. you'll get the meeting. he'll get the fight over the nominees. he'll get the fight over the proposal. maybe it goes his way. very well may not. doesn't necessarily mean this fight doesn't continue frankly because the argument will continue to be made one would think unless ebay somehow gets

the growth rate of the marketplace. >> right. last night i'm doing my show and i'm watching, i'm looking ebay comes out, there it goes again, that's going to go right down to 44% and i look up and you are on talking about the story. people have to understand that there is a great amount of pressure on ebay to do what carl icahn wants because the stock is just continuing to fall short. and yet paypal continues to get better and better. people want that piece of paypal. some talk about a tracking stock like malone. i think that's a mistake, i don't really like those. but when i look at paypal and mastercard and visa and i think the young person is paypal, it's great, they've got mobile. give me that stock. >> they aren't a perfect comparison but the best you can do and then, of course, you got to compare ebay and maybe this s is part of amazon. >> thank you. >> john talked about the fixed price on ebay which is most of the business now.

it's not auctions, but nonetheless they are competing every day against amazon which does not use paypal. >> right, yeah. that is the outlier there, but it's the elephant in the room. merchant services, david, you talked a lot about this business. this is amazon web service so to speak, showing accelerated revenue growth it's not like ebay is falling behind. it just comes back to that gross merchandise value. the old ebay is -- almost being viewed as faddish and yet the numbers that they're putting up most retailers would kill for. this is an anomaly. donahoe must feel like this isn't fair. i'm giving her all she's got and the market continues to not like me. but do you know what he doesn't ever do, he does not do upod, he has not underpromised and overdelivered. his guidance has been too high for three straight quarters. driving me crazy. >> final point for me on any vote that will take place on this proposal, the founder of ebay has 10% and he's obviously

on the board as well. >> really interesting. i know he kept saying that the board is good. the board does have a lot of senior statesmen on it. >> andreessen and he's got a pretty strong board. icahn nominating two of his employees. >> this is one that will be with us for some time. thank you for getting that interview. >> sure thing. all right, let's head over to the bond pits. rick santelli is at the cme group in chicago. take it away, rick. >> thanks, david. before we get to the charts, you know, jim cramer, you nailed it. if we look at a 2 1/2-year best on pmi in the euro zone as an aggregate and you contrast that with the dismal pmi below 50 in china and then you look at the response considering all that in the picked income marketplace, china trumps it. and that trust issue that chinese trust bank you brought up, jim, is exactly spot on. it raised a raft of issues, not the least of which is moral hazard and should the things off the balance sheet be moved on and how they obliterate the capital ratios, it will be a big

topic in china. why did the markets key on that? that's why. look at the two-day of tens, wow, did we reverse to the downside which, of course, implies weakness. and it's not only us. look at the boon, in their own backyard where they had a great pmi look at what their yields did. look at the gild yields and if you look at the flattening yield curve twos to tens, it continues to be flat and should we close here under 282 in tens, it will be a 6 1/2-week low yield close. but one market paid attention to the pmis in europe, that's foreign exchange. enough said. a chart speaks volumes. look at an intra day of the euro versus the dollar. it's screaming to the upside. one of the best rallies in a month. we definitely want to pay attention to the tug-of-war going on between global economics in different regions of the globe. back to you, carl. >> all right, rick, thank you very much. when we come back, while the markets are in selloff mode, netflix is on fire. >> so, i guess the ceo of hbo

doesn't mind me, then, sharing his account information so it's hbo.com and his password is -- >> that was netflix ceo reed hastings joking on last night's earnings call. the latest rally is no joke. we'll get more on netflix high surge, the nasdaq down. and the s&p is down 12. (vo) you are a business pro. seeker of the sublime.

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we've had a lot of split markets in the past few sessions. 8 of 14 have had directionally different dow, s&p movements. not today. some uniformity as the dow's down 142, s&p's down 12. on you mentioned some china concerns, not just the pmi that was weak but other broader banking issues we'll see if they come back to haunt us. >> you've got a government that's a controlled economy and obviously if they really, truly want to put some pain into the

system and rein in the growth, this is how to do it, let a piece of paper default. one of the things i think has to happen is this whole idea that there could be a january 31st default, it has to be factored in by the market before we can go higher. or stabilized. but i do notice that mcdonald's is kind of the quintessential interest rate, bob mentioned the trades are going down and the dividend is solid and so the stock doesn't get hit. it's counterintuitive but a lot of companies reported good numbers in the last few days and they are really getting crushed. >> meanwhile, sandanter, we mentioned the u.s. holding company, sandanter usa up 8.5% here as they are trying to make up with weakness at home and finding strength across the globe. >> there was kind of a bright idea of spinning all of all of america, they've bifurcated and done a lot of different spinoffs and sandanter is still not as good as bbpa. >> we'll get 6 in 60 with jim in just a moment. tdd#: 1-888-648-6021 there are trading opportunities

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let's get 6 in 60. 6 stocks in 60 seconds. crm? >> this has been the hottest stock and deutsche bank downgrades it to a hold. this is a good barometer whether the market can snap right back. >> baird up.

>> there was a big raid on lynn and lynnco and this is a 9% yielder, this is a company that completed a very big acquisition. >> sandisk which we'll talk to this morning. >> mentioned that in part because of this is a company that's done a lot of good things in flash. but it's not enough. nothing's enough right now. >> keycorp. >> we were kind of stunned that this stock is down as badly. it had the best growth of any regional. >> valero, the refiners. >> when we saw the trans-canada pipe go down and realized that, wait a second, maybe the glut could be alleviated, the refiners came under pressure and bingo, valero better-than-expected number. >> and dks cut by morgan stanley. >> it's been a charmer since last time it reported a quarter and no one wants to be affiliated with a retailer, no one! >> what's coming up on "mad money"? >> one of my great bankable 21s from "get rich carefully" is chuck bunch, he's the forerunner

to what dupont is doing. if you talk to dan loeb about dow chemical he would say why can't liveris ceo of dow be chuck bunch. a great ceo. >> it's going to be fun to watch. >> what a day. trying to catch my breath. >> 6:00 and 11:00 eastern time. we'll get existing homes, lei and ahead of union pacific in just a minute. tte or au lait? cozy or cool? "meow" or "woof"? everything the way you want it ... until boom, it's bedtime! and your mattress a battleground of thwarted desire. enter the sleep number bed. designed to let couples sleep together in individualized comfort. he's a softy. his sleep number setting is 35. you're the rock, at 60. and as your needs change over time you can adjust your bed to sleep better together. 48-month financing available through

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welcome back to "squawk on the street." rick santelli here. december lei leading economic indicators up 0.1 a little light. we also had a house price index that was up the same amount, 0.1 of 1% but you have to go back to january of 2012 to find a smaller month-over-month change and i'll toss to diana olick and her feeling on the house price index, diana? >> existing home sales up 1% in december to a seasonally adjusted rate of is 1.8 million, and november and december were the slowest sales months for all

of 2013. but we do have the total tally in for the year, 5.09 million home sales that's the highest in seven years, we're up 9% from 2012 in 2013. median existing home price, now, i know this differs from the number you got which was based on fannie and freddie sales, overall home prices the median price was $198,000 even up 9.9% year over year so we're back into the single digits on the home price appreciation for the realtor's numbers, and case-shiller and core logic have it higher but that's what we have from the realtors and that's due to lower sales on the low end because they do a median, not a sale to sale. inventory's down 9% month to month and that's seasonal, up 1.6% year over year but we still have very low inventories 1.86 million homes on the market and a 4.6-month supply and finally first-time home buyers dropping again.

very slow in this market. the lowest on record since the realtors began tracking. sara? >> all right. thank you very much, dianale olick. it looks like u.s. stocks still in the red. the dow jones industrial average down triple digits and the s&p 500 down three-quarters of a percent and the nasdaq also losing traction 0.75% despite some winners like netflix and ebay. >> the transports hit a new record as the airlines continue to be on fire. the split market between the industrials and transports very interesting. >> union pacific reporting strong numbers. we'll be speaking to the ceo, signs are looking up at least for those big industries. kind of a mixed read with the weaker mcdonald's numbers. >> the big mover is netflix the shares skyrocketing on better-than-expected results across the board. our julia boorstin joins us this morning to break down the results and the highlights from the earnings call. hey, julia. >> hey, carl.

