did, we wouldn't have the connectivity -- we would not have had the communications revolution and the knowledge revolution we have today. >> okay, eric, thank you for being here. >> come and see us again. >> come and see us again. >> when it's warmer. it's been a great week but that wraps it up for us from davos this morning. that does it for us. we'll see you back in the united states on monday. right now it's time for "squawk on the street." ♪ kudos to "squawk box" for a great week from davos, guys, nice work. nice friday morning, welcome to "squawk on the street." we're at the new york stock exchange. if the market did not have your attention before, it does now, an emerging market selloff, currency interventions the worst day for the dow in three months and futures do suggest some more weakness at the top. the ten-year yield is poised for its biggest one-month decline since may of 2012, down some 30 basis points now at 2747.

and europe is hurting especially spain. let's start with the markets and the stocks set to open in the red as the dow and s&p are on pace for their worst week in a month and a half following a slide in several emerging markets and the international currencies. >> microsoft set to open in the green after reporting stronger than expected profits. and starbucks getting a jolt set to om higher after first quarter earnings top estimates and starbucks raised its guidance for the rest of the year and we'll talk to the chairman and ceo shoulder shultz later on this hour. first up, though, futures are falling one day after the 176-point drop in the dow and the s&p on track for a second week in declines in the wake of the selloff in emerging market assets. slower growth prospects in china and various local political issues among the key factors. of particular note a big drop in currencies like the lira which hit a record low against the

dollar this morning and the argentinean peso. it has authorized citizens to buy colors and lowered surcharge on any dollar purchases. the country has been trying to decline a severe decline in its 4x reserves. these things popped out of nowhere. >> yeah, they did. i'm going to recommend the strategy no one wants to hear. don't panic. because panic is just really in vogue. when you feel it, you really want to join. it's difficult to try to understand how there have been moments where we have survived a ten-fold turkish lira devaluation. it's difficult to recognize when venezuela went from being an investable country to being a rogue nation and we had good markets. in the 1988 and 1989 time frame when brazil and venezuela disappeared and bank of boston almost got taken down because of it. four weeks from now many of the issues we're facing are not going to be as important and at

the same time honeywell, procter & gamble, bristol-myers, stanley works, microsoft, kimberly-clark, starbucks all reported excellent quarters and no one will care at all today. no one. >> you know, it's interesting, though, you say that because this morning i did come in and i made two sets of phone calls. one to people i knew who knew argentin argentina, a couple of portfolio managers who held argentinean bonds. and the others, just a phone call in general, are you worried. and most not anywhere near panicking in terms of what you said, even hearing the things, you know, it's not so bad for the market to turn a little bit. i hate to say it but sort of build this base and let's kind of get moving. but these things will pass. as for argentina, this is not insignificant. it's important for this country, that being argentina, in terms of, all right, the risk there has always can hyperinflation. by the way, the black market exchange rate has always been far lower than the official exchange rate, but the key will be reserves as carl said and

they have an expectation of taking in $8 billion of reserves, it's summer there, the farmers sell a lot of the crops, the wheat, the soybeans or whatever, and dollars and turn them right in. and so there is that belief that this may be quickly dealt with. will you get an imf in there, you know, there's a lot of other qes. but bonds have not been hit that badly. >> it's important to distinguish this between the euro crisis. let me just say one thing. if the futures go down today and i was calm, people will think that, well, why wasn't cramer more vociferous about the need to sell. and the answer is because these crises while they all look the same, some of them are cypr cyprcypru cyprus and spain and italy. if you want to put it in context, argentina is more cyprus.

mike white once told me that direct tv had a lot of business. i'm trying to put it in perspective, because there was a reason to worry about europe because our banks were very intertwined. there's always a reason to worry about china because we do so much business there. >> and italy being one of the largest bond issuers in the world. >> but this is a stove that has been touched before. >> i had a big position in yapi credit. the bank of america of turkey. that's what they told me. i met with them. i thought they were brilliant. it was great, it was great, it was great. i noticed one day i came in and it was worth one-tenth what i paid for it. it was unchanged in the stock market. but the turkish lira had killed me. i think we have to -- we have to bring these issues up. but here i am if i'm working at bristol-myers, i'm saying what the cramer going to talk about, the fact that we just had an unbelievable quarter reoriented toward cancer, what does that have to do with the price-to-earnings ratio of

bristol-myers, the answer is absolutely nothing but it's something people talk about. >> we'll get to all of those reports be got last night and this morning. really quick, though, lloyd blankfein at goldman sachs, of course, was on joe, becky and andrew on "squawk" and was asked about the emerging market selloff and here's what he said. >> in the long run somebody said you take a position on the emerging markets and you can't change your mind for, fill in the blank, one year, five years, i'd be long, not short. it doesn't mean i'll feel good about the next -- sure, in the long run you have to bet on growth. >> and the growth has been there. although we will see, again, those markets taking it hard. they do seem to trade in unison very often. or at least together. mitigating this idea of diversity. let's move on to specific stocks, though, this morning and as jim said, it's largely a lot of good news at least today. not necessarily through much of earnings season, but microsoft, for example, reported fiscal second quarter results that were above wall street estimates.

helped by strong holiday sales in his video consoles and surface tb tablets, they had upbeat results for the office software suite but it provided no update on a search to successor for retiring ceo steve balmer, but a nice note for him to go out on one would think, i don't have a lot to add on that, in terms of they apparently were down to two candidates. >> right. >> some time ago. i have not been updated by anybody close enough to the situation that i would believe they knew what was going on. we'll see. we expected perhaps any day now. >> i was reading this literally going over the same time as another portfolio manager doing it, when we completed it, we said, steve, don't go! this was it. he's waited for 58 years to come up with this quarter. and he's leaving now? this was an all-cylinders xbox surface enterprise quarter! i mean, this was the great growth stock report.

see you later, steve. >> xbox strong holiday sales, the surface tablet revenue doubles year over year. the phone business obviously still challenged especially after what we heard from nokia. >> right. but amy hood, geez, she was good on the conference call. >> getting a plus for capital allocation, too, waking up on that. >> yes. xbox, this was an xbox people talk about what wasn't selling in retail. well, when you read this, we don't see. i am favoring -- i was hoping that allen law would come in and break it up and we'd have this device business, apropos with what we talked about yesterday with donahoe. the device business, the xbox took retail sales. it actually had a percentage of retail sales. when we look at what people spent on, this number buried within this great american company was so huge that somebody didn't buy something else. they bought an xbox. >> on a holiday where the pc saw its first holiday decline in five years. >> yes.

>> they had head winds to deal with, too. >> if they put together xbox and skype and i told steve this, we were knocking back a couple ipas, the first time i knew what an ipa was. >> really? >> they taste awful. look, this device, you've got this skype and you've got xbox and it's, like, you know, i think he was in a kind of moment there for him, but it's really, truly all came together in this, his last quarter. >> yeah. >> it is. this is his last quarterly report. >> right. he went out on a high. >> i wondered if he weeped privately. he likes to cry. >> that kind face, it never works, you know, it's never really played out. if you own starbucks shares you are not crying today. the coffee chain said profits rose 25% in the fiscal first quarter 71 cents a share, did top consensus. global same-store sales up 5% in the period slightly below forecasts. starbucks says more people chose to shop online during the holidays instead of going out to stores but they are raising

earnings-per-share guidance for the fiscal live and stay tuned for the live and exclusive interview with howard schultz later this hour with "squawk on the street." americas the overall trend is coming down in terms of same-store sales. >> howard does not shy from that. he talks about the notion of mall traffic. this is the sea change. i'm sure we'll speak -- when we speak with him, he wants very much to talk about this, by the way. even though mall for him in the u.s. is not a predominant business, he addressed this notion this is the quarter where people really started saying, you know, i'll look at the mall, and i'll showroom it and then i'm going to go elsewhere to buy and a competitor no longer is in the mall, it's all the way across the country. but what he didn't do and i accused him of burying the lead, frankly, this european number is miraculous, plus five. the china number is plus five. but howard in its brilliant conference call, but i would have done a different arc because what he did was basically said, listen, here's why the u.s. is weak and then the analysts pounced on u.s.

and u.s. wasn't weak. mcdonald's u.s. is weak. starbucks was the strongest, a plus five number in u.s.? only macy's and costco, seattle company, only macy's and costco delivered that kind of performance. but howard is not one to shy away from what was weak. and he brought that up right up top. i don't think it was weak at all and that's why the stock is up, not down. >> yeah, we're obviously going to ask him about the shift to food and whether that path to higher margins is on track. the normalization of some coffee prices, right? the expansion. >> the margins still good. one of the things, you know, you talk about drive-through doing good and belange rolls out and remodelling and starbucks consumer products story. carbonated beverage story went well and china sales strong. yet this was a huge short in the market. people were telling me, jim, bail, bail, bail, on twitter when they are not napalming me, they are using daisy cutters telling me how could you be behind starbucks. i have chemical nuclear weapons

in my arsenal and right now i am keeping them in place. >> let's try to demilitarize across the board. how about a little love on this friday? >> let's sit down at the table. >> it is -- starbucks is a battleground. >> yes. >> and there are people very much who wanted this stock down because it was xrushl crucial t thee sills that the growth stocks are too high and howard didn't fit the thesis. >> as i said the interview is coming up later this hour. in the meantime we'll get more on the earnings parade including the pulse of the consumer with names like p & g and kimberly-clark after the break. howard schultz interview and one more look at futures here, we haven't had a triple digit losses on the dow since december 11th and 12th potentially could do it today. we'll see. "squawk on the street" from post nine is back in a minute.

♪ a lot of earnings to tell you about today including names synonymous with the consumer, procter & gamble, kimberly clack, stanley and black & decker reporting better-than-expected numbers and honeywell and altera beat the street as well. let's talk about p & g, volume up three, health care up six. beauty still the problem. >> right. we keep thinking, well, when are we going to wake up and say we've got three companies here?

but that's not the way they're going. they're focusing on the fact that the organic sales were up three. i think that this is a company where i saw grooming be a little bit better. i like that. it's a company that is misunderstood by a lot of people because in the last few years it's been a battleground and this is kind of like a soothing quarter. there was nothing really negative about it. i continue to continue it's a charitable trust name. i continue to believe they'll catch up to unilever in emerging markets. >> certainly after what unilever said earlier in the week, looking at some of their first fall, i think, slowdown since '09 in terms of demand. >> this company is coming back and one of the things that is really difficult, the dollar has made -- you read the reports and it looks horrible. but the dollar is strong. look, if you're selling in turkey, right, you just got your numbers, your numbers are down 30%. but you're looking at it saying, wait a second, i sold just as much shampoo. people have to recognize it's

not just the euro. and if you look at the pg release in the third paragraph it's got volume and then foreign exchange and foreign exchange wipes out volume in almost every category. >> juniper beats by six cents. a lot of talk not just about elliott but janna and the new ceo who some argue is actually receptive to some of the activist demands. >> we reported on elliott, they are in there 6%, 6.2% i think it is trying to be constructive at this point more suggestive than activist. >> suggestive? so good! >> isn't that good? i'm a suggestive. yes. we'll see how long that lasts. but activism has been the story of last year and now this year already. whether it's juniper or any number of names. just think about the week that we've had whether it be dow chemical with dan loeb or ebay with mr. icahn or apple with mr. icahn. we will continue to talk about this in significant ways, but juniper is a company now as you

point out, carl, not just of elliott. >> if i were at juniper, i'd be so angry, listen, we have the cycle going for us and the volume of business is finally good and now you come in starting to make noise it's been awful and the whole way down and you said nothing and now it's finally good to us and are suggesting. >> they are probably saying shrink to grow. >> they finally got it right and now they are all over them! throw the bums out! >> stanley beats by two cents. sales up nine. construction up six two in do it yourself. >> europe did not hurt them for once. i have a theory. and stephanie bounces back and forth with me on this. when you see a company that has horrible quarters last fime they don't let it happen again. they did pull it off. europe turning is a continuing theme. i know we have to focus on -- on countries that are right now currency plunging, but when you listen to chuck bunch, europe's turning.

