ross sorkin and steve liesman. becky quick and joe kernen are off today. we'll see them on friday live from pebble beach. wall industry rebounded yesterday given a boost to stocks in asia. the nikkei in japan closing about 11% higher. chinese markets remain closed for the lunar new year holiday. hong kong benchmark hang seng index finished lower following choppy trading. in europe european trading, we are seeing pretty mixed stock. the ftse 100 over in london, a little higher. 0.3%. not much movement, though. among the catalysts here, data showing output in the eurozone in the economy there, expanded at fastest pace since june 2011. a quick check here on u.s. equity futures early this morning. set to open just slightly lower. a rebound in yesterday's trading. today's big test for the markets is going to come from a jobs report. the january adp employment report. forecasters say the economy

likely added 193,000 private jobs last month. and then the big government jobs report out on friday. sara, thanks. in corporate news, a number of legal headlines out of the financial sector this morning, jpmorgan agreeing to pay $614 million in the mortgage fraud case. the late nest a string of legal claims against the bank. as part of the settlement, jpm admitted it defrauded federal agencies by underwriting mortgage loans. at issue, thousands of insured loans that were not eligible for insurance by the fha or department of veteran affairs. morgan stanley will pay $1.25 billion to resolve the mortgage lawsuit. morgan will add $150 million to its legal reserve as a result of the settlement. and a new judge priding over the bank of america's proposed $8.5 million settlement has postponed entering a final judgment in the

case. the decision raises the possibility of additional rel maneuvers. the judge agreed this wouldn't take effect until at least february 19th. andrew, what was the total of those fines i just read about? >> what did you say there? >> what was the total of those fines i just read. $8.5 million, $115 million. >> just a day's worth of work. we've got tech news for you this morning. microsoft's new ceo satya nadella is going to be getting a base salary more than $70 million higher than steve ballmer's base pay. he will be eligible for an annual cash bonus up to $6.3 million as well as stock rewards. he could receive up to $18 million his fist year on the job. he has nothing on google's eric schmidt. this is the second time in less than three years that he has

received an equity award of that side. i don't know what microof the is doing. >> and i know you compared him with steve ballmer, but i like how the journal compared it to other tech ceos. >> is that like saying yada, yada, yada as well as stock awards? >> what is -- >> if i'm reading this right, i'm reading your script, will be eligible for an annual cash bonus up to 6.3 million as well as stock awards. >> total of $18 million. >> but only $18 million. >> at ibm, it was 16 million. marissa mayer, the annual salary was $1 million but, of course, there were equity compensations. packaged to $36.4 million. >> i don't know if anybody read "the wall street journal" this morning. the most interesting nugget on

this whole thing, the fact that the reason why alan mulally dropped out was because he didn't want -- because there was such friction in class with steve ballmer who was going to remain on the board, one sentence bizarrely buried in the story that explained why -- and i don't know if that's really why alan mulally left, but the suggestion was they kind of hated each other, the story said, i thought that was fascinating. >> it was unclear. he was set up to be a front-runner when rick sherman put out the no predicting alan mulally. all of a sudden, his name sort of dropped off. >> anyway, that is a fantastic story. there's so many nuggets of jewelry all throughout. you didn't read this piece. you don't know what i'm talking about? >> my feet are still freezing from standing in the snow. >> it's the classic bill gates -- >> you have a driver. that's right. >> don thompson, now the chairman of microsoft, formerly

of semantic, it was going to be thompson, bill gates and thompson standing in front of the staff yesterday and bill gates looks at thompson and says, no, no, only us. >> these little anecdotes which are fun for those readers up at this early hour. >> we certainly know. it took us several months to get that decision. let's get a check on the markets this morning. futures not doing a whole lot at this early hour. adp at 8:15. private sector jobs report. after yesterday's sort of mini rebound, would you call it? >> it's better than red arrows, which is what this is looking like right now. >> the dow jones down about 50. it's early still. nasdaq down 16. we're still in earnings season. so far, i don't know, how would you rate the earnings season? i would say that profits look overall like they -- well, profit is okay, but the guidance has some trouble. >> i was looking a day ago. i haven't done an update on it,

but big down turn in the outlook for the first quarter. >> yeah. >> back in january, i want to say, we were up near 7% or 8%. now the outlook for q1 is 4.5%. so that's down. even though q2 remains up by 9. 9 and change. >> just wanted to make sure. some other markets on the move, i want to check on oil. we had seen elevated energy prices throughout the week. crude oil, 98.02. brent crude, the international benchmark elevated here this morning. nat gas under a little bit of pressure, but it's been a pretty big rally. who would have thought significantly lower yields. everyone called for higher yields. >> steve raises his hand. >> i didn't think lower yields. i just thought mostly unchanged yields. you realize what's happening, right isn't it true i don't know if you want to talk about this now. >> speak out on it now while you can. >> this is a mistake to put the two of us together. >> so forget everything else

that is going on. the fed, as it reduces the amount of qe out there, actually staying about in place as a percentage of the total issuance that it's taking down because of the deficits come down, the government is issuing somewhat less in the way of new bonds. okay? so the 65 billion -- i haven't run the numbers in a little bit, but it's more or less on par with the 85 in the older world with higher deficits as well when it comes to more regions. >> and that's come as a bit of a surprise. >> the better deficits, it's a bit of a surprise. but there was still forecast ahead. so the fed had to taper just to remain as stimulative as it was. >> good point. how about the u.s. dollar moving, especially the dollar/yen. under pressure, 101. stronger yen, weaker u.s. dollar this morning. the euro is under pressure, as well. did it disappointing data out of europe and the pound, as well. pretty much a strong dollar across the board.

we want to track on gold, as well. gold prices 1256, slightly higher. we've both gotten a safe haven bid. >> i wish i hadn't bought bitcoins, but i wish i had. i told you about my missed opportunity, $5 a bitcoin. >> and that would be worth what now? >> i could have done it because nobody knew what it was at the time. and there are no regulations on it. >> yeah, pretty much. >> what about asian markets? a mini rebound in japan overnight. adam joins us live from tokyo with the story. adam, 4% sell-off the day before. 11% rebound. doesn't seem like much. >> and it doesn't look like it's going to last, either, sara. you just read the dollar/yen cross. we're looking at more strength is in the jap jack niece yen.

a lot will hinge on exactly what the idp number comes up with and, of course, the nfp number which comes on friday to dictate sentiment including equities, fixed income and currencies. as you well know, in the united states, the performance of japanese equities are tightly correlated, positively correla e correlated to the movement in the dollar/yen. that said, we did see the markets down from the trading session here in tokyo on wednesday. it was up about 170 plus points to the nikkei 225. but a far cry from the savaging that we saw on the previous trading session when we lost about 600 points. in terms of what we're moving, the markets is all about the shift towards the corporate earnings season as you guys are also in currently. with consumer electronic stocks once again outperforming in these equity markets, the likes of panasonic, that was the staff performer in tokyo today after they announced that their profits down double digits, 20%

is 730 million u.s. dollars for the october to december period. in fact, the nine-month period returning to the plaque after three years black after successive losses. because of some os thof those n businesses. in the meantime, sony is very much in focus in tokyo today. media reports suggesting that they might be close to selling their stake in terms of their pc division. they have the pcs and they have been bleeding red ink for many, many years. sony will be coming out with their earnings report on thursday in tokyo, so a lot of eyes will be on that. as you well know, activist investors have been pressing very hard for the chief executive and the board of director toes shake up sony and, of course, divide out some of these divisions that are not performing any more and, of course, may be spinning off some of the other divisions like the

entertainment. in the meantime, autos in focus, did very, very well in japan on the back of toyota's numbers. rising five fold. it was pretty much a good session for tokyo stocks, but it could all change tomorrow depending on how you guys performance tonight in the united states. >> thank you, adam. that computer business at sony, that's going to happen later this week from my sources. so i think we will see that. more importantly, adam, i don't know if we still have you, people are now telling me the value of sony's entertainment business is whoorth more than t whole stupid business combined. potentially that the when he is whole piout opportunity could arise. >> the thing is, andrew, if you look back at what daniel loeb is trying to suggest to the board of directors of sony last year, they said, look, you know, they need to spin off some of these outperforming divisions like they just mentioned, entertainment. but if you look back at the q2

numb numbers, it was the entertainment division that didn't do so well because they didn't have some huge blockbuster movies. so it hasn't been performing all that well. really, at the end of the day, those numbers in sony were boosted by financial services, insurance business. so it doesn't have a lot of legs to go on at this point in time. yes, the playstation 4 managed to outperform, you know, when they launched it back in november in the united states. they saw solid sales in december. but a lot of people are saying that sony needs to do a lot more and a lot faster to cut away some of these recommend rajjing businesses that have been dr dragging them down for years. >> by the way, the cultural issue is they can't get rid of them. they put them next to the elevator in hopes that they get the joique that they're going to leave. but then because they have so much pride, they stay there. if you go into the offices in japan, they literally put them

there but they don't go. if we had the kind of snow you get in the stadz, we would be shut for months, let me tell you. outpacers over decliners by a ratio of 6/3 this morning. the ftse is up 16 points, so pretty flat on the last 48 hours. as far as data is concerned, we had services pmi coming out. 58 points, a little lower than we thought. but the long run average for this series has been 55. so still well into expansion territory and the composite number now pointing to quarterly growth in the uk around 0.8%, which is fairley good quarter on quarter. the german markets off 0.2%. off about 0.1% for the cac 40.

break that down into the sectors. this is where we stand at the moment. weighted to the upside. chemicals and construction have any real sense of weakness, down 0.3%. health care is up about 0.5%. along with the basic resources and banks. no big moves every way. one stock worth pointing out today, the swatch brand up nearly 4% today. the ceo says that china is going like crazy in terms of sales there today. and they had good numbers, as well, expecting healthy growth this year. watch and jewelry sales hoping net profit up more than 2% in 2013. so china, one market that is good for this company. that's where we stand right now in europe. back to you. >> all right. thanks very much, ross. let's get a check on global currency markets this morning. of course, in the lead lately, joining us is camilla sutton, the chief current strategist at scofa bank. also with us, rich costinas from

citigroup. camilla, a week ago we were all sitting here freaking out about currencies from argentina, from turkey, things seem to have calmed a little. is the worst over for these emerging market currencies? >> it's always hard to pinpoint the worst is over. but i think what 2014 has told us so far is we've reintroduced tail risk. i think that's a big theme for 2014 and we're going to have periods of rolling risk that continue to spike up. when we look at what fed policy did after the crisis, which is really to take away that tail risk, as we move away from unconventional policy, we're seeing that tail risk re-enter. i think tail risk has reentered. it's part of all the fx stories. >> you know, we talk about volatility being back for the stock market. we're seeing it in currencies, too. very unusual to see these kind of 1.5% to 2% swings in currencies day-to-day. what's driving that? who is actually selling? >> well, i think from our side it's still leverage investors

that are predominantly driving this sell-off. but we haven't seen a lot of the longer term or real money capital selling aggressively. the em currencies overall. in general, it's still some of the short-term people adjusting their portfolio. i think one of the interesting things about volatility is if you look at currency volatility, it's elevated in em. but if you look across assets, equity volatility is quite high. but fixed income volatility still remains quite low. so one of the things that we look at is given the fact that emerging markets are selling off, bond volatility being low really kind of indicates to us that some of those underlying positions are remaining in place and that this is more of a short-term correction rather than a long-term repricing of emfx. >> what about the underlying economics of these countries. first when it comes to their debt, are they more in control of their debt in the sense that more of it is local currently compared to other crises or do

they have large exterior dollar-based debt? >> it's very much a stock in currencies. some positions are better than they were back in 2006, 2007. but in general, there's still -- as has been talked about, the fragile five, the ones that are very depend y'allant on external servicing to cover this debt. >> camilla, do you see any move tomorrow? it gets interesting. i think what we have tomorrow is no move from the ecb. what we're likely to see is on march 6th when they release new forecasts, that will be the time when they're able to decrease their inflation outlook. there are two things that will have the ecb to act. one is unwanted tightening and the other is more dissen flainf. we've seen ongoing signs of that. tomorrow is going to be laying

the groundwork. march 6th is the meeting when we see all the time. >> camilla, can i stick with you for a second? i just want to know the process by which fed tapering creates unwinding of the carry trade. it was supposed to be an interest rate differential, and now u.s. interest rates are back down again. there's not a whole lot less money out there from the fed because they went from 85 to 65. why would the carry trades unwind because of what the fed did? >> you know this better than anyone. to look at forex. the market is looking ahead and all of a sudden the markets saying, look, really loose policy has been able to, for the em, for all the pieces, cover up all these other problems, structural imbalances, bigger imbalances. now we're at the time where the fed is moving ahead and so far they've really indicated that they expect what's happening in the yen to be part of what's going on. and because of that, i think

that it has markets realizing it's time to reprice. it's -- the grounds are shifting here. even though it's not really going to complete until maybe the end of this year. the grounds have shifted and we are moving from one phase to another. and markets know how to price that. >> thanks for starting the morning here with currencies. a lot going on, camilla and rich. good to see you both. you know, steve, i think when you see the japanese yen strengthen like this, it jives with what we've been seeing, this flight to quality. >> right. i'm trying to break apart real stuff as in the flow of money from fear stuff, which is the sense of will there be an exit. and i'm trying to figure out if there's a mechanical thing where the fed dialing back on qe creates less money out there. is it tapered money, excess reserves? >> it's not that easy. it's not that straightforward. >> why wouldn't the carry trade be back on? >> it is a long conversaon.