it wasn't just netflix better-than-expected earnings and revenue subscriber numbers and first quarter forecasts, driving shares higher was reed hastings across-the-board confidence of the company's future with margins heading higher and substantial european expansion and even headwinds like net neutrality rules being struck down in court, not a problem. >> if major isps were to contemplate blocking netflix or other services, it would significantly fuel the fire for more regulation. which is not something they're interested in. so, you know, the long term we still need to figure out what it means and how that works out, but i think in the short term it's very likely that there's no change. >> hastings talked about the potential introducing tiered pricing saying a lower price could bring in new users promising if there are higher prices current customers would be, quote, generously grandfathered in. he also dismissed the possibility of an ad-based

option or much higher priced subscriptions. hastings clearly felt emboldened, reviving a rivalry with time warner. three years ago time warner's ceo calling netflix as threatening as the albanian army saying it's more like a 200-pound chimp than an 800-pound gorilla. here's what hastings when asked about the hbo ceo saying shared go passwords aren't a big issue. >> i guess the ceo of hbo doesn't mind me, then, sharing his account information, so it's hbo.com and his password is -- >> up until now, hastings has had nothing but glowing things to say about hbo, saying he's its biggest fan. we'll have to see whether time warner responds when it reports its earnings next week. sara? >> all right, shots fired, julia boorstin, thanks for the rundown on netflix earnings. let's get more insight on the surge this morning. mike santelli is a senior

columnist with yahoo! finances and we've got the entertainment analyst with standard & poor's, clearly encouraging results. how worried should the traditional media and cable giants be by netflix numbers? >> well, i think they should be, you know, clearly worried here with the kind of momentum and subscriber growth that we see, but there's no doubt that sentiment for this stock is turned for the better, you know, so you've seen a number of positive indicators, you know, ranging from streaming subscriber growth and margin expansion to viewership acceleration thanks in mart to the original programming. and i think more and more investors are buying into theent national story which not too long ago we would argue was somewhat of a count on the stock but right now more investors are warming to the international expansion as part of the thesis. >> i'm glad you brought up the idea of sentiment, that's always part of the story with netflix. mike, shares were up 300% last year. it was the best performer in the

s&p 500 and the nasdaq 100. clearly the bar is set higher. can reed hastings and netflix continue to deliver these kind of beats? >> the risk is clearly going to be that you get this state of overbelief, overconfidence both in the company and the investor base. but i will also point out it remains a relatively heavily shorted stock. it remains this kind of reservoir of doubters, as by the way, there probably should be for a stock trading at multiples close to 200 times earnings. i mean, i guess you get it down to 60 times earnings or so if you believe the 2015 numbers. so i think there's a real battleground here, but really to me as long august the fundamental momentum is there, meaning subscriber growth momentum, that will determine whether the valuation matters or not in the more short term. >> tuna, they say vigorously protest any attempt to impede video streams on that net neutrality decision. is that a concern for you or not long term? >> that is clearly a concern, you know, for us. i think a lot has to depend on

what reaction that ruling elicits from the internet service providers. just talking to them i get a sense that they would not do anything that would kind of, you know, jeopardize the current regulatory regime, meaning you don't want to attract the attention of washington unnecessarily. having said that, i think the ruling is a modest negative for netflix and they went at length in the call to address that issue, but, again, it remains to be seen. >> another head wind that a lot of handanalysts talk is about i competition. you are seeing demand rising for streaming on amazon prime and hulu prlus and hbo go. will it trip up netflix? >> that's the big question. you can't make them anointed a category killer. they will be kind of nipped by the other streaming services and, you know, actually believe it or not, it's like pandora where someone will upend netflix

and become the big one, but might there be other alternatives cheaper or different that do drag on its growth. i don't think it matters in terms of netflix and media growth trajectory because they are building out geographically and just like facebook got the u.s. kind of saturation, but it didn't really stop its overall growth because the platform grew internationally. but down the road i obviously think this is now the new battlefront for delivering new media chon tent and people aren't just going to let netflix have it. >> thanks very much. a lot of enthusiasm around netflix on the numbers and reed hastings' tone. mike and tuna, thank you for joining us this morning. one of the few other stocks up is ebay. shares not up a great deal, but might very well be down a good deal if it were not for the presence of carl icahn in those shares and his nomination of two directors to the board. you can see at the bottom as well, i guess we're starting with herbal life. those shares are down sharply

after a report in the "hill" the newspaper on capitol hill that ed markey, the senator fromch massachusetts has asked the ftc and s.e.c. to investigate hlf as a possible pyramid scheme based on what he's heard from constituents and i'm reading here from a wire report who have lost their life savings on investing in hlf as well as others who were pushed to recruit family members into the company and buy products. markey saying he's not choosing sides merely asking for an investigation. he's sent a letter to herbal life ceo michael johnson and seeking details from the company. so, yet again caught in the cross fire if you will there. bill ackman remains soundly in the corner that says the company is not one that should frankly exist. the stock price, however, had been as high as $80 a share not that long ago. they got the audited financials

and there might be a return of capital in some form perhaps through a dutch auction that would even force him even more so although much of his position now is in the form of derivatives as opposed to just an outright short position on which he is still down, but today the shares you can see moving sharply lower again on news being reported by the "hill" that ed markey is going to ask the s.e.c. and ftc to investigate. >> this is what bill ackman was waiting for, right? this is what was not happening last year given all of ackman's presentations, his multipage presentations why it's a pyramid scheme asking the regulators to step in. >> it's a senator asking the regulators to do so, they haven't seemingly responded to mr. ackman in terms of his allegations. >> still interesting it's on the radar. >> yeah, it will be now for whatever reason, ed markey. said he's not choosing sides, but right now bill ackman is happy to have him on his side. do we want to also talk ebay? i think we should. the shares are up a bit this

morning. but would conceivably dedown rather sharply given the guidance received from the company last night in its earnings release, but within that release, of course, the company also alerted us to the prepares of carl icahn. his demand for two directors on its board and has nominated two members of his investing company to stand for that board election that will take place sometime back. the nominating deadline, though, was january 17th. icahn wants them to split off the paypal business from the marketplace business, that is something, by the way, that's been around for quite some time at least something thought by investors to potentially generate strong returns. ebay has resisted it for years and continues to do so. in fact, in an interview with us right here on the "squawk on the street" set this morning, ceo john donahoe gave us any number of reasons why the two companies are better off together. >> it's noteworthy there has not

been anyone else that has created another paypal since paypal was created and that's because commerce and payments are converging into one thing. a payments network needs a commerce network like ebay. it's noteworthy that most of the large commerce companies are getting into payments and some of the payments companies are getting into commerce. so, ebay makes paypal better. ebay helps accelerate paypal's growth. >> well, it does indeed and, of course, that is part of the -- at least the idea of why some would favor a split namely that it is a higher-growth company within ebay that it's not getting the multiple it deserves and would therefore benefit shareholders by being independent. and there's a school of thought if and when paypal was 71 off in a tax-free manner it could conceivably be an acquisition target hence even delivering more of a payday if you will to shareholders. of course, donahoe saying he simply doesn't believe any way that is the case. shareholders themselves will

have an opportunity to at least weigh in on the subject. carl icahn has also asked for and will get a nonbinding proposal on the proxy asking shareholders whether they would support a spinoff of paypal from ebay. i asked donahoe if, in fact, the shareholders, more than 50% of them said yes, what the company would do. >> you know, we'll confront that set of facts when we get it. i think the thing you would say about our board and our management team is we're rational and we want to do what's best for the company, what's best for customers and what's best for shareholders. >> the company also announcing a $5 billion share buyback over time, again, some would say given its ability to generate free cash flow as much as $4 billion in this year perhaps that should be higher, although donahoe pointing out much of the cash on the balance sheet is overseas. we've heard that story many times. >> oh, yes, we have. and it's interesting to watch analysts' reaction to this saying ebay is so resistant to the split eventually the weaker

fundamentals will come into play. we're keeping our eye on markets and down sharply now and heading south the dow down 164 points and s&p 500 down almost a full percent. so is the nasdaq. the one and only art cashin will join us here to give us some color on this selloff. "squawk on the street" will be right back. female announcer: it's time to make room