it's turning in a rather substantial way. and that's why stanley works can rally. >> honeywell beats by three cents and revenue which had been consistently missing expectations for the past few quarters finally beats. organic volume up, again, five. >> monster quarter. dave cody really delivering. total confidence, charitable trust name, i love the guy. he lives next door to me. what do you do? i have to disclose it, when i had a big party at the back of my house, he didn't complain. it's one of those quarters a lot of the things the money he's put into new projects is really being reaped. they are also in aerospace which is so strong. >> what do you make of the fact unilever and today it's hyundai and samsung. the multinationals not based here warning about 2014 that looks a lot tougher to them. >> in case by case, i look at what's happening with samsung and i say apple. apple's taking back the leadership. look, that's where it is. >> right. not necessarily because apple's

done anything that monumental, but samsung perhaps has failed to advance in the way that they had been in the last year or two in terms of product development. >> a year ago samsung had the momentum and i think the momentum has switched. this is a bit of a momentum game. not unlike the nfl. some teams get hot. samsung was very hot. and now samsung's no. and i think that matters. you know, we can focus endlessly on what carl icahn wants to do but if i were at apple, i would say we have it now, samsung doesn't. >> and the reports that apple looking at a larger screen. >> yes. >> potentially a curved screen and, of course, today if you haven't heard by now is the 30th anniversary of the mac, the mcintosh, feirst time a lot of people had see a trash can as the way to delete a file. you forget how new that was. >> i know. wow. >> think about that price point, though, as a percentage of the average income.

holy cow. >> i know. i was doing some work on the price point of the average income of a couple of starbucks in china. >> what did you come up with? >> well, people say it's equivalent of $27. >> really? >> yeah. >> but it's really good coffee. >> yeah, it's -- it's got -- it's got triple vente with it. it's got the vente thing. >> that's worth $10 right there. when we come back cramer's "mad dash," we'll count down to the opening bell and later a slive and exclusive interview with starbucks howard schultz. look one more look at futures as we wrap up this challenging week. more "squawk on the street" in a minute. ♪ with the lights on and she's making her play ♪ ppen in a seco. with fidelity's guaranteed one-second trade execution, we route your order to up to 75 market centers to look for the best possible price, maybe even better than you expected. it's all part of our goal to execute your trade in one second.

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♪ all right. >> i can't see the clock but i know the open bell's coming up. there it is, six minutes to the opening bell. happy friday to you. >> same to you. >> so many earnings. let's get to more of them i guess. >> i'm trying to adopt a zen-like approach because i admit i'm not on the conference calls because i'm here right now and that makes me a disadvantage to the people at home listening to the conference calls. >> it is important to do that well beyond just reading the press release, but remember, the key point is press and that means publicity to a certain extent. >> for instance, for proctor i mentioned i believe the conference call's going to go on, listen, i've seen the seahawks game plan, it's very good. all right. now, intuitive surgical, they've been making a comeback, david, a lot of people said down here all the woes are done, and da vinci

is back and it's fantastic. they didn't give guidance and they had a slowdown last night and people are now going to call it all into question whether there really was a comeback and i went there i was talking to my friend herb greenberg about it because he did a special on it. >> online special on it. >> and once again i have to tell people, you got to go again. you got to sell it. >> sell it? the >> yeah, you got to sell it. >> because of the lack of guidance. >> i don't like when they can't give me guidance and the hospital spend situation in flux. you know that business right now. there's so many regulations. no one really knows what to do in hospitals because of affordable care. i really believe the spending has been frozen. now, another one, this is what you're going to start hearing because people get nervous. chipotle, very good outfit, they downgrade chipotle, why? on valuation. this chart doesn't allow you to see where this stock was a couple years ago. but what's happened is there's a fear right now in the marketplace particularly of strangely enough this is why i

mention it, large dollar amount stocks. you and i both know that that doesn't matter. >> no. >> you can dwild it by ten. it's a $49 stock. there's a lot of retail players who got in the market and they blanch when they say something like this down ten, they say, oh, my, i got to get out. this is why one of the reasons that they were right to split the stocks. salesforce and vf. because right now this stock was up. it had a target on its back. >> right. >> because it's got so much dollar amount. please divide by ten if you are having trouble. >> it really hurt google that dollar amount. >> well, google's different, david. >> why? >> because it's like the rich. they are different from you and me. did you listen to eric schmidt this morning? >> i did. >> oh, my god. he is -- he may be the central spokesman for the world right now, from the nsa to curing poverty, but i have to tell you i like that stock even more after listening to him. >> and it is well over $1,000. we've got the opening bell. it is, let me give you the exact count, let's call it 3:20 from

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of the world. busy trading floor this morning. opening bell just a few seconds here. as we shape up for another down day, guys, as we said, triple digit down days since the middle of december. there's a look at the s&p. and down here the big board, an online marketplace for family care services, celebrating its ipo today. we'll talk to the ceo in the next hour. over at the nasdaq technoglass, a manufacturer of glass and windows, for residential and commercial construction. so, with that, jim, january is shaping up we're down for the month we're down two, three on the dow. one one on the s&p. it's not as bad yet as the last negative month which was august of last year. >> i know that when we started the show, i knew i'd be taking heed for saying this, but people will say we're down 1%, why not sell everything. but the s&p it's not like that.

there's some companies that need to be bought today on weakness. the futures take down everything. and if you want to have a -- take a clinical view of things, then you're going to start looking on day two. this is day two of the selloff. you begin to look at companies like bristol-myers. >> bristol-myers! up 1.56% right now. >> what am i going to say? they reconfigured themselves as an aggressive biotech company within the clothing of an old pharma company. they have a cancer franchise where they are getting your own immunity system to fight cancer, this is rather breakthrough and this is the kind of stock you need to buy today, not sell. take a look at the futures, they take down everything. pick the things that don't have to do with turkey and don't have to do with china and don't have to do with argentina and three weeks from now you actually may make some money. >> does that mean that gold does not hang on to 12.67? >> geez, gold is so hard here. the crosscurrents in gold, i'm so glad i'm not a gold trader.

lloyd blankfein he used to trade some gold. >> yes, he did. >> another good interview. "squawk" did a great job. >> good work all along. >> blankfein talked broadly about the markets and -- >> energy. >> yep. >> we didn't mention, by the way, jamie dimon got a pay raise. most people in america probably feel pretty good about that, right? >> he, you know, fully deserving. >> most people have had their wages static now for 20 years but you pay $20 billion in fines. good for you. >> yep. the average ceo pay should be around 300 times the average workers'. >> i read all the stories this morning and said i'm going to bring it up but i'll bring it up around the bell. jpmorgan, big position in my charitable trust. it just didn't sit right. it didn't sit right. and -- >> it was cut last year significantly as a result of the whale. think of everything he had to go through, all the negotiations that he dealt with justice department on or with -- on the madoff, just all the work.

>> then give him a psychiatrist. i don't know. it just seemed like a lot of money! >> did it seem like a lot of money when lloyd blankfein made $69 million? >> they all seem like they make too much money. they all. i think america's outraged. look, i'm on this -- >> wait until the state of the union on tuesday. >> it will be the tale of two cities there. the book tours, how can you live with yourself? you live on wall street. i come to work. i mean, but america's still angry. america's still angry. that's what they're going to be talking about in america is jamie dimon's pay raise and no clawback. >> well, to blankfein's point this morning, he said, we're not giving ourselves credit for the things that are going right. the energy boom, he says, should be a real boost to morale retive to what other countries have to deal with but it gets buried in the social political issues. >> it does. but, remember, a lot of people aren't doing well in the country, employment is not that great in the country and he's so

right about energy. energy is a self-sufficient continent and we're a food self-sufficient continent, and you look at the problems in the world it's places where they are not energy and food self-sufficient. not to mention the pay raises when we see the speech on tuesday will be about the two americas because we're maybe too close to it and think, well, do you know what, he did -- the stock price went up so i guess he should make a lot of money and i think americans will be angry about it. >> we're at an interesting time because you still have the too big to fail. and the occ reported by bloomberg and by the "journal" getting involved in telling banks exactly what they can and can't do in terms of lending. you can lend to that leveraged buyout and you can't do that. which is stunning and seemingly absurd and yet a result of the fact that the institutions are viewed too big to fail, back to dimon's compensation or any other compensation that people should feel, well, which is it?

>> look, in the vast scheme of things there were people in the jpmorgan that were against giving this. against giving the raise. it's not like i'm sitting here being vladimir lenin. >> but you bare a resemblance. not to bring that conversation to a close, but do you buy microsoft here? >> yes. >> you do. easy answer. >> wow. i mean, yeah. i mean, this stock was at $38 when they weren't firing at all cylinders. >> not knowing who the ceo is going to be, not knowing how much pcs have stabilized. >> i'm glad you asked me, two days ago we heard if an insider were picked for microsoft the stock would go down. >> that was a citi call. >> the quarter was so good, if an insider is picked up, the better. microsoft is doing a lot of things right. it's a device society. we'll hear that from howard schultz. if you put money in devices, that's why i'm not necessarily going to blanch anymore about the nokia.

nobody t maybe the nokia thing works. >> maybe. maybe it works, maybe not. you have to admit many people expect to be non -- let's call it nonevent when we see a new ceo. >> right. >> few expect it will be, oh, my god, we never thought it would be that person. yay. >> well, i just, i don't know, look, i don't like to buy stocks up above $40 but that was the best quarter so far of the year. of the companies i follow. the major companies. >> relative to expectations. >> the dow companies. yeah. i kept thinking there's got to be something wrong here, you know, i just kept thinking this has to be something, enterprise, no good, xbox, no good. the windows utility, really good. i just kept thinking there's got to be something wrong here and there wasn't. it was perfect execution. >> yeah, even though that ceo search has gone on for five months now. >> i want that job now. everyone says, geez, i want in, right? >> yeah. >> the names we mentioned this morning are a few names that are

up, p & g up 2.5% and june per up. >> and juniper reannounce and if you are following the telco equipment players, you would mav had a better sense. people felt starbucks would miss and short sales are backfiring and people felt that proctor would screw up and unilever was tepid, in retrospect they are not that bad. but a shot of shorts weighing on stocks that didn't blow up. >> really quickly the rails which have been doing well among the weakest today. the ntsb with new recommendations about how to transport crude oil around the country. >> it's a huge business for union pacific. >> kansas city southern is down 14. >> ksu, just such, wow, you know, that is -- whoo, that's really the mexican train, too, you know. that's the trunk line, that was the nafta winner, so i'll look

at that closely because that's not a bad company. >> dow is down and bob pisani is on the floor. >> hey, guys, sorry, we're about to open one of the ipos here, care.com which is an online caregiver, 5.3 million shares at 17 and 19 to 21 looking pretty good. the one about to open here and they seem to be screaming back and forth is rice which is a natural gas exploration production company. 44 million shares at 21. they look ready to try to open but i don't see an indication on that. weak open here. same thing as yesterday, industrials, materials, energy stocks, all the big multinationals on the weak side. but you mentioned the earnings reports, nice moves up here. i see juniper up, discover up. microso microsoft, stanley works, procter & gamble up nicely on better-than-expected earnings. it's been a great year so far. have you seen what the markets are doing? put up the screen how we are doing in the u.s. this year, the

dow industrials were down 2.4%, i did this at 9:15, the dow transports up 2.3% and the nasdaq and the russell are both up. it's big cap weakness we've seen in 2014. the rest of the u.s. market is doing fine. the real problem as we've all been talking about is emerging markets and all the revolution that jim o'neal at goldman started more than a decade ago is finally starting to break down. the problem when you start talking about bricks, china, brazil, russia, end india were emerging and look what's going on so far this year. china has been down for four years essentially moving to the downside, they are trying to move people into frontier markets and there's been a great bait and switch that's been going on here. look at frontier markets so far this year, kenya, nigeria, kuwait, indonesia, this is what everybody is talking about these days and the etfs for all of these countries now, there's a nigeria etf, for example, that has attracted a lot of interest

in the last six months, the problem i have with it and why i don't talk it up that much you don't see a lot of movement in them, there's not a lot of volume or liquidity in them overall. take a look at the retailers today, all are weak today. and you know the paradigm everybody loved retail in the prior year, and today everybody's talking about the bad weather and the de-malling of america. bottom line is, in 30 days the narrative on consumer stocks have shifted rather notably. guys, back to you. >> thank you very much, bob pisani. wanted to get to a story we've been following here and it seemed fitting we'd bring you up to date on it. mckesson, yesterday, as we anticipated might be the case and many investors anticipated in mckesson for a short-term trade they did finally secure the shares needed to actually acquire more than 75% of this german company's shares and, therefore, essentially for all intents and purposes close the acquisition. german takeover law, of course, very different from our own, and there is a lot of game theory that goes on in the back end of

these mergers given the ability of those who hold the shares to conceivably get at least the amount paid by the acquirer, if not more, and a 5% yield, yes, that is correct, on whatever they own that has not been tendered. and so you had a lot of game theory as i said. which led to mckesson not estimating correctly what it would take in originally. it failed in its first attempts to actually collect the necessary shares. this time it succeeds and it will move on at this point in terms of having that 75% ownership threshold past and, therefore, closing on this deal. which was viewed as a positive for the company and you can see today is resulting in mckesson making up much of the lost ground that it had seen previously when people were, like, well, what's going on and many of us tried to learn a bit about what happens in germany in terms of take shovover laws. i wanted to share it with you.