we have another story we have to bring you. we are now just days away from the start of the winter olympics. of course, being brafoadcast on nbc. this is big. at&t has now become the first major advertiser to protest russia's anti-gay laws. in a blog, the company saying russia's law is harmful to lesbian, gooi gay, bisexual and transgender individuals and families and it's harmful to society. i should also say some of this conversation began in davos just two weeks ago when dan loeb and paul singer sponsored a breakfast about this issue. they are big supporters of really trying to appeal these laws in this country. there was a huge protest that went on in atlanta around co

coca-co coca-cola. also for businesses, a big one over the next two or three weeks. so i'm fascinated by that. >> i am, too. >> we can also talk about the carry trade, as well. >> this to me is moving the world forward. >> and my thing is it's backwards. >> no. coming up, the countdown to the adp employment report, some clues about the government's release on friday. and has mother nature started to take a bite out of the economy? more nasty weather. this is a live look at chicago. we'll get the national forecast when "squawk box" comes right back. announcer: where can an investor

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all the snow and ice this winter is creating a shortage of salt. now areas are rationing their salt. road crews are experimenting with liquid cheese brine. i guess they have plenty of that, mixing that in with rock salt before it goes on the road. >> what? >> yeah. it tries to make the salt wetter, i guess, to make the salt stick in place rather than bouncing away. >> that looks like a live shot of getting here to work. i was behind those truck these morning. so you had to wait. >> that is not a bad place to be. >> no, but we were hoping to

move faster than the trucks were moving was sort of the problem. let's talk about the harsh weather for much of the east coast this morning. there could be more on the way. let's get to the national forecast now from the weather channel's jennifer delgado. good morning, jennifer. >> good morning, guys. you're right. it is messy out there. the cheese brine is down in parts of new jersey. we have winter weather alerts in place from parts of the midwest over towards new england. we have been seeing a lot of snow coming down and we're also talking about freezing rain as well as that wintry mix. anywhere you're seeing in purple as well as the pink shading setting up across northern parts of virginia as well as into philadelphia. notice, new york, you've been dealing with some very heavy snow out there. but you're going to be looking at icy conditions, as well. that means driving on the roadways for areas including north jersey as well as new york. it's going to be really messy out there. you can see that wintry mix is working in. in addition to the snow you guys had earlier this week, you're

getting another round. some locations up to about 3 inches of snowfall. it is going to be cold out there. we'll help you time this out for you. we started off@7:15 a.m. you see where the wintry mix is. the snow is going to be heaviest across areas like boston where they're expecting in some of these locations 10 inches of snowfall, maybe even a foot. as we look ahead to 12:15, new york, you're going to start to get some of that warm air in place and that's changing that precipitation over to rain. and that is good news because that shows you the warming that's going to be happening there. by time you're driving home this evening, really, the bulk of the heavy stuff is gone for new york as well as into pennsylvania. still hanging on to parts in new england. boston, it's going to be messy out there if you're driving home. hopefully a lot of you are going to be off work tonight because it is still going be dealing with some very heavy snowfall in the course of very cold temperatures lead to go icy spots. if you want to know how much we are talking, some of these locations, as i said, more than a foot of snow and that means boston, parts of southern new

hampshire as well as vermont and for new york, it looks like 1 to 3 inches for you. steve, i know it's messy in new jersey. it's going to be messier across parts of boston this time. you won this one over boston. >> i guess so. except we have the -- >> everybody is a loser. >> we have the ice, too, another fabulous component. thanks very much, jennifer. >> you're welcome. the weather is grabbing attention at the fed. i heard a little something-something yesterday. >> it's all the weather's fault. >> the economy. >> i know the fed is interested to the extent to which the weather could have some responsibility for the recent weakness in the data. i know they're thinking it's not the only thing. perhaps some snapback. we had two strong quarters. and you had a lot of inventory built in the third and forty quarter. so you're going to have some putback a little bit in the first quarter.that's very usual. i did this yesterday. you could be 1% to 2% lower on an average in the second half because of that. but here is what i think they're

looking at, which is what i understand. they're trying to look at population adjusted weather degree days. >> population adjusted weather degree -- what does that mean? >> how much of the population is affected? >> right, by the lower than normal temperatures. and they're trying to look at that and fold that into the economic data. the bottom line is it's going to take us some time to figure all this stuff out. >> by the way, the next -- is the economy going to be more screwed up because of what's going on this month? >> yeah. that's when the data -- you'll get the data next month or so. >> right. >> but here is what you have. you'll have a down turn because of the weather. a snapback because of the weather, right? but neither one of those points are telling you the truly true story about the economy. so there's going be a lot of confusion in the data, assuming you get this trough and this peak as a result of it all. >> but the up shot is how could they move on policy or change their current path to policy given that we don't know how much -- >> i think they won't.

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good morning. welcome back to "squawk box" right here on cnbc. about 6:33 on the east coast. i'm andrew ross sorkin. sara sara isen is in today. becky quick and joe kernen will be joining us live from bebl peach this coming friday. that's always a hardship assignment that they -- they always -- they never want to go, they push back and then -- >> and clint eastwood i hear is the highlight. >> it strikes me this morning how much smarter becky and joe are than you. you how is it they know not to

come in today, they end up in pebble beach, you come in in the sleet and snow and they're who knows where. of all things. >> i've thought this one through and i haven't figured it out. >> i'm going to bring smu other headlines this morning. we are now less than two hours away from that january adp employment report. polled forecasters say the economy likely added 193,000 private jobs last month. in washington news, the federal government is taking steps to avoid hitting the debt limit. will temporarily suspend treasury securities to state and local governments starting at noon on friday. that move will be followed by other bookkeeping maneuvers with the goal of keeping the government functioning until congress decides to raise the debt limit. and some corporate news just crossing the wires, the eu and google reaching a landmark dial in an anti-trust case. this would settle that three-year investigation and prevent a fine up to $5 million.

the investigation started back in 2010 after a dozen businesses accused google of promoting its own services at their expense. >> and now you understand why eric schmidt is getting paid $100 million. $100 million is cheap if you're saving $5 billion. >> my guest is some of the staff thing -- >> no, no, eric schmidt is responsible forethis settlement. he's been the man in the middle of these negotiations. everything he does now is basically negotiate with regulators. that's his job. just telling you. >> i don't think you have to pay him $100 million to do that. you have some guys who would do it for 80 or 70 even. >> are you raising your hand? >> i'd do it for 60. >> andrew, we've been told to me move to this. the futures this morning, down red arrows, 353 on the dow, 16 on the nasdaq.

s&p 7.85 right now. let's look at europe, which was down, as well. mixed. up 0.25 on the ftse. up 7.39 points on the cac and the dax down just fractionally. asia this morning was up a bit. 1% plus on the nikkei. the hang seng, that's open, right, sara? >> hang seng? yeah. shanghai is not. >> okay. korea up about 0.25%, andrew. joining us now to talk more about the markets, the men with the purple ties. this morning, lee has a purple tie on. lee partridge. and john lonski, moody's chief financial markets. my question is not whether i should hold my stocks because everybody knows we're not going to sell our stocks amid all this craziness. my question is whether i'm supposed to buy stocks right now. >> my answer would be no. i would wait for some clear

signs that the market has stabilized. >> if it's stabilized, then i'm too late. >> then you're trying to be too cute by trying to time the bottom. why try to catch the falling knight using that tired cliche. >> where are you on this, mr. purple tie? >> andrew, i would say more people have more stocks than what they need to begin with. >> oversupposed. >> they're oversupposed from the beginning. people don't know why the stock market rose 32% last year. it's basically the same as saying stocks went up because stocks went up. >> how much more do we have to go, then? and what gets us there? >> that is fair value? we're trading at 17 times earnings. there's heavidy projections. are we going to hit 115, 120 earnings per share on the s&p 500. i think that's a kwen big question mark. you have some real formidable headwinds. the fed has tapering $20 billion

in pure chases. if mortgage rates are going up, that creates a lot of headwind. >> if i'm not buying and i'm sitting -- do you want me sitting in cash waiting to pounce for this moment where i'm going to be too -- or do you want me sitting in bonds? god forbid, i'm sitting in bonds. >> but bonds are the lead performers thus far in 2014. >> that's right. >> and the question of ov overvaluati overvaluation, overvaluation doesn't necessarily imply that the market is about to tank. we can have an extended period of overvaluation. what tends to matter most in a rising market for equities is that profits continue to grow. for the most part, the consensus is calling for an extended climb by profits throughout 2014 and into 2015. >> nethe numbers were actually double digits in the third and fourth quarter. i think the numbers were 4, 5 for the first quarter, around 9 -- tell me when i'm wrong

here -- for the second quarter and double digits for third and fourth quarter. i think that's overly optimistic, but they're pretty high in terms of the outlook. i want to know, if you choose, andrew, for example, not to buy stocks, what else should you be buying? >> that's what i'm -- >> keep it in cash or -- my point, i guess, is that there aren't very many decent alternatives out there. >> how about gold, bonds, the dollar? >> i stayed away from gold. i wouldn't be that averse to holding cash. i'd look at shorter term bonds where you have less price risk. you might want to go out, you know, with bonds to a maturity no longer than, perhaps, five years to play it on the safe side. we're starting to see the ten-year treasury make two runs for 3%. both sooidz times it failed them. that was in september and most recently late december, early january. and maybe that's telling us that the uk economy, the world economy is not quite yet strong

enough to shoulder a ten-year treasury yields of 3% or higher. so one of the big surprises this year may be that the ten-year treasury yields averages something less than 3%. especially yet the labor market doesn't strengthen enough to provide us with something more substantial in terms of income growth. >> steve, can i interject one point here? i think questioning where you put your money is the right question. and right now, it's very difficult to see what the future is going to look like. so a lot of people tell you they have a crystal ball, they know what stocks are going to do. history has taught us that the experts are wrong more often than are right. so we firmly believe in diversification. commodities are an important part of the portfolio. you think about what is a reasonable inflation hedge? agriculture is a much better inflation hedge than gold, which is a surprise to people. >> why am i -- inflation right now? that seems like the least worry that i have out there.

>> is it? look at emerging markets. >> there is some inflation. >> but it's -- there's different cycles going on around the globe. right now, we are facing deflationary forces, but it can switch as labor markets here start to tighten. >> the market has been wrong and a place inflation throughout most of the current recovery. 59% of the months of the current recovery, the tips contract has overestimated inflation. previous recoveries said overestimation was no higher than 35%. we have this huge inventory build up in the second half of last year. and that tends to support the argument that in the early part of 2014 we're going to see core pc price index inflation on a year to year basis go under 1%. >> what -- how does the fed react to that? folks should know that the pc price indicator rather than the cpi is where the fete really follows. that tends to run lower than the

cpi. so you're saying they move further away from their 2% goal and then below 1%, which has been a concern of deflation in the past for that. >> i would not be surprised if something arises not right away, but perhaps towards the middle of this year with the fed decides to temporarily halt tapering. >> wow. >> because of downward pressure in pricing. >> and, john, how much weather is in these weak numbers right now, in your opinion? >> well, especially in the housing front, you know, construction activities, being hurt, industrial activities, so the polar vortex makes it very difficult to interpret. the jobses numbers we're going to be getting for january as well as what we had earlier from ism on manufacturing activity. >> have you had a chance to take things apart? >> you know, i wouldn't be surprised if payrolls growth is at least 100,000 jobs less than otherwise because of inclement weather. >> wow. >> that's important. >> mr. purple ties, thank you for coming in. >> greet conversations.