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art cashin director of floor operations for ubs joins us this morning at post nine. good morning, art. >> good morning. >> talking about component complication lately, it's not the case today. >> we're all in lockstep, the dow continues to be the most volatile and that's part of what we discussed when they reshaped it they made it far more volatile than the other indices. it's leading to the downside but they're in lockstep to some degree. >> explain to people who are coming to the story cold in china. the concerns today are not just about the pmi which was at a six-month low. what's it about? >> it's about a couple things. peoples bank of china put some money in the early easy explanation was that we're coming up on the lunar new year. a quarter of the nation's going to be traveling. they might be hoarding money, so that's all we want to do. well, you dig past that, the equivalent of the chinese beige book came out and they use a phrase that maybe my translation's bad, but it read

as the credit transmission may be broken. that's a pretty strong statement, and that raised a concern that maybe this isn't a little holiday blip that's going on. and then to add on to it, we've got a little bit of an accounting spat on u.s. listed chinese companies, so it's 70% china here, but we've got other things going on. some problems in south america, so everybody's on alert. >> how much do you buy in to the china doom story? you always get some of these negative headlines, sometimes they move u.s. markets, sometimes we can get past them. how worrisome is it what's going on there on a number of fronts? >> i think because it goes across a wider section and because you are going into lunar new year, and as i said, well over a quarter of the population gets up and travels. now, that puts strain on the money system anyway, even if everything were on the up-and-up, that's there. so, you look for the other corroborating things. you've got gold up nearly 25

bucks. that tells you that there's some people thinking there's some problems around. >> the japanese yen is stronger today. >> i think we're going to have to watch. this is not a one-day event. i think you'll have to watch for a couple of days and see what develops in the various markets, but it certainly has the warning signal. >> finally, we always wonder whyio politics isn't playing a bigger role in the market's behavior, but certainly the headlines we have gotten out of geneva and other places around the world haven't been, what would you call them, positive? >> yeah, i mean, when they had the meeting on something as important as the iran sanctions and they come out with an emily lo lotella, oh, never mind, that's not what i said. that doesn't make anybody happy. we'll watch the gold and the spreads in some of these markets but i think the viewers want to stay on alert probably into wednesday of next week. >> art, thanks so much. art cashin here at post nine

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today we continue the process of whittling down the list of the 200 most influential business people of the past 25 years. in the next few months we'll come up with a definitive ranking of the top 25 who mattered most to business all around the world. joining us this morning is a professor at insed business school joins us live from paris talking about putting together this list as well as some names you might not normally know. good to have you with us this morning. >> thanks, carl. >> walk us through how you came. 200 is a lot of names, but given

where business has been over the past quarter century, it's tough to even whittle it down to that much. how hard has that been? >> we did have a hard time whittling it down. we had some very, very lively debate about who should be in or not. we had a lot of debate about who had made their contributions maybe a little bit in the process in the time of that span of those 25 years. but we've got it down to 200 at this point. it's going to be hard to get it down to 25. >> yeah, i don't know how we're going to do it but somehow it's going to happen. walk us through some of the names that when people peruse the list are not going to be familiar with. you have a few you advocated for yourself. >> okay. let me take one. one is lubna olayan, she's ceo of a conglomerate based in riyadh, saudi arabia, which is

the largest investor in the saudi stock market. she's a pioneer in a lot of different ways not just in her role in her company, olayan financing, she also was the first woman ever to be appointed to a board of directors in saudi arabia. and on top of all of that, she's been quite the pioneer in speaking out for social and economic change in the middle east. particularly when it comes to the role of women in the workplace which as we know the more women enter into the workplace, the higher the economic outcomes for a country. so, for example, one of the interesting things about olayan is that she was the first woman ever to speak to a mixed audience in saudi arabia. and she gave a speech in which she basically said that she had a vision of a country in which every citizen, irrespective of gender, could find a job in the field for which he or she was best qualified.

and she's really put her time and support behind those words through a number of initiatives. >> i just want to move on here for a second because you have another female on the list. >> so, this is interesting, just news today, gail kelly's at davos today where she just received the honor of having west pac named the world most sustainable company for its commitment to social, economic and environmental responsibility. now, kelly has long been considered one of the most powerful business women in asia. she's currently ceo of westpack which is the second largest australian bank but before that she was the first woman in australia heading a bank. and under -- under kelly, westpac really not only weathered well the financial crisis, but became one of the 20

largest banks in the world. and through the merger with st. georges bank, she really engaged in what was the largest merger ever conducted in australia in financial services. >> and finally the third one you mentioned is the former ceo of samsung, who essentially created the platform for samsung to become what it is today. it's a great list, obviously, we encourage everyone to go and read it and we thank you for your time today. >> thank you very much. >> and we do want to hear from you. who do you think should be in the top 25? go to cnbc.com/top25 to cast your vote. >> i cast my note. there are central bankers on that list as well. >> yes, there are. i have gone through my checklist. >> mario draghi is at the top of my list. shares of f-5 shares spiking today thanks to soaring demand

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welcome back to "squawk on the street," the government reporting that natural gas inventories declined by 107 billion cubic feet last week slightly less than the estimates from analysts, they were looking for a withdrawal of 110 cubic feet.

certainly a big drop from the week before but a lot of folks anticipating we are using a lot of natural gas right now with the polar wave of cold that is gripping much of the country. we are seeing natural gas holding. in fact, a little bit higher than it was just before the number. right now we're at 485, got close to $5 this morning, guys. the last nat gas above $5 was about four years ago. at the top of the hour we'll be getting the inventory numbers delayed by a day for crude and produ products. some analysts looking for the first build in four weeks but crude holding in with that keystone extension now online, a lot of folks seeing the bottleneck easing up in oklahoma. shares of f-5 up 7% after the data networking km had better-than-expected results for the fiscal first quarter and issued a strong outlook. the profit slid 2% but adjusted results in revenue did beat

expectations helped by strong demand from some of its newer products. joining us this morning for a cnbc exclusive the ceo of f-5 john mcadam joins us from seattle. good morning to you. >> good morning. >> stock hit $109 this morning, you got to go back two years, is there something about network equipment that investors are just beginning to realize? >> well, we have a lot of good business drivers going for us right now. security big opportunity. we did a product transition last year and, you know, i think that caused some delays in spending and that product transition's done a whole refresh of our product line. mobility is a big opportunity for us as well, as is the cloud and software defined networking, so we've got some real tangible business rivals. >> is security driving all of this, or is it something else? >> security's our biggest driver. where we focus in security is protecting applications. those applications across the internet, that can be in data centers, in mobile devices, that's definitely our biggest

driver. but also mobility and the increase in traffic because of mobility is also a big one. >> i know you work with a lot of businesses, enterprise has been a strong spot for you. what are you seeing in terms of your corporate clients and their attitude toward spending? are they ramping it up? >> well, i mean, it was a tough year last year across the board, and they are very, very focused in software solution, the customer base, and we've been driving that product roadmap. they're looking at agility. they want, you know, to increase their competitive advantage. so, they're really looking for fast -- the ability to being able to really quickly drive it out and get products to market and at the same time it's just cost. >> you have a partnership with cisco and we've been watching cisco very closely along with juniper and some of the other big boys. talk to us about how that fits in the broader narrative? >> well, that's very related to the software defined networking space that i mentioned earlier

where cisco have built a product in that area. it was from a spinoff that they spun back into the company. and we're very involved in bringing that to market. basically what we bring is visibility to the application levels. because we can see if the application's working well. if it needs more resources. and our products communicate with the cisco solution. >> there have been a lot of talk this week about bring your own devices. people at work who are able to use their own android or apple products at work managed through their work's i.t. department, uf help those i.t. departments manage all of that. would you argue, as some have, that apple is really making some inroads into the enterprise business? >> oh, no question. there's no question that a lot of companies, including our own, actually, we basically allow our employees to have ios devices, android devices and we support, you know, all the whole spectrum of that. so, more and more you're seeing that. and then companies like us are

building products that actually will secure those environments. we have a product called axis policy manager that knows where the mobile device, you at characteristics of it and basically dictates as to what applications that user can access in that data center. so, more and more there's no question that ios devices will be more on the enterprise. >> security is a big theme for you so do you expect the hack attacks and the headlines we've been seeing to continue to increase through the year? >> oh,off. it's just a continuing battle against the bad guys, the hackers, et cetera. there's no question about that. it's also much more sophisticated. you're seeing knowledge of applications is where they're attacking. phishing is becoming more and more important where you basically show a screen that looks like your bank and it's not. we actually did a small acquisition not too long ago for anti-fraud, for anti-phishing, for anti-malware and will be here in seattle and tel aviv and

the whole idea is to stop fraud across the internet. >> john, interesting and certainly a good market day for you on a day where it's tough to get out of the gate on a broader level. thanks so much for your time. >> thanks a lot. let's send it over to dominick chu for a quick market flash at headquarters. >> check out shares of janus capital, the denver-based asset manager saw fourth quarter profit rise 23% on higher management fees but janus had its worst outflows in years as it struggled to reverse steady withdrawals by customers moving away from its well-known equity funds. net redemptions of $6.2 billion were offset by market gains of a of around $13.5 million and janus as a stock is up 21% over the course of the past year. back over to you. >> interesting what it tells us about flows. dominick, thanks. if you have a smartphone or tablet, you probably have some sandisk in your device.