we can go way back where the acquiring company has gone up on news of the deal. it's not a insignificant transaction for the enormous drugmaker in the united states. let's go to the middle of the country to rick santelli who joins us from chicago, rick? >> i tell you what, it is obviously gaining momentum and you could call it a onetime event, a one-week event, but traders they look at it every minute and they look at it from a fresh perspective and the water balloon is being squeezed, whether it's the connectivity of how money flows in and out from developed to emerging markets and central banks and questionable programs. look at mr. carney at the bank of england forsaking forward guidance. look at a two-day chart of tens and realize we're down ten basis points on the week and down pretty good on the sessions as well. but if you open the chart up a bit, it will be the lowest since about the third week in

november. we look at the flattening yield curve tens to twos very significant. this is the market expressing its desires to kind of escape from some of the restraints being put on it by various fed programs and you can see that this is the flattest since about mid-november. but does it end there? no. look at how globalization keeps everything correlated. whether you look at boons, this is big timsince august and gild since november if you want to see some currencies, i know the dollar/yen is being talked about, but look at the extremes whether it's the dollar versus canada going back to 2009 whether it's the dollar versus the pound, these are very large moves, so we will continue to monitor how all these moving pieces connected as they are will continue or not give horsepower to what has been a rather surprising drop in yields for 2014. carl, back to you. >> all right, rick, thank you very much, rick santelli.

when we come back a live and exclusive interview with starbucks chairman howard schultz when "squawk on the street" continues. you got the bargain kind?

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starbucks shares are opening up more than 2% after reporting earnings last night the stock was initially down big. joining us for an exclusive interview is howard schultz, the chairman, ceo, of starbucks. howard, welcome to the show. >> thank you, jim. where home of the super bowl seattle super -- no, sorry about that, home of the super bowl seattle seahawks. >> well, i -- yes, indeed. i know that i was hoping i'd see you at the game because i know that i think that you guys are going to win, but that's not what we're here to talk about right now. i'm the astute follower of your conference calls. i think you buried the lead but we're going to go with what you said first instead of what i thought should have been led which is the amazing turn in europe and how strong china is, you felt that you wanted to talk about the sea change and the pronounced shift that brick and

mortars are no longer doing as well and the way the digital is coming on strong via device, why lead with those when the stock is clearly saying it's a turn in europe and the strength in china that matters? >> well, there's no question that the month of december was an inflection point in the u.s. retail business and over time it will be a reflection point around the world. what i mean by that specifically is the amazon effect of the power of e-commerce all over the country and the world is going to have a significant effect on pedestrian shopping, mall shopping just as it had in december. now, the december month was skewed towards holiday gifting. but over time that is going to be the case and that's going to be the challenge for every retailer. what i said in the call is that starbucks anticipated that and was well positioned to navigate through that. and the prime example is we sold $1.4 billion worth of cards that unfortunately do not get activated during the quarter.

obviously do not go into our account number. but if you isolate the comp number which unfortunately was the issue that the street was focused on, we had a 5% comp number in the u.s. which if you look at our peer group was an incredible number, but unto itself there was a level of disappointment. let me just isolate that. one point of comps in december was approximately $23 million in revenue. however, we did $1.4 billion in the card but, moreover, $230 million over last year. ten times more in revenue and ultimately in profit that was not booked that is coming back to us in calendar 2014. what would you rather have? 5% comps in the u.s. or $230 million or 10x in card sales and that is so emblematic of how starbucks is benefiting from the convergence of what is happening online and in our stores. >> let's take it further. 10x on cards, what does your

model shows you that someone has never been to starbucks and gets a starbucks a card as a gift. what do they buy in addition to what you would expect? >> that's a very interesting question. our research has shown for years that a large percentage of gift recipients of the card are new customers to starbucks. so, this bodes well for us in calendar 2014 that we'll be bringing new people to starbucks as a result of those people receiving a gift. then if you look around the world, we had 8% comps in china, 7% increase in traffic. we had our strongest quarter in the -- in the uk in over a year. and the traffic in the u.s. was 4% up. i submit that probably is five retailers or national chains of n any size that had an increase in terms of traffic. we look at the composite of our quarter $4.2 billion in revenue, record number, 19% plus in margin, a record number and then eps, this is the real i think

the coup de gras which is the eps and earnings hower continues to be 2x over the double digit sales number and the sales-to-investment ratio of new stores in the past year is 2:1. we are navigating through what i believe is a significant sea change and we're going to be talking about this for quite some time. i would not want to be a traditional bricks and mortar retailer that did not have mobile payment, that did not have social, digital media, those companies are going to find themselves significantly challenged in 2014 and beyond. and we're making significant new investments in this area including at some point in the future we'll have express order and pay which will be another advantage that we'll have over any other company in our space. >> all right. howard, i would be remiss if we didn't talk about india and china. october 22nd the chinese central television 1.2 billion viewers basically said that you overcharge in china. did that hurt your sales at all. >> we had --

>> did it hurt you? >> no. we see no dilution whatsoever in our china business. an 8% comp number over 1,000 stores. we're going full speed ahead in china. you mentioned india. it's only been about a year and a half with about 31 stores, we're 31 for 31 in terms of stores doing well. great partner in tata, a lot of white space there. also i said something on the call which i think very few people listened to which was i think we've underestimated the size and scale of market share opportunities specifically in north america. we're going to accelerate our growth in nontraditional retail formats in the u.s. >> howard, i can't help but listen to you as somebody who has been able to foresee trends so well, to want to understand the underpinnings for your belief, to use your words, we are in a sea change in the way people essentially commit commerce so to speak. what -- >> sure. >> what are you seeing that convinces you this is a seminal change as opposed to one perhaps

that may come and go? >> well, this is not the first year in which we saw black friday and post-thanksgiving heading into christmas be more of a nonevent than the year before. the amount of promotional dollars and advertising and discounting that traditional retailers have to put in place to drive traffic into their stores is really a collision course with time. it's not a good strategy. the reason they have to do that is to offset the challenge, the convenience, and the pricing of e-commerce. and i think this is just the beginning. there's no doubt in my mind, if you think about yourself, your own household, your friends, we all did much more gift giving and we're doing much more business on e-commerce because of trust issues and the amount of product available to us and traditional retailers are going to be challenged by that. starbucks is not going to be one of those companies. you can't replicate the starbucks experience, thank goodness you cannot make a latte

through the web. the third place environment is more meaningful than ever. but most importantly the investments that we have made and we continue to make in social, digital media, mobile payments and what we're going to be able to do as a result of that to make sure that we continue to have a very ongoing, emotional relationship and high degree of relevance with our customers inside and outside of our stores will put starbucks in a position to win. >> thank you so much, howard. that's a great interview and an unbelievable conference call. people have to listen in. yes, best of luck to the seahawks. i'm counting on you. >> thanks. thanks very much, jim. i appreciate your support. take care. >> yeah. >> all right, that was great. in the meantime, we are watching crcm, care.com, it's an online caregiver marketplace. they priced 5.3 million shares at $17, above the range. and as you can see up 30%, $22.15 and we'll 6 in 60 with

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another weak day, dow down 93, 6 in 60. ual, jim. >> want to come back to themes as the market comes down fall

back on big themes, use the weakness, ual, love, buy it. >> wells cuts rig. >> there's a day rate crisis going on and a lot may have to do with brazil and mexico but they are slashing rates to drill. pretty soon you and i can drill it will be so cheap. >> no. >> there's a big debate on fire island. >> this is the internet security barclays goes from buy to hold, valuation, finally someone is thinking maybe they've gotten too expensive. >> wells on precision cat. >> i bring it up because, again, big theme. it's aerospace, precision cast part is in every singing boeing, people are selling it, wrong. >> disney. >> you buy it midday not instantly now. >> and the miss out of igt. >> patty hart this is not a good quarter. the bricks and mortar casinos not spending enough. the digital is not coming on strong enough. this is clearly clearly disappointing from a terrific

ceo. disappointing number. >> how are you going to wrap up the week? >> we got to find out where tech really is and nobody has a better handle on it than avnet, i call these guys the whole foods of tech, i know that's a little -- but it's a big supermarket and they do a lot of business in europe and i bet you we hear that europe's good. >> see you tonight, jim. big week. >> trying so hard, carl. >> it's not over yet, 6:00 and 11:00 eastern time. when we return veteran microsoft analyst rick sherlund. keep it right here. [ bagpipes play ]

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welcome back to "squawk on the street" our roadmap begins with the market. stocks on pace for their worst week in more than a month as markets and currencies all over the world slide. we'll find out what it means for your money. there's a bright spot, microsoft spiking higher after a strong second quarter and rick sherlund will join us live about his takes and the results and the impending ceo search. and howard schultz spoke to us moments ago and we'll tell you what he had to say about the future of brick and mortar retailers and, of course, the future of starbucks.

but we'll start with the selloff in emerging markets, the nosedive most evident in global currencies, goldman sachs ceo lloyd blankfein commenting on the risk in emerging market currencies earlier today on "squawk box." >> when it's one country specific, it's, like, credit, if it's name specific and we're at that part of the world, how's this country doing, that country doing it. but at some point it becomes kind of a macroevent when all the countries very far apart on the globe are very, very close together in investors' minds. >> sara is back at headquarters with more on the currency crisis, no one better to walk us through this. >> good morning, carl. currency crisis is a scary thing on wall street and beyond and we are starting to see some extreme moves here when you look at some countries' currencies in "emerging markets." specifically we're talking about argentina. you can see the carnage there where the peso has dropped the most in 12 years. the government is in damage control mode this morning to try to loosen some of its strict

controls on the currency. in turkey, where the lira is at a record low, the central bank there desperately trying to stop the decline on concerns there about the government. in ukraine, where violence on the streets has led to sharp outflows from the country. you may be thinking these are currencies you don't hear about every day. you certainly don't trade. but here's why they matter. because we've seen this game before. remember, it was the thaibot that plunged that triggered the asian financial crisis in 1997 spreading economic pain around the world economy. the mexican peso in 1994. these are currency crisises that can spiral in financial crises. i'm not saying it will happen and i don't want to overplay it but it's why the sudden and sharp moves trigger bad memories and why lloyd blankfein was talking about the sipsychology.