>> we thank you. >> appreciate it a lot. i looked at -- >> important investment. all right. next, did people order up buffalo wild wings last quarter? we'll find out. also, netflix was one of the biggest stock market darlings of 2013. now the streaming video service is capitalizing on one of its hit shows. good news if you're a house of cards fan, next on "squawk box."

welcome back to "squawk box." equity futures at this hour pointing south.

dow jones indicated to saturday lower by 43 points. the s&p down by almost 7. and the nasdaq by more than 13. check out shares of buffalo wild wings here in early market. and last year. the restaurant franchise reporting fourth quarter profits of $1.10 on 345 million in revenue versus estimated earnings per share of 106 on 347 million of revenue. >> and they're now serving pepsi, if you remember. they went from coke to pepsi. >> wings are in right now. >> wings are in. i think we should have wings over here. hollywood news, besides watching live business news all day, i bet some people forced to stay home may be checking out their netflix for some bing viewing. one way to do that would be to get going on more episodes of "house of cards." the original will now be getting a third season of the washington-based drama. the second season will premier on february 14th on valentine's

day. all 13 episodes will be available all at once. just two points on this situation. they bought this thing two seasons at one time. which had never been done in tv land. usually, you know, a network buys one season at best. oftentimes they buy -- >> until they renew it. >> everybody had said that the creators of this show had not -- were never going to make a small fortune off this because the first two seasons nobody night was going to be a hit, so netflix got a great deal. they just now finally got the payday. so everybody who is involved in this is -- >> now they're making money, yeah. >> the creators of the show just made this all work. >> catching up the third season. >> yes. but actors historically never want to do a third season. if you're kevin spacey, a you're a movie guy, you could i can get 5, 10 million -- >> well, no, no. >> there's not as much money in tv traditionally as movies. netflix, that stock has been one high flyer. coming up --

>> you've got to watch this show. >> my wife watches it. >> it gets a little -- i thought it was very realistic up until the end, but i won't give away what that means. >> you're an establishment anchor at the show, the music plays, you ignore it. i'm felg in, i follow it. coming up, the weather is causing a shortage of pressure. find out why this supply problem could have a national impact. and we're not talk about your backyard grill, but first, check out the price of natural gas, which has been moving higher. more "squawk box" coming next. actually, it's lower right now. this is humira, adalimumab. this is humira working to help relieve my pain. this is humira helping me through the twists and turns. this is humira helping to protect my joints from further damage. doctors have been prescribing humira for over ten years. humira works by targeting and helping to block a specific source of inflammation that contributes to ra symptoms. for many adults, humira is proven to help relieve pain

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as this wicked winter weather stretches on, the midwest supply of propane is thinning out. it's causing record high prices and forcing many stations to declare propane emergencies. didn't know that was a declaration that was possible. our morgan brennan is in one of those states. she joins us now from sully, iowa. good morning, morgan. >> reporter: good morning. and yes, propane prices are at record highs as the shortage continues, especially in the midwest and northeast where 6 million homes and nearly 1 million farms use propane as their primary heating source. in the last week of january alone, we saw the national average price of propane top $4 a gallon. that was a 30% jump in that just in the week, way above levels we saw last year. here in iowa where we are, prices surged 80% in a week.

in some places hitting as high as $5 a gallon. now, why are we seeing this? pardon the pun, steve, but this is a perfect storm of issues. obviously, the cold, cold weather. i mean, here, it's five degrees before the windchill. also we're seeing a record-breaking wet and late crop. that required more propane-powered heaters to dry it. also increased exports. propane exports are at record highs right now according to the eia. 400,000 barrels of propane getting exported per day. >> in the summer months when inventory has historically built here in the united states before we built the export capacity, instead that propane went outside the country primarily to latin america, europe and some asian markets. >> reporter: now, combine all of this with a transportation

bottleneck, having pipeline issues, railcar issues, there are not enough trucks to transport propane. there's not even enough drivers to do it. so we're seeing all of this is causing the d.o.t. to declare an emergency situation for 35 states and washington, d.c. they're loosening restrictions to get more propane out of the storage hubs in kansas and texas, to places like iowa and other hard-hit states. eventually, hopefully this is going to get better. as you guys know, seeing the winter weather, second storm there just this week, it could get worse before that happens. steve, back to you. >> morgan, thanks very much. please go get and stay warm. >> where's sully? >> morgan in sully, iowa. i don't know where that is. but i'm going to look it up. >> okay. >> reporter: an hour outside of des moines. >> okay. coming up, we're going to talk about the economy. it is in focus, and it is all about jobs. could the upcoming numbers spark another selloff? plus, when will all the flight delays and cancellations start to hurt the airline

sector? this weather not helping these airline companies. how much snow is too much for the nation's air carriers and investors? we've got that story and a lot more coming up in two very big hours of "squawk box" when we return. opportunities aren't always obvious. sometimes they just drop in. cme group can help you navigate risks and capture opportunities. we enable you to reach global markets and drive forward with broader possibilities. cme group: how the world advances.

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good morning and welcome back to "squawk box" on a very snowy day here on cnbc. i'm andrew ross sorkin along with steve liesman. sara is here. becky and joe will rejoin us this friday live from what i imagine is better weather in

pebble beach on the other side of the country. let's take a look at the futures, see how things are setting themselves up for the day. after a little bit of a better day yesterday, it looks like this morning may not start nearly as well. sort of like a snow day. dow jones looks like it would open down about 60 points off. s&p 500 off about almost 9 points and the nasdaq off about 16 points. we also have some morning headlines for you this morning. today's market fortunes could be driven by the monthly adp report for january. here's the number to watch. economists are expecting that report to show 193,000 new private sector jobs last month. and of course, those numbers will be out at 8:15 eastern time. and we will bring them to you and, of course, steve and sara's instant analysis. we do have breaking news for you right now. this is big. cvs caremark, that chain is announcing it is going to remove cigarettes and tobacco from all 7,600 of its pharmacy locations by october 1st of this year. the president of cvs pharmacy

explaining the decision to nbc's tom costello. >> this positions us really towards where health care is going because we know the sale of tobacco is extremely inconsistent with being a health care provider. we certainly expect other people who are in the pharmacy business to look at the mirror and ask themselves, where do they want to be in the next few years and what kind of role do they want to play in health care. but ultimately that will be their decision. >> tom costello joins us in about 15 minutes with more. i have to tell you, i know we're supposed to be journalists and not have views. i applaud this. the idea that they were selling cigarettes next to pharmaceuticals and drugs at a health care store never made sense to begin with. >> i think it's an interesting decision cvs is making. to me it sounds like cvs and walgreens has been doing this as well, going all in on health care, on obamacare, making them sort of more useful to consumers, educating consumers

about health care, giving out more health care services. so to me, that's what this sounds like, that they're focusing on that, and therefore giving this up. the question is how much revenue -- how much sales are they going to lose? >> they're saying a billion dollars? >> i think that's the number. but what about e-cigarettes? >> will they still sell those? and nontobacco replacements? >> you mean like -- >> the gum. >> like chew. >> the chew, right. >> chew and all that kind of stuff. i don't know. we will find out. >> i also wonder, i mean, they sell other unhealthy things. >> like potato chips and soda. >> sugary drinks. do they sell alcohol at drugstores? >> take a look at this. while we've been talking, and this is premarket action, take it for what it is. looks like cvs caremark stock dropping because they are going to take a hit on this as a principled stand at least for now in terms of the economics because they will lose money at least initially on this. hard to say, by the way, there's probably marketing value in this from an economic perspective,

but beyond that, this seems to be more of, you know, a board saying we don't want to be in this business as opposed to, you know, we can make more money by not being in this business. >> it's an interesting call. it's going to be debated, by the way, by the shareholder advocates out there who say that the company should only take into account -- and i had this argument the other day with the fine, fine gentlemen. >> the shareholder. >> right. and this is -- maybe it is, maybe it isn't. i'm not sure. a company doing what it considers to be the right thing. >> this is the right thing. arguably the right thing. >> exactly in the interest of the shareholder or not? >> let me ask you another question. does this make walgreens do something different? does it make a walmart do -- you know, do other major companies that have tried to fashion their brand around being good for at least the lifestyle? maybe not a health care company in the same way that cvs is, say we shouldn't be in this business either, and do customers either

revolt, or do they applaud this, and what does that mean? and by the way, it's probably not right to look at the share value right now to say this is good or bad for shareholder because as you say, over time if walgreens does this, it puts pressure on them. >> it would be interesting if they do this because i would think that they would be taking market share here from cvs. yes, you can approximate the value, but people go in to buy cigarettes and they end up buying gum p. >> walgreens is not going to run ads saying we're so thrilled to sell cigarettes, please come visit us. >> my point is whether or not the head of cvs sort of said that, that we think we're on the leading edge of this, so we're getting there earlier than maybe my competitors. >> can i ask you a question? you're the closest to this topic than i think -- maybe you are, i don't know if you're a smoker or not. >> i'm not a smoker, but i do frequent drugstores. >> steve, will this -- you know, how do you think about this?

>> it's part of what's going on. >> yeah. >> i don't think much of it. >> do you begrudge them? >> not at all. >> i don't know what the sort of sense is on all this. >> it's all good. >> i just think it's part of the trend. if you look at walgreens, they're offering more services, more health care services. they're offering, you know, free flu shots and various other things. >> kind of hard to do that and sell cigarettes. >> exactly. so to me, the question is how much business are they likely to gain by going all in on sort of being more of a health care company? >> walgreens -- is walgreens picking up cvs's loss here? a little bit. >> marginal. >> i want to know the market cap of cvs and how much they lose of the market cap from this. what percent is worth -- you should read this. i should have read the other one. we are now -- >> cultural story. >> we're now just days away -- that's a good point there.

we're just days away from the start of the winter olympics. you can see the countdown in the wall right there. in advance of the games, at&t becoming the first major advertiser to protest russia's anti-gay law. in a blog post, the company saying, quote, russia's law is harmful to lesbian, gay, bisexual and transgender individuals, and families, and it's harmful to a diverse society. at&t is a major winter olympics advertiser and a longtime sponsor of the united states olympic committee. >> does this put pressure on all the other olympic advertisers to say we're going to make a stand? and does this become the story of the next two weeks beyond the sports? >> let me ask you, andrew, first. i'm trying to figure out in my head the down side of at&t saying what it's saying. is it really going to offend russia here? by saying it opposes the law? is sounds like it's bold, but i'm just wondering, is there a down side to at&t and any other

company saying this? >> i assume that there's not. well, it depends. i assume at&t has very little business in russia. >> i think they do have some, i suspect. >> coca-cola the one we were talking about in the last hour, a lot of people have been protesting. they sell a lot of product in russia. >> as you earlier reported, i applaud at&t for doing this. >> absolutely. randall stevenson should stand up and take a bow. >> how controversial is it. for a company to come out and say i oppose -- not here, but is it something that has a down side to at&t? >> go to the middle east. it gets tough, probably. there are places this becomes a sort of -- >> well, it is the first. we'll see if other companies follow will be the question. we have some earnings reports to talk about this morning that i want to flag here. dow component merck posting quarterly reports. earnings missing the mark by just a penny. revenue came in a bit shy. checking out merck reaction. time warner reported profit of