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stocks are in selloff mode with the dow jones industrial average down triple digits, the third down day in a row for the dow down 155 points at this hour, the concern china, the economy and some questions about its financial system. want to get more color right now on the markets. turn it over to chicago. rick santelli's at the cme group with the santelli exchange. hey, rick. >> hi, sara, and thank you. yes, there were some very important data points out this morning globally. let's highlight them and what the market's response was and maybe some reasons why the market responded as it did. all right. we look to china. their pmi under 50 on january preliminary. obviously not a good issue. switch gears a bit and let's look at the euro zone, 53.9 and

2 1/2 best on their pmi euro zone aggregate. how did the markets respond? well, on the one hand what we saw response was in the fixed income markets. we saw yields, treasuries, gilds, boons, all move lower. weakness, it wasn't showing up in europe's data today, obviously it was driven by china. if we look at what moved on the euro zone number that was positive it was the euro currency. as of the most recent data, as of 2012 if you look at exports of good and services as a percent of gdp in the euro zone it was shy of 27%. similar number in china. look at the u.s. so, what i think this data means you want to pay attention to the euro currency because it's about exports. when you talk consumption, you are thinking the u.s., what, are we going to buy everything from everybody? everybody loves art cashin. he's the sage of the marketplace!

we're lucky to have him at cnbc. here's something he said today. let's play the clip. well, the equivalent of the chinese beige book came out and art said if high translation is correct it read the credit transmission may be broken. we have the engines of global economies and the transmission. everybody wants to tinker with the engine. it's the transmission that needs work. just look at some of these stories jim cramer and i talked about with these chinese trusts, you know, they could be a fat tale waiting to happen but whether they or not, these are ongoing issues, on balance sheet, off balance sheet, capital ratios, this isn't something that is going to go away, it's not the light at the end of the tunnel that will get you, it's the light you don't see. back to you. >> thank you very much, rick santelli in chicago. when we come back, union pacific raised prices and hauled in more freight resulting in the company's first overall volume growth in six quarters.

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welcome back. we are tracking shares of herballife which you can see are down as much as 13%.

had been down about that bit since we got a press release from senator ed markey's office saying the lawmaker is concerned the nutritional supplement company could be operating outside securities law as a pyramid scheme. in a press release the senator's office saying that after hearing serious complaints of improper pressure and financial hardship including from a constituent in massachusetts who lost her entire retirement savings, senator markey calling for more information about the business practices of herballife. he sent letters to the s.e.c., the federal trade commission and to the company itself. interesting in the release, and i haven't been able to follow up on the specifics of this, he cites one family in norton, massachusetts, who reported they lost $130,000 including the family's entire 401(k) investing in herbalife which one might take to mean investing in the stock, but in this case would assume to be actually investing in the company's products, but we don't have specifics on that.

obviously all of this certainly a help to bill ackman and his large short position. most of that comprised now i believe of put options, long dated and the like, but, of course, he's made no secret of his huge short position that he had taken late in 2012 in the stock, which has hurt him. interesting to note this price is back to where, well, not far from where back in late november filed the latest 13-d, i believe that is the last one, with a 6.83% position. the prejudices of mr. sterretz a legend in the food business has been one that emboldened many who are positive on herbalife's future and even the idea being that perhaps he'd try to take the company private at some point, but we'll see. there has been no dutch tender from the company, even though it did get a clean bill of health from its new auditor not that long ago. again, expectations programs the company would go out and lever

up and buy back a lot of stock, but for its part suffering today and down a bit on the nu skin controversy in china. prior to that it was as i had as $ $80. and shares of union pacific hitting an all-time high after fourth quarter earnings beat on the top and bottom line. the railroad operator seeing overall volume growth for the first time in six quarters despite weaker coal shipments. here first on cnbc is jack koraleski president and ceo of union pacific. i love the railroads because it's a nice window into the u.s. economy, and judging by your numbers today, jack, it looks like the economy is certainly on the mend, wouldn't you agree? >> you know, i would. if you hock at our fourth quarter performance, the top growth for us was in grain, but right behind it was automobiles and industrial products. and industrial products are things like metals and lumber,

the key construction. so, those are the fundamentals of the u.s. economy. consumer confidence is reflected in buying cars and housing starts, and those are on a nice, slow, steady growth trajectory for us. slow stready growth trajectory for us. >> agriculture up almost 20% a autos strong, up 17%. what's you're out look, specifically on autos? can it continue this momentum in terms of shipments? >> well, you know, if you look at the year and they're saying 15.6 start rate for the full year, seasonally adjusted and the predictions is saying $16 million. that will be a nice step forward for us in 2014 and, again, consumers continue to buy which means consumer confidence is good. yeah, i think it can continue. >> what about coal shipments? that has been sort of the hard thing for some of these railr d railroads including yourself, coal down 1% in terms of freight revenues. how much longer is this going to

continue to plague results? >> we ought to be able to see in 2014 how it really plays itself out. so many things about coal depends on things like weather, natural gas prices, and the overall economic activity in the united states and how much electricity they consume. today coal is basically producing about 40% of u.s. electricity. so the economy is headed in the right direction. we're certainly off to a nice cold winter which is good for the coal burn. and as we look at it overall natural gas prices hanging in there around $4.60. those are all good indicators for our coal business. >> you mentioned the cold weather, jack. certainly that is going to help in terms of people having to heat their homes, use the grid. but how much is weather and the snow, the ice, affected efficiency, average speed, that kind of thing? >> yeah, we saw a hit in our speed in the fourth quarter. it went down to about 25.8 miles an hour. it wasn't really that bad. it was still a great service product for our customers.

and we've weathered you through both of those storms, the one that was early in the area in the fourth quarter and then also the one that just happened right now in early january. and it's doing well. i don't think it's going to have a major impact. if we can just stay out of mother nature's way, you know, railroading is an outdoor sport. we're prepared for it. our team does a great job. we learn from everything that happens and set our playbook for the next event. >> i know that with the increase of oil production in this country and railroads play a key role. there are also questions about safety of railroad transportation and oil. is this going to be a risk that you're going to have to fight as the government continues to look into this both in the u.s. and in canada? >> well, you know, sarah, we don't really view it as a fight. we're there with the department of transportation and the fra with our customers, with the builders of the tank cars to find the right solution. our goal is to move the product safely, efficiently, and reliably.

and we think we can do that. >> all right. thanks for joining us. and congratulations on what was a pretty strong quarter for union pacific. the ceo jooek koraleski. >> thank you. tesla is get progressive with pricing in china. will it pay off? we'll talk about that after the break.