you are seeing the south african rand is at record lows and the ruble is at record low against the euro. all these countries are getting sold off for unique reasons. some of them have political problems, economics tensions, they have trouble with ammunition for fighting, these kind of financial problems. but the common thread here, and this is important, the vulnerabilities are being exposed right now with the federal reserve in tapering mode. now that the fed is scaling back its stimulus and set to do so even further next week, some of those problems that have been masked by the liquidity rush of the last few years of qe are really coming to the fore. you've got the fed and the internal struggles and it's really a triple whammy here because you've got china. there are growing concerns that its financial system and shadow banks and its economy may be in worse shape than previously thought. we know china is the mother of emerging markets and the three concerns starting to weigh down on the currencies and that's why

the world is watching and it's spreading over and affecting u.s. markets. >> it's interesting you say there are unique reasons for the selloff but we're seeing weakness in all equity markets and we want to bring in steve liesman and talk about what it means for the emerging economies. we'll keep you around, sara, but we want to talk to steve. what are you seeing and how do you tie it all together? >> there's more questions than answers. sara mentioned the thai bot triggering a global selloff and risk event. and that's the question maybe people have and asking the question a little bit sooner having just come from the financial crisis the way we did, getting by the stove, all stoves are hot and will burn it is a how a lot of people think about it. it becomes a macroevent by virtue of the selloff, that's a short-term event, it remains a macro event and becomes serious

if the underlying macroeconomics are problematic. and the question is whether or not you have the leverage in these trades and that's first and whether or not the countries have underlying economic issues. my guess right now these issues are not on a scale that we saw in '97, '98, the countries have taken those lessons to heart and made some changes. but the thing that sara said that was most interesting to me was the idea that there are unique circumstances in each country it's not a global macro underlying reason, for that reason i think it's a bet that it's not the second stage of a macro event. >> here's the problem with that argument. >> it's your argument. >> here's the problem with your argument and why this could be a bigger deal and the imf have certainly flagged this, the international monetary fund, this is their job as the firefighter for all the financial crises, and that is you have declining liquidity. the federal reserve in tapering mode. the uk looking better, the bank of england -- >> can i just stop you? when you say declining

liquidity. the fed is putting $10 billion less out there into the market right now than it had been. it is still putting $75 billion out there. there's still $4 trillion -- >> but it's being taken by the markets as not as much of this chase and yield the trade you've seen over the last few years. whether you want to say it's not tightening, it's not tightening conditions, there's still ample liquidity, it still is having an impact on markets. you saw it in india when the fed started hinting at tapering and if you have other central banks in this mode a lot of the money rushing into emerging markets could rush out. >> i gree with yagree with you liquidity is a state of mind more than anything else, if people don't believe that someone will take them out in the next trade, the liquidity problem exists. >> and you have china on top of that and it's even more concerning what's going on with the economy and the financial system. >> the one worry i hear from traders we did see intervention

by the central bank in turk kif. we did see a little bit of intervention in argentina earlier in the week but it doesn't seem to be effective. what happens if they try to intervene and nothing happens? >> it's a good point because that's what the central banks do in reaction to try to prevent it from spiraling out of control, they use their foreign exchange reserves. they intervene to try to stop the bleeding. the problem is we're talking about a $5 trillion a day market when it comes to global currencies. it's really hard for central banks to get a grip on this market. they often get fought especially in the less liquid currencies like the turkish lira and some of the other emerging markets. >> it's clear what is happening in those countries is different from china where there are current account problems in some countries is not a problem in china. >> a good debate to have, sara, steve, thanks for joining us for this debate. meanwhile the unrest in global markets still weighing on stocks here at home. all three indices deep in the red. the dow down by 79 points.

not its worst, to discuss where they see the markets going from here let's bringn andrew berkeley managing director at oppenheimer and jim paulson chief investment strategist with wells capital management. thank you for being with us. we're talking about the global selloff and the potential that we are down for january, a lot of strategists have been talking about a need for a correction in the market. do you think this is the one the market has been waiting for? >> yeah, our thesis coming into the year was high single digits for the overall year but increase in volatility as the taper started to play out and more importantly as the economic momentum started to wane a bit. the tapering is just coming as the economic data was kind of reaching a peak in terms of the pmi momentum, et cetera. i don't think it will turn into much, we're expecting a 5% to 10% dip but we think the markets to rebound after that. >> you expect the market to be higher on the year even if we see weakness in the near term.

are you change any of your thesis here? >> i have a flat forecast. i think it will be real volatile. i think we'll go higher first, maybe up towards 2000 this the s&p and go back to where we started the year at. that's my guess. i kind of think this is just a -- i don't think it will amount to a big selloff right now. i just don't think the hurdles are there for the market right now. you don't have an interest rate -- a new interest rate environment that we've been at this 275 level since last summer really. valuations are just barely above average right now. there's still good economic momentum in the world overall. one bad china report doesn't bring down the economic momentum of the globe. and then optimism is up. investors are more comfortable. but i don't see where there's extreme optimism. and what you have is a lot of people on the sidelines i think that didn't get into the market last year. and they're waiting for an opportunity and we get a couple

or weeks worth of dip here, i think you're going to see a lot of buyers come in to try to catch up. >> some contrarian signs are out there, the transports are up. the vix is up slightly, but only 14 which is still historically pretty low. do you think those are bright shoots for the market here? where else are we doing okay? >> i do. i think the transports are at an all-time record high relative performance. they're going straight north. you also have the base of materials have been holding up fairly well. some of the industrial commodity prices sneakily are at their highest levels since last april. so, international commerce must be doing something better than we think overall. i think it's also interesting how much the dividend aristocrat index has underperformed and utilities, there may be a buy there on the interest-sensitive stocks that have really gotten cheapened here recently. >> andrew, we had some pretty solid earnings report this morning but that's not indicative of the entire

earnings season. capital spending could be the lowest in four years. do you think we'll see strength from corporate america? >> the earnings season has been okay. two-thirds of companies beating revenue, a little bit better, but it's the cap-ex that people are waiting to catch on. the china news got amplified because people are looking to rotate out of the united states domestic consumer story into a more global cap-ex story and caterpillar is announcing on monday and it will be interesting to see comments from there and a couple of other bellwethers on monday, apple on monday. and the earnings season is shaping up pretty well and probably the biggest positive we see out there analysts' expectations for the full year are relatively muted this year. the difference between the topdown strategist and the bottomdown analysts estimates this year is one of the tightest that we've seen. >> the dow is moving down to 99 points in the red so we're obviously moving toward the lows

of the session, but for now we'll leave it there. andrew, jim, thanks so much for being with us. >> thank you. up next a solid holiday season for the xbox and the surface tablet pushing microoft shares higher, up 3%. but still no word on the new ceo and we'll break it down with rick sherlund when "squawk on the street" comes right back. on the trading floor itg in real time. ♪ the shell brought him great fame. ♪ but then, one day, he noticed that everybody could have a magic seashell. [ indistinct talking ] [ male announcer ] right there in their trading platform. ♪ [ indistinct talking continues ] [ male announcer ] so the magic shell went back to being a...shell. get live squawks right in your trading platform with think or swim from td ameritrade. ♪ stacy's mom has got it goin' on ♪ ♪ stacy's mom has got it goin' on ♪

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check out kansas city southern, fourth quarter earnings rose 24% but below what the street was expecting and investors are punishing the stock in a big way. down 20% bun of the biggest losers in the s&p and it comes after rivals uniyorn pacific and northern southern did post better-than-expected results. carl, back over to you. now to a bright spot in the market today, that is microsoft. shares are rising after second quarter earnings easily beat estimates here with us is rick sherlund, who has a buy on microsoft and a $45 price target. happy friday, good to see you. >> hi, carl. >> is this the quarter you want to go out on? >> it was a very good quarter, it was from hardware which they don't make money at, so it kind of came from the wrong place, but amy hood the new cfo i think is doing a very good job of managing expenses, so it was really a story of cost cutting more so than the upside in revenues because that was a big xbox quarter, but you're not going to repeat that and you

lose money on xbox anyway. >> don't repeat it because it was a holiday event. >> it's a launch event as well. >> how about the surface? what explains that? >> surface did almost $900 million in revenues but it was severely capacity constrained in the quarter. they moved a lot of the old surface products so they actually lost money on that as well. >> still structurally left with weak pcs and a very slim share in phones, right? >> correct, yes. >> nothing on the horizon changes that. >> unfortunately they have nokia pending acquisition and nokia just had a bad quarter. so, we're not looking forward to that closing at some point this quarter. the good news is, they do get a royalty on all the android -- well, not all the android phones but the ones in china they don't seem to get paid for, but they do about $2 billion a year in android royalties. >> you seem less enthusiastic than i would expect from somebody that has a buy on the stock and has been generally positive even during some tougher times. >> so, we've not been positive on the fundamentals.

we've been positive on the opportunity for a new direction in the company and enhancement of shareholder value from bringing in someone like mulally. >> which is not happening. >> which is not happening. >> where are we on the ceo search? my own reporting indicated a couple weeks ago were down to two, and one internalist and one from overseas not quite sure whom it was. >> i think they got a couple of outside candidates, and what occurred to me on the conference call yesterday that amy hood is doing such a good job of managing expenses, if you were to take one of the internal candidates and pair that with amy hood who could enhance shareholder value by controlling costs -- >> and capital allocation, also, right? people are applauding the capital allocation. >> and you have a technical person inside the company driving new direction, but the board has to allow the new ceo maybe in combination with amy hood to make the changes that

are going to be necessary, so i have had more confidence that you bring someone with gravitas from the outside in that can direct the board and take them in a very different direction where they need to go, so i've had more reservations about whether you could accomplish the same objective with somebody internally that's been reporting to ballmer all along and may continue to do so on the board, so i do think, though, with amy there you could pair the two and actually come out with a pretty good conclusion. >> one surprise part of today's earnings was the success of microsoft office and namely 365. you have been bullish on office for quite some time. were you pleased with what you saw there? >> office is in decline along with pcs and in part there's a substitution for office 365 which is a subscription model that hurts office revenues. but office and windows are both tied to pcs, so, look, i think the new ceo needs to push more

aggressively into the cloud, platform is a service in the cloud, more enterprise businesses, but also on the consumer side, you need to do lightweight apps like evernote, like drop box. it's so unfortunate that microsoft just misses these opportunities left and right. >> it seems at least with the pricing structure it looks a little bit more like what adobe is doing as long as they can move it to the cloud. >> there's a institution effect moving but in this case there is also leakage out of the system so you're losing business. sit all subscription or up front. you are actually losing business. >> do you think the notion that an outsider would have come in, done some big transformational splitup of the units, is that now off the table or can an insider still do that? >> i have more reservations about whether an insider can effect that change. but i think that you need pretty radical change in the business itself. you're going to have to pursue much lower-margin business

opportunities. the lightweight apps of evernote and drop box are free. you can sell enterprise versions and sell people more storage capacity but that's where the growth is, so i think what you need to do is enhance shareholder value from repurchasing 10% of the stock, cutting costs 10%, that would get stuck to 50 bucks and that gives you the cover to pursue lower-margin businesses where you have a chance to really grow and position the company better, you need to do both i think. >> it sounds like what some people want apple to do as well. >> i want them to fix the business, not just financial engineering but i think you have to enhance shareholder value stamt and i think you can do both. >> thanks for coming in. care.com trading sharply higher in its new york stock exchange debut, is there value in this new dot-com stock? we'll get the details from its ceo live here at post nine after a short break.

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to $16. want to welcome the founder founder and ceo of care.com, here to post nine, congratulations on a pretty nice open. >> thanks, carl. >> i'm trying to think of the demographic play, the senior care side, and explain how it fits with the child care side. >> we're basically targeting 42 million families, families with children under 18 and families with elderly 65 years or older and right now we're only 2% penetrated so we're fairly young as a company and we're excited to continue to grow and help millions of families. >> the revenue is a split. there's some advertising but some subscription, right? >> it's primarily subscription, 75% of the revenue of the company is subscription. >> from those actually seeking the care. >> seeking care primarily, correct. >> how is revenue tracked? we've seen a lot of companies come public that have a model like that for whom the bottom line is clearly not a priority. they are not into margin maximization.

where are you on that track? >> we've seen 89% revenue growth since 2008 to 2012 on compounded annual growth rate. but if we remove the benefit of acquisitions, we've actually seen 63% organic growth since 2012 and we're very focused around an ebita target for our company because line of sight, it's very important for us to make money for our investors as well and continue to grow aggressively. >> a very important facet of this for people who are serking these services is background checks. >> yes. >> talk a little bit about how you conduct these for a customer of essentially human capital. >> it's very comprehensive, we do national criminal records, sexual offender registry checks, you know, just a lot of variety of different background checks for different families as well as reviews from our families and references. and it's very important that we make -- we help families make the smart decisions. because we're a marketplace and we want to make sure they're properly doing the checks for their family members.

or for their caregivers. i'm sorry? >> what are you going to do with the money you've raised today? >> primarily continue to grow the service and focus on continuing to improve our matching service of families and caregivers as well as look at opportunities for acquisitions. >> you're a harvard business school graduate, you built this company in boston, not silicon valley or silicon alley. >> we're very proud of boston strong and we're extremely proud of the investors that came in that supported us and that includes fidelity and wellington and some terrific companies, and just all the employees that are back in boston, just want to say that we're very, very proud and we'd love to see spawning more entrepreneurism in the boston area. >> bring everyone down to the floor today? one of the loudest opens we've had in a long time. >> we brought our family members and very -- and also the best employees are spirit award winners, truly just believing in the mission of the company is amazing. >> congratulations on the open and thanks for stopping by.