$1.17 per share, 2 cents above estimates. revenue also beat analysts' forecasts. time warner also announcing a 10% dividend increase and a new $5 billion stock buyback program. good for shareholders. and google has reached a tentative deal with european regulators to settle that three-year antitrust case. google, turns out, has pledged to display links to rival sites in a clearly visible and comparable way. that was the quote to its own services. the eu will now take comment on the proposal to google competitors after which it will then decide whether to give the final approval. so that was sort of google's way of making nice and pacifying those concerns. >> and i still think spending $100 million for that may be the best deal of the day. >> $100 million, the new pay package. >> and i still think somebody out there would have done that same job for $50 million. >> maybe, maybe. we want to talk about the markets because u.s. stocks are bouncing back. we saw that yesterday. this morning, a little pressure

on futures. we'll see how much resilience is out there and how much bargain hunting comes into the mix. joining us now, john lynch, regional chief investment officer at wells fargo private bank in charlotte. john, is it time yet for the bargain hunters to swoop in and look for buys? >> hey, sara, good morning. yeah, we had a nice rally yesterday, but it was only about a 25% of what we lost on monday. so i'm not convinced the time is just right yet. the technical breakdown has been pretty strong. and i would like to see, as i'm sure you would, a two-handle, 200,000 or so on private payrolls, maybe get a good comment from the ecb tomorrow, follow that up, if we're able to get that with a good jobs report friday, we may not get this elusive 10% correction just yet. i've got to think, though, that the technical repair is going to take a while. >> so you sound a little bit cautious here. are there any portfolio moves you should be making, or should you just stay in it for the long haul and not be deterred? >> well, i'm glad you said

portfolio because that's something we try to emphasize here at wells fargo. make sure we're not positioning for the next trade. we're all about rebalancing and taking advantage of weakness to add to positions where portfolios haven't participated. we still think the longer-term trend is favorable for profits, more historically averaged. add profits, call it 6% or 7% with an income opportunity on the equity market. we're looking at more historically average return opportunities. we do think in spite of what the ten-year has done these past couple of weeks, we still think the trend is gradually higher. so consequently, we want to keep durations on the shorter end. we still want to favor credit risk or interest rate risk. >> yeah, everyone thought that the bond market that yields had bottomed. everyone thought get out of bonds. they're looking increasingly risky. the surprise of 2014 to me has been a very strong trade. yields have gone even lower. what would you say? would you say this is the greatest opportunity right now to get out of bonds, or should you keep some? >> you and me both being

surprised on that. yeah, everyone was leaning into the wind, right? and then the ten-year turned around. i think it's more a function of risk off, if you will. i still think ultimately if a federal reserve has quadrupled its balance sheet, the bank of england, swiss bank, ecb has doubled theirs, boj has doubled theirs, there's going to be a longer-term inflationary risk as a result of this. i don't think we're going to go to 1980-type levels of inflation, but i've got to think down the line, if you buy the ten-year yielding 2.6%, if you own that a decade out, i'm fairly confident inflation will have eaten away at that total return. we want to underweight sovereigns, treasuries and look for opportunities in spread sectors, whether it be corporates and also take advantage of some of the muni selloff from last fall due to the puerto rican and detroit situations. >> all right. thanks, john, for the tips. it's been a rocky new year to start the year for stocks. john lynch. friday is the big jobs report.

it's also the day that we hit the debt ceiling. yes, they can put in temporary maneuvers, but could we go again to the brink? >> i think it's march, isn't it, that they pushed it ahead? because of the extraordinary measures? >> yeah, but jack lew has been warning, mid-february. >> i thought he said mid-march. >> ben white has a thing on this this morning that we could take a look at and talk about after the break. we also have the big story now of the morning. cvs just saying no to tobacco products. it's no longer going to be selling cigarettes, cigars, chewing tobacco. that answers that question we had about, steve, what's coming off the shelves. including the chew and all that other stuff. all that coming off starting october 1st. more about this bold move, what it cost for the drugstore chain, what everybody else is going to do about it. we're going to do that next. i want to know -- that means they're going to take candy and alcohol off, too. we'll see about that when we come back. cast your vote today for the most influential business

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where do we go now, guys? are we going to go -- >> we're going to talk puerto rico. >> we're going to keep reading. s&p cutting its credit rating on puerto rico to junk status. the agency cites concerns about the cash-strapped u.s. territories' ability to access capital markets. the call makes it harder for the caribbean market to borrow in the $3.7 trillion municipal bond market. the territory has been preparing to return to the market for the first time since august. >> tough news. coming up, more snow means more cancellations and flight delays. is mother nature going to take a bite out of airline profits? they've been going strong lately. with had will it start to hurt the industry which is really starting to take off, or is the weather a nonissue? we'll discuss next. time now for today's "aflac trivia question." what is america's favorite condiment? the answer when cnbc's "squawk

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the u.s. consumes $2 billion worth each year. >> aflac. >> i'm not a mayonnaise guy. we were just talking about that. we've got to talk about this extreme weather. causing massive flight delays and cancellations. let's talk about what this all means. here to talk about the impact on this rough weather is having on airlines, michael boyd, one of our favorite, chairman of the boyd group. help us here, which airlines are going to get impacted the most, and what kind of losses are we talking about? >> we think industry losses could be somewhere in the neighborhood of 300 -- about $500,000 when you consider everything. air travel is episodic. >> just give us the time frame. that's our january snapshot? >> through january. >> through january. we're now into february, and this weekend's going to get worse, apparently. >> it's going to get a lot worse. it's almost like the airline

industry did something karmically bad. they're blanketing every hub east of the mississippi, doing a good job keeping airplanes on the ground. we're looking at $500 million or more in terms of lost revenue and then other losses beyond that. it's, you know, for some airlines like jetblue, that's going to hurt. other airlines like, say, american where they have a global network, it's going to hurt less, but it's still going to hurt. >> you said american. is there anybody else you put in this sort of -- not winner category, but life is relative so let's call them winners? >> oh, sure, like alaska airlines. they're up in frozen alaska on the west coast. or, for example, virgin america. those kinds of carriers, spirit, they're not going to get hurt as badly. but those that focus on the east coast and certainly in the midwest, they're going to get hit very badly. that's united, that's american, that certainly is jetblue. but again, jetblue doesn't have the same network that the other carriers have. >> in terms of mitigating those losses on a relative basis among the losers, is there one or two airlines you think is somehow

better operated or better prepared to the extent that you can be? >> jetblue made the right decision. if you can't fly reliably, park it, wait it out and go from there. that makes a lot of sense. and you have rules now that if you get diverted from hartford to laguardia and can't find a gate, the government is going to fine you. they just ground everything. sorry. >> no, michael, i just wanted to ask you on top of all these weather issues, we've been hearing more about this new law requiring pilots to rest more. how much is that exacerbating thattes problems for the airlines? >> that's when this comes to the fore when you have off-schedule operations. that eats up a lot of pilot time which means that pilot can't operate that last leg say from chicago to new york because he or she is out of time. airlines anticipate that and cancel early. but it does make it worse. there's no question. >> okay. michael, thank you for joining us this morning, helping us try to understand all this. stay warm and safe up there in the air where you are.

we'll talk to you soon. we're going to move on and talk about cvs because that is the big story. cvs taking tobacco products off the shelves. nbc's tom costello joins us from bethesda, maryland. he had that big interview. tom. >> reporter: good morning. cvs says it could not reconcile the contradiction between trying to improve people's lives through pharmacy help and also through better products and also, of course, through their minute clinics, while at the same time, selling tobacco products. so by october 1st, they say, they will have removed all tobacco products from store shelves. they say this is going to cost them about a $1.5 billion in tobacco sales, another $500 million in sales of other things that people buy when they come to the store. but they believe that this is an important part of them transitioning to more of a health care provider type of role as opposed to, of course, just a retailer. so the question this morning, i think, that everybody is asking is, will other pharmacy retailers feel pressure to do the same? you know, they have been under

tremendous pressure from the american pharmacists association, the american lung association, cancer, heart, you name it, all of them have been pressuring these retailers for years, saying this makes no sense for you as a pharmacy to be selling tobacco products. walgreens, duane reade, rite-aid, you name it. they'd have to give up cash, no doubt, on sales, but will they gain it in terms of good will from customers, and is this simply where we're going where in five, ten years we're going to say why the heck did we ever tolerate pharmacists to sell tobacco products? so this morning cvs breaking the mold and setting the standard, and we'll see how this plays out throughout the entire sector, guys. but it's a fascinating and a big day. when i talked to the president of cvs, she makes the point we're simply trying to transition to more of this health care provider role. we can't be in tobacco anymore. and while we think it's going to be a $1.5 million to $2 billion

hit, we think it's the right thing to do from a corporate and an ethical perspective as well. >> and they're clearly taking a principled stand. when we reported -- your report earlier, the first tweets and e-mails we got from readers were what about alcohol, liquor, the candy that you see when you first get to the cash register and other sugary drinks and things like that, did you get the chance to talk to her about that? >> reporter: i've got to tell you, i didn't ask her if they were going to take candy off the shelves. there's a big difference i think between candy and cigarettes. the evidence is so overwhelming about the role that cigarettes plays in our society, 500,000 deaths every year attributed to smoking-related illnesses and, of course, that issue is one that the pressure has been growing on not only big tobacco over the years but also these retailers to do something about. you know, this is clearly a position that cvs has decided that it has to take because it simply could not continue selling tobacco products.

>> tom, i know you've got to run. is your expectation or is their expectation rather, cvs's expectation that others will follow suit because of the principled decision they're taking? >> reporter: i asked her that. she said she would not be surprised, but she's not -- you know, this news was embargoed until 7:00 a.m. this morning. so i'm sure that some of it was out there already and kind of leaked and people were hearing about it. walgreens, in particular, has been under shareholder pressure to do something for some time. but it will be interesting to see how this plays out. but she wouldn't venture a guess as to whether their competitors would do the same or whether this decision might drive people to their competitors or will people say, you know what is this this is an opportunity for me to quit. i should point out, cvs is also starting a campaign to help people quit, and the white house this morning weighing in. president obama saying he applauds cvs and hopes others will follow suit. >> tom costello, thank you for bringing us that report this morning. appreciate it very much. >> reporter: you bet. >> sara, you were saying dollar stores, right? >> yeah, i got a note in from

stacy, a cnbc contributor, go to dollar stores and walmart. they probably won't pull them. timing the markets, not always the wise thing to do unless you really know what you're doing. and even then, it's tough. we talk to strategists watching the charts for you next.

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welcome back to "squawk box." in the headlines, a lot of news to bring you. dow component merck reporting quarterly profit of 88 cents per share, 1 cent below estimates. revenue was also slightly shy of consensus. results were impacted in part by patent expirations. let's hope they're not patient expirations and negative currency effects. also president obama now praising cvs caremark for its decision this morning, just announced, to stop selling tobacco products at its stores. that coming earlier this hour. cvs will end those sales, they say, by october. becoming the first u.s. drugstore chain to do so. they're saying this could cost them about $1.5 billion directly

and perhaps more from those folks who come in to buy cigarettes and other things and now they may not. we're also watching shares of dow component 3m. get your post-it notes out. the company has announced a new stock buyback program. the plan existing an existing $7.5 billion program. but on the markets here, our next guest is a market timer. he gained fame last year when he likened the dow jones industrial average of 2013 to that of 1929. and then made a spot-on call about just how far the rally would take us. so far, it has been dead right. what are the technicals telling us now? with us, founder and ceo of demark appenalytics. i know everybody follows your stuff, hedge funds, investors. 1929 sounds scary. zloo >> it sounds a little extreme but so far it's aligned perfectly. when we uncovered that relationship last year, we were pretty silent about it because it was extreme. the early part of october, we said wait, there's more here

than meets the eye. and on october 9th, we went public and said the stock market had made its low just as it had done in 1929. in just the month prior to the peak in 1929, it was october 9th, by the way. and we expected a rally of 12.6%, which was identical to the rally in 1929. they were both 12.6%. >> yeah, but the other bad thing that happened -- the bad thing that happened in 1929, october, the crash. is that where we're heading? >> if we're looking at it very carefully right now. what happened when the market made its high september 3rd, there were 23 subsequent trading days where the dow jones industrial average had a short-term bottom. 23 days aligns with the low end on monday. and subsequent to that, we had a four-day rally. and the market unraveled, went down 48%. we're currently at that inflection point. like i said, so far, everything's aligned. we think the next two to three days are extremely critical.