tesla is announcing pricing for the model s sedan in china. it will sell for 121,000 u.s. dollars. it's a $40,000 difference between the u.s. price. phil lebeau has more on that in chicago. hey, phil. >> a lot of people are looking at this and saying, $11,000, they're going to sell a lot of model s vehicles in china despite the fact that it will cost more there than here in the u.s. the price is $121,000, tesla expects to sell the model s beginning in march or april. they're still working on a few final things but have already shipped a few vehicles there. why the difference between china and u.s. pricing? there you see the base price. shipping and handling, $3600. the big hit comes when you factor in the duties because the

vehicle is built over here in the u.s. and all vehicles built outside of china, there's going to be a tax and duty there. you have the value-added tax and final total, $121,370. tesla built more than 22,000 mod sell dell s vehicles in 2013. they expect to ramp up more. the expectation is this is the begin that the chinese market will be a big market because, a, it's the largest in terms of luxury vehicles in the world, and, b, there is a definite rotation towards electric vehicles because of the pollution products in shanghai and beijing. never gets old looking at this because people look at it and say, is it over priced at 174? as many people who say it is, others say, you know what, we still think there's room to run here. >> better than it did at 130. phil lebeau with that story regarding tesla in china. china is one big reason the broader marketses are lower today. in fact, at minus 179, the dow is -- just did look at its worse

single day loss since september 20th. it's a day we haven't seen this kind of weakness in quite a while led largely by the banks. potentially tied to concerns about china. >> indeed, the leadership and the banks in terms of losses have been varying but roughly 2% down on the big names there. it's been an interesting year thus far. last year if you were running a hedge fund and you wanted to short a stock, it was a very difficult thing to do. you took your life in your hands in some of the thesis behind the short names did not pan out. this year, very different story so far. we have seen more shorts being put on as a result. >> i'm beginning to see 52-week low lists which we really didn't see at all in the second half of last year. david, thanks again for everything today. >> sure thing, carl. >> if you're just joining us this morning. you missed a lot. here's what you saw. welcome to "squawk on the street." here's what's happened so far. >> i never look at stock market as necessarily tell you about

the future but sometimes it actually does. it's a lot of smart people buying something and look in the prospects of 5,000 individual companies and feel good about that. that is a reflection sometime in the american economy and what people think. >> we're doing pretty well in the u.s. economy right now. we've got some tail winds. we're seeing the year ending strong, beginning strong. we have to make sure there are no more self-inflicted wounds. that we let the private sector get some confidence, job creation is so important to middle class americans. >> there's a things occurring here. people might understand how could the stock go up that much? many people. >> reporter: coming in with a sell or hold ratings. second, the conference call is masterful. >> our company is better off together. there's an enormous change going on in the commerce and the e-commerce market. and e-paying together has delivered strong results over the last three years. 20% revenue growth. 15% earnings growth. 100% shareholder appreciation.

[ bell ] >> it is protecting applications. those applications across the internet, they can be in data centers, mobile devices. that's definitely our biggest driver. also move mobility and increase in traffic because of mobility is also a big one. rvenlg w welcome back to "squawk on the street." i'm bertha coombs at the nymex. we're awaiting the number on the energy department on crude and products. delayed for a day because of the martin luther king holiday. here we go. we have a build of 1 million barrels of crude. a build of 2.1 million barrels of gasoline. that's slightly more than the expectation. and we've seen distillate fuel which includes heating oil. a withdrawal there of 3.2

million barrels. as far as refining, can't see the number there but we've had some refining outages. so the expectation was that we would see a little bit of draw dlsz down in refining. we've got crude oil prices up just slightly here from where they were ahead of the report. but wti and nymex crude numbers are holding up fairly well today in part because of the news that we have seen the keystone extension from cushing, oklahoma. the delivery product opening up at around 300,000 barrels a day, taking that oil out of that hub, helping to unlock some of the production bottleneck that we have seen there over the last few years. so now we've got, with the other pipeline, the c way, somewhere in the neighborhood of 800,000 barrels a day that are able to come of the of cushing and that has folks very bull risch on wti and nymex and the heating oil

nowadays with the coal gripping much of the nation. >> that's a big story and we haven't talked about it nearly enough. thank you. bertha coombs at the nymex. looking at the markets on this thursday morning, weakness from the get go. we knew it would be bad judging from the futures. s&p is down almost 20 points to 1825. and we are office shawly looking at the dow's worse single day at this level since the 20th of september. our bob pisani is on the floor at the nyse with more. >> it's a tough day. it started overnight. look at the s&p futures. you can see this simply. look at nalast night. we were up after the close. and 8:30, the chinese showed contraction. futures just kind of dropped. then we dropped again just prior to the open. the key here is to watch the dollar/yen because that's the source of funding. put up the dollar/yen again, please. that's the key for the source of funding in the united states. these people use this money, hedge funds, to borrow cheaply.

when the yen strengthens, that chart going down means the yen is strengthening. they have to unwind that trade and that puts pressure on the stock market, bonds tend to go up. the dollar/yen is the key here. traders watch this kind of stuff. stock traders do. there you see a pretty good correlation in the last year. the dollar strengthens, markets go up. if it doesn't, it weakens against the yen, markets go down. simple correlation overall. look at some of the chinese stocks today, particularly chinese internet stocks. in addition to what happened in china a ruling from the s.e.c. yesterday, administrative judge suggest that some of the big four chinese firms should be banned in the u.s. for six months. investigating chine neesz accounting issues. these firms are not cooperating. saying chinese authorities won't allow them to do it. there's a jurisdictional dispute going on. you can see the effect on some soft chinese names.

in the meantime, the sectors in the united states, what's happening is what we used to call and don't call anymore the risk on names, materials, energy, financials all on the weak side. i would note financials have had a great year overall. it's the eem, guys, the emerging market stocks that have had an ugly year. that group down again today, down about 6% so far this year. there's the eem. that's the proxy for emerging markets. a little after 11:00 a.m. on the east coast. 8:00 a.m. pacific. the top tech stories in the squawk feed. great day for netflix. stocks are soaring. >> ebay beating the street on earnings. carl icahn announced a stake in the company and called for a spinoff of pay pal. >> smart appliance company nest making headlines last week after google bought the company and that deal worth over $3 billion approximately weep talk to nest ceo in his first television interview since that acquisition. outside the marks, the big news

coming out of the tech sector this morning. of course, joining us in today's "squawk feed" is jon fortt and john steinberg and kara swisher, the co-executive editor at re/code. we have the content sharing partner think with re/code. you put the all-star in all-star panel. >> good to be here. >> jon, your thoughts on netflix today. >> it's amazing how they keep chucking along, adding the subscribers, the international growth is there. the content that they've been able to develop themselves is certainly helping, too. quite a turn about from the buzz a little bit ago. remember quickster? hey, you've got to love it. >> there's sense they might have learned from the awkward pricing decisions from yesteryear. >> if call we talked about all different options that might roll out. investors love this company because it's the company of the future today. over the top, content on demand. it's what every other media

company needs to get into that they're doing now. you're paying a premium to get into it. 28 times ebitda. >> i believe in your world they call that disruptive. netflix continues to disrupt the traditional television model. >> they're loud about it and well-known. there are a lot of competitors, amazon, google, you know, i'm sure yahoo! will get in here in some way. still not -- et cetera nit's no business for them to be in and they have to keep making hits. as entertaining as reid hasties it is it's still difficult for them to continue to succeed going forward. >> one of the things that jumped out at me is the net neutrality discussion. the opponents of net neutrality. valid points. bad for small companies, bad for big companies. hastings came out and said almost i dare them. >> yeah. you know what i love about the net neutrality comment. >> whenever there's government regulation there's always a good thing, that means you're on to something. look at uber.

if the government isn't mucking around in your stuff you're not doing anything that disruptive. >> i think that's how hastings put it. kara, do you see this as a risk for netflix? >> i do. i think net neutrality is a big issue. these are the very same companies who don't want regulators involved. the internet companies are so anti-regulation. that's a big risk. and there's going to be a big fight around this issue of -- until they figure out more technological means of solving the problems, it's still something -- i love his isle e-mails to hbo. it's very funny. >> yes. >> it's very funny. he's like that. he's a terrific personality. >> he is entertaining. >> what if he doesn't have a hit next year. that's thing. what if "house of cards" doesn't work. i love orange is the new black. you have to keep making hits. hbo keeps making hits. >> it's been aid said that netflix became hbo faster than hbo could become netflix and hastings did respond to butler, the ceo of netflix, a few days

ago he doesn't mind when users share passwords. >> so i guess butler's, the ceo of hbo doesn't mind me then sharg his account information. so it's butler@hbo.com and his password is netflix. >> kara? >> whatever. >> fighting words or is there something underneath that? >> you know, he's always been fighting with the time warner people. it's just funny. he likes to pop off with stuff like that. that's an issue for everybody. people want to use the services they are sharing passwords. it is a challenge to hbo's business. it's no question. same thing for him. lots of people share netflix passwords. >> he made that comment at our buzzfeed, rich greenfield was at. what's interesting is hbo has the innovator's dilemma. what he said to our peter is he

i'm talted bill clinton and said, it's just arithmetic, meaning he's got a way, the fees from the carriers versus going over the top. netflix doesn't have to worry about the legacy revenue lines. they've got a lot more freedom to just innovate without worrying about cannibalizing themselves. >> nobody remembers quick ster. >> that was a legacy. >> it continues to be about the subscriber growth. hastings says, substantial european expansion is on the way. how much room internationally does netflix have to grow? >> tons. i mean, tons. again, it's something they can deliver it almost anywhere once they start sbro duszing it. getting the rights from hollywood to use the shows they use. even though they have the popular sort of tent poll shows the "house of cards," and so you really have to see if they can get that there, if they can move into asia. it's huge. it's a huge opportunity for someone. i just think locally a lot of this -- there's going to be a lot of local competition there, too. >> let's move to ebay.