>> thank you very much. >> care.com debuting on the nyse. and straight ahead on "squawk on the street," starbucks ceo howard schultz speaking exclusively to this program today. speaking about the company's performance and what's coming up next. that story right after this short break. [ male announcer ] there is no substitute for experience. for what reality teaches you firsthand. in the face of danger, and under the most demanding circumstances. experience builds character. experience builds confidence.

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and one hour into trading here are the stories we're talking about at 7:31 on the west coast, 10:31 here on wall street. procter & gamble is up 4% currently. quarterly earnings coming in slightly above estimates. p & g expects strong profit growth during the second half of the fiscal year even despite headwinds. on the flip side international game technology is one of the biggest losers on the s&p 500. that stock down 13%. the slot machine maker posting a quarterly earnings miss and also issuing a full-year profit warning citing weakness in the north american gaming market. and the vix up above the $15 mark and it rose yesterday and that's on the rise amid weakness in the global market and the dow down 150 points into the triple digit dip. it's the first on the dow since june of 2012. and starbucks meantime powering higher after reporting earnings last night. chairman and ceo howard schultz did join us in the last hour for

an exclusive interview and he addressed the quarter and the bigger seasonal picture for retail. take a listen -- >> the month of december was an inflection point in the u.s. retail business and over time it will be a reflection point around the world. what i mean by that specifically is the amazon effect of the power of e-commerce all over the country and the world is going to have a significant effect on pedestrian shopping, mall shopping, just as it had in december. now, the december month was skewed towards holiday gifting, but over time that is going to be the case and that's going to be the challenge for every retailer. what i said on the call is at starbucks anticipated that and was well positioned to navigate through that. and the prime example is we sold $1.4 billion worth of cards that unfortunately do not get activated during the quarter. obviously do not go into our comp number. but if you isolate the comp number, which unfortunately was

the issue that the street was focused on, we had a 5% comp number in the u.s., which is if you look at our peer group was an incredible number, but unto itself there was a level of disappointment. let me just isolate that, one point of comps in december was approximately $23 million in revenue. however, we did $1.4 billion on the card but moreover $230 million over last year. ten times more in revenue and ultimately in profit that was not booked that is coming back to us in calendar 2014. what would you rather have? 5% comes in the u.s. or $230 million or 10x in card sales and that is so emblematic of how starbucks is benefiting from the convergence of what is happening online and in our stores. >> for reaction to howard schultz and more on the quarterly results, let's bring in jeff bernstein and peter sally, gentlemen, thanks for

being with us. we want to get to the bigger picture issues that howard schultz raises in a second. but your thoughts of the quarter that on the face looked fairly strong? >> no doubt about it, it was a solid quarter from starbucks with mid single digit comps around the globe, but, yes, i guess people do focus primarily on the u.s. business and trends did slow in the december quarter from the past few quarters, so that definitely raised some questions that howard addressed on the call, but the market seems to be rewarding the shares this morning. i think people understood the slowdown and still believe in the starbucks story. >> peter, a 5% same-store sales growth number is fairly good compared to starbucks competitors, but as shultz said, unto itself for the company, that is disappointing. are you disappointed by the 5% sales growth in the u.s.? >> no, i'm not. when you look at the rest of retail, it's hard to find somebody putting up 5% of comps with 4% of traffic, so i'm not disappointed with it. i think it's a good number and i think they have a lot more comp

drivers yet to come this summer with the launch of carbonated beverages and in the fall the phase two of the lava lunch which will have more lunch offerings for the afternoon. >> talk a little bit about the starbucks card. howard schultz had mentioned this and you expected some of the same-store sales growth to come from more dollars loaded onto the card, and he seems to be extremely worried about the amazon effect. how do you think it plays into the starbucks story? >> it's interesting because the seismic shift that they took about, probably more evolution than revolution, but over time people are definitely spending less time out and about and shopping and doing more online. so, starbucks is probably better positioned than most of their restaurant peers because they do have their loyalty program and their app and a reason to come into the store. and i think restaurants and starbucks are all better off than the brick and mortar players that are probably going to face the biggest pressure. but the shift towards more online is really not good for anybody in the restaurant space

because it does mean less people are out and about and, therefore, less people stopping into the restaurants. >> peter, howard schultz said thank goodness you can't make a latte online, that's one core business that will not shift to the web because it can't. but how do you build this -- the traffic decline into your models when you think about some of that ancillary business that starbucks does get from people going and shopping in person? >> i think, you know, the bottom line is you can't replace the starbucks experience online. unlike some of these other retailers where you can buy, you know, a pair of shoes or a shirt or something online. you can't replace that experience. so, will they feel some pressure with mall traffic declining? for sure. but as you go forward, you know, you can -- they're building more drive-throughs and those obviously are not in malls, so the more drive-throughs, they're outside of the mall, so they're insulating themselves as best as they can from the traffic declines you'll see in the malls going forward. >> hey, peter, you work at a firm focused on retail research.

i'm curious whether you have any chats with some of your other analysts there about what he is saying because it seems it would have as much of an impact on their view of retail as yours. >> it is. and, you know, we're seeing that across the board. we've had a lot of conversations with folks, investors, and trying to figure out when do we wake up one day and, you know, the internet has really taken over. and it seems like it's kind of happening now. i would tell you we've seen a lot of weakness in the month of december across all of retail. we saw on a lot of the strip center operators, pier one, five below. you name it. these guys all announcing weak results, you know, the internet has something to do with it and, you know, the weak weather -- or the poor weather really has something to play with it as well. >> meantime, jeff, you know, schultz is expanding the menu and moving into food and higher margin products but all of that creates kitchen complexity and hopefully not an increase in service time. so, is that what the mobile payment push is all about?

>> absolutely. the benefits from mobile payment are huge, so, one, just getting people to commit to a certain dollar amount on their card obviously keeps them loyal to your brand. but it definitely does help with speed of service as well, so gets you through the line quicker which when you have the demand they do and the traffic they do, you know, seconds count. so, definitely a net positive and, you know, especially when people are talking about, you know, being out and about a little bit less, people feel compelled to come back to starbucks because they do have kind of a vested interest in the brand with the card in their wallet. >> guys, we've got to leave it there, jeff, peter, thanks for joining us today. starbucks price up better than 3% on the news of that quarter. >> on a very tough day. thanks, guys. the dow having its worst week not since june of last year, but the year before that. let's send it to sheila with a market flash. >> ww granger is getting hammered after they reported weaker-than-expected fourth quarter earnings and lowered its

fiscal 2014 guidance amid weakness of its canadian business and sales of specialty brands. the stock, though, is up 15% over the past year but today taking a big hit, carl? >> sheila, thanks so much. when we come back, it's been called the grease of the united states. puerto rico, 70 billion in debt, $30 billion in unfunded retirement benefits. is a default inevitable? more on that after the break. i need proof of insurance. that's my geico digital insurance id card - gots all my pertinents on it and such. works for me. turn to the camera. ah, actually i think my eyes might ha... next! digital insurance id cards. just a tap away on the geico app. could save you fifteen percent or more on car insurance. everybody knows that. well, did you know that when a tree falls in the forest

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well, the emerging markets not making life any easier for puerto rico which finds itself in the midst of a debt crisis. the commonwealth needs to borrow money and pretty soon, it does run the risk of getting downgraded to junk, we're talking about $70 billion worth of debt, a widely owned

municipal security here in the united states. cnbc's international correspondent michelle caruso cabrera is life in san juan. 77 degrees. michelle? >> reporter: the wind has picked up which is great because it's so hot here, david. but i digress. thanks for the introduction. let me introduce the two guests here who are trying to deal with the debt crisis in puerto rico. david chafee is the chairman of the puerto rico government development bank and melva costa is the treasury secretary of the island. you are under pressure from the ratings agencies. they are concerned that you are using a lot of short-term financing eating up a lot of cash within even though you have a lot of debt, they want you to borrow more, moody's wants you to do long-term financing in january. there's only five days left. are you going to be able to do that and do you want to do that? >> we're preparing ourselves to go to the market, it will be soon, the next month. and we are -- we have been preparing since day one of this

new schedule. we've been working with all the financial backers that puerto rico is facing. and this is part of the preparation to go to the market. you have covered well that, you know, everything that puerto rico has been doing with the fiscal reform of the two largest pension funds, caught in the budget deficit from 2.2 to $800 million, increasing revenue measures, increasing revenues, on track, overbudget and the expenditures are under control. and we are preparing to go to market. >> there are additional moves we took this week to demonstrate additional fiscal responsibility. therefore, timing is sometimes in the month of february. >> reporter: you told me in the past you wouldn't come to market unless the price was right. what is the price? >> the market will determine the price. obviously i think we need to have market access. we have until the end of the second quarter of this year, and so, therefore, puerto rico is trading at a fairly high yield. that's what it takes to bring in

investors, that's fine. i mean, we have options that have been talked about, and, you know, we will do it at sometime in february. >> reporter: how nervous are you about the selloff of emerging assets and risky assets in general, doesn't that put you at a disadvantage? >> not worried at all. it helps emerging markets and helps us and puerto rico is trading on its own fundamentals and, therefore, what we are doing in terms of balance the budget and pension reform and you at measures demonstrating that we're working hard to fix the situation should improve yields in the puerto rico bonds and make borrowing more effective. >> reporter: you've done a lot of things that are very unpopular. we interviewed the head of the teachers union and a lot of those that will retire are going to retire with a lot less. you've done so much as you mentioned. what if you get downgraded to junk anyways? what does it do to your pride and the island's pride? >> we certainly, as i mentioned, 2013 was a very difficult year. we still have to put together additional fiscal measures that we're going to be doing that.

we're doing everything we cannot to get a downgrade and we hope that doesn't happen. and certainly if it happen, you know, we will act responsibly and will take additional action. certainly you plan for everything, the good and the bad, so we are prepared for an event like that. >> reporter: even the bulls on puerto rico debt have caveats. a guy name jonathan carmel, he said, look, some of the debt's trading at 60 cents. i think it's worth 80 cents. 80 cents still implies a restructuring. what do you say to people who say the numbers are so huge, restructuring is inevitable in puerto rico? >> we are working very, very hard with all the measures, they are substantial, the number of measures we've passed over the last year which should give the market comfort that we are working our way through this. obviously we need the economy to pick up. a lot of the measures do have a dampening effect on the economy, so we need a little bit of time in this process, but certainly we've taken a significant amount of measures to make people feel comfortable that we're on our way.