we get into the minutia as well as the long term. and what it looks like to us, if we were to get, just as an example, today we're to be at an up close. and then tomorrow, we close down. and we follow a lower opening the next day and trade a little weaker. we're probably going to unravel quickly. now, yesterday we did have an up close. most of the major u.s. indices. so if we get a down close today and tomorrow we open lower and trade lower, we're probably going to unravel and the news, regardless what it is on friday, perceived negative. >> for everybody who's saying i'm just going to hold. i'm going to hang tight and i'm going to hold, and then the question we were asking this morning is should you be buying on this quote, unquote dip? i'm getting the idea that maybe you should be selling everything. >> not really because we said that the market, on the air with rick santelli, it topped on january 14th. the dow jones industrial average topped -- >> you missed it by a day. >> yeah, we did. but if you use the dow jones industrial average, it topped on

december 31st. that's what we're using as our reference. 23 days, back to the dow jones average. like i said, we've already participated in that decline. and right now we're watching very carefully because that sequence is very important. we do a lot of analysis in our shop, and we dedicate it to it 24 hours a day. >> what's the down side from here? as far as you can see? >> okay. if you go back to 1987, for example, we projected off the august 25th high at that time that we would have a correction of 62% off that intra-day high. and we went down to approximately 1600 on october 20th. and march 25th of 2000, we use the s&p average, and it was about 1520, 1540. we took 60% again. and the actual low was the september 21st low, and it came right to the tick of our 61.2% projection. what we're seeing right now, if the market does unravel, i think we'll have a 60% correction of 40% off the high.

which would put us about 1100 if that happens. >> that's painful. >> it would be. the thing that gives us more confidence -- >> what about the vix, for instance? can you factor these other things in there? >> sure. what's happening now is very timely as well. the vix has exceeded the level of 21 four times -- this is the fifth time in the last 12 to 16 months. every time the vix has exceeded 21, the market has rallied. it's been the day of the low. but what's going to happen, people are conditioned just like they are with the market. every time the market breaks down, they re-enter the market and the market rallies. i think the fact that the vix is at 21 right now is significant because this could be the one time that the market doesn't respond. and it goes lower and the vix goes higher. >> what would change the dynamic to break to the high side? >> we think it's almost preordained right now. what could happen, we could get something akin to what happened september 25th in 1987. the market made its peak on august 25th high. then it had a decline, kind of meandered around the lows for a

period of time and then struggled and did a really feeble rally into the peak in early october prior to the decline, waterfalled decline. and i think we could see that outcome. if the market in the next couple days is unable to record that down close and a lower opening -- >> can we just go to the 40% down? >> it's extreme. >> i understand. >> totally. >> i assume you put percentages on this stuff. >> i can tell you with high probability and normal certainty, i hate to say that because there's nothing certain in this business, if the market were to say today close higher, i've been getting very specific, but we've done that before. at the -- we made a forecast in april of 2011 at the market peak when the market was 1370, approximately, 1365, we projected down side that the market would go to 1075, okay. and everyone was saying no way. no way. on august 9th, we made a low.

>> very basic, what are you doing with your money? >> sidelines. >> sidelines. sitting in cash? bonds? gold? bitcoin? >> treasury bills. >> technical watchers, gold is an interesting one, down almost 30% last year. it was the first rough year. is it headed back up? >> sure. when we were on with rick santelli december 16th, gold was trading at approximately 1245 to 1260, intraday move. and we project the down side that gold would go to 1180, 1156, 1180. that forecast was really made back in september of 2011. if you were to take 60% of the high when gold made its high in 1920, take 60% of that, that will get you right down to 1180. we did not make a good low on gold at that june bottom, and we did not make a good low. when we were around rick, we projected the low would be december 31st because of tax law. that was the exact date of low. markets don't make lows the way they made that low was made on december 31st.

we always call it a reversal. and markets usually make lows with extreme pessimism. the pessimism does not only occur with intraday low. the closing low is also weak. we got a big reversal with the strong close that day. so we're confident we're going to break that low. >> tom, how accurate are you? how can i judge if your calls are a success? do you have a percentage that you say? >> no. >> how do i know that following you is an investable proposition for me? >> we're not asking anyone to follow ourselves. we're sharing research. we've done 40-plus years of really intense research. >> how accurate are your calls? >> i don't know. ask people who dlai-- >> steve cohen, i know, is a fan. >> best trader in history. yes. >> how do you remember all the dates? you see charts in your head? >> yes, i do. my wife had our first delivery back in the olden days, they had those monitors. i say hey, this looks like a breakout. she looked at me and said, we're not working now.

but i know, most of the people who work with us are really committed to the markets and probably should be committed to the institution as well. we are obsessed with markets. i don't know, as far as accuracy, sometimes it's uncanny. people have attributed a lot of attention to us -- success, that 1076 call. that was the april high. there was an august premature low just like we're seeing in gold right now. i think we're going to undercut the low. shanghai index is another one. the last six turns have been identified to the day. but we've got some really big busts, too. sometimes the accuracy is -- >> thank you for scaring the heck out of us. >> hopefully it won't happen. maybe it won't unfold the next few days. >> in fact, i hope you're right and wrong in this case. >> right and left. >> either way, thanks for coming in and talking with us. thomas demark, always good to talk to you. >> wow. i'm still hung up on the 40%. we will all hope it doesn't, but you're coming back if it does. coming up, much more on this story this morning.

the big one, cvs dumping tobacco products from its stores. also when we come back, aramark serving up public results after going public last year. we've got the first interview with the ceo after the break. you do not want to miss this because robert frank has a cool story. he's going to take us to the world of the super rich storage game. we've got more on "squawk" coming right back. mine was earned in korea in 1953. afghanistan, in 2009. orbiting the moon in 1971. [ male announcer ] once it's earned, usaa auto insurance is often handed down from generation to generation. because it offers a superior level of protection. and because usaa's commitment to serve current and former military members and their families is without equal. begin your legacy. get an auto insurance quote. usaa. we know what it means to serve.

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checking on futures this morning, looks like a lower start for wall street after a rebound yesterday. futures indicating dow jones industrial average set to open lower. just about 60 points. they've been relatively unchanged throughout the morning. we'll watch how they respond to the adp report, private sector jobs at 8:15. s&p futures down 9. making headlines, connecticut's democratic governor is calling for the state to raise its minimum wage to $10.10 an hour. that matches president obama's call last month to raise the national minimum wage to that level. washington state currently has the highest minimum in the nation, $9.32 an hour.

we're going to talk about aramark, reporting better than expected earnings in revenue. the company's ceo, you know aramark because they provide the food, just about everything, cafeterias, airplanes, prisons. what else is on the list, eric? >> well, we like to say we provide services where people learn, work, play and recover. everything from education to sports to, you know, the world of business and industry as well as health care, our core businesses. >> first let's talk about the earnings and then i want to get into the economy. and i've got a hundred other questions including the minimum wage issue which i assume may be hitting you or at least you have a few on. but let's just go through the earnings first. you beat on both sides. the request he is whether you can keep this up, and what are you actually seeing in the economy? >> well, i think first and foremost, as you saw this morning, we're very excited about our first quarter as a public company. i think you can look at the results we posted and really across every financial

indicator, strong top-line growth. we've been very focused on making sure, you know, we enhance our margins which we did which drove double-digits operating income and a double-digits earnings growth that did beat expectations. you know, we're very excited not just about the quarter but we're actually very excited about the future as well. you know, one of the things that's applicable to our business model is this is a very resilient business model that can perform both in great economic times and even more challenging economic times. so it's a resilient model. >> to the extent that you have your finger on the pulse of the economy and maybe a barometer, what do you think is going on in the real economy versus what we're seeing in the markets right now? >> well, i think, you know, we continue to see a consumer that's very cautious. i think that's going to continue. there's been a lot of talk about the emerging markets the last few weeks. to be honest with you, we see continued growth opportunity in the emerging markets. we saw double-digit growth.

>> what percentage of your business right now? >> it's about 8%, andrew. we've doubled it over the last five years, but it's continued to grow double digit as it did in first quarter. we grew our emerging market business 18%. >> are there particular countries you don't want to touch right now or you think are going to be tougher than others? >> well, we're very targeted. there's been a lot of talk about asia. it was up double digit led by china up 21%. very strong performance in south america. you know, i think as we look at the emerging market business, it's continued to grow double digit. and right now, you know, i think emerging markets will continue to grow at threefold what you'll see developing markets. so we continue to see growth opportunities going forward in emerging markets. >> what are you seeing in terms of corporate spending right now, appetite from executives to lay out more money and invest in their businesses? >> well, it's an interesting question. again, for us, as you think about some of the challenging economic indicators that we're all faced with right now, it's interesting that for us as

businesses face those challenges or educational institutions face those challenges or health care institutions face those challenges, it actually can play right into our favor. they tend to look at those productivity opportunities as an opportunity to outsource, foodservice or facility services that we provide them. so for us as those pressures continue, that's what i talk about, this resilient business model that helps us in even more challenging economic times. and we would expect that outsourcing trend to continue. >> eric, i want you to weigh in on this debate about the minimum wage in connecticut now, calling for an increase in the wage as well. what do you think it would do "a," to your business, but also more broadly to the economy? >> well, it's a great question, andrew. i mean, i think we start -- one of our core values is front line first. we want to do what's right for our employees first and foremost. having said that, 99% of our employees are paid above the minimum wage today. so as we look at this and as we look at, you know, what the options are and how to evaluate

those options, we want to do what's right for our business. we want to do what's right for the overall economy. i think one of the things that has to be front and center as we go through the decision-making matrix is to make sure whatever we do has the right impact on employment and the broad economy. and to me that's the screen by which we would look at it. >> i appreciate that, but what is the answer, then? is $10.10 right? is that wrong? what would it do to your business? >> again, i think for our business, 1% of our employees are paid the minimum wage today. as we assess the whole opportunity on minimum wage, assuming it's reasonable relative to what is looked at, it would have minimal impact on us. having said that, i think it is the question of what would it do to the overall employment situation and the broad economy that becomes the key decision. >> okay. eric, we are going to leave the conversation there. please stay warm. i think philly may be worse off

than new york right now. thanks again. >> he employs 270,000 people. >> i know. and the fact that only 1% of them are paid minimum wage. >> not bad. >> not bad. all right. our next story takes self-storage to a whole new level. the place where the super rich store their stuff. cars, paintings, you name it, robert frank brings us inside next. >> how do they get the shots inside my house like that? tdd#: 1-800-345-2550 trading inspires your life.

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robert frank. robert? >> steve, you don't worry about it, but the wealthy sure do because they're buying a lot of expensive stuff. and increasingly they're storing it in places like the robo vault. tonight we're going to take you inside one of the most expensish warehouses in america. this is a place where the wealthy store their art, wine, collectible cars. and for security reasons rather than elevators and stairs, all of the items are retrieved with a 70-ton robotic lift. let's take a look. >> reporter: you're inside one of the largest, most high-tech vaults in the country. to get a super car in or out, you need a secret code and a fingerprint that sets this robo crane in motion. sending it on a hunt to retrieve a ferrari 458 italia from deep

inside the vault. >> the valet, the way all the pieces move together. ♪ >> enjoy the view. >> reporter: ron loves watching a ferrari dance through the vault. even the ones that aren't his. >> this is state-of-the-art kind of thing. what more could you ask for? >> and guys, you know, we were joking about it earlier, but if you look around the world, this is one of those burgeoning, quiet economies where these storage facilities for the wealthy are just exploding. singapore, geneva, luxembourg, they're all building storage for all of this art and wine people are buying that they can't fit in their four or five homes. and this is becoming a huge business. but it's also attracted some controversy, of course, because, you know, this could be used for money laundering, for miding illicit goods and that kind of thing. >> robert, how much does it cost to park your car in one of these effectively? >> they don't give us any

prices. my guess is they range from about, you know, $1,000 a month to thousands of dollars a month, depending on how much you're storing there and depending on the size of the unit. so this is a lot more expensive than public storage, but, you know, if you're talking about a $30 million collectible car, it makes sense. >> are they insured? who's responsible? >> well, that's one of the big issues. yes, they're insured. but, you know, a lot of -- with all these storage facilities growing, we had a case with the chelsea wine vault here in new york with a lot of the richest new yorkers had their wine stored, and some of it was damaged in sandy. they're still working that out in the courts. although it's safer than putting it in your house, there's still a lot of questions when there are claims. >> robert, do people keep cash in this? you remember walter white kept that all of his cash in the storage facility. >> yes, he did. >> is that a possibility? or you have to keep it at the bank? >> we don't know. there's some weird stuff that they kept in here that one of the weirdest collections they had in here when we were shooting was a case of dinosaur

bones that was being shipped to a big museum. so, you know, there may be, and you don't really have to declare everything that's in there, maybe, but my guess is, you know, the expense and the amount of disclosure that's now required for this, people are probably using less expensive, less visible storage areas for methamphetamine cash is my guess. >> this facility we're looking at, where is that located? >> ft. lauderdale, florida. >> why is it -- i guess why does it have to go deep under the ground? the cost of doing that seems kind of incredible. it looks, obviously, like something out of a movie. >> ferrari can survive a nuclear blast. >> exactly. >> why don't you know that? >> this is designed to withstand bullets, fire, 200-mile-an-hour winds. and if you live in florida, you know, and you're in a hurricane-prone area on the ocean, you know, your car is actually safer in here. your wine is safer in here. a lot of the people who store stuff in this warehouse have

lived through a hurricane and had to carry their wine or their cars somewhere. in this area, this is like a fort knox. they can leave it there, and it's safe from just about anything that's going to happen. much safer than themselves. >> robert, do they have to give their name, and does the owner of the storage facility, are they required to tell authorities, for example, if they have stuff by somebody who may be accused of a crime? >> in this one, they do. now, if you're talking about the ones overseas, that's where it's gotten very black market. if you talk about these facilities in singapore, geneva and luxembourg, it's nondeclared, and there's no tax if you have a transaction inside the warehouse. so there's a lot of funky stuff going on overseas. this one in the u.s., there's a lot of disclosure. >> the electricity goes down, by the way, then you're stuck. >> this has a generator for two weeks. so again, your ferrari is fine. you may be in trouble, but your ferrari would be fine for two weeks. >> thank you, robert. terrific story. and do not forget to tune into "the secret lives of the super rich."