the fourth quarter earnings, of cour course, did eat estimates. icahn has a stake in the company and is calling for the tech giant to spinoff pay pal into its own business. donahoe responded to icahn this morning on this set. take a listen. >> our company is better off together. there's an enormous change going on in the commerce and e-commerce together. ebay and pay pal together has delivered strong results. 20% revenue growth. 15% earnings growth. 100% shareholder appreciation. we believe that paypal's competitive position will be stronger as part of ebay over the next period of time as well. >> what do you think, fortt? >> this is like the windows and office discussion with microsoft. i read donahoe's comment. saw him on our air this morning. he makes somewhat compelling case. so much of paypal's business comes from ebay. there's the data argument. at the same time, one could argue if they split those apart

they might accelerate, take advantage of different opportunities. that could harm the other but benefit those individual pieces. >> i agree. i would say somewhat compelling is how i would characterize it as well. pay pal is the exciting business. it's the one that grew 25% year over year in terms of volume in the quarter as opposed to the marketplace business which only grew at 11%. right? it's a much more exciting company. with that said the one thing he didn't say to faber this morning which was from the call that was interesting was that 30% of paypal's new customers come from ebay. there's no acquisition cost that's free. everybody knows the name of the came here is being able to add subscribers or users' cost efficiently. >> kara, what do you think of icahn's proposal for ebay? >> icahn, i don't know what else to say. he's the only one who didn't make a ton of money at yahoo!. i think he's had a lot of trouble. my mother made money at yahoo! i'm sure. no, she didn't. he's coming out of the company a very strong ceo. they're not splitting it up. it just seems like a typical thing he's just trying for.

donahoe who has been mentioned as a microsoft ceo possibility, not going, i don't believe, but i think he's got a very strong case. and they're not -- they're just not splitting it up. it's not happening. he's going to go away empty handed i suspect. >> interesting. care racks you know, we're whittling down this list of 200 business leaders down to 25. thoughts? >> the buzzfeed people obviously. no -- >> nice. >> i would say there's only three i would put in that list. probably steve jobs, number one, obviously. iconic person. jeff bezos from amazon, i think a real inno vater and visionary. and i'm split between bill gates and mark but probably both of them. mark inventing the browser and bill gates for business operations in tech, also very important. >> how about you, jon? >> i'm contrariacontrarian. i would say ebbers and lay. he made it about ethics and the

importance of learning accounting. it just totally changed the conversation. i would do that one. steve jobs, and shultz because what an innovator. coffee? he made coffee into something exciting. >> he's on the list for sure. >> my unique crib bus was probably line news torvalds. i don't know if i would argue for him in the final 25 a but he's definitely in there. bono i also argued for. johnny ive didn't make the cut but he should have been in there with jobs and john lassiter. >> they never put the bad people on the list. the bad people never win and they're the most transformative. >> we got some. >> no, the winners. >> i'm surprised none of you talk about marissa mayer. she gets celebrity status. >> i don't think kara is going there. >> no. fine, but, i mean, you put larry

page, larry and sergei, i would put in front of her. famous. >> kara, if your mom has stock picks -- >> she does not. she does not. >> we'll see you soon. >> it was a joke. it was a joke, bad joke. >> kara swisher and jon steinberg and jon fortt. shares of sandisk are on the move despite strong fourth quarter earnings. we will talk to the ceo of sandisk in a moment. but sfirs, rick santelli, what are you watching today? >> data, data everywhere. let's look at our own data, existing home sales. look at december 4.8 million annualized units. last month, 4.82. that's the weakest month-to-month pairing. mark hanson is going to be my guest in about ten minutes. we're going to dig down deep into the housing market. opportunities aren't always obvious.

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obviously a bruising day for the markets. down 173 on the dow. financials is one of the big reason on this dow day. dominic chu has more on that. >> it's a weak day for the financials, like you said, overall. the biggest loser this morning, sallie mae, the big loan giant followed by a regional bank key corp. and another dig bank in custody banks, state street. e trade is another one because

it reports earnings after today's closing bell and ans asset manager legg mason rounds out the bottom five. those names across the board showing weakness in today's trade. back over to you. >> yeah, also trickling over the europe. the span anything i beck is down over 2%. watching shares of sandisk because fourth quarter results are in and the chip maker handedly beat earnings estimates. the stock, however, is down this morning after softer than expected guidance. jon fortt joins us now along with sandisk ceo. jon, take it away. >> sanjay, good to see you. congratulations on the quarter. $1.73 billion in revenue, 1.71. gross margins above 51%. i want to ask you about the enterprise because this is an area that seemed to drive a lot of your margin out performance. how long can that continue? how much legs do we have in the enterprise market? >> you know, enterprise market

is very much for flash memory in the early earnings just started for us. and this is going to be one of the fastest growth segments for sandisk. we're excited about our position in the enterprise market with broadening portfolio and deeper customer engagement. this is going to be driving larger growth at sandisk both on the top line and bottom line. this is what we consider as our high value for proposition to the customers. and we are very excited about the fortunate in this market segment. enterprise is basically going flash storage from fortune 500 and we've got the products and the capabilities to add to this market. >> sanjay, i believe you said that ib mks had signed on to be a customer for your ultradim product lenovo now taking over ibm's x-86 server business. how is server come modization going to affect you going forward? is that an opportunity to sell more for could that hurt you?

>> ultradim is an example of a product that we just recently announced. shows unique position in the market. it's very innovative product that really makes access to data through the servers in the data centers faster and highly reliable. this is a market that's a great example of our eco system and the servers storage, market is going to be a strong growth segment. flash really brings a strong value proposition to this market because it enables highly reliable, fast, data storage and the word today is really about all content. internet of things leading to big data, leading to a lot of need for data creation, data consumption, data analysis. and flash is really playing a key part being disruptive in the segment of the market. >> sanjay, i wonder if sandisk might be an interesting way to play against some other trends. we see a slow down in the high end of the smartphone market.

your cards often get used in low-end or mid-tier phones in emerging markets. you're calling that a booming area where a lot of other people are having trouble there. how do you see that panning out in 2014 specifically, low and mid-tier smartphones for you? >> the smartphone continues to be a strong market for us. you're right. they are the high-end smartd phone, the growth rates have somewhat slowed down. the mid range and the low budget smartphones are growing with their features become larger. this is growing in the emerging market. it's how sandisk over the last few years have really driven a greater penetration into the marketplace. and we are supplying to this market and look at it as a beautiful portion for us with flash embedded inside these phones as well as, yes, through the cards that get sold in the after market. sandisk retail brand is a number one brand globally and we really did excellent job in our retail business in 2013.

it was a record year for them. sandisk is really fighting on all cylinders in terms of driving growth and enterprise storage and smartphones and tablets and removable devices such as flash cards and flash drives. >> thanks a lot for joining us. interesting counter to a lot of these trends. server commoditization, low and mid-tier smartphones where sandisk is. >> margins alone in this quarter alone will get your attention. i want to get back to headquarters and check in with scott wapner. >> official response now from herba life to senator markey's. the letters sent to the s.e.c. and ftc. her herbalife spokesperson telling me we received the letter from senator markey this morning and look forward to an opportunity to introduce the company to him and address his concerns at his earliest convenience. immediatee

dive on the news that senator markey to call for an investigation into herbalife. there have been other consumer groups to have done that but now you have a sitting u.s. senator who is calling for an investigation into herbalife's business practices. bill ackman has no comment at this point on the news of markey's laters and we're only two days away from the one-year anniversary of the brawl here on cnbc of ackman and icahn over this stock. so much has played out over the last year and this is the most recent development. and what i think can be termed as a significant win for bill ackman, at least to this point, just the mere fact alone that someone of markey's stature has sent these types of letters calling for an investigation into that company's business practices. >> hard to believe it's been a year but i guarantee you every trader down here remembers that day as if it was yesterday.