>> reporter: madam secretary, the same question to you. >> we've done everything to not make it happen. the obligation bonds are covered by the constitution are protected. we have taken many measures not only for the central government but also the public corporations, they are big interest also. so, we have always said puerto rico is doing everything that they cannot to default and to honor its obligations. >> reporter: last question, federal government bailout. a lot of investors think that's a possibility. have you asked for help? >> we have not offered help and we have not asked for help. we are working with all the tools and mechanisms that we have and certainly the federal government has offered the technical assistance and that's what we're getting. >> reporter: technical but not financial. >> not financial. >> reporter: lady and gentleman, thank you for joining us here live in san juan. >> thank you for coming to puerto rico. >> thank you. >> reporter: that the latest from puerto rico where they are trifeing to figure out what they're going to do here, we've seen debt crisis before, guys, and they are taking all the measures they can but at some point they have to grow here or they'll really struggle. back to you. >> great coverage of a story we

all need to understand. michelle, thank you. it's been a rough week for the markets as we told you earlier, the dow suffering its worst two days in 3 1/2 months and the worst week in almost a year and a half. how should you be positioning yourself ahead of the weekend? we'll talk with art cashin on set with more on that in just a minute. the old dining table at 25th and hoffman. ...and the little room above the strip mall off roble avenue. ♪ this magic moment it is the story of where every great idea begins. and of those who believed they had the power to do more. dell is honored to be part of some of the world's great stories. that began much the same way ours did. in a little dorm room -- 2713. ♪ this magic moment ♪

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the dow is down 157 on a tough friday. let's check in with rick santelli and get the santelli exchange. >> thanks, carl. of course, the topic today has to be what's going on in all the markets around globe. and i think the best way to look at it is to think about when you were a kid you used to do cannonball, okay? you jump in the water with a cannonball and you get a big splash. now imagine something else. imagine that same pool. imagine you have a big refrigerator in it with a crane. if you lift it up fast you get the same action with a cannonball and the burst. you get a big splash when you put something in or take something out quickly. let's think about the fairy dust

aspects of commercial banks or central banks. you have the cbs. many are going to, of course, say, you could look back to all of the emerging markets. many people involved in their central banking and practices to try and keep their currencies in order. there's been a lot of squawking. these are unintended consequences. we look at the fairy dust commercial, central banks have created. we have to give them a nod that at least for a while they made everything seem like it could work, that everything we're building upon is a foundation for the aftermath of the credit crisis is solid and it works for a while. but, think about a couple of things. not only is it about central banks but i think the word i've heard absolutely the most in the last 24 hours has been margins. okay? so let's consider a simplified version of a margin situation. you have $1 and you can control $5 of trade. margin is about leverage. it doesn't matter that $1 controls $5, the $1 controls $10

or the $1 controls $50. the important part is that there's no excess margin in the system. okay? so there's the central banks want to create a fairy dust so the system can have all of these chains and gears and everything to work together. the problem is the reality of the marketplace has been kind of moved over in a subsidies come in to try to allow all of this to occur. hoping it will gain traction become the real deal. but as we learn most recently from mr. carney at the bank of england, that whether it's a threshold by ben bernanke, janet yellen, or carney, that they don't necessarily have confidence. in other words, they are the architects of this building that creates, you know, this structure, but in the end they don't want to live in these buildings. they're not confident. we can see that. so as the argument goes, if there's no excess margin in the system, then you have the world interconnected with all of these swaps which traders now feel

comfortable owning again because that fairy dust aspect. what happens when you get a destabilization in areas like emerging market foreign exchange? what happens is you're basically picking an interest rate and swapping flows. so you have income streams. well, if one income stream is derived by a certain currency going to fund other parts of your swaps and all of this leverage is created, it would be like having a thousand keys in very good order so that you can go to any one of o1,000 doors ad see which one it opens quickly. throw them up the air and say we need to know what's behind door number 93 and we need to know in 90 seconds. it's not going to happen. we see this massive quick rearranging where you have to rob peter to pay paul. you have to pick what positions are on fire, see how they affect other things that are tinder backes to catch on fire and try to figure out where you're going to find water to put it out. and it all happens too fast.

whether you believe this is a big thing like in '97 or a small thing, it's too early to tell. but one thing i can tell you is, anybody who doesn't think central banks have a part in this because the taper is small, no, no, no, it's the perception by many in the world now that these programs can't go on forever and the market is realizing this in a very short time frame. back to you. >> thank you for that, rick. traders certainly in search of atswater today given where the market is today. markets are in the red. dow down 166. stocks have the worst week if more than a month. we'll have more when "squawk on the street" comes back. announce] the new new york is open. open to innovation. open to ambition. open to bold ideas. that's why new york has a new plan -- dozens of tax free zones all across the state. move here, expand here, or start a new business here and pay no taxes for ten years... we're new york.

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today's market flash. that is bristol. it looks like i am having mike troubles right now. >> all right, sheila. with some audio difficulty. we'll take it here. the dow is not having a good day. we walked you through some of the metrics. the worst day for the dow in about -- almost a year and a half. we've been talking a lot about how the dow is leveraged with the changes recently. you're seeing a little bit more volatility. the s&p at 1807 getting close to

some levels technicians are talking about. >> for traders who still had safe haven position, gold at a seven-week peak. 273 on the ten-year right now. >> 273. imagine that. >> so afraid of 3 3/4, too. it's incredible. good weekend, david. see you next week. >> thank you. if you're just joining us, here's what you missed earlier on. >> welcome to "squawk on the street," here's what's happened so far. >> somebody said you take a position on the emerging marke s s you can't change your mind for fill in the bank. i will be long on short. it doesn't mean i'm going to feel good. sure, in the long run you have to bet on growth. >> the american model of innovation is the envy of everyone here. but you need to emphasize when you put more emphasis on it and basically support it in every way we can. >> these things just sort of popped out of nowhere. >> yeah, they did. i'm going to recommend the strategy no one wants to hear. don't panic.

panic is just really en vogue. when you feel it you really want to join. >> 58 years to come up with this quarter and he's leaving now? this was an all cylinders xbox surface enterprise quirk? i mean, this was the great growth stock report. >> see you later, steve. [ bell ringing ] >> i would not want to be a traditional bricks and mortar retail their did not have mobile payment, that did not have social digital media, those companies are going to find themselves significantly challenged in 2014 and beyond. >> tapering is just coming as economic data. kind of reaching a peak in terms of pmi, et cetera. i don't think it's going to turn into much. we're expecting a 5% to 10% dip but we do think the markets will rebound after that. our road map begins with the

markets. the stocks are moving to the downside after posting major losses yesterday. in fact, the dow is on track for its worse week since june of 2012. >> while other stocks are down, microsoft is rallying after reporting strong second quarter profit. those results out by strong holiday sales for x boboxxbox. >> starbucks is rallying. the company raised guidance for the rest of the year. we talked to starbucks ceo howard schultz in a cnbc exclusive and we'll tell you one of the most important things he he had to say. giant procter & gamble posting a strong second quarter but it could have been better were it not for your facial hair. very interesting comments on that conference call. we'll explain more in a moment. right now the dow is down triple digits for a second day in a row. it hasn't done that since december 2011. let's bring in art cashin, director of floor operations at ubs to walk us through a week we knew was going to have losses.

you pointed out 1808 as a level to watch. we're there. >> we got down there several times today and they seemed to hold and then they broke through. we're seeing subtle changes here today that the dow is actually not the weakest of the lot which it had been. the nasdaq and s&p are slightly weaker on a percentage basis. and the other thing that we're seeing that's a subtle change is yesterday the yield on the ten-year benefited on flight to safety. and while that's still a factor, there's a little bit of a hint that people are wondering if this chaotic movement in emerging markets continue. the fed may back off a little bit on the tapering. now, there's precedent for that. and particularly the most traumatic was in '82 when paul volcker who was choking inflation to death and unrelenting in almost every area, and in august of '82 it looked like mexico and the peso

were going to break. when it got to the break level he backed off. he lowered rates and the stock market took off and never looked back. sglr we'll see. >> most recent reports had been that the taper for next week will be attack. the past 48 hours might have changed that? >> i think there should be a lot of discussion and thinking as they get there. we'll wait and see. they may continue. the other thing to remember is that while tapering has an impact here we have seen even the talk of tapering affected the emerging markets. they're very susceptible to this. >> you said 70% to 80% of yesterday's move due to china today. what would you handicap the move at? >> i would say now it's easily 70% to the emerging markets. the chaotic currency situation going on. and people are trying to sort through it as my friend dennis gartman alluded to at a different time. they're trying to figure t out whether there are argentina or

any of these other places are the new cypress, the new greece or exactly what it is. maybe it's the combination. >> your point about the fed. santelli was just arcing that this is what you get. when you run out of water, to use his analogy. is this all part of the natural phenomenon of taking off a band-a band-aid, of withdrawing, tapering down some liquidity, or does this have more to do with what china did and their pmi? >> it's a combination of both. the china pmi is important but don't lose track of the other part of the story and is that their banking system and the liquidity problems evident in china. that was part of the discussion. that helped start this. this is like a cascading effect. yesterday on china and the worries about their financial system as well as the slowdown prompted people in asia to go on a flight to safety which meant, believe it or not, buying the

japanese yen because they're most familiar with that. that reversed the carry trade. and it got everything rolling over into all the other currencies. >> so much weakness in the emerging markets and especially the bricks. o'neal is now saying turn your focus to the mints, mexico, indonesia, new mexico, nigeria, turkey. do you agree with that? >> you have to be careful when you are dealing with mints. they make you sick sometimes. i would be a little worried. >> the level to watch this afternoon? >> simple since we pretty much broke through the initial, i would say in the s&p 1798 to 1801. >> all right. art, thanks for stopping by. have a great weekend. >> yes, stay warm. >> same to you. >> the ice cubes don't stand a chance. meantime, let's go to --she. we will keep a track of the markets. microsoft managing the power ahead. one of the big winners in

today's rally this morning, second quarter profit and revenue topped analyst estimates. we'll tell you what led that company higher. also wish a happy 30th birthday to the original mac computer. it doesn't look a day over 29. we'll have that story when whoa come back. [ male announcer ] here at optionsxpress, our clients really seem to appreciate our powerful, easy-to-use platform. no, thank you. we know you're always looking for the best fill price. and walk limit automatically tries to find it for you. just set your start and end price. and let it do its thing. wow, more fan mail. hey ray, my uncle wanted to say thanks for idea hub. o well tell him i said you're welcome. he loves how he can click on it and get specific actionable trade ideas with their probabilities throughout the day. yea, and these ideas are across the board -- bullish, bearish and neutral. i think you need a bigger desk, pal. another one? traders love our trading patterns, now with options patterns. what's not to love? they see what others are trading -- like the day's top 10 options trades by volume --

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is jon steinberg, coo on tap for today. we've got microsoft, samsung, and apple. let's start with microsoft. the software giant, surprising the streets, second quarter profit and revenue coming in above expectations. results helped by strong holiday sales of the xbox game consoles and the surface tablets which doubled revenue, almost $900 million. jon? >> let's knnot get too excited. it's good. some people can't sell tablets even when they discount them. a lot of microsoft's lower end tablets sold here, that's good for them. they got a little momentum, more confidence. big xbox quarter as you would expect in the holidays. we'll see if the games they put out in the next couple months are able to extend that. but it's not really a hardware story. this is about the cloud services. they're even seeing some margin expansion as they get to scale with azur and things like that. that's the important thing this quarter. >> on the call or in the press release they said there was continued softness in the konl super pc sector.

that's the macro story that's driving this here. the good part about the xbox story, the ceo of gamestop was here. he was tepid about being committed. so that is a positive story. they're becoming devices and cloud company now. >> do you think the company should split? we had rick on earlier and he said i think the chances of bringing an outsider in to really shake up microsoft are probably done for at this point. when you see such strength in those consumer friendly segments like xbox and like surface you wonder what happens to that company. >> i have a kcrazier idea. i saw cramer on this morning. why does he have to leave? i was thinking we were going to move departments and desided at the 11th hour the day before let's not move, it's such a hassle. shultz we're going to talk about later on. shultz came back. why not just not leave. >> he's not really leaving because he's still got 4% of that company. >> that's true. >> they're going to have to beat him with a stick to get him

completely away. but, you know, really, the cloud stuff i think has got to be central here. and the question is does windows continue to be the core of this company? i think it really sacrificed a lot of potential off this growth. if they had gone whole hog on office for android and office, how much money could they be making right now? >> rather than rolling out the apps they put the weight in the surface. they sold $890 million on surface, to your point, we don't know how much discounting is in th that. this is rounding errors. >> microsoft would say office 365 works on the other platforms, too. it's not a full commitment. >> samamsung, posting the first quarterly profit decline in nearly two years. pressured by currency fluctuations, a special bonus for employees. samsung warning if weak earnings growth to come, demand for smartphones, tvs and displays will decline because of seasonal

weakness. man, how the tide has turned from a year ago when they were on top of the word and crushing apple, some said. >> they stuffed the channel a bit in q3 ahead of the holidays with smartphone nsz particular. and some of that had to sell through. you mention the tv issue. they're hope that world cup in the next year helps to boost their tv. but, hey, apple showed up with the 5s. that's done well. now it's a little bit more head to head in china with apple in china mobile. i think samsung really needs a hit smartphone this coming year. something a little special to really push ahead in the game. >> mobile sales down 9% for them. we are reaching smartphone penetration in the developing world. smartphones of the future, now everybody's got the smartphone. the world happened so fast. >> samsung wants the unit lead in tab bracelets. >> when i look at buzzfeed, our traffic, 50% mobile. only about 9% of that is tablets. there is so much head room in tablets. tablets are the next smartphone in terms of reach and penetration. >> that's what apple's new ad

campaign is about, right? >> yeah. >> is this the end of samsung's ads saying that apple is not cool anymore? samsung is the cool thing? >> i think they need to push harder on the tablets, more on terms of pricing and features. people are just not going to keep upgrading for a sensor when you move your hand over, if you blink your eye, scrolls. it's a little bit much at this point. >> part of what hurt is what they spend on marketing. >> yes. >> need to get more than apple. >> sponsorships, everything manageable. >> they need to have hit innovations at the same scale. >> we mentioned apple. it is the mac's birthday. it turns 30 today. apple decided to honor the anniversary with a cool video on the website celebrating 30 years of the mac. and from the old to the new, the journal says the apple will introduce new iphones with bigger screen bs in the second half of the year, even suggesting that they're toying with a curved screen. it's been pointed out if you bought an apple share, though, in '84, jon, instead of mac you

make a lot more money. 400 k versus the 2k the mac cost. >> if that 7, 8 years old i had had that kind of money that would have been pretty special, too. i think it also just just goes to show the kind of transformation that apple needs to continue to make. look at it. the m ark c ac is in decline. the ipod is in decline. just a few years ago this was the base of the company's comeback. that can happen tort current products. we have to see whether they go tv, wearable, or something else to fuel that surge. >> when you look at the historical retrospective, that's not what a technology company should be doing about the products. the mac is the past at this point. new version of the os will be more like ios. ipad pro will probably come out this year. we've seen the consumer pc decline. this is almost like an obituary. >> i'd like to shoutout to my favorite i-mac g3. we hardly knew you. egg shaped.