>> these are the best. he does such a good job with these things. >> eye candy. >> that's tonight at 9:00 p.m. on cnbc. >> we're back in just a moment.

fifteen minutes could save you fifteen percent or more on car insurance. everybody knows that parker. well, did you know auctioneers make bad grocery store clerks? that'll be $23.50. now .75, 23.75, hold 'em. hey now do i hear 23.75? 24! hey 24 dollar, 24 and a quarter, quarter, now half, 24 and a half and .75! 25! now a quarter, hey 26 and a quarter, do you wanna pay now, you wanna do it, 25 and a quarter - sold to the man in the khaki jacket! geico. fifteen minutes could save you... well, you know. cvs is just saying no.

the drugstore chain taking tobacco products off the shelves. we have the reaction to the bold move. the countdown to jobs. first up, the adp employment report for january. we have the numbers at 8:15 a.m. eastern time. and has the january market slide created some pockets of opportunity? tech investor paul meeks gives us stocks to watch. "squawk box" begins right now. ♪ ♪ and i ain't gonna be treated this way ♪ welcome back to "squawk box" here on cnbc, first in business worldwide. steve liesman's with us telling you this is the grateful dead. what is this? >> "cold rain and snow." >> which makes sense because of the weather. i am andrew ross sorkin. steve liesman is in for joe. sara is in for becky. they have the day off. we'll catch up with them because they'll be coming to us from the other coast where it's much warmer, pebble beach on friday. meantime, headlines for you this

morning. the january adp employment report is now about 15 minutes away. of course, we'll bring it to you when it comes. the forecasters say the economy likely added 189,000 private jobs last month. steve and sara will have great analysis when it hits. also, some corporate news this morning, the eu and google reaching a landmark deal in an antitrust case. this would settle that three-year-old investigation and prevent a fine of up to $5 billion. the investigation started back in 2010 after more than a dozen kpl complainants accused them of promoting their own services at their expense. and the talker of the morning, a story we've been talking about all morning, cvs caremark is kicking the habit. that chain announcing it is going to be removing cigarettes and all tobacco from all 7,600 pharmacy locations by october 1st of this year. the president of cvs pharmacy explaining the decision to nbc's tom costello. >> this positions us really towards where health care is

going because we know the sale of tobacco is extremely inconsistent with being a health care provider. we certainly expect other people who are in the pharmacy business to look at the mirror themselves and ask themselves where do they want to be in the next few years, and what kind of role do they want to play in health care. but ultimately that will be their decision to make. >> and we should note that in a statement, walgreens saying that it has been evaluating the tobacco product category for some time and will continue to do so. meantime, president obama releasing a statement of his own. he applauded cvs's decision. he, of course, is a smoker. we should also note -- >> was. >> or was a smoker. people say that he might occasionally still be a smoker. they will have nicorette and other things at cvs. e-cigarettes apparently also staying at least temporarily. >> turns out according to "the new york times" article, cvs doesn't sell e-cigarettes. they're trying to figure out what the fda says about them. that's a work in progress. >> candy still at cvs. >> candy, soda, no alcohol,

though. i don't think they sell alcohol. >> you were saying the dollar store might be a winner in this. tobacco stocks. at some point we should look at those. i imagine they would be getting hit. >> yeah, philip morris interpret. we'll have to see the fallout. certainly is a big decision. first we check on markets on this wednesday morning. u.s. equity futures pointing to a lower start across the board. s&p futures indicated to lower -- to open lower by 10 points. dow futures have been moving south pretty much all morning l long. nasdaq also in the red, down 18. all of this ahead of the 8:15 adp jobs report. in europe, it's been sort of a mixed session. asia first, overnight, japan's nikkei got a bounce, 1.2%. still has a long way to recover from the selloff. it's now 14% since the peak at the end of december. hang seng closed lower. remember, chinese markets in shanghai are closed for the lunar new year. in europe, mixed bag. ftse 100 in the uk and france

higher. germany lower. disappointing economic data to chew on over in europe. it was looking like things were turning a corner but not such a smooth shot up. >> definitely not. i'm just reading this isi report. did you see it on cvs? 1.5% to 2% of total corporate revenue from not selling cigarettes. >> it's going to take a hit. >> but saying there's other opportunities. the company is identifying whether or not they could potentially offset. >> one of our twitter followers asked whether that opportunity would be medical marijuana. >> 6 to 9 cents a share, is that right, 0.6 to 0.9 cents. >> it's really $2 billion in revenue that they say they're losing. $1.5 billion to direct and another $1.5 billion. >> the others are getting new business with obamacare and promoting services. >> more shelf space they're saving on cigarettes, they're actually going to be able to reconfigure -- >> no, but it's not like a total loss. there will be other things they

can sell. to global markets now. joining us now, i'm sorry, there was two jims. chief executive officer of principal global investors and jim o'sullivan. >> good morning. >> at high frequency economics. let me turn to jim o'sullivan. >> steve. >> jim, you made it interesting -- an interesting research paper the other day about the difference between short-term and long-term unemployment. and the idea that the short-term unemployment is doing okay, and it's the long-term unemployment that's a separate problem. and there may not be as much slack in the economy as we think. >> yes. i mean, it's obviously an important issue ultimately for when the fed has to start reversing. it's not an immediate issue, oo the market. you look at the survey and companies are asked how many job openings they have they are unable to fill. 23% of firms say they have job openings they're not able to fill. and that's the highest number

since january 2008. january 2008, the unemployment rate was 5%. today it's 6.7%. the short-term unemployment rate, people unemployed for no more than 26 beakweeks, 4 pi.1. there is literature that suggests that the short-term unemployment rate that is the key indicator in terms of labor market pressures p sfwhoop what are you expecting in jobs on friday? >> steve, seasonal adjustments in the weather are going to make it slightly confused, i suspect. but i think the consensus is about right. it seems to me that the u.s. economy underlying and we'll see this when we get a few months of a run is creating about 200,000 jobs a month. i think many people are actually underestimating how well the u.s. economy is doing. i think the factors of low energy, productivity and innovation and a recovering housing market continue to drive the u.s. economy in a pretty

positive direction. even though we're in a risk-off world with all the bad news that's been coming from emerging markets. so i'd stick with the u.s. market. and by the way, on the other jim's point, i still think there is a decent output gap in the u.s. economy. and i wouldn't write off the longer-term unemployed so quickly. >> jim o'sullivan, i wonder how much you can really make of a jobs report these days with this weather. i mean, it's been so messy, not to mention all the seasonal adjustment that comes in around december and january. how seriously if you're a trader, if you're an investor should you take the number on friday? >> well, keep in mind when you look at the raw numbers on friday that there's a 3 million swing underneath the surface just for a not seasonally adjusted change from december to january. >> crazy. >> they're very volatile numbers this time of year. there's no question weather has been extreme. maybe it's an excuse to some extent. i think if anything, you could get some payback for weather effects in december that the sample week in early january was on the mild side. now january as a whole was cold, but in any event, weather

obviously can play havoc with these numbers. so you can't take them too literally, whatever they are. >> if i lose my job tomorrow, which could happen because of something i might say right here on television. >> it is not going to happen. >> what are my chances of getting back to work versus if i've been out of work for six months? what are my chances of getting back to work? >> i don't know what the percentages are, but obviously statistically, you're more likely, the more recent that you are out of work. just to go back to the other jim's point, i'm certainly not saying that the long-term unemployed should be written off. clearly it's a fed goal here to get those people back in the work force before they're lost for good. and that's absolutely what they should be doing. the goal should be to get long-term unemployment down. >> i have an opinion on this is which i think the fed may have done what it could do to put the unemployed back to work, and especially when you see that short term coming down, it tells me that we're maybe now into a more normal market, where if i lose my job, i can get back to work. and that maybe now what we're talking about with the long-term unemployed is an issue for the

fiscal side. maybe some of the programs that president obama brought up. i'm sure there were republican ideas, but increasingly less is an issue for monetary policy. >> i think it is an argument for keeping mostly easy. we may be getting close to a tradeoff. obviously they have a cushion in that inflation is 1% or so. their ultimate goal is 2%. there is a little cushion and they can keep on pushing. we may be at the point where unemployment is low enough for short-term unemployment that we do start seeing some wage pressures and some drifting up in inflation. it's not going to suddenly go from 1% to 3%. so the fed does have some time. but i think it does change the balance of risks a little bit going forward. >> to the other jim, you're looking through the weather, through some of the short-term things here. what's your outlook for economic growth and, say, the stock market for the next several months? >> yeah, for the u.s. economy, i would look over the next several months to growth will probably, because of the way inventories have gone and because of the weather dipped down a little bit

in the first quarter, maybe 2%. but i think we're back up to 2.5, 3 for the rest of the year. i think notwithstanding the earlier discussion, i think the output gap is on our side. and i do think therefore that with many people underestimating the strength of the u.s. economy, this is a time to buy on setbacks. january has actually seen, for all the frenzied rhetoric, january saw midsingledigits. i'd be buying on setbacks and waiting on u.s. equities. in terms of other equity markets, i'd be much more wary. i think it's too early to be heavily into emerging. i think europe is dangerous, but stick with the u.s. equities. >> while we're talking about jobs, jim o'sullivan, i just wanted to ask you very quickly here about that cbo report for all the republicans that say obamacare's a job killer. they got some ammunition that it will shrink the labor force by 2

million, equivalent of 2 million workers over the next several years. >> yes. >> is that something you factored in? >> it's a little nuanced. it's a question of supply, not demand. it's not effective for jobs according to analysis right now. it's more of a long-term supply of labor. ultimately, as people evaluate the participation rate, then that's something you have to consider in terms of how much the drop in the participation rate is secular and structural as distinct from cyclical, and that could be another reason to bring down the participation rate. >> the jim and the other jim, thank you for joining us. after the break, adp employment released at 8:15 eastern. wi we'll have the numbers. and check out cvs making the multibillion-dollar decision to drop tobacco products. we'll talk to an analyst about that bold move at 8:30 eastern. we're back with more of "squawk" in just a second. ♪

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welcome back to "squawk box." you were just looking at a live shot of chicago there. nasty out, by the way. nasty here. new york city schools, i think,

are open. at least the last time i looked, they were. that's going to make some people's day a little bit tougher. we should tell you what's going on in the futures. dow looks like it would open down 70 points after what was a better day yesterday. nasdaq would open down 20 points and s&p 500 down about 11. steve's got the news. adp reporting that nonfarm payrolls, private sector rising by 175,000, that's their estimate. the estimate was 189,000, which is also, by the way, the full estimate for this friday. i think given how weak the data was, i think this is a victory for the bulls or at least not the bears, anyway. 175,000 is the number. december revised, down 11,000 to still a strong 227. i remember that goes back against the government's 74,000. and there's the nonfarm payroll estimate of 189,000. strength, the most strength in small business, up 75,000. medium business, 66,000. and large, 34,000.