we'll get more from you soon. >> we'll have more on the "halftime show" in just a bit. when we come back, last year was a pretty good one for existing home sales coming in at the highest level since back in '06. can those numbers continue in 2014. r.? where ♪

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special guest today, what an appropriate day to have mark hanson, my housing guy, on a day we have important housing data. if you look at november and december together for existing home sales, it is the weakest back-to-back performance in that metric since september and october of 2012. look at the august read. 5.4 million units we're off 540,000 from that clip.

welco welcome, mark. how would you address this weakness especially after the big high watermarks in august and september of last year? >> you got that exactly right. in fact, in a lot of the go go new investor havens that we track closely as leading indicate irs that led the market in 2003, the way down in 2007, back up again in 2009 and '10 on the tax credit, back down again in 2011 on the hangover and back up again on the twist, short squeeze we've experienced over the last two years, they're down 20% year over year in december. we had a big demand destruction abyss happen sometime late last year. and i suspect it is the new era investors pulling out of the market. rents are flat. house prices are way up. and we're getting to a stage now where affordability is simply lost. >> all right. you know, mark, you brought up a great point. let's think of the economics of housing for a minute. definitely if the young family

wanting to have kids, buys a house, they're going to have certain amount of economic activity create that family unit, buying a single family home. but if you look at the renter aspect it has much less dynamic input into the economy as a whole. can you expand on that? >> well, we know that in the last 12 months household formation is really taken another hit. not exactly sure why. but you're absolutely right. also think about one other thing. never before have we seen so many -- so many single family beautifully rehabbed houses coming on the market, competing head to head with both builder product and with existing home sales. so at some degree rentals are spongeable with house sales. and if you can get in with zero money down and you can have a short term every year or two while you get your act together and save money for a while, while house prices have gone up so much over the past 24 months, i think a lot of people are

choosing that option. plus multi-family, rick. we have more apartment buildings going off and rehabs than we did in 2006. >> well, mark, we're out of time. definitely when i look at housing you've got to keep your eye on the economic implications. that's why we pay such close attention to the market. thanks for taking the time today. sarah, it's all yours. >> thank you very much, rick santelli. breaking news, let's go back to headquarter, courtney reagan has some of the latest news out of neem miman-marcuneiman-marcu >> the company did reveal there was a data breach with their point of sales systems at their stores. but at the time we didn't know how many cards were effected or the time frame. now we do. it looks like 1.1 million customers that swiped visa, mastercard, those type of credit cards at their stores, could have been impacted. the period of time, hour, nwevet the holiday season.

neiman-marcus says they do not collect pin information at the store so that would not have been collected. no social security numbers or birth dates. they are offering free credit monitoring to a year for customers that think they may have been impacted. but again, 1.1 million neiman-marcus in-store customers could have been impacted during the period of july 16th to october 30th. back to you. >> thanks for the update on those neiman-marcus hack attacks. update on the markets. as you can see, down day across the board. stock slipping. five-week low for the dow. why the decline this morning? we'll talk to goingen him's ceo scott minerd in a moment. tte or? cozy or cool? "meow" or "woof"? everything the way you want it ...

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uk and across continental europe largely on the red following disappointing earnings. data showing contraction in chinese manufacturing. that news did overshadow some of the stronger than expected pmis we got in europe rising this month to levels not seen since the middle of 2011. the china data weighed on the mining sector, all lower in london trading. and meantime, shares of nokia down sharply, too. 40 quarter sales down 22% at the core network equipment division. handset sales declined in the period. they are in the process of completing the sale of the phone business to microsoft. in the meantime, staying with the markets, guggenheim partners

manages more than $190 billion. remains bullish this year. what do they think of today's moves? let's bring in scott minerd joining us live from davos today. scott, it is great to have you. welcome. >> well, thank you for having me. >> it's nice -- i'll let you get to the parties here after we talk. in the meantime you guys are making a play toward europe. you've got an office in london now. looking at real estate opportunities there. what would you describe as the key conversation coming out of davos right now as it relates to markets? >> well, the two big themes that we're hearing about this year is income in equality and that africa is the place to be in terms of emerging markets. there's a little bit of fear among europeans regarding the possibility of re-entering the financial crisis that they've just come out of. and they feel that perhaps growth is too slow and prices

could maybe, you know, go deflationary. but the bottom line is i think all of those worries in europe are healthy. markets that were -- nobody's worried, i tend to worry myself. >> today, scott, everybody is talking about china here. we saw weaker manufacturing number. shbc pmi number below 50. what do you hear in terms of where that economy is headed this year? well, it's really interesting. the one thing we were discussing last night among a number of senior financial people here is no one's talking about china. i think people don't know what to make out of it or what to do. they think that the united states is the hope of the locomotive that can pull china and europe out of their slowdowns. but, you know, there's a big question mark over china. and i think it's really hard to get the information you need to

make an investment decision there. >> that would be the ultimate hope trade, scott, wouldn't it? the notion that china's actually going to help the rest of us dig out of this? >> well, actually, you know, i think that the only thing you can say that i would say is positive about china is the valuation is good. you know, we're only marginally above where we were at the financial crisis in terms of market cap to gdp. and that seems to put together a coherent plan to restructure the economy. but i think we could have an opportunity to buy the market cheaper than we have today. >> scott, the retail investors getting to know the guggenheim name a lot better over the last couple of years. a lot has been said about your ability to steal market share from pimco. now we know that al is on his way out and although gross says he's 110% recharged, how aggressive are you going to be

trying to steal some of that bond business? >> well, you know, we like to be a company where we like the facts to speak for themselves. our performance has been very strong. we posted positive numbers in all of our fixed income products last year with the exception of munez. a lot of other managers can't make that statement. so we're trying to get that message out and still respect the fact that bill and mohammed are fantastic money managers that are going through a difficult time. >> on the bond trade this year, what do you see in terms of yield? are we going to go even lower on some of the weakness perhaps out of china and the fact that we're not out of the woods yet in the global economy or are bonds looking increasingly risky? >> well, it's interesting. it's interesting how the way you phrase that question, are bonds becoming increasingly risky. you know, the question that i ask myself is, can you afford

the risk of not having an allocation to bonds? if we get, you know, some sort of a sell-off here in equities, which i think is quite likely in the second half of the year, given the size and the length of the run-up, we're overdue to correct. that's a diversifying asset class, to be underweight bonds at this point is a real bet. and i think that a lot of investors need to rethink their positions and maybe start allocating money back to fixed income. >> you know, scott, for those of us in tv, guggenheim's ownership of dick clark productions continues to just make us shake our heads. the success of the golden globes, the success of new year's eve. did guggenheim know when you took this that there was going to be this emphasis on live events that we now see? >> well, you know, one thing i want to clarify is guggenheim itself does not own the golden globes or dick clark productions. those -- the company is owned by

investors that we arranged and put an investor group together. but we did see the prospects that dick clark had a lot of underutilized capacity. the other thing that we recognized was the fact that time shifting makes it very difficult for a lot of television medium to exploit advertising. so the beauty of being in the golden globes or any number of these other tv shows that dick clark is associated with is you don't want to hear who won the golden globe the next day at the watercooler. you're going to watch the show. and by virtue of the fact that you're going to watch the show it makes the advertising time more valuable. and so the only question then is can we improve the content, can we extend the brand of dick clark? and that's where dick clark is currently focusing its efforts. >> scott, great stuff. we covered a lot of ground here in a short period of time.

enjoy wherever you're going tonight. say hi to matt damon and goldie hawn. >> if i run into them, i will. >> scott minerd of guggenheim joining us from davos today. thanks, scott. on treasuries, on china, and on the golden globes. nest, the company that makes smart smoke detectors and thermostats made a lot of headlines last week after google bought the company in a deal over $3 billion. stay tuned because we'll hear directly from nest ceo in his first television interview since that google deal, next. ♪ ♪ [ male announcer ] eeny, meeny, miny, go. ♪ ♪ more adventures await in the new seven-passenger lexus gx.