that was the centerpiece of my family's living room for so long. >> that shows your age. my dad had the original and the first time he used that spray can effect, amazing. >> i'd graduated to the attic fairly quickly. >> when you look at it, it is a bit of nostalgia. nostalgia is something we find on buzzfeed is powerful. people love it. they have a site where you can go on and put down the first mac you had but there's no sharing functionality. at buzzfeed, tweet out your first mac. >> i got to celebrate it though. you say they botched their own anniversary? >> i don't think they did a great job with the nostalgia campaign. why can't you share out what your first computer was? what city would youed a ideally live in because people love to share out what city should they live in. i need to get on the phone with them. >> i agree with you. >> buzzfeed. >> apple is not great when it comes to social and sharing. they proved that again and again. ping, was it called?

>> oh, my god. >> but i think nostalgia is a good move here. they have done well in the past, thinking back inspirational figures. it's nice to take stock for 30 years. >> somebody suggested yesterday because we talked so much about icahn and his campaign against apple, it would have been nice to see jobs take on the activists and see how he would have responded. maybe something different. than what cook is doing. >> he could stimometimes bit pry picked when folks took at shot at it. >> the employment to capital is the best way to stave off act i.s. they should have done the nest acquisition. they should be doing something with that cash. when you sit on those mounds of cash you have to give it back or do something with it. >> apple pays money to keep executives. can you imagine rewarding one with $3.2 billion for leaving and bringing him back? >> maybe it's an issue with that particular one, right? the best way to stave off the activists is innovation. let's get that watch out the

door, the tv out the door, get the products shipping. >> on the innovation front when you think about the fact that they're trying to make a bigger version of an iphone or smaller tablet which is basically the same product, that's the wrong direction for them to go in? >> no, they're going to do a bigger tablet. there's rumors in the channel of doing the ipad pro. i think all xhoothe commuting i going to move toward that. the tablet penetration is low ith now, i think. >> i think the big innovation we see from apple isn't so much going to be the next device. it's going to be the next service, the next itunes. are they going to be able to figure out how to tie together this wearable eco system, health data, that kind of thing into a sort of service that people like to use. >> which is challenges because they're weak there. i cloud is hard to use. what is icloud, they haven't been great with the services layer. they need to do an acquisition here. there's a lot of stuff to buy in silicon valley. >> i love itn feisty. see you. have a great weekend. >> thank you so much. take a look at starbucks

rallying after first quarter profit came in above analyst estimates. now this morning it is cnbc excluszive interview, starbucks ceo howard schultz with an interesting piece of advice for brick and mortar stores. we'll tell you exactly what he had to say in a moment. [ male announcer ] this is the story of the little room over the pizza place on chestnut street the modest first floor bedroom in tallinn, estonia and the southbound bus barreling down i-95. ♪ this magic moment it is the story of where every great idea begins. and of those who believed they had the power to do more. dell is honored to be part of some of the world's great stories. that began much the same way ours did. in a little dorm room -- 2713. ♪ this magic moment ♪

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look at the dow. although the real story is quickly becoming the s&p, that's now 25 to 1803. art cashin said to watch 1708 which we'll do over the next several hours. the amazon effect is real and starbucks is ready. that's what howard shultchultz us this morning in an exclusive interview. he had this other tech advice. >> we are, i think, navigating through what i believe is a significant c change and we're going to talk about this for quite some time. i would not want to be a traditional bricks and mortar retail their did not have mobile payment, that did not have social digital media, those companies are going to find

themselves significantly challenged in 2014 and beyond. and we're making significant new investments in this area, including at some point in the future we'll have express order and pay which will be another advantage that we'll have over any other company in our space. this is not the first year in which we saw black friday and post thanksgiving and heading into christmas being more of a non-event in the year before. the amount of promotional dollars and advertising and discounting that traditional retailers have to put in place to drive traffic into their stores is really a collision course with time. it's not a good strategy. the reason they have to do that is to offset the challenge, the convenience, and the pricing of e-commerce. and i think this is just the beginning. s there's no doubt in my mind, if you think about yourself, your own household, your friends, we all did much more gift giving and we're going much more business on e-commerce because of trust issues and the

amount of product available to us and traditional retailers are going to be challenged by that. starbucks is not going to be one of those companies. you can't replicate the starbucks experience. thank goodness you cannot make a latte through the web. the third place environment is more meaningful than ever, but most importantly, the sin vestment ves -- investments that we make in social media, mobile payments and what we're going to be able to do as a result of that make sure we continue to have very on going, emotional relationship and high degree of relevance with our customers inside and outside of our stores will put starbucks in a position to win. >> that's shultz on "squawk on the street" earlier this morning. jon steinberg from buzzfeed continues to join us. he's raising big questions, which you actually prestaged when you were on with us yesterday. >> yes. >> you called them a tech company. >> they've always been a tech company, i think. they had wi-fi in the stores before almost anybody. interesting apps you can connect to the instore wi-fi to download

songs of the day. the payments is a triumph for the quarter. $1.3 billion loaded on to starbucks cards. 30% of transactions in the u.s. done on the cards or on the app. it's impressive. >> in this shift you have to give some credit to the starbucks board which is very tech heavy. clear shy who is a social game changer, ceo of juniper networks. you have a lot of brain power adding to what shultz is doing at star buksz. >> the investment in square. jack dorsey's company putting square into the stoergs res as . i don't know how many retailers have the chief digital officer on the call. shultz threw a couple of questions to him as well. that's a big commitment for a retailer, i think. >> some would argue though they're just having to swim upstream to some degree. in the end you do need people to come and buy a coffee in your store. >> how much can you amazon hot coffee, right? you can't deliver it with drones. out can't ship it overnight. but they are trying to do is

stuff with ek press payments. they are trying to do stuff where you can order in advance. i think they have to think bold the way they bezos does. could it be a situation you order from the app and as you walk passed the store on your way to work they hand you the cup of coffee? could they do delivery to office buildings with charts? >> her eyes lit up on everything you said. >> i certainly wouldn't turn that down. if they wanted to deliver it to me overnight i would accept that. >> these are the decisions they have to figure out. he's very candid about it. he talked about this being the first holiday season where online really hit off line hard so he's not like bearing the lead. >> i believe he put it as a collision course with time. >> yeah. >> although what's interesting he's not naming amazon by name in the call or even in our interview this morning. i wonder why that is. >> i think that maybe a lot of people don't like to mention names of competitor or influencers for some reason. also, they might be a collaborator down the road. maybe there is something they the do together. who better to call up if you

want to do in-office or tower delivery. >> nice foreshadowing yesterday. >> appreciate it. let's send it over to sheila and get a quick market flash here. almost down 200. >> yeah, big move. check out the transports. that's part of the story here. they are getting hammered today. down 3%. having the worst day in nine months. amongst the bigger losers, kansas city southern, three airlines, jetblue, delta, united continental, and you have trucking company con-way taking a hit. >> thank you for that, sheila. red arrows across the board here. the bells are about to sound across europe. just a few minutes left in the trading day. we'll have details on the impact on the u.s. markets right after this break.

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dow jones industrial average now down 204 points in the s&p is down more than 27 to some critical levels. technicians argue around 1801. not coincidentally, europe is about to close the stocks suffering the biggest one-day slide there in seven months amid a global sell-off. worries about emerging markets, currency crisis in argentina. taking an especially hard toll on spain. benchmark ibex is down. in the uk, falling sharply after underperform by morgan stanley. concerns about aberdeen's

exposure to iemerging markets. >> and meanwhile emerging markets providing a shock on the commodity come flex. for that we have sharon epperson live at the nymex. >> we're watching natural gas which just topped $5. the first time that's happened since june of 2010. this is a 5% surge just today in natural gas futures. that has a lot to do with the fact that the revised forecast that we're seeing for the weather calls on cold temperatures, record cold to last into february. and we are looking at production freezeoffs in some areas as well as some pipeline disruptions. that has helped to have natural gas rally 5% a day for the past three days. we're looking at natural gas as the best performing commodity in 2014 and a lot of folks may be looking to see how they can play natural gas. retail investors look at the natural gas fund. that etf is up sharply this year. up about 15% or so since the

start of 2014. we're also watching what's happening in terms of the oil market and the big news this week with the starting of that trans canada, southern leg of the keystone pipeline to the gulf coast and that has caused the spread between brent crude futures and wti oil futures to come in sharply. it came in below the $10 a barrel level earlier today. that's a first time that has happened since november. other commodities we're watching. of course, we're keeping our eye on gold which has been this stealth climber here as we've seen equities fall and some traders are talking about gold potentially making a run toward that 1300 level if equity prices continue to falter. back to you guys. >> sharon, thank you very much. let's bring in bob pisani talk about the market and why europe's close may or may not change. we'll see. >> let's hope it does a little bit. germany closed at the lowe's for the day. they had selling there as well. sometimes you get a little bit of bounce because obviously there's been sellers over there. no respite really so far today. put up the s&p.

the same thing bothering the market recently, big global names. materials, energy, anything in the commodities space have been really low. you see we're sitting at the lows for the day. as for emerging markets, etfs, we're in correction territory on most of them for the year. put up the emerging market etfs. china, well, down 10%. remember, you have currency risks here, too. turkey, brazil, south korea, ch chile, all are for the year. i'm not putting up the markets. all down 10% for the year. what else is going on? there's been an interesting little game going on for the last six months where strategists are trying to convince us to go into frontier markets. there is differentiation. vietnam, philippines, indonesia, most have etfs associate we'd them. they're all up nicely on the year. there's rotation going on. it's almost the anything but china, anything but bricks, brazil, russia, india, china play that's going on. one point i would make is over estimating global growth,

emerging market groewth, usuall means small caps do better. you can bye -- here's the emerging market etf. eem down 8 for the year. there's a small cap emerging market etf, too. buy small caps globally, down. big difference yatiatiodifferen. small caps are doing much better in the united states. until today the russell 2,000 was on the upside. so the dow is down 3% for the year. the russell 2000 small caps only down 0.9%. my point is if you're looking for areas to go, small caps is definitely a safer area to look in right now. let's move on here. i want to talk about the vix because people ask me, the vix ask going up. it's going up, yes. and it's moving up on the short end here. so here is the spot vix right now at 16. but look a little further out. you can see they're going up, too, here's something interesting, right the spot number. here is higher than the february futures contract.

i would be more impressed if this hit 16 as well because once you see the aversion of the yield curve on the vix, in the past that's been a very good buying opportunity. it happened back in march. it happened back in october. and both times we saw these inversions of the yield curve it proved to be short term bottoms in the market. i would be a little more impressed if this february number popped up and moved past the march number. this is starting to get interesting. this has been a good indicator in the past two years or so about when markets are hitting certain kinds of bottoms. let's just hope here we get a little bit of a bounce now that the european markets are closed and the dow is coming off the lows ride now. >> traders who are wishing for volatility now hoping that they don't have quite as much. >> that's right. nobody owned volatility. nobody was long volatility. i think some people have woken up in the past two days. keeps us all on our toes. >> we also want to get to rick santelli in chicago. you're looking at interest rates and housing. what do have you got? >> absolutely. you know, always trying to make some lemonade out of lemons.