by sector, the goods-producing sector, 16,000. by the way, with construction up 25,000, and i guess we have mark zandi coming up, going to ask him about this right away -- >> i was going to say. zmoo manufacturing down 12,000. don't know if there's a potential weather impact there or whatever is going on in manufacturing. let's see, professional services, 49,000. so in trend is how i would call this. let's bring in mark zandi. he's on the phone this morning. chief economist at moody's. >> they're going down. >> just give it time to settle. this is an ail goe rhythm algor black box trade. let's go to mark zandi. if he's not here, maybe it's his program. mark, good morning. >> good morning. good morning. >> what do you make of this report, 175,000? >> i think you said it, it's right on trend. be on stra

abstracting from weather effects and other things unexplainable, the trend is between 175,000 and 2 200k. >> it's hard to look at the 25,000 gain in construction and say there's a big weather effect in the economy or in jobs right here. >> yeah. you should know, you know, adp doesn't really pick up weather effects well. the bls measures people who are paid. the adp measures people who are on their payrolls, active employees on the payroll. so if there are weather effects, the adp number won't pick that up, at least not to the same degree that bls would pick it up. i think in that sense, a better measure of the underlying trend abstracting from weather effects. >> so if i'm not paid but i'm still on the payroll, not being paid means i don't show up as a job on the payroll reports of the government, but being on the payroll means i show up on adp

jobs. >> that's beautiful. you explained it beautifully. that's exactly right. >> this is what george costanzo in "seinfeld" believes. that's it. that sounded good in >> i'm just wondering broadly about the disconnect. steve, you mentioned between the government report that we got last time around. >> that's exactly where i was going, sara. good question. >> and then the adp report which was much better last month. >> 74,000 -- revised 227,000. >> can we really glean anything from this one about friday's number? >> well, you know, i'd say a couple things. i mean, the bls number in december was more than weather. i mean, that was weather partially. there was a lot of other bizarre things going on that i don't think reflect any kind of reality. i think the adp number is closer to reality. i think that in january, there was still weather effects but much less so. it's hard to remember back, but that survey week, the week of january 12th, was actually a relatively warm, dry week. the rest of the month was a mess. but that week was warm.

i don't know that -- i don't think we got any weather bounceback in january. but i don't know that weather was playing as big a role in the month. >> mark, we had a big decline in government spending in the fourth quarter in the gdp reports. what do you expect is happening with government employment right now? did they reaccelerate in terms of some of the firings that were going on or the declines in payrolls? >> no, you know, steve, that reflects the shutdown, right? so you had all these folks that weren't working. during the month. and that, in fact, did show up in terms of the gdp number. it didn't affect the payroll employment number, but it did affect the gdp number. so that was more shutdown effects. nonetheless, you abstracting from that, the thorough government is still shedding jobs probably 3, 4, 5k per month, and i would expect that to continue throughout most of this year. >> i have go us the big picture.

this is the first -- i know it's light and the market seems to be treating it as light, although now it was down 49, i guess, on the dow, a little bit better than it was. this is the first, more or less, in line back to the trend report we were on in a while. >> yes. >> is this telling you the economy is still at 2, 2.5% economy, still a 150,000 to 200,000 jobs economy per month? >> it's better than that. it's a 3% economy, and it's 175,000 to 200k monthly payroll gain. i think the economy -- nothing changed in december, january fundamentally. the economy is still improving. it's just getting masked by, you know. i can personally attest to it. i was sitting in my house because there's literally a tree down across my driveway. it is a mess. and it's been like this for, you know, a couple months. and it really is starting to affect the data. >> it's good to see more jobs are coming back to the economy. i'm curious about wages. i always look at the average hourly earnings and the monthly

jobs report. any sign of movement there, real pickup in wages which we've been waiting for for so long? >> no, no. i mean, the unemployment rate is still 6.7%. you still have a boatload of people who have stepped out of the work force because they're discouraged. that's partly why the participation rate is down. there's just a lot of underemployed. we've got a lot more work to do to tighten up the labor market before we start to get wage growth. the interesting thing is, you know, if you had told me, you know, five, six years ago that we had a 6.7% unemployment rate and had fallen 3 percentage points, what would wage growth be doing, i would say it would be falling. but the fact that it's still 2% is interesting. i think businesses are willing to pay their workers inflation but no more than that. and they won't be willing to pay more than that until the labor market tightens up. >> very quickly, we've got to go, but do you expect a big revision to this 74,000 from the government on friday? for the prior month? >> you know, steve, i don't know

if it will. i bet you this. i bet you a year from now when we get all the revisions in, it won't be 74k. it will be 174k. >> we will see you friday, mark. thanks for joining us this morning. >> that was valuable to have him on after the release. >> i thits an important report. it's a bit of a redirect after the defense obliterated the defense, then the adp comes back and says maybe it's not as bad as it seems. >> looking owesier in adp. coming up, a major olympics advertiser speaking out against russia's anti-gay laws. bus caremark kicking the hackett, deciding to pull all tobacco products from its shelves. will its competitors follow suit? and what does the decision mean for the tobacco giants? an industry analyst weighs in on that multibillion-dollar question next. i always say be the man with the plan

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am welcome back. our top story this morning, the adp employment report. mark zandi just told us the economy gained 175,000 jobs last month, 12,000 light of the estimate of 189,000. futures worse, better, now worse again, down 83 on the dow jones. s&p down 13. i'm talking about the implied open after the fair value numbers. nasdaq down about 24 points. >> yeah, that's the low of the session, isn't it? >> i think 83. we're just days away from the start of the winter olympics. and in advance of the games,

at&t has become the first major advertiser to protest russia's anti-gay law. in a blog post, the company says, quote, russia's law is harmful to lesbian, gay, bisexual and transgender individuals and hardlmful to a diverse society. at&t is a longtime sponsor of the united states olympic econo committee. >> i think this could be a big thing. in other olympics news, moody's says hosting the games in sochi is unlikely to provide much of a boost to the russian economy. the olympics will cost the country reported $50 billion. that's always a question, right? if a local -- if a place gets a boost from the olympics. >> i'm not excited about going on a vacation to sochi. >> most sports events are not the boom they're expected to be. >> world cup, all of that? >> doesn't always work out. coming up, we'll get more reaction to the cvs move to drop

tobacco products that just happened this morning. we'll look at this from the big tobacco side of the equation. will other retailers follow suit? this could be a big move. we're also going to take a check, get some of the stock opportunities created from this january slide. as we head to a break, take a look at u.s. equicquity futures. the dow opened down about 80 points. we're back in a moment. fedex one rate. really makes my life easier. maybe a promotion is in order. good news. i got a new title. and a raise? management couldn't make that happen. [ male announcer ] introducing fedex one rate. simple, flat rate shipping with the reliability of fedex. afghanistan, in 2009. orbiting the moon in 1971. [ male announcer ] once it's earned, usaa auto insurance

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let's get a check on market reaction to that adp report. just showed private sector jobs growth. we'll have more in a few minutes. dow jones industrial average down to near session lows at this point. set to open higher by -- or lower by 83 points. the s&p 500 pointing to a lower start. almost 14 points down. and the nasdaq down nearly 24 points. at this early hour. time warner reported fourth quarter profit of $1.17 per share. 2 cents above estimates. revenue also came in above consensus. and time warner announced a hike and a $5 billion stock buyback program. a company that specializes in diagnostic products, myriad earned 66 cents per share for the second quarter. 20 cents above estimates. also raised the 2014 outlook.

that one should be a big mover today. and ralph lauren shares rising in premarket trading. the company reporting fiscal third quarter profit, 257 per share, beating estimates by 6 cents, also upped its 2014 revenue outlook. the big story of the morning, at least talker of the morning at least, cvs making the multibillion -- $2 billion decision to drop all tobacco products by october 1st. nik modi is on the line for us. what does this mean for tobacco companies, nik? >> i think it's important to keep in context that the drug channel in general in totality is about 5% of the channel mix for all tobacco companies in the u.s. the predominant amount is sold through convenience stores which is a major class of trade. you know, the reality is, even just in the general landscape of the entire industry, this is a very small piece of the business. the second point i would say is foot traffic, you know.

if drugstores aren't selling the product, i think the corto bako consumer will go to another channel to buy the product. that's kind of how i think about this. i know it sounds like a pretty big event, but at least to the p&ls of the company, i don't know it's going to be that material. >> i appreciate if it's just cvs, that's one thing. if you throw walgreens in there, other companies, and then do you ever get to the point where a walmart, which i know, look, walmart sells guns, so maybe this will never happen, but, you know, to the extent that there becomes a social movement for something like this to happen, then what? >> yeah. like i said, even with walgreens and the rest of the drug channel, it's still 5% of the overall industry. but again, you know, we've seen this time and time again in different channels. so for instance, the dollar channel was resisting to sell tobacco for quite some time. and they realized they were losing a lot of foot traffic to competing retailers. and so they started selling tobacco about 18 months ago. again, in the end, we have to

realize tobacco is a unique category. and the consumer is going to find a way to get their product. >> still up in the air is e-cigarettes. of the big tobacco companies, are they all making e-cigarettes now? i think from my understanding, it's possible that a cvs caremark could still sell a product like that, and they're also obviously selling likes like nicorette and things along those lines. >> this is what i think is the more interesting story line here. first of all, most of the major guys are selling e-cigarettes. alltrade just purchased greensmoke two days ago, which is a leading product in terms of product efficacy and quality. so they all are in the category. what i think is most interesting is what will cvs actually do? because that will make a big statement in terms of how the perception of this category will be with the consumer. cvs has basically made a commitment to health and wellness. if they sell e-cigarettes, what does that say in terms of

smoking cessation, relative risk. so i think it's going to be a very interesting decision had they make it. of course, they're waiting for clarity from the fda. >> i wonder if this is a good time to be buying tobacco companies. usually they do well when there's lots of volatility. and you don't seem too shaken by this decision by cvs. >> no. interestingly enough, we put out a piece this morning titled "dislocation." we have not seen the category or sector dislocated relative to the macros like today. for instance, emerging markets, big area of concern which is why a lot of stocks have sold off. tobacco has underperformed and none of my companies have any emerging market exposure. the second thing is dividend yield spreads have widened relative to the ten-year which is a key vart for valuations. so that's attractive. the last is when the vix is elevated and rising, tobacco stocks tend to outperform which makes sense because it's classic defensive sector. and it's underperforming now. we think this is an opportune

time to start looking long on some of these names. >> i know cvs is a domestic company so it may not have any kind of international impact, but do pharmacies and other drug-oriented companies or retailers internationally where there is still some growth in the cigarette market or tobacco market, do they sell tobacco? >> yeah, i'm not familiar with any international retailers that do not sell tobacco. i know canada, they don't do it, but i guess you can consider that part of north america. but i'm not familiar with any, you know, folks overseas making those types of decisions at this point. >> nik, thanks for joining us on this, big talker of the morning. appreciate it. >> thanks for having me. a little less than one hour until the opening bell. just want to check on markets here. it looks like futures are still indicating a slightly lower start after adp came in a little bit shy of estimates. rick santelli will join us now from the cme in chicago with a little more market reaction. good morning, rick. >> reporter: good morning, sara. well, we continue to see all the logical dynamics.

you get a weak number, and i'll leave all the boilerplate subtext of weather to others to debate. the markets have moved. we see yields once again moving into the high 250s and the ten-year pretty much where they've come to rest at their lows intraday levels. we're hovering right now at 260, but that isn't the point. the point is that, that we're going to hear all day long how much the weather impacted this number, how much the weather impacted other numbers. and while that's occurring, we're going to see this mostly virtuous negative cycle, i guess not to virtuous, kind of the exact mirror image opposite of what we've had the last 2 1/2 years where the data would come out bad. it was good news is bad news. stocks would rally. we're going to go through the other i'd, but this one's going to be a whole lot more uncomfortable for viewers because they'll cringe when they hear excuses in my opinion. rates continue to mirror and track whether it's the nikkei,

dollar-yen, euro-yen, pound-yen. the guys on that side trading fixed income watch the guys on that side trading the stock market. and if the stock market opens under pressure and bounces, you'll see interest rates pop back up. but if we see triple digits in the first hour or so, i would definitely think that would be getting closer and closer to a test of the 2 1/2% level. dollar index also traded off. there's this notion that the dollar is going to benefit from a flight to safety. once again, what we are seeing really isn't a flight so safety. the catalyst was a runaway from positions. an expulsion of positions, so to speak. and i think that we're just seeing a rebalancing of that. this jobs report, in my opinion, is very indicative of what we're going to see on friday. >> all right, rick santelli, thanks very much. also just got a note from dennis gartman to check out gold which is sharply higher after the adp report as well. >> did bitcoin go up, too? >> i don't agree that this was such a bad number.

and i'll tell you why. several of the numbers we've had recently have missed by several standard deviations. this one missed, but it's within a tolerance. missing by 12,000 on a base of 189, and you're trying to count 136 million jobs. >> right, not a big miss. >> not like having at 56, ends up at 51, that's a big miss. this was within tolerance. >> on trend was your phrase. >> on trend. and that was my phrase. i don't know, maybe the market is looking to sell off, but i don't see this as guessing the economy as weak. >> take that to the bank. >> i don't know about that. when we come back, pockets of opportunities. are there stocks out there that are worth a second look right now despite the recent market volatility? we'll get names to watch from a tech investor, paul meeks is going to come up on the program when we return. but first, take a look at gold which sara was just talking about. we're back in a moment. ♪ [ male announcer ] how did edward jones become one of the biggest financial services companies in the country? hey.