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with easy step-by-step guidance, we're here to help you turn your dream into a reality. start your business today with legalzoom. hour, we are talking to the manager of 2013's best performing mutual fund. he's going to reveal what helped him return 7 9% last year. netflix, one has been right, one has been wrong. so what happened now? and big arrests today in the infamous heist from the '70s. and for the movie "goodfellas." the latest on that story at noon. >> i can just see those fur koetsz right now. scott wapner, thanks.

google announced the acquisition of nest last week to the tube of $3.2 billion. earlier this morning our jon fortt spoke with nest ceo tony fadell on a first on broadcast interview since that acquisition. jon? >> carl, yeah, i managed to get him to sit down in davos. obviously it was a long distance interview, i'm here. first thing i asked him about how much of this acquisition was about money, got quite a bit of it $3.2 billion. how much was about time. take a listen. >> when i was spending, you know, 95% of my time working on infrastructure and 5% of my time on product, i felt that it was the wrong mix. especially as fast as the marketing is developing. i wanted to go back and focus on the thing that was the biggest value creation for the company which was the products and the services we create. >> he also talked about employeeiemploye employees and how they reacted to the news that they were getting this big google payday. >> where were we spending our

time, building the difference yags for our company. so were we spending it with customer products and building those things and bringing those out as fast as possible or were we just in the background making servers, making, you know, putting in facilities and inf infrastructure. >> we might have gotten the wrong clip up there but i'm hoping we can queue the last one, that's about his predictions for how much of this type of m&a activity we'll see in the future, the last clip. let's take a listen. >> for us and for other companies it shows that there is an ability to actually having a successful company and in some ways going public without going public. i think you will see other companies stepping up like that who have large cash balances. i think the activity is going to be much more frequent over the coming years. i think google is just the leader in this space at this point. >> much more frequent. not a lot of companies with large cash balances, you've got

apple, you've got microsoft, a couple others. and he's predicting we're going to see more buyouts of some of these early stage companys like nest. >> i think he's an interesting guy because he was an apple executive. wasn't he one of the original kree creators of the ipod, here he is selling his company for $3 billion to google. i wonder what sort of edge that gives google as you talk about in this whole new category. >> i think it depends how much they can get him involved outside of just nest and all the myriad hardware products google has going from tablets to phones, glass, all over the place. he wants to focus on this. so larry page is going to have to be careful about how he handles this. >> the cynics are out there. they still call it the most extensive talent acquisition in history, right, buying these guys. not necessarily the product but the smarts behind the products. >> one of the things that we didn't have a chance to play, i asked him about that and about how much google paid and he said, well, years from now it might look cheap. so he clearly believes that this

space is big and really how much is the ipod worth? how much is an iphone worth? if they're right, maybe the talent acquisition is where it's at. >> everybody i know who uses the nest, loves it, obsessed with it. >> they've got a few technical issues, compatibility with netgear, he says it is a challenge globally to get everything to integrate correctly but they are hard at work on that. ecstatic though they are, they are hard at work making all those things happen. >> good get. >> the force of google is now behind them. take a look at united continental making a big move lower on earnings this morning. the earnings squad will be here to break down ual and more earnings news that you need to know in just a moment. [ bell ringing, applause ] five tech stocks with more than a 10%... change in after-market trading. ♪ all the tech stocks with a market cap... of at least 50 billion... are up on the day.

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visit truecar.comoney,com,t and never overpay.yer's remorse. a good deal or not. "okay, this is the price,"sman comes and you're like.ells you, welcome to the earnings squaed. joining me today is dominic chu and dr. john najarian. let's start off with united continental. posting better than expected profits and improved revenue and lower integration expense as they are trading lower here after releasing weak 2014 guidance. dom, following this one. a monster last year. >> it's a huge run over the past year. these stocks have been soaring. they're one of the reasons why dow transport hit a record high again today. it's not just -- delta was great. that was a stand alone report.

but today you had them, southwest airlines,al lasz a airlines, all beating on profits coming -- matching or beating on sales. but the outlooks are what have investors concerned. delta is a stand alone right now. a positive performer with all of these names here. three words. lower fuel cost are going to help them still though cost overall. they have to be a concern for some of these airlines. >> would you continue to be long here? >> i would. >> you would? >> yeah. it's one of pete's picks, united, continental, i would add to it the dips, the integration costs that dom mentioned are going to continue to go down because now they're starting to see the benefit of that united/continental merger. same thing that delta saw last year. >> mcdonald's reporting in line fourth quarter numbers but what's going on with december sales is the problem here. >> in particular, u.s. sales. and dom and i were joking about it. one thing you can't buy like you can do shopping on amazon you can't just click on a button and

have a latte delivered or a burger delivered and so forth. i think weather played a certain part into this. >> right. >> u.s. sales were weaker than expected. europe is still pretty flat and not growing as much. but they only missed slightly. it was really the u.s. that was the biggest problem for mcdonald's. it's up about 1.5% year over year. but you do collect a 3.5% dividend. >> how complex the menu items are in the u.s. and how much that is weighing on this. >> the dollar menu with the dollar plus menu now. that didn't really gain traction. >> they just announced yesterday, a woman, first time ever. >> perhaps a sign of hope for all those long suffering investors. >> a tip of the hat for somebody who said you've got to get someone from the outside. she's been with lexus and ford and a real go getter. that could make a big change at mcdonald's. >> same thing with the defense stocks. that's a story here with

lockheed martin posting better than expected fourth quarter earnings. the profits are a concern here according to analysts here. it has had a long streak of boating estimates. that is a problem here. this is a stock that did quite nicely along with the entire defense industry in 2013. so people are looking for reasons to take money off the table. cfo making comments about military spend in 2014 after sequestration saying that perhaps stabilization will happen this year. >> bottoming out maybe. >> bottoming out maybe. but again, after a huge run, 60% over the past year, what do you do with a stock like this? investors today are of thing to sale after it hit a 52-week high in this session. that does it for earnings squad for this morning. if you want to join in on the conversation tweet us. we will be back with "street signs" with more updates and insights. meantime, coming up on "squawk on the street," stocks still sinking. right now the dow is down triple digits. take a closer look at the biggest movers. mine was earned in korea in 1953.

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and grows more businesses... we're open to it. start a tax-free business at startup-ny.com. is facebook on the way out? a new report from princeton university says interest has peaked and the social network could lose up to eight by% of users by 2017. it looked up a number of google searches for facebook and it peaked in december of 2012.

apparently a similar spike was observed for myspace before it hit its peak in 2008 and started to decline. we did get a response from facebook on this. they said, quote, this report is utter nonsense, which is sort of to the point. >> nonsense is too kind a word. >> you don't like this? >> this is so ridiculous. first of all, the shift to mobile means people are not googling facebook to use it. second of all, it's a difference between a social network and disease, like ant bodies fighting our -- a big part of their model, based on how diseases are spread. >> they compared facebook to a viral epidemic. not so nice. >> yeah. i mean, there's comedy here. but since we're covering this, actually kind of not funny. boy. if facebook were a disease, yes. >> not funny because investors are wondering about the sustainability of facebook's numbers and engagement because

there have been warning signs of teens spending less time on facebook. >> for what it's worth, facebook is down but in a very weak tape. s&p was down almost 20 points. now down 16. interestingly, the dow is down, as of this morning, 1.2% for the year. transports were at record highs. we continue to see the airlines and the rails do fairly well. correlation among the s&ps breaking down, lowest level in a year. the number of s&p components positive for the year, 251 as of about an hour ago. almost exactly half of the s&p. it's still up for the year today. >> really starting to see investors more distinguishing between companies, better industries, better sectors, than, say, last year, where it was a riding tide lifted. >> i'm trying to look at volume because that's important when you see this drop. how it compares to other 30-day trend. >> right. there's sentiment. we just t got sentiment figureses. neutral sentiment on the market, at an 11-year high as people

either they calm off their bearish or bullish positions from last year. >> i'm watching the japanese yen. it is stronger. bob pisani showed us strong correlation there as well. >> right. scott wapner, you've got a lot to cover over the next hour. >> no doubt, carl. everything is cyclical is being thrown in the trash condition today. financials are down. materials are down. so many individual stock stories. herbalife breaking within the last hour or so. we will cover all of that right now. welcome to the "halftime report." we're following the biggest stories on the street today. top dog, manager of number one ranked mutual fund is here with his best picks for your money. battle of the analysts. it's pachter and what hmahaney . picking the losers and winners on the high flying trans. pete najarian and his brother jon. josh brown and stephan