as i look at the stock markets in the world being used as piggy banks to fund everything that needs funding in a world where there's no excess margin there is one thing going on that may be a positive for housing. and 245 is, we're down 31 basis points from where we closed last year in a 30-year. will lower yields be one of the positives for this current move? my guest from double line, you're the guy to ask. in may when interest rates went un, one of the republicans that housing started to hiccup. >> that is correct. >> will rates negate all that and housing moving to the same levels it was kind of in the summer, early fall when we really had the big existing home sales numbers? >> one would like to think so. if we look at where the current rates are right now in 30-year mortgages, looking at, oh if you want to bring up that chart, 441. okay? i think with a 272 ten-year, we're probably move that down a little president very positive move for the housing market. however, where is the hiccup in

the housing market? where do we have to look? the biggest growth in price appreciation has been in the under $1,000 market and that market is, god forbid i should say it, subprime. and right now the subprime market is, if you look at the loss of earnings have flattened out. and subprime markets have been priced to perfection. and they're not perfect. i think what's going to happen and what you will see is that it's taking so long to get folks out of foreclosed on to get them moved out and get that housing moved it's just going to continue to increase the severity market overall. so my feeling is that, yeah, 272, ten-year, probably a very good positive. what we haven't addressed is all of the governmental interference, all of the foreclosure mortgage, things that need to be moved away to get this housing market moving and get it back to a more natural, normal state. >> you know, when i think about the funding for what's going on in housing, it's still pretty much mostly government areas. >> correct. >> the gses, the zombies is

what's going on in the world right now all the different moving parts and the resulting drop in rates, going to make banks more or less ept to lend than they have in the past, in your opinion? >> okay. i would suggest the following. i would suggest the jumbo market, the guys like you and i who can afford a house, i tell you what. they're going to lend to those folks. it's the folks in the middle who if they don't get that freddie, fannie loan or that fha loan it's going to be difficult. >> it goes back to the same thing, new interest rates are a key for the central bank programs but it's the audience that can enter abointeract witht should be more debated. gang, "squawk on the street," it's all yours. check out shares of procter & gamble, in relative rally mode after second quarter earnings did top estimates. but that second quarter could have been stronger if it wasn't for november. we'll explain that in just a moment. ♪

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the big buzz words and why should you care? and betting on liquid assets with investment grade scotch and super chef danielle balou. covering all that and see you in 20 minutes or so. >> busy hour, scott. thanks for that. meanwhile, shares of proctor and gamble. the company saying it expects to see strong earnings growth but not until the second half of this fiscal year. senior household and personal care analyst with jpmorgan chase. he has an overweight rating on p&g. john, thanks for being with us. >> start off with your general deck aways because xwekives the said it was as expected. media said mixed and analysts say better than feared. how do you handicap this quarter? >> i think that last comment about better than feared is how we look at it. the quarter definitely started off weak. we had seen weak consumer data in terms of the data we get from grocery stores, mass

merchandisers, what have you. i think they had a really strong december. they talked about that on "the call." that allowed them to hit the revenue number. a little bit of tax drove the earnings upside. mixed but it could have been worse. >> he does expect etf growth to return by the second half of this fiscal year. some commentators have likened this company to turning an air craft carrier $220 billion market cap. do you think this carrier is finally turning? >> yes, i do. it's been a couple of years. what praoctor has lacked is a strong productivity program to get them through tough times. they now have the productivity. we should see the gross margin turn in the back half of the year. maybe we get a little bit more brand investment, a lot of new products. and that should help them. the problem proctor is, you know, you can't just launch one new product and have it impact the whole company. it's got to be a whole raft of them. i think they're getting closer there. >> yeah. how much of that is happening though, john, in beauty and when

does that stop be b the laggard that it has been for a while? >> you know, that's the big question. i'm still relatively pessimistic on beauty in terms of getting up to category growth rates. at this point we would settle for just losing less market share. the haircare business in particular is a big problem. they continue to launch new products on pantene but with limited success. it's the market there provides the opportunity. the business doesn't need to be great. it needs to be less bad. >> the lower mar jin businesses like fabricare was seeing the bulk of the growth here. do you think the marketing mix needs to change as well? >> i think it's a little bit of the marketing mix. i think it's new products. i think we're going to see more going on in beauty relative to fabric care. unilever is more aggressive on the beauty care business. that's one area that proctor needs to be sharper and smart we're the mashing. i think they underestimated the

competition for too long but now they're realizing the other companies are eating their lunch. >> it seems like one surprise on the earnings call is what they called a secular decline in facial shaving. caught them by surprise. caught analysts by surprise. this is the phenomenon known as movember. is that a real phenomenon or just an excuse? >> i mean, i actually think it is having an impact on the overall category results. if it was just proctor's problem, and that could be the case because their price points in shaving is relatively hi. but energizer would have gained share and the category overall has been weak lately. a little bit better in this quarter than the last quarter. so it's definitely having an impact. is that driving all their problems in grooming? no way. but the movember impact seems to be real. >> finally, how long does lastly stick around around who is next? >> i think it's still a horse race there. we're not going to call that right now. you know, there's still a ton of

work to be done since he came back. it hasn't really been that long. i think he's around for a couple more years. i think they've got a great productivity program. the expectations are low. so i think we probably got about two more years before he passes the reins over. >> all right. thanks for your thoughts this morning. >> thank you. >> a big morning for earnings. and to the markets. still not quite down 200 points. let's go to sheila and get a market flash here. >> gaming stocks continue to fall. the market vector etf is down 7% in the past week. you can blame china. jpmorgan says it expects them to slow. remember the casinos are getting the bulk of the revenue from macaw and seeing wynn resorts and las vegas sands and mgm stray trading to the downside. kimberly clark making a nice move to the upside after doubling profit in the fourth quarter. the earning squad is here with more on kmb in just a moment. female announcer: get beautyrest, posturepedic,

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save even more on floor samples, demonstrators, and closeout inventory. the year end clearance sale ends sunday at sleep train. ♪ your ticket to a better night's sleep ♪ welcome to the earnings squad. i'm melissa day. courtney rry again and dr. john najarian. bristol-myers squib, this is the tale of the larger tape and the run it's had over the past nine months because it's been up 46% over the past 12 months and today the overall sentiment in

the markets, negative. this is a company that's been transitioning away from a diabetes fran franchise and the faster growing cancer franchise. last month it agreed to sell the stake it had to astra seneca so it freed it up. doc, you know a lot of these stocks move in the back of this. they're looking for positive data out of their newest drug. that right now is being decembered december tested in skin, lung. they said the estimates on that portfolio may be conservative so the stock is down what, here, 4%. where would you go in the farm la spa what space? >> i think that's some of the safety that people will look for. today's move notwithstanding. i think they will look for that, for merck, for pfizer, for novartis, rather than some of the bioteches that are more hit or miss with a new drug and trial. >> plus, the dividend doesn't hurt.

>> no. >> igt international game technology. that's another one we're watching here on the squad extending the premarket loss after posting lower than expected. lowering guidance as gaming revenues fell across north america. doc, do you like this one? >> i do but i like scientific games, sjms better. multimedia games. and the reason for that, mel, is that regardless, if you go away from casino games, video poker machines and the like, would you go to mobile and social, europing peter europe i you're robbing peter to pay paul. >> i thought that was disappointing what happened in new jersey after the first month of revenues. >> in terms of revenue, yes. in terms of people who signed up. now these guys won't be seeing the major revenue share for several months if not years into the future. but i think they're carving out some great opportunities going forward. i would buy those two i mentioned ahead of igt. >> let's talk kimberly clark,

releasing stronger than expected fourth quarter earnings. courtney has been watching this one. with the crush in emerging market, current devaluations across the board, kimberly-clark is a good one to watch. >> got p&g this morning which the show has already hit on. kleenex, scott, huggies, kotex, names everyone knows. they also have this other business division that services the physicians offices. they've seen margins improved both with higher revenue and lower cost. something we haven't seen for a lot of consumer product companies. the street is liking this today. organic sales growth up. international growth up 7%. even though the revenue forecast was light street, relatively shrugging it off in a down market today. citi analyst is warning, i don't know. watch out for the valuation. i think we're pretty fully valued here. they've come a long way. >> it has. also, doc, when you look at the international markets the 7% growth that courtney mentioned

driven by brazil as well as venezuela. their bonds are going crazy. the real right now, five-month low. does it make you a little bit concerned here? >> it does. big banks are pulling back away from the supports that were in place down there and that 14% move out of argentina, you know, just over the border from those other countries you mentioned. that's concerning and i think that's why people could shy away for the short term against a company like kimberly. >> that does it here for the earnings squad. if you want to join the conversation, tweet us #earni s #earningssquad. coming up next on "squawk on the street," the dow is still down triple digits around the nasdaq approaching session lows. we'll look at the biggest movers in a moment when "squawk on the street" comes right back. [ male announcer ] the new new york is open.

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markets are deep in the red today. let's get to the nasdaq. >> carl, a bearish scenario shaping up for the nasdaq with the composite as you just mentioned at session lows. it's now getting close to

breaking its 50-day moving average. a key support level that market technicians watch. now, in terms of where we're seeing the weakness, chip stocks are significantly underperforming the tape just as transports are seen as a leading indicator for the dow, carl, semiconductor players, they power smartphones, tab blelets seen as the leading indicator for the chip stocks. another sector weighing on the nasdaq is biotech. gaining at 62% in 2013 but it's been a tough week for biotech. we're looking at vertex, two of the worst performing stocks on the nasdaq 100. in the sea of red we do have a couple of bright spots. many of whom you've been speaking of this morning. starbucks topping the nasdaq 100. we also have microsoft in the green. what's interesting is starbucks, a competitor, green mountain coffee, is moving lower as well.

>> thank you for that. interestingly, what's happening at all tleerks pretty mau jor kol vum. nyse composite volume at this point running 20% above yesterday's pace would be -- at this pace, the highest non nonexpiration day volume. >> that's nothing to sniff at, either, especially when you see how thin the bigger moves are. 175 points to the downside and that is on heavy volume. you know where the sentiment is. >> right. take a look at intraday gold, intraday vix, the fear indicators that we turn to first whenever there's a big market day. vix did almost crack 17, i believe. not quite. but has managed to turn around a little bit. and then gold, of course, which was up a little bit earlier this morning is now roughly flat as people look for alternatives to some emerging markets. cashin's point about watching 1801, s&p was almost exactly on the money. >> we had a big earnings day but

also some movers that we haven't talked about. stanley black and decker was one that jumped out of the gate but now it's given up most gains on that conference call. the executives were talking about a little bit of weakness even though they were two cents above estimates, not really a rosy outlook when your profits are falling 52% for that company. >> one thing we have not mentioned all through last year was a list of 52-week lows because in some case on the s&p there were hardly any. >> you had to look hard for them. >> the list is starting to gl i little by little. on the 52-week low, target, ralph lauren, transocean, philip morr morris, noble. >> but that's a cross section of some pretty broad moves there. you look at oil refiners, cigarette companies, ralph lauren and target obviously have retail presence and noble corp an energy player. you are are seeing broad moves. >> we have to mention natgas

cracking $5 for the first time since 2010. art cashin just came by and told me it's been the coldest winter since '79. that winter was the coldest in 100 years. >> heating bills expected to go up. but you haven't seen a big move in stocks like exco. we will see if they react later today. >> scott wapner, do you have your hands full for the next hour. >> we do, carl. we're going to cover it all, of course. we always ask people in the midst of these sell-offs or big gains in the market what are you worried about? it's always the unforeseen. last week nobody said they're worried about turkey, or jargen and russia's currencies. right, carl? >> true. hopefully danielle will make things easier for you. >> it's a good day to have that. we certainly need one as do many people down on the floor of the new york stock exchange. have a great weekend. welcome to the "halftime" show. what's the buzz? the catch words, companies are using most in their earnings reports and why you should