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welcome back to "squawk box." let's take a look at futures right now. following that adp private sector jobs report, came out at 8:15. a little shy of estimates right now. futures indicating a slightly lower start. there we go. down 73 points for the dow. nasdaq down 20. and s&p down 12. they've been pretty much lower all morning long. it took a little bit of a lag lower on the adp report. some investors headed to the sidelines, but our next guest is

pacing his buying because he thinks there's so much opportunity. paul meeks. i always feel like i'm mispronouncing it. he joins us now with stock picks and outlook on tech companies. paul, how are you? >> good morning. >> help us here. you like some tech numbers. you're apparently picking this stuff up and you're not worried. we had a guy on this program i think in the last hour or two who thinks it could have a correction of 40% on the market. >> yeah, i realized that, but i see it a different way. the way i look at things is i don't think stocks are egregiously overvalued. i don't think they're necessarily cheap, but i think they're about fair to maybe slightly above fair. so i'm encouraged there. i think the u.s. is on the mend. i do think that europe which has been in the doldrums for a long time is somewhat on the mend. of course, emerging markets has gone to hell in a handbasket. but all that considered, i've been fortunate to have fund flows. and so my cash position has risen. and i'm taking advantage buying

some great names. not too quickly, not in too much size, but slowly and deliberately during this correction. >> let's walk through some names. i want to start with google. there's been news out this morning that they just settled this antitrust case as well as the other news that eric schmidt just got. a nice little $100 million bump in compensation. you still like that stock at these price valuations? >> i'd probably buy google a little lower, but yeah, i do. i think the stock's worth at least 20% to 40% more. >> what else do you love right now? i stee starbucee starbucks is o? >> i run a growth fund. within the tech sector, qualcomm and microchip are interesting here. i've been trying to buy some classic growth names beyond the tech sector. starbucks is one. borg-warner is another one. tjx which is the tj maxx stores is a third. >> help me with one thing. all of us are sitting around thinking that we're in correction territory. we're on our way in a big way.

do you care? is your expectation that we end the year higher? where are you in all of this in terms of -- you say you're pacing your buying. i'm just trying to understand at what point do you think this is going to bottom out if it does? >> i think what happens this year is i don't know how long or how deep this correction is going to be. i do think that as you go et to december 31st of 2014, we'll absorb any correction. and this may not be the only one during the year, and we will end up higher. >> let's go through a couple others that you really like. i see -- go ahead. >> sorry. >> no, go ahead. >> no, please. >> i was going to go to bwa, which is the auto parts supplier. we can put that up on the screen. what do you like about that company? >> well, borg-warner is a very interesting company. the company has shown very steady growth over a long period of time despite just the poor january results from the automakers. i think that's more of an aberration due to poor weather.

borg-warner is very nicely positioned and has a great track record. i expect them to continue to grow nicely. the stock has come down a bit, gives me the chance to buy some. >> before we go, one more name? >> i do like starbucks. we're here in seattle preparing for the super bowl parade in a couple of hours. starbucks is a great company. the comp stores sales have gone from 9% to 5% which is still wildly successful for any type of retailer. and the stock has come down a lot if you look at the stock chart. a good opportunity to buy a stock and at least some sort of a discount in a real nice, high-quality company. >> paul meeks, thanks for joining us. appreciate your time. thanks for being on the program. >> u this. coming up, it will take more than a little snowstorm to keep jim cramer from his post. we get his take on the cvs story and the stocks surrounding the drugstore chain's decision to drop tobacco products. more "squawk" coming back next. this friday, "squawk box"

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snowy, wintry day. and on this morning, cvs making that multibillion-dollar decision to drop all tobacco products by october 1st. we want to bring in scott mushkin covering cvs, joins us on the cnbc news line. scott, clearly this was a bold decision. might turn out to be an expensive decision, but is it a good business decision? >> you know, we think it definitely is. we agree with cvs that selling cigarettes in a pharmacy is kind of counter to what they're trying to do. and so they've taken a step. they've been contemplating it actually i think for a number of years. and we say kudos to the management team for doing it.

clearly, they give up $2 billion in revenues and 6 to 9 cents this year in earnings, but to demonstrate the strength of their business, they haven't adjusted their one of the thinge about cvs, we think the business has a lot of strength behind it. >> do you think the strategy going more towards a health care provider and giving more services in health care will give cvs a competitive edge over its rivals? >> we do. they have a new head of their retail groups and she's been with the company a long time and is one of their best executives. she's been put in charge of retail. really to take advantage of all the traffic that's going to the cvs stores because of the pharmacy. and so we think this is really compatible. it's one of her first big moves and we like the decision. >> do you think others are going to follow suit? >> you know, i think there's going to be mounting pressure on pharmacies to follow suit although i think some of them will be a little bit hesitant right now probably liking some of the traffic they may pick up in the front end from the move. >> when you say that this is a

good financial decision as well, how do you justify that when they talk about $2 billion in revenue that they're no longer going to have? >> i think in the short term the fact that they can offset it makes you feel good about the trend of their business underlying, the underlying business. in the long term from a strategic perspective, one of the things that will happen with health care it's going to be much more consumer driven with the affordable care act, so the brand and what it stands for will become more and more important in attracting customers. >> you think people wouldn't go into the store that there weren't cigarettes there. i've never thought about the fact that there's cigarettes at cva or any of these drugstores. >> certainly not the majority of the population but there's definitely a group of people particularly as you get into the younger generation that would not like that product in the store. and it's obviously just not compatible with what they're trying to do. >> clearly the affordable care act is trading a lot of opportunities for these retail

pharmacies. who is best positioned to take advantage? >> we think absolutely the answer is cva as they combine both their caremark business with the retail business. very large players in the medicaid, managed medicaid area and we think they're going to take advantage of that. that's been one of the biggest growth drivers with the affordable care act so far. so, we think it's hands down cvs' best decision. >> that pretty much jives with the decision today to stop selling tobacco products. thanks for joining us last minute on the story. >> thanks very much for having me. >> let's get down to the new york stock exchange and i want to hear what jim cramer has to say about all of this. jim? >> what's going on? >> what do you think about the decision? >> i don't like cutting numbers, i don't like tobacco. when i saw dollar general move into this business even though the margins were squeezed, it cut gross margins, it did boost traffic so dollar general's the

way to go. walgreens is looking at all options. rite aid has been on fire. that has a little bit more of a downscale customer, rite aid could be a place to go. i like cvs, i like the company, the stock has been straight down in a while. i'm in a holistic rap that this is good. that shelf staff will be taken up by medical marijuana and that gets the stock back up because that group is the hottest group in the world. no, cutting numbers cvs is not what i want if i own a stock in what has become a very treacherous environment. >> we just had this analyst on. he tried to say long term that cigarettes are not compatible with the brand and that long term it would be better for business. do you buy that piece of it? >> no. >> okay. >> and do you -- >> i mean, what -- i mean, i thought your question about walmart was a great one. these companies don't really -- look, it's great, cvs is committed to health care. that's absolutely right.

tobacco is real bad. we could go through case by case and decide what these companies are doing. in the end this is capitalism, all right? and if cvs thinks tobacco is bad for business, they'll get rid of it. people don't wake up one morning and say, do you know what, i'm going to is that right to do well and good. it just doesn't work like that. walgreens is a terrific company. if walgreens pulls out and said, listen, we think tobacco is so bad it's attracting people who are the wrong customer like an abercrombie & fitch thing, i don't know, maybe that's the way to justify it. i just think that cvs is doing what's right but that doesn't make you more money. >> let me ask you a different question. randall stevenson at&t put out a statement in support of gay and lesbian and bisexual -- >> stra >> transgender. >> transgender. and there's a lot going with russia and the olympics, should they be making political statements and what does it do for their business?

>> again, nothing. look, there's -- be someone maybe who switches their -- i'm talking to dick cheney at the commissioner's ball this weekend at the nfl so we can link everything. but i do think, again, i mean, these are great statements. i don't want to -- i put another hat on and said i'm so glad cvs is doing this. i hate tobacco i think it's the scourge of this country. i'm pro any sort of equality moves. but, again, i mean, i'm stuck with the four walls of trying to figure out the eps and the eps for cvs just got worse and i'm taking down numbers cvs. this is a market that's not saying, you know, i'm going to buy cvs, they're good citizens. it doesn't work like that. >> jim cramer taking us back to reality and i appreciate it. we'll see you at 9:00 eastern time on "squawk on the street." thanks, jim. >> speaking on behalf of the shareholder. it's a good point. >> that's the honest we can all feel good about it but in the immediate term he is correct. all right.

next the stock of the day. and as we head to break check out what futures are doing this morning. they are pointing to a lower start but they're cutting their losses ahead of the open after that adp report. "squawk box" will be right back. there's a saying around here,

you stand behind what you say. around here you don't make excuses. you make commitments. and when you can't live up to them, you own up, and make it right. some people think the kind of accountability that thrives on so many streets in this country

has gone missing in the places where it's needed most. but i know you'll still find it when you know where to look. in a we believe outshining the competition tomorrow quires challenging your business inside and out today. at cognizant, we help forward-looking companies run better and run different - to give your customers every reason to keep looking for you. so if you're ready to see opportunities and see them through, we say: let's get to work. because the future belongs to those who challenge the present.

the stock of the day! ralph lauren. >> love that company. >> you wear their company. the company posting better-than-expected quarterly results and raising its full-year revenue outlook and adding to the stock buyback plan. as my mother would say we should have more of these type of people. >> and i contributed to their earnings. >> it is not minimal when you contribute it's a big thing. >> but do you think will really help? the olympics. >> why will they help? >> they are the official outfitter and last year when they made the products in china and it was a big kerfuffle and it was a big deal. but now they are made here. >> you bought the full-body skating suit? >> today i'm wearing my sweater. >> what did you say? >> i have no mark on it. >> this is not ralph. >> i've never stood as an economics reporter why i pay somebody money to wear their

logo on my shirt. i felt they should pay me for that. i don't wear stuff with logos. >> you are modest, insignias sell. >> guys, thanks for joining us this morning. make sure you join us tomorrow. "street signs" begins right now. ♪ ♪ i'm giving you a long look every day every day every day every day i write the book ♪ morning. and welcome to "squawk on the street" i'm david faber with jim cramer. author of "get rich carefully" who had a very successful book signing at new york's union square. >> standing room only. >> that's what i like to hear. and scott wapner is joining us and we're live from the new york stock exchange and carl is on a plane right now for so much dhi. let's take a look at the futures. you can see we've got an implied open that would put us down on the s&p and the dow, of course, after a rare positive day for the month for the year yesterday, let's take a look